-----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, N2vr19kZZj0bLC2km4A9bKkLbUn1FSAzJx4sHzSyxcYgzi7uePcVtOU935if3Ewf sEFxr3o+ESTfkyLdpSGFvQ== 0001193805-09-001950.txt : 20091015 0001193805-09-001950.hdr.sgml : 20091015 20091015171925 ACCESSION NUMBER: 0001193805-09-001950 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20090831 FILED AS OF DATE: 20091015 DATE AS OF CHANGE: 20091015 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: 091121989 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 e605932_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, 2009 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 incorporation or organization) Identification No.) 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, 2009 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 3. - Quantitative and Qualitative Disclosures about Market Risk 11 Item 4T - Controls and Procedures 11 PART II - OTHER INFORMATION Item 1A. - Risk Factors 11 Item 3 - Defaults Upon Senior Securities 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 28, 2009 2009 ------------ ------------ (unaudited) CURRENT ASSETS: Cash $ 9,000 $ 1,000 Prepaid expense 9,000 3,000 ------------ ------------ Total current assets $ 18,000 $ 4,000 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Notes payable and accrued interest payable to a shareholder $ 203,000 $ 158,000 Accounts payable (including approximately $68,000 which is payable to the Company's President for expenses he paid on the Company's behalf) 340,000 336,000 Accrued expenses and other current liabilities 37,000 33,000 ------------ ------------ Total current liabilities 580,000 527,000 ------------ ------------ 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 1,000 1,000 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 27,180,000 Accumulated deficit (27,743,000) (27,704,000) ------------ ------------ Total stockholders' deficit (562,000) (523,000) ------------ ------------ Total liabilities and stockholders' deficit $ 18,000 $ 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, 2009 and 2008 (unaudited)
Three months ended Six months ended August 31, August 31, ---------- ---------- 2009 2008 2009 2008 -------------- -------------- -------------- -------------- REVENUES $ -- $ -- $ -- $ -- -------------- -------------- -------------- -------------- OPERATING EXPENSES: General and administrative 14,000 79,000 28,000 102,000 -------------- -------------- -------------- -------------- LOSS FROM OPERATIONS (14,000) (79,000) (28,000) (102,000) -------------- -------------- -------------- -------------- OTHER EXPENSE - Interest expense 6,000 5,000 11,000 8,000 -------------- -------------- -------------- -------------- NET LOSS $ (20,000) $ (84,000) $ (39,000) (110,000) ============== ============== ============== ============== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED 1,179,000 1,127,000 1,179,000 1,104,000 ============== ============== ============== ============== NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.02) $ (0.07) $ (0.03) $ (0.10) ============== ============== ============== ==============
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, 2009 and 2008 (unaudited)
2009 2008 ----------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (39,000) $ (110,000) ----------- ------------- 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 (6,000) (5,000) Accounts payable, accrued liabilities and all other 23,000 82,000 ----------- ------------- NET CASH USED IN OPERATING ACTIVITIES (22,000) (23,000) ----------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds received from notes payable to shareholder 30,000 30,000 ----------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 30,000 30,000 ----------- ------------- NET INCREASE (DECREASE) IN CASH 8,000 7,000 CASH: Beginning of period 1,000 1,000 ----------- ------------- End of period $ 9,000 $ 8,000 =========== ============= SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES Note payable used to finance insurance $ 10,000 $ 11,000 =========== =============
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, 2009 (unaudited)
Common Stock -------------------------------------------- Capital in Class A Class B Excess -------------------------------------------- of Par Accumulated Shares Amount Shares Amount Value Deficit ------------------------------------------------------------------------------- BALANCES, February 28, 2009 1,176,025 $ 1,000 3,304 $ - $ 27,180,000 $(27,704,000) NET LOSS, unaudited - - - - - (39,000) ------------------------------------------------------------------------------- BALANCES, August 31, 2009 1,176,025 $ 1,000 3,304 $ - $ 27,180,000 $(27,743,000) ===============================================================================
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: 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-K for the year ended February 28, 2009. The operating results for the three and six months ended August 31, 2009 are not necessarily indicative of the results that may be expected for the year ended February 28, 2010. 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, 2009, the Company had only $9,000 of cash and approximately $562,000 in negative working capital and stockholders' deficit and negative cash flows from operations. For the six months ended August 31, 2009, the Company had a net loss of approximately $39,000 and utilized approximately $22,000 of cash in operating activities. Further, losses are continuing subsequent to August 31, 2009. 