DEF 14A 1 v074944_def14a.htm Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the registrant x
Filed by a party other than the registrant o

Check the appropriate box:
o  Preliminary Proxy Statement.
o Confidential, for use of the Commission only (as permitted by Rule14a-6(e)(2)).
x Definitive Proxy Statement
o Definitive additional materials.
o Soliciting material pursuant to Rule 14a-11 (c) or Rule 14a-12.

MAGNITUDE INFORMATION SYSTEMS, INC.
(Name of Registrant as Specified in Its Charter)
 
Payment of Filing Fee (Check the appropriate box):

x No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 
1.
Title of each class of securities to which transaction applies:
     
 
2.
Aggregate number of securities to which transaction applies:

 
3.
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
     
 
4.
Proposed maximum aggregate value of transaction:

 
5.
Total fee paid:

o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

1. Amount Previously Paid: _____________________________________
2. Form, Schedule or Registration Statement No.: ____________________
3. Filing Party: _______________________________________________
4. Date Filed: ________________________________________________


 
 
MAGNITUDE INFORMATION SYSTEMS, INC.
1250 Route 28
Suite 309
Branchburg, New Jersey 08876
 


NOTICE OF ACTION OF SHAREHOLDERS BY WRITTEN CONSENT
IN LIEU OF SHAREHOLDER'S MEETING

To the Stockholders:

On behalf of the Board of Directors and management of Magnitude Information Systems, Inc. (the "Company"), we urge you to consider and act upon the following proposals to acquire Kiwibox Media, Inc. and the proposed amendments to the Company's Certificate of Incorporation, which the Board of Directors recommends that shareholders approve by Written Consent in lieu of a Shareholder's Meeting:

1. To approve the Company’s acquisition of Kiwibox Media, Inc. by means of a merger with a wholly owned subsidiary of the Company;

2. Increase the number of shares of Common Stock that the Company is authorized to issue from 300,000,000 to 700,000,000 shares, and.

3. To change the Company’s corporate name from Magnitude Information Systems, Inc. to “KiwiAge Enterprises, Inc.”

Pursuant to the applicable provisions of the Delaware General Corporation Law and our Company's Certificate of Incorporation, as amended, the written consent of stockholders owning no less than the majority of the Company’s outstanding shares of common stock are required in order to approve the acquisition of Kiwibox Media, Inc. and to amend the Company's Certificate of Incorporation. Your Board of Directors has fixed May 15, 2007, as the record date for purposes of this solicitation. Therefore, only holders who owned Company common shares as of the close of business on May 15, 2007, are permitted to provide their Written Consent.

The proposals to acquire Kiwibox Media, Inc. and amend our Certificate of Incorporation and procedure to exercise your rights in connection with this solicitation is described in the accompanying Consent Solicitation Statement. It is requested that your written consent, using the accompanying Consent Card, be delivered to Securities Transfer Corporation, 2591 Dallas Parkway, Suite 102 Frisco, Texas 75034, Attention: Proxy Department, on or before June 15, 2007. An addressed return envelope is enclosed for this purpose, which requires no postage if mailed in the United States.

By Order of the Board of Directors
Joerg L. Klaube,
Secretary

Branchburg, New Jersey

May 18, 2007


 

TABLE OF CONTENTS


   
Page
INTRODUCTION
 
1
SUMMARY OF ACQUISITION MERGER
 
2
The Parties to the ACQUISITION MERGER
 
2
Kiwibox Business to be acquired by Subsidiary
 
2
Liabilities to be Assumed by Magnitude
 
2
Acquisition Price; Stock and Cash
 
2
Tax Treatment
 
3
Employment Agreements
 
4
Recommendation of the Company's Board and Reasons for Acquisition Merger
   
Conduct of Business Following the Acquisition Merger
 
4
Conditions to Completion of Acquisition Merger; Votes Required to Authorize
   
Acquisition Merger
 
5
Expenses
 
5
No Appraisal Rights
 
5
QUESTIONS AND ANSWERS ABOUT THE ACQUISITION AND SOLICITATION
 
5
Why did I receive this Consent Solicitation?
 
5
What am I being asked to vote my shares for in the Consent Solicitation?
 
5
Why are stockholders being asked to approve the Company’s Acquisition of
   
Kiwibox?
 
6
Why is the Company seeking to increase the number of shares of common
   
stock it is authorized to issue?
 
6
What is the voting requirement to approve the amendments to the Certificate
   
of Incorporation?
 
6
How will the increase in authorized shares of common stock affect my
   
ownership of Company's common stock?
 
7
In addition to obtaining stockholder consent to the Acquisition and to
   
the proposed Amendments to the Company’s Certificate of Incorporation,
   
how does the Company plan to meet the closing condition of having
   
$3.5 million of equity at Closing to invest in the Kiwibox business?
 
7
What business will the Company conduct after the Kiwibox Acquisition ?
 
7
What happens if stockholders do not approve the Kiwibox Acquisition or
   
if the minimum $3.5 million in equity is not raised?
 
7
If approved, when will the Kiwibox Acquisition be completed?
 
7
Am I entitled to Appraisal Rights in connection with the Kiwibox
   
Acquisition?
 
7
What will happen to my shares if the Kiwibox Acquisition is approved?
 
7
How does the Company’s Board of Directors recommend that I vote for the
   
proposals contained in this Consent Solicitation?
 
7
Who can sign the Consent Cards?
 
8
How do I vote my shares in this Consent Solicitation?
 
8
Can I change my vote after I return my Consent Card?
 
8
What do I do if my shares are held in “street name”?
 
8
What does it mean if I get more than one Consent Card?
 
8
How many votes do I have?
 
8
What vote is required to approve the three proposals?
   
-The Kiwibox Acquisition
 
8
The Amendment to the Certificate of Incorporation, increasing the
   
authorized common shares
 
8
The Amendment to the Certificate of Incorporation, changing our
   
corporate name
 
 9
How are votes counted?
 
 9
Who pays for this consent solicitation?
   
PROPOSALs TO STOCKHOLDERS
 
10
Proposal 1 - The Acquisition of Kiwibox
 
10
Background of the Kiwibox Acquisition
 
10
The Kiwibox Acquisition Price: Stock and Cash,Employment Agreements
   
And Stock to Potential Investors
 
11
 

 
Kiwibox Acquisition Investment: $3,500,000 and Closing Costs/Public
   
Company Operations: $2,500,000
 
13
Closing: on or about June 15, 2007
 
14
Conduct of Business Following the Closing
 
15
Financial Statements and Selected Financial Data
 
15
Selected Pro-Forma Financial Data
 
16-17
Accounting Treatment
 
18
Management’s Discussion and Analysis of Financial Condition and Results
   
of Operations - Fiscal Year 2006
 
18
Changes in and Disagreements with Accountants on Accounting and
   
Financial Disclosure
 
19
The Kiwibox Acquisition
 
20
The Parties to the Kiwibox Acquisition
 
20
The Effective Time
 
20
The Kiwibox Business Acquired
 
20
Liabilities to be Assumed
 
20
Representations and Warranties
 
20
Covenants
 
20
Closing Conditions
 
20
Termination
 
21
Business and Plan of Operation of the New Company
 
21
Proposal 2 - Amendment to Certificate of Incorporation to Increase
   
the Number of Authorized Shares of Common Stock
 
21
Reasons for the Change to the Company's Common Stock
 
21
General Effect of the Changes to the Company's Common Stock
 
22
Proposal 3 - Amendment to Certificate of Incorporation to Change
   
the Corporate Name of the Company
 
23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
23
PRINCIPAL STOCKHOLDERS
 
24
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
 
25
EXECUTIVE COMPENSATION
 
27
CORPORATE GOVERNANCE AND CODE OF ETHICS
 
32
AUDIT COMMITTEE
 
32
COMPENSATION AND NOMINATING COMMITTEES
 
32
THE CONSENT PROCEDURE
 
32
 
Exhibit A:
Agreement and Plan of Reorganization
Exhibit B:
Amendment No. 1 to Certificate of Incorporation
Exhibit C:
Amendment No. 2 to Certificate of Incorporation
Exhibit D:
Company’s annual report on Form 10-KSB for the fiscal year ended December 31, 2007
Exhibit E:
Kiwibox Media, Inc.’s audited financial statements for the fiscal year ended December 31, 2007
 


INTRODUCTION
 
MAGNITUDE INFORMATION SYSTEMS, INC.

1250 Route 28
Suite 309
Branchburg, New Jersey 08876
 

 
CONSENT SOLICITATION STATEMENT
FOR
THE SOLICITATION OF WRITTEN CONSENTS
FOR THE ACQUISITION OF KIWIBOX MEDIA, INC. AND
ADOPTION OF TWO AMENDMENTS TO THE
CERTIFICATE OF INCORPORATION
 
This Consent Solicitation Statement (the "Consent Statement") is furnished to the stockholders of MAGNITUDE INFORMATION SYSTEMS, INC., a Delaware corporation (the "Company"), by the Board of Directors in connection with the solicitation by the Company of the written consent of stockholders. The stockholders are being asked to provide their written consent for:

1. The approval of the Company’s acquisition of Kiwibox Media, Inc. by merger with a wholly owned subsidiary of the Company;

2. The approval of an amendment to the Company’s Certificate of Incorporation, increasing the number of shares of common stock, $.0001 par value (the “Common Stock”) which the Company has authority to issue from 300,000,000 to 700,000,000 shares; and

3. The approval of an amendment to the Company’s Certificate of Incorporation, changing the Company’s corporate name to “KiwiAge Enterprises, Inc.”.

A Copy of the Agreement and Plan of Reorganization, pursuant to the principal terms of which the Company will acquire Kiwibox Media, Inc. is attached as Exhibit A to this Consent Statement. We sometimes refer to our acquisition of Kiwibox Media, Inc. through its merger with our wholly-owned subsidiary as the “Acquisition” or “Merger” and the agreement as the “Acquisition Agreement”. A copy of the proposed Amendment to increase the Company’s authorized common stock is attached as Exhibit B. The second Amendment to our Certificate of Incorporation, seeking shareholder approval to change the Company’s corporate name from Magnitude Information System, Inc. to “KiwiAge Enterprises, Inc.”, is attached as Exhibit C. We sometimes refer to these two proposed amendments to our Certificate of Incorporation as the “Amendments”.

The Company intends to distribute this Consent Statement and the accompanying Consent Card commencing on or about May 18, 2007, to the holders of record of the Common Stock as of the close of business on May 15, 2007. This date is referred to as the "record date." Written consents of stockholders representing a majority of the outstanding shares of Common Stock at the record date are required to approve the Acquisition and the Amendments.

Only stockholders of record as of May 15, 2007, are entitled to consent, to withhold their consent, or to revoke their consent, to the Amendment. Stockholders are entitled to one vote for each outstanding share of Common Stock held at the record date. As of the record date there were 231,195,681 issued and outstanding shares of Common Stock.
 
1

 
Consents, once dated, signed, and delivered to the Company, will remain effective unless and until revoked by written notice of revocation dated, signed, and delivered to the Company at the address set forth below on or before June 15, 2007.

The Acquisition and the Amendments will be approved if by June 15, 2007, the Company holds unrevoked written consents of stockholders approving the Acquisition and the Amendments from a majority of the outstanding shares of Common Stock at the Record Date. Consequently, the withholding of consent, abstentions and the failure to deliver a Consent Card would all have the effect of a vote against approval of the Acquisition and the Amendments. If a stockholder holds his shares in "street name" and fails to instruct his broker or nominee as to how to vote his shares, the broker or nominee may not, pursuant to applicable stock exchange rules, vote such shares and, accordingly, such shares will have the effect of a vote against the Acquisition and the Amendments.

Stockholders are requested to indicate approval of the Acquisition and the Amendments by signing and dating the Consent Card, checking each box on the Consent Card which corresponds to the approval of the Acquisition and for each of the Amendments, and delivering the Consent Card to the Company's transfer agent at the address set forth below. Withholding of consent to the Acquisition and to the Amendments, or abstention with respect to the approval of the Acquisition and the Amendments, may be indicated by signing and dating the Consent Card, checking the box which corresponds to withholding of consent for each of the Acquisition and Amendments or abstention with respect to the approval of each of the Acquisition and Amendments, respectively, and delivering the Consent Card to the Company's transfer agent at the address set forth below.

The principal executive offices of the Company are located at 1250 Route 28, Suite 309, Branchburg, New Jersey 08876, and the telephone number of the Company is (908) 927-0004.

Your written consent is important to us. Questions and answers about how to vote in this Consent Solicitation and how to revoke your written consent are set forth in this Consent Solicitation below under the heading “QUESTIONS AND ANSWERS ABOUT THE ACQUISITION, THE AMENDMENTS AND THIS CONSENT SOLICITATION”.

SUMMARY OF THE TERMS OF THE KIWIBOX ACQUISTION

This summary highlights selected information contained in this Consent Solicitation and the in the Agreement and Plan of Reorganization, dated as of February 19, 2007 (the “Acquisition Agreement”), among us, our wholly owned subsidiary, Magnitude Operations, Inc. ( the “Subsidiary”), Kiwibox Media, Inc. (“Kiwibox”) and the three shareholders of Kiwibox Media, Inc. (the “Kiwibox Shareholders”) concerning our acquisition of Kiwibox through its merger with our Subsidiary. To fully understand the Acquisition and for a more complete description of the terms of the Acquisition, please carefully read this Consent Statement and the Acquisition Agreement, which is attached hereto as Exhibit A, and the other documents described herein.

The Parties to the Acquisition (page 16)

·
Us, our wholly owned subsidiary, Magnitude Operations, Inc., Kiwibox Media, Inc. and the three (3) shareholders of Kiwibox Media, Inc.

Business to be Acquired by our Subsidiary (page 16)

·
All of its assets related to its Kiwibox website business.

Liabilities to be Assumed and or Paid by Us (page16)

·
Certain liabilities related to the operation of the business to be acquired not to exceed $83,500.
 
2

 
Acquisition Price For Kiwibox; Stock and Cash (page12)

We estimate that we will need between 162,500,000 and 351,500,000 Common Shares to consummate the Acquisition and the Three Employment Agreements we will sign with the Three Kiwibox Shareholders; this amount includes between 100,000,000 and 120,000,000 Common Shares we will need to privately place with an investor or investors in order to raise the minimum $3.5 million we have committed to invest in the Kiwibox website business and the approximate $2.5 million needed to pay closing expenses and fund our public company operations. These amounts of our common shares are issuable in the following parts of our Kiwibox Acquisition:

·
Our Common Stock Issuable in the Acquisition Agreement: Between 30,000,000 and 150,000,000 Common Shares. In exchange for their ownership shares of Kiwibox, we will issue new shares to the three Kiwibox Shareholders. The amount of our common shares we will issue to them will be based upon the value of $1,500,000, divided by the “Market Price” of our publicly traded common stock. The Market Price will be the average sales price of our common stock over for the ten trading day period immediately preceding the Closing. For example, if the Market Price is determined to be $.05 per common share, then we will divide the $1,500,000 value by $.05 and issue a total 30,000,000 common shares to the Kiwibox Shareholders. Similarly, if the Market Price is determined to be $.025 per common share, then we will divide the $1,500,000 value by $.025 and we will issue 60,000,000 common shares to the Kiwibox Shareholders and 150,000,000 common shares if our Market Price falls to $.01. We have agreed that even if our Market Price is determined to be higher than $.05 per common share that we will issue no less than 30,000,000 common shares to the three Kiwibox Shareholders. The three Kiwibox Shareholders will divide our common shares between them based upon their percentage ownership of their Kiwibox shares. Holders of our common shares have the right to vote on all shareholder voting matters.

·
Our Preferred Stock, convertible into our Common Stock: Between 10,000,000 and 50,000,000 Common Shares. We have also agreed to issue a total 43,610 shares of our preferred stock to the three Kiwibox Shareholders.
 
·
Each share of Series E Preferred Stock will have the following terms:

·
Stated Value. $11.47.

·
No voting rights

·
No dividend rights.
 
·
Liquidation Preference. on par with all other classes of outstanding preferred shares to the extent of the stated value price.

·
No redemption rights.

·
The 43,610 Shares of Our Preferred Stock are Automatically Convertible into Shares of Our Common Stock. All 43,610 of these preferred shares shall automatically convert into shares of our common stock upon the second anniversary date of the Closing. The amount of our common shares into which these preferred shares will be converted is based upon the value of $500,000, divided by the “Market Price” of our publicly traded common stock. Our Market Price for this conversion will be the average sales price of our common stock over for the twenty trading day period immediately preceding the second anniversary date of the Closing. For example, if the Market Price is determined to be $.05 per common share, then we will divide the $500,000 value by $.05 and convert the 43,610 preferred shares into an aggregate 10,000,000 common shares. If the Market Price is determined to be $.025 per common share, then we will divide the $500,000 value by $.025 and convert the 43,610 preferred shares into an aggregate 20,000,000 common shares, and if $.01 per share, the preferred shares will convert into 50,000,000 common shares. As with our Common Stock we have agreed to issue to the Kiwibox Shareholders, we have agreed that even if our Market Price at the time is determined to be higher than $.05 per common share, the 43,610 preferred shares shall convert into no less than 10,000,000 common shares.
 
3

 
·
Cash Payment. We have agreed to pay the Kiwibox Shareholders a cash payment of $300,000 at Closing.

Tax Treatment (page 16)
 
·
Election of Directors. The right to elect, together with the holders of common stock, one member of our board of directors.
 
·
Protective Provisions. The consent of two of the three Kiwibox Shareholders will be required if Magnitude or Subsidiary desire (i) to undertake a material acquisition or (ii) sell all or any material portion of the business of Kiwibox during the two-year period following the closing.
 
Employment Agreements (page 13)

·
In connection with the Acquisition, we also will enter into Employment Agreements, each having identical terms and provisions, with each of the three Kiwibox Shareholders, containing the following terms:

·
A two year term.

·
Each shall be paid an annual base salary of $150,000 with the right to earn up to an additional $100,000 cash bonus based upon the business attaining certain goals.

