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: November 30, 2000
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
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Commission file number 0-21320
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Magna-Lab Inc.
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(Exact name of small business issuer as specified in its charter)
New York 11-3074326
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6800 Jericho Turnpike, #120W, Syosset, NY 11797
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(Address of principal executive offices)
(516) 393-5874
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ( X ) No ( )
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 10, 2001
Class A Common Stock, $.001 Par Value 58,774,187
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Class B Common Stock, $.001 Par Value 408,840
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Class Shares
Transitional Small Business Disclosure Format (check one) Yes ( ) No (X)
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PART I: FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
MAGNA-LAB INC. AND SUBSIDIARY
CONTENTS
PART 1 - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 2
CONSOLIDATED STATEMENTS OF OPERATIONS 3
CONSOLIDATED STATEMENTS OF CASH FLOWS 4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-9
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION 10-11
PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS 12
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS 12
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
All items which are not applicable or to which the answer is negative have been
omitted from this report.
1
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<CAPTION>
MAGNA-LAB INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
November 30, 2000 (unaudited) and February 29, 2000
November 30, February 29,
2000 2000
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ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,776,000 $ 1,372,000
Other current assets - deposit with vendor 107,000 130,000
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Total current assets 3,883,000 1,502,000
PROPERTY AND EQUIPMENT, net, and all other 6,000 9,000
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$ 3,889,000 $ 1,511,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 363,000 $ 283,000
Accrued expenses and other current liabilities 281,000 942,000
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Total current liabilities 644,000 1,225,000
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NON-CURRENT LIABILITIES - 37,000
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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,
100,000,000 shares authorized, 58,774,187 and 30,811,087
shares, respectively, issued and outstanding. 58,000 30,000
Common stock, Class B, par value $.001 per share,
3,750,000 shares authorized, 1,875,000 shares issued,
408,840 and 735,034 shares, respectively, outstanding 1,000 1,000
Capital in excess of par value 21,912,000 17,675,000
Class A common stock subscribed (18,181,818 shares) 4,000,000 -
Common stock subscriptions receivable (4,000,000) -
Accumulated deficit (18,726,000) (17,457,000)
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Total stockholders' equity 3,245,000 249,000
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$ 3,889,000 $ 1,511,000
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See accompanying notes to consolidated financial statements
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2
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<CAPTION>
MAGNA-LAB INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended Nine months ended
November 30, November 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ -
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Selling and marketing - - - -
General and administrative 488,000 16,000 810,000 164,000
Research and development 145,000 328,000 540,000 723,000
------------ ------------ ------------ ------------
633,000 344,000 1,350,000 887,000
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OTHER INCOME (EXPENSE):
Other income - - - -
Interest expense - - - -
Interest income 39,000 - 81,000 -
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NET LOSS $ (594,000) $ (344,000) $(1,269,000) $ (887,000)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING,
BASIC AND DILUTED 53,985,000 22,601,000 43,995,000 22,534,000
============ ============ ============ ============
NET LOSS PER SHARE,
BASIC AND DILUTED $ (0.01) $ (0.02) $ (0.03) $ (0.04)
============ ============ ============ ============
See accompanying notes to consolidated financial statements
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3
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MAGNA-LAB INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(unaudited)
Nine months ended November 30,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,269,000) $ (887,000)
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Adjustments:
Depreciation and amortization 3,000 1,000
Non-cash charge for warrants/options to consultants 275,000 -
