UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB\A

Amendment No. 1

⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended: April 30, 2008

OR

□ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission file number: 0-15284

NATIONAL LAMPOON, INC.

(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction ofIncorporation or organization)
95-4053296(I.R.S. EmployerIdentification No.)8228 Sunset BoulevardLos Angeles, CA 90046(Address of principal executive offices)(Zip Code)(310) 474-5252(Registrant's telephone number including area code)




(Former name, former address and former fiscal year, if changed since last
report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X]No
[  ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). 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: The registrant had 8,654,724 shares
of common stock, $0.0001 par value, issued and outstanding as of June 6, 2008.

Transitional Small Business Disclosure Format (Check one):  Yes
[  ]  No [X]






EXPLANATORY NOTE

National Lampoon, Inc. is filing this Amendment No. 1 to its Quarterly Report on
Form 10-QSB for the period ended April 30, 2008 for the purpose of adding the
Condensed Consolidated Statement of Cash Flows, which was inadvertently left out
of the original filing.






FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB/A contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 as
codified in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements discuss future
events and developments, including our future business strategy and our ability
to generate revenue, income and cash flow. In some cases, you can identify
forward-looking statements by words or phrases such as "may," "could," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue," "the Company's future success depends," "seeks to
continue," or the negative of these words or phrases, or comparable words or
phrases. These statements are only predictions that are based, in part, on
assumptions involving judgments about future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately. Actual events or results may differ
materially. Some of the factors that could cause our actual results to vary from
the forward-looking statements include:

•
a decline in the general state of the economy, which impacts the amount of money
spent by consumers for entertainment products,•
whether we will be able to raise capital or debt for film financing as we need
it,•
whether the entertainment products we produce or to which we license our brand
will generate significant sales,•
whether our subsidiary, National Lampoon Networks, Inc., will be able to
continue its relationships with its current advertisers and continue to attract
new advertisers,•
our overall ability to successfully compete in our market and our industry,•
whether we will continue to receive the services of our executive officers and
directors, particularly our Chief Executive Officer, Daniel S. Laikin,•
unanticipated increases in development, production or marketing expenses related
to our various business activities,




and other factors, some of which will be outside of our control. In evaluating
forward-looking statements, you should consider the factors identified above as
well as those risks discussed in the section of this quarterly report titled
"Management's Discussion and Analysis or Plan of Operation". Although the
Company believes that the expectations reflected in the forward-looking
statements are reasonable, it cannot guarantee future results, levels of
activity, performance or achievements. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date on
which they are made. The Company does not undertake to update any of the
forward-looking statements to conform these statements to actual results. You
should carefully review the risk factors included in the Company's Annual Report
on Form 10-KSB and in other documents it files from time to time with the
Securities and Exchange Commission.








PART I - FINANCIAL INFORMATION

Item 1 - Condensed Consolidated
Financial Statements

NATIONAL LAMPOON,
INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEET(UNAUDITED)As ofASSETS
April 30, 2008CURRENT ASSETSCash
$      14,931Accounts receivable, net of reserves
of $283,577
1,561,174Tax credit receivable
223,459Prepaid expenses and other current
assets
85,397Total current assets
1,884,961Fixed assets, net of accumulated
depreciation of $188,568
34,218Capitalized production costs, net of
$5,570,433 of amortization
5,368,448Capitalized publishing costs, net of
$493,727 of amortization
98,942Intangible assets, net of accumulated
amortization of $4,655,808
1,594,684Fair value of available-for-sale
securities
882,692Total non-current
assets
7,978,984TOTAL ASSETS
$   9,863,945LIABILITIES AND SHAREHOLDERS'
DEFICITCURRENT LIABILITIESAccounts payable
$   1,357,849Accrued expenses
299,352Notes payable secured by tax credit
receivable
223,459Notes payable - related party,
including interest of $117,218
1,909,160Production loans - related party,
including interest of $361,113
3,867,235Deferred income
1,695,309TOTAL CURRENT
LIABILITIES
9,352,364COMMITMENTS AND CONTINGENCIESAccrued dividends payable in common
stock
4,261,949SHAREHOLDERS' DEFICITSeries B Convertible Preferred Stock,
par value $.0001 per share, 68,406 shares authorized, 61,832 shares issued and
outstanding
6Series C Convertible Preferred Stock,
par value $.0001 per share, 250,000 shares authorized, 190,947 shares issued and
outstanding
18Common Stock, par value $.0001 per
share, 60,000,000 shares authorized, 8,607,012 shares issued and
outstanding
861Additional paid-in capital
38,541,885Accumulated other comprehensive
income
882,692Accumulated deficit
(43,175,830)TOTAL SHAREHOLDERS'
DEFICIT
(3,750,368)TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT
$      9,863,945The accompanying notes are an integral part of
these condensed consolidated financial statements.









NATIONAL LAMPOON, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED)Three months ended

Nine months endedApril 30,

April 30,2008

2007

2008

2007REVENUESProduction

$   265,828

$             -

$       265,828

$        44,500Licensing

1,717,552

329,736

2,272,968

3,751,373Advertising &
Promotion

553,019

319,389

1,159,195

1,800,211Publishing

(55,241)

164,792

(21,091)

334,994Distribution

154,772

-

159,831

-Tours

-



110,000Total revenues

2,635,930

813,917

3,946,731

5,931,078COSTS AND EXPENSESCosts related to production
revenue

21,900

1,056

40,948

4,056Costs related to licensing
revenue

41,243

14,360

84,394

172,176Costs related to advertising and
promotion revenues
68,893

572,329

404,506

1,789,329Costs related to publishing
revenues

76,080

-

124,125

-Costs related to
distribution

92,311

-

106,811

-Amortization of capitalized
production costs

1,208,416

42,313

1,208,937

462,582Amortization of intangible
assets

61,637

60,197

184,021

181,337Selling, general and administrative
expenses

938,022

1,280,785

4,058,679

4,484,348Total costs and
expenses

2,508,502

1,971,040

6,212,421

7,093,828OPERATING INCOME
(LOSS)

127,428

(1,157,123)

(2,265,690)

(1,162,750)OTHER INCOME (EXPENSE)Interest income

-

1,045

-

5,546Interest expense

(29,039)

(9,752)

(74,745)

(38,590)Write off of royalty
payable

-

-

396,250

-Equity in investee loss

-

-

-

(800)Other income

(645)

4,515

25,639

25,927Total other income
(expense)

(29,684)

(4,192)

347,144

(7,917)NET INCOME (LOSS)

97,744

(1,161,315)

(1,918,546)

(1,170,667)Preferred stock dividends

(292,356)

(289,817)

(887,898)

(932,832)Net loss attributable to common
shareholders

$    (194,612)

$   (1,451,132)

$   2,806,444)

$  (2,103,499)Net loss per share attributable to common
shareholder - basic and diluted

$          (0.02)

$           (0.18)

$          (0.34)

$           (0.28)Weighted average number of common shares - basic
and diluted

8,465,847

8,093,585

8,342,931

7,257,688The accompanying notes are an integral part of
these condensed consolidated financial statements.













NATIONAL LAMPOON, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS'
DEFICITFOR THE NINE MONTHS ENDED APRIL 30,
2008(UNAUDITED)AccumulatedPreferred



Common

Additional

OtherSeries B

Series C

Stock

Common

Stock

Paid-in

Comprehensive

AccumulatedShares

Shares

Amount

Stock

Amount

Capital

Income

Deficit

TotalBalance at August 1, 2007

63,607

190,947

$      24

8,207,822

$      821

$    37,819,138

$           -

$(41,257,284)

$ (3,437,301)Stock issued for services

-

-

-

237,043

24

515,144

-

-

515,168Exercise of options for common stock

-

-

-

5,000

-

8,000

-

-

8,000Exercise of warrants for common stock

-

-

-

18,835

2

33,432

-

-

33,434Stock issued in exchange for intangible
assets

-

-

-

5,750

1

11,424

-

-

11,425Conversion of Series B shares into common
stock

(1,775)

-

-

99,999

10

(10)

-

-

-Conversion accrued dividends on Series B shares
into common stock

-

-

-

32,563

3

58,609

-

-

58,612Fair value of options and warrants issued to
consultants

-

-

-

-

-

580,993

-

-

580,993Fair value of vesting of employee stock
options

-

-

-

-

-

403,053

-

-

403,053Series B dividend accrual

-

-

-

-

-

(460,016)

-

-

(460,016)Series C dividend accrual

-

-

-

-

-

(427,882)

-

-

(427,882)Increase fair value of available-for-sale
securities

-

-

-

-

-

-

882,692

-

882,692Net loss for the period

-













(1,918,546)

(1,918,546)Balance at April 30, 2008

61,832

190,947

$        24

8,607,012

$       861

$38,541,885

$   882,692

$(43,175,830)

$ (3,750,368)The accompanying notes are an integral part of
these condensed consolidated financial statements.











NATIONAL
LAMPOON, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)Nine months endedApril 30,2008

2007CASH FLOWS FROM OPERATING ACTIVITIESNet Loss

$(1,918,546)

$(1,170,667)Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation

13,164

9,491Amortization of intangible
assets

184,021

181,337Loss on disposal of fixed
assets

3,145

-Fair value of shares issued for
services

515,168

444,759Fair value of vested stock, options and
warrants

984,046

414,431Amortization of capitalized production
costs

1,208,937

462,582Provision for doubtful
accounts

-

149,566Write off of royalty

(396,250)

-Undistributed loss of equity
investment

-

800Changes in assets and liabilities(Increase)/decrease in accounts
receivable

(1,202,832)

164,981(Increase) in tax credit
receivable

(223,459)

-(Increase) in prepaid expenses and other
assets

(20,215)

(30,480)(Increase)/decrease in publishing
costs

(36,763)

251(Increase) in production
costs

(1,093,877)

(2,402,554)Increase/(decrease) in accounts
payable

428,243

(44,455)Increase in accrued expenses

142,903

87,726Increase in deferred revenues

459,536

543,642NET CASH USED IN OPERATING
ACTIVITIES

(952,779)

(1,188,590)CASH FLOWS FROM INVESTING
ACTIVITIES:Purchase of fixed assets

(13,096)

(27,240)Purchase of intangible assets

(158,781)

(73,652)Investments in equity
securities

-

(800)NET CASH USED IN INVESTING ACTIVITIES

(171,877)

(101,692)CASH FLOWS FROM FINANCING ACTIVITIES:Payments of production loans

(450,491)

(272,963)Borrowings on production loans

589,181

2,615,219Payments of notes payable, related
party

(388,709)

(711,573)Proceeds from notes payable, related
party

1,039,007

-Borrowings on notes payable

223,459

-Proceeds from the exercise of stock
options

8,000

131,810Proceeds from the exercise of
warrants

33,434

9,000NET CASH PROVIDED BY FINANCING ACTIVITIES

1,053,881

1,771,493NET (DECREASE)/INCREASE IN CASH

(70,775)

481,211CASH AT BEGINNING OF PERIOD

85,706

74,601CASH AT END OF PERIOD

$14,931

$   555,812SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATIONCash paid for:Taxes

$             -

$     10,290Interest

$      2,472

$     62,794Non-cash investing and financing
activities:Accrued dividends on preferred stock
payable in common shares

$   887,898

$    932,832Conversion of accrued dividends on
Convertible Preferred Stock to common stock

$     58,612

$   227,475Stock issued in exchange for intangible
assets

$     11,425

$              -Increase in fair value of
available-for-sale securities

$   882,692

$              -The accompanying notes are an integral part of these
condensed consolidated financial statements.