·
Our Common Stock Issuable under the Employment Agreements: Between 22,500,000 and 31,500,000 Common Shares

·
Each shall receive at Closing a stock option grant to purchase up to 7,500,000 shares of Magnitude common stock, vesting 50% on first anniversary date of Closing and 25% each on the 18 month and second anniversary dates of the Closing, at the exercise price equal to the public market price on the date of Closing, and a second option grant to purchase up to an additional 1,500,000 Magnitude common shares at the end of each of the two years of their employment agreements (3,000,000 shares each) if the business attains certain goals.
 
·
Participation in Magnitude’s medical and health insurance coverage and all employee benefit plans, with paid vacation.

·
Restrictive covenants against competition with the customary pledges of confidentiality.

·
Standard termination rights and legal claims provisions.

$6 million equity private placement (page 13 )

·
Our Common Stock Issuable to potential investors in our private placement to raise the minimum $3.5 million we have committed to invest in the Kiwibox website business and to raise the approximate $2.5 million to pay for our Acquisition closing costs as well as to pay for our public company expenses and operations:: Between 100,000,000 and 120,000,000 Common Shares

Our Board of Directors has authorized us to offer to one or more of our business associates with whom we have a pre-existing relationship and who qualify as either an accredited or institutional investor between 100,000,000 and 120,000,000 shares of our common stock to raise the minimum $3.5 million we need in order to close the Kiwibox Acquisition and meet our commitment to invest these funds into the Kiwibox website business over the 18 month period following the closing and to raise the approximate $2.5 million to pay our closing costs and the public company operating expenses over the same 18 month period. We estimate our closing costs for fees due attorneys, accountants, investment bankers, finders, etc., and to pay accrued Company debts to be approximately between $1,000,000 and $1,200,000. Accordingly, if we succeed in raising the aggregate $6.0 million in our private placement, we will have the $3.5 million needed to close the Kiwibox Acquisition, and between approximately $1,300,000 and $1,500,000 to pay our estimated public company and operational expenses for the 18 month period following the closing of the Kiwibox Acquisition. We can not assure shareholders that we will succeed in raising any amount of equity funds in our private placement. If we do not succeed in raising the minimum $3.5 million necessary to close the Kiwibox Acquisition, and the approximate $2.5 million needed to pay the estimated Acquisition closing costs and fund the public company operations, such failure will have a material adverse effect on our financial condition and plan of operations and we will be required to seek to raise additional equity or debt to fund our operations. 
 
4


Recommendation of the Company's Board of Directors and Reasons for Acquisition (page 11)

·
Vote FOR the proposal to authorize the Kiwibox Acquisition. The Board believes that the Acquisition is in the best interest of the Company because, among other things, it would provide the Company with a new business opportunity in the social network website industry.

Conduct of Business Following the Acquisition (page 17)

·
Magnitude will devote its management and resources to develop and expand the Kiwibox website business.

Conditions to Completion of the Kiwibox Acquisition, Vote Required to Authorize the Kiwibox Acquisition (page 17)

·
In addition to customary closing conditions,

·
Approval by Magnitude stockholders,

·
Consummation of a private placement of at least $3.5 million to meet our investment obligation to Kiwibox and an estimated additional $2.5 million for operations, and closing costs.

·
Execution of employment agreements with the three Kiwibox Shareholders,

·
Stockholder approval requires a majority of the consent votes entitled to be cast by stockholders in this Consent Solicitation.

·
The Company's Board members and executive officers, who collectively own approximately 4.3% shares of the Company's common stock have indicated that they intend to vote for the Acquisition.

Expenses (page 16)

·
Magnitude has agreed to pay up to $42,500 of legal fees, up to $17,000 of accounting fees and $15,000 of investment banking fees and 2.5% of the shares payable to the Kiwibox Shareholders pursuant to Article 3.2, on behalf of the Kiwibox Shareholders as well a spaying its own costs and fees associated with the Acquisition.
 
5

 
No Appraisal Rights (page 8)

·
Company stockholders do not have appraisal rights in connection with the Acquisition under Delaware law or the Company's Certificate of Incorporation or Bylaws.

QUESTIONS AND ANSWERS ABOUT THE ACQUISITION AND THE CONSENT SOLICITATION

Following are some commonly asked questions that may be raised by stockholders and answers to each of those questions.

Why did I receive this Consent Solicitation?

This Consent Solicitation and the enclosed consent card have been sent to the Company's stockholders as of the record date for the solicitation of consents, because the Company's Board of Directors is soliciting their consent in this Consent Solicitation. This Consent Solicitation summarizes the information stockholders need to consent in an informed manner on the proposals to be considered in this Consent Solicitation. Stockholders must complete, sign and return the enclosed consent card in order to vote their shares.

What am I being asked to vote my shares for in this Consent Solicitation?

The Company's stockholders will consider and vote upon the following proposals:

·
Approval of the Acquisition of Kiwibox Media, Inc. through a merger with and into our Subsidiary;

·
Amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of its common stock from 300,000,000 to 700,000,000 in order to provide the estimated number of common shares available to consummate the Acquisition; and
 
·
Amendment to the Company’s Certificate of Incorporation, changing the Company’s corporate name to “KiwiAge Enterprises, Inc.”

Why are shareholders being asked to approve the Company’s acquisition of Kiwibox Media, Inc. in this Consent Solicitation?

As of the Record Date, the Company had 231,195,681 shares of its common stock outstanding, including common shares reserved for issuance under outstanding stock options and warrants. We estimate that we will need between 162,500,000 and 351,500,000 aggregate common shares in order:

·
to issue the $1,500,000 value worth of common shares necessary to consummate the Acquisition (between 30,000,000 and 150,000,000 shares);

·
to issue the common shares required under the employment agreements with the three Kiwibox shareholders (between 22,500,000 and 31,500,000 shares);

·
to issue the common shares into which our $500,000 value worth of preferred shares will convert on the second anniversary of the Closing (between 10,000,000 and 50,000,000 shares), and;

·
to issue the common shares to our potential investors in our private placement to raise $6 million of equity funds (between 100,000,000 and 120,000,000 shares).

Since the Company must increase its authorized common shares in order to meet its common share issuance commitments in the Kiwibox Acquisition, shareholders are required by applicable federal securities laws governing consent solicitations such as this to first approve the Kiwibox Acquisition.
 
6

 
What is the voting requirement to approve the amendments to the Certificate of Incorporation?

The Amendment to increase our authorized common stock by an additional 400,000,000 shares and to change our corporate name to “KiwiAge Enterprises, Inc.” will be approved if by June 15, 2007, the Company holds unrevoked written consents of stockholders approving the Amendments from a majority of the outstanding shares of Common Stock at the Record Date. Consequently, the withholding of consent, abstentions and the failure to deliver a Consent Card would all have the effect of a vote against approval of the Amendments. If a stockholder holds his shares in "street name" and fails to instruct his broker or nominee as to how to vote his shares, the broker or nominee may not, pursuant to applicable stock exchange rules, vote such shares and, accordingly, such shares will have the effect of a vote against the Amendments.

Why is the Company seeking to increase the number of common shares it is authorized to issue?

 Only approximately 5,000,000 shares of common stock have not been issued or reserved for issuance under presently outstanding stock options and warrants. We anticipate that we will issue between 162,500,000 and 351,500,000 common shares to the three Kiwibox shareholders in order to consummate the Acquisition at Closing, to meet our obligations under their employment agreements, to accommodate the conversion of our preferred stock into common shares on the second anniversary of the Closing and to provide the necessary common shares to the potential investor in our private placement. The Company will need no less than approximately 350,000,000 newly authorized common shares for these purposes.

 In addition, the Company believes that an increase in the number of authorized shares of common stock will benefit the Company by providing flexibility to issue common stock for a variety of business and financial objectives in the future without the necessity of delaying such activities for further stockholder approval. These objectives include, but are not limited to, raising additional capital for business operations, current and future employee compensation and benefits and other corporate purposes. The Company anticipates that it may be issuing shares and/or options in the near future to raise additional needed capital, and/or compensate employees and officers. However, other than in connection with the Kiwibox Acquisition and its private placement to raise the $3.5 million for the Kiwibox investment and approximately $2.5 million to pay the estimated Acquisition closing costs and to fund its continuing public company operations, the Company has no current plans to issue any of the shares that would be authorized should this proposal be approved by our stockholders.

How will the increase in the authorized common shares affect my ownership of Company common shares?

 Your will not suffer any dilution in the ownership percentage of your common shares as a result of the increase in authorized common shares. However, if and when the Company does issue common shares, whether in connection with the Acquisition, the private placement or otherwise, these issuances will reduce your percentage ownership of the Company, and if issued for less than what you paid for your Company shares, will reduce the value of your Company shares.

In addition to obtaining stockholder consent to the Acquisition and to the proposed Amendments to the Company’s Certificate of Incorporation, how does the Company plan to meet the closing condition of having $3.5 million of equity at Closing to invest in the Kiwibox business?

The Company is in discussions with various potential investors who are business associates of the Company and who qualify as accredited investors to raise the minimum $3.5 million to meet this condition to close the Acquisition. At this date, Magnitude has no understanding, agreement or commitment from any of these potential investors that they will invest any funds with Magnitude. In the event Magnitude has not raised the minimum $3.5 million on or before the Closing date of June 15, 2007, Kiwibox may terminate the Acquisition Agreement.

7



What business will the Company conduct after the Kiwibox Acquisition?

The Company intends to further develop and manage the social network Kiwibox website business acquired.

What happens if stockholders do not approve the Kiwibox Acquisition or if the minimum $3.5 million in equity is not raised?

 The Kiwibox Acquisition Agreement will terminate and Magnitude will seek other business opportunities. In such an event, the Company will need immediate funds to maintain its current, reduced level of operations and if it is unable to raise such funds, its financial condition will be materially adversely affected and it may need to further limit or curtail operations.

If approved, when will the Kiwibox Acquisition be completed?

It is expected that the Kiwibox Acquisition will be completed as soon as possible following this Consent Solicitation.

Am I entitled to Appraisal Rights in connection with the Kiwibox Acquisition?

 No. The holders of Company common stock or preferred stock are not entitled to appraisal rights under Delaware General Corporation Law, the Company’s Certificate of Incorporation or the Company’s Bylaws.

What will happen to my shares if the Kiwibox Acquisition is approved?

 The Kiwibox Acquisition will not alter the rights, privileges or nature of the Company’s common stock or preferred stock. A stockholder who owns shares of the Company’s common stock or preferred stock immediately prior to the Kiwibox Acquisition will continue to hold the same number of shares immediately after the Acquisition.

How does the Company’s Board of Directors recommend that I vote for the proposals contained in this Consent Solicitation?

 The Board of Directors recommends that you vote on the attached Consent Card (1) to approve the Kiwibox Acquisition, (2) to approve the increase in the Company’s authorized common shares from 300,000,000 to 700,000,000 common shares and (3) to change the Company’s corporate name to “KiwiAge Enterprises, Inc.”.

Who can sign the Consent Cards?

You can sign the written Consent Card attached to this document and vote your shares if our records show that you owned shares of our common stock as of May 15, 2007. On that date, a total of 231,195,681 shares of common stock were outstanding and entitled to vote by written consent in this solicitation of written consent. Each stockholder is entitled to one vote for each share of common stock held by such stockholder. The enclosed Consent Card shows the number of shares you can vote.
 
How do I vote my shares in this Consent Solicitation?

Follow the instructions on the enclosed Consent Card to vote on each proposal to be considered in this Solicitation Statement. Sign and date the Consent Card and mail it to Securities Transfer Corporation, 2591 Dallas Parkway, Suite 102, Frisco, Texas 75034, Attention: Proxy Department, in the enclosed envelope.
 
8

 
Can I change my vote after I return my Consent Card?
 
Yes. At any time before June 15, 2007, you can change your vote either by giving us a written notice revoking your Consent Card or by signing, dating, and returning to us a new Consent Card. We will honor the Consent Card with the latest date.

What do I do if my shares are held in “street name”?
 
If your shares are held in the name of your broker, a bank, or other nominee, that party should give you instructions for voting your shares.
 
What does it mean if I get more than one Consent Card?
 
It means you hold shares registered in more than one account. Sign and return all Consent Cards to ensure that all your shares are voted.
 
How many votes do I have?

 Stockholders who owned the Company’s common shares as of the close of business on May 15, 2007 are entitled to vote on the three matters identified in this Consent Solicitation. Each common share is entitled to one vote per share.

What vote is required to approve three proposals?

The Kiwibox Acquisition

The affirmative vote of a majority of the votes entitled to be cast by the holders of the Company’s outstanding common shares on the record date is required to consummate the acquisition of Kiwibox Media, Inc. through its merger with our Company subsidiary.

The Amendment to the Certificate of Incorporation, increasing the authorized common shares

The affirmative vote of a majority of the votes entitled to be cast by the holders of the Company’s outstanding common shares on the record date is required to increase the Company’s authorized common shares from 300,000,000 to 700,000,000 common shares.

The Amendment to the Certificate of Incorporation, changing our corporate name

The affirmative vote of a majority of the votes entitled to be cast by the holders of the Company’s outstanding common shares on the record date is required to change our corporate name to “KiwiAge Enterprises, Inc.”

Members of the Company’s Board of Directors and executive officers who collectively own 9,027,929 common shares , approximately 4.3% of the outstanding shares, have indicated that they intend to vote their consent cards for (1) the Acquisition of Kiwibox, (2) for the Amendment to our Certificate of Incorporation, increasing the authorized common shares from 300,000,000 to 700,000,000 common shares and (3) for the Amendment to or Certificate of Incorporation, changing our corporate name to “KiwiAge Enterprises, Inc.”

How are votes counted?
 
Only signed, dated and delivered Consent Cards will be accepted and counted on June 15, 2007, approving, withholding of consent or abstention on the two proposed Amendments to the Company’s Certificate of Incorporation. A Consent card which has been signed, dated and delivered to our transfer agent without indicating approval, withholding of consent, or abstention will constitute a consent to the Amendments.
 
9

 
Section 228 of the General Corporation Law of the State of Delaware states that, unless otherwise provided in the certificate of incorporation, any action that may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and those consents are delivered to the corporation by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which the proceedings of meetings of stockholders are recorded. The Company's Certificate of Incorporation contains no provision or language in any way limiting the right of stockholders of the Company to take action by written consent.

Only stockholders of record as of May 15, 2007, are entitled to consent, to withhold their consent, or to revoke their consent, to the Amendments. Stockholders are entitled to one vote for each outstanding share of Common Stock held at the record date. As of the record date there were 231,195,681 issued and outstanding shares of Common Stock.

Consents, once dated, signed, and delivered to the Company, will remain effective unless and until revoked by written notice of revocation dated, signed, and delivered to the Company at the address set forth below on or before June 15, 2007.
  
Who pays for this consent solicitation?
 
Magnitude does. In addition to sending you these materials, some of our directors and employees may contact you by telephone, by mail, or in person. None of our directors or employees will receive any extra compensation for any such solicitation.
 
10

 
Proposals to Stockholders

Proposal No. 1
The Acquisition of Kiwibox

Background of the Kiwibox Acquisition

During fiscal year 2006, management determined to seek a business opportunity for the Company and its shareholders. In early November, a representative of the New York investment bank, Southridge International, Inc., contacted management and a meeting was scheduled to introduce the principals of a social networking website known as Kiwibox.com. A meeting between Company management and the Kiwibox principals took place at the offices of Southridge in New York City and initial discussions exploring a potential business combination ensued.

Following a series of meetings and further negotiations, the three principals of Kiwibox and the Company signed a confidential Letter of Intent on January 5, 2007, pursuant to which the parties agreed to a proposed structure of a business combination between the two companies, agreed upon the terms of employment agreements for the three Kiwibox shareholders and to draft and execute a definitive agreement as soon as practicable.

Thereafter, Company and Kiwibox management began financial and legal due diligence reviews of each other’s business and organization. With the assistance of Kiwibox counsel, the parties began drafting the definitive agreement. On February 16, 2007, the Company’s Boartd of Directors unanimously approved the proposed transactions between the Company and Kiwibox. On February 19, 2007, the Company, Kiwibox Media, Inc. and the three Kiwiobox shareholders executed and delivered an Agreement and Plan of Reorganization which contained as an exhibit, the agreed upon terms and provisions of employment agreements for each of the three Kiwibox shareholders.

The Board of Directors of the Company considered the business and financial aspects of the Agreement and Plan of Reorganization and determined that the Kiwibox Acquisition was in the best interests of the Company and its shareholders.

In making its determination, the Board considered the following factors:

·
The Company’s ergonomic software business had not generated sales and revenues sufficient to support its continuing operations and continues to require the raising of additional equity capital to fund its operations:

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

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

·
The Company was in preliminary discussions with several of its ex-employees about licensing its line of ergonomic software products and assuming all customer support operations, which discussions, in fact, materialized with the execution and delivery of a certain License and Client Software Support Agreement with Imminent Technologies, LLC ("IMT"), pursuant to the principal terms of which, the Company appointed IMT as a non-exclusive licensee/reseller for its suite of ergonomic software products and as the exclusive provider of support services to the Company's current customers with service contracts.

After considering all of the above factors, the Board unanimously determined that the Kiwibox Acquisition was in the best interests of the Company and its shareholders.
 
11

 
 Based upon the foregoing, the Company’s Board recommends a vote for the Acquisition of Kiwibox on the enclosed Consent Card.
 
If the Company fails to get the shareholder’s approval for the Kiwibox Acquisition, our subsidiary will not merge with Kiwibox Media, Inc. and the acquisition will not occur. The holders of the Company’s common stock are not entitled to appraisal rights under the Delaware General Corporation Law, the Company’s Certificate of Incorporation or its Company’s Bylaws.

Members of the Company’s Board of Directors and its officers who own an aggregate 9,027,929 common shares, representing an aggregate approximate 4.3% of the shares outstanding, intend to vote these shares in favor of the Kiwibox Acquisition.