Effect on cash of changes in operating assets and liabilities:
Accounts payable and accrued liabilities and all other (557,000) 783.000
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Total adjustments (279,000) 784.000
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NET CASH USED IN OPERATING ACTIVITIES (1,548,000) (103,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
None - -
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NET CASH USED IN INVESTING ACTIVITIES - -
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Class A common shares in private placement to accredited investors 995,000 30,000
Stock subscriptions and deposits collected 3,250,000 -
Exercise of options 140,000 -
Issuance of demand notes payable to shareholders - 20,000
Cost of private placements (461,000) (14,000)
Other equity 28,000 -
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,952,000 36,000
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,404,000 (67,000)
CASH AND CASH EQUIVALENTS:
Beginning of period 1,372,000 67,000
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End of period $ 3,776,000 $ -
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SUPPLEMENTAL INFORMATION ON NON-CASH TRANSACTIONS
Common stock subscribed $ 4,000,000 $ -
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Common stock issued to settle account payable $ 18,000 $ -
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Bridge loans settled with issuance of Class A common stock $ 20,000 $ -
=============== ==============
See accompanying notes to consolidated financial statements
</TABLE>
4
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<TABLE>
<CAPTION>
MAGNA-LAB INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the nine months ended November 30, 2000 (unaudited)
Common Stock
--------------------------- Capital in
Class A Class B Excess Common Stock
---------------- ---------------- of Par Accumulated Stock Subscriptions
Shares Amount Shares Amount Value Deficit Subscribed Receivable
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, February 29, 2000 30,811,087 $ 30,000 735,034 $ 1,000 $ 17,675,000 $(17,457,000) $ 0 $ 0
PRIVATE PLACEMENT 4,536,907 5,000 - - 990,000 - - -
DEPOSIT FROM NOGA - - - - 100,000 - - -
SETTLE VENDOR BALANCE 100,000 - - - 18,000 - - -
PAY BRIDGE NOTES IN STOCK 90,909 - - - 20,000 - - -
CONVERT B TO A SHARES 326,194 - (326,194) - - - - -
CHARGE FOR WARRANTS - - - - 275,000 - - -
COSTS OF PRIVATE PLACEMENTS - - - - (461,000) - - -
OTHER EQUITY - - - - 28,000 - - -
COMMON STOCK SUBSCRIBED - - - - - - 7,150,000 (7,150,000)
NOGA SUBSCRIPTIONS PAID 14,318,181 14,000 - - 3,136,000 - (3,150,000) 3,150,000
OPTIONS EXERCISED 7,000,000 7,000 - - 133,000 - - -
APPLY NOGA DEPOSITS 1,590,909 2,000 - - (2,000) - - -
NET LOSS - - - - - (1,269,000) - -
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BALANCES, November 30, 2000 58,774,187 $ 58,000 408,840 $ 1,000 $ 21,912,000 $(18,726,000) $ 4,000,000 $(4,000,000)
====================================================================================================
See accompanying notes to consolidated financial statements
</TABLE>
5
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MAGNA-LAB INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The accompanying consolidated 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 consolidated financial statements and notes thereto included in
the Company's annual report on Form 10-KSB for the year ended February 29, 2000.
NOTE 2 - DISCUSSION OF THE COMPANY'S ACTIVITIES/PRODUCTS AND CASH REQUIREMENTS;
GOING CONCERN CONSIDERATION:
COMPANY ACTIVITIES - Magna-Lab Inc. and Subsidiary (the "Company") is engaged in
research and development activities. The Company's activities are devoted to
developing disposable, non-invasive and minimally invasive medical devices for
use in increasing the effectiveness of Magnetic Resonance Imaging ("MRI") for
the detection and definitive diagnosis of Coronary Artery Disease (the "Cardiac
MRI Initiative"). The Company's planned principal products have been developed
in conjunction with a collaboration with the Zena and Michael A. Weiner
Cardiovascular Institute of the Mount Sinai School of Medicine ("MSSM") in New
York.
See Form 10-KSB for the year ended February 29, 2000 for a discussion of the
background and history prior to the Company's restructuring in 1997 into its
current activities.
The Company's recent financing activities are discussed in further detail in
Note 6. During the quarter ended August 31, 2000, the Company finalized
arrangements to raise a total of $7,290,000 of equity capital (including
subscriptions for $7,150,000 and $140,000 of planned option exercises). Through
November 30, 2000, $3,290,000 of this commitment has been received. As such, the
accompanying consolidated financial statements, as of November 30, 2000, show
the Company had working capital of approximately $3,239,000 and net worth of
approximately $3,245,000. Although the Company has no present revenue and a
continuing development agenda, it currently believes that its present financial
resources are sufficient to fund its operations for the coming twelve months.
