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, 1998
                                                  ------------

     ( ) 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 780, Syosset, N.Y. 11791
                    ----------------------------------------
                    (Address of principal executive offices)

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

      ---------------------------------------------------------------------
      (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 - June 30, 1998

  Class A Common Stock, $.001 Par Value                           19,422,142
  -------------------------------------                           ----------

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






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

<PAGE>

                          MAGNA-LAB INC. and Subsidiary


                                    CONTENTS



PART 1 - FINANCIAL INFORMATION (UNAUDITED)

       ITEM 1. - FINANCIAL STATEMENTS

                   CONSOLIDATED BALANCE SHEETS                                1

                   CONSOLDATED STATEMENTS OF OPERATIONS                       2

                   CONSOLDATED STATEMENTS OF CASH FLOWS                       3

                   CONSOLDATED STATEMENT OF STOCKHOLDERS' EQUITY              4

                   NOTES TO CONSOLDATED 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


























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. and Subsidiary

                           CONSOLIDATED BALANCE SHEETS
                 May 31, 1998 (unaudited) and February 28, 1998


                                                                                        May 31,       February 28,
                                                                                          1998               1998
                                                                                        -------       ------------
<S>                                                                             <C>                 <C>          
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                                     $      248,000      $     599,000
  Accounts receivable, net of allowance for doubtful accounts of  $356,000                   -                  -
  Inventory, net of allowance for estimated
    non-realizable value of approximately $532,000                                           -                  -
                                                                                ---------------     --------------
Total current assets                                                                   248,000            599,000
                                                                                ---------------     --------------

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

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

                                                                                $      265,000      $     616,000
                                                                                ===============     ==============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                              $      194,000      $     254,000
  Accrued and other current liabilities                                                490,000            511,000
                                                                                ---------------     --------------
        Total current liabilities                                                      684,000            765,000
                                                                                ---------------     --------------


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, 19,422,142 and
   19,322,142 shares issued and outstanding, respectively.                              19,000             19,000
  Common stock, Class B, par value $.001 per share, 
   3,750,000 shares authorized, 1,875,000 shares issued,  
   764,858 shares outstanding (after forfeiture and cancellation of 
   1,000,000 shares effective February 28, 1998).                                        1,000              1,000
  Capital in excess of par value                                                    15,354,000         15,334,000
  Accumulated deficit                                                              (15,793,000)       (15,503,000)
                                                                                ---------------     --------------  
     Total stockholders' equity                                                       (419,000)          (149,000)
                                                                                ---------------     --------------
                                                                                $      265,000      $     616,000
                                                                                ===============     ==============


                 See accompanying notes to financial statements
</TABLE>

                                        1


<PAGE>



<TABLE>
<CAPTION>

                          MAGNA-LAB INC. and Subsidiary

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)




                                                                                        Three months ended May 31,

                                                                                         1998                1997
                                                                                --------------     ---------------
<S>                                                                             <C>                <C> 
REVENUES                                                                        $           -      $            -
                                                                                --------------     ---------------

COSTS AND EXPENSES:
  Selling and marketing                                                                     -              39,000
  General and administrative                                                           81,000             197,000
  Research and development                                                            222,000              42,000
                                                                                --------------     ---------------
                                                                                      303,000             278,000
                                                                                --------------     ---------------

OTHER INCOME (EXPENSE)
  Other income                                                                         10,000                   -
  Interest expense                                                                          -              (3,000)
  Interest income                                                                       3,000                   -
                                                                                --------------     ---------------
                                                                                       13,000              (3,000)
                                                                                --------------     ---------------

NET LOSS                                                                        $    (290,000)     $     (281,000)
                                                                                ==============     ===============


WEIGHTED AVERAGE NUMBER OF
 SHARES OUTSTANDING                                                                19,422,000           4,890,000
                                                                                ==============     ===============

NET LOSS PER SHARE                                                              $       (0.02)     $        (0.06)












