U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB
                                   (Mark One)

     (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                  For the quarterly period ended: May 31, 1997

    ( ) 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 small business issuer as specified in its charter)

          New York                                   11-3074326
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                       P.O.Box 1313, Brentwood. NY 11717
                    ----------------------------------------
                    (Address of principal executive offices)

                                 (516) 595-2111
                          ---------------------------
                          (Issuer's telephone number)

                                 Not applicable
              ----------------------------------------------------
              (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 (  )      No ( X)

                      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 - January 9, 1998

Class A Common Stock, $.001 Par Value                           19,322,142
--------------------------------------------------             -----------------

Class B Common Stock, $.001 Par Value                            1,764,858
--------------------------------------------------             -----------------
Class                                                          Shares






    Transitional Small Business Disclosure Format (check one) Yes ( ) No (X)

<PAGE>

                                 MAGNA-LAB INC.


                                    CONTENTS



PART 1 - FINANCIAL INFORMATION (UNAUDITED)

         ITEM 1. - FINANCIAL STATEMENTS

                           BALANCE SHEETS                                      1

                           STATEMENTS OF OPERATIONS                            2

                           STATEMENTS OF CASH FLOWS                            3

                           STATEMENT OF STOCKHOLDERS' EQUITY                   4

                           NOTES TO FINANCIAL STATEMENTS                     5-8

         ITEM 2.   - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
                           OF OPERATION                                     8-10

PART II - OTHER INFORMATION

         ITEM 1 - LEGAL PROCEEDINGS                                           11

         ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS                   11

         ITEM 5 - OTHER INFORMATION                                           11

         ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                            11












All items which are not  applicable or to which the answer is negative have been
omitted from this report.

<PAGE>

PART I: FINANCIAL INFORMATION
        ITEM 1. - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                 MAGNA-LAB INC.

                                 BALANCE SHEETS
                 May 31, 1997 (unaudited) and February 28, 1997

                                                                        May 31,     February 28,
                                                                          1997             1997
                                                                   ------------     ------------
<S>                                                               <C>               <C>    

                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                       $          -      $    10,000
  Accounts receivable                                                   61,000           61,000
  Inventory, net of allowance for estimated
      non-realizable value of approximately $532,000                         -                -
  Deposits and other, net of amounts written off                             -                -
                                                                  -------------     ------------
        Total current assets                                            61,000           89,000
                                                                  -------------     ------------

PROPERTY AND EQUIPMENT, less accumulated depreciation
 and amortization and write offs of approximately $792,000
 and $791,000, respectively                                             17,000           18,000
                                                                  -------------     ------------

OTHER ASSETS                                                                 -                -  
                                                                  -------------     ------------

                                                                  $     78,000      $    89,000
                                                                  =============     ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Notes payable to related party, overdue                         $     75,000      $    75,000
  Accounts payable                                                   1,202,000        1,126,000
  Accrued and other current liabilities                              1,102,000          908,000
                                                                  -------------     ------------
        Total current liabilities                                    2,379,000        2,109,000
                                                                  -------------     ------------


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, par value $.01 per share, 5,000,000
   shares authorized, no shares issued                                       -                -
  Common stock, Class A, par value $.001 per share,
   40,000,000 shares authorized, 4,190,811 and
   3,765,811 shares issued and outstanding, respectively.                4,000            4,000
  Common stock, Class B, par value $.001 per share,
   3,750,000 shares authorized, 1,875,000 shares issued,
   1,824,189 and 1,824,189 shares outstanding, respectively.             2,000            2,000
  Capital in excess of par value                                    13,465,000       13,324,000
  Accumulated deficit                                              (15,772,000)     (15,490,000)
                                                                  -------------     ------------
        Total stockholders' equity                                  (2,301,000)      (2,020,000)
                                                                  -------------     ------------
                                                                  $     78,000      $    89,000
                                                                  =============     ============


                 See accompanying notes to financial statements

</TABLE>

                                        1



<PAGE>





                                 MAGNA-LAB INC.