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, 2009. The Company's plans to deal with this uncertainty are described above in "Company Activities." Management's plans to raise capital, 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 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 Statement of Financial Accounting Standards ("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 (loss) per share excludes dilution and is computed by dividing 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 5 stock that then shared in the earnings of the entity. Since there are no options, warrants or derivative securities outstanding, basic and diluted loss per share were the same for the three month periods ended August 31, 2009 and 2008. NOTE 4 - NOTES PAYABLE: Notes payable include 12% unsecured notes payable to the Company's principal shareholder in the aggregate principal amount of $165,000, plus approximately $38,000 of interest accrued, including $30,000 issued during the three months ended August 31, 2009. Such notes become due 120 days after issuance and, as such, $135,000 principal amount of such notes are overdue at August 31, 2009. The notes that are overdue 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 ACCRUALS: 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 was to be repaid if the proposed merger transaction with this party was not completed. This party subsequently merged with a third party and abandoned its possible transaction with the Company. There has not been a demand for repayment of this amount. Further, the Company has asserted that it is due recovery of its 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-K for the year ended February 28, 2009 for other information on outstanding liabilities and related matters. There was no activity in the restructuring accrual for the pre-1997 activities during the three and six months ended August 31, 2009 or 2008. 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 Accounting Principles Board Opinion ("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%. NOTE 7 - EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS: In December 2007, the 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 6 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 noncontrolling 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 believes that the effect SFAS 141(R) will have on its condensed consolidated financial statements will only be known when and if it completes a reverse merger transaction. In December 2007, the FASB issued SFAS No. 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 believes that the effect SFAS 160 will have on its condensed consolidated financial statements will only be known when and if it completes a reverse merger transaction. In April 2009, the FASB issued three Final Staff Positions ("FSP"s) intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities. FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, provides guidelines for making fair value measurements more consistent with the principles presented in FASB Statement No. 157, Fair Value Measurements. FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, enhances consistency in financial reporting by increasing the frequency of fair value disclosures. FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. FSP 157-2 amends SFAS 157 by delaying the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are already recognized or disclosed at fair value in the financial statements on a recurring basis, to fiscal years beginning after November 15, 2008. FSP FAS 157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms what Statement 157 states is the objective of fair value measurement--to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. FSP FAS 107-1 and APB 28-1 relate to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. Prior to issuing this FSP, fair values for these assets and liabilities were only disclosed once a year. The FSP requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. FSP FAS 115-2 and FAS 124-2 on other-than-temporary impairments are intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in comprehensive income remains fair value. The FSP also requires increased and more timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The FSPs are effective for interim and annual periods ending after June 15, 2009 and have not had a material effect on the financial statements of the Company. 7 In June 2009, FASB issued SFAS No. 165, "Subsequent Events" which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or available to be issued. It is effective for interim and annual periods ending after June 15, 2009. The adoption of this pronouncement has not had a material effect on the condensed consolidated financial statements. In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("GAAP") - a replacement of FASB Statement No. 162," which will become the source of authoritative US GAAP recognized by the FASB to be applied to nongovernmental entities. It is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company does not believe that this will have a material effect on its consolidated financial statements. Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed 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-K for the year ended February 28, 2009 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, and entered into definitive agreements with one candidate (which agreement was subsequently terminated) 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, 2009, MALLC loaned us an aggregate $165,000 under a series of promissory notes payable that mature 120 days from issuance, including $30,000 loaned to us in the three months ended August 31, 2009. At August 31, 2009, $135,000 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, 2009, the Company had approximately $9,000 in cash and approximately $562,000 in negative 9 working capital and stockholders' deficit and negative cash flows from operations. For the six months ended August 31, 2009, the Company had a net loss of approximately $39,000 and utilized approximately $22,000 of cash in operating activities. Further, losses are continuing subsequent to August 31, 2009. 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, 2009. These factors, among others, raise substantial doubt about the Company's ability to continue operations as a going concern. 