Further, the Company believes that upon collection of the remaining $4,000,000
of subscriptions, it will have financial resources to fund its operations for
longer than one year.
In reporting periods prior to August 31, 2000, the Company had reported that it
was subject to certain going concern considerations.
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. 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 ZENA AND MICHAEL A. WEINER CARDIOVASCULAR
INSTITUTE OF THE MOUNT SINAI SCHOOL OF MEDICINE:
In May 1997, the Company entered into a three-year agreement with the Zena and
Michael A. Weiner Cardiovascular 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 until August 1997. In January and April 2000, the Company and MSSM
agreed that certain work contemplated by the Agreement needed to be rescheduled
as a result of, among other things, development delays in 1999. As such, the
Company and MSSM agreed to the following schedule for payment of the accrued and
remaining payments; $150,000 in each of March, April, July and October 2000 (all
of which payments have been made). The agreement with MSSM was concluded at
October 31, 2000, as agreed.
6
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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 accrued for the cost of the collaboration with MSSM as research and
development expense monthly, based upon the originally scheduled $600,000 annual
payments from August 1997 to July 1999 and $300,000 annual payments from August
1999 to July 2000.
For the quarter and nine months ended November 30, 2000, $ -0- and $125,000,
respectively, was charged to operations and $150,000 and $600,000, respectively,
was paid. For the quarter and nine months ended November 30, 1999, $150,000 and
$450,000, respectively, was charged to operations and no amounts were paid. At
November 30, 2000 and February 29, 2000, $ -0- and $475,000, respectively,
remained in accrued liabilities.
NOTE 5 - PROPERTY AND EQUIPMENT:
Details of property and equipment at November 30, 2000 are as follows:
Machinery and equipment $ 360,000
Purchased software 49,000
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409,000
Less: accumulated depreciation and amortization
and write-downs (403,000)
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$ 6,000
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NOTE 6 - 2000 PRIVATE PLACEMENT OF COMMON STOCK:
INVESTMENT ARRANGEMENTS FOR 2000 - In the fourth quarter of the fiscal year
ended February 29, 2000, the Company was successful in raising $2,218,000 under
two arrangements aimed at raising an aggregate of $5,000,000. During the nine
months ended November 30, 2000, an additional approximately $3,250,000 was
raised bringing the total raised to approximately $5,468,000. These transactions
are described below.
From December 1999 through February 29, 2000, the Company was successful in
raising $1,468,000 of proceeds from the issuance of 6,672,727 shares of Class A
common stock under a $2,000,000 private placement to accredited investors.
During the nine months ended November 30, 2000, an additional approximately
$1,000,000 of proceeds was raised from the issuance of 4,536,907 shares of Class
A common stock under this placement.
Separately, in December 1999 an investor, Noga Investments in Technology, Ltd.
("Noga") made a non-refundable $250,000 deposit with the Company toward a
proposed investment of $3,000,000 for the purchase of a total of 13,636,363
shares of class A common stock over a seven month period ending (as amended in
May 2000) in July 2000. The agreement, as amended in May 2000, called for
investments of $500,000, which were made, prior to February 29, 2000, an
additional non-refundable deposit of $100,000 in May 2000 (which was made) and a
remaining investment of $2,150,000 to have been made prior to September 30, 2000
(which was made). Upon completion of these investment commitments, Noga was to
receive Class A common shares for the aggregate $350,000 of non-refundable
deposits (the original $250,000 plus the additional May 2000 $100,000). In
addition, Noga had the option to purchase such additional shares as would be
necessary to satisfy minimum capital requirements for listing on Nasdaq
SmallCap, at $0.22 prior to July 27, 2000, (the "Listing Option") as well as the
option discussed in the next paragraph.