                            STATEMENTS OF OPERATIONS
                                   (unaudited)








                                                  Three months ended May 31,
                                                  --------------------------
                                                        1997            1996
                                                  --------------------------

REVENUES                                        $          -     $         -  
                                                -------------    ------------

COSTS AND EXPENSES:
  Cost of sales                                            -               -
  Selling and marketing                               39,000         130,000
  General and administrative                         197,000         285,000
  Research and development                            42,000         319,000
                                                -------------    ------------
                                                     278,000         734,000

OTHER INCOME (EXPENSE)
  Interest expense                                    (3,000)         (2,000)
  Interest income                                          -          28,000
                                                -------------    ------------

NET LOSS                                        $   (281,000)    $  (708,000)
                                                =============    ============


WEIGHTED AVERAGE NUMBER OF
 SHARES OUTSTANDING                                4,890,000       4,590,000
                                                =============    ============

NET LOSS PER SHARE                                    $(0.06)          (0.15) 
                                                =============    ============













                 See accompanying notes to financial statements

                                        2


<PAGE>

<TABLE>
<CAPTION>

                                 MAGNA-LAB INC.


                            STATEMENTS OF CASH FLOWS
                Increase (Decrease) in Cash and Cash Equivalents
                                   (unaudited)




                                                                                Three Months ended May 31,
                                                                                --------------------------
                                                                                    1997             1996
                                                                                --------------------------
<S>                                                                          <C>              <C>    

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                   $  (281,000)     $  (708,000)
                                                                             ------------     ------------
  Adjustments:
    Depreciation and amortization                                                  1,000           26,000
Effect on cash of changes in operating assets and liabilities:
      Inventory                                                                        -         (241,000)
      Accounts receivable                                                              -           55,000
      Deposits and other                                                               -           (6,000)
      Accounts payable and accrued liabilities                                  (272,000)        (110,000)
      Customer deposits                                                                -          (80,000)
                                                                             ------------     ------------
           Total adjustments                                                    (271,000)        (356,000)
                                                                             ------------     ------------

NET CASH USED IN OPERATING ACTIVITIES                                            (10,000)      (1,064,000)
                                                                             ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of equipment and software                                                -          (55,000)
                                                                             ------------     ------------
NET CASH USED IN INVESTING ACTIVITIES                                                  -          (55,000)
                                                                             ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Other, net                                                                             -                -  
                                                                             ------------     ------------

NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES                                     -                -
                                                                             ------------     ------------   
NET INCREASE (DECREASE) IN CASH
 AND CASH EQUIVALENTS                                                            (10,000)      (1,119,000)
CASH AND CASH EQUIVALENTS:
  Beginning of period                                                             10,000        3,047,000
                                                                             ------------     ------------
  End of period                                                              $         -      $ 1,928,000
                                                                             ============     ============

                 See accompanying notes to financial statements
</TABLE>

                                                                          3


<PAGE>
<TABLE>
<CAPTION>


                                 MAGNA-LAB INC.


                       STATEMENTS OF STOCKHOLDERS' EQUITY

                 For the quarter ended May 31, 1997 (unaudited)















                                                                                                    Capital in
                                                       Common Stock                                  Excess
                                          ---------------------------------------------------  
                                            Class A                   Class B                        Of Par       Accumulated
                                            Shares        Amount      Shares           Amount        Value (a)      Deficit
                                          -----------------------------------------------------------------------------------
<S>                                        <C>           <C>          <C>          <C>             <C>           <C>

BALANCES, February 28, 1997                3,765,851     $  4,000     1,824,149    $   2,000       $13,464,000   (15,490,000)

CONVERT B SHARES TO A                              -                          -

ISSUE SUBSCRIBED SHARES                      300,000

NET LOSS                                                                                                            (204,000)
                                          -----------------------------------------------------------------------------------
BALANCES, May 31, 1996 (unaudited)         4,065,851     $  4,000     1,824,149    $   2,000       $13,464,000   (15,694,000)
                                          ===========    =========    ==========   ==========      ============  ============














(a) Includes amounts classified as Common stock subscribed at February 28, 1997.




                 See accompanying notes to financial statements
</TABLE>
                                        4

<PAGE>


                                 MAGNA-LAB INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
NOTE 1  - ACTIVITIES:

         Since  commencement of operations on February 10. 1992,  Magna-Lab Inc.
(the  "Company")  has  developed  and  intended  to  manufacture  and market the
MAGNA-SL,  the  first of a planned  series of  anatomy  specific  MRI  (Magnetic
Resonance  Imaging)  products which are smaller and cost less to own install and
operate than present "whole body" MRI systems.  The Company's  efforts to market
and sell the  MAGNA-SL  did not  generate  sufficient  revenues  to sustain  the
Company's planned operations.