                 See accompanying notes to financial statements
</TABLE>

                                        2


<PAGE>

<TABLE>
<CAPTION>

                          MAGNA-LAB INC. and Subsidiary


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



                                                                                        Three Months ended May 31,
                                                                                           1998               1997
                                                                                ---------------    ---------------
<S>                                                                             <C>                <C>    
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                      $     (290,000)    $     (281,000)
                                                                                ---------------    ---------------
  Adjustments:
    Depreciation and amortization                                                            -              1,000
  Effect on cash of changes in operating assets and liabilities:
    Accounts payable and accrued liabilities                                           (61,000)           270,000
                                                                                ---------------    ---------------
       Total adjustments                                                               (61,000)           271,000
                                                                                ---------------    ---------------

NET CASH USED IN OPERATING ACTIVITIES                                                 (351,000)           (10,000)
                                                                                ---------------    ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  None                                                                                       -                  -
                                                                                ---------------    ---------------
NET CASH USED IN INVESTING ACTIVITIES                                                        -                  -
                                                                                ---------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  None                                                                                       -                  -
                                                                                ---------------    ---------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                          -                  -
                                                                                ---------------    ---------------

NET INCREASE (DECREASE) IN CASH
 AND CASH EQUIVALENTS                                                                 (351,000)           (10,000)
CASH AND CASH EQUIVALENTS:
 Beginning of period                                                                   599,000             10,000
                                                                                ---------------    ---------------
 End of period                                                                  $      248,000     $            -
                                                                                ===============    ===============


SUPPLEMENTAL INFORMATION ON NON-CASH TRANSACTIONS
  Common stock issued to settle account payable                                 $       20,000     $            -
                                                                                ===============    ===============




See accompanying notes to financial statements
</TABLE>


                                        3


<PAGE>

<TABLE>
<CAPTION>

                          MAGNA-LAB INC. and Subsidiary


                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                 For the quarter ended May 31, 1998 (unaudited)















                                                                                                 
                                                              Common Stock
                                          -------------------------------------------------      Capital in
                                                 Class A                     Class B               Excess
                                          ----------------------        -------------------        Of Par       Accumulated
                                          Shares          Amount        Shares       Amount       Value (a)        Deficit
                                        -------------------------------------------------------------------------------------
<S>                                     <C>          <C>               <C>       <C>             <C>            <C>          
BALANCES, February 28, 1998             19,322,142   $    19,000       764,858   $    1,000      $15,334,000    $(15,503,000)

CONVERT B SHARES TO A                            -             -             -            -                -               -

SHARES ISSUED TO SETTLE LIABILITY          100,000             -             -            -           20,000               -

NET LOSS                                         -             -             -            -                -        (290,000)
                                       --------------------------------------------------------------------------------------

BALANCES, May 31, 1998 (unaudited)      19,422,142   $    19,000       764,858   $    1,000      $15,354,000    $(15,793,000)
                                        ===========  ============      ========  ===========     ============   =============















See accompanying notes to financial statements
</TABLE>

                                        4

<PAGE>


                                 MAGNA-LAB INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - 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
disclosures   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 more complete  information and
financial  statements and notes thereto  included in the Company's annual report
on Form 10-KSB for the year ended February 28, 1998.

NOTE 2 - DISCUSSION OF THE COMPANY'S  ACTIVITIES/PRODUCTS AND CASH REQUIREMENTS;
GOING CONCERN CONSIDERATION:

BACKGROUND/HISTORY  - Since  commencement  of  operations  on February 10, 1992,
Magna-Lab  Inc. and  Subsidiary  (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.

Since  receiving US marketing  clearance for the MAGNA-SL in September 1994 from
the Food and Drug  Administration,  the Company sold and delivered four MAGNA-SL
scanners.  Three such sales were made to a related  party with which the Company
had  entered  into a sales,  marketing  and  distribution  agreement.  The third
scanner  delivered to this  related  party has not been paid for by such related
party  and  the  Company  has  recorded  a 100%  valuation  allowance  for  this
receivable.  The Company is  presently  unable to support  this  product and the
passage of time may make it impossible to realize any value from this product.