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In connection with both transactions, the Company has agreed to provide warrants
to purchase 7,000,000 shares of Class A common stock at $0.02 ($140,000),
3,500,000 to an officer of the Company and 3,500,000 to Noga, both of which have
been exercised. Additionally, the Company has agreed to certain representation
on its Board of Directors. Certain fees and costs are to be paid in connection
with the amounts raised.
ADDITIONAL INVESTMENT COMMITMENTS AND REVISED PAYMENTS IN THE NINE MONTHS ENDED
NOVEMBER 30, 2000 - In July 2000, the following changes to the above described
arrangements were agreed to between Noga, an officer of the Company and the
Company.
In exchange for new investment undertakings by Noga, the Company and Noga agreed
that Noga would provide its remaining $2,150,000 due at July 27, 2000 under the
original commitment as follows: $750,000 on July 28, 2000 $700,000 by each of
September 15, 2000 and October 15, 2000 (all of which has been paid).
In addition, the Company and Noga agreed to replace Noga's Listing Option with
(a) Noga's commitment to purchase for $3,000,000, and (b) the commitment by an
officer of the Company to purchase for $2,000,000 (after a portion is offered
first to certain investors and management), an aggregate 22,727,272 shares of
Class A Common Stock of the Company. Noga's $3,000,000 new investment is to be
made as follows: $1,000,000 prior to September 30, 2000 (which was paid) and the
remaining $2,000,000 prior to October 31, 2000. The officer's new investment of
$2,000,000 is required to be paid by him or by current investors and management
prior to September 30, 2000. Both the remaining Noga investment ($2,000,000) and
the officer's new investment ($2,000,000) remain unpaid and the Company, the
officer and Noga are discussing various matters related to finalizing such
commitments.
Noga has executed, and the officer of the Company has agreed to execute, Notes
Payable to the Company to secure their commitment to provide an aggregate
$7,150,000 in financing for the Company. The Company has recorded these
remaining financing commitments as "Class A common stock subscribed" and the
related receivable as "Common stock subscriptions receivable" in the
accompanying consolidated financial statements. To the extent that such common
stock subscriptions receivable are paid prior to the release of the consolidated
financial statements, they are included among current assets as permitted by
Emerging Issues Task Force pronouncement 85-1 and SEC Staff Accounting Bulletin
40 Topic 4E. To the extent that such subscriptions receivable remain outstanding
prior to the release of the consolidated financial statements, they have been
included as a contra amount in consolidated stockholders' equity.
NOTE 7 - OTHER MATTERS:
INCREASE IN AUTHORIZED SHARES OF CLASS A COMMON STOCK - On September 28, 2000,
the shareholders of the Company approved the amendment of the Company's Amended
Certificate of Incorporation to increase the authorized shares of Class A common
stock from 40,000,000 to 100,000,000. Such change is reflected in the
accompanying consolidated balance sheet at November 30, 2000.
INCREASE IN SHARES OF CLASS A COMMON STOCK AVAILABLE FOR STOCK OPTIONS - On
September 28, 2000, the shareholders of the Company approved the increase in the
number of shares of Class A common stock available under the Company's 1992
Stock Option Plan from 1,000,000 to 14,000,000. Because management and the Board
controlled enough votes to assure passage of the increase in the plan as it
relates to options granted which were subject to such approval, the Company has
not recorded a charge to operations as a result of the passage of the increase
in the plan.
WARRANTS ISSUED TO CONSULTANTS - During the quarter ended November 30, 2000, the
Company completed negotiating a consulting agreement with one Director which
includes that Director being granted options to purchase 2,500,000 shares of
Class A Common Stock at $0.49 per share vesting over two years and exercisable
for five years. Generally accepted accounting principles requires that the
Company record a charge to compensation for such options issued to a consultant.
Based upon a calculation utilizing Black Scholes methodology, the Company has
recorded a charge to third quarter and nine month operations of $200,000
reflecting $150,000 for the quarter and $50,000 to reflect the retroactive date
of August 1, 2000 of the agreement.