         In February  1997,  the Board of Directors  retained a  consultant  and
approved a plan of restructuring of the Company's  operations conceived with the
assistance  of the  consultant  (the  "Plan").  The Plan has, as its  objective,
restructuring of the Company's  existing  business by elimination of production,
marketing  and  certain  system   engineering  by  strengthening   the  existing
relationship with Elscint  Cryomagnetics,  Ltd. ("Elscint" - see Form 10-KSB for
the year ended  February  28,1997  for a  discussion  of the  relationship  with
Elscint),  and repositioning the Company into a royalty and development  company
in the near term.  The  repositioning  involves a  significant  new  development
iniative  in Cardiac  MRI  through a joint  collaberation  with the Mount  Sinai
School of Medicine  (the  "Cardiac  MRI  Iniative").  The Company has received a
proposal  from  Elscint  (the  "Elscint  Proposal")  for  certain  work which is
integral to the Plan but the Company  has been unable to finalize  the  proposal
because of lack of funds.  The Company has concluded an agreement with the Mount
Sinai  School of Medicine  for the Cardiac MRI  Iniative  but has been unable to
fund its  obligations  under the agreement  until  January  1998.  See Note 10 -
Subsequent Events.

         The Plan  involves  termination,  in March 1997, of the majority of the
Company's  workforce  including  the  entire  sales  and  marketing  staff,  the
production  department and portions of the engineering staff.  Further, the Plan
includes  elimination  of the Company's  production,  development  and executive
facility,  reductions in the need for other assets  including leased assets with
remaining  non-cancelable  terms,  and other  measures.  The Plan also  includes
raising new  financing  in order to support the  Cardiac  MRI  Iniative  and the
financial resources needed to go forward with the Elscint Proposal.  The Company
recorded a  restructuring  charge of  approximately  $1.5  million to the fourth
quarter ending February 28, 1997 for write downs of fixed assets, inventory (see
next   paragraph)   and  deposits   made  with   strategic   vendors  which  are
non-refundable,  as well as accruals for lease  termination and other costs. The
ultimate amount may differ from this estimate.

         Pursuant  to  the  Plan  and  after  its  further   attempts  to  raise
substantial additional working capital were unsuccesssful, on March 5, 1997, the
Company informed 10 of its 20 employees that they were being  indefinitely  laid
off and between  March 5 and March 15, 1996,  another 4 employees  were laid off
due to  insufficient  funds for their  payroll.  The  remaining  employees  were
offered the  opportunity  to continue  with the Company in exchange for deferred
compensation  pending successful  completion of continuing efforts to complete a
financing.  At March 15,  1997,  unpaid  payroll to  terminated  and  continuing
employees totaled  approximately  $150,000.  Of the remainder,  only Lawrence A.
Minkoff, Ph. D., the Company's Chairman,  president and Chief Executive Officer,
is in the full time employ of the Company as of January 1, 1998.  The  remaining
employees  have  terminated  their full time  relationship  with the Company and
approximately  four of them serve or have  indicated that they may serve as part
time  employees  or  consultants  to the Company.  When the Company  vacated its
principal production, development and executive facility it agreed to a judgment
against it by the landlord for unpaid rent in amounts  exceeding $50,000 and for
additional  rent  totaling  approxiately  $70,000 in settlement of the unexpired
term of the lease.  The Company then placed  certain  inventory and equipment in
storage and several key  individuals  continued the search for new capital.  The
Company's operations have, therefore,  all but ceased.  Additionally,  virtually
all of the Company's  creditors  have  threatened  or initiated  legal action to
recover  amounts due them which the Company has no ability to pay (See - Note 10
Subsequent Events and Part II, Item 1 - Legal Proceedings).

         As indicated in the attached financial  statements,  as of May 31, 1997
Magna-Lab Inc. (the "Company") had no substantial current assets , approximately
$2.4 million of  liabilities  and  virtually no cash.  Further,  the Company has
incurred a loss of approximately $300,000 for the quarter ended May 31, 1997 and
losses  have  continued  since May 31,  1997 as  indicated  in the  accompanying
condensed financial statements. These factors, among others, indicate that the
                                        5
<PAGE>

Company  is in need of very  significant  additional  financing  or a  strategic
business  arrangement in order to continue any aspect of its planned  operations
in the fiscal  year  beginning  March 1, 1997.  (See Note 10  Subsequent  Events
egarding, among other things,  completion of this financing in December 1997 and
January 1998).