CURRENT  ACTIVITIES  - In  February  1997,  the  Company  commenced  a  plan  of
restructuring of the Company's operations (the "Plan") to reposition itself into
a development  and royalty  company in the near-term.  The Company's  activities
under the Plan in the fiscal year ended  February 28, 1998 included  elimination
of   Company-directed   production,   marketing,   administration   and  systems
engineering and development related to the MAGNA-SL and attempting to strengthen
the relationship with Elscint Cryomagnetics, Ltd. ("Elscint" - See Note 5) which
was begun in June 1996. A critical component of the repositioning involves a new
development  initiative in Cardiac MRI (the "Cardiac MRI Initiative")  through a
joint  collaboration  with the Cardiac  Institute  of the Mount Sinai  School of
Medicine (New York City) ("MSSM"),  as well as raising  sufficient  financing to
pursue the Cardiac MRI  Initiative.  The  Company has  received a proposal  from
Elscint (the "Elscint  Proposal") to support the license element of the Plan and
has continued to have  discussions with Elscint  regarding  certain work that is
integral to the Plan.  The Company  has,  however,  been unable to finalize  the
Elscint  Proposal  because  of various  difficulties  in its  negotiations  with
Elscint,  including a lack of adequate funds and the Company's belief that plans
submitted by Elscint did not represent an adequate opportunity for the Company's
shareholders.

In  accordance  with the Plan,  in March 1997,  the  majority  of the  Company's
workforce  including the entire sales and marketing  staff,  the  production and
engineering and  administrative  staff were  terminated.  Further,  the Company,
shortly thereafter,  vacated its production,  development and executive facility
and ceased the need for other  assets  including  leased  assets with  remaining
non-cancelable   terms,  and  took  other  measures.   The  Company  recorded  a
restructuring  charge of approximately  $1.5 million in the fourth quarter ended
February 28, 1997 for write downs of fixed assets, inventories and deposits made
with strategic vendors which are  non-refundable,  as well as accruals for lease
termination  and other  costs.  While the  ultimate  amount may differ from this
estimate,  the Company  presently  believes  that such  restructuring  charge is
adequate.  At May 31, 1998,  only the Company's  President and Chief  Scientific
Officer is in the full time employ of the Company.

When the Company  vacated its principal  production,  development  and executive
facility,  it 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  MSSM.  The  Company's  operations  were,
therefore, severely curtailed.
                                        5
<PAGE>

In  December  1997,  the  Company's  efforts to raise  additional  financing  to
initiate the Cardiac MRI Initiative were successful in raising $1.884 million in
a private  placement of 15,072,000  shares of common stock (the  "December  1997
Financing").  Such financing was conditioned on the Company initiating a program
to pay its  liabilities on a reduced basis (the "Debt  Reduction  Program" - See
Note 9). Since  December  1997,  the Company has: (1) initiated and advanced the
Cardiac  MRI  Initiative,  (2)  continued  the Debt  Reduction  Program  and (3)
continued to have  discussions  with Elscint with the objective of advancing the
Elscint  Proposal.  The December 1997  Financing is believed to be sufficient to
fund the Company's operations until approximately July 1998, assuming success in
its Debt Reduction Program and discussions with Elscint.  Thereafter,  or sooner
if these  assumptions  are  incorrect,  the  Company  will  require  significant
additional  financing  to support the Plan.  It is expected  that the  Company's
ability to obtain such  additional  financing will be dependent upon the success
of the Debt Reduction Program,  negotiations  regarding the Elscint Proposal and
the development activities with MSSM.

Activities  during the quarter  ended May 31, 1998 included  advancement  of the
Cardiac Initiative  through  collaborative  research with MSSM,  discussion with
Elscint and business planning/capital raising activities.

The Company is  continuing  its efforts to: (1) raise  additional  capital,  (2)
complete the Elscint Proposal or enter into a strategic arrangement with others,
(3)  complete the Debt  Reduction  Program and (4) move forward with the Cardiac
MRI  Initiative.  There  is no  assurance  that  any of  these  efforts  will be
successful or that the Company will be able to continue  even its  significantly
reduced operations, for which the Company will require additional capital.

GOING  CONCERN  CONSIDERATION  - As  indicated  in  the  accompanying  unaudited
consolidated financial statements,  as of May 31, 1998, the Company had negative
working capital,  approximately  $684,000 of liabilities,  negative net worth of
approximately  ($419,000)  and a development  agenda which  requires  additional
financing. Further, as indicated in the accompanying unaudited consolidated
financial   statements,   the  Company  has  incurred  a   cumulative   loss  of
approximately  $15.8 million since inception and has no present revenue.  Losses
have continued since May 31, 1998.  These factors,  among others,  indicate that
the Company is in need of significant  additional  financing  and/or a strategic
business  arrangement in order to continue the Plan.  The Company  believes that
its cash resources at May 31, 1998 are  sufficient to fund its operations  until
approximately  July 1998,  after which it will be  required to raise  additional
capital to continue its planned operations.