The Board of Directors, in making its decision to pursue the Kiwibox Acquisition, did not have the financial resources with which to hire an independent investment bank or other financial institution to do a due diligence review of the Kiwibox website and business and render an opinion on the value and fairness of the acquisition price to the shareholders the Company. Company management negotiated the best terms available for the Kiwibox Acquisition and did not rely upon any third party to advise them in the negotiations. Although Kiwibox and its three shareholders were represented and continue to be represented by the investment bank of Southridge International, Inc. of New York, the Company and its Board were not, nor are they now, represented by any investment bank.

The Kiwibox Acquisition Price: Stock, Cash, Employment Agreements and Stock to Potential Investors

·  Company Cash Payment to the Kiwibox Shareholders as part of the Acquisition Price:

The Company will pay the Kiwibox shareholders an aggregate cash payment of $300,000 at Closing.

·  Company Common Stock to be Issued as part of the Acquisition Price:

 The Company will pay the Kiwibox shareholders at Closing a number of Company common shares equivalent to an aggregate $1,500,000 in value, based upon the Company’s common stock “Market Price”. Market Price is the average price of our common stock sold during the 10 trading days preceding the Closing. For example, if the Market Price is determined to be $.05 per common share, then we will divide the $1,500,000 value by $.05 and issue a total 30,000,000 common shares to the Kiwibox Shareholders. Similarly, if the Market Price is determined to be $.025 per common share, then we will divide the $1,500,000 value by $.025 and we will issue 60,000,000 common shares to the Kiwibox Shareholders and 150,000,000 common shares if our Market Price falls to $.01. We have agreed that even if our Market Price is determined to be higher than $.05 per common share that we will issue no less than 30,000,000 common shares to the three Kiwibox Shareholders. The three Kiwibox Shareholders will divide our common shares between them based upon their percentage ownership of their Kiwibox shares. Holders of our common shares have the right to vote on all shareholder voting matters.

·  Company Preferred Stock to be Issued as part of the Acquisition Price:

In addition, the Company will issue to the three Kiwibox Shareholders at the closing an aggregate 43,610 Shares of preferred stock that are automatically convertible into shares of Company common stock upon the second anniversary date of the Closing. The amount of our common shares into which these preferred shares will be converted is based upon the value of $500,000, divided by the “Market Price” of our publicly traded common stock. Our Market Price for this conversion will be the average sales price of our common stock over for the twenty trading day period immediately preceding the second anniversary date of the Closing. For example, if the Market Price is determined to be $.05 per common share, then we will divide the $500,000 value by $.05 and convert the 43,610 preferred shares into an aggregate 10,000,000 common shares. If the Market Price is determined to be $.025 per common share, then we will divide the $500,000 value by $.025 and convert the 43,610 preferred shares into an aggregate 20,000,000 common shares, and if $.01 per share, the preferred shares will convert into 50,000,000 common shares. As with our Common Stock we have agreed to issue to the Kiwibox Shareholders, we have agreed that even if our Market Price at the time is determined to be higher than $.05 per common share, the 43,610 preferred shares shall convert into no less than 10,000,000 common shares. We will, therefore, issue aggregate common shares for these issuances ranging from an aggregate minimum 40,000,000 shares, if our Market Price is $.05 per share or higher, and possibly up to an aggregate 200,000,000 shares, if our Market Price is $.01 per share.
 
12


 
·
Company Cash and Stock Payments Through Employment Agreements

As part of the Acquisition agreement, the Company has agreed to execute and deliver employment agreements with each of the three Kiwibox Shareholders at the Closing. These employment agreements cover a term of two (2) years and pay each Kiwibox Shareholder an annual base salary of $150,000. In addition, the Company has agreed to pay each an annual bonus if certain business goals are met. The Company agreed to pay each a $100,000 bonus if the Kiwi Business has received no less than an average 215,000 “Unique Visitors” during either the 10th, 11th or 12th month of the first year of the term or achieved no less than $316,000 in gross revenues within the 12 moth period following the Closing. Alternatively, the Company agreed to pay each a $50,000 bonus if the Kiwi Business has received at least an average 175,000 but less than an average 215,000 “Unique Visitors” during either the 10th, 11th or 12th month of the first year of the term or at least $237,000 in gross revenues but less than $316,000 within the 12 moth period following the Closing. A “Unique Visitor” is a person who visits a Kiwibox website during any month during the term. For the second year of their employment agreements, the Company has agreed to pay each a $100,000 bonus if the Kiwi Business has received no less than an average 550,000 Unique Visitors during either the 22nd, 23rd or 24th month of the second year of the term or attained $1,961,000 in gross revenues, or a bonus of $50,000 each if the Kiwi Business has received at least an average 415,000 but less than an average 550,000 Unique Visitors during either the 22nd, 23rd or 24th month of the second year of the term or attained at least $1,500,000 in gross revenues but less than $1,961,000. Each Kiwibox Shareholder will receive a stock option to purchase up to 7,500,000 shares of our common stock at an exercise price equal to our stock Market Price as also determined by the 20-trading day average price preceding the Closing which shall vest and be exercisable by the Kiwibox Shareholders, 50% on the first anniversary date of the Closing, 25% 18 months after the Closing and 25% on the second anniversary of the Closing. Each may also earn a performance stock option to purchase up to an additional 3,000,000 shares of our common stock, 1,500,000 of which options shall vest and be exercisable by the Kiwibox Shareholders after the first anniversary date of the Closing if the Kiwi Business has received no less than an average 215,000 Unique Visitors during either the 10th, 11th or 12th month of the first year of the term or achieved $316,000 in gross revenues during the first year, and the balance, or 1,500,000 options shall vest and be exercisable by the Kiwibox Shareholders after the second anniversary date of the Closing if the Kiwi Business has received at least an average 550,000 Unique Visitors during either the 22nd, 23rd or 24th month of the second year of the term or achieved $1,961,000 in gross revenues during the second year of the agreements. The exercise prices for these stock options shall be the average sales price of the Company’s common stock during the 20-trading days preceding the Closing. 

 Each of the three employment agreements for each of the three Kiwibox Shareholders contain identical terms and provisions and provide that each will be entitled to participation in Company’s medical and health insurance coverage and all employee benefit plans, with paid vacations. These agreements also contain restrictive covenants against competition with the customary pledges of confidentiality, termination rights and legal claims provisions. Please refer to the copy of the employment agreement attached as Exhibit E to the Kiwibox Acquisition Agreement, attached as Exhibit A to this Consent Statement.

Kiwibox Acquisition Investment: $3,500,000 and Closing Costs/Public Company Operations: $2,500,000

The Minimum $3.5 million Kiwibox Investment

In order to close the Kiwibox acquisition, we must raise a minimum $3,500,000 in equity funds we have committed to invest in the Kiwibox business over the 18 month period following closing The Company’s Board of Directors has authorized a private placement of between 100,000,000 and 120,000,000 common shares in order to raise the $6 million for these purposes. Company officers and directors are in discussions with some of our business associates and shareholders who are accredited investors and with whom the Company has pre-existing business relationships in connection with the private placement. As of this date, we have no understandings, agreements or contracts with any potential investor to provide any amount of these private placement funds. If we can not raise the minimum $3.5 million in equity funds by Closing, the Kiwibox acquisition will not take place.
 
13

 
The $2.5 Million to Pay the Kiwibox Acquisition Costs and Fund our Public Company Operations

In addition to the minimum $3.5 million we seek to raise in our private placement to fund our investment commitment to the Kiwibox business, we are seeking to raise an additional $2.5 million to pay for the Acquisition closing costs, estimated to be between $1,000,000 and $1,200,000, as well as provide funds to pay for the public company operations for the same 18 month period following closing.

We anticipate that our Acquisition closing costs, ranging between $1,000,000 and $1,200,000, will pay for the following estimated fees: attorneys’ fees ($150,000 to $200,000), accountant’s fees ($100,000 to $150,000), investment banker’s/consultants’ fees ($150,000 to $250,000), finders’ fees ($600,000). We estimate that our costs to fund certain of the operations of the public company over the 18 month period following the closing of the Kiwibox Acquisition will be approximately between $1,300,000 and $1,500,000. Following the closing of the Kiwibox Acquisition, we expect to negotiate an employment agreement with our current President and Chief Executive Officer, Edward Marney. We have had preliminary discussions with Mr. Marney concerning his continued service to the Company following the Kiwibox Acquisition, and Mr. Marney has given the Company his commitment to do so, subject to negotiating an employment agreement satisfactory to both parties. Following the negotiation of an employment agreement with Mr. Marney, we expect him to devote all of his time to the development of the Kiwibox business. We have reached an agreement in principle with Mr. Eric Brahms, to employ him for three years as our Senior Vice President of Operations, at a base annual salary of $150,000 and we intend to finalize an employment agreement with Mr. Brahms in the near future. Mr. Brahms is currently serving as a consultant to the Company, devoting his time to the planning and development of the Kiwibox website business. Following the Kiwibox Acquisition, we intend to pay at least one-half of the cash compensation due to Edward Marney and Eric Brahms out of the $3.5 million we intend to invest in the Kiwibox business during the 18 month period following closing. We do not have employment agreements with any other persons.

Accordingly, the $1,000,000 to $1,200,000 in funds dedicated to certain of the public company expenses and operations during the 18 month period following the closing are estimated to be applied for: one-half of the salary and benefits for the Chief Executive Officer/President ($87,500 to $125,000 per year) and for our Senior Vice President of Operations, Eric Brahms ($75,000 to $87,500); full salary and benefits for our Chief Financial Officer ($125,000 to $135,000); full salary and benefits for one administrative person ($50,000 to $60,000); all audit fees for auditor ($50,000 to $75,000); all attorneys’ fees ($150,000 to $200,000); medical/insurance plan for these four persons ($25,000 to $30,000) with working capital/ miscellaneous ($104,000 to $87,500).

The Company can not provide any assurances to shareholders that it will be able to identify a source or sources for these equity funds or if such sources are identified, that such equity funds can be obtained by the Company on terms that it is currently offering: between 100,000,000 and 120,000,000 common shares.

Closing: on or about June 15, 2007

Although originally scheduled for on or before March 31, 2007, we have agreed with Kiwibox to extend the prospective date of Closing to on or before June 15, 2007. This means that if we do not receive shareholder approval to all three of the matters discussed in this Consent Solicitation and successfully raised the minimum $3.5 million for the Kiwibox investment on or before June 15, 2007, the Kiwibox principals may terminate the Acquisition Agreement. If the Kiwibox acquisition is terminated, the Company will have to immediately raise funds to sustain its limited operations, in which case, the Company’s financial condition and plan of operations would suffer a material adverse effect, potentially requiring the Company to curtail operations.
 
14

 
Conduct of Business Following the Closing

Assuming the Company obtains shareholder approval on the three matters discussed and presented in this Consent Solicitation and successfully raises the minimum $3,500,000 necessary to make the investment in Kiwibox and the $2.5 million necessary to fund the Acquisition closing costs and certain of the public company operating expenses, the Company anticipates working with the Kiwibox principals to further develop the content and market the offerings of the Kiwibox website.

Financial Statements and Selected Financial Data

Please see audited financial statements for the Company’s fiscal year ended December 31, 2006 contained in the Company’s annual report on Form 10-KSB attached as Exhibit D.

Selected Pro-Forma Financial Data

MAGNITUDE INFORMATION SYSTEMS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET

The following unaudited pro forma combined balance sheet, and statement of operations as of December 31, 2006, is based on the historical financial statements of the Company and the Subsidiary and gives effect to the pro forma adjustments described herein as though the Agreement and Plan of Reorganization had been consummated at December 31, 2006.

The unaudited pro forma combined balance sheet should be read in conjunction with the notes thereto and with the historical financial statements of the Company, as filed in its annual report on Form 10-KSB for the year ended December 31, 2006 , included in Exhibit D attached hereto. The unaudited pro forma combined balance sheet is not necessarily indicative of the Company's combined financial position that would have been achieved had the Agreement and Plan of Reorganization been consummated at December 31, 2006.

15

Unaudited Pro Forma Balance Sheet of Magnitude Information Systems, Inc.
December 31, 2006

   
Magnitude Information Systems, Inc.
 
Kiwibox Media, Inc.
 
Capital Raise Magnitude )1
 
Stock Issued to Kiwibox Stockholders )2,3
 
Elimination in Merger
 
Pro Forma Balance Sheet
 
Assets
                         
Current Assets
                         
Cash and cash equivalents
 
$
81,307
 
$
1,322
 
$
3,500,000
 
$
   
$
 
$
3,582,629
 
Accounts receivable
   
66
   
20,568
                     
20,634
 
Prepaiid expenses
   
39,789
                           
39,789
 
Miscellaneous receivables
           
3,000
                        
3,000
 
Total Current Assets
   
121,162
   
24,890
   
3,500,000
   
0
   
0
   
3,646,052
 
Property and Equipment, net
   
10,076
   
3,500
                     
13,576
 
Other Assets
   
37,890
   
3,224
                           
41,114
 
Total Assets
 
$
169,128
 
$
31,614
 
$
3,500,000
 
$
0
 
$
0
 
$
3,700,742
 
 
                                     
Liabilities and Stockholders' Equity (Deficiency)
                                     
Current Liabilities
                                     
Accounts payable and accrued expenses
 
$
466,746
 
$
26,798
       
$
 
$
   
$
 493,544
 
Deferred revenue
   
102,829
                           
102,829
 
Dividends payable
   
341,168
                           
341,168
 
Notes payable
   
442,450
                           
442,450
 
Current maturities of long-term debt
   
33,529
                           
33,529
 
Derivative liability for options and warrants
   
1,190,452
                           
1,190,452
 
Other current liabilities
   
97,439
   
26,383
                           
123,822
 
Total Liabilities
   
2,674,613
   
53,181
   
0
   
0
   
0
   
2,727,794
 
 
                                     
Stockholders' Equity (Deficiency)
                                     
Common stock
   
22,424
   
469
   
7,000
   
4,286
   
(469
)
 
33,710
 
Treasury stock
         
(3,236
)
             
3,236
   
0
 
Preferred convertible stock
   
110
               
44
         
154
 
Additional paid-in capital
   
33,112,773
   
46,431
   
3,493,000
   
(4,330
)
 
(2,767
)
 
36,645,107
 
Retained earnings
   
(35,640,792
)
 
218,598
                     
(35,422,194
)
Stockholders' loans
           
(283,829
)
                         
(283,829
)
Total Stockholders' Equity (Deficiency)
   
(2,505,485
)
 
(21,567
)
 
3,500,000
   
0
   
0
   
972,948
 
 
                                                 
Total Liabilities and Stockholders' Equity (Deficiency)
 
$
169,128
 
$
31,614
 
$
3,500,000
 
$
0
 
$
0
 
$
3,700,742
 
  
1)
Assumes placement at $0.05 /share
   
2)
Assumes average market price of $0.035 /share (average of ten trading days preceeding December 31, 2006) for 42,857,143 shares
   
3)
Issuance of 43,610 preferred shares, par value $0.001
 
16

 
Unaudited Pro Forma Income Statement of Magnitude Information Systems, Inc.
For the Year Ended December 31, 2006

 
 
Magnitude
Information Systems, Inc.
 
Kiwibox
Media, Inc.
 
Pro Forma
Balance Sheet
 
               
Revenues 
 
$
47,701
 
$
107,153
 
$
154,854
 
Cost of Sales 
   
145,496
         
145,496
 
                           
Gross Profit 
   
(97,795
)
 
107,153
   
9,358
 
                     
 Selling, general and administrative expenses
   
2,035,997
   
149,781
   
2,185,778
 
 Stock-based compensation
   
1,583,075
           
1,583,075
 
Loss from Operations 
   
(3,716,867
)
 
(42,628
)
 
(3,759,495
)
                     
Other Income (Expense) 
                   
 Interest Income
   
20
   
12,903
   
12,923
 
 Interest expense
   
(326,744
)
       
(326,744
)
 Other income
   
294,898
         
294,898
 
 Other expense
   
(180,309
)
         
(180,309
)
Total Other Income (Expense) 
   
(212,135
)
 
12,903
   
(199,232
)
                           
Income before Income Taxes 
   
(3,929,002
)
 
(29,725
)
 
(3,958,727
)
                     
Benefit from (Provision for) Income Tax 
   
33,740
   
(600
)
 
33,140
 
                           
Net Loss
 
$
(3,895,262
)
$
(30,325
)
$
(3,925,587
)
                     
 Dividends on Preferred Shares
   
(578,464
)
       
(578,464
)
Net Loss applicable to Common Shareholders 
 
$
(4,473,726
)
$
(30,325
)
$
(4,504,051
)
                     
Net Loss per Common Share 
 
$
(0.026
)
$
(0.001
)
$
(0.021
)
Weighted Average of Common Shares Outstanding 
   
170,692,731
   
42,857,143
)1
 
213,549,874
 
 
 
1)
Converting the 46,900 shares of Kiwibix common stock into Magnitude common stock (see Note 2 to Pro Forma Balance Sheet)
 
17

Accounting Treatment

The Company is taking the position that the merger of Kiwibox Media, Inc. with and into the Company’s subsidiary and the exchange of Kiwibox shares for Company shares should qualify as a tax free reorganization under section 368(a) of the Internal Revenue Code of 1986, as amended.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Fiscal Year 2006.

We are providing the following disclosures to shareholders concerning, among other information, a discussion of our financial results of our operations for the fiscal year ended December 31, 2006. Except for our update of the “Subsequent Events -Fiscal Year 2007” paragraph below, these disclosures are also contained in our Form 10-KSB for the fiscal year ended December 31, 2006, a copy of which is attached to this Consent Statement as Exhibit D.

Results of Operations for the Year Ended December 31, 2006

For the year ended December 31, 2006, the Company had revenues of $47,701 compared to $189,552 in 2005. Revenues consisted almost entirely of charges for maintenance and support services.