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, we do not have the cash to preserve the intellectual property of that business and therefore we have ceased making efforts to preserve such technology and 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, 2009, our net loss was approximately $20,000 and $39,000, respectively, compared to a net loss of approximately $84,000 and $110,000, respectively, in the three and six months ended August 31, 2008. During the three and six months ended August 31, 2008, the higher costs result primarily from professional and consulting fees associated with a potential merger transaction that ultimately did not close. The lower net loss in the three months ended August 31, 2009 results from the absence of a potential transaction during that period as well as lower operating costs, primarily professional fees and occupancy. Our interest costs in the three and six months ended August 31, 2009 are higher than in the same periods of the prior year due to higher debt levels and higher default interest. The operating results for the three and six months ended August 31, 2009 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. Our interest expenses are increasing with additional outstanding borrowings which are increasingly at default interest rates (15%). 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. 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk is the sensitivity of income or loss to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market driven rates or prices. We are not presently engaged in any substantive commercial business. Accordingly, the risks associated with foreign exchange rates, commodity prices, and equity prices are not significant. Our debt obligations contain interest rates that are fixed and we do not enter into derivatives or other financial instruments for trading or speculative purposes. 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) 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, 11 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, 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-K for the year ended February 28, 2009. Item 3. Defaults Upon Senior Securities As discussed in Managements Discussion and Analysis of Financial Condition and Results of Operations - Overview, Background and History, $135,000 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 6. - Exhibits 10.01 Note Payable to Magna Acquisition LLC dated August 18, 2009. 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 13, 2009 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 --- ----------- 10.01 Note Payable to Magna Acquisition LLC dated August 18, 2009. 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-10.01 2 e605932_ex10-01.txt PROMISSORY NOTE $10,000.00 August 18, 2009 FOR VALUE RECEIVED, the undersigned, Magna-Lab Inc., a New York corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of Magna Acquisition LLC or its registered assigns ( "Lender"), in lawful money of the United States of America, in the manner and at the times provided hereinafter, the principal sum of Ten Thousand Dollars (US$10,000), together with Interest (as hereinafter defined) and Default Interest (as hereinafter defined) and all other amounts due and payable pursuant to and in accordance with terms of this Note. Interest shall accrue on the unpaid principal amount of this Note from the date hereof until such principal amount is paid in full. "Interest" shall mean twelve percent (12%) per annum. Interest shall be computed on the actual number of days elapsed, predicated on a year consisting of three hundred and sixty (360) days. Default Interest, if any, shall be payable on demand. "Default Interest" shall mean interest computed at fifteen percent (15%) per annum, on (i) the entire principal balance of this Note from time to time unpaid from and after such amounts becomes due and payable (whether upon maturity, by acceleration or otherwise), and (ii) any and all other unpaid amounts due pursuant to the terms and provisions of this Note (including, but not limited to, accrued and unpaid Interest) from and after the respective date(s) on which those amounts become due and payable, whether upon maturity, by acceleration or otherwise; in each case from and after the expiration of any applicable grace period. Default Interest shall be computed on the actual number of days elapsed, predicated on a year consisting of three hundred and sixty (360) days. Notwithstanding anything to the contrary contained herein, for any period in which Default Interest is accruing on the entire unpaid principal balance hereunder, Interest shall not accrue. Default Interest shall compound on an annual basis. Unless otherwise accelerated pursuant to the terms hereof, this Note shall mature and all outstanding and unpaid principal and Interest shall be due and payable on the date that is 120 days from and after the date hereof. This Note may be prepaid, in whole or in part, at any time by Borrower without premium or penalty. Any prepayment of this Note shall be accompanied by payment of any Interest accrued and unpaid through the date of such prepayment, and all Default Interest, if any, accrued and unpaid through the date of such prepayment. Notwithstanding anything to the contrary contained herein, upon the occurrence of any one or more of: (i) a default in the payment of any amounts due hereunder and a failure to cure such default within five (5) business days, or (ii) a default hereunder, and the expiration of any grace period applicable to any default as set forth herein, then at the sole option and discretion of Lender, and without further demand or notice of any kind, the following shall become immediately due and payable: 1. the aggregate principal amount of this Note outstanding and remaining unpaid hereunder; 2. unpaid Interest; 3. Default Interest; and 4. all other indebtedness evidence by this Note. The following shall constitute events of default hereunder: (i) the assignment for the benefit of creditors by Borrower; (ii) the application for the appointment of a receiver for Borrower or for the property of Borrower; (iii) the filing of a petition in bankruptcy by or against Borrower; (iv) the issuance of an attachment or the entry of a judgment against Borrower; (v) a default by Borrower with respect to any other indebtedness due to Lender; (vi) the making or sending of a notice of an intended bulk sale by Borrower; (vii) the merger, consolidation, termination of existence, dissolution or insolvency of Borrower; (viii) the good faith determination by Lender that it deems itself insecure or that a material