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 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 were  forfeited  at March 31,  1998  because
certain  performance  objectives  were  not  met,  from  shares  outstanding  in
computing net loss 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 - RELATIONSHIP  WITH  THE CARDIAC  INSTITUTE OF THE MOUNT SINAI SCHOOL OF
MEDICINE:

In May 1997,  the Company  entered into a three-year  agreement with the Cardiac
Institute of the Mount Sinai School of Medicine (New York City) and Dr. Valentin
Fuster  (as  principal  investigator)  ("MSSM")  for  a  collaborative  research
arrangement  devoted to utilizing MRI in cardiac  arterial imaging (the "Cardiac
MRI Initiative").  Under the agreement, the Company is required to make payments
to MSSM of  $600,000 in each of the first and second  years and  $300,000 in the
third year. The start of the annual periods was delayed and payments of $300,000
have been made to MSSM  during the fiscal  year ended  February  28,  1998.  The
Company has also agreed to pay royalties,  as defined in the agreement,  to MSSM
for the sole and exclusive  right to use,  make,  have made,  sell and otherwise
exploit the results of the collaboration.

The Company accrues for the cost of the collaboration  with MSSM as research and
development  expense  monthly,  subsequent  to the  delayed  start  of  payments
mentioned  above.  For the quarter  ended May 31, 1998,  $150,000 was charged to
research and development expense for this arrangement.

                                        6
<PAGE>

NOTE 5 - RELATIONSHIP WITH ELSCINT:

In June 1996,  the Company  and Elscint  entered  into an  agreement  covering a
strategic  business  arrangement in which Elscint would manufacture the MAGNA-SL
for  marketing  and sale by Elscint in certain  non-United  States  territories,
principally  Europe, the Peoples Republic of China, parts of the Middle East and
other  territories.   The  Company  would  be  paid  royalties  on  each  system
manufactured  and sold by Elscint.  To maintain its rights under the  agreement,
Elscint was required to sell a minimum number of systems as defined therein,  or
to cure, as defined therein, shortfalls.  Additionally,  Elscint and the Company
agreed to  cooperate in various  other  matters.  The Company  agreed to provide
certain ongoing  research and development  support which is no longer  practical
given the Company's resources.  Elscint was granted a right of first negotiation
on certain new products.

The  Company  was   obligated  to  complete   certain   development   tasks  and
enhancements,  which,  if not  completed  by  November  1996,  could  result  in
termination  of the agreement by Elscint.  Elscint has informed the Company that
it is not satisfied with the completion of certain of the tasks agreed to by the
parties and has  reserved  all of its rights  including  to  complete  the tasks
itself at the  Company's  expense or to terminate the agreement and seek damages
from the Company. Elscint has presented to the Company the Elscint Proposal (See
Note  2) to  assume  the  uncompleted  tasks  and  make a major  alteration  and
improvement of certain  systems  comprising the MAGNA-SL.  The Elscint  Proposal
requires a development  payment of $500,000 plus certain support activities from
the Company.  The Company  initially agreed to proceed with the Elscint Proposal
but has been unsatisfied  with certain aspects of Elscint's  expressed plans and
has had difficulties in making the required payments to initiate or complete the
Proposal. The Company is still in discussions with Elscint regarding the Elscint
Proposal but there can be no assurance  that this  proposal will go forward (See
Note 9).


NOTE 6 - PROPERTY AND EQUIPMENT:

Details of property and equipment at May 31, 1998 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 7 - ACCRUED LIABILITIES:

Included in accrued  liabilities at May 31, 1998 are approximately  $150,000 for
accrued restructuring costs.

NOTE 8 - OTHER

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.