         While the  Company  had  ceased  virtually  all  operations  during the
quarter  ended May 31, 1997,  it continued to search for new capital in order to
continue  its  operations  pursuant to the Plan.  In October  1997,  the Company
reached  agreement with an investor group to provide  certain limited funding to
the  Company  predicated  on  the  Company's  ability  to  reduce  its  recorded
liabilities  (through creditor  consessions) by a very material amount. See Note
10 Subsequent Events.

         In May 1997,  the Company  entered into an  agreement  with Mount Sinai
School  of  Medicine  (New York  City) and Dr.  Valentin  Fuster  (as  principal
investigator) for a collaborative  research arrangement devoted to utilizing MRI
in cardiac arterial imaging and requiring  payments totaling  approximately $1.5
million over three years.  The initial  required payment of $150,000 was made in
December 1997.

         The Company is continuing its efforts to (1) raise additional  capital,
(2) enter into a strategic  arrangement  with others,  and (3) move forward with
the new product opportunity in cardiac MRI and the Elscint proposal. There is no
assurance that any of these efforts will be successful and that the Company will
be able to  continue  even its  severely  curtailed  operations,  for  which the
Company will require additional capital. See Note 10 Subsequent Events.

         There can be no assurances  that  management's  plans  described in the
preceding  paragraphs will be realized.  These factors,  among others,  indicate
that the Company may be unable to continue operations as a going concern.


NOTE 2  - BASIS OF PRESENTATION:

The accompanying  financial statements have been prepared in accordance with the
instructions  to Form  10-QSB  and do not  include  all of the  information  and
footnotes required by generally accepted accounting principles.  All adjustments
which are of a normal  recurring  nature  and,  in the  opinion  of  management,
necessary for a fair presentation have been included. These statements should be
read in conjunction with the financial  statements and notes thereto included in
the Company's annual report on Form 10-KSB for the year ended February 29, 1996.

NOTE 3  -  LOSS PER SHARE OF COMMON STOCK:

Net loss per share is computed  based on the weighted  average number of Class A
Common  and  Class  B  Common  shares  outstanding  after  subtracting   certain
(1,000,000)  Calss B shares,  which are  forfeitable  at March 31,  1998  unless
certain events occur,  from shares  outstanding in computing net loss per share.
Such forfeitable shares would not be deducted in computing net income per share.
Dilutive options and warrants outstanding would be considered in the computation
of net income per share under the treasury  stock method when their effect is to
reduce reported net income per share.

NOTE 4 - DEPOSITS:

In August  1993,  the Company  made a $480,000  non-refundable  deposit  payment
pursuant  to  an  agreement  with  an  unaffiliated  European  supplier  of  MRI
components  (consoles).  Such agreement,  as amended in July 1994,  provides for
purchases of consoles and the license of certain technology underlying consoles.
The Company has agreed to purchase  initial  consoles which,  as amended,  would
result in an additional payment of approximately  $240,000 (which has been paid)
beyond the $480,000 paid as a deposit.  The unamortized deposit of approximately
$332,000 remaining at May 31, 1997 has been written off to restructuring charges
in the statement of operations for the fiscal year ended February 28, 1997.






                                        6
<PAGE>

NOTE 5 -  PROPERTY AND EQUIPMENT:

Details of property and equipment at May 31, 1997 are as follows:

         Machinery and equipment                              $ 760,000
         Purchased software                                      49,000
                                                              ---------   
                                                                809,000
         Less: accumulated depreciation and amortization        392,000
               amounts written off in restructuring charge      400,000
                                                              ---------   
                                                              $  17,000

NOTE 6 - NOTES PAYABLE:

In February 1997, the Company issued an interest bearing (10%) note payable to a
shareholder on March 15, 1997 for $75,000, secured by certain amounts receivable
from the taxing authorities of the United Kingdom and the machine delivered to a
related  party in December  1996 but not paid for by that  party.  In June 1997,
upon  collection of the  receivable  from the taxing  authorities  of the United
Kingdom,  the Company  repaid  approximately  $64,000 of this note and  interest
payable. The remainder, plus penalty interest remains due.