adverse change in the financial condition of Borrower has occurred since the date hereof and that Lender's prospect of payment hereunder has been impaired; or (ix) any breach or default under any indebtedness of Borrower to any banking or financial institution, and the expiration of any grace period applicable to such breach or default. If Borrower fails to pay any amounts when due hereunder, whether at maturity, by acceleration or otherwise, or if there occurs any event which entitles Lender to accelerate the indebtedness due under this Note and any grace period applicable to any such failure to pay or event as set forth herein expires, then Lender shall have all of the rights and remedies provided to it hereunder, and at law or in equity. The remedies of Lender, as provided herein, shall be cumulative and concurrent, and may be pursued singularly, successively, or otherwise, at the sole discretion of Lender, and may be exercised as often as occasion therefor shall arise. Lender may resort for payment hereunder to any of security for, or any guaranty of, this Note whether or not Lender shall have resorted for payment hereunder to any other security for or guaranty of this Note. No act or omission of Lender, including specifically any failure to exercise any right, remedy or recourse, shall be deemed to be a waiver or release of the same, such waiver or release to be effected only through a written document executed by Lender and then only to the extent specifically recited therein. A waiver or release with reference to any one event shall not be construed as continuing, as a bar to, or as a waiver or release of, any subsequent right, remedy, or recourse as to a subsequent event. If this Note is placed in the hands of an attorney for collection or is collected on advice of counsel or through any legal proceeding, Borrower promises to pay, to the extent permitted by law, court costs and reasonable attorneys' fees incurred by Lender. Borrower hereby waives presentment, demand, notice of dishonor or nonpayment, protest and notice of protest in connection therewith. If any provision of this Note is unenforceable, invalid or contrary to law, or its inclusion herein would affect the validity, legality or enforcement of this Note, such provision shall be limited to the extent necessary to render the same valid or shall be excised from this Note, as the circumstances require, and this Note shall be construed as if said provision had been incorporated herein as so limited or as if said provision had not been included herein, as the case may be. Time is of the essence of this Note. Upon maturity or following the occurrence of any event which entitles Lender to accelerate the indebtedness evidenced hereby, all payments received on account of the indebtedness evidenced hereby shall be applied, in whatever order, combination and amounts as Lender, in its sole and absolute discretion, decides, to all costs, expenses and other indebtedness, if any, owing to Lender by reason of this Note; Default Interest, Interest; and principal. This Note, and the terms and provisions hereof, shall be binding upon Borrower and its successors, administrators, and assigns, and shall inure to the benefit of any holder hereof. All amounts due hereunder shall be paid without deduction, set-off or counterclaim, Borrower expressly waiving any such rights to deduction, set-off or counterclaim. 2 Notwithstanding any provisions to the contrary contained in this Note or in any of the other documents or instruments referred to in this Note, if at any time or times the interest and any sums considered for such purposes to be interest, payable under or by reason of this Note or any such other documents or instruments, should exceed the maximum which, by the laws of the State having jurisdiction, may be charged with respect to the loan evidenced hereby, given the nature and all of the pertinent circumstances of such loan, than all such sums in excess of such maximum shall be deemed not to be interest, but rather to be payments on account of principal, and without further agreement of the parties shall be so applied without regard to any other provision of this Note, provided that Lender may elect instead that no sums shall be payable in excess of such maximum, whereupon this Note, and such other documents and instruments hall be deemed amended accordingly without further action by any party. This Note shall inure to the benefit of Lender and its successors and assigns and shall be governed by, and construed in accordance with, the laws of the State of Delaware. MAGNA-LAB INC., a New York corporation By /s/ Lawrence A Minkoff ----------------------------------- Name: Lawrence A. Minkoff Title: Chairman and President 3 EX-31.1 3 e605932_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 13, 2009 By: /s/ Lawrence A. Minkoff --------------------------------------- Lawrence A. Minkoff President (principal executive officer) EX-31.2 4 e605932_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 13, 2009 By: /s/ Kenneth C. Riscica ----------------------------------------- Kenneth C. Riscica, Treasurer & Secretary (principal financial officer) EX-32.1 5 e605932_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 ended August 31, 2009, 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 ended August 31, 2009 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 ended August 31, 2009 fairly presents, in all material respects, the financial condition and results of operations of Magna-Lab, Inc. October 13, 2009 /s/ Lawrence A. Minkoff ----------------------- Name: Lawrence A. Minkoff Title: President (principal executive officer) EX-32.2 6 e605932_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 ended August 31, 2009, 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 ended August 31, 2009 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 ended August 31, 2009 fairly presents, in all material respects, the financial condition and results of operations of Magna-Lab, Inc. October 13, 2009 /s/ Kenneth C. Riscica ---------------------- Name: Kenneth C. Riscica Title: Treasurer & Secretary (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----