NOTE 9 - COMMITMENTS AND CONTINGENCIES:

DEBT  REDUCTION  PROGRAM - By  November  30,  1997,  the  Company  had  recorded
liabilities of approximately $2,528,000 (unaudited), no cash and no other assets
which were realizable in the near-term. After a period of seeking new investment
into the Company to advance the Plan,  new investors  were  identified.  The new
investors indicated their willingness to invest in the Company's Plan if certain
conditions  were met including the reduction of recorded  liabilities  by a very
material  amount.  In  approximately  October,  1997,  with  the  assistance  of
reorganization counsel retained for this purpose, the Company commenced the Debt
Reduction Program. Under the Debt Reduction Program, the Company commenced a

                                        7

<PAGE>

program of  contacting  its  creditors,  informing  them of the  Company's  dire
financial  condition,  advising  such  creditors of the Debt  Reduction  Program
agreed to with the potential new  investors  and the  Company's  willingness  to
settle liabilities for a reduced amount.

The Company has offered its trade and other  creditors the opportunity to settle
the  Company's  obligations  to them for a reduced  amount.  As of May 31, 1998,
certain  vendor  claims have been  agreed to be settled for reduced  amounts and
efforts are still in process to settle remaining amounts in an orderly manner.

In total,  approximately $1,650,000 of liabilities at November 30, 1997 has been
either paid or agreed to be reduced.  The difference  between recorded  payables
and accruals and amounts paid for  settlement  has been included in other income
in the consolidated financial statements.

The  Company  has  received  statements  of account  from one vendor for amounts
(approximately  $132,000 plus claimed interest)  materially in excess of amounts
recorded by the Company  (approximately  $22,000) for amounts  alleged to be due
from this  vendor.  The vendor  statements  indicate  billings of  approximately
$83,000 in January  1997 and  $16,000  in April 1997 for  components  fabricated
which were not  received by the  Company.  The Company does not have a record of
being  billed for such  amounts nor for receipt of such  fabricated  components.
This matter is being investigated for resolution.

The Company's Debt  Reduction  Program is ongoing and the Company is the subject
of several  threatened,  and certain  actual,  legal  actions for  nonpayment of
obligations.  While several large legal actions have been settled, various other
creditors  have  threatened the Company with  litigation to recover  amounts due
them and some of these  parties have  retained  counsel who have  contacted  the
Company  regarding  these claims.  While the Company has had success in reducing
its liabilities and negotiating with its creditors and others in accordance with
the Plan and the Debt Reduction Plan, the ultimate  liabilities in these matters
are not known and the  vendors,  in some  cases,  may seek  damages in excess of
amounts recorded in the consolidated financial statements. The Company believes,
but no  assurance  can be made,  that its  liability  will  not  exceed  amounts
recorded in the consolidated financial statements.

WARRANTY,  SERVICE, PRODUCT LIABILITY - The Company has been unable to honor its
obligations for warranty and service for the MAGNA-SL since  approximately March
1997.  Additionally,  product  liability  claims relating to the MAGNA-SL may be
asserted  against the Company.  If such claims are asserted against the Company,
there can be no  assurance  that the Company will have  sufficient  resources to
defend against any such claim or satisfy any such successful claim. In the event
of an uninsured or inadequately  insured product  liability claim, the Company's
business and financial condition could further be materially adversely affected.

AGREEMENT WITH ELSCINT - Elscint has informed the Company on several  occasions,
including  in May 1998,  that it  believes  the  Company to be in default of its
obligations  under the June 1996  agreement  with  Elscint  described in Note 5.
Elscint may assert damages against the Company. The Company has not recorded any
liability to its consolidated  financial statements for this contingency because
it is unable to determine what, if any, liability it could have to Elscint after
any defenses and counterclaims which it may make against Elscint.  The Company's
intention  is, and it continues to work toward,  a negotiated  settlement of the
business  issues  (including  the "Elscint  Proposal"  described in Note 2) with
Elscint.

AGREEMENT  WITH ACT  MEDICAL,  INC. - In May 1998,  the Company  entered into an
agreement with ACT Medical, Inc. ("ACT") under which it is contemplated that ACT
will  provide  the  Company  with  design  review,   pre-production  prototypes,
regulatory compliance services,  production prototypes and ultimately production
of the first product under the Cardiac Initiative. The Company made a payment to
ACT of $12,000 in May 1998 to initiate the relationship.  This relationship will
involve costs of several hundred thousand dollars and will be dependent upon the
Company's ability to obtain additional capital.