Gross profits amounted to negative $97,795. Gross profits were burdened with a fixed charge for amortization of certain proprietary software assets. Such software assets underlie the Company’s products and were 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. After deducting selling -, research -, and general and administrative expenses of $3,619,072 compared to the $2,448,509 recorded in 2005, the Company realized an operating loss of $3,716,867 compared to an operating loss of $2,410,670 in 2005. A large portion of such SG&A expenses is attributable to non-cash charges in connection with the valuation at market price of the underlying stock, of securities issued in connection with settlement agreements reached with a shareholder who was a former officer of the Company, and with the former president and CEO, which together amounted to $632,677. In addition, securities valued at approximately $950,000 were issued as compensation to consultants. Non-operating income and expenses included $326,744 net interest expense (including $291,762 of amortization of debt discounts due to recognition of a derivative conversion option, beneficial conversion features and detachable warrants issued with the debt), $102,762 income in connection with the change in fair value of a derivative conversion option on convertible debt, a charge of 174,954 for the impairment of software intangibles, and income of $192,136 from recording the change in fair value of derivative options and warrants reclassified as liabilities. The Company also realized a credit of $33,740 from the sale of net loss carry-forward tax credits pursuant to the New Jersey Emerging Technology and Biotechnology Financial Assistance Act. The year concluded with a net loss of $3,895,262. After accounting for dividends accrued and discounts on outstanding preferred stock which totaled $578,464 the net loss applicable to common shareholders was $4,473,726or $0.03 per share, compared to a loss of $2,341,492 or $0.02 per share for the previous year.

Liquidity and Capital Resources

In the absence of cash flow from operations, required working capital to finance ongoing operations was supplied primarily from new equity capital. The Company recorded $1,218,500 in new equity funding in the form of cash. The Company also assumed new private debt in the amount of approximately $440,000.
At December 31, 2006, the deficit in working capital amounted to $2,553,451 as compared to $1,016,230 at December 31, 2005. Stockholders’ equity showed an impairment of $2,505,485 at the end of the year, compared to an impairment of $664,381 at the beginning of the year. The negative cash flow from operations totaled $1,589,089 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” sections in the Company’s reports on Form 10-QSB during the year, as well as in the pertinent section of this report. During 2006, the Company had filed amendments to four previously filed registration statements on Form SB-2, all of which covered common shares directly issued as well as common shares underlying the previously issued convertible preferred stock and warrants, in connection with these and prior financing transactions. These filings were made on behalf of certain investors in the Company’s equities and proceeds of any sales of such registered securities will accrue entirely to such investors. The filings will shortly be updated with the current financial statements and forwarded to the Securities and Exchange Commission for review. 
 
18

 
At the time of this submission, the Company had no bank debt. At December 31, 2006 its short-term liabilities, aside from trade payables and accruals, consisted of certain notes and loans aggregating approximately $442,450. Accruals include $341,168 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. In order to remedy the resulting liquidity constraints and address any “going-concern” issues, management, during the third quarter, had drastically reduced staff and the level of on-going cash outlays for operations. In addition, management is currently negotiating 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.

Subsequent Events - Fiscal Year 2007

In August and December, 2006, we negotiated a termination agreement and debt conversion agreements, respectively, with our founder, Steven Rudnik, resulting in Mr. Rudnik’s departure from the Company and the conversion of approximately $125,000 due him under the terms of a note and prior agreements into 6,250,000 common shares and 3,125,000 five-year warrants, exercisable at $.05 per share. As a result, Ed Marney assumed the role of President and management recommended to the Board of Directors That the Company seek a new business opportunity. The Board of Directors determined it was in the best interests of the Company and its shareholders to scale-down its operations and staff during the third quarter of 2006 in order to decrease overhead. During 2006 we terminated seven employees and reduced our monthly cash expenses from the level at the beginning of the year by approximately $140,000 per month to approximately $60,000 per month during the fourth quarter.

In December, 2006, an investment banker introduced the owners of a social networking website known as Kiwibox.com to management. Following a period of mutual due diligence, the parties signed an Agreement and Plan of Reorganization on February 19, 2007, pursuant to the principal terms of which the Kiwibox business, owned by the corporation Kiwibox Media, Inc., will merge with our subsidiary and we will issue to the three owners of Kiwibox common stock and preferred stock, the number of which shall be based upon an aggregate value of $2,000,000, a $300,000 cash payment at closing and delivery to each of the three Kiwibox owners a two-year employment agreement that will pay each a base salary of $150,000 and stock options to purchase 7,500,000 common shares, vesting over a two-year period, with the ability to earn additional cash and stock bonuses based upon the attainment of certain business goals. The closing of the transaction with Kiwibox is scheduled to occur on or before June 15, 2007, and is subject, among other usual due diligence contingencies, to our having raised a minimum $3.5 million in cash by closing which we have promised to invest in Kiwibox in the 18-month period following closing. See “Summary of Acquisition Merger” and other disclosures in this Consent Statement for a more detailed description of our transactions with Kiwibox and its shareholders.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
Magnitude has made no changes in nor has had any disagreements with the its independent auditors during the last two years.
 
19

 
The Kiwibox Acquisition

The Parties to the Kiwibox Acquisition

The parties to the Kiwibox acquisition will be the Company, its wholly owned subsidiary, Magnitude Operations, Inc., Kiwibox Media, Inc. and the three Kiwibox shareholders.

The Effective Time

The Kiwibox acquisition will become effective promptly following the shareholder’s approval of the Kiwibox acquisition and the filing of the proposed Amendments to our Certificate of Incorporation, increasing our authorized common shares and changing our corporate name to KiwiAge Enterprises, Inc. with the Secretary of State, State of Delaware.

The Kiwibox Business Acquired

We are acquiring Kiwibox’s social networking website business through a merger and the Company will own all of the assets associated with Kiwibox’s business once the merger is consummated. The Kiwibox assets that we will acquire include the domain name of Kiwibox, all of its proprietary trade secrets, all of its software and methodologies and all aspects of the Kiwibox website.
 
The Agreement and Plan of Reorganization provides that the Company will assume the following liabilities of Kiwibox:

1. Kiwibox Legal Fees due Barton, Barton & Plotnik, LLP, up to $42, 500

2. Kiwibox Accounting Fees due J.H. Cohn up to $17,000

3. Kiwibox Investment Banking Fees due Southridge Investment Group, LLC of $15,000 and 2.5% of the stock transferable to the Kiwibox Shareholders pursuant to Article 3.2 hereof.

4. Up to $9,000 of Kiwibox American Express charges if related to business

Representations and Warranties

The Acquisition Agreement contains the customary representations and warranties by the parties, including representations and warranties regarding the following: (i) organization; (ii) authority with respect to the Acquisition Agreement; (iii) accuracy of financial statements; (iv) absence of litigation; and (v) consents and approvals and absence of violations of or conflicts with certain laws and agreements.

Covenants

The Acquisition Agreement contains customary covenants by the parties, including cooperation with the each other’s agents, full and reasonable access to documents, to operate their respective businesses in the ordinary course, not to solicit to engage in a similar transaction with any other party and during the two-year period following the closing, Magnitude covenants not to engage in any material acquisition or dispose of any material assets without the consent of at least two of the three Kiwibox Shareholders.

Closing Conditions

Conditions to Closing the Agreement with Kiwibox

The Acquisition Agreement is subject to the prior satisfaction or waiver of certain customary conditions and additional conditions, including:

·
that the respective representations and warranties of the parties contained in the Acquisition Agreement shall be true in all material respects as of the closing;
 
20


·
Kiwibox shall have delivered to Magnitude audited financial statements for its two fiscal years ended December 31, 2006 and 2005;

·
that the Company’s shareholders must approve the Kiwibox Acquisition and the Amendment to our Certificate of Incorporation, increasing our authorized common shares from 300,000,000 to 700,000,000 shares;

·
that Magnitude have $3,500,000 in funds available at the closing for its commitment to invest these monies into the Kiwibox business over the 18-month period following the Closing;

If any of the conditions to closing are not satisfied on or before June 15, 2007, the scheduled closing date, either the Company or Kiwibox may terminate the Agreement, in which case there shall be no liability or claims against any party.

Termination

The Acquisition Agreement may be terminated by the mutual consent of the parties, or by any party if a party breaches a covenant or fails to meet and does not waive a condition of closing.

Business and Plan of Operation of the New Company

Prior to the Kiwibox acquisition, the sole activities of our wholly owned subsidiary, Magnitude Operations, Inc., will have been to organize and enter into the Agreement and Plan of Reorganization. Following the Kiwibox acquisition, Magnitude Operations, Inc., into which Kiwibox Media, Inc. will have merged, will be to conduct the social networking website business previously conducted by Kiwibox Media, Inc. The Company with the three Kiwibox shareholders as new management team members, will develop and effectuate a business plan to expand the content and membership of the Kiwibox.com website.

Initially, the Kiwibox business will be funded by the $3,500,000 the Company is committed to raise as a condition to close the Kiwibox Acquisition. If these funds are raised and the Kiwibox Acquisition is consummated, Company management believes that these funds will be sufficient to sustain operations for at least the next 12 months, and probably for the first 18 months. In the event, however, that additional funds are needed, no assurances can be given that the Company will be able to find a source or sources for such additional funds or if identified, whether such funds can be obtained on terms and conditions that are favorable or even commercially reasonable.

PROPOSAL 2
AMENDMENT TO CERTIFICATE OF  INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

The Company's Board of Directors has unanimously adopted, subject to stockholder approval, an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of the Company's Common Stock from 300,000,000 shares to 700,000,000 shares.

A copy of the amendment to the Company’s Certificate of Incorporation, containing the above change is appended as Exhibit B to this Consent Solicitation.

Reasons for the Change to The Company’s Common Stock

As of May 15, 2007, the Record Date, the Company had 231,195,681 shares of issued and outstanding Common Stock, 12,107,408 outstanding stock options, 51,290,000 outstanding common stock purchase warrants, 93,190 preferred shares convertible into 757,198 common shares. If all the outstanding stock options, common stock purchase warrants and convertible preferred shares were exercised and/or converted by their holders an additional 64,154,606 common shares would be outstanding; this would represent an approximate 30% increase in our outstanding common shares.
 
21

 
In connection with the acquisition of Kiwibox and the employment agreements with the three Kiwibox Shareholders, we are committed to issue at the closing, during the between a minimum 162,500,000 and up to an estimated maximum 351,500,000 common shares and stock options:

·
Between 30,000,000 and 150,000,000 Common Shares for the Acquisition;

·
Between 10,000,000 and 50,000,000 Common Shares as a result of the automatic conversion of our preferred stock on the second anniversary date of the closing;

·
Between 22,500,000 and 31,500,000 Common Shares from exercise of stock options under their employment agreements, and;

·
Between 100,000,000 and 120,000,000 Common Shares issuable to the potential investors in our private placement, seeking to raise the minimum $3,5 million for the Kiwibox investment and the $2.5 million for the Acquisition closing costs and to fund certain public company operations.

The foregoing is only a summary of the terms and provisions of the Acquisition Agreement and the employment agreements. Shareholders should review these documents in their entirety for a full understanding of these terms and provisions, copies of which are attached and included in this Consent Statement as Exhibit A. (see “Summary of Terms of Acquisition”).

In connection with our private placement to raise the minimum $3.5 million to meet our investment commitment in connection with the Kiwibox Acquisition and the $2.5 million to pay Acquisition costs and fund certain public company operating costs, through the sale of between 100,000,000 and 120,000,000 common shares as authorized by our Board of Directors, meeting this projected share requirement would require using authorized but unissued common shares.

In addition, we believe that by increasing our authorized shares of common stock the Company will benefit by providing flexibility to issue common stock for a variety of future business and financial objectives without the necessity of delaying these actions in order to obtain further shareholder approval. These objectives include, but are not limited to raising additional equity capital for acquisitions and to provide for future compensation to officers, directors and employees and for other corporate purposes.

General Effect of the Changes to Our Common Stock

Shareholders will not realize any dilution in their percentage of ownership of the Company or in their voting rights as a result of shareholder approval to increase our authorized common shares. However, shareholders’ ownership percentage in our Company will suffer dilution if we close the Kiwibox Acquisition and we succeed in raising the minimum $3.5 million for the Kiwibox Acquisition and the $2.5 million to pay the Acquisition costs and fund certain public company expenses through the private placement of our common shares. Our Board has authorized us to privately place our common shares at between $.05 and $.06 per common share. Shareholders who purchased our common shares at prices above these amounts will also suffer a dilution in the value of their shares, the difference between the price a shareholder paid for his or her shares and the $.05 to $.06 private placement offering price.

In addition, the authorization of additional capital, under certain circumstances, may have an anti-takeover effect, although that is not the intent of our Board of Directors. For example, it may be possible for the Board of Directors to delay or impede a takeover or transfer of control of our Company by causing such additional authorized shares to be issued to persons or shareholders who might support our Board of Directors in opposing a takeover bid that the Board determines is not in the best interests of our Company and its shareholders. The increased authorized capital, therefore, may have the effect of discouraging unsolicited takeover bids. By potentially discouraging plans to commence unsolicited takeover bids, increasing our capital shares may reduce or eliminate any opportunities for our shareholders to sell their shares at the higher prices generally available in takeover bids or that may be available pursuant to a merger proposal. The increase in our common shares may have the effect of permitting our Board of Directors and officers to keep their positions with our Company and put them in a better position to resist any changes that shareholders may wish to take if they are dissatisfied with the performance of these management persons or if they are dissatisfied with the conduct of the Company’s business. Please be advised, however, that our Board of Directors did not unanimously approve the increase in our authorized common shares with the intent to use such a measure as a type of anti-takeover mechanism.
 
22

 
If our shareholders do not approve of the amendment to increase our authorized common shares, the Company will not be able to close the Kiwibox Acquisition and will not be able to raise the minimum $3.5 million investment requirement through the private placement of our common shares. If the Company is unable to both close the Kiwibox Acquisition and raise the minimum $3.5 million needed to close this transaction, its financial condition will be materially adversely affected and it may need to limit or curtail its operations.
 
THE BOARD OF DIRECTORS HAS ADOPTED RESOLUTIONS THAT SET FORTH THE AMENDMENT, DECLARE THE ADVISABILITY OF THE AMENDMENT, AND SUBMIT THE AMENDMENT TO THE STOCKHOLDERS FOR APPROVAL. THE BOARD RECOMMENDS APPROVAL OF THE AMENDMENT BY THE STOCKHOLDERS.
 
PROPOSAL 3
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO CHANGE THE COMPANY’S CORPORATE NAME TO “KIWIAGE ENTERPRISES, INC.”

As a result of the Company's entering the agreement to acquire Kiwibox and its recent agreement with Imminent Technologies, LLC, granting it the right to sublicense its ergonomic software products and assume all related customer support functions, resulting in a strategic change in the Company’s business, the Company believes that its new selected corporate name, KiwiAge Enterprises, Inc., will more accurately reflect the business of the Company and will generate wider name recognition in the media website development and financial communities. The Company will compete exclusively in the website social networking and media marketplace. With the surge in social networking websites, the Company's Board of Directors and management made the strategic decision to refocus the organization on this fast-growing marketplace once the opportunity presented itself to acquire the website and assets of Kiwibox.

THE BOARD OF DIRECTORS HAS ADOPTED RESOLUTIONS THAT SET FORTH THE AMENDMENT, DECLARE THE ADVISABILITY OF THE AMENDMENT, AND SUBMIT THE AMENDMENT TO THE STOCKHOLDERS FOR APPROVAL. THE BOARD RECOMMENDS APPROVAL OF THE AMENDMENT BY THE STOCKHOLDERS.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On March 31, 2000, the Company and its former President and Chief Executive Officer agreed to convert a current liability payable to him in the amount of $374,890 into a Company obligation, of which $100,000 was subsequently classified as due on demand, which was repaid in April 2002, with the remaining balance of $274,890 maturing July 1, 2002. On February 19, 2002, the maturity of the term portion of $274,890 was extended to July 2003, and the board of directors of the Company approved a change in the conversion option towards a rate of $0.10 per share. In January 2004, $175,000 was repaid and the maturity of the remaining open balance of $99,890 was extended to January, 2005. This amount has been converted into common stock and warrants pursuant to a settlement agreement entered into in December 2006.
 
23

 
In May 2005, the Company and its former President and Chief Executive Officer agreed to convert most of his base salary for the remainder of the year 2005 into 1,000,000 shares of restricted common stock and 1,000,000 warrants, exercisable during three years at the price of $0.15 per share, in lieu of $100,000 cash. 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 the Company’s current private placement. We replaced the surrendered and cancelled common shares with shares of our Series E preferred stock which automatically converted in March, 2006, into 11,247,607 common shares, the amount of common shares equal to those surrendered. We also intend to reissue the 4,507,709 stock options and 2,283,916 warrants also surrendered for cancellation by our officers and directors with an equal amount of common shares underlying these securities. The recipients of the Series E preferred stock have waived their right to receive any dividends on their shares.

During 2006 and 2005, one outside director of the Company who also serves as the Company’s general and securities counsel, was paid an aggregate $96,121 and $131,140, respectively, for legal services.

On August 8, 2006, Steven D. Rudnik resigned from the position of Chairman of the Board of Directors of the Company. Pursuant to the principle terms of the resignation agreement, (a) his current employment agreement was terminated, (b) he resigned the position of chairman, (c) he received 6 million restricted common shares plus cash payments totaling $60,000.00 to be paid in installments through November 1, 2006, and (d) that options and warrants for an aggregate 4,486,875 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.

On December 13, 2006, the Company and Steven D. Rudnik, our former President and Chief Executive Officer signed a second settlement agreement, pursuant to the principal terms of which Mr. Rudnik exchanged a Company promissory note due him in the principal amount of approximately $100,000, a $15,000 payment due him under his resignation agreement of August 8, 2006 and certain interest payments by conversion into 6,250,000 common shares and 3,125,000 warrants, exercisable over a three year period at an exercise price of $.05 per share. The Company also agreed to reissue the previously terminated stock options and warrants on or before February 18, 2007, comprised of 1,583,333 warrants to purchase common shares at the exercise price of $.10 per share anytime during the three-year period, commencing February 18, 2007, and 2,903,542 stock options to purchase common shares at the exercise price of $.10 per share anytime during the three-year period commencing February 18, 2007. This agreement also provides Mr. Rudnik a 12-month "reset" provision that entitles him to automatically benefit from any terms that are more favorable than those set forth in the agreement, including a more favorable debt conversion rate or equity investment price, that the Registrant grants to any party over the next 12 months.

