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: August 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               (IRS 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 22, 1998

Class A Common Stock, $.001 Par Value                               19,325,391
-----------------------------------------------------            ---------------

Class B Common Stock, $.001 Par Value                                1,761,609
-----------------------------------------------------           ----------------
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

                           CONDENSED BALANCE SHEETS                            1

                           CONDENSED STATEMENTS OF OPERATIONS                  2

                           CONDENSED STATEMENTS OF CASH FLOWS                  3

                           CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY        4

                           NOTES TO CONDENSED FINANCIAL STATEMENTS         5 - 8

         ITEM 2.   - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
                           OF OPERATION                                   9 - 11


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.

                            CONDENSED BALANCE SHEETS
                August 31, 1997 (unaudited) and February 28, 1997


                                                                     August 31,     February 28,
                                                                          1997             1997 
<S>                                                               <C>               <C>  
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                       $          -      $    10,000
  Accounts receivable                                                        -           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                                                 -           71,000
                                                                  -------------     ------------

PROPERTY AND EQUIPMENT, less accumulated depreciation 
 and amortization and write offs of approximately $793,000
 and $791,000, respectively                                             16,000           18,000
                                                                  -------------     ------------

OTHER ASSETS                                                                 -                -  
                                                                  -------------     ------------
                                                                  $     16,000      $    89,000
                                                                  =============     ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Notes payable to related party, overdue                         $     22,000      $    75,000
  Accounts payable                                                   1,277,000        1,126,000
  Accrued and other current liabilities                              1,125,000          908,000
                                                                  -------------     ------------
        Total current liabilities                                    2,424,000        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, 4,253,431 and
   3,765,851 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,
   1,761,569 and 1,824,149 shares outstanding, respectively.             2,000            2,000
  Capital in excess of par value                                    13,464,000       13,464,000
  Accumulated deficit                                              (15,878,000)     (15,490,000)
                                                                  -------------     ------------
        Total stockholders' equity                                  (2,408,000)      (2,020,000)
                                                                  -------------     ------------
                                                                  $     16,000      $    89,000
                                                                  =============     ============


                 See accompanying notes to financial statements

</TABLE>
                                        1


<PAGE>





<TABLE>
<CAPTION>


                                 MAGNA-LAB INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (unaudited)








                                                           Three months ended                    Six months ended
                                                               August 31,                           August 31,
                                                         1997             1996                 1997            1996
                                                   ------------------------------------------------------------------
<S>                                                 <C>              <C>                   <C>              <C>    

REVENUES
  Sales                                             $          -     $    400,000          $          -     $    400,000
  Royalties                                                    -          250,000                     -          250,000
                                                    -------------    -------------         -------------    -------------
                                                               -          650,000                     -          650,000

COST OF SALES                                                  -          259,000                     -          259,000
                                                    -------------    -------------         -------------    -------------

GROSS PROFIT                                                   -          391,000                     -          391,000
                                                    -------------    -------------         -------------    -------------

OPERATING EXPENSES:
  General and administative                              104,000          388,000               302,000          673,000
  Selling and marketing                                        -          182,000                39,000          312,000
  Research and development                                     -          244,000                42,000          562,000
                                                    -------------    -------------         -------------    -------------
                                                         104,000          814,000               383,000        1,547,000
                                                    -------------    -------------         -------------    -------------
LOSS FROM OPERATIONS                                    (104,000)        (423,000)             (383,000)      (1,156,000)
                                                    -------------    -------------         -------------    -------------

OTHER INCOME (EXPENSE):
  Interest and financing expense                          (2,000)          (4,000)               (5,000)          (6,000)
  Interest income                                              -           17,000                     -           45,000
                                                    -------------    -------------         -------------    -------------

NET LOSS                                            $   (106,000)    $   (410,000)         $   (388,000)    $ (1,117,000)
                                                    =============    =============         =============    =============


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

NET LOSS PER SHARE                                  $      (0.02)    $      (0.09)         $      (0.08)    $      (0.24)
                                                    =============    =============         =============    =============







                 See accompanying notes to financial statements
</TABLE>

                                        2


<PAGE>
<TABLE>
<CAPTION>


                                 MAGNA-LAB INC.

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


                                                                                  Six months ended August 31,

                                                                                   1997                1996   
                                                                            --------------------------------------
<S>                                                                          <C>                <C>    

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                   $     (388,000)    $   (1,117,000)
                                                                             ---------------    ---------------
  Adjustments:
    Depreciation and amortization                                                     1,000             52,000
    Effect on cash of changes in operating assets and liabilities:
      Inventory                                                                           -           (292,000)
      Accounts Receivable                                                            64,000           (245,000)
      Deposits and other                                                                  -             60,000
      Accounts payable and accrued liabilities                                      377,000           (119,000)
      Customer deposits                                                                   -           (174,000)
                                                                             ---------------    ---------------
           Total adjustments                                                        442,000            718,000

NET CASH GENERATED (USED) IN OPERATING ACTIVITIES                                    54,000         (1,835,000)
                                                                             ---------------    ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of equipment and software                                                     -            (97,000)
  All other, net                                                                          -    
                                                                             ---------------    ---------------