                                        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 OR PLAN OF OPERATIONS -

BACKGROUND/HISTORY  - Since  commencement  of  operations  on February 10, 1992,
Magna-Lab  Inc. and  subsidiary  (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.

     Since  receiving US marketing  clearance for the MAGNA-SL in September 1994
from the Food and Drug  Administration,  the  Company  sold and  delivered  four
MAGNA-SL scanners.  Three such sales were made to a related party with which the
Company had entered into a sales,  marketing  and  distribution  agreement.  The
third  scanner  delivered  to this  related  party has not been paid for by such
related  party and the Company has written off this  receivable.  The Company is
presently  unable to support  this  product  and the passage of time may make it
impossible to realize any value from this product.

     See Note 8 to Consolidated  Financial  Statements (Item 7.) included in the
Company's  Form 10-KSB for the year ended  February 28, 1998 for a discussion of
financings completed since the Company's inception including a private placement
of 15,072,000  shares of class A common stock in the fiscal year ended  February
28, 1998.

     CURRENT  ACTIVITIES  AND PLAN OF OPERATION - In February  1997, the Company
commenced a plan of  restructuring  of the Company's  operations (the "Plan") to
reposition  itself into a development and royalty company in the near-term.  The
Company's  activities  under the Plan in the fiscal year ended February 28, 1998
included elimination of Company-directed production,  marketing,  administration
and system engineering and development related to the MAGNA-SL and attempting to
strengthen the relationship with Elscint  Cryomagnetics,  Ltd.  ("Elscint" - see
Note 5 to  Consolidated  Financial  Statements)  which was begun in June 1996. A
critical component of the repositioning involves a new development initiative in
Cardiac MRI (the "Cardiac MRI Initiative")  through a joint  collaboration  with
the  Cardiac  Institute  of the Mount Sinai  School of Medicine  (New York City)
("MSSM"),  as well as raising  sufficient  financing  to pursue the  Cardiac MRI
Initiative.  The Company has  received a proposal  from  Elscint  (the  "Elscint
Proposal") to support the license  element of the Plan and has continued to have
discussions  with Elscint  regarding  certain work that is integral to the Plan.
The Company has,  however,  been unable to finalize the Elscint Proposal because
of various difficulties in its negotiation with Elscint, including the Company's
lack of adequate funds and the Company's  belief that plans submitted by Elscint
did  not   represent  a  sufficient   enough   opportunity   for  the  Company's
shareholders.

     In accordance  with the Plan, in March 1997,  the majority of the Company's
workforce  including the entire sales and marketing  staff,  the  production and
engineering and  administrative  staff were  terminated.  Further,  the Company,
shortly thereafter,  vacated its production,  development and executive facility
and ceased the need for other  assets  including  leased  assets with  remaining
non-cancelable   terms,  and  took  other  measures.   The  Company  recorded  a
restructuring  charge of approximately  $1.5 million to the fourth quarter ended
February 28, 1997 for write downs of fixed  assets,  inventories,  deposits made
with strategic vendors which are  non-refundable,  as well as accruals for lease
termination  and other  costs.  While the  ultimate  amount may differ from this
estimate,  the Company  presently  believes  that such  restructuring  charge is
adequate.  At  February  28,  1998,  only  the  Company's  President  and  Chief
Scientific  Officer  is in the full time  employ  of the  Company.  The  Company
utilizes consultants in the management of the affairs of the Company,  including
its Chairman and Chief Executive Officer.

     When  the  Company  vacated  its  principal  production,   development  and
executive  facility,  it 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 MSSM. The Company's  operations were,
therefore, severely curtailed.

                                        9
<PAGE>

     In December 1997, the Company's  efforts to raise  additional  financing to
initiate the Cardiac MRI Initiative were successful in raising $1.884 million in
a private  placement of 15,072,000  shares of common stock (the  "December  1997
Financing").  Such financing was conditioned on the Company initiating a program
to pay its liabilities on a reduced basis (the "Debt Reduction Program").  Since
December  1997,  the Company  has:  (1)  initiated  and advanced the Cardiac MRI
Initiative,  (2) continued the Debt Reduction  Program and (3) continued to have
discussions  with Elscint with the objective of advancing the Elscint  Proposal.
The December  1997  Financing is believed to be sufficient to fund the Company's
operations  through  approximately  July  1998,  assuming  success  in its  Debt
Reduction program and discussions with Elscint.  Thereafter,  or sooner if these
assumptions  are  incorrect,  the Company  will require  significant  additional
financing  to support the Plan.  It is expected  that the  Company's  ability to
obtain such additional  financing will be dependent upon the success of the Debt
Reduction  Program,   negotiations   regarding  the  Elscint  Proposal  and  the
development activities with MSSM.

