-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J+NjGNGCvgV5JGnfIKIXqj+5VGg1sHC+7l6hWmzxRLwQ3ZjI7B9hS89+J0+kt2ct dcFyfI3Mgp/tQzEJmG3WPw== 0001193805-08-002407.txt : 20081020 0001193805-08-002407.hdr.sgml : 20081020 20081020164024 ACCESSION NUMBER: 0001193805-08-002407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080831 FILED AS OF DATE: 20081020 DATE AS OF CHANGE: 20081020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAGNA LAB INC CENTRAL INDEX KEY: 0000895464 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 113074326 STATE OF INCORPORATION: NY FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21320 FILM NUMBER: 081131749 BUSINESS ADDRESS: STREET 1: 6800 JERICHO TURNPIKE, SUITE 120W CITY: SYOSSET STATE: NY ZIP: 11791 BUSINESS PHONE: (516) 393 5874 MAIL ADDRESS: STREET 1: 6800 JERICHO TURNPIKE, SUITE 120W CITY: SYOSSET STATE: NY ZIP: 11791 10-Q 1 e604374_10q-magna.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: August 31, 2008 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission File Number 0-21320 Magna-Lab Inc. -------------- (Exact name of smaller reporting company as specified in its charter) New York 11-3074326 --------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 6800 Jericho Turnpike, Suite 120W, Syosset, NY 11791 ---------------------------------------------------- (Address of principal executive offices and Zip code) (516) 393 5874 ----------------------------------------------- (Issuer's telephone number including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_| Smaller reporting company |X| (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_| APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date - October 1, 2008 Class A Common Stock, $.001 Par Value 1,176,025 - ------------------------------------- ------------------ Class B Common Stock, $.001 Par Value 3,304 - ------------------------------------- ------------------ Class Shares MAGNA-LAB INC. AND SUBSIDIARY CONTENTS PART 1 - FINANCIAL INFORMATION Item 1. - Financial Statements Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Operations 2 Condensed Consolidated Statements of Cash Flows 3 Condensed Consolidated Statement of Stockholders' Deficit 4 Notes to Condensed Consolidated Financial Statements 5 - 8 Item 2. - Management's Discussion and Analysis of Financial Condition And Results of Operations 9 - 10 Item 4T - Controls and Procedures 11 PART II - OTHER INFORMATION Item 1A. - Risk Factors 11 Item 3 - Defaults Upon Senior Securities 12 Item 5 - Other Information 12 Item 6 - Exhibits 12 SIGNATURES 12 All items which are not applicable or to which the answer is negative have been omitted from this report. PART I: FINANCIAL INFORMATION Item 1. - Financial Statements MAGNA-LAB INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
August 31, February 29, 2008 2008 ------------ ------------ (unaudited) CURRENT ASSETS: Cash $ 8,000 $ 1,000 Prepaid expense 8,000 3,000 ------------ ------------ Total current assets $ 16,000 $ 4,000 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Notes payable and accrued interest payable to a shareholder $ 139,000 $ 95,000 Accounts payable (including approximately $68,000 which is payable to the Company's President for expenses he paid on the Company's behalf) 320,000 264,000 Accrued expenses and other current liabilities 45,000 33,000 ------------ ------------ Total current liabilities 504,000 392,000 ------------ ------------ STOCKHOLDERS' DEFICIT: Preferred stock, par value $.01 per share, 5,000,000 shares authorized, none issued -- -- Common stock, Class A, par value $.001 per share, 120,000,000 shares authorized, 1,176,025 shares issued and outstanding at August 31, 1,000 1,000 2008 and February 29, 2008, respectively Common stock, Class B, par value $.001 per share, 3,750,000 shares authorized, 18,750 shares issued and 3,304 shares outstanding -- -- Capital-in-excess of par value 27,180,000 27,170,000 Accumulated deficit (27,669,000) (27,559,000) ------------ ------------ Total stockholders' deficit (488,000) (388,000) ------------ ------------ Total liabilities and stockholders' deficit $ 16,000 $ 4,000 ============ ============
See accompanying notes to the condensed consolidated financial statements. 1 MAGNA-LAB INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three and six months ended August 31, 2008 and 2007 (unaudited)
Three months ended Six months ended August 31, August 31, 2008 2007 2008 2007 ----------- ----------- ----------- ----------- REVENUES $ -- $ -- $ -- $ -- ----------- ----------- ----------- ----------- OPERATING EXPENSES: General and administrative 79,000 41,000 102,000 70,000 ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS (79,000) (41,000) (102,000) (70,000) ----------- ----------- ----------- ----------- OTHER EXPENSE - Interest expense 5,000 2,000 8,000 3,000 ----------- ----------- ----------- ----------- NET LOSS $ (84,000) $ (43,000) $ (110,000) $ (73,000) =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED 1,127,000 1,089,000 1,104,000 1,089,000 =========== =========== =========== =========== NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.07) $ (0.04) $ (0.10) $ (0.07) =========== =========== =========== ===========