On January 2, 2007, the Company and a former employee, Steven W. Jagels settled a lawsuit commenced by Mr. Jagels against the Company based upon claims which included breach of his employment agreement. We agreed to make a payment of $20,040 to Mr. Jagels and to issue 3,000,000 common shares to him by January 7, 2007. We also agreed to include these shares in this registration statement and when it is declared effective by the SEC, to cause a buyer to purchase these shares from Mr. Jagels for $75,000 prior to February 28, 2007. Upon Mr. Jagels’ receipt of these proceeds, the lawsuit will be discontinued with prejudice, or if not consummated as agreed, the lawsuit will continue.
 
PRINCIPAL STOCKHOLDERS

The following table sets forth, as of May 15, 2007, the record and beneficial ownership of common stock of the Company by each executive officer and director, all executive officers and directors as a group, and each person known to the Company to own beneficially, or of record, five percent or more of the outstanding shares of the Company:
 
Title
 
Name and Address of
 
Amount and Nature of
 
Percent
of Class )*
 
Beneficial Owner
 
Beneficial Ownership (1)
 
of Class
Common Stock
 
 
 
 
 
 
   
Steven L. Gray
 
5,614,096 (2)
 
2.5%
 
 
Joerg H. Klaube
 
1,400,000      
 
0.6%
 
 
Joseph J. Tomasek
 
2,847,166 (3)
 
1.1%
 
 
Edward L. Marney
 
0
 
 
 
24

 
Address of all persons above: c/o the Company.

All Directors and Executive Officers
 
9,861,262     
 
4.3%
as a Group (4 persons)
 
 
 
 
 
 
 
 
 
 
 
 
 
Michael G. Martin
 
13,000,000 (4)
 
5.7%
 
 
12 Tillman Ct, Bridgewater, NJ 08807
 
 
 
 
 
 
33 Group LLC
 
12,500,000      
 
5.7 %
 
 
3589 NW 61 Circle, Boca Raton, FL 33496
 
 
 
 
 
 
Azzurri Group, LLC
 
12,500,000      
 
5.7%
 
 
3589 NW 61 Circle, Boca Raton, FL 33496
 
 
 
 

)* The Company also has issued and outstanding as of November 15, 2006, 109,857 shares of its Senior Convertible Preferred Stock, with concentrations in excess of 10% for one or more of the holders of such stock, however, none of such shares bear any voting rights.
 

(1)  
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock which such person has the right to acquire within 60 days of November 15, 2006. For purposes of computing the percentage of outstanding shares of Common Stock held by each person or group of persons named above, any security which such person or persons has or have the right to acquire within such date is deemed to be outstanding but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnote to this table and pursuant to applicable community property laws, the Company believes based on information supplied by such persons, that the persons named in this table have sole voting and investment power with respect to all shares of Common Stock which they beneficially own.
   
(2)  
Includes stock options for 500,000 shares.

(3)  
Includes warrants for 333,333 shares.
   
(4)  
Includes stock options for 750,000 shares.

(5)  
Includes stock options for 2,903,542 shares and warrants for 4,708,333 shares.
 
 DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES 

The names and ages of all directors and executive officers of the Company are as follows:
 
Name
 
Positions
 
Term Served (Expires)
 
 
 
 
 
Edward L. Marney 
 
Director
 
May 5, 2006
 
 
President, Chief Executive
   
 
 
Officer
 
 
 
 
 
 
 
Joerg H. Klaube Sr.
 
Director
 
December 2, 2005
   
Vice President, Secretary,
   
 
 
Chief Financial Officer
 
 
 
 
 
 
 
Steven L. Gray
 
Director
 
August 30, 2006
 
 
Chairman of the Board
   
 
 
 
 
 
Joseph J. Tomasek 
 
Director
 
Feb. 11, 1999 (2006)
 
25

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

Edward L. Marney, Age 49 - Director, President and Chief Executive Officer.  Mr. Marney joined Magnitude, Inc. in May 2006 and was appointed a director in August 2006.  From 2003 to 2006, Mr. Marney was Managing Director of Triad Partners, LLC, a privately held investment company.  Prior to that from 2001-2003 Mr. Marney was Vice President, Business Intelligence at Medical Manager/WebMD Corporation.  Mr. Marney founded TouchPoint Software Corporation in 1994 and served as its CEO & President until its acquisition by WebMD Corporation in 2001.  Prior to that Mr. Marney served in various marketing and sales roles at Medical Information Technology and Burroughs Corporation.  He graduated with a B.S. from the Whittemore School of Business and Economics at the University of New Hampshire.

Joerg H. Klaube, Age 65 - Director and Chief Financial Officer, Senior Vice President. Joined Magnitude, Inc. in December 1994. From 1993 to 1994 he was Vice President Administration for Comar Technologies Inc., a computer retail firm, and from 1983 to 1993 Chief Financial Officer for Unitronix Corporation, a publicly traded software design and computer marketing firm. Prior to that, Mr. .Klaube was employed for 16 years with Siemens Corp., the US subsidiary of Siemens AG, where he served most recently as Director of Business Administration for its Telecommunications Division. He graduated from the Banking School in Berlin, Germany, and holds an MBA degree from Rutgers University.

Joseph J. Tomasek, Age 60 - Director. Mr. Tomasek was appointed a director in February 2000. He has been engaged in the private practice of corporate and securities law in his own law firm for the last ten years. Mr. Tomasek was appointed to serve as general counsel for the Company in 1999. In addition to his work with the Company, Mr. Tomasek represents several other clients in the area of corporate law.

Steven L. Gray, Age 57 - Director. Mr. Gray was elected to serve on the Board on May 18, 2000. He is a resident of Venice, Florida. For the past six years, Mr. Gray has served as the President and is a shareholder of a private Florida corporation engaged in the retail distribution of nutritional products. This corporation has a customer base in nine countries. Prior to that time, Mr. Gray ran his own real estate development company, specializing in the design and construction of multi-family housing.

Family Relationships
 
There are no family relationships between any of the directors or executive officers.
 
26

 
EXECUTIVE COMPENSATION
2006 SUMMARY COMPENSATION TABLE

The following table sets forth the cash compensation and executive capacities for the fiscal years ended December 31, 2006 and December 31, 2005, for the chief executive officer and for each executive officer whose aggregate cash remuneration exceeded $100,000, for all executive officers as a group, and for certain other most highly compensated employees:

 (1)
Name and
Principal Position
 
Year
 
Salary
($)
 
Bonus
($)
 
Stock
Awards
($)
 
Option Awards
($)
 
Non-Equity Incentive Plan Compensation
($)
 
Non-Qualified Deferred Compensation Earnings
($)
 
All
Other
Compen
sation
($)
 
Total
($)
 
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
 
 
Edward L. Marney
Chief Executive
Officer,
President
   
2006
   
86,538
   
   
   
   
   
   
5,950
   
92,488
 
Steven D. Rudnik
Former Chief Executive Officer,
President
   
2006
2005
   
64,788
33,333
   
 
-
   
577,105
124.306
   
   
 
-
   
 
-
   
45,000
   
686,893
157,639
 
Mark Chroscielewski
Former Sr. Vice President
Business Development
   
2006
2005
   
82,185
125,000
   
 
-
   
   
   
 
-
   
 
-
   
 
12,900
   
82,185
137,900
 
Joerg H. Klaube
Sr. Vice President,
CFO
   
2006
2005
   
61,376
117,308
   
-
   
   
   
-
   
-
   
2,626
12,203
   
 
129,511
 
Steven W. Jagels
Former Sr. Vice President
Information Systems
   
2006
2005
   
61,875
108,333
   
-
   
   
   
-
   
-
   
61,875
13,556
   
 
121,889
 
Joseph J. Tomasek, Esq., Director and General Legal Counsel
Legal Fees:
   
2006
2005
   
   
   
   
   
   
   
96,121
131,140
   
 
131,140
 
Steven Gray
Director
   
2006
   
30,000
   
   
   
   
   
   
87,167
   
117,167
 
All executive officers
As a group (2 persons)
   
2006
2005
   
147,914
117,308
   
-
   
   
   
-
   
-
   
8,576
12,203
   
156,490
12,203
 
 
27

 
Explanation: No current Company officer or employee has an employment agreement with the Company. All of the items of compensation paid to the officers and directors listed in the above Summary Compensation Table are discussed in the following paragraphs, under the individual officer’s or director’s name.

Edward L. Marney; 2006. Ed Marney joined the Company in May, 2006, becoming first our Chief Executive Officer, then our President and a director. We paid Mr. Marney a cash salary of $86,538 and reimbursed $5,950 of healthcare payments to him during 2006.
 
Steven D. Rudnik; 2006 and 2005. We paid our former CEO and President, Steven D. Rudnik, a cash salary of $64,788 during fiscal year 2006. On August 8, 2006, Mr. Rudnik terminated his employment agreement with us in exchange for 6,000,000 restricted common shares and aggregate cash payments of $60,000. The aggregate amount of compensation of $577,105 included in the “Stock Awards” column above, includes these 6,000,000 restricted common shares which we valued at $.04 per share, the average public market price of the Company’s common stock on the date of this settlement agreement, August 8, 2006. On December 15, 2006, the Company negotiated a second agreement with Mr. Rudnik, pursuant to which the Company exchanged (i) 6,250,000 common shares, which we valued at $.03 per share, the average public market price of the Company’s common stock on the date of the exchange agreement, December 15, 2006, (ii) 3,125,000 common stock purchase warrants, exercisable over the 3-year period commencing January 18, 2007 and exercisable at an exercise price of $.05 per common share, which we valued at $83,750 (iii) 1,583,333 common stock purchase warrants, exercisable over the 3-year period commencing January 18, 2007 and exercisable at an exercise price of $.10 per common share, which we valued at $23,592 and (iv) 2,903,542 common stock options, exercisable over the 3-year period commencing January 18, 2007 at the stock option exercise price of $.10 per common share, which we valued at $42,263, for a Company promissory note in the approximate principal amount of $100,000, approximately $10,000 of accrued interest thereunder and a $15,000 debt.

In addition, the amount of “All Other Compensation” represents cash payments of $45,000 made by the Company in connection with the August 8, 2006 settlement agreement and $3,250 paid by the Company for Mr. Rudnik’s life insurance.

 During fiscal year 2005, the Company agreed to convert $100,000 of Mr. Rudnik’s cash salary into 1,000,000 restricted common shares and 1,000,000 common stock purchase warrants, exercisable over the 3-year period, commencing on June 8, 2005, and exercisable at the exercise price of $0.15 per common share. In addition, this amount includes Company payments of $21,056 for car payments and $3,250 representing payments made for Mr. Rudnik’s life insurance.

Mark Chroscielewski; 2006 and 2005: During fiscal year 2006, the Company paid this former executive $82,185 in Salary. During 2005, we paid Mr. Chroscielewski a cash salary of $125,000 and in the column “All Other Compensation” above for 2005, we made car payments on his behalf in the aggregate amount of $4,000 and insurance premium payments of $8,900.

Joerg H. Klaube 2006 and 2005. We paid our Chief Financial Officer a cash salary of $ 61,376 during 2006 and in the column “All Other Compensation” in the above table for 2006,life insurance premium payments on this executive’s behalf in the amount of $2,626. During fiscal year 2005, the Company paid Mr. Klaube cash salary of $117,308 and as indicated in the column “All Other Compensation” in the above table for 2005, we made life insurance premium payments on this executive’s behalf in the amount of $2,626 and car payments in the amount of $9,577.
 
28

 
Steven Jagels 2006 and 2005: We paid this former executive a cash salary of $61,875 during 2006. During fiscal year 2005, the Company paid Mr. Jagels a salary of $108,333 and as indicated in the column “All Other Compensation” in the above table for 2005, we made life insurance premium payments on this executive’s behalf in the amount of $1,940 and car payments in the amount of $11,616.

Joseph J. Tomasek 2006 and 2005: During fiscal years 2006 and 2005, the Company paid $ 96,121 and $ 131,140, respectively, to Mr. Tomasek for his legal services rendered to the Company.
 
Steven Gray 2006. During fiscal year 2006, we issued an aggregate 1,550,000 restricted common shares and 500,000 common stock purchase warrants to Mr. Gray for services rendered to the Company. During 2006, Mr. Gray assisted the Company in its change of management, providing day-to-day assistance in operations, customer relations including, interviewing potential candidates for management positions and coordinating the various audit schedule and management review projects. As set forth in the column “All Other Compensation” in the above table for 2006, we valued the 1,550,000 restricted common shares based upon their average public market trading price as of the dates we issued these shares to Mr. Gray, totaling $73,000 and thw 500,000 warrants at $14,450, based upon a formula called the Black Sholes Model.

Stock Options and Stock Option Plans:

No stock options or other grants were made to any eligible participants, including employees during fiscal years 2006 and 2005 pursuant to the Company’s 1997 Stock Option Plan or the Company’s 2000 Stock Incentive Plan.
 
1997 Stock Option Plan:

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

As adopted, the 1997 Plan permits the grant of stock options to employees, directors and key consultants of the Company. It provides for the issuance of incentive stock options within the meaning of Section 422 of the Internal Revenue Code and non-qualified stock options. The 1997 Plan provides for options covering up to an aggregate 1,000,000 shares of Common Stock. The 1997 Plan was approved by the Company’s stockholders. There are no available shares of common stock under the 1997 Plan.
 
The 1997 Plan is administered by the Board of Directors. Each option is evidenced by a written agreement in a form approved by the Board of Directors. No options granted under the 1997 Plan are transferable by the optionee other than by will or by the laws of descent and distribution, and each option is exercisable, during the lifetime of the optionee, only by the optionee.
 
Under the 1997 Plan, the exercise price of an incentive stock option must be at least equal to 100% of the fair market value of the Common Stock on the date of grant (110% of the fair market value in the case of options granted to employees who hold more than ten percent of the voting power of the Company’s capital stock on the date of grant). The exercise price of a non-qualified stock option must be not less than 85% of the fair market value of the Common Stock on the date of grant. For both incentive stock options and non-qualified stock options, the exercise price must not be less than the par value of a share of the Common Stock on the date of grant. The term of any stock option is not to exceed ten years (five years in the case of an incentive stock option granted to a ten percent holder). The Board of Directors has the discretion to determine the vesting schedule and the period required for full exercisability of stock options; however, in no event can the Board of Directors shorten such period to less than six months. Upon exercise of any option granted under the 1997 Plan, the exercise price may be paid in cash, and/or such other form of payment as may be permitted under the applicable option agreement, including, without limitation, previously owned shares of Common Stock.
 
29

 
2000 Stock Incentive Plan
 
The 2000 Incentive Stock Plan (the “2000 Plan”) permits the grant of stock options, stock appreciation rights and stock grants to employees, directors and key consultants of the Company. It provides for the issuance of incentive stock options within the meaning of Section 422 of the Internal Revenue Code as well as non-qualified stock options. It also provides for the grant of stock appreciation rights, either alone or in tandem with other grants, and restricted stock grants. The 2000 Plan provides for grants covering up to an aggregate 5,000,000 shares of Common Stock. The 2000 Plan was approved by the Company’s stockholders. There are no available shares of common stock under the 2000 Plan. The 2000 Plan, as with the 1997 Plan, is administered by the Board of Directors. Each award or grant is evidenced by a written agreement in a form approved by the Board of Directors. No awards granted under the 2000 Plan are transferable by the recipient other than by will or by the laws of descent and distribution, and each option is exercisable, during the lifetime of the recipient, only by the recipient.

Under the 2000 Plan, the exercise price of an incentive stock option must be at least equal to 100% of the fair market value of the Common Stock on the date of grant (110% of the fair market value in the case of options granted to employees who hold more than ten percent of the voting power of the Company’s capital stock on the date of grant). The exercise price of a non-qualified stock option may be fixed by the Board of Directors. For incentive stock options, the exercise price must not be less than the 100% of the fair market value of the Common Stock on the date of grant. The term of any stock option is not to exceed ten years (five years in the case of an incentive stock option granted to a ten percent holder). The Board of Directors has the discretion to determine the vesting schedule for any awards or grants issued as well as and the period required for full exercisability of stock options; however, in no event can the Board of Directors shorten such period to less than six months. Upon exercise of any option granted under the 2000 Plan, the exercise price may be paid in cash, and/or such other form of payment as may be permitted under the applicable award agreement, including, without limitation, previously owned shares of Common Stock.
 
30

 
Outstanding Equity Awards At Fiscal Year-End Table 
 
Name and
Principal Position
 
Number of Securities
Underlying
Unexercised
Options
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
 
Equity
Incentive
Plan Awards:
Number of Underlying
Unexercised
Unearned
Options
 
Option
Exercise
Price
 
Option Expira-tion
Date
 
Number of
Shares or Units of
Stock That Have Not Vested)
 
Market
Value of Shares or Units of
Stock That Have not Vested
 
Equity
Incentive
Awards
Shares, Units
Or Other
Rights
That
Have Not
Vested
 
Equity
Incentive 
Plan
Awards:
Market
Or
Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
 
 
 
Total
($)
(j)
 
Name
                                         
Edward L. Marney
Chief Executive
Officer,
President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-
 
 
-
 
-
 
 
 
Steven D. Rudnik
Former Chief Executive Officer,
President
   
2,903,542
   
   
-
 
$
0.10
   
1/6/10
   
-
   
-
   
   
   
 
Mark Chroscielewski
Former Sr. Vice President
Business Development
   
   
   
-
   
   
   
-
   
-
   
8,400
   
   
 
Joerg H. Klaube
Sr. Vice President,
CFO
   
   
   
-
   
   
   
-
   
-
   
1,710
   
   
 
Steven W. Jagels
Former Sr. Vice President
Information Systems
   
250,000
   
   
-
 
$
0.1325
   
2/18/07
   
-
   
-
   
1,940
   
   
 
Joseph J. Tomasek, Esq., Director and General Legal Counsel
   
   
   
   
   
   
   
   
   
   
 
Steven Gray
Director
   
500,000
   
   
 
$
0.15
   
1/01/09
   
   
   
   
   
 
All executive officers
As a group (2 persons)
   
500,000
   
   
-
   
   
   
-
   
-
   
   
   
 
 
Compensation of Directors:

The Company has not paid nor does it owe any compensation to any of its Directors for their service as directors and members of the Board of Directors during the past two fiscal years of 2006 and 2005. 
 