     The Company is continuing its efforts to (1) raise additional capital,  (2)
complete the Elscint Proposal or enter into a strategic arrangement with others,
(3)  complete the Debt  Reduction  Program and (4) move forward with the Cardiac
MRI  Initiative.  There  is no  assurance  that  any of  these  efforts  will be
successful or that the Company will be able to continue  even its  significantly
reduced operations, for which the Company will require additional capital.

     The Company  does not have the  financial  resources  to complete  the next
twelve months.  The Company  believes,  based upon its resources at May 31, 1998
and  anticipated  operations,  that it has the  financial  resources to fund its
operations  through  approximately  July  1998  without  substantial  additional
capital or a strategic business arrangement.

     GOING CONCERN CONSIDERATION - As indicated in the accompanying consolidated
financial  statements,  as of May 31,  1998,  the Company had  negative  working
capital,   approximately   $685,000  of  liabilities,   negative  net  worth  of
approximately  ($419,000)  and a development  agenda which  requires  additional
financing.  Further,  as indicated in the  accompanying  consolidated  financial
statements,  the Company has incurred a cumulative loss of  approximately  $15.8
million since inception and has no present revenue.  Losses have continued since
May 31, 1998. These factors, among others,  indicate that the Company is in need
of significant  additional  financing and/or a strategic business arrangement in
order to  continue  the Plan in the fiscal  year  beginning  March 1, 1998.  The
Company  believes that its cash resources at May 31, 1998 are sufficient to fund
its operations through  approximately July 1998, after which it will be required
to raise additional capital to continue its planned operations.

     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's  belief about its  financing  plans and  prospects,  Elscint
Proposal and  arrangements  with Mount Sinai  School of  Medicine,  ACT Medical,
Inc.,  as well as other  information  contained  in this report  (including  its
prospects  for surviving as a going  concern) are based upon present  conditions
and  anticipated  developments.  This belief is further based upon estimates and
assumptions  including,  among other things,  completion of additional financing
necessary to fund the planned  activities,  timely and successful  completion of
development   milestones,   competitive  and  intellectual   property   factors,
cooperation  of  creditors  and  others  with the Debt  Reduction  Program,  and
successful  efforts to conclude an  arrangement  with  Elscint or others,  among
other matters.  In the event that the Company's  estimates and assumptions prove
materially  incorrect,  the  Company  does  not  presently  have  the  financial
resources to fund planned  operations.  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,  1998  resulted in a net loss of
approximately $290,000. The loss results principally from the Cardiac Initiative
development activities in collaboration with the Mount Sinai School of Medicine.
Cost of the MSSM portion of the collaboration were approximately $150,000 of the
net  loss  for  the  quarter.  In May  1998,  the  Company  initiated  a  design
review/regulatory/contract  manufacturing  relationship  with a third  party and
paid $12,000 to initiate that relationship.  General and administrative expenses
consisted of executive,  administrative and business development  consultants as
well as certain occupancy, storage and professional costs.



                                       10
<PAGE>

     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.



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, 1998 for discussion of legal proceedings commenced or threatened against the
Company  (including by Devcom, by the Company's former landlord Heartland Rental
Properties  Partnership  and  by  Elscint)  as  well  as for  discussion  of the
settlements  of the DevCom and Heartland  Rental  Properties  Partnership  legal
proceedings. The Company continues to be subject to judgments for lesser amounts
and other litigation and/or threatened litigation.

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  did not file  reports on Form 8-K during the quarter
               ended May 31, 1998.






















                                       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:  July  15,  1998            By:   /s/ Daniel M. Mulvena
            ------                      -------------------------------
                                        Daniel M. Mulvena , Chairman of the
                                        Board of Directors, Chief Executive
                                        Officer  (Principal Executive Officer),
                                        Acting Treasurer (Principal Financial
                                        and Accounting Officer)




























                                       12

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