NATIONAL LAMPOON, INC. AND
SUBSIDIARIES

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDING APRIL 30, 2008 AND 2007

(UNAUDITED)

NOTE A - BUSINESS ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation.The interim condensed consolidated
financial statements are unaudited, but in the opinion of management of the
Company, contain all adjustments, which include normal recurring adjustments,
necessary to present fairly the financial position at April 30, 2008 and the
results of operations for the three and nine months ended April 30, 2008 and
2007 and cash flows for the nine months ended April 30, 2008 and 2007.

Certain information and footnote disclosures normally included in financial
statements that have been presented in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission with respect to interim
financial statements, although management of the Company believes that the
disclosures contained in these financial statements are adequate to make the
information presented therein not misleading.  For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
July 31, 2007, as filed with the Securities and Exchange Commission.

The Company's results of operations for the three and nine months ended April
30, 2008 are not necessarily indicative of the results of operations to be
expected for the full fiscal year ending July 31, 2008.

The condensed consolidated financial statements of the Company include the
accounts of National Lampoon, Inc., its wholly owned subsidiaries, National
Lampoon Networks, Inc. and National Lampoon Tours, Inc. along with its 50%
ownership in National Lampoon Clubhouse, Inc., and its 100% ownership in Bagboy
Productions, Inc, Ratko Productions, Inc. and 301 Productions, Inc. During the
2007 fiscal year, the Company disposed of its interest in Totally Baked, LLC
pursuant to a settlement agreement with Laughter Heals, Inc. The Company has the
full and exclusive control of the management and operation of the business of
each subsidiary and participates in 100% of the revenues and losses of its
subsidiaries. The Company participates in 50% of the revenues and net losses of
National Lampoon Clubhouse, Inc. Inter-company balances and transactions have
been eliminated in consolidation.

Organization.The Company was formed in California in 1986
and was primarily engaged in the acquisition, production and distribution of
videocassette programs for retail sale. During the 1991 fiscal year, the Company
acquired all of the outstanding shares of National Lampoon, Inc. (NLI). NLI was
incorporated in 1967 and was primarily engaged in publishing National Lampoon
Magazine and related activities. Subsequent to the Company's acquisition of NLI,
it de-emphasized its videocassette business and publishing operations and began
to focus primarily on exploitation of the National LampoonTM trademark. The
Company reincorporated in Delaware under the name National Lampoon, Inc. in
November 2002.

On May 17, 2002 a group of investors gained voting control of the Company
through the acquisition of its Series B Convertible Preferred Stock and warrants
to purchase its common stock (the "Reorganization Transaction"). Since the
Reorganization Transaction, the Company's business has expanded to include
operations other than licensing. On September 3, 2002, the Company's subsidiary,
National Lampoon Networks, Inc., acquired Burly Bear Network, Inc. to gain
access to campus television stations. The division has since expanded to the
Internet and now sells advertising space on a number of National Lampoon
websites. A majority of our programming is developed for both the college
network and the Internet. Aside from providing programming to the college
stations and the Internet, National Lampoon Networks, Inc. provides an
integrated marketing approach to retailers who wish to target the college
market. The Company has also entered the feature film and home entertainment
market, producing original motion pictures. In 2004, the Company began to offer
travel services during spring break through its subsidiary, National Lampoon
Tours, Inc. The Company has discontinued these services, however, National
Lampoon Tours may continue to maintain a significant presence at Spring Break
events so that we may offer advertising, distribute promotional material and
hold live events for our advertisers and other customers. In 2006 the Company
began publishing its own books and has also expanded its licensing activities by
licensing its name to other books, content displayed over wireless
communications devices and electronic games.



7




Going Concern. The accompanying condensed consolidated financial
statements have been prepared assuming the Company will continue as a going
concern. The Company's current net loss of $1,918,546 for the nine months ended
April 30, 2008 along with the prior two years net losses of $2,504,170 and
$6,859,085 as well as negative working capital of $7,467,403 and shareholders'
deficiency of $3,750,368 at April 30, 2008, raise substantial doubt about its
ability to continue as a going concern. We are currently devoting efforts to
achieving profitable operations and generating or raising additional capital.
Our ability to continue as a going concern is dependent upon our ability to
develop additional sources of capital and revenue. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. As of June 6, 2008, we had cash on hand of approximately
$67,152 and receivables totaling $1,811,257. We also had $1,036,732 in minimum
guarantee and home video payments due from domestic and foreign distributors
including $250,000 from Comedy Partners (US), $85,000 from LCT Entertainment
(Russia), $63,405 from Pueblo Film Distribution (Australia), $58,000 from Front
Row (Middle East), and $580,327 from Beta Cinema (Germany) which is based on
€375,410 due at an exchange rate of $1.54585 on June 6, 2008. We are
currently delivering seven films for which the minimum guarantee and home video
payments are due upon notice of delivery and we expect payments to be received
by the fourth quarter of fiscal 2008. Additionally we have completed an audit of
Warner Bros. Entertainment, Inc. relating to its exploitation of the films
National Lampoon's Vacation, National Lampoon's European Vacation
and National Lampoon's Christmas Vacation. We have submitted the audit
reports to Warner Bros and will begin negotiations immediately. Based on the
audit reports we expect a favorable outcome from the negotiations.

Our principal sources of funds used for operations and working capital have been
revenues and loans received from Daniel S. Laikin, our Chief Executive Officer,
and Timothy Durham, a director. The aggregate amount of the loans and accrued
interest owed to Mr. Laikin and Mr. Durham at April 30, 2008 is $1,891,498 as
compared to $1,241,937 at July 31, 2007. These two individuals have expressed
their continued support to provide loans to us to meet any immediate working
capital requirements.

Revenue Recognition. Royalty income from film contracts is derived from the sale of
DVDs or from the licensing of film rights to third parties. A significant
portion of royalty income is paid to the Company based on the timetable
associated with royalty statements generated by third party processors, and is
not typically known by the Company on a timely basis. This revenue is
consequently not recognized until the amount is either known or reasonably
estimable or until receipt of the statements from the third parties. The Company
contracts with various agencies to facilitate collection of royalty income. When
the Company is entitled to royalties based on gross receipts, revenue is
recognized before deduction of agency fees, which are included as a component of
cost of revenue.

The Company recognizes revenue from television and film productions pursuant to
American Institute of Certified Public Accountants Statement of Position 00-2,
"Accounting by Producers or Distributors of Films" ("SOP 00-2"). The following
conditions must be met in order to recognize revenue under SOP 00-2:
(i) persuasive evidence of a sale or licensing arrangement exists;
(ii) the program is complete and has been delivered or is available for
immediate and unconditional delivery; (iii) the license period of the
arrangement has begun and the customer can begin its exploitation, exhibition or
sale; (iv) the arrangement fee is fixed or determinable; and
(v) collection of the arrangement fee is reasonably assured. Advance
payments of $1,695,309 that have been received as of April 30, 2008 from buyers
or licensees are included in the financial statements as a component of deferred
revenue.

Film Costs.Investment in film costs includes the
capitalization of costs incurred to produce the film content including direct
negative costs, production overhead, interest and development. These costs are
recognized as operating expenses on an individual film basis in the ratio that
the current year's gross revenues bear to management's estimate of total
ultimate gross revenues from all sources to be earned over a seven-year period.
Capitalized production costs are stated at the lower of unamortized cost or
estimated fair value on an individual film basis. Revenue forecasts, based
primarily on historical sales statistics, are continually reviewed by management
and revised when warranted by changing conditions. When estimates of total
revenues and other events or changes in circumstances indicate that a film has a
fair value that is less than its unamortized cost, an impairment loss is
recognized in the current period for the amount by which the unamortized cost
exceeds the film's fair value.

Use of Estimates.The preparation of
condensed consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the condensed
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Management makes estimates that effect reserves for allowance for
doubtful accounts, estimated useful life of property and equipment, accrued
expenses, fair value of equity instruments, reserves for any commitments or
contingencies, debt issue costs, capitalized film costs, calculation of
impairment, amortization expense and deferred income taxes.

8




Concentrations.  The Company maintains its cash balances at
financial institutions that are federally insured; however, at times such
balances may exceed federally insured limits. The Company has not experienced
any losses in such accounts. The Company's cash balances on deposit with banks
are guaranteed by the Federal Deposit Insurance Corporation up to $100,000. The
Company may be exposed to risk for the amounts of funds held in bank accounts in
excess of the insurance limit. In assessing the risk, the Company's policy is to
maintain cash balances with high quality financial institutions. The Company had
  cash balances in excess of the $100,000 guarantee during the nine months
ended April 30, 2008.

During the three months ended April 30, 2008 three customers accounted for
$750,000 (28%), $485,411 (18%) and $406,911 (15%) of total revenue. During the
three months ended April 30, 2007, three customers accounted for $169,532 (21%),
$90,000 (11%) and $83,576 (10%) of total revenue.

During the nine months ended April 30, 2008 three customers accounted for
$750,000 (19%), $617,411 (16%) and $485,411 (12%) of total revenue. During the
nine months ended April 30, 2007, one customer accounted for 54% of total
revenue.

As of April 30, 2008, the Company had $557,146 (32%) and $334,610 (19%) of gross
accounts receivable due from its largest customers.

The Company currently does not rely on a single vendor for a majority of its
productions. The Company has different vendors that can be replaced if the need
arises. A change in vendors would not cause a significant delay in the
production process that would ultimately affect operating results.

Fair Value of Financial Instruments.The carrying amount of the
Company's financial instruments including cash, accounts receivable, accounts
payable, and accrued expenses approximate their fair value as of April 30,
2008 due to their short maturities. The carrying amounts of production
loans and notes payable approximate fair value because the related effective
interest rates on these instruments approximate the rates currently available to
the Company.

Effective January 1, 2008, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 157, "Fair Value Measurements." This Statement defines
fair value for certain financial and nonfinancial assets and liabilities that
are recorded at fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements. This guidance applies to
other accounting pronouncements that require or permit fair value measurements.
On February 12, 2008, the FASB finalized FASB Staff Position (FSP) No.
157-2, Effective Date of FASB Statement No. 157. This Staff Position delays
the effective date of SFAS No. 157 for nonfinancial assets and liabilities
to fiscal years beginning after November 15, 2008 and interim periods within
those fiscal years, except for those items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).
The adoption of SFAS No. 157 had no effect on the Company's consolidated
financial position or results of operations.

Comprehensive Income (Loss).SFAS No. 130, "Reporting
Comprehensive Income", established rules for the reporting and display of
comprehensive income and its components. SFAS No. 130 requires unrealized gains
or losses on the Company's available-for-sale securities adjustments to be
reported as a separate component (comprehensive income/loss) of shareholders'
equity. The components of comprehensive income (loss) are as follows:



Three months ended April 30,

Nine months ended April 30,2008

2007

2008

2007Net Income (Loss)

$   97,744

$  (1,161,315)

$(1,918,546)

$(1,170,667)Fair value adjustment on available-for-sale securities

882,692

-

882,692

-Comprehensive Income (Loss)

$  980,436

$  (1,161,315)

$(1,035,854)

$(1,170,667)




Investments. The Company accounts for its investments in equity
securities under SFAS 115, "Accounting for Certain Investments in Debt and
Equity Securities." The Company has classified its investments as available for
sale securities, and such securities are carried at fair value. The fair values
for marketable equity securities are based on quoted market prices. Unrealized
gains or losses, net of tax, are included as a component of accumulated other
comprehensive income in stockholders' equity. Realized gains and losses and
declines in value considered to be other than temporary on available for sale
securities are included in other income (loss).