31

 
CORPORATE GOVERNANCE AND CODE OF ETHICS

The Company has always been committed to good corporate governance. In furtherance of this commitment, during 2002 the Board of Directors expanded the duties of the Company’s Audit Committee by increasing the Committee's duties specifically to include responsibility and oversight of corporate governance matters and adherence to the Company’s Code of Ethics. A copy of the Corporate Code of Ethics and Conduct had been included as an exhibit to the Company’s report on Form 10-KSB for the year ended December 31, 2002.
 
Our Board of Directors has determined that none of its current members, Edward L. Marney, Joerg H. Klaube, Joseph J. Tomasek and Steven Gray, are independent in accordance under applicable securities laws. It is the intention, however, of the Board of Directors, to identify and appoint independent directors in the current fiscal year.
Board Committees

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

COMPENSATION AND NOMINATING COMMITTEES

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

THE CONSENT PROCEDURE

Only stockholders of record as of May 15, 2007, are entitled to consent, to withhold their consent, or to revoke their consent, to the Amendment. Stockholders are entitled to one vote for each outstanding share of Common Stock held at the record date. As of the record date there were 231,195,681 issued and outstanding shares of Common Stock.

Consents, once dated, signed, and delivered to the Company, will remain effective unless and until revoked by written notice of revocation dated, signed, and delivered to the Company at the address set forth below on or before June 15, 2007.

The Kiwibox acquisition and the Amendments will be approved if by June 15, 2007, the Company holds unrevoked written consents of stockholders approving the Kiwibox acquisition and the Amendments from a majority of the outstanding shares of Common Stock at the Record Date. Consequently, the withholding of consent, abstentions and the failure to deliver a Consent Card would all have the effect of a vote against approval of the Kiwibox acquisition and the Amendments. If a stockholder holds his shares in "street name" and fails to instruct his broker or nominee as to how to vote his shares, the broker or nominee may not, pursuant to applicable stock exchange rules, vote such shares and, accordingly, such shares will have the effect of a vote against theKiwibox Acquisition and the Amendments. Stockholders are requested to indicate approval of the Kiwibox acquisition and the Amendments by signing and dating the Consent Card, checking each box on the Consent Card which corresponds to the approval of each of the Kiwibox acquisition and the Amendments, and delivering the Consent Card to the Company's transfer agent at the address set forth below. Withholding of consent to the Kiwibox acquisition and the Amendments, or abstention with respect to the approval of the Kiwibox acquisition and the Amendments, may be indicated by signing and dating the Consent Card, checking the box which corresponds to withholding of consent for each of the proposals or abstention with respect to the approval of each of the three proposals, respectively, and delivering the Consent Card to the Company's transfer agent at the address set forth below.
 
32

 
A CONSENT CARD WHICH HAS BEEN SIGNED, DATED AND DELIVERED TO THE COMPANY'S TRANSFER AGENT WITHOUT INDICATING APPROVAL, WITHHOLDING OF CONSENT, OR ABSTENTION WILL CONSTITUTE A CONSENT TO THE KIWIBOX ACQUISITION AND TO THE AMENDMENTS.
 
Consent Cards may be delivered to the following address:
 
Securities Transfer Corporation
2591 Dallas Parkway, Suite 102
Frisco, Texas 75034
Attention: Proxy Department

Consent Cards should be delivered to the Company's transfer agent as soon as possible. An addressed return envelope is enclosed for this purpose, which requires no postage if mailed in the United States. Consent Cards and revocations of consents will be deemed to have been received by the Company upon actual delivery at the above address.

ABSENCE OF APPRAISAL RIGHTS

Stockholders who abstain from consenting with respect to the three proposals, who withhold consent to the proposals, or who do not deliver a Consent Card do not have the right to an appraisal of their shares of Common Stock or any similar dissenters' rights under applicable law.

EXPENSE OF CONSENT SOLICITATION

The Company will bear the entire cost of the solicitation, including the preparation, assembly, printing and mailing of this Consent Statement and any additional material furnished to stockholders. Brokerage firms and other custodians, nominees, and fiduciaries will be requested to forward the soliciting material to their principals and to obtain authorization for the execution of consents. The Company may, upon request, reimburse brokerage firms, and other custodians, nominees, and fiduciaries for their reasonable expenses in forwarding solicitation materials to their principals.

ADDITIONAL INFORMATION

The Company files reports and other information with the Securities and Exchange Commission. Copies of these documents may be obtained at the SEC's public reference room in Washington, D.C. The Company's SEC filings are also available from commercial document retrieval services or on the SEC's web site at http://www.sec.gov. Stockholders may also request a copy of the Company's financial reports filed with the SEC by contacting the Company's Secretary in writing at 1250 Route 28, Suite 309, Branchburg, New Jersey 08876 or by calling (908) 927-0004.

By Order of the Board of Directors
 
Joerg H. Klaube, Secretary
 
May 18, 2007
Branchburg, New Jersey
 
33

 
IMPORTANT
PLEASE COMPLETE, SIGN AND DATE YOUR WRITTEN CONSENT AND PROMPTLY
RETURN IT IN THE ENCLOSED ENVELOPE

WRITTEN CONSENT OF THE STOCKHOLDERS
OF
MAGNITUDE INFORMATION SYSTEMS, INC.

This consent is solicited by the Board of Directors. When properly executed, this consent will be voted as designated by the undersigned on the reverse side. If this consent is signed, dated, and delivered to Magnitude Information Systems, Inc. with no designation by the undersigned, this consent will constitute the stockholder's consent to and approval of the amendments.
[X] PLEASE MARK AS IN THIS SAMPLE.

Approval of the Kiwibox Acquisition by the Company

MARK ONLY ONE OF THE FOLLOWING THREE BOXES:
  
o FOR 
o WITHHOLD
o ABSTAIN

Amendment No. 1 to increase the authorized Common Stock of the Company from 300,000,000 shares to 700,000,000 shares.

MARK ONLY ONE OF THE FOLLOWING THREE BOXES:
 
o FOR 
o WITHHOLD
o ABSTAIN

Amendment No. 2 to change the corporate name of the Company to “KiwiAge Enterprises, Inc.”.

MARK ONLY ONE OF THE FOLLOWING THREE BOXES:
 
o FOR 
o WITHHOLD
o ABSTAIN
 
   
 (Please sign and date below) 
 
 
 
 
 
 
Dated:  __________________________
 
Signature of Stockholder(s)
 
   
Signature of Stockholder(s)
 
Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
 
34

Exhibit A
 
AGREEMENT AND PLAN OF REORGANIZATION
 
This AGREEMENT AND PLAN OF REORGANIZATION dated as of 19 February, 2007 (the “Agreement”), between Magnitude Information Systems, Inc., a Delaware corporation (“Magnitude”), Kiwibox Media, Inc. , a Delaware corporation (“Kiwibox”) and Magnitude Operations, Inc., a wholly-owned Subsidiary of Magnitude (in organization) (“Subsidiary”) and the shareholders of Kiwibox, Lin Dai, Ivan Tumanov, and Michael Howard (the “Kiwibox Shareholders”) Kiwibox. Magnitude and Subsidiary may also be referred to herein as the “Constituent Corporations” or the “Parties.”
 
WHEREAS, the Parties acknowledge and affirm the following:
 
 
A.
Magnitude is a corporation duly organized and existing under the laws of the State of Delaware.
 
 
B.
Kiwibox is a corporation duly organized and existing under the laws of the State of Delaware.
 
 
C.
Subsidiary is a corporation which is 100% owned by Magnitude and is duly organized and existing under the laws of the State of Delaware.
 
 
D.
The Delaware General Corporation Law (the “DGCL”) permits the merger of two domestic business corporations of the State of Delaware with and into each other.
 
   
  
E.
Magnitude and Kiwibox and their respective Boards of Directors declare it advisable and to the advantage, welfare, and best interests of said corporations and their respective stockholders to merge Subsidiary with and into Kiwibox pursuant to the provisions of the DGCL upon the terms and conditions hereinafter set forth.
 
 
F.
The respective Boards of Directors of Magnitude and Kiwibox have approved this Agreement; and the shareholders of Kiwibox have approved the merger.
 
 
G.
For federal income tax purposes, it is intended that the merger qualify as a tax free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “IRC”).
 
ARTICLE 1
THE MERGER
 
1.1 Merger.
 
In accordance with the provisions of this Agreement and applicable provisions of the DGCL, Subsidiary shall be merged with and into Kiwibox (the “Merger”). Following the Merger, the separate existence of Subsidiary shall cease and Kiwibox shall be, and is herein sometimes referred to as, the “Surviving Corporation.” For the purposes of this Agreement, this form of transaction may also be referred to herein as a “reverse triangular merger.”
 
1.2 Filing and Effectiveness.
 
The Merger shall become effective when the following actions shall have been completed:
 
 
(a)
This Agreement and the Merger shall have been adopted and approved by the shareholders of Kiwibox in accordance with the requirements of the DGCL;
 
 
(b)
Magnitude shall have formed a wholly-owned subsidiary for the purposes of this Merger in accordance with the requirements of the DGCL (the “Subsidiary”);
 

 
  
 
(c)
 
All of the conditions precedent to the consummation of the Merger specified in this Agreement shall have been satisfied or duly waived, in writing, by the Party entitled to satisfaction thereof;
 
 
(d)
As soon as practicable following the Closing, the Parties shall execute a Certificate of Merger meeting the requirements of the DGCL and file same with the Secretary of State of the State of Delaware in substantially the form attached hereto as Exhibit A; the time the Certificate of Merger is filed with the Secretary of State of the State of Delaware is the “Effective Time”; and
 
   
 
(e)
The closing of the transactions described in this Agreement is herein called the “Closing.” The Parties agree that the Closing of the transactions identified in this Agreement shall take place at the offices of Joseph J. Tomasek, Esq., or at such other place as the Parties may mutually determine, on or before April 30, 2007.
 
 
(f)
The audit of the financial statements of Kiwibox for the calendar years ended December 31, 2006 and 2005 shall have been completed with all necessary data and materials delivered by Kiwibox to Magnitude.
 
1.3 Effect of the Merger.
 
Upon the Effective Time, hereinafter defined, and upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, the separate existence of Subsidiary shall cease and, Kiwibox, as the Surviving Corporation,: (i) shall continue to possess all of the assets, rights, powers and property of Kiwibox and Subsidiary as constituted immediately prior to the Effective Time, and all debts, liabilities and duties of Kiwibox and Subsidiary shall become the debts, liabilities and duties of the Surviving Corporation, all as more fully provided under the applicable provisions of the DGCL.
  
ARTICLE 2
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
 
2.1 Certificate of Incorporation: Kiwibox.
 
Attached hereto as Exhibit B and made a part hereof is a copy of the Certificate of Incorporation of Kiwibox as in effect in the State of Delaware immediately prior to the Closing; and at the Effective Time said Certificate of Incorporation shall continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law.
 
2.2 Subsidiary.
 
Attached hereto as Exhibit C and made a part hereof is a copy of the Articles of Incorporation of Subsidiary as in effect immediately prior to the Closing.

2.3 Bylaws.
 
Attached hereto as Exhibit D and made a part hereof is a copy of the Bylaws of Kiwibox as in effect immediately prior to the Closing; and at the Effective Time said Bylaws shall continue in full force and effect as the Bylaws of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law.
  
2.4 Directors and Officers.
 
The directors and officers of Kiwibox immediately prior to the Closing shall be the directors and officers of the Surviving Corporation until their successors shall have been duly elected and qualified or until as otherwise provided by law, the Certificate of Incorporation of the Surviving Corporation or the Bylaws of the Surviving Corporation.
 


2.5 Employment Agreements

All Parties shall each execute the employment agreements between Magnitude and each of the three Kiwibox Shareholders, the form of which is attached hereto as Exhibit E .
 
ARTICLE 3
TERMS OF MERGER, PAYMENT, EXCHANGE OF STOCK AND INVESTMENT COMMITMENTS
 
3.1 Magnitude Payment.

In addition to the Magnitude shares being issued in the exchange and as partial consideration therefor, Magnitude shall pay an aggregate cash payment of $300,000 to the Kiwibox Shareholders, in proportion to their respective stock ownership positions in Kiwibox at the Closing.

3.2  Conversion of Kiwibox Shares.

 
(a)
Conversion of Subsidiary Common Stock. At the Effective Time, each outstanding share of the common stock no par value per share, of Subsidiary shall, by virtue of the Merger and without any action on the part of Magnitude, Subsidiary or Kiwibox, be converted into one fully paid and non-assessable share of common stock of the Surviving Corporation.
     
 
(b)
Each share of the common stock, $.01 par value per share, of Kiwibox (“Kiwibox Common Stock”) issued and outstanding prior to the Effective Time shall by virtue of the Merger and without any action on the part of Magnitude, Subsidiary, Kiwibox or any holder thereof, be converted into and be exchangeable for the right to receive newly issued , fully paid and non-assessable voting common shares, par value $.0001 per share, of Magnitude ("Magnitude Shares"), based upon an exchange ratio (“Exchange Ratio”) determined in accordance with the provisions below.
     
 
(c)
Amount of Magnitude Shares o be Exchanged: Upon the Closing, Magnitude shall issue and exchange for the Kiwibox Common Stock with the Kiwibox Shareholders an amount of Magnitude common shares valued at $1,500,000. The number of Magnitude common shares to be issued shall be determined by dividing $1,500,000 by their “Market Price”. Market Price shall mean the average sales price of a Magnitude common share for the ten (10) successive trading days immediately preceding the Closing, as recorded by the Electronic Bulletin Board, over-the-counter market. For example, if the Market Price is $.05 per share, then Magnitude shall issue 30,000,000 common shares, in exchange for the Kiwibox Common Stock with the Kiwibox Shareholders; if the Market Price is $.025 per share, then Magnitude shall issue 60,000,000 shares to the Kiwibox Shareholders, in exchange for their Kiwibox Common Stock Notwithstanding anything to the contrary implied or set forth herein and for all purposes under this Section 3.2, the Market Price shall never exceed $.05 per share, so that the amount of Magnitude common shares payable hereunder shall never be less than 30,000,000 common shares.
     
 
(d)
Exchange Ratio: shall be determined by dividing the amount of the Magnitude Shares determined in accordance with Article 3.2 (c) above by the shares of outstanding Kiwibox Common Stock.
     
 
(e)
At the Effective Time, each share of the Kiwibox Common Stock held by the Kiwibox immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Merger Sub or the Company, be canceled, retired and cease to exist and no payment shall be made with respect thereto.
 

 
 
(f)
No Further Ownership Rights in Kiwibox Common Stock. All Magnitude Shares issued and exchanged in accordance with the terms of this Article 3 shall be deemed to have been issued in full satisfaction of all rights pertaining to the Kiwibox Common Stock.
     
 
(g)
Appraisal Rights: This executed Agreement shall constitute each of the Kiwibox Stockholders' acknowledgment to decline any appraisal rights under section 262 of DGCL.
By executing this Agreement, each Kiwibox Stockholder acknowledges receipt of written notice of appraisal rights and a copy of Section 262 of DGCL at least 20 days prior to the date of executing this Agreement.
 
3.3 Magnitude Preferred

   
At the Closing, Magnitude shall issue an aggregate 43,610 shares of its Series G Preferred Stock to the Kiwibox Shareholders in proportion to their respective stock ownership positions in Kiwibox at the Closing which shares shall be subject to the automatic conversion  provisions more fully set forth in Section 5.5 below. A copy of the Certificate of Designations of the Series G Preferred Stock is attached as Exhibit F.
  
3.4 Status of Magnitude Preferred and Common Shares.
 
 
(a)
The Magnitude Series G Preferred Stock and Common Shares to be issued to the Kiwibox Shareholders in the reorganization will not be registered under the Securities Act of 1933, as amended (the "1933 Act") and may not be sold, transferred or otherwise disposed of except in compliance with the 1933 Act or pursuant to an exemption from the registration provisions thereof and the Securities Exchange Act of 1934, as amended (the "1934 Act").
     
   
(b)
Each Certificate representing the Magnitude Preferred Shares and the Common Shares shall bear the following or substantially similar legend:
     
   
"The Shares represented by this Certificate have not been registered under the Securities Act of 1933, as amended. These Shares have been acquired for investment purposes and not with a view to distribution or resale, and may not be sold, assigned, pledged, hypothecated or otherwise transferred without an effective Registration Statement for such Shares under the Securities Act of 1933, as amended, or an opinion of counsel to the effect that registration is not required under such Act."
 
3.5 Magnitude Investment and Commitment.

 Magnitude shall invest no less than $3.5 million in accordance with the Kiwibox Business Plan and Budget attached hereto as Exhibit G. Such funds shall be maintained in a separate bank account and Magnitude shall be keep them free from the claims of creditors, secured or unsecured, and which claims arise out of transactions, past or present, that are not associated with the Kiwibox Business Plan.

3.6 Kiwibox Legal Fees

Magnitude agrees to pay the legal fees of Barton, Barton & Plotnik, LLP, counsel for Kiwibox, at or before the Closing, provided that such counsel provide to Magnitude current weekly statements, on Friday of each week prior to the Closing, and provided further that the the maximum amount Magnitude shall pay under this Article 3.6 is $42,500 which shall be paid by bank or certified check or wire transferred in accordance with such instructions by such counsel. Notwithstanding anything set forth herein to the contrary, Magnitude shall not be responsible for the aforesaid payment of legal fees if this Agreement is terminated by Magnitude and Kiwibox pursuant to Article 10 (a) or by Magnitude pursuant to Article 10 (b) or by Kiwibox and/or the Kiwibox Shareholders for any reason other than pursuant to Article 10(c).
 


ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF KIWIBOX AND THE KIWIBOX SHAREHOLDERS
 
Kiwibox and the Kiwibox Shareholders represent and warrant to Magnitude that the statements contained in this Article 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing as though made then and as though the Closing were substituted for the date of this Agreement throughout this Article 4, with respect to itself.
 