NOTE 7 - STOCKHOLDERS' EQUITY:

In May 1997,  the The Board of  Directors  of the  Company  determined  that the
purposes of the 1992 Stock Option Plan were not being  adequately  achieved with
respect to those employees and consultants holding options that were exercisable
above  the then  current  market  value  and that it was  essential  to the best
interests of the Company and the Company's  shareholders that the Company retain
and motivate  such  employees and  consultants.  The Board  concluded  that such
retention  was  particularly  important  given the Company's  severely  strained
financial situation and the sacrifices made by the key employees to work without
current pay and put forth their own resources to support the Companys  Plan. The
Board further  determined  that it would be in the best interests of the Company
and the Company's  shareholders  to provide such  optionees the  opportunity  to
exchange  their above market value options for options  exercisable  at the then
current  market value.  In May 1997,  upon approval of the Board of Directors of
the Company,  the Company  offered the holders of outstanding  options under the
1992 Stock  Option Plan who were  identified  by the Board to have a  continuing
role in the Company's Plan of restructure  with exercise  prices above $2.00 per
share,  the  opportunity  to exchange  such options for new stock  options at an
exercise price of $0.25 per share. The bid price for the Class A Common stock on
Nasdaq on that date was $0.22.  Any holder  accepting this offer was required to
give up existing  options.  In  addition,  in  recognition  of their  efforts to
advance the Plan,  the  completion of the  agreement  with Mount Sinai School of
Medicine,  and the early successful  results of the work with Mount Sinai School
of Medicine,  the Board awarded (subject to shareholders  approval which has not
yet been  obtained)  new options to purchase an aggregate  of 900,000  shares of
Class A common  stock at  $0.25  per  share to  officers  and  directors  of the
Company. Each of the new options were granted for a five year period of exercise
with options for 650,000 shares exercisable  immediately and options for 250,000
shares exercisable ratably over a three year period.

NOTE 8 - ACCRUED LIABILITIES:

Included in accrued  liabilities at May 31, 1997 are approximately  $250,000 for
accrued payroll.

NOTE 9 - OTHER

Related party matters - A director of the Company, who is also a principal owner
of a company  which owns stock in the Company,  is a partner in a law firm which
provides  legal  services  to the  Company.  Fees  accruing  to such firm in the
quarter ended May 31, 1996 have been recorded at  approximately  $75,000 related
to financing,  strategic and general  corporate  matters.  Amounts owing to such
firm are included in the financial  statements at  approximately  $50,000 at May
31, 1996.
                                        7

<PAGE>

Restructuring charge recouped in May 1997 quarter - During the quarter ended May
31,  1997,  inventories  which had been written off to  restructuring  charge at
February 28, 1997  totaling  approximately  $60,000 were returned to vendors for
credit. This amount has been credited to general and administrative costs during
the quarter ended May 31, 1997.

Litigation  matters  -  As  a  result  of  the  Company's  distressed  financial
condition, it is subject to the risk of litigation related to unsettled payables
as further discussed in Form 10-KSB for the year ended February 28, 1997.

NOTE 10 SUBSEQUENT EVENTS:

Subsequent to the  completion  of the quarter ended May 31, 1997,  the following
events,  pursuant to the Plan of  restructuring  outlined  above,  have occurred
which  are  material  to  the  Company's   financial  position  and  results  of
operations:

(a) Private placement with accredited investors - Pursuant to a private offering
to accredited  investors beginning in November 1997, in January 1998 the Company
completed the offering of  15,072,000  shares of class A common stock to a group
of accredited  investors for gross  proceeds of  approximately  $1,884,000.  The
proceeds  are to be used to advance the Plan of  restructuring  outlined  above,
including the initial  funding of the  agreement  with the Mount Sinai School of
Medicine.

(b) Negotiated  settlements with creditors - In connection with the January 1998
private  placement of securities  outlined in (a) above, the Company has offered
its trade and other creditors the opportunity to settle the Company's obligation
to them for a reduced amount. As of January 1, 1998, certain vendor and employee
claims have been agreed to be settled and efforts are still in process to settle
remaining amounts in an orderly manner.