See accompanying notes to the condensed consolidated financial statements. 2 MAGNA-LAB INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended August 31, 2008 and 2007 (unaudited)
2008 2007 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(110,000) $ (73,000) --------- --------- Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 10,000 -- Effect on cash of changes in operating assets and liabilities: Prepaid expenses and other assets (5,000) (6,000) Accounts payable, accrued liabilities and all other 82,000 49,000 --------- --------- NET CASH USED IN OPERATING ACTIVITIES (23,000) (30,000) --------- --------- CASH PROVIDED BY FINANCING ACTIVITIES: Proceeds received from notes payable to shareholder 30,000 25,000 --------- --------- NET INCREASE (DECREASE) IN CASH 7,000 (5,000) CASH: Beginning of period 1,000 6,000 --------- --------- End of period $ 8,000 $ 1,000 ========= ========= SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES Note payable used to finance insurance $ 11,000 $ 10,000 ========= =========
See accompanying notes to the condensed consolidated financial statements. 3 MAGNA-LAB INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT For the six months ended August 31, 2008
Common Stock -------------------------------------------------------- Capital-in- Class A Class B Excess -------------------------------------------------------- of Par Accumulated Shares Amount Shares Amount Value Deficit ---------------------------------------------------------------------------------------- BALANCES, February 29, 2008 1,086,025 $ 1,000 3,304 $ -- $ 27,170,000 $(27,559,000) STOCK-BASED COMPENSATION EXPENSE (unaudited) 90,000 -- -- -- 10,000 -- NET LOSS (unaudited) -- -- -- -- -- (110,000) BALANCES, August 31, 2008 (unaudited) 1,176,025 $ 1,000 3,304 $ -- $ 27,180,000 $(27,669,000)
See accompanying notes to the condensed consolidated financial statements. 4 MAGNA-LAB INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BASIS OF PRESENTATION AND CONSOLIDATION: The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X for small business issuers and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. The condensed consolidated financial statements include the accounts of Magna-Lab Inc. and its wholly-owned subsidiary, Cardiac MRI, Inc. (collectively, the "Company") and all significant intercompany transactions and balances have been eliminated in consolidation. All adjustments which are of a normal recurring nature and, in the opinion of management, necessary for a fair presentation have been included. These condensed consolidated financial statements should be read in conjunction with the more complete information and the Company's audited consolidated financial statements and related notes thereto included in the Company's annual report on Form 10-KSB for the year ended February 29, 2008. NOTE 2 - DISCUSSION OF THE COMPANY'S ACTIVITIES/PRODUCTS AND GOING CONCERN CONSIDERATION: Company Activities - The Company is focused on engaging in a "reverse merger" transaction with an unrelated business that would benefit from the Company's public reporting status. Additional activities have included preserving cash, making settlements with creditors, attempting to raise capital and continuing its public reporting. The Company was previously engaged in research, development and commercialization activities until it ceased such activities during the period September 2002 through March 2003. The Company's efforts to raise additional capital or enter into a strategic arrangement in order to complete commercialization of its cardiac diagnostic Illuminator products and development of its Artery View product or to seek other means to realize value through sale, license or otherwise have been unsuccessful. Going Concern Consideration - As indicated in the accompanying condensed consolidated financial statements, at August 31, 2008, the Company had approximately $8,000 in cash and approximately $488,000 in negative working capital and stockholders' deficit and negative cash flows from operations. For the six months ended August 31, 2008, the Company had a net loss of approximately $110,000 and utilized approximately $23,000 of cash in operating activities. Further, losses are continuing subsequent to August 31, 2008. These factors, among others, indicate that the Company is in need of additional financing or a strategic arrangement in order to continue its planned activities for the fiscal year that began on March 1, 2008. The Company's plans to deal with this uncertainty are described above in "Company Activities." Management's plans to enter into a strategic arrangement or sell or license its products/technology or merge with an unrelated business have not been successful to date and there can be no assurance that management's plans can be realized at all. These factors, among others, raise substantial doubt about the Company's ability to continue operations as a going concern. No adjustment has been made in the accompanying consolidated financial statements to the amounts and classification of assets and liabilities which could result should the Company be unable to continue as a going concern. NOTE 3 - NET LOSS PER COMMON SHARE: The Company complies with the accounting and reporting requirements of SFAS No. 128, "Earnings per Share." Net loss per common share is computed based on the weighted average number of Class A Common and Class B Common shares outstanding. Basic net loss per share excludes dilution and is computed by dividing net loss available to common stockholders by the weighted average common shares outstanding for the year. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Since there are no options, warrants or derivative securities outstanding, basic and diluted net loss per share were the same for the three and six month periods ended August 31, 2008 and 2007. 5 NOTE 4 - NOTES PAYABLE TO SHAREHOLDER: Notes payable include 12% unsecured notes payable to the Company's principal shareholder in the aggregate principal amount of $120,000, plus approximately $19,000 of interest accrued, including $30,000 borrowed on June 10, 2008. Such notes become due 120 days after issuance and, as such, $90,000 principal amount of such notes are in default at August 31, 2008 as a result of their non-payment when due. The notes that are in default bear interest at 15% per year subsequent to their maturity date. The Company intends to make a proposal to this principal shareholder to convert of all amounts outstanding to them (including overdue amounts) into common stock of the Company. NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Approximately $106,000 of accounts payable relates to intellectual property counsel fees and costs including approximately $68,000 of which has been paid by and is therefore due to the Company's Chairman and President for payments he has made on the Company's behalf to preserve certain intellectual property rights. Accrued expenses includes approximately $18,000 payable to a third party, guaranteed by our principal shareholder, for amounts paid to an account payable in October 2007 on our behalf. This amount is repayable if the proposed merger transaction with this party is not completed. This party subsequently merged with a third party and abandoned its possible transaction with the Company, however there has not been a demand for repayment of this amount. Further, the Company has pursued, without success, recovery of certain costs from this third party associated with a proposed transaction pursuant to understandings between the parties. See also Notes 3 and 8 to the audited consolidated financial statements included in the Company's Annual Report on Form 10-KSB for the year ended February 29, 2008 for other information on outstanding liabilities and related matters. There was no activity in the restructuring accrual for the pre-1997 activities during the six months ended August 31, 2008 or 2007. The Company periodically adjusts the remaining accrual based on the status of the matters and activity given the passage of time. NOTE 6 - STOCK-BASED COMPENSATION: In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 123R, "Share-Based Payment." SFAS No. 123R is a revision of SFAS No. 123, "Accounting for Stock Based Compensation," and supersedes APB No. 25. Among other items, SFAS No. 123R eliminates the use of APB No. 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments in the financial statements based on the grant date fair value of those awards. Stock awards to consultants and other non-employees are accounted for based on an estimate of their fair value at the time of grant and, in the instance of options and warrants, are based upon a Black-Scholes option pricing model. The fair value of each option grant under SFAS No. 123R is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions: risk free interest rate of 5%; no dividend yield; expected option lives of five to nine years and expected volatility in excess of 200%. In April 2004, the Board of Directors agreed to reserve 90,000 shares of class A common stock for issuance to directors and management in the event that their efforts result in Board approval of a merger or financing transaction. Such award, if granted, was intended to recognize the efforts of the Board and the Merger Committee working over an extended period of time with no or minimal 6 compensation for their efforts in (a) administering the wrap up of the Company's affairs and (b) originating, negotiating, executing and administrating a merger and related transactions to provide the Company shareholders with an opportunity to realize value for their shares. On July 24, 2008, pursuant to such Board approval, the Company entered into a definitive agreement for the merger of the Company with Belle Haven Partners, LLC under which a company, newly formed by Belle Haven for the purpose of acquiring all of the outstanding stock of Worldwide Equities, Inc., a Florida corporation, would be merged into a newly formed wholly-owned subsidiary of our company. Worldwide Equities, Inc., through its wholly-owned subsidiary, International Global Metals, Inc., is focused on scrap metal recycling, with an emphasis on reselling and processing ferrous and non-ferrous scrap metal. As such, the criteria for recognition of this share compensation was met on July 24, 2008 and the Company recorded stock-based compensation expense of approximately $10,000 reflecting the fair value of the 90,000 shares at the date of entry into the agreement at the closing bid price of the Company's stock. NOTE 7 - RECENTLY ISSUED OR ADOPTED ACCOUNTING PRONOUNCEMENTS: Effective March 1, 2007, the Company adopted the provisions of the FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. No amounts were accrued for the payment of interest and penalties at March 1, 2008. There was no change to this balance at August 31, 2008. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. The adoption of the provisions of FIN 48 did not have a material impact on the Company's consolidated financial position, results of operations and cash flows. Effective March 1, 2008, the Company adopted Statement of Financial Accounting Standard No. 157, Fair Value Measurement ("SFAS 157"), for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In accordance with the provisions of FSP No. FAS 157-2, Effective Date f FASB Statement No. 157, the Company elected to defer implementation of SFAS 157 as it relates to our non-financial assets and non-financial liabilities that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis until January 1, 2009. The Company is evaluating the impact, if any, this Standard will have on our consolidated non-financial assets and liabilities. SFAS No. 157 defines fair value, thereby eliminating inconsistencies in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations. SFAS No. 157 establishes a three tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. SFAS No. 157 requires the Company to maximize the use of observable inputs and to minimize the use of unobservable inputs in making fair value judgments. The Company's financial assets and liabilities measured at fair value on a recurring basis include those securities classified as cash and cash equivalents on the condensed consolidated balance sheet. All securities owned are valued under the first tier of the hierarchy where the assets are measured using quoted prices in active markets. In March 2008, the Company adopted SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." The adoption of SFAS No. 159 did not have any material impact on the Company's consolidated financial statements. In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141 (Revised 2007), "Business Combinations" ("SFAS 141(R)"). This statement replaces SFAS No. 141, "Business Combinations" ("SFAS 141"). This statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the expected effect, if any, SFAS 141(R) will have on its consolidated financial statements. 7 In December 2007, the Financial Accounting Standards Board issued SFAS 160, "Non-controlling Interests in Consolidated Financial Statements" ("SFAS 160"), an amendment of Accounting Research Bulletin No. 51, "Consolidated Financial Statements" ("ARB 51"). SFAS 160 establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. Minority interests will be re characterized as non-controlling interests and will be reported as a component of equity separate from the parent's equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. This pronouncement is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 160 on its consolidated financial statements. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. The objective of the guidance is to provide users of financial statements with an enhanced understanding of how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for; and how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008. Management is currently evaluating the impact SFAS 161 will have on the Company's consolidated financial statements. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements Some of the statements contained in this report discuss our plans and strategies for our business or state other forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. Statements that are not statements of historical facts may be deemed to be forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "plan," "intend," "should," "seek," "will," and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. These forward-looking statements reflect the current views of our management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, these statements. See our Form 10-KSB for the year ended February 29, 2008 for a discussion of certain known risks; also see Part II, Item 1A. Overview, Background and History We are currently a "shell company" with no meaningful assets or operations other than our efforts to identify and merge with an operating company. We no longer have any full-time employees and our Chief Executive and Chief Financial Officers serve on a part-time consulting basis. Prior to March 2003, our business had been focused on pre-revenue development and commercialization of disposable medical devices designed to enhance the effectiveness of magnetic resonance imaging in detection and diagnosis of heart disease. Due to the unavailability of funding, beginning in the Fall of 2002 we essentially ceased