9




Intangible Assets.Intangible assets consist primarily of the
National Lampoon trademark which is being amortized on a straight-line basis
over twenty-five years. The Company continually evaluates whether events or
circumstances have occurred that indicate the remaining estimated useful life of
intangible assets should be revised or the remaining balance of intangible
assets may not be recoverable. Factors that would indicate the occurrence of
such events or circumstances include current period operating or cash flow
losses, a projection or forecast of future operating or cash flow losses, or the
inability of the Company to identify and pursue trademark licensing
opportunities on terms favorable to the Company. Gross intangibles were
approximately $6,250,492 with accumulated amortization of approximately
$4,655,808 at April 30, 2008, which includes approximately $184,021 of
amortization being expensed during the nine months ended April 30, 2008. The
estimated aggregate amortization expense for each of the six succeeding fiscal
years is $245,000 per year, which primarily represents the original acquired
intangible relating to the National Lampoon trademark, amortized over
twenty-five years.

As of April 30,
2008, the Company has determined and tested for impairment in accordance with
SFAS 141, paragraphs 16-21, and concluded that the expected future cash flows
relating to its intangible assets will result in the recovery of the carrying
value of such asset. The continued realization of these intangible assets,
however, is dependent upon the continued exploitation of the National Lampoon
trademark for use in motion pictures, television, the Internet, merchandising
and other appropriate opportunities. If these and other ventures that the
Company may enter into do not result in sufficient revenues to recover the
associated intangible assets, the Company's future results of operations may be
adversely affected by adjustments to the carrying values of such intangible.

Recently Adopted Accounting Pronouncements.Effective August 1,
2007, the Company adopted FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,
Accounting for Income Taxes" ("FIN 48"). FIN 48 addresses the determination of
whether tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than fifty percent likelihood of
being realized upon ultimate settlement. FIN 48 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures. At the date of
adoption, and as of April 30, 2008, the Company does not have a liability for
unrecognized tax benefits, and no adjustment was required at adoption.

The Company files income tax returns in the U.S. federal jurisdiction and
various states. The Company is subject to U.S. federal or state income tax
examinations by tax authorities for years after 2002. During the periods open to
examination, the Company has net operating loss and tax credit carry-forwards
for U.S. federal and state tax purposes that have attributes from closed
periods. Since these net operating loss and tax credit carry-forwards may be
utilized in future periods, they remain subject to examination.

The Company's policy is to record interest and penalties on uncertain tax
provisions as income tax expense. As of April 30, 2008, the Company has no
accrued interest or penalties related to uncertain tax positions. Additionally,
tax years 2003 through 2007 remain open to examination by the major taxing
jurisdictions to which the Company is subject.

Recent Accounting Pronouncements.In December 2007, the FASB
issued FASB Statement No. 141(R), "Business Combinations" (FAS 141(R)),
which establishes accounting principles and disclosure requirements for all
transactions in which a company obtains control over another business. Statement
141(R) applies prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. Earlier adoption is prohibited.

10




In December 2007, the FASB issued SFAS No. 160,
"Non-controlling Interests in Consolidated Financial Statements, an amendment of
ARB No. 51". SFAS No. 160 establishes accounting and reporting
standards that require that the ownership interests in subsidiaries held by
parties other than the parent be clearly identified, labeled, and presented in
the consolidated statement of financial position within equity, but separate
from the parent's equity; the amount of consolidated net income attributable to
the parent and to the non-controlling interest be clearly identified and
presented on the face of the consolidated statement of income; and changes in a
parent's ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently. SFAS No. 160 also
requires that any retained non-controlling equity investment in the former
subsidiary be initially measured at fair value when a subsidiary is
deconsolidated. SFAS No. 160 also sets forth the disclosure requirements to
identify and distinguish between the interests of the parent and the interests
of the non-controlling owners. SFAS No. 160 applies to all entities that
prepare consolidated financial statements, except not-for-profit organizations,
but will affect only those entities that have an outstanding non-controlling
interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS
No. 160 is effective for fiscal years, and interim periods within those
fiscal years beginning on or after December 15, 2008. Earlier adoption is
prohibited. SFAS No. 160 must be applied prospectively as of the beginning
of the fiscal year in which it is initially applied, except for the presentation
and disclosure requirements. The presentation and disclosure requirements are
applied retrospectively for all periods presented. The Company does not have a
non-controlling interest in one or more subsidiaries.

Net Income or Loss per Share.Basic loss per share is calculated
by dividing net loss available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted loss per share is
calculated assuming the issuance of common shares under the treasury stock
method, if dilutive, resulting from the exercise of stock options and warrants.
Basic and diluted losses per share are the same at April 30, 2008 and 2007, as
common equivalent shares have been excluded from the computation due to the fact
that they are anti-dilutive. Options and warrants to purchase 6,358,722 and
8,430,035 common shares during the nine months ended April 30, 2008 and 2007,
respectively, are not included in the calculation of diluted earnings per share
because their inclusion would be anti-dilutive. 7,302,431 and 7,430,431 shares
that would be issuable upon conversion of the convertible preferred stock are
not included in the calculation of diluted earnings per share during the nine
months ended April 30, 2008 and 2007, respectively, because their inclusion
would be anti-dilutive.

At April 30, 2008, there are 61,832 Series B Convertible Preferred Shares and
190,947 Series C Convertible Preferred Shares outstanding. Upon conversion of
the 61,832 Series B Convertible Preferred Shares, 3,483,491 common shares would
be issuable. Upon conversion of the 190,947 Series C Convertible Preferred
Shares, 3,818,940 common shares would be issuable. This would result in a
diluted weighted average number of shares of 16,917,809 for the nine months
ended April 30, 2008.

Each Series B Convertible Preferred Share is convertible into 56.338 common
shares. Each Series C Convertible Preferred Share is convertible into 20 common
shares. Warrants attached to the Series B and Series C Convertible Preferred
Stock are not included in the calculation of diluted earnings per share during
the three and nine months ended April 30, 2008 because their inclusion would be
anti-dilutive.

Stock Based Compensation.The Company periodically issues stock
options and warrants to employees and non-employees in non-capital raising
transactions for goods and services. The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123R effective January 1, 2006 and is using the
modified prospective method in which compensation cost is recognized beginning
with the effective date (a) based on the requirements of SFAS No. 123R for all
share-based payments granted after the effective date and (b) based on the
requirements of SFAS No. 123R for all awards granted to employees prior to the
effective date of SFAS No. 123R that remained unvested on the effective date.
The Company accounts for stock option and warrant grants issued and vesting to
non-employees in accordance with EITF No. 96-18: "Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services" and EITF 00-18 "Accounting
Recognition for Certain Transactions involving Equity Instruments Granted to
Other Than Employees" whereas the value of the stock compensation is based upon
the measurement date as determined at either a) the date at which a performance
commitment is reached, or b) at the date at which the necessary performance to
earn equity instruments is complete.

11




The Company recognizes compensation cost for
equity-based compensation for all new modified grants issued after December 31,
2005. In addition, commencing January 1, 2006, the Company recognized the
unvested portion of the grant date fair value of awards issued prior to adoption
of SFAS No. 123R based on the fair values previously calculated for disclosure
purposes over the remaining vesting period of the outstanding stock options and
warrants.

The fair value of options was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for the nine months ended April 30, 2008 and 2007:

NOTE B - CAPITALIZED PRODUCTION COSTS

The following table summarizes the net capitalized film and television costs in
various stages of production at April 30, 2008:

April 30,2008In development

$
2,505,610Completed


2,862,838Total film costs

$
5,368,448




The Company expects to amortize within three years 90% of capitalized film costs
based on the estimated costs and ultimate revenue projected. The portion of the
costs of the Company's films that was amortized during the three and nine months
ended April 30, 2008 was $1,208,416 and $1,208,937, respectively, and during the
three and nine months ended April 30, 2007, was $42,313 and $462,582,
respectively. The portion of the costs of the Company's films that are expected
to be amortized during the upcoming 12 months is approximately $1,280,614.

NOTE C - FIXED ASSETS

Fixed assets are comprised of the following as of April 30, 2008:

April 30,2008Computer equipment

$
178,700Camera and lighting equipment


39,869Furniture and office equipment


4,217222,786Accumulated depreciation


(188,568
)$
34,218




Depreciation expense for the nine months ended April 30, 2008 and 2007 was
$13,164 and $9,491, respectively.

NOTE D - NOTES PAYABLE TO RELATED
PARTIES AND ACCRUED INTEREST

Notes payable to related parties and accrued interest consist of the following
at April 30, 2008:

April 30,2008(A) Payable to Daniel Laikin

$
951,107(B) Payable to Timothy Durham


866,239(C) Payable to Christopher Williams


91,814$
1,909,160




(A) As of April 30, 2008, the Company owed Daniel Laikin, the Company's Chief
Executive Officer, $868,789 in principal and $82,318 in interest. The loans bear
interest at the rate of 6% per annum. The obligation to Mr. Laikin is unsecured
and payable on demand. During the nine months ending April 30, 2008, the Company
made net payments of $101,211 to Mr. Laikin.

(B) As of April 30, 2008, the Company owed Timothy Durham, a director, $839,819
in principal and $26,420 in interest. The loans bear interest at the rate of 6%
per annum. The obligation to Mr. Durham is unsecured and payable on demand.
During the nine months ending April 30, 2008, the Company received advances of
$677,025 from Mr. Durham.

(C) As of April 30, 2008, the Company owed Christopher R. Williams, a
shareholder, $83,333 in principal and $8,481 in interest. The loans bear
interest at the rate of 6% per annum. The obligation to Mr. Williams is payable
on demand. During the nine months ending April 30, 2008, no principal and no
interest had been paid to Mr. Williams.

12




NOTE
E - PRODUCTION LOANS FROM RELATED PARTIES AND ACCRUED INTEREST

Outstanding production loans from related parties and accrued interest consist
of the following as of April 30, 2008:

April 30,2008(A) Red Rock Productions, Inc. - Bag Boy Productions, Inc.

$
1,694,446(B) Red Rock Productions, Inc. - Ratko Productions, Inc.


2,098,637(C) Dan Laikin


74,152$
3,867,235




(A)
On October 26, 2006, the Company entered into a financing agreement with Red
Rock Productions Inc. (Red Rock) regarding the financing of the theatrical
motion picture Bag Boy. Red Rock Pictures Holdings, Inc., Red Rock's
parent, is a publicly traded company and related party (See Note G). In
accordance with the agreement, Red Rock agreed to loan the Company up to
$2,000,000 (unless otherwise agreed to by both parties) to fund this film, with
payments to be made according to an approved production cash flow as provided by
the Company. Red Rock will be entitled to recoup its investment plus interest at
10% per annum accruing on the average daily balance from the date the loan is
provided to the Company. Red Rock will also be entitled to contingent
participation of 25% of all net contingent proceeds from the picture. Red Rock
has a security interest in the film to the extent of the actual amount of the
funding as long as there is an unpaid balance on the loan. As of April 30, 2008,
advances to the Company totaled $1,518,139, and interest accrued totaled
$176,307 under this financing agreement.