8
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In March 2000, the Company entered into a contract with an investor relations
firm calling for annual fees of approximately $48,000 plus expenses. Under the
agreement, the Company agreed to issue five year warrants to purchase 280,000
shares of Class A common stock at an exercise price of $0.22 per share. The
options vest as follows: 120,000 in March 2000 and 160,000 in November 2000,
subject to the Company electing to continue to retain the services of this
investor relations firm at that time. The warrants result in a charge to
compensation over the period of service and approximately $25,000 and $75,000
has been included as a non-cash charge in the accompanying consolidated
statements of operations for the three and nine months ended November 30, 2000,
respectively.
DEPOSIT WITH VENDOR - Deposit with vendor of $107,000 included in the
accompanying November 30, 2000 consolidated balance sheet consists of amounts on
deposit with the Company's outsourced manufacturer. This amount will be deduced
from the final billings due to this vendor. Billings from this vendor for work
performed during the nine months ended November 30, 2000 were approximately
$106,000.
LIABILITIES SETTLED FOR STOCK - During the nine months ended November 30, 2000,
the Company reached agreement with one vendor and with the holders of bridge
loans made to the Company in September 1999 to settle these obligations, which
aggregated approximately $37,000, for an aggregate 190,909 shares of Class A
common stock.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
DEBT REDUCTION PROGRAM - Information regarding the Debt Reduction Program
commenced in 1997 is contained in Note 8 to Consolidated Financial Statements
contained in the Company's Form 10-KSB for the year ended February 29, 2000.
There has been no material change in the status of such program.
LITIGATION - The Company knows of no pending litigation against it although
there have been some unpaid judgments against the Company for various claims
that the Company believes do not exceed $25,000. The Company could be exposed to
potential litigation from agreements entered into in connection with its
discontinued business activities as further discussed in Note 8 to Consolidated
Financial Statements contained in the Company's Form 10-KSB for the year ended
February 29, 2000. The Company has not recorded liabilities for any
contingencies that could arise from these agreements as it cannot estimate an
amount of liability, if any.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THIS REPORT AND THE
FOLLOWING DISCUSSION 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. SUCH STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES AND THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW IN FACTORS
THAT MAY AFFECT FUTURE RESULTS
(B) MANAGEMENT'S ANALYSIS AND DISCUSSION OR PLAN OF OPERATIONS -
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 2000, the Company had working capital of approximately
$3,239,000 and net worth of approximately $3,245,000, improvements of
approximately $3,000,000 from the year ended February 29, 2000. These
improvements result principally from (a) the placement of additional shares
under its private placement to accredited investors (approximately $1,000,000),
(b) the receipt of deposits and common stock subscriptions receivable from Noga
toward its financing commitment to the Company ($3,250,000), (c) exercise of
warrants issued in connection with such financings of $140,000, reduced by (d)
losses from operations and the payment of private placement costs.
Although the Company has no present revenue and a continuing development
agenda, it currently believes that its present financial resources are
sufficient to fund its operations for the coming twelve months. Further, the
Company believes that upon collection of the remaining $4,000,000 of
subscriptions, it would have financial resources to fund its operations for
longer than one year.
RESULTS OF OPERATIONS
Operations for the three and nine months ended November 30, 2000 resulted
in a net loss of approximately $594,000 and $1,269,000, respectively,
principally in connection with the Company's business and development activities
under the Cardiac MRI Initiative. During the quarter ended November 30, 2000,
the Company completed its collaboration with MSSM and, as such, costs of
research and development decreased and business development expenses increased.
Research and development costs totaled approximately $145,000 and 540,000,
respectively, during the quarter and nine months ended November 30, 2000.