NET CASH USED IN INVESTING ACTIVITIES                                                     -            (97,000)
                                                                             ---------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repay Note payable to shareholder                                                 (64,000)                 -
  Deferred debt and offering costs; other                                                 -             (8,000)
                                                                             ---------------    ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                           (64,000)           200,000
                                                                             ---------------    --------------- 
NET INCREASE (DECREASE) IN CASH
 AND CASH EQUIVALENTS                                                               (10,000)          (777,000)
CASH AND CASH EQUIVALENTS:
  Beginning of period                                                                10,000            903,000
                                                                             ---------------    ---------------
  End of period                                                              $            -     $      126,000
                                                                             ===============    ===============







                 See accompanying notes to financial statements

</TABLE>
                                        3


<PAGE>

<TABLE>
<CAPTION>




                                 MAGNA-LAB INC.

                   CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY

                    For the six months ended August 31, 1997
                                   (unaudited)






                                                                                 
                                                       Common Stock                                Capital in
                                          ---------------------------------------------------        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 TO A SHARES                         62,580            -       (62,580)          -

SHARES DEEMED ISSUED IN PLACEMENT            300,000            - 

SHARES DEEMED ISSUED IN DISPUTE              125,000            -

NET LOSS                                                                                                             (388,000)
                                           -----------------------------------------------------------------------------------

BALANCES,
 August 31, 1997 (unaudited)               4,253,431     $  4,000     1,761,569    $  2,000        $13,464,000   $(15,878,000)
                                           ==========    =========    ==========   =========       ============  =============












(a) Includes  amounts  considered  "subscribed" in the Balance Sheet at February
28, 1997.










                 See accompanying notes to financial statements
</TABLE>

                                        4

<PAGE>





                                 MAGNA-LAB INC.

                     NOTES TO CONDENSED 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
initiative  in Cardiac  MRI through a joint  collaboration  with the Mount Sinai
School of Medicine  (the "Cardiac MRI  Initiative").  The Company has received a
proposal from Elscint (the "Elscint Proposal") for certain work that 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  Initiative  but has been unable to fund
its obligations under the agreement until January 1998. See Note 11 - 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  Initiative  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 unsuccessful,  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, 1997,  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 August 31, 1997,  unpaid  payroll to  terminated  and  continuing
employees totaled approximately  $340,000. At January 15, 1998, only Lawrence A.
Minkoff,  Ph.D., the Company's Chairman,  President and Chief Executive Officer,
is in the  full  time  employ  of the  Company.  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 and the advancement of the
development collaboration with the Mount Sinai School of Medicine. The Company's
operations have, therefore, been severely curtailed. 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 11
Subsequent Events and Part II, Item 1 - Legal Proceedings).

         As  indicated in the attached  financial  statements,  as of August 31,
1997  Magna-Lab  Inc.  (the  "Company")  had  no  substantial   current  assets,
approximately $2.4 million of liabilities and no cash. Further,  the Company has
incurred a loss of  approximately  $388,000  for the six months ended August 31,
1997 as indicated in the accompanying  condensed financial statements and losses
have continued since August 31, 1997. 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 11  Subsequent  Events
regarding,  among other things, completion of certain financing in December 1997
and January 1998).

         While the Company had  severely  curtailed  its  operations  during the
quarter ended May 31, 1997, it continued,  in the quarter ended August 31, 1997,
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  concessions) by a
very material amount. See Note 11 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 and charged to research and development costs at that time.

         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 or that the Company will
be able to  continue  even its  severely  curtailed  operations,  for  which the
Company will require additional capital. See Note 11 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 28, 1997.

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)  Class 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 February  28, 1997 has been written off to  restructuring
charges in the  statement of operations  for the fiscal year ended  February 28,
1997.

NOTE 5 - ROYALTY  INCOME IN AUGUST 31,  1996  PERIOD AND THIRD  PARTY CLAIM - In
June 1996, the Company  entered into a license and  distribution  agreement with
Elscint as  described  in greater  detail in the Form  10-KSB for the year ended
February 28, 1997.  Revenues of $250,000  recorded in the quarter and six months
ended  August 31,  1996  reflect  initial,  non-refundable  royalties  under the
agreement  with Elscint.  The Company and Elscint are having  discussions  about
revisions to the agreement as discussed elsewhere herein and in the Form 10-KSB.
                                        6
<PAGE>

As discussed in the Company's Form 10-KSB for the year ended February 28, 1997 a
third party had claimed,  and the Company disputed, a fee in connection with the
Elscint agreement  referred to in the preceding  paragraph.  On August 27, 1997,
this dispute was settled by the issuance of 125,000 unregistered shares of Class
A common stock to this third party.  Such amount had been charged to  operations
as part of restructuring  charges in the fiscal year ended February 28, 1997. No
adjustment  to the  wieghted  average  shares used to compute loss per share was
made for the quarter and six months  ended  August 31, 1997 since it occurred so
close to the end of the quarter that its effect would be insignificant.