(c)  Settlement  of  liabilities  to employees - In December  1997,  the Company
offered to settle  claims by  non-executive  employees of the Company for unpaid
payroll and expenses of  approximately  $133,000,  representing  the approximate
amount recorded by the Company for such liabilities. Over 80% of this amount has
been agreed for  settlement  and  efforts  are ongoing to settle the  remainder.
Executive  employees of the Company were offered the  opportunity  to settle the
liability for amounts due them for compensation for a reduced amount aggregating
approximately  $150,000.  Approximately 80% of this amount has been agreed to by
the  executives  and  efforts  are  continuing  to settle the  remainder.  1 (d)
Settlement of litigation with a vendor - In October 1997 a judgment for $300,000
was entered  against the Company in the action  commensed by a vendor to recover
amounts alledged to be due from the Company (see Note 12 to finanaial  statement
at February 28, 1997).  In December  1997,  the Company and the vendor agreed to
settle this judgment for a total of $150,000, substantially less than the amount
that had been accrued to the May 31, 1997 condensed balance sheet.

(e)  Settlement  of  judgment  in favor or a former  landlord - Amounts due to a
former  landlord,  including  amounts  under a  judgment  rendered  against  the
Company, have been settled for approximately $150,000.





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


THIS REPORT CONTAINS  FORWARD-LOOKING  STATEMENTS WITHIN THE MEANINGS OF SECTION
27A OF THER  SECURITIES ACT OF 1933 AND SECTION 21E OF THE  SECURITIES  EXCHANGE
ACT OF 1934.  ACTUAL  RESULTS  AND EVENTS  COULD  DIFFER  MATERIALLY  FROM THOSE
PROJECTED



     (B) MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

FINANCIAL CONDITION -

HISTORY - During the fiscal year ended February 28, 1994,  the Company  realized
net proceeds of approximately $5.4

                                        8
<PAGE>

million in connection with the initial public offering of its equity securities.
At that time, it was estimated  that the proceeds of the public  offering  would
last the  Company  for  approximately  one year  and  that  the  Company  may be
dependent  upon the receipt of  additional  financing  in order to continue  its
activities beyond that time. During the fiscal year ended February 28, 1995, the
Company  raised an aggregate of $1.65 million  through the private  placement of
notes  payable in 1995 and warrants.  During the fiscal year ended  February 29,
1996, the Company  raised  $500,000  (approximately  $410,000 net proceeds) in a
bridge loan  transaction and  approximately  $4.6 million in net proceeds from a
public offering of equity  securities.  During the year ended February 28, 1997,
the  Company  raised  approximately  $75,000  in a  secured  note  payable  to a
shareholder  due in  March  1997  (which  note is  presently  in  default  as to
approximately  $13,000 of principal plus accrued interest and penalty  interest)
and approximately  $100,000 in a private placement with accredited  investors of
300,000 shares of the Company's Class A Common Stock.

In  January  1997,  the  Company  ran out of cash  and  since  then,  and  until
completion of a private  placement of Class A common stock in December 1997 (See
Note 10 Subesquent  Events) has had no financial  resources  available to it. 

AT MAY 31, 1997 - FINANCIAL  CONDITION AND GOING CONCERN  MATTERS - Reference is
made to the Form 10-KSB for a discussion of conditions  leading to the Company's
financial situation.

         During the quarter ended May 31, 1997, the Company was  unsuccessful in
its efforts to raise additional capital, the amounts receivable from the related
party have not been paid, inventory produced for that party has not gone forward
into  further  production,  and,  as such,  the  Company  ceased  virtually  all
operations.

         In February  1997,  the Board of Directors  retained a  consultant  and
approved a plan of restructuring of the Company's  operations conceived with the
assistance  of the  consultant  (the  "Plan").  The Plan has, as its  objective,
restructuring of the Company's  existing  business by elimination of production,
marketing  and  certain  system   engineering  by  strengthening   the  existing
relationship with Elscint  Cryomagnetics,  Ltd. ("Elscint" - see Form 10-KSB for
the year ended  February  28,1997  for a  discussion  of the  relationship  with
Elscint),  and repositioning the Company into a royalty and development  company
in the near term.  The  repositioning  involves a  significant  new  development
iniative  in Cardiac  MRI  through a joint  collaberation  with the Mount  Sinai
School of Medicine  (the  "Cardiac  MRI  Iniative").  The Company has received a
proposal  from  Elscint  (the  "Elscint  Proposal")  for  certain  work which is
integral to the Plan but the Company  has been unable to finalize  the  proposal
because of lack of funds.  The Company has concluded an agreement with the Mount
Sinai  School of Medicine  for the Cardiac MRI  Iniative  but has been unable to
fund its  obligations  under the agreement  until  January  1998.  See Note 10 -
Subsequent Events.