all of our operations including product development and commercialization activities. Our efforts to realize value for our prior business and MRI technology have been unsuccessful. As a result, we view our most viable option to be merging with an unrelated operating company that would benefit from our status as a reporting company in a so-called "reverse merger" transaction. Entering into a "reverse merger" would likely involve very substantial dilution to the existing shareholders. It would, however, provide an opportunity to return some value to shareholders. While we have identified and explored merging with a number of candidates over the past few years we have no commitments to merge with any company at the present time. In order to raise cash to continue our efforts to pursue a reverse merger, on October 31, 2005, the Company consummated a stock purchase agreement with Magna Acquisition LLC ("MALLC") which resulted in a change of control of our company. Under the agreement, we sold 300,000 shares of Class A Common Stock to MALLC for gross proceeds of $190,000, before expenses. Contemporaneous with the new investment, MALLC purchased from our former principal stockholder 307,727 shares of the Company's Class A Common Stock, representing all the shares of our common stock owned by that shareholder. Two of our directors and our Chief Financial Officer serve as sole managers of MALLC, with the ability to vote and dispose of the shares of our Company owned by MALLC by majority vote. These directors have assumed a lead role with management in pursuing financing and merger candidates and operating matters. MALLC has been responsible for substantially all of our funding since October 2005. During the period from October 2005 to August 31, 2008, MALLC loaned us an aggregate $120,000 under a series of promissory notes payable that mature 120 days from issuance, including $30,000 loaned to us during the six months ended August 31, 2008. At August 31, 2008, $90,000 face amount of such notes were beyond their maturity date and therefore due on demand. The notes bear interest at 12% per year increasing to 15% per year for periods beyond maturity. The Company intends to make a proposal to MALLC to convert all of the amounts outstanding to them (including overdue amounts) into common stock of the Company. While we have reduced our expenditures very significantly, we do not have sufficient cash to continue our activities for the coming twelve months. We currently do not have any commitments for new funding. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition, Liquidity and Capital Resources - At August 31, 2008, we had approximately $8,000 in cash and our working capital deficit and stockholders' deficit were both approximately $488,000. Although MALLC loaned us $30,000 in June 2008, much of that money was used to pay existing payables and we continue to lose money. Net loss for the six months ended August 31, 2008 was approximately $110,000 and cash used in operations during the six months totaled approximately $23,000. 9 Our plan of operations for the coming twelve months is to pursue our "reverse merger" strategy by seeking, evaluating and negotiating with merger candidates and to continue to take actions to preserve our cash and continue our public reporting. We do not have the cash resources to continue our plan for the coming twelve months, even at our reduced expenditure levels. As such, we may have to take further measures or cease activities altogether, including terminating our public reporting status. Should we enter into a "reverse-merger" transaction, it is highly unlikely that any funds would be allocated to our prior cardiac diagnostic business (which business would require significant capital). Further, since we do not have the cash to continue to preserve the intellectual property of that business, we may be forced to abandon it altogether. We currently have no material commitments for capital expenditures. Results of Operations - During the three and six months ended August 31, 2008, our net loss was approximately $84,000 and $110,000, respectively, compared to a net loss of approximately $43,000 and $73,000, respectively, in the three and six months ended August 31, 2007. The higher net loss in the current year three and six months results from approximately $50,000 of costs associated with our negotiation of and entry into a definitive agreement to merge with a target company, which agreement we subsequently terminated due to the counterparty's breach. While the counterparty is obligated to reimburse up to $50,000 of our deal-related expenses, there can be no assurance that we will be successful in recouping such amounts. As such, we have charged such costs to operations. Partly offsetting such increased cost are lower operating costs for occupancy, intellectual property (which costs have ceased) and costs associated with the reverse split of our shares. Higher interest cost results from higher debt levels, and higher default interest, in the three and six months ended August 31, 2008 compared to the three and six months ended August 31, 2007. The operating results for the three