NOTE 6 -  PROPERTY AND EQUIPMENT:

Details of property and equipment at August 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   401,000
                                                              ---------
                                                              $ 16,000

NOTE 7 - 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 8 - 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 Company's 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
and to the  consultant.  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 9 - ACCRUED LIABILITIES:

Included in accrued  liabilities at August 31, 1997 are  approximately  $340,000
for accrued payroll and approximately  $184,000 in accrued  restructuring costs.
During the quarter and six months ended August 31, 1997,  approximately  $50,000
of was charged to the restructuring accrual.


                                        7
<PAGE>

NOTE 10 - 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.  Amounts owing to such firm are included
in the financial statements at approximately $290,000 at August 31, 1997.

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.

Vendor  claims - The Company has received  statements of account with one vendor
for amounts (approximately  $132,000 plus claimed interest) materially in excess
of amounts  recorded by the Company  (approximately  $22,000) for goods received
from this  vendor.  The vendor  statements  indicate  billings of  approximately
$83,000 in January  1997 and $16,000 in April 1997.  The Company does not have a
record of being billed for such amounts nor for receipt of such materials.  This
matter is being investigated for resolution.

NOTE 11 SUBSEQUENT EVENTS:

Subsequent to the completion of the quarter ended August 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  15,  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 90% 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 75% of this amount has been agreed to by
the executives and efforts are continuing to settle the remainder.

(d)  Settlement  of  litigation  with a vendor - In October  1997 a judgment for
$300,000 was entered against the Company in the action  commenced by a vendor to
recover  amounts  alleged to be due from the Company  (see Note 12 to  financial
statements 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 August 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.




                                        8
<PAGE>

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


THIS REPORT CONTAINS  FORWARD-LOOKING  STATEMENTS WITHIN THE MEANINGS OF SECTION
27A OF THE 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 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 has been partially  repaid but is in default at August 31, 1997
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 and
January  1998 (See Note 11  Subsequent  Events) has had no  financial  resources
available to it.

FINANCIAL  POSITION AT AUGUST 31, 1997 - FINANCIAL  CONDITION  AND GOING CONCERN
MATTERS - Reference  is made to the Form 10-KSB for the year ended  February 28,
1997  for  a  discussion  of  conditions  leading  to  the  Company's  financial
situation.

         During  the  six  months  ended  August  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
initiative  in Cardiac  MRI through a joint  collaboration  with the Mount Sinai
School of Medicine  (the "Cardiac MRI  Initiative").  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  Initiative  but has been unable to
fund its  obligations  under the agreement  until  January  1998.  See Note 11 -
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  Initiative  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.


                                        9
<PAGE>

         Pursuant  to  the  Plan  and  after  its  further   attempts  to  raise
substantial additional working capital were unsuccessful,  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, 1997,  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 August 31, 1997,  unpaid  payroll to  terminated  and  continuing
employees totaled approximately  $340,000. At January 15, 1998, only Lawrence A.
Minkoff,  Ph.D., the Company's Chairman,  President and Chief Executive Officer,
is in the  full  time  employ  of the  Company.  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 operations have, therefore,  been severely
curtailed.   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 11 Subsequent Events).

         As  indicated in the attached  financial  statements,  as of August 31,
1997  Magna-Lab  Inc.  (the  "Company")  had no  substantial  current  assets  ,
approximately $2.4 million of liabilities and no cash. Further,  the Company has
incurred a loss of  approximately  $388,000  for the six months ended August 31,
1997,  as indicated in the  accompanying  condensed  financial  statements,  and
losses have  continued  since  August 31, 1997.  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 15,072,000
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,  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
Company  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 capital in addition to that raised in December 1997 and
January 1998, 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.

         The Company  believes,  based upon its resources after the January 1998
private  placement and  anticipated  operations and further  anticipated  vendor
settlements,  that it  does  not  have  the  financial  resources  to  fund  its
operations for more than six months without substantial  additional capital or a
strategic business  arrangement.  This belief, which 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,
conditions,  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.








                                       10
<PAGE>

RESULTS OF OPERATIONS -

         Operations in the quarter and six months ended August 31, 1997 resulted
in a net loss of approximately $106,000 and $388,000, respectively. 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 ended May 31,
1997 and approximately three executives continued to devote their efforts to the
Plan during the quarter ended August 31, 1997. Their payroll,  which was accrued
but not paid during the six months,  is the principal  cost in the  accompanying
Statement of Operations  for the three and six months ended August 31, 1997. 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 and six months ended August 31, 1996 resulted
in a net loss of approximately $410,000 and $1,117,000,  respectively.  The loss
results from the low level of shipments  (one unit in the quarter and six months
ended  August 31, 1997) and the ongoing  selling,  general,  administrative  and
research/development  costs of the  Company at that time,  offset  partially  by
initial royalties recorded upon executing the license and distribution agreement
with Elscint.

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





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
28, 1997 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 11 -  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  11 -  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 11 - Subsequent Events,  above, for a discussion of significant Company
developments 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 in 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

                                       11



<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  26,  1998      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)




                                       12
<PAGE>