(B)
On October 26, 2007, the Company entered into a financing agreement with Red
Rock regarding the financing of the theatrical motion picture Ratko. In
accordance with the agreement, Red Rock agreed to loan the Company up to
$2,000,000 to fund this film, with payments to be made according to an approved
production cash flow as provided by the Company. Red Rock will be entitled to
recoup its investment plus interest at 10% per annum accruing on the average
daily balance from the date the loan is provided to the Company. Red Rock will
also be entitled to contingent participation of 25% of all net contingent
proceeds from the picture. Red Rock has a security interest in the film to the
extent of the actual amount of the funding as long as there is an unpaid balance
on the loan. As of April 30, 2008, advances to the Company totaled $1,922,028
and interest accrued totaled $176,609 under this financing agreement.




(C)
Mr. Laikin, the Company's Chief Executive Officer, has made various loans to us
for film financing. As of April 30, 2008, he was owed $67,000 in principal and
$7,152 in interest for these production loans. The loans bear interest at the
rate of 6% per annum.




NOTE F - ACCRUED SERIES B AND C DIVIDENDS

Dividends accrue on the Company's Series B and Series C Convertible Preferred
Stock. The Company accrued dividends on a daily basis and will continue to do so
until the date at which the Series B or Series C Convertible Preferred Stock is
converted, until a liquidation event occurs, or, in the case of the Series C
Convertible Preferred Stock, until the redemption date (although the redemption
date is not defined and there is no right of redemption as to the Series C
Convertible Preferred Stock). Dividends accrue at the rate of 9% per annum on
the sum of the original purchase price of the Series B or Series C Convertible
Preferred Stock plus all accumulated and unpaid dividends thereon (compounding
annually). Dividends that accrue on the Company's Series B and Series C
Convertible Preferred Stock must be paid with our common stock. During the
nine-month periods ended April 30, 2008, the Company had accrued $887,898 of
Series B and Series C dividends.

At April 30, 2008, the Company had accrued $4,261,949 representing the total
value of the dividends accrued on the Series B and Series C Convertible
Preferred Stock.

On conversion of the Series B and Series C Convertible Preferred Stock, the
Company becomes liable to pay dividends. Conversion of dividends on the Series B
and Series C Convertible Preferred Stock are computed using the closing price of
the common stock, as reported by the exchange or regulated quotation service on
which the Company's common stock is traded, on the trading date immediately
preceding the date that the Company becomes liable to pay the dividend. If no
trades were made on that date, then the number of shares to be issued is
computed using the closing price of the last date on which trades were made and
reported.



13




NOTE G - INVESTMENT IN RED ROCK

In October 2006, the Company invested $800 in Red Rock Pictures Holdings, Inc.,
("Red Rock") which was then merged into a publicly traded entity. The investment
at the time represented 11,769,236 shares or approximately 18% of the then total
outstanding shares of Red Rock. Three members of National Lampoon's board
of directors, Robert Levy, Timothy Durham and Daniel Laikin, also own stock in
Red Rock. The Company recorded the transaction under the equity method due to
the determination that it had significant influence, and recognized its
proportionate share of the investee's losses not to exceed the $800 investment.
In addition, the Company's investment had been determined to not be a variable
interest entity in accordance with FIN46(R) since Red Rock was not formed for
the primary benefit of the Company, and the Company does not have an obligation
to absorb the losses, nor receive any return.

On or about June 12, 2008, Red Rock announced the Entry into a Material
Definitive Agreement for a Stock for Stock Exchange, a Completion of Acquisition
and a Departure of Directors or Certain Officers; Election of Directors;
Appointment for Certain Officers; and Compensatory Arrangements of Certain
Officers. Pursuant to these agreements, Red Rock has undergone significant
changes to management and control. Consequently, the Company's ownership
decreased from 18% to 13% and the Company changed the recording of the
investment in Red Rock from the equity method to the fair value method as
defined in FAS 115. The Company determined that its investment in Red Rock
shares should be treated as an investment in securities available for sale. The
market value of each share of Red Rock as of April 30, 2008 was quoted at $0.075
and the fair value of the security was recorded as an adjustment to
comprehensive income in the amount of $882,692 during the three months ended
April 30, 2008.

Included in the accompanying balance sheet for the period ended April 30, 2008
are notes payable to Red Rock of $3,793,083. In September 2006, Red Rock entered
into a sub lease agreement with National Lampoon, Inc. for office space at
$2,000 per month. In August 2007 the Company entered into an agreement with Red
Rock whereby Red Rock agreed to pay the Company for distribution and prints and
advertising (P&A) services for certain titles released by the Company at up
to $500,000 per title. According to the terms of the agreement, Red Rock will be
reimbursed by the film, plus a 20% premium, for the funding from the release of
the titles. Also, in most cases, Red Rock negotiates additional profit
participation with the producers of each film. Pursuant to this agreement, the
Company has invoiced Red Rock a total of $617,411 for distribution and P&A
services for two titles, which is included in revenue for the nine months ended
April 30, 2008. The Company is expected to invoice Red Rock for marketing
services for two additional titles during the fourth quarter of the fiscal year
2008.

NOTE H - ISSUANCE OF COMMON STOCK

During the nine months ended April 30, 2008, 61,016 shares of restricted stock
were issued at market prices ranging from $1.90 to $2.52 with a total value of
$144,590 to various consultants of the Company for services rendered. In
addition, 171,856 shares of registered stock were issued at market prices
ranging from $1.52 to $2.55 with a total value of $361,609 to various
consultants and employees of the Company for services rendered. Furthermore,
4,171 shares of registered stock were issued at a market price of $2.15,
having a total value of $8,969, for fees owed to the Board of Directors.

During the nine months ended April 30, 2008, 5,000 shares of restricted stock
were issued upon the exercise of options at an exercise price of $1.60 resulting
in proceeds of $8,000. In addition, 18,835 shares of restricted stock were
issued upon the exercise of 18,835 warrants attached to the Series C Convertible
Preferred Stock at an exercise price of $1.775 resulting in proceeds of $33,434.
Furthermore, 99,999 shares of restricted stock were issued upon the conversion
of 1,775 Series B Convertible Preferred Stock and 32,563 shares of restricted
stock were issued upon the conversion of the related accrued dividends of
$58,612 at a market price of $1.80.

During the nine months ended April 30, 2008, 750 restricted shares were issued
at a market price of $1.90 with a total value of $1,425, and 5,000 restricted
shares were issued at a market price of $2.00 with a total value of $10,000 for
the purchase of intangible assets.

NOTE
I - COMMITMENTS AND CONTINGENCIES

Film Financing Commitments

As of April 30, 2008, the Company had obtained $3,793,083 of funding under
finance agreements with Red Rock for its motion picture projects, National
Lampoon's Bag Boyand National Lampoon's Ratko: the Dictator's Son.
The terms of the financing provide for the investor to recoup its contribution
plus interest from the first proceeds of these films. After all costs are
recouped by the Company, the investor is entitled to 25% of the net profits
paid to the Company, but the investor does not have any ownership rights in the
film (See Note E).



14




The Company has also entered into various distribution agreements for the
marketing and distribution of certain films listed below. The Company will
receive varying distribution fees ranging from 20% to 25% relating to the
exploitation and distribution of these films. These films will require the
Company to contribute certain production and print and advertising costs for the
completion and distribution of these films as follows:



Funding CommitmentsPrints & Advertising

TotalFilm

Production

Lower

Upper

Lower

UpperHomo Erectus

$
90,000

$
200,000

$
400,000

$
290,000

$
490,000Beach Party at the Threshold of Hell


50,000


300,000


500,000


350,000


550,000Electric Apricot - The Quest for Festaroo


-


300,000


300,000


300,000


300,000One, Two, Many


105,000


300,000


300,000


405,000


405,000$
245,000

$
1,100,000

$
1,500,000

$
1,345,000

$
1,745,000




Litigation

On or about April 10, 2008, Raleigh Studios, through its attorneys, filed a
Complaint styled, RP Holdings, Inc. v. National Lampoon Clubhouse, Inc. et
al, CA No SCO97777, in the Superior Court of Los Angeles County, California,
alleging that National Lampoon breached a contract known as the Raleigh Studios
License Agreement ("Master Agreement"), as well as certain additional claims at
common law and by statute ("Law Suit"). On the 4th day of June, 2008, a
Settlement Agreement and Release ("Agreement") was entered into between RP
Holdings, Inc. dba Raleigh Studios, ("Raleigh"), and National Lampoon Clubhouse,
Inc. and National Lampoon, Inc., (collectively "National Lampoon"). The
plaintiffs agreed to dismiss the complaint against the Company in exchange for a
payment of $15,000 to be made in four installments starting from the date of
full execution of the settlement agreement. The Company's first installment of
the payment was made June 6, 2008.

On or about March 11, 2008, Brightcove, Inc., through its attorneys, filed a
Complaint styled, Brightcove Inc. v. National Lampoon, Inc., CA No
MICV2008-1006 TRIAL COURT CIVIL ACTION 08-1006, in the Superior Court of
Middlesex County, Massachusetts, alleging that National Lampoon breached a
contract between Brightcove and National Lampoon, as well as certain intentional
tort claims at common law and by statute (the "Lawsuit"). On the 23rd
day of May, 2008, a Settlement Agreement and Release ("Agreement") between
Brightcove Inc. ("Brightcove") and National Lampoon, Inc. ("National Lampoon")
was entered into. The plaintiffs agreed to dismiss the complaint against the
Company in exchange for a payment of $84,122 to be made in six installments
starting from the date of full execution of the settlement agreement. The
Company's first installment of the payment was made on May 23, 2008.

National Lampoon, Inc. v. Alma Investments (d/b/a Bahia Mar Hotel) (Los Angeles
Superior Court Case No. BC 356118). The Company filed this complaint on July 27,
2006. The action arose from an agreement the Company had with Bahia Mar Hotel
pursuant to which we were to provide to Bahia Mar Hotel an entertainment package
for the 2006 spring break. We alleged that Bahia Mar Hotel failed to support the
program, and, in fact, diverted some of the business to our competitors. In our
complaint, we alleged causes of action for fraud, breach of contract, promissory
estoppel, quantum meruit and breach of the covenant of good faith and fair
dealing. On February 4, 2008, the Company entered into a settlement agreement
with Alma Investments. The Company agreed to dismiss the complaint against Alma
Investments in exchange for a payment of $110,000 to be made upon execution of
the settlement agreement. The settlement amount was recognized as Tours revenue
and applied entirely towards approximately $143,000 in legal fees directly
related to the case and the remaining balance was written off by our attorneys.

Cinergy Creative, Inc. and Leslie Allen v. National Lampoon Clubhouse, Inc.,
National Lampoon, Inc., Majestic Entertainment, Inc. and Lorenzo Doumani (Los
Angeles Superior Court Case No. SC091496). This complaint was filed on October
20, 2006. The plaintiffs allege causes of action for alter ego, breach of
written contract, breach of oral contract, breach of the implied covenant of
good faith and fair dealing, quantum meruit, fraud and deceit based on promises
made without intention to perform, intentional misrepresentation, slander per
se, libel per se, breach of confidence, declaratory relief, conversion, untrue
or misleading advertising, unfair competition and negligence. Specifically, the
plaintiffs allege that we and our co-defendants induced them to set aside other
projects so that they would spend their time working on projects for the benefit
of us and our co-defendants. The plaintiffs also allege that they were promised
a share of profits from the projects and/or a "partnership" interest in them.
The plaintiffs allege that their damages are in excess of $2,000,000. The
Company entered into a settlement agreement with the plaintiffs dated November
5, 2007. The plaintiffs agreed to dismiss the complaint against the Company in
exchange for a payment of $50,000 to be made within 90 days from the execution
of the settlement agreement. The Company's portion of the payment was made
during February 2008. The remaining defendants have reached settlements as well.