months ended May 31, 2008 are reflective of our core operating costs when we are not engaged in active negotiations for a merger transaction. Our expenses, particularly professional and consulting fees, can increase significantly if we are actively engaged in negotiations for a merger transaction as was the instance in the three months ended August 31, 2008. Off Balance Sheet Arrangements The Company has no material off balance sheet arrangements that are likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. Critical Accounting Principles - We have identified critical accounting principles that affect our consolidated financial statements by considering accounting policies that involve the most complex or subjective decisions or assessments as well as considering newly adopted principals. They are: Use of Estimates, Going Concern Consideration - Our condensed consolidated financial statements have been prepared assuming we are a "going concern". We are in need of immediate substantial additional capital or a strategic business arrangement in order to continue our planned activities. There can be no assurance that our plans to address this need can be realized. As such, we may be unable to continue operations as a going concern. No adjustment has been made in the condensed consolidated financial statements which could result should we be unable to continue as a going concern. Item 4T. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures. The Company's senior management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) 10 under the Securities Exchange Act of 1934 (the "Exchange Act") designed to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures under the supervision of and with the participation of management, including the Chief Executive Officer and our Chief Financial Officer as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective. (b) Changes in Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during our most recently completed fiscal quarter which is the subject of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There are inherent limitations in any system of internal control. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that its objectives are met. Further, the design of a control system must consider that resources are not unlimited and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgment in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. _____________________________________ PART II - OTHER INFORMATION Item 1A. Risk Factors Any investment in our common stock involves a high degree of risk. Some of these many known risks that affect an investment in our Company (there can be others) include: o we have incurred significant net losses in the past and unless we receive additional financing, we may be forced to cease all operations and liquidate our company, o we may issue shares of our capital stock or debt securities to raise capital and to complete a business combination, which would reduce the equity interest of our stockholders and likely cause a change in control of our ownership, o if we merge with an unrelated business, we may divest our cardiac MRI technology, partly in connection with or in anticipation of a merger with an unrelated business or such technology may remain with the Company and not receive any priority in allocation of any funding that may be available, o if we merge with an unrelated business, it is likely that our current officers and directors may resign upon consummation of a business combination, 11 o because of our limited resources and the significant competition for business combination opportunities, we may not be able to consummate a business combination with suitable growth potential, o we may be unable to obtain additional financing that may be needed to fund the operations and/or growth of the target business, o we have no full time employees and are substantially dependent on the efforts of part-time management and members of the Board of Directors, working for per-diem or no cash compensation, none of whom are bound by term employment agreements and o our significant shareholders and executive officers and directors currently are able, by virtue of their position as managers of Magna Acquisition LLC, a 56% shareholder of the Company, to influence matters requiring stockholder approval and their interests may conflict with those of other shareholders. For a more complete listing and description of these and other risks that the Company faces please see our Annual Report on Form 10-KSB for the year ended February 29, 2008. Item 3. Defaults Upon Senior Securities As discussed in Managements Discussion and Analysis of Financial Condition and Results of Operations - Overview, Background and History, $90,000 principal amount of 12% notes payable to Magna Acquisition LLC ("MALLC) are in default as a result of their non-payment when due. Such notes now carry a default rate of interest of 15%. MALLC has waived the cross default that would otherwise result from the above default with respect to an additional $30,000 principal amount of notes payable to MALLC that were issued subsequent to the above defaults. Item 