         The Plan  involves  termination,  in March 1997, of the majority of the
Company's  workforce  including  the  entire  sales  and  marketing  staff,  the
production  department and portions of the engineering staff.  Further, the Plan
includes  elimination  of the Company's  production,  development  and executive
facility,  reductions in the need for other assets  including leased assets with
remaining  non-cancelable  terms,  and other  measures.  The Plan also  includes
raising new  financing  in order to support the  Cardiac  MRI  Iniative  and the
financial resources needed to go forward with the Elscint Proposal.  The Company
recorded a  restructuring  charge of  approximately  $1.5  million to the fourth
quarter ending February 28, 1997 for write downs of fixed assets, inventory (see
next   paragraph)   and  deposits   made  with   strategic   vendors  which  are
non-refundable,  as well as accruals for lease  termination and other costs. The
ultimate amount may differ from this estimate.

         Pursuant  to  the  Plan  and  after  its  further   attempts  to  raise
substantial additional working capital were unsuccesssful, on March 5, 1997, the
Company informed 10 of its 20 employees that they were being  indefinitely  laid
off and between  March 5 and March 15, 1996,  another 4 employees  were laid off
due to  insufficient  funds for their  payroll.  The  remaining  employees  were
offered the  opportunity  to continue  with the Company in exchange for deferred
compensation  pending successful  completion of continuing efforts to complete a
financing.  At March 15,  1997,  unpaid  payroll to  terminated  and  continuing
employees totaled  approximately  $150,000.  Of the remainder,  only Lawrence A.
Minkoff, Ph. D., the Company's Chairman,  president and Chief Executive Officer,
is in the full time employ of the Company as of January 1, 1998.  The  remaining
employees  have  terminated  their full time  relationship  with the Company and
approximately  four of them serve or have  indicated that they may serve as part
time  employees  or  consultants  to the Company.  When the Company  vacated its
principal production, development and executive facility it agreed to a judgment
against it by the landlord for unpaid rent in amounts  exceeding $50,000 and for
additional  rent totaling  approximately  $70,000 in settlement of the unexpired
term of the lease.  The Company then placed  certain  inventory and equipment in
storage and several key  individuals  continued the search for new capital.  The
Company's
                                        9

<PAGE>

operations have, therefore, all but ceased.  Additionally,  virtually all of the
Company's creditors have threatened or initiated legal action to recover amounts
due them which the  Company has no ability to pay (See - Part II, Item 1 - Legal
Proceedings and Note 10 Subsequent Events).

         As indicated in the attached financial  statements,  as of May 31, 1997
Magna-Lab Inc. (the "Company") had no substantial current assets , approximately
$2.4 million of  liabilities  and  virtually no cash.  Further,  the Company has
incurred a loss of approximately $300,000 for the quarter ended May 31, 1997 and
losses  have  continued  since May 31,  1997 as  indicated  in the  accompanying
condensed financial statements.  These factors, among others,  indicate that the
Company  is in need of very  significant  additional  financing  or a  strategic
business  arrangement in order to continue any aspect of its planned  operations
in the fiscal year beginning March 1, 1997.

          While the  Company  has ceased  virtually  all  operations  during the
quarter  ended May 31, 1997,  it continued to search for new capital in order to
continue its operations pursuant to the Plan.

         Pursuant  to a  private  placement  to  accredited  investors  begun in
November 1997, in January 1998 the Company  completed the offering of 15,036,000
shares  of class A common  stock to a group of  accredited  investors  for gross
proceeds of approximately $1,884,000. The proceeds are to be used to advance the
Plan of  restructuring  outlined  above,  specifically to fund the launch of the
Cardiac MRI initiative,  to reduce  indebtedness and to provide working capital.
Based on vendor and executive employee concessions to date and anticipated,  the
expects  that the  proceeds  of this  offering  will last it no longer  than six
months, after which it would require additional capital to pursue the Plan.

         The Company is continuing its efforts to (1) raise additional  capital,
(2) enter into a strategic  arrangement  with others,  and (3) move forward with
the new product opportunity in cardiac MRI and the Elscint proposal. The Company
will require additional if it is to pursue its plans.

         There can be no assurances  that  management's  plans  described in the
preceding  paragraphs will be realized.  These factors,  among others,  indicate
that the Company may be unable to continue operations as a going concern.


         On April 10, 1997, the Company's  equity  securities  were removed from
listing on the NASDAQ SmallCap Market after the Company's  appeal to the Listing
Qualifications Committee was unsuccessful.