15




Screen Actor's Guild v. National Lampoon Clubhouse, Inc. During late 2006, the
Screen Actor's Guild ("SAG") filed claims against National Lampoon Clubhouse,
Inc. ("Clubhouse") for unpaid wages and pension, health and welfare benefits
incurred for the filming of "Monster House" aka "Trick or Treat". SAG alleges
that certain actors were not paid in full and are owed more compensation,
expenses and benefit payments under the SAG agreement. Clubhouse disputes these
claims and intends to vigorously defend this action. Due to recent changes
within SAG the arbitration with SAG is being rescheduled to take place on a date
to be determined some time during the fourth quarter of fiscal 2008 or first
quarter of fiscal 2009.

American Cinema Distribution Corporation v. National Lampoon, Inc. In August
2007, the American Cinema Distribution Corporation ("ACDC") filed claims against
National Lampoon, Inc. for costs incurred on the release of "National Lampoon's
Pucked". ACDC alleges that the Company did not perform distribution services as
agreed and that ACDC should be reimbursed for distribution costs it incurred
estimated at $65,000. ACDC also alleges that it does not owe distribution fees
to the Company for marketing, publicity, promotional and advertising services
the Company provided which services the Company alleges have a value in excess
of $290,000. The Company disputes these claims and has filed a demand for
arbitration against ACDC as the agreement calls for and intends to vigorously
defend this action.



NOTE J - STOCK OPTIONS AND WARRANTS

On January 30, 2002, the Company adopted the Amended and Restated 1999 Stock
Option, Deferred Stock and Restricted Stock Plan (the "1999 Plan"), which was
thereafter approved by the Company's shareholders at its annual meeting on April
25, 2002. The options may be granted from time to time by the Compensation
Committee. Individuals eligible to receive options include employees of the
Company, consultants to the Company and directors of the Company. The
options must have a fixed price, which may not be less than 100% of
the fair market value per share on the grant date. The total number
of shares of common stock reserved for awards is 6,500,000.

At April 30, 2008 options outstanding are as follows:

Weightedaverage

AggregateNumber of

exercise

intrinsicoptions

price

value (1)Balance at August 1, 2007


5,369,606

$
2.55Granted


1,063,389


2.16Exercised


(5,000
)

1.60Forfeited


(710,000
)

2.73Expired


(67,000
)

3.68Balance at April 30, 2008


5,650,995

$
2.45

$
323,906




(1) The aggregate intrinsic value was calculated as the difference between the
market price and the exercise price of the Company's stock for the 2,051,606
options outstanding, which were in-the-money.

Additional information regarding options outstanding as of April 30, 2008 is as
follows:



Options outstanding

Options exercisableWeightedaverageremaining

Weighted



WeightedNumber

contractual

average

Number

averageExercise price

outstanding

life (years)

exercise price

exercisable

exercise price$1 to $2


2,201,606


3.73

$
1.75


2,101,606

$
1.75$2 to $3


2,119,389


6.14


2.26


1,218,391


2.29$3 to $4


998,000


2.36


3.26


978,000


3.26$4 to $5


132,000


4.36


4.13


98,667


4.12$5 to $6


-


-


-


-


-$6 to $7


100,000


2.82


6.41


100,000


6.41$7 to $8


100,000


1.66


7.38


100,000


7.38Total


5,650,995


4.35

$
2.45


4,596,664

$
2.49




16




At April 30, 2008 warrants outstanding are as follows:

Weighted

Aggregateaverage

intrinsicNumber of

exercise

valuewarrants

price

(1)Balance at August 1, 2007


1,286,731

$
3.59Granted


40,000


1.75Cancelled


(619,004
)

4.00Balance at April 30, 2008


707,727

$
3.13

$
6,000




(1) The aggregate intrinsic value was calculated as the difference between the
market price and the exercise price of the Company's stock for the 40,000
warrants outstanding which were in-the-money.

Additional information regarding warrants outstanding as of April 30, 2008 is as
follows:

Warrants outstanding

Warrants exercisableWeightedaverageremaining

Weighted



WeightedNumber

contractual

average

Number

averageExercise price

outstanding

life (years)

exercise price

exercisable

exercise price$1 to $2


40,000


1.39

$
1.75


30,000

$
1.75$2 to $3


155,000


8.32


2.59


155,000


2.59$3 to $4


512,727


1.85


3.40


446,060


3.46Total


707,727


3.24

$
3.13


631,060

$
3.16




Stock based compensation expense related to the vesting of stock
options and warrants of $984,046 and $444,759 was recognized during
the nine months ended April 30, 2008 and 2007, respectively. As of April 30,
2008, the unamortized value of these option awards and warrants was $955,422,
which will be amortized as stock based compensation cost over the average of
approximately three years as the options and warrants vest.

NOTE K - SEGMENT INFORMATION

Segment Reporting - SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information" results in the use of a management approach in
identifying segments of an enterprise. The Company operates in five business
segments: (i) licensing and exploitation of the National LampoonTM
trademark and related properties including the sale of products to consumers;
(ii) advertising and promotion through field marketing, live events and the
distribution of television programming on college campuses; (iii) production of
DVD and television products; (iv) travel services; and (v) distribution. Segment
operating income/(loss) excludes the amortization of intangible assets, interest
expense, interest income, other income and expenses and income taxes.
Selling, general and administrative expenses not specifically attributable to
any segment have been prorated based on revenue among the five segments.



17




Summarized financial information for the three and nine
months ended April 30, 2008 and 2007 concerning the Company's segments is as
follows:

Licensing

Advertising&

&



TravelPublishing

Promotion

Production

Services

Distribution(1)

(2)

(3)

(4)

(5)

TotalThree Months Ended April 30, 2008Segment revenue
$
1,662,311

$
553,019

$
265,828

$
-

$
154,772

$
2,635,930Segment operating (loss)
$
(10,964)

$
287,329

$
(4,892
)
$
-

$
(82,408)

$
189,065Depreciation expense
$
3,227

$
1,341

$
-

$
-

$
-

$
4,568Three Months Ended April 30, 2007Segment revenue
$
494,528

$
319,389

$
-

$
-

$
-

$
813,917Segment operating (loss)
$
(298,025
)
$
(755,532
)
$
(43,369
)
$
-

$
-

$
(1,096,926
)Depreciation expense
$
1,923

$
1,240

$
-

$
-

$
-

$
3,163Nine months Ended April 30, 2008Segment revenue
$
2,251,877

$
1,159,195

$
265,828

$
110,000

$
159,831

$
3,946,731Segment operating (loss)
$
(921,130)

$
(813,703
)
$
(24,460
)
$
(215,556
)
$
(106,821
)
$
(2,081,670
)Depreciation expense
$
10,056

$
3,108

$
-

$
-

$
-

$
13,164Nine months Ended April 30, 2007Segment revenue
$
4,086,367

$
1,800,211

$
44,500

$
-

$
-

$
5,931,078Segment operating income/(loss)
$
1,351,106

$
(1,900,992
)
$
(431,527
)
$
-

$
-

$
(981,413
)Depreciation expense
$
5,052

$
4,439

$
-

$
-

$
-

$
9,491




NOTE L - INCOME TAXES

As of April 30, 2008, the Company has unused net operating loss (NOL) carry
forwards totaling $32,097,000 which expire at various dates from 2008 to 2028.
These NOL's and other timing differences comprise the Company's deferred tax
assets. A valuation allowance has been recorded for the total deferred tax
assets as a result of uncertainties regarding realization of the asset based
upon the lack of profitability and the uncertainty of future profitability.

The tax effects of significant temporary differences representing deferred tax
assets are as follows:

April 30, 2008Deferred tax assets:Accrued Royalties

$
21,000Accrued Interest


191,000Accrued Expenses


54,000Net Operating losses


12,839,000Total Deferred Tax Asset


13,105,000Valuation Allowance


(13,105,000
)Net deferred tax asset

$
-




18




A reconciliation between the statutory federal tax rate and the Company's
effective tax rate is as follows:

Three months ended April 30,

Nine months ended April 30,2008

2007

2008

2007Expected Federal and State Income Tax Rate

36.0%

(36.0%)

(36.0%)

(36.0%)Increase (Decrease) in Valuation Analysis

(36.0%)

36.0%

36.0%

36.0%Effective Tax Rate

0.0%

0.0%

0.0%

0.0%




NOTE M - SUBSEQUENT EVENTS

Subsequent to April 30, 2008, we issued 29,039 shares of registered stock
at market prices ranging from $1.84 to $2.00 with a total value of $54,121 to
various consultants of the Company for services rendered.

In addition, 14,000 shares of restricted stock were issued upon the conversion
of 700 Series C Convertible Preferred Stock and 4,673 shares of restricted stock
were issued upon the payment of the related accrued dividends of $7,945 at a
market price of $1.70.

On February 27, 2008 we received a letter from the American Stock Exchange which
indicated that we do not meet certain of the American Stock Exchange's continued
listing standards as set forth in Part 10 of the Amex Company Guide.
Specifically, we are not in compliance with Section 1003(a)(iv) of the Company
Guide because we have sustained losses which are substantial in relation to our
overall operations or our existing financial resources, or our financial
condition has become so impaired that it appears questionable, in the opinion of
the American Stock Exchange, as to whether we will be able to continue our
operations and/or meet our obligations as they mature.

19




Item 2 -
Management's Discussion and Analysis or Plan of Operation

Management's Discussion and Analysis or Plan of Operation discusses the
Company's consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management evaluates its
estimates and judgments. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Overview

We are a media and entertainment company that creates and distributes comedic
content. The National LampoonTM brand was initially developed in 1970
through publication of National Lampoon Magazineand later through the use of our name on motion pictures, including
National Lampoon's Animal Houseand National Lampoon's Vacation.
Our plan is to expand the use of our brand in order to increase the revenues we
generate through license fees, advertising and other sources. We are pursuing
this plan as follows:

Motion Picture Production and Distribution

We produce feature films. Historically, motion pictures that carry our brand had
been produced and financed by third parties. Thirty four motion pictures have
been released using the National LampoonTM name.

We decided to produce and finance motion pictures under the National Lampoon
name in order to control both the creative process and the distribution of the
film, to build a film library, and to expand our brand awareness.

Approximately seven motion pictures are planned for release during the 2008
fiscal year, all of which will be distributed by the Company. Additionally, two
of the films were financed and produced directly by us. We expect to produce two
to four additional titles per year.

We are now delivering on a feature film currently titled National Lampoon's
Bag Boywhich was financed by National Lampoon and Red Rock and was released
during the third quarter of the fiscal year. We are in post production on the
film National Lampoon's Ratko: the Dictator's Sonwhich is expected to be
released during the fourth quarter of the 2008 fiscal year or the first quarter
of the 2009 fiscal year.