5. - Other Information On July 24, 2008 the criteria for issuance of 90,000 shares of class A common stock to management and the Board of Directors was reached and such shares became issuable. See discussion under Note 6 of Notes to Condensed Consolidated Financial Statements. These shares have been offered and sold in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereunder. Item 6. - Exhibits 31.1 Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MAGNA-LAB INC. -------------- (Registrant) Date: October 17, 2008 By: /s/ Lawrence A. Minkoff -------------------------------------------------- Lawrence A. Minkoff, Chairman, President and Chief Scientific Officer (Principal Executive Officer) By: /s/ Kenneth C. Riscica -------------------------------------------------- Kenneth C. Riscica, Treasurer and Secretary (Principal Financial and Accounting Officer) 12 INDEX TO EXHIBITS No. Description - --- ----------- 31.1 Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. EX-31.1 2 e604374_ex31-1.txt EXHIBIT 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULE 13a-14(a)(as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) I, Lawrence A. Minkoff, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Magna-Lab, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The smaller reporting company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the smaller reporting company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the smaller reporting company's internal control over financial reporting that occurred during the smaller reporting company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the smaller reporting company's internal control over financial reporting; and 5. The smaller reporting company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the smaller reporting company's auditors and the audit committee of the smaller reporting company's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the smaller reporting company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the smaller reporting company's internal control over financial reporting. Dated: October 17, 2008 By: /s/ Lawrence A. Minkoff --------------------------------------- Lawrence A. Minkoff President (principal executive officer) EX-31.2 3 e604374_ex31-2.txt EXHIBIT 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULE 13a-14(a)(as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) I, Kenneth C. Riscica, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Magna-Lab, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The smaller reporting company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the smaller reporting company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the smaller reporting company's internal control over financial reporting that occurred during the smaller reporting company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the smaller reporting company's internal control over financial reporting; and 5. The smaller reporting company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the smaller reporting company's auditors and the audit committee of the smaller reporting company's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the smaller reporting company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the smaller reporting company's internal control over financial reporting. Dated: October 17, 2008 By: /s/ Kenneth C. Riscica ----------------------------------------- Kenneth C. Riscica, Treasurer & Secretary (principal financial officer) EX-32.1 4 e604374_ex32-1.txt EXHIBIT 32.1: CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In connection with the accompanying Quarterly report on Form 10-Q of Magna-Lab, Inc. for the quarter and six months ended August 31, 2008, the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that: (1) such Quarterly report on Form 10-Q for the quarter and six months ended August 31, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in such Quarterly report on Form 10-Q for the quarter and six months ended August 31, 2008 fairly presents, in all material respects, the financial condition and results of operations of Magna-Lab, Inc. October 17, 2008 /s/ Lawrence A. Minkoff ---------------------------------------------- Name: Lawrence A. Minkoff Title: President (principal executive officer) EX-32.2 5 e604374_ex32-2.txt EXHIBIT 32.2: CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In connection with the accompanying Quarterly report on Form 10-Q of Magna-Lab, Inc. for the quarter and six months ended August 31, 2008, the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that: (1) such Quarterly report on Form 10-Q for the quarter and six months ended August 31, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in such Quarterly report on Form 10-Q for the quarter and six months ended August 31, 2008 fairly presents, in all material respects, the financial condition and results of operations of Magna-Lab, Inc. October 17, 2008 /s/ Kenneth C. Riscica ---------------------------------------------------------- Name: Kenneth C. Riscica Title: Treasurer & Secretary (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----