4.1 Organization of Kiwibox.
 
Kiwibox is duly organized, validly existing, and in good standing under the laws of Delaware.
 
4.2 Authorization of Transaction.

(a)
Kiwibox has full corporate power and authority to execute and deliver this Agreement and to perform his obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Kiwibox, enforceable in accordance with its terms and conditions. Except as expressly contemplated hereby, Kiwibox need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement.

(b)
The Kiwibox Shareholders, individually represent and warrant to Magnitude that: this Agreement constitutes the legal, valid and binding obligation of each of the Kiwibox Shareholders and is enforceable against each of them in accordance with the terms hereof; each of them own their respective Kiwibox Common Shares free and clear of any and all liens, claims, pledges, restrictions, obligations, security interests and encumbrances of any kind; Attached hereto as Exhibit H is an accurate and complete list of the Kiwibox Common Shares owned by each Kiwibox Shareholder; none of the Kiwibox Shareholders have issued any calls, puts, options and/or any other rights in favor of any third party whatsoever with respect to their Kiwibox Common Shares, and; none of their respective Kiwibox Common Shares are subject to any voting agreements, voting trusts, stockholder agreements and/or any other agreements, obligations or understandings.

  4.3 Non-contravention.
 
Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Kiwibox is subject or any provision of its charter or bylaws; or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Kiwibox is a party or by which it is bound or to which any of its assets is subject, except for such notices or consents which have been given or obtained by Kiwibox on or prior to the Closing.

4.4 Capitalization.
 
The authorized capital stock of Kiwibox consists of 100,000,000 shares of Common Stock, $.01 par value per share. As of the date of this Agreement, there are 43,610 shares of Common Stock issued and outstanding. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require Kiwibox to issue, sell, or otherwise cause to become outstanding any of its capital stock. There is no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to Kiwibox’s Common Stock. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of Kiwibox.
 

 
4.5 Investment.
 
The Kiwibox Shareholders are not acquiring the Preferred Shares and the Common Shares of Magnitude with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act of 1933. Kiwibox and the Kiwibox Shareholders have had access to all information concerning Magnitude and its operations which it required to make its investment decision.
 
4.6 Brokers' Fees.
 
Other than their obligation (i) to transfer to Southridge Investment Group, LLC (“Southridge”), two and one-half (2.5%) percent of the Magnitude Common Stock transferable to the Kiwibox Shareholders pursuant to Article 3.2 and (ii) the obligation of each of the Kiwibox Shareholders to make arrangements with Southridge to pay $7,000 each, or as may be otherwise expressly set forth in this Agreement, Kiwibox has incurred no obligation to pay any commission, finder’s fee or other charge in connection with the transactions contemplated in this Agreement for which Magnitude could become liable or obligated. Kiwibox and the Kiwibox Shareholders, jointly and severally, will indemnify and hold Magnitude, and the Subsidiary, their respective officers, directors, employees, accountants and lawyers harmless from and against any and all liabilities and claims of any nature whatsoever arising out of or in connection with any commission, fee or charge so far as any arises by reason of services alleged to have been rendered to, or at the instance of, Kiwibox and/or the Kiwibox Shareholders. This indemnification shall survive the Closing and shall be included in the terms of indemnification set forth in Article 4.7 of this Agreement.

4.7  Events Subsequent to Year End.
 
Since the most recent calendar-fiscal year end of Kiwibox there has not been any material adverse change in the business, financial condition, operations, results of operations, or future prospects of Kiwibox taken as a whole. Kiwibox and the Kiwibox Shareholders, jointly and severally, shall indemnify, defend and hold Magnitude and Subsidiary, their successors and assigns, harmless from and against any order, action, cost, claim, damage, disbursement, expense, liability, loss, deficiency, obligation, penalty, fine, assessment or settlement of any kid or nature, whether foreseeable or unforeseeable, including, but not limited to, any and all attorney’s fees, costs, and other expenses, directly or indirectly, as a result of, or upon or arising from (i) any inaccuracy or breach or non-performance of any of the representations, warranties, covenants or agreements made by Kiwibox or the Kiwibox Shareholders in or pursuant to this Agreement, (ii) any order, action, cost, claim, damage, liability or lien arising out of Kiwibox’s or Kiwibox Shareholder’s conduct before or after the Closing, (iii) any third party claims against Kiwibox or the Kiwibox Shareholders, before or after the Closing that arise from Kiwibox’s or Kiwibox Shareholder’s conduct, or (iv) any loss or liability the proximate cause of which is determined to be the result of Kiwibox’s or Kiwibox Shareholder’s negligence or failure to comply with their respective obligations under this Agreement. Magnitude and/or Subsidiary, as the case may be, their successors and assigns, shall notify Kiwibox and/or the Kiwibox Shareholders of any claim for indemnification with reasonable promptness, and Kiwibox’s or Kiwibox’s legal representatives or Kiwibox Shareholder’s or their legal representatives shall have, at their election, the right to compromise or defend any such matter involving such asserted liability of Kiwibox and/or the Kiwibox Shareholders through counsel of their own choosing, at the expense of Kiwibox and the Kiwibox Shareholders. Kiwibox and the Kiwibox Shareholders shall notify Magnitude and the Subsidiary, or their successors or assigns, in writing promptly of their intention to compromise or defend any claim and Magnitude and/or the Subsidiary, or their successors or assigns, shall cooperate with Kiwibox and the Kiwibox Shareholders, their respective counsel in compromising or defending any such claim, in accordance with Article 8 hereof. The terms of this Article 4.7 shall survive Closing.


 
4.8 Undisclosed Liabilities.
 
Kiwibox has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or un-accrued, whether liquidated or un-liquidated, and whether due or to become due, including any liability for taxes), except for (i) liabilities set forth on the Kiwibox Financial Statements; and (ii) liabilities which have arisen after the date of the Kiwibox Financial Statements in the ordinary course of business. As used herein, “Kiwibox Financial Statements” consist of the financial statements of Kiwibox previously delivered to Magnitude in the form attached hereto as Exhibit I.
 
4.9 Legal Compliance.
 
Kiwibox has complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against Kiwibox alleging any failure so to comply, except where the failure to comply would not have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of Kiwibox.

4.10 Tax Matters.
 
 
(a)
Kiwibox has filed all income tax returns that it has been required to file. All such income tax returns were correct and complete in all material respects. All income taxes owed by Kiwibox (whether or not shown on any income tax return) have been paid. Kiwibox is not currently the beneficiary of any extension of time within which to file any income tax return.
  
 
(b)
There is no material dispute or claim concerning any income tax liability of Kiwibox either (i) claimed or raised by any authority in writing; or (ii) as to which Kiwibox has knowledge based upon personal contact with any agent of such authority.
 
4.11 Contracts.

The Kiwibox Financial Statements disclose all material contracts of Kiwibox. Each contract or legal obligation of Kiwibox which is to be assumed by Kiwibox in connection with the Merger is listed on Exhibit J hereto. To the extent requested, true and correct copies of such contracts have been delivered to Kiwibox for due diligence purposes.
 
4.12 Environmental, Health and Safety Matters.
 
Kiwibox and its predecessors and affiliates have complied and are in compliance, in each case in all material respects, with all Environmental, Health, and Safety Requirements. As used herein “Environmental, Health & Safety Requirements” means any Environmental, Health & Safety law or regulation including air and water quality laws and regulations and other similar requirements.
 
4.13 Disclosure.
 
The representations and warranties contained in this Article 4 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Article 4 not misleading.
 
4.14 Financial Statements.
 
The Kiwibox Financial Statements are true and correct in all material respects, have been prepared on a consistent basis, and fairly represent the business, financial condition, assets and liabilities of Kiwibox.
 

 
4.15 Litigation.
 
There is no claim, suit, action, proceeding or investigation pending or, to the knowledge of Kiwibox, pending against Kiwibox or any of its subsidiaries or assets which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on Kiwibox.
 
4.16 Materials Required for Audit.
 
To the best of its knowledge, Kiwibox has maintained its records, data and materials related to the financial accounting of the business, and have all such data and materials immediately available, such that an audit may be completed per regulatory requirements.
 
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MAGNITUDE
 
Magnitude represents and warrants to Kiwibox and to the Kiwibox Shareholders that the statements contained in this Article 5 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing (as though made then and as though the Closing were substituted for the date of this Agreement throughout this Article 5).
 
5.1 Organization of Magnitude
 
Magnitude is a corporation duly organized, validly existing, and in good standing under the laws of Delaware Magnitude has two subsidiaries, Magnitude, Inc., and the Subsidiary.
 
5.2 Authorization of Transaction.
 
Magnitude has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and no approval of Magnitude’s shareholders is required under the DGCL to consummate the Merger and other transactions contemplated in this Agreement. This Agreement constitutes the valid and legally binding obligation of Magnitude, enforceable in accordance with its terms and conditions. Except as expressly contemplated hereby, Magnitude need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement.

5.3 Non-contravention.
 
Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Magnitude is subject or any provision of its charter or bylaws; or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Magnitude is a party or by which it is bound or to which any of its assets is subject, except for such notices or consents which have been given or obtained by Magnitude on or prior to the Closing.
 
5.4 Capitalization.
 
The authorized capital stock of Magnitude consists of 300,000,000 shares of Common Stock, $.001 par value per share, and 10,000,000 shares of Preferred Stock. As of the date of this Agreement, there were 227,379,014 shares of Common Stock and 109,857 shares of Preferred Stock, convertible into 2,423,865 common shares, are issued and outstanding. There are 12,357,408 outstanding options, and 52,273,333 outstanding warrants, and no other outstanding purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require Magnitude to issue, sell, or otherwise cause to become outstanding any of its capital stock except as may be set forth in one or more of the material agreements identified in Exhibit L hereto. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to Magnitude’s Common Stock. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of Magnitude.
 


5.5 Mandatory Conversion of Magnitude Preferred Stock

Upon the Closing, Magnitude shall issue 43,610 Shares of its Series G Preferred Stock (the “Preferred Stock”) to the Kiwibox Shareholders on the basis of one Common Share of the Surviving Corporation for each Kiwibox Common Share owned of record at the Effective Time. All 43,610 Shares of the Preferred Stock shall be non-transferable and shall be subject to automatic conversion upon the second anniversary of this Agreement in accordance to the terms set forth below. The Kiwibox Shareholders shall not dispose of or encumber the Preferred Shares. For all purposes under this Agreement, the 43,610 Preferred Shares shall have an aggregate conversion value of $500,000 (the “Conversion Value”), convertible into shares of the common stock of Magnitude, based upon “Market Price”. The number of Magnitude common shares to be issued in the automatic conversion shall be determined by dividing the Conversion Value of $500,000 by the Market Price of the common shares of Magnitude. Market Price shall mean the average sales price of a Magnitude common share during the twenty (20) successive trading days immediately preceding the second anniversary of this Agreement as recorded by the Electronic Bulletin Board, over-the-counter stock market maintained by the NASD or such other stock market where the common shares of Magnitude are then traded. For example, if the Market Price is $.025 per share, then the Conversion Value would be 20,000,000 Magnitude common shares which Magnitude would issue to the Kiwibox Shareholders in proportion to their ownership of the 43,610 Preferred Shares. For all purposes under this Section 6.5, the amount of shares representing the Conversion Value shall not be less than 10,000,000 common shares notwithstanding the fact that the Market Price is above $.05 per share. The Magnitude common shares issuable based upon the Conversion Value shall be issued by Magnitude to the Kiwibox Shareholders within thirty days following the second anniversary of this Agreement, in proportion to their ownership of the 43,610 Preferred Shares.

The certificate or certificates representing the 43,610 shares of Preferred Stock issued to the Kiwibox Shareholders pursuant to this Section 5.5 shall be held in escrow by counsel for Magnitude pending their automatic conversion as set forth above.
 
 5.6 Brokers' Fees.
 
Other than its obligation (i) to issue to Southridge Investment Group, LLC (“Southridge”), newly issued common shares in an amount equal to two and one-half (2.5%) percent of the Magnitude Common Stock transferable to the Kiwibox Shareholders pursuant to Article 3.2; (ii) to pay Southridge an investment banking fee of $15,000 on behalf of Kiwibox and the Kiwibox Shareholders, and; (iii) to execute an investment banking agreement between Magnitude and Southridge at the Closing, or as may be otherwise expressely set forth in this Agreement, Magnitude has incurred no obligation to pay any commission, finder’s fee or other charge in connection with the transactions contemplated in this Agreement for which Magnitude could become liable or obligated. Magnitude will indemnify and hold Kiwibox, and the Kiwibox Shareholders, their respective officers, directors, employees, accountants and lawyers harmless from and against any and all liabilities and claims of any nature whatsoever arising out of or in connection with any commission, fee or charge so far as any arises by reason of services alleged to have been rendered to, or at the instance of, Magnitude or Subsidiary, including any liability or claim arising from the Parties’ dealings with Southridge, as described herein. This indemnification shall survive the Closing and shall be included in the terms of indemnification set forth in Article 5.7 of this Agreement.

5.7 Events Subsequent to Year End.

Since the most recent calendar-fiscal year end of Magnitude, there has not been any material adverse change in the business, financial condition, operations, results of operations, or future prospects of Magnitude taken as a whole. Magnitude shall indemnify, defend and hold Kiwibox, Kiwibox Shareholders, their successors and assigns, harmless from and against any order, action, cost, claim, damage, disbursement, expense, liability, loss, deficiency, obligation, penalty, fine, assessment or settlement of any kid or nature, whether foreseeable or unforeseeable, including, but not limited to, any and all attorney’s fees, costs, and other expenses, directly or indirectly, as a result of, or upon or arising from (i) any inaccuracy or breach or non-performance of any of the representations, warranties, covenants or agreements made by Magnitude or Subsidiary in or pursuant to this Agreement, (ii) any order, action, cost, claim, damage, liability or lien arising out of Magnitude’s conduct before or after the Closing, (iii) any third party claims against Magnitude, Subsidiary before or after the Closing that arise from Magnitude’s conduct, or (iv) any loss or liability the proximate cause of which is determined to be the result of Magnitude’s negligence or failure to comply with its obligations under this Agreement. Kiwibox and Kiwibox’s Shareholders, their successors and assigns, shall notify Magnitude of any claim for indemnification with reasonable promptness, and Magnitude or Magnitude’s legal representatives shall have, at their election, the right to compromise or defend any such matter involving such asserted liability of Magnitude through counsel of their own choosing, at the expense of Magnitude. Magnitude shall notify Kiwibox, Kiwibox’s Shareholders, or their successors or assigns, in writing promptly of their intention to compromise or defend any claim and Kiwibox, Kiwibox’s Shareholders, or their successors or assigns, shall cooperate with Magnitude and Magnitude’s counsel in compromising or defending any such claim, in accordance with Article 8 hereof. The terms of this Article 5.7 shall survive Closing.
 


5.8 Undisclosed Liabilities.
 
Magnitude has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or un-accrued, whether liquidated or un-liquidated, and whether due or to become due, including any liability for taxes), except for (i) liabilities set forth on the Magnitude Financial Statements; and (ii) liabilities which have arisen after the date of the Magnitude Financial Statements in the ordinary course of business. As used herein, “Magnitude Financial Statements” consist of the financial statements of Magnitude previously delivered to Kiwibox in the form attached hereto as Exhibit K.
 
5.9 Legal Compliance.
 
Magnitude has complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against Magnitude alleging any failure so to comply, except where the failure to comply would not have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of Magnitude.

 5.10 Tax Matters.
 
 
(a)
Magnitude has filed all income tax returns that it has been required to file. All such income tax returns were correct and complete in all material respects. All income taxes owed by Magnitude (whether or not shown on any income tax return) have been paid. Magnitude is not currently the beneficiary of any extension of time within which to file any income tax return.
     
 
 
(b)
There is no material dispute or claim concerning any income tax liability of Magnitude either (i) claimed or raised by any authority in writing; or (ii) as to which Magnitude has knowledge based upon personal contact with any agent of such authority.
 
5.11 Contracts.
 
The Magnitude Financial Statements disclose all material contracts of Magnitude. Each contract or legal obligation of Magnitude to which Magnitude shall remain subject after the Merger is listed on Exhibit L hereto. To the extent requested, true and correct copies of such contracts have been delivered to Kiwibox for due diligence purposes.
 

 
5.12 Environmental, Health and Safety Matters.
 
Magnitude and its predecessors and affiliates have complied and are in compliance, in each case in all material respects, with all Environmental, Health, and Safety Requirements. As used herein “Environmental, Health & Safety Requirements” means any Environmental, Health & Safety law or regulation including air and water quality laws and regulations and other similar requirements.
 
5.13 Disclosure.
 
The representations and warranties contained in this Article 5 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Article 5 not misleading.
 
5.14 Financial Statements.
 
The Magnitude Financial Statements are true and correct in all material respects, have been prepared on a consistent basis, and fairly represent the business, financial condition, assets and liabilities of Magnitude.
 
5.15 Litigation.
 
There is no claim, suit, action, proceeding or investigation pending or, to the knowledge of Magnitude, pending against Magnitude or any of its subsidiaries or assets which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on Magnitude.
 
5.16 Materials Required for Audit.

To the best of its knowledge, Magnitude has maintained its records, data and materials related to the financial accounting of the business, and has all such data and materials immediately available, such that an audit may be completed per regulatory requirements.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY
 
Magnitude represents and warrants to Kiwibox that Subsidiary has been formed solely for the purpose of this Merger and that no contract, liabilities or other obligations exist in Subsidiary.
 
6.1 Organization of Subsidiary.
 
Subsidiary is a corporation duly organized, validly existing, and in good standing under the laws of Delaware and 100% owned by Magnitude.
 
6.2 Authorization of Transaction.
 
 Magnitude has full corporate power and authority to execute and deliver Subsidiary with regard to this Agreement and to perform its obligations hereunder, including shareholder approval as may be required by the DGCL.
 

 
6.3 Non-contravention.
 
Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Magnitude or Subsidiary is subject or any provision of its charter or bylaws; or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Magnitude or Subsidiary is a party or by which it is bound or to which any of its assets is subject, except for such notices or consents which have been given or obtained by Kiwibox on or prior to the Closing.
 