We have also acquired distribution rights for five films produced by unrelated
third parties including National Lampoon's Jake's Booty Call, National
Lampoon's Homo Erectus, National Lampoon Presents Beach Party at the
Threshold of Hell, National Lampoon Presents Electric Apricotand
National Lampoon Presents One, Two Many. We earn distribution revenues
for all revenue generated from these films, including home video sales and
rental, foreign sales, television, and digital distribution. All of the titles
are expected to be released during the 2008 fiscal year.

We have an interest in National Lampoon Clubhouse, Inc., a production entity,
which produced the film Monster Nightaka Trick or Treat.
Monster Nightwas released in the fall of 2006. We also own 13% of Red
Rock Picture Holdings, Inc. (sometimes referred to in this report as "Red
Rock"), a development-stage company formed in August 2006. Red Rock was formed
for the purpose of providing financing and consulting services relating to the
production and exploitation of motion pictures. We entered into a non-exclusive
agreement with Red Rock whereby it provides financing for National Lampoon
motion picture productions.

During the three and nine months ended
April 30, 2008, revenues derived from distribution fees totaled approximately
$154,772 and $159,831, or 6% and 4%, of all the revenues we earned during these
periods respectively.

We no longer offer production services on third-party films. We may receive
producer fees on our own productions. For the three and nine months ended April
30, 2008, production revenues from production services were $265,828 for the
production of a live show and the subsequent production and delivery of a video
of the show to a distributor.

Licensing

We have derived a substantial portion of our revenues from license fees relating
to the use of our name on new motion pictures and from royalties from previously
released motion pictures bearing our brand, including movies such as National
Lampoon's Animal Houseand National Lampoon's Vacation. Releasing a
film with our brand enhances its ability to find distribution outlets. Once a
film is released with our brand, we earn revenues from foreign sales, theatrical
release, home video and DVD sales and rentals and pay-per-view.

20




With the exception of two films that we produced, and a film produced by
National Lampoon Clubhouse, Inc., motion pictures that carry our brand have
historically been produced and financed by third parties. We have licensed the
National LampoonTM brand, as well as content from our library, for use in a
wide variety of products including movies, television programming, live events,
radio broadcasts, recordings, electronic games, and other consumer products. We
anticipate granting fewer new licenses as we begin increasing the number of our
own productions in the future.

We have also acquired distribution rights for five third-party films including
National Lampoon's Jake's Booty Call, National Lampoon's Homo
Erectus, National Lampoon Presents Beach Party at the Threshold of Hell,
National Lampoon Presents Electric Apricotand National Lampoon Presents
One, Two Many. We earn licensing fees for television, video and foreign
distribution. All of the titles were released during the fiscal year 2008.

For the three and nine months ended April 30, 2008, revenues derived from our
licensing and royalties (exclusive of revenues derived from our publishing
activities) totaled approximately $1,717,552 and $2,272,968 or approximately 65%
and 58% of the revenues we earned during the periods, respectively. A
significant portion of this revenue was realized from foreign and television
distribution licenses of recent National Lampoon films.

Additionally, we have completed an audit of the records of Warner Bros.
Entertainment, Inc. relating to its exploitation of the films National
Lampoon's Vacation, National Lampoon's European Vacation and
National Lampoon's Christmas Vacation. We have submitted the audit
reports to Warner Bros. and will begin negotiations immediately. Based on the
audit reports we expect a favorable outcome from the negotiations.

National Lampoon Networks

National Lampoon Networks, Inc. (sometimes referred to in this report as "NLN")
includes our Internet, television and field marketing activities. We believe
that we provide an appealing platform to advertisers who want their commercial
messages to reach the college age market.

For those businesses targeting the college market, NLN provides an integrated
marketing platform that includes Internet advertisers, on-air advertising, and
field marketing.

NLN's Internet properties are comprised of several Internet destination sites.
These include NationalLampoon.com, DrunkUniversity.com, TOGATV.com,
NationalLampoonSplog.com and KnuckleheadVideo.com. We have acquired other
websites and we continue making such acquisitions on a regular basis. We
have focused substantial resources toward launching these websites, and we
plan to continue doing so on an ongoing basis.  These destination sites are
also part of National Lampoon's online networks, which include the National
Lampoon Humor Network and the Drunk University Network.  These are
aggregated online networks of more than fifty of the most popular humor and
college lifestyle destination sites on the Internet.

We actively sell advertising space on these sites and networks in the form of
video streamed advertisements, full-page takeover advertisements, and banner
advertisements.  We also are actively engaged in creating "branded
entertainment" as well as custom promotional content production and
distribution.



We recently announced the launch of the National Lampoon Video Network where we
entered into content distribution agreements and launched branded channels with
several Internet video portals including Joost, Veoh, Yahoo!, YouTube and
others. These partners sell advertising space, including video streaming, and we
receive a portion of the revenues earned. During the three and nine months ended
April 30, 2008, we earned $4,439 and $11,683, or less than 1% of the revenues we
earned during the periods from these partners.

NLN's television activities include delivering programming during the standard
academic school year to more than 200 affiliated college and other television
stations, reaching nearly two million college students in their dormitories and
other places of residence.

Aside from providing an outlet for advertisers targeting the college market, NLN
develops, produces and distributes comedic Internet and television programming
to audiences through its network.

For the three and nine month periods ended April 30, 2008, revenues derived from
National Lampoon Networks, exclusive of licensing revenues, totaled
approximately $335,069 and $741,024 or approximately 13% and 19% of all the
revenues we earned during the periods, respectively.

21




Publishing

In October 2002, we entered into an agreement with Rugged Land, LLC to publish
six National Lampoon books over a three-year period based on new and established
National Lampoon comedic content. We have released four books under this
agreement, including 1964 High School Reunion Year Book, National
Lampoon's Book of Love, National Lampoon's Big Book of True Factsand
National Lampoon's Encyclopedia of Humor.During the 2007 fiscal year the
Company and Rugged Land agreed to terminate this agreement and no additional
books are expected to be released pursuant to it.



During the 2006 fiscal year we began
publishing our books. As of April 30, 2008, we have released 12 books including
National Lampoon's Saddam Dump [Saddam Hussein's Trial Blog], National
Lampoon's Magazine Rack, National Lampoon's Jokes Jokes Jokes,
National Lampoon's Not Fit For Print, National Lampoon's Favorite
Cartoons of the 21stCentury,
National Lampoon's Van Wilder Guide to Graduating College In Eight Years or
More, National Lampoon's Road Trip, National Lampoon's Animal House,
National Lampoon's Help!, National Lampoon's Jokes Jokes Jokes 2, National
Lampoon's Balls!and National Lampoon's Pimp it Yourself.

For the three and nine months ending April 30, 2008, revenues derived from our
publishing activities totaled approximately ($55,241) and ($21,091), or
approximately (2%) and (1)% of all the revenues we earned during the periods,
respectively. The decrease in publishing revenues was primarily attributable to
significant book returns totaling $262,924 that were recorded against publishing
revenues during the nine months ended April 30, 2008.

Radio

In March 2005, NL Radio, LLC was formed. We hold a 25% interest in this entity.
In October 2006, NL Radio, LLC launched an entertainment radio format under our
brand. We have licensed the content of our radio library, as well as certain
domain names, URLs and websites to NL Radio, LLC for this purpose. NL Radio, LLC
used samples of the programming, called "pilot programming," to introduce the
format and content to radio networks and local stations. If the programming is
sold to a network it may be syndicated, meaning that it would be distributed to
stations affiliated with the network. Purchasers of the programming may
broadcast segments of the programming at their discretion, such as during "drive
time" or as late night programming. Programming was launched on XM radio during
the fiscal year ended July 31, 2007. Our radio library includes approximately 80
hours of National Lampoon radio programming consisting primarily of one to two
minute short comedy routines and one-hour comedy sketches and parodies. Revenue
will be earned from ad sales, direct response advertising and product promotion
arrangements. We receive a licensing fee equal to 8% of the gross receipts
received by NL Radio, LLC from all sources in connection with any use of our
brand.

For the three and nine months ending April 30, 2008, revenues derived from NL
Radio totaled approximately $342 and $2,381, or less than 1% of all the revenues
we earned during the periods, respectively.

Library

Our library includes 247 issues of National Lampoon Magazine, which we
continue to use to generate new content for movies, television programming and
other licensing opportunities. Our library also consists of television
programming, including more than 300 hours of footage produced for National
Lampoon Networks, radio programming, recordings and other materials.

22




Business Objective

We intend to provide National LampoonTM comedic content to as many
consumers as possible by expanding the use of our brand. The following describes
the ways in which we plan to achieve this goal.

•
We plan to continue to expand National Lampoon Networks (the Network) by
launching additional niche online networks and by growing our existing networks
by adding new affiliate Internet sites as well as acquiring Internet sites and
driving traffic to these sites. We have over 40 affiliates and have acquired or
launched 56 websites to date. We will concentrate our efforts on measured
marketing and sell available advertising and marketing space on our expanding
Network. We will continue to create, produce and acquire programming for all of
our web sites as well as our college television network and capitalize on our
expertise in the college and young adult market to continue to grow revenue in
these areas.




•
We intend to expand our film library by increasing the number of film products
we produce internally. We currently have one film in post production and one
film completed and are actively developing several new projects and have
finalized domestic and international distribution arrangements. The domestic
distribution arrangement includes a number of home video distributors and
retailers and a domestic cable provider. In some cases we are guaranteed a
minimum payment upon delivery of the film to the respective broadcaster or
distributor.




•
We plan to capitalize on our reputation and relationships with independent
studios and other multimedia companies to expand the use of the National
LampoonTM brand.




•
We plan to create new licensing opportunities in markets outside of publishing,
film and television, such as games, records, radio programming and live events.




•
National Lampoon Networks continues to maintain a presence at third-party events
and provide field marketing campaigns for various advertisers. However, we no
longer produce our own events.




•
We began publishing and distributing books we created to continue capitalizing
on the National Lampoon brand. During the 2007 fiscal year we published eight
books and during the nine months ended April 30, 2008 we published four more
books, however, going forward we plan to release only two books per year.




•
During the 2007 fiscal year, NL Radio, LLC launched an entertainment radio
format using our brand with a 24 hour/7 day-a-week channel on XM Satellite
Radio. We own a 25% interest in NL Radio, LLC.




Critical Accounting Policies



Management believes the following critical accounting policies, among others,
affect its more significant judgments and estimates used in the preparation of
our condensed consolidated financial statements.



Revenue Recognition.Royalty income from film contracts is derived
from the sale of DVDs or from the licensing of film rights to third parties.
Because a significant portion of royalty income is based on the timetable
associated with royalty statements generated by third party processors, we do
not typically know on a timely basis when royalties may be paid or the amount of
payment. This revenue is consequently not recognized until the amount is either
known or reasonably estimable or until receipt of the statements from the third
parties. We contract with various agencies to facilitate collection of royalty
income. When we are entitled to royalties based on gross receipts, revenue is
recognized before deduction of agency fees, which are included as a component of
cost of revenue.



We recognize revenue from television and film productions pursuant to American
Institute of Certified Public Accountants Statement of Position 00-2,
"Accounting by Producers or Distributors of Films" ("SOP 00-2"). The following
conditions must be met in order to recognize revenue under SOP 00-2:
(i) persuasive evidence of a sale or licensing arrangement exists;
(ii) the program is complete and has been delivered or is available for
immediate and unconditional delivery; (iii) the license period of the
arrangement has begun and the customer can begin its exploitation, exhibition or
sale; (iv) the arrangement fee is fixed or determinable; and
(v) collection of the arrangement fee is reasonably assured. Advance
payments received from buyers or licensees are included in the financial
statements as a component of deferred revenue.