General and administrative costs were approximately $488,000 and 810,000,
respectively for the quarter and nine months ended November 30, 2000 reflecting
management and other operating costs including occupancy, storage and
professional fees, among other items and included a non-cash charge of
approximately $225,000 and $275,000, respectively for the compensatory element
of warrants issued to consultants. Total costs and expenses were offset by
interest income of approximately $39,000 and $81,000, respectively in the
quarter and nine months ended November 30, 2000 as a result of the investment of
higher cash balances. The increase in total costs and expenses over the
comparable periods of 1999 consists principally of $275,000 in non-cash charges
associated with certain consultant options, increased management costs and
professional fees to support the Company's planned commercial operations,
charges associated with an investor relations consultant and key man and other
insurance added in 2000. Cash used by operations totaled approximately
$1,548,000 consisting of the loss from operations as well as the general
reduction of accounts payable and accrued liabilities, including $600,000 paid
to MSSM.
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Operations for the nine months ended November 30, 1999 resulted in a net
loss of approximately $887,000 and, because of the lack of cash at the time,
utilized approximately $103,000 of cash principally in connection with
activities under the Cardiac MRI Initiative. Payments to MSSM were approximately
$800,000 in arrears at November 30, 1999. Net loss of approximately $887,000
reflects accrual of costs under the MSSM agreement as well as accrual of other
costs incurred, most of which were unpaid at November 30, 1999.
THE YEAR 2000 ISSUE
The Year 2000 issue refers to the fact that many computers and applications
have been programmed with two digit date fields for the year and is discussed in
the Company's Form 10-KSB for the year ended February 29, 2000. No changes in
this matter have occurred during the quarter and nine months ended November 30,
2000.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's future operating results are dependent upon many factors
including, but not limited to the Company's ability to: (i) obtain sufficient
capital or a strategic business arrangement when needed to fund its plan of
operations, (ii) pay its debts including significant payments to its outsourced
manufacturer as they come due and any residual claims or obligations that may
exist relative to its discontinued business, (iii) successfully develop its
planned products, Cardiac View and Artery View, (iv) successfully accomplish its
business development and marketing efforts to commercialize any products
developed, (v) maintain its relationship with the Zena and Michael A. Weiner
Cardiovascular Institute of the Mount Sinai School of Medicine and with its
principal medical investigator and develop necessary relationships with other
institutions and collaborators, (vi) develop products which do not infringe the
intellectual property rights of others, (vii) protect its intellectual property
rights from infringement by others with patents and other protections, (viii)
build the management and infrastructure necessary to support the growth of its
business, as well as (i) competitive factors and developments beyond the
Company's control and (ii) general economic conditions and conditions in the
financial and technology markets.
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PART II - OTHER INFORMATION
ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS
As discussed in Note 6 to the Consolidated Financial Statements, on July
27, 2000, Noga committed to purchase $3,000,000 of Class A Common Stock of the
Company at $0.22 per share, payable $1,000,000 by September 30, 2000 and the
balance by October 31, 2000. At the same date, an officer of the Company
committed to purchase $2,000,000 of Class A Common Stock at the same price
(subject to a portion being first offered to certain existing investors and
management) payable, as amended, by December 15, 2000. Of such amounts,
$2,000,000 of Noga's commitment and the full amount of the officer's commitment
remains unpaid as of the date hereof. Both Noga and the officer have represented
to the Company that they are "accredited investors" as that term is defined in
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). and the Company is relying on the exemption from Sec. 4 (2)
of the Securities Act for this transaction.
The Company plans to use the proceeds of the financings described above to
advance its Cardiac MRI initiative and for working capital purposes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
At its Annual meeting of shareholders held on September 28, 2000 the
matters brought for a vote of the shareholders were disclosed in the Form 10-QSB
for the quarter and six months ended August 31, 2000 filed in October 2000.
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 November 30, 2000.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MAGNA-LAB INC.
--------------
(Registrant)
Date: January 16, 2001 By: /s/ Daniel M. Mulvena
---- -------------------------------
Daniel M. Mulvena , Chairman of the
Board of Directors, Chief Executive
Officer (Principal Executive Officer),
/s/ Kenneth C. Riscica
--------------------------------
Treasurer, Secretary (Principal
Financial and Accounting Officer)
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