6.4 Capitalization.
 
The authorized capital stock of Subsidiary consists of two hundred (200) shares of Common Stock, $.01 par value per share, and no shares of Preferred Stock. As of the date of the Closing, there shall be 160 shares issued and outstanding and owned by Magnitude. There are not now nor shall there be any outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require Subsidiary to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to Subsidiary’s Common Stock. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of Subsidiary.
 
ARTICLE 7
PRE-CLOSING COVENANTS
 
The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing:
 
7.1 General.
 
Each of the Parties will use its reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Article 9 below).
 
7.2 Notices and Consents.
 
Each of the Parties will give any notices to, make any filings with, and use its reasonable best efforts to obtain any and all authorizations, consents, and approvals of governments and governmental agencies in connection with the transactions contemplated hereby.
 
7.3 Operation of Business.
 
Kiwibox, Magnitude, including Subsidiary, will not engage in any practice, take any action, or enter into any transaction outside the ordinary course of business, including, but not limited to declaration of dividends or distributions, redemptions, splits, recapitalizations, or similar events respecting its capital stock prior to Closing except, however, Magnitude shall prepare and file all documents necessary to increase its authorized common shares and enter into employment and consulting agreements pursuant to which it may issue its securities.
 
7.4 Full Access For Due Diligence.
 
The Parties shall permit their respective representatives to have full access at all reasonable times, and in a manner so as not to interfere with their respective normal business operations, to all premises, properties, personnel, books, records (including tax records), contracts, and documents. The Parties shall treat and hold as such any Confidential Information they receive from Kiwibox, will not use any of the Confidential Information except in connection with this Agreement, and, if this Agreement is terminated for any reason whatsoever, will return to Kiwibox all tangible embodiments (and all copies) of the Confidential Information which are in their possession.
 


7.5 No Shop Promises.

Each of Magnitude, Kiwibox and the Kiwibox Shareholders have promised to each other that they shall utilize their respective best efforts to undertake any and all measures and deliver any and all documents necessary to consummate the transactions contemplated in this Agreement. The Parties make the following covenants to each other:

(a) Except in the case that it terminates this Agreement pursuant to Article 10(c) or in the event of an automatic termination pursuant to Article 10(d), the Kiwibox Shareholders shall not solicit or seek to acquire any assets or stock of any third party, nor shall they accept any offer to purchase or exchange any assets or securities of Kiwibox from the date of this Agreement to the Closing or through the date they terminate this Agreement pursuant to the Articles set forth in this Article 10(a).

(b) Except in the case that it terminates this Agreement pursuant to Article 10(b) or in the event of an automatic termination pursuant to Article 10(d), Magnitude shall not solicit or seek to acquire any assets or stock of any third party from the date of this Agreement to the Closing or through the date it terminates this Agreement pursuant to the Articles set forth in this Article 10(b).
 
ARTICLE 8
POST-CLOSING COVENANTS
 
The Parties agree as follows with respect to the period following the Closing.
 
8.1 General.

In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party. Kiwibox acknowledges and agrees that from and after the Closing, Magnitude will be entitled to possession of all documents, books, records (including tax records), agreements, and financial data of any sort relating to Kiwibox.

8.2 No Material Acquisition.

During the two year period following the Closing, neither Magnitude nor Subsidiary shall (i) undertake a material acquisition nor (ii) sell all or any material portion of the business of Kiwibox without the prior written consent of no less than two of the three Kiwibox Shareholders.

8.3 Litigation Support.
 
In the event and for so long as Magnitude or Kiwibox actively are contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement; or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving Kiwibox, then Kiwibox and its affiliates will cooperate with Magnitude or Kiwibox in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party.
 

 
ARTICLE 9
CONDITIONS TO OBLIGATION TO CLOSE
 
9.1 Assumption of Kiwibox Liabilities by Magnitude. Magnitude shall pay for only such liabilities as defined in Exhibit M hereto.
 
9.2 Conditions to Obligation of Magnitude and Subsidiary.
 
The obligations of Magnitude and Subsidiary to consummate the transactions to be performed by them in connection with the Closing are subject to satisfaction of the following conditions:
 
 
(a)
the representations and warranties set forth in Article 4 above shall be true and correct in all material respects at and as of the Closing Date;
 
 
(b)
Kiwibox shall have performed and complied with all of its covenants hereunder in all material respects through the Closing, including Article 4 hereby;
 
   
  
(c)
no action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement; (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; or (iii) affect materially and adversely the right of Kiwibox to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);
     
  
(d)
Kiwibox shall have delivered to Magnitude a certificate to the effect that each of the conditions specified above in paragraphs 9.2 (a) through (c) is satisfied in all respects;
 
 
(e)
all actions to be taken by Kiwibox in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Magnitude.
 
 
(f)
Kiwibox shall have delivered to Magnitude its audited financial statements for the fiscal years ended December 31, 2006 and 2005.
     
 
(g)
Kiwibox and/or the Kiwibox Shareholders shall pay the fees and transfer the Magnitude Common Shares to Southridge in satisfaction of their commitment set forth in Article 4.6.

9.3 Conditions to Obligation of Kiwibox and the Kiwibox Shareholders.
 
The obligation of Kiwibox and the Kiwibox Shareholders to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions:
 
 
(a)
the representations and warranties set forth in Articles 5 and 6 above shall be true and correct in all material respects at and as of the Closing Date;
 

 
 
(b)
Magnitude shall have performed and complied with all of their covenants hereunder in all material respects through the Closing;
 
   
 
(c)
no action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement; or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);
 
 
(d)
Magnitude shall have delivered to Kiwibox a certificate to the effect that each of the conditions specified above in paragraphs 9.3 (a) through (c) is satisfied in all respects;
 
 
(e)
all actions to be taken by Magnitude in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Kiwibox.
 
 
(f)
Magnitude shall have provided documentary evidence that it has the sum of $3.5 million in a bank account in satisfaction of its commitment set forth in Article 3.5, including the commitment to show that such amount is not subject to any claims of creditors of Magnitude or any of its affiliates.
 
 
(g)
The representations, warranties and covenants of the parties contained in Articles 4, 5, 6, 7 and 8 of this Agreement shall survive the Closing hereunder.
 
 
(h)
Magnitude shall have paid the legal fees incurred by Kiwibox and the Kiwibox Shareholders in satisfaction of its commitment set forth in Article 3.6.
 
 
(i)
Magnitude shall pay the fees and issue the Magnitude Common Shares to Southridge in satisfaction of its commitment set forth in Article 5.6.
 
ARTICLE 10
TERMINATION
 
This Agreement may be terminated:

(a) by the mutual written consent of Magnitude and Kiwibox;

(b) by Magnitude, in the event that any of the conditions to obligation to close enumerated in Section 9.2 have not been satisfied or waived by Magnitude in writing at or prior to the Closing;

 (c) by Kiwibox and the Kiwibox Shareholders, in the event that any of the conditions to obligation to close enumerated in Section 9.3 have not been satisfied or waived by Kiwibox and the Kiwibox Shareholders, in writing, at or prior to the Closing;
 
(d) automatically, in the event that the Closing has not occurred on or before April 30, 2007 unless extended by mutual agreement of the parties.

In the event of the termination of this Agreement in accordance with the provisions of this Article 10: this Agreement shall forthwith become null and void and there shall be no liability or obligation on the part of Magnitude, Kiwibox or the Kiwibox Shareholders or their respective officers and directors, and; the parties shall cooperate to rescind any corporate filings made with the Secretary of State, State of Delaware, if filed.
 


ARTICLE 11
MISCELLANEOUS
 
11.1 Further Assurances
 
From time to time, as and when required by Magnitude, Kiwibox and/or the Kiwibox Shareholders shall execute and deliver on behalf of Kiwibox such deeds and other instruments, and shall take or cause to be taken by it such further and other actions, as shall be appropriate or necessary in order to vest or perfect in or conform of record the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of Kiwibox and to otherwise carry out the purposes of this Agreement. The officers and directors of Kiwibox are fully authorized in the name and on behalf of Kiwibox to take any and all such action and to execute and deliver any and all such deeds and other instruments.
 
11.2 Agreement
 
Executed copies of this Agreement will be on file at the principal place of business of Magnitude at 1250 Route 28, Suite 309, Branchburg, New Jersey 08876, and copies thereof will be furnished to any stockholder of a Constituent Corporation, upon request at such shareholder’s cost. Magnitude shall be responsible for all post-closing filings with any and all state and federal agencies.
 
11.3 No Third-Party Beneficiaries.
 
This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns.

 11.4 Entire Agreement.
 
This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, Letter of Intent, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof.
 
11.5 Succession and Assignment.
 
This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other Parties.

11.6 Counterparts.
 
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.
 
11.7 Headings.
 
The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
 
11.8 Notices.
 
All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
 
 
If to Magnitude:
Magnitude Information Systems, Inc.
1250 Route 28
Suite 309
 
 
 
 
Branchburg, New Jersey 08876
 
With a copy to:
 
Joseph J. Tomasek, Esq.
77 North Bridge Street
Somerville, New Jersey 08876
 

 
 
To Kiwibox:
Kiwi Media, Inc.
 
 
330 West 38th Street
 
 
Suite 1607
New York, NY 10018
 
With a copy to:
Gary Adelman, Esq.
Barton Barton & Plotkin, LLP
420 Lexington Avenue, 18th Floor
New York, New York 10170
     
Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.
 
11.9 Governing Law.
 
This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction).

11.10 Amendments and Waivers.
 
No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each of the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
 
11.11 Severability.
 
Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.
 

 
11.12 Expenses.
 
Each of the Parties will bear its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, except, however, Magnitude agrees to pay Kiwibox’s legal fees and consultant fees in accordance with Articles 3.6 and 5.6, respectively. Any sales tax, filing or recording fees or similar expense shall be paid by Magnitude.
 
11.13 Construction.
 
The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.
 
11.14 Status.
 
Nothing contained in this Agreement shall cause a Party to be deemed an agent, employee, franchisee, joint venture, partner or legal representative of any other Party, and no Party shall purport to act in any such capacity for any other Party.
 
11.15 Arbitration. 

Any and all disputes arising out of or relating to this Agreement shall be resolved by arbitration. All arbitration hereunder will be conducted by the American Arbitration Association (“AAA”). If the AAA is dissolved, disbanded or becomes subject to any state or federal bankruptcy or insolvency proceeding, the parties will remain subject to binding arbitration which will be conducted by a mutually agreeable arbitral forum. The parties agree that all arbitrator(s) selected will be attorneys with at least five (5) years securities and corporate reorganization experience. The arbitrator(s) will decide if any inconsistency exists between the rules of any applicable arbitral forum and the arbitration provisions contained herein. If such inconsistency exists, the arbitration provisions contained herein will control and supersede such rules. The site of all arbitration proceedings will be in the State, City and County of New York in which AAA maintains a regional office. Any arbitration award rendered shall be final, conclusive and binding upon the Parties hereto, and a judgment thereon may be entered in any court of competent jurisdiction. Notwithstanding anything set forth in this Article 11.15 to the contrary, the Parties shall have the right to seek injunctive or similar relief in any Federal or State Court in the City and State of New York.
 

 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be signed by their respective officers thereunto duly authorized as of the date first written above.
 
ATTEST:
 
MAGNITUDE INFORMATION SYSTEMS, INC.
 
 
 
 
 
By:

Joerg H. Klaube, Secretary
 

Edward L. Marney, CEO and President
     
     
ATTEST:
 
 
 
MAGNITUDE OPERATIONS, INC.
(In Organization)
 
By:

Joerg H. Klaube, Secretary
 

Edward L. Marney, CEO and President
     
     
ATTEST:
 
KIWIBOX MEDIA, INC.
     
 
 
By:

                                     , Secretary
 

Lin Dai, President
   
     
WITNESS:
 
 
 
KIWIBOX SHAREHOLDERS:
 
 
Lin Dai, Shareholder
     
     
WITNESS:
   
 
 

 
 
 
 

Ivan Tumanov, Shareholder
     
     
WITNESS:
   
 
 

 
 
 

Michael Howard, Shareholder
 

 
EXHIBIT A
CERTIFICATE OF MERGER
(TO BE PROVIDED PRIOR TO CLOSING) 


 
EXHIBIT B
CERTIFICATE OF INCORPORATION OF KIWIBOX MEDIA INC.



EXHIBIT C
ARTICLES OF INCORPORATION OF SUBSIDIARY
(TO BE PROVIDED PRIOR TO CLOSING)



EXHIBIT D
BYLAWS OF KIWIBOX MEDIA INC.



EXHIBIT E
FORM OF KIWIBOX SHAREHOLDER EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated January __, 2007

By and Between:

MAGNITUDE INFORMATION SYSTEMS, INC., a Delaware corporation (the "Company" or the “Employer"),

AND

___________________________, an individual having an address at

_____________________________________ and one of three (3) shareholders of Kiwibox Media, Inc. ("Executive")

WHEREAS, the Company desires to hire the Executive and employ him in the position of Executive Officer; and

WHEREAS, Executive has agreed to serve as the Company’s Executive Officer, pursuant to the terms and conditions set forth herein.

NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises and the mutual covenants, agreements, representations and warranties contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Company hereby agree as follows:

ARTICLE 1

EMPLOYMENT

1.1 Employer hereby hires the Executive as the Executive Officer of the Company and Executive hereby affirms and accepts such positions and employment by Employer for the Term (as defined in Article 3 below), upon the terms and conditions set forth herein.

1.2 The Employer shall utilize its best efforts to cause its Board of Directors to appoint one of the three Kiwibox Shareholders as a member of the Employer's Board of Directors throughout the Term.

ARTICLE 2

DUTIES

During the Term, Executive shall serve Employer faithfully, diligently and to the best of his ability, under the direction and supervision of the Board of Directors of Employer ("Board of Directors") and shall use his best efforts to promote the interests and goodwill of Employer and any affiliates, successors, assigns, parent corporations, subsidiaries, and/or future purchasers of Employer. Executive shall render such services during the Term at Employer's principal place of business or at such other place of business as may be determined by the Board of Directors, as Employer may from time to time reasonably require of him, and shall devote all of his business time to the performance thereof. Executive shall have those duties and powers as generally pertain to each of the offices of which he holds, as the case may be, subject to the control of the Board of Directors. Employer and Executive also agree that Employer shall utilize its best efforts to have its Board of Directors appoint one of the three Kiwibox Shareholders to be a member of the Employer's Board of Directors during the Term.
 


ARTICLE 3

TERM

The term of this Agreement (the "Term") shall commence on the date hereof (the "Effective Date"), and continue thereafter for a term of two (2) years, as may be extended or earlier terminated pursuant to the terms and conditions of this Agreement. The Term is renewable upon the agreement of the parties hereto.

ARTICLE 4

COMPENSATION

4.1 Salary and Equity Compensation

(a) In consideration of Executive's services to Employer, Employer shall pay to Executive an annual base salary (the "Base Salary") of One Hundred Fifty Thousand Dollars ($150,000.00), payable in equal installments at the end of each regular payroll accounting period as established by Employer, or in such other installments upon which the parties hereto shall mutually agree, and in accordance with Employer's usual payroll procedures, but no less frequently than monthly.

(b) In addition to the Base Salary, Employer shall pay to Executive an annual bonus, based upon the attainment of certain business goals (the “Performance Bonus”), equal to (i) $100,000 in the event the Kiwi Business has received no less than an average 215,000 Unique Visitors during either the 10th, 11th or 12th month of the first year of the term or $316,000 in gross revenues within the 12 moth period following the Effective Date, or (ii) $50,000 in the event the Kiwi Business has received at least an average 175,000 but less than an average 215,000 Unique Visitors during either the 10th, 11th or 12th month of the first year of the term or at least $237,000 in gross revenues but less than $316,000 within the 12 moth period following the Effective Date, and: (x) $100,000 in the event the Kiwi Business has received no less than an average 550,000 Unique Visitors during either the 22nd, 23rd or 24th month of the second year of the term or $1,961,000 in gross revenues within the 12 moth period following the first anniversary of the Effective Date, or (ii) $50,000 in the event the Kiwi Business has received at least an average 415,000 but less than an average 550,000 Unique Visitors during either the 22nd, 23rd or 24th month of the second year of the term or at least $1,500,000 in gross revenues but less than $1,961,000 within the 12 month period following the first anniversary of the Effective Date.
 


(c) In addition to the Base Salary and Executive’s right to earn the Performance Bonus, Employer shall issue to Executive a Stock Option to purchase 7,500,000 shares of the Employer's common stock, at an exercise price equal to Employer's common stock fair market value as of the date of this Agreement (the "Stock Option"). The Stock Option shall vest (i.e., become exercisable) in three installments, as follows: One half of the Stock Options shall vest on the first anniversary date of the Effective Date; an additional quarter of the Stock Option shall vest on each of the 18th month and second anniversaries of the Effective Date. Executive must be continuously a full-time employee of the Company through the time he exercises part or all of the Stock Option, except, however, in the event this Agreement is terminated by the Executive for a Good Reason, as defined in Article 10.1 and 10.2 below, or by the Employer without Cause, as defined in Article 10.3 below, in which cases the Stock Option shall immediately and fully vest upon such termination provided further that the events surrounding any such termination have not been the subject of any claim, proceeding or lawsuit by either the Executive or the Company in which further case the Stock Option shall only vest upon final adjudication, determining that such termination was a valid termination by the Executive for Good Reason or by the Employer without Cause pursuant to the applicable above referenced articles of this Agreement. The Stock Option shall be deemed a non-qualified stock option (i.e., not an ISO).

(d) In addition to the Base Salary, the Stock Option and the Executive’s right to earn the Performance Bonus, Employer shall issue to Executive a second Stock Option to purchase 3,000,000 shares of the Employer's common stock, at an exercise price equal to the “Market Price” of the Company’s publicly traded common shares. “Market Price” means the average sales price of a Company common share for the twenty (20) successive trading days immediately preceding the Closing, as recorded by the Electronic Bulletin Board, over-the-counter market. and which shall vest based upon the attainment of certain business goals (the "Performance Stock Option"). The Performance