23




Film Costs.Investment in film costs includes the
capitalization of costs incurred to produce the film content including direct
negative costs, production overhead, interest and development. These costs are
recognized as operating expenses on an individual film basis in the ratio that
the current year's gross revenues bear to management's estimate of total
ultimate gross revenues from all sources to be earned over a seven year period.
Capitalized production costs are stated at the lower of unamortized cost or
estimated fair value on an individual film basis. Revenue forecasts, based
primarily on historical sales statistics, are continually reviewed by management
and revised when warranted by changing conditions. When estimates of total
revenues and other events or changes in circumstances indicate that a film has a
fair value that is less than its unamortized cost, an impairment loss is
recognized in the current period for the amount by which the unamortized cost
exceeds the film's fair value.

Investments.The Company accounts for its investments in
equity securities under SFAS 115, "Accounting for Certain Investments in Debt
and Equity Securities." The Company has classified its investments as available
for sale securities, and such securities are carried at fair value. The fair
values for marketable equity securities are based on quoted market prices.
Unrealized gains or losses, net of tax, are included as a component of
accumulated other comprehensive income in stockholders' equity. Realized gains
and losses and declines in value considered to be other than temporary on
available for sale securities are included in other income (loss).

Reorganization Transaction

In the discussion below, we sometimes refer to the "Reorganization Transaction".
The Reorganization Transaction occurred on May 17, 2002, when a group of
investors that we refer to as "the NLAG Group" completed the acquisition of our
Series B Convertible Preferred Stock and warrants to purchase our common stock,
thereby gaining voting control of our company.

Results of Operations

We operate in five business segments, namely,

•
licensing and exploitation of the National LampoonTM trademark and related
properties including the sale of products to consumers;




•
advertising and promotion on our Internet websites, field marketing, live events
and the distribution of television programming on college campuses;




•
travel services;




•
production of motion pictures, television and DVD products;




•
distribution of motion pictures, television and DVD products;




Three months ended April 30, 2008 as compared to the three months ended April
30, 2007

Licensing and Publishing Revenues

Licensing and publishing revenues for the three months ended April 30, 2008 were
$1,662,311 compared to $494,528 for the three months ended April 30, 2007,
representing an increase of $1,167,783 or approximately 236%. The increase in
licensing revenues was primarily due to the recognition of $750,000 earned from
licensing the television rights of one of our titles and $690,411 earned from
domestic and international distributions rights of our movies. The increase was
partially offset by a decrease of $220,033 in publishing revenues net of returns
to ($55,241) during the three months ended April 30, 2008 from $164,792 during
the three months ending April 30, 2007.

Costs related to licensing revenues were $41,243 during the three months ended
April 30, 2008 compared to $14,360 for the three months ended April 30, 2007.
This represents an increase of $26,883 or approximately 187%. The increase was
primarily due to increased royalties of $49,234 due to the Harvard Lampoon, Inc.
whose royalties are computed on a percentage of revenues less related cost of
goods sold. In addition, $8,757 was paid to Red Rock Pictures Holdings Inc.
during the three months ended April 30, 2008 for its participation share from
prints and advertising (P&A) funding for our various titles. The increase in
licensing costs was partially offset by the reversal of $34,122 of participation
costs accrued during a prior period. The accrual was based on a receivable that
was deemed uncollectible therefore the royalty was no longer payable. Costs
related to publishing revenues were $76,080 during the three months ended April
30, 2008 compared to $0 during the three months ended April 30, 2007. The
increase in costs related to publishing was due to the amortization of
capitalized costs for books that have been released during the three months
ended April 30, 2008, whereas the publishing costs were allocated to advertising
and promotion revenues during the three months ended April 30, 2007.

24




There was an increase of $1,166,103 in amortization of capitalized production
costs to $1,208,416 for the three months ended April 30, 2008 compared to
$42,313 for the three month period ended April 30, 2007. Amortization for
current productions begins upon theatrical and/or home video release. The
increase was primarily due to the amortization of capitalized film production
costs of $979,767 due to recognition of domestic and international licensing
revenue from the release of National Lampoon's Bagboy and $136,672 due to
revenue recognition for domestic and international licensing of four other film
titles.  In addition, we had $91,977 in amortization of production costs for
producing a video of a live show that was completed during the quarter ended
April 30, 2008.

Advertising and Promotion Revenues

During the three months ended April 30, 2008, advertising and promotion revenues
were $553,019 compared to $319,389 for the three months ended April 30, 2007.
This represents an increase of $233,630 or 73%.The increase was primarily due to
an increase of $218,911 of revenues earned from Red Rock Pictures Inc. for
P&A services related to our movies.  The increase was also due to an
increase of $200,000 in Internet advertising revenue earned during the three
months ended April 30, 2008 from Red Rock Productions, Inc. The increase was
offset by a decrease of $90,000 in revenues from Spring Break sponsorship to $0
for the three months ended April 30, 2008 from $90,000 during the three months
ended April 30, 2007, as well as a decrease of $53,094 in advertising on
affiliate websites through the Humor Network to $125,294 for the three months
ended April 30, 2008 from $178,388 for the three months ended April 30, 2007,
due to decreased sales staff. However during the quarter ended April 30, 2008,
we hired new sales staff and we expect that advertising through the Humor
Network and affiliates should increase during the fourth quarter of the 2008
fiscal year. The increase was further offset by a decrease of $51,000 in product
placement revenue to $0 during the three months ended April 30, 2008.

Costs of advertising and promotion revenue were $68,893
during the three months ended April 30, 2008 compared to $572,329 for the three
months ended April 30, 2007, representing a decrease of $503,436 or 87%. The
decrease in costs of advertising and promotion resulted partially from a
decrease to $0 in costs of live events at Spring Break during the three months
ended April 30, 2008, from $61,872 during the three months ended April 30, 2007.
Although we produced fewer live events, we continue to provide sponsorship
opportunities at live events organized by third parties. The decrease was also
due to a decrease of $9,567 in website development to $20,894 during the three
months ended April 30, 2008 from $30,461 during the three months ended April 30,
2007, as well as a decrease of $56,687 in computer expenses to $(18,432) during
the three months ended April 30, 2008 from $38,255 during the three months ended
April 30, 2007. The decrease in computer expenses resulted from the allocation
of computer consulting expenses in the amount of $58,800 to intangible assets
for websites during the three months ended April 30, 2008, which will be
amortized over 25 years. Costs associated with our Internet operations also
decreased by $16,092 to $18,983 during the three months ended April 30, 2008
from $35,075 during the three months ended April 30, 2007 due to reduced
Internet service fees as we improve our Internet capabilities, and royalties
paid to affiliate websites under the Humor Network decreased by $65,007 to
$49,266 during the three months ended April 30, 2008 from $114,273 during the
three months ended April 30, 2007 due to a reduction in salespeople. The
decrease was also attributable to a decrease of $57,088 in the amortization of
production costs for web shows to $0 during the three months ended April 30,
2008. The decrease in costs related to advertising and promotion revenues was
further reduced as a result of the allocation of $18,610 in publishing costs,
$52,496 in amortization of publishing costs and $87,296 in amortization of
capitalized film costs allocated to the cost of advertising and promotion during
the three months ended April 30, 2007, whereas those cost were allocated to
costs of publishing revenues during the three months ended April 30, 2008.

We continue to expand and improve our digital distribution and entertainment
capabilities which we expect to result in increased revenue from our network and
affiliate network of Internet websites. We intend to hire additional sales
representatives to increase our Internet advertising revenues. Going forward, we
expect to focus our resources on increasing revenues generated from our Internet
websites and from product placement. While we intend to continue providing field
promotion services at events held by third parties, we no longer produce field
promotion events.

Costs related to advertising revenues include bandwidth usage fees, website
development costs, and content conversion costs along with amortization of
capitalized television production costs. We incur costs related to promotion
revenues based on direct costs of live events and promotion of third-party
feature films, which are expensed as they are incurred.

Travel Services

We earned no revenue from this segment of our business during the three months
ended April 30, 2008 and 2007. The Company has discontinued travel services and
no further revenues are expected to be earned.

25




Production and Distribution Revenues

We no longer offer production services on third-party films. We may receive
producer fees on our own productions. We produce our own films for which we have
a presale, minimum guarantee or co-production agreement in place, which reduces
our risk as productions tend to be capital intensive. However, we are expanding
our productions and we have negotiated an output arrangement with a domestic
cable provider which guarantees us a cable distribution outlet for our new
product along with a minimum return on each new motion picture release. The
output arrangement provides for a pre-negotiated minimum guarantee or sales
price for the licensing of a specific media and territory. We have also
negotiated home video distribution with a number of domestic retailers and
distributors and have licensed international rights in several territories with
minimum guarantees. For the video distribution, there is no minimum price
guarantee but the arrangement provides us with a video distribution outlet for
our new product. In addition, we have an agreement with Red Rock to provide
production financing. As these output and financing arrangements are signed, we
will allocate additional internal resources to this segment of our business. For
the three months ended April 30, 2008, production revenues from production
services increased due to the production of a live show and the subsequent
production and delivery of a video of the show to a distributor.

For the three months ended April 30, 2008, we earned
$265,828 in production revenues as compared to $0 for the three months ended
April 30, 2007. The increase in production revenues primarily resulted from
production services of $250,000 from Capazoo World Corporation for a video of a
live show, as well as $13,900 in revenues from Mania TV and Lemmings. During the
three months ended April 30, 2008, revenues derived from distribution fees
totaled approximately $154,772 compared to $0 for the three months ended April
30, 2007. The increase was primarily due to the release of five titles through
home video distributors including $87,600 from Blockbuster, $46,750 from
Spectacle Group and $6,521 from Rentrak.

Costs related to production revenue during the three months ended April 30, 2008
increased $20,844 to $21,900 from $1,056, or 1,973% for the three months ended
April 30, 2007. The increase was primarily due to movie delivery fees of $7,500
and $6,305 in production costs incurred during the three months ended April 30,
2008. In addition, there was an increase of $8,063 of video tape delivery
expenses for the College Network during the three months ended April 30, 2008 as
compared to the three months ended April 30, 2007. Costs related to distribution
revenue during the three months ended April 30, 2008 increased $92,311 from $0
during the three months ended April 30, 2007. The increase was primarily due to
$61,072 in residuals accrued, shipping costs to Blockbuster of $16,500 and
$14,739 in delivery materials which were recorded during the three months ended
April 30, 2008.

Other Costs and Expenses

Amortization of intangible assets, which consists of the costs of acquisition
and protection of the "National LampoonTM trademark, was $60,449 during the
three months ended April 30, 2008. Amortization of intangible assets was $60,197
during the three months ended April 30, 2007.

Amortization of intangible assets, which consists of the costs of our
acquisition and protection of websites and domain names, was $1,188 during the
three months ended April 30, 2008 and $0 during the three months ended April 30,
2007.