         The Company  believes,  based upon its resources after the January 1998
private  placement  and  anticipated  operations,  that it  does  not  have  the
financial  resources  to fund its  operations  for more than six months  without
substantial additional capital or a stretegic business arrangement.  This belief
is  based  upon   estimates  and  the  Company's   belief  about  its  financial
requirements,  as well as other information  contained in this report, are based
upon present resources,  condititions,  developments and anticipated operations.
This  belief is based upon  estimates  and  assumptions  including,  among other
things,  levels of existing liabilities and discussions with creditors,  as well
as existing and projected  operating  costs,  efficiencies  and scheduling.  The
foregoing information constitutes  forward-looking statements within the meaning
of Section 21E under the Securities Exchange Act of 1934, as amended.

RESULTS OF OPERATIONS -

         Operations  in the quarter ended May 31, 1997 resulted in a net loss of
approximately  $281,000.  The majority of the workforce was  terminated  between
March 5 and  March  15,  1997,  however,  six  senior  managers  and  executives
continued to devote their efforts to the Company's  Plan of  restructure  during
the  majority  of the  quarter.  Their  payroll,  which was accrued but not paid
during the  quarter,  is the  principal  cost in the  accompanying  Statement of
Operations.  Net loss also  includes  the reversal of  approximately  $60,000 of
restructuring charge as a result of the return for credit of inventory which was
written off to restructuring charge at February 28, 1997.

         Operations  in the quarter ended May 31, 1996 resulted in a net loss of
approximately  $708,000.  The loss  results from the absence of shipments in the
quarter    and   the    ongoing    selling,    general,    administrative    and
research/development costs of the Company at that time.





                                       10
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. - LEGAL PROCEEDINGS

Reference is made to Part I - Item 3 of Form 10-KSB for the year ended  February
29, 1996 for  discussion of a legal  proceeding  commenced  against the Company,
including  by Devcom  and by the  Company's  former  landlord  Heartland  Rental
Properties  Partnership).  See  paragraphs  (d) and (e) of Note 10 -  Subsequent
Events, above, for disclosure of the settlements of these two legal proceedings.
The Company  continues to be subject to judgments  for lesser  amounts and other
litigation and/or threatened litigation.

ITEM 2. - CHANGES IN SECURITIES AND USEOF PROCEEDS

See  paragraph  (a)  of  Note  10 -  Subsequent  Events  and  Part  1.  Item  2,
Management's  Analysis  and  Discussion  of Financial  Condition  and Results of
Operations,  for a discussion of a private placement of equity securities (under
Rule 506 Regulation D).

ITEM 5. - OTHER INFORMATION

See Note 10 - Subsequent Events,  above, for a discussion of significant Company
developpments during the October 1998 through January 1998 period.

In May 1997,  the Company  entered into an agreement  with Mount Sinai School of
Medicine and Dr. Valentin Fuster (as principal investigator) for a collaborative
research  arrangement  devoted to utilizing MRI in cardiac  arterial imaging and
requiring  payments  totaling  approximately  $1.5 million over three years. The
initial required payment of $150,000 was made by the Company until January 1998.

ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

         Exhibit No.

               (11)      Statement  re:  computation  of  loss  per  share  -  A
                         statement  regarding the  computation of loss per share
                         is   omitted   because   computation   can  be  clearly
                         determined   from  the   material   contained  in  this
                         Quarterly Report on Form 10-QSB.

               (27)      Financial Data Schedule

         (b)   The Company filed a report on Form 8-K during the quarter ended 
                May 31, 1997 (filed in April 1997)
                  The Form 8-K reported (under Item 5) the following events -
                        - The very significant financial distress of the Company
                        - The private placement of $100,000 of Class A common
                           stock and a $75,000  secured  promissory  note with a
                           shareholder  
                        - The  Company's  Plan of  restructuring together with 
                           activities under the Plan 
                        - The removal of  the  Company's  securities  from  
                          listing  on the NASDAQ  SmallCap  market 
                        - The  agreement  with Mount Sinai School of Medicine








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<PAGE>





                                            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:  January  15,  1997        By:  /s/ Lawrence A. Minkoff
       ------------------             ------------------------------
                                      Lawrence A. Minkoff , Chairman of the
                                      Board of Directors, Chief Executive
                                      Officer and President (Principal Executive
                                      Officer), Acting Treasurer (Principal 
                                      Financial and Accounting Officer)







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