Stock issued for services decreased $186,292, or 70%, to $79,898 during the
three months ended April 30, 2008, from $266,189, for the three months ended
April 30, 2007. The decrease is primarily due to a reduced number of shares of
common stock issued to consultants hired for investor relations and Internet
services.  Compensation expense associated with the vesting of stock, warrants
and options decreased by $79,194, or 58%, to $57,056 during the three months
ended April 30, 2008, from $136,250 during the three months ended April 30,
2007. The decrease in compensation cost associated with the vesting of stock,
warrants and options was primarily due to a decrease in compensation to
consultants paid with options and warrants.

There was no provision for doubtful accounts for the three months ended April
30, 2008 compared to a $78,000 bad debt write off for the three months ended
April 30, 2007. The provision for the three months ended April 30, 2007, is
primarily attributable to accounts we deemed to be uncollectible.

Other selling, general and administrative costs decreased $155,278, or 16%, to
$801,068 during the three months ended April 30, 2008 from $956,346 for the
three months ended April 30, 2007. The decrease in selling, general and
administrative costs resulted from a decrease in payroll and related payroll
taxes of $363,220 due to a reduction in our employee count, a decrease in office
expense of $5,571, a decrease in employee health benefits of $4,986 and a
decrease of $63,828 in legal expenses. The decrease in selling, general and
administrative costs was offset by an increase in rent expense of $17,124, an
increase in international sales expenses of $68,173, and an increase in
marketing expense of $7,196 and accounting and public company expenses of
$72,726.

The Company incurred other expenses of $645 during the three months ended April
30, 2008 compared to other income of $4,515 for the three months ended April 30,
2007.

26




For the three months ended April 30, 2008, we had a net income of $97,744,
compared to a net loss of $1,161,315 for the three months ended April 30, 2007.
This represents an increase in net income of $1,259,059 for the three months
ended April 30, 2008. The increase to net income for the three months ended
April 30, 2008 resulted primarily from an increase of $1,542,588 in licensing
and distribution revenues from the release of National Lampoon's Bagboy
and four other titles, as well as an increase in production revenues of $265,828
and advertising and promotion revenues of $233,630, offset by a decrease in
publishing revenues of $220,033. The increase in net income was also due to a
decrease of $503,436 in advertising and promotion costs and a decrease of
$342,763 in selling, general and administrative costs. The increase in net
income was partially offset by an increase in the amortization of production
costs due to the release of National Lampoon's Bagboy and four other
titles of $1,166,103 as well as an increase in publishing costs of $76,080.  The
increase in net income was further offset by an increase of $19,287 in interest
expense to $29,039 during the three months ended April 30, 2008, from $9,752
during the three months ended April 30, 2007, which was primarily due to an
increase in production loans from related parties.

During the three months ended April 30, 2008 and 2007, we had no provision for
income taxes due to the significant net operating losses incurred in prior
periods and carried forward into the current period. We also accrued dividends
for preferred shareholders of $292,356 during the three months ended April 30,
2008 and $289,817 during the same period in 2007. The addition of the accrued
dividends resulted in a net loss attributable to common shareholders of $194,612
or $0.02 per basic and fully diluted share for the three months ended April 30,
2008, compared to net loss attributable to common shareholders of $1,451,132 or
$0.18 per basic and fully diluted share for the three months ended April 30,
2007.

Nine months ended April 30, 2008 as compared to the nine months ended April
30, 2007

Licensing and Publishing Revenues

Licensing and publishing revenues for the nine months ended April 30, 2008 were
$2,251,877 compared to $4,086,367 for the nine months ended April 30, 2007,
representing a decrease of $1,834,490 or approximately 44%. During the nine
months ended April 30, 2007, we received a one-time payment of approximately
$2.9 million in settlement of a royalty dispute. No such payment occurred during
the nine months ended April 30, 2008. The decrease in licensing and publishing
revenues was also due to an overall reduction in publishing revenues of $356,085
or 106%, to ($21,091) during the nine months ended April 30, 2008, from $334,994
during the nine months ended April 30, 2007. The decrease in publishing revenues
was primarily attributable to book returns totaling $262,924 that we recorded
against publishing revenues during the nine months ended April 30, 2008,  During
the nine months ended April 30, 2007, we recorded book returns totaling $214,756
to cost of advertising and promotion.  The decrease in licensing and publishing
revenues was offset by an increase in licensing revenues due to the recognition
of $750,000 earned from licensing the television rights to one of our titles and
$690,411 earned from domestic and international distributions rights of our
movies.

Costs related to licensing revenues were $84,394 during the nine months ended
April 30, 2008 compared to $172,176 for the nine months ended April 30, 2007.
This represents a decrease of $87,782 or approximately 50%. Costs related to
publishing revenues were $124,125 during the nine months ended April 30, 2008
compared to $0, during the nine months ended April 30, 2007. The decrease in
costs related to license revenues resulted primarily from a decrease of $80,652
in royalty and commission expense to $57,402 during the nine months ended April
30, 2008, from $138,054 during the nine months ended April 30, 2007. The
decrease was also offset by an increase in licensing costs of $26,990, which
represents costs incurred for the Capazoo licensing program. The increase in
costs related to publishing revenues for the nine months ended April 30, 2008
resulted from an increase of $124,125 in these costs, consisting of $102,220 in
amortized publishing costs and $21,905 in direct publishing costs as compared to
$0 in costs related to publishing revenues incurred during the nine months ended
April 30, 2007.

There was an increase of $745,834 in amortization of capitalized production
costs to $1,208,416 for the nine months ended April 30, 2008 compared to
$462,582 for the nine months ended April 30, 2007. Amortization for current
productions begins upon theatrical and/or home video release. The increase was
primarily due to the amortization of capitalized film production costs of
$979,767 due to recognition of domestic and international licensing revenue from
the release of National Lampoon's Bagboyand $136,670 due to revenue
recognition for domestic and international licensing of four other film titles.
In addition we had $91,977 in amortization of production costs for the
production and distribution of a video of a live show that was completed during
the quarter ended April 30, 2008. The increase in amortization of capitalized
production costs was offset by a decrease in amortization of capitalized
production costs of $408,897 recorded for the permanent impairment of
National Lampoon's Trick or Treat during the nine months ended April 30,
2007.

27




Advertising and Promotion Revenues

During the nine months ended April 30, 2008, advertising and promotion revenues
were $1,159,195 compared to $1,800,211 for the nine months ended April 30, 2007.
This represents a decrease of $641,016 or 36%. The decrease was primarily the
result of a decrease of $200,000 in presence marketing revenues for Pledge
This!offset by an increase in marketing and promotions revenue from Red
Rock of $417,411. The reduction in our New York sales staff also resulted in a
decrease of $117,164 in revenues from Network TV advertising spots to $10,535
for the nine months ending April 30, 2008 from $127,699 during the nine months
ended April 30, 2007 and a decrease of $80,823 in Internet advertising to
$721,248 during the nine months ended April 30, 2008 from $802,071 during the
nine months ended April 30, 2007. Due to the reduction in the number of live
events we produced and a decrease in field events and presence marketing, we
earned no revenues from these sources during the nine months ended April 30,
2008, resulting in a decrease in advertising and promotion revenues of $180,200.
Revenues from sponsored production shoots decreased $393,018 to $10,000 during
the nine months ended April 30, 2008 from $403,018 during the nine months ended
April 30, 2007, due to decreased sales staff.

Costs of advertising and promotion revenue were $404,506 during the nine months
ended April 30, 2008 compared to $1,789,329 for the nine months ended April 30,
2007, representing a decrease of $1,384,823 or 77%. The decrease in costs of
advertising and promotion resulted primarily from a decrease of $282,140 in
costs of live events to promote College Poker, as well as a decrease of
$85,699 due to a reduction in the number of live events that we produced.
Although we produced fewer live events we continue to provide sponsorship
opportunities at live events organized by third parties. The decrease also
resulted from a decrease of $46,126 in costs of advertising and promotion to $0
during the nine months ending April 30, 2008. Further decreases resulted from a
decrease in overall costs due to a reduction in the size of the New York office
including a decrease of $41,412 in salaries for web development, to $67,580 for
the nine months ended April 30, 2008 from $108,992 during the nine months ended
April 30, 2007, a decrease in sales commission of $143,959 to $189,799 for the
nine months ended April 30, 2008 from $333,758 during the nine months ended
April 30, 2007, as well as a decrease of $181,872 in video production to $39,876
during the nine months ended April 30, 2008, from $221,748. However, this also
resulted in lower Internet revenues. Costs associated with our Internet
operations decreased by $45,322 to $115,642 during the nine months ended April
30, 2008 from $160,964 during the nine months ended April 30, 2007 due to
reduced Internet service fees as we improve our Internet capabilities. The
decrease in costs related to advertising and promotion revenues was also
attributable to the allocation of $214,756 in amortization of publishing costs
and $135,312 in direct publishing costs to the cost of advertising and promotion
during the nine months ended April 30, 2007, whereas those costs were allocated
to costs of publishing revenues during the nine months ended April 30, 2008.
This reduction was offset by an increase of $36,491 in royalties paid to
affiliate websites under the Humor Network due to the continued expansion of the
network.

Costs related to amortization of capitalized television production costs during
the nine months ended April 30, 2008 decreased $70,939 to $523 in for the nine
months ended April 30, 2008 from $71,462 for the nine month period ended April
30, 2007. The decrease is a result of the expensing of costs of television shows
as they are released immediately on the Network. No further write-down of
capitalized television production costs is expected after the quarter ended
April 30, 2008.

We continue to expand and improve our digital distribution and entertainment
capabilities which we expect to result in increased revenue from our network and
affiliate network of Internet websites. We intend to hire additional sales
representatives to increase our Internet advertising revenues. Going forward, we
expect to focus our resources on increasing revenues generated from our Internet
websites and from product placement. While we intend to continue providing field
promotion services at events held by third parties, we no longer produce field
promotion events.

Costs related to advertising revenues include bandwidth usage fees, website
development costs, and content conversion costs along with amortization of
capitalized television production costs. We incur costs related to promotion
revenues based on direct costs of live events and promotion of third-party
feature films, which are expensed as they are incurred.

Travel Services

During the nine months ended April 30, 2008, travel services revenues were
$110,000 compared to $0 for the nine months ended April 30, 2007. This increase
resulted from the settlement of a legal action. We agreed to dismiss the
complaint in exchange for a payment of $110,000 to be made upon execution of the
settlement agreement. The settlement amount was recognized as revenue. Prior to
the settlement the Company discontinued travel services and no further revenues
are expected to be earned from this segment.

28




Production and Distribution Revenues

We no longer offer production services on third-party films. We may receive
producer fees on our own film and video productions. We produce our own films
and videos for which we have a presale, minimum guarantee or co-production
agreement in place. This reduces our risk as productions tend to be capital
intensive. However, we are expanding our productions and we have negotiated an
output arrangement with a domestic cable provider which guarantees us a cable
distribution outlet for our new product along with a minimum return on each new
motion picture release. The output arrangement provides for a pre-negotiated
minimum guarantee or sales price for the licensing of a specific media and
territory. We have also negotiated home video distribution with a number of
domestic retailers and distributors and have licensed international rights in
several territories with minimum guarantees. For the video distribution, there
is no minimum price guarantee but the arrangement provides us with a video
distribution outlet for our new product. In addition, we are negotiating with
Red Rock to provide production financing. As these output and financing
arrangements are signed, we will allocate additional internal resources to this
segment of our business. For the nine months ended April 30, 2008, production
revenues from production services to third parties decreased due to the
allocation of internal personnel to the production of two feature films.

For the nine months ended April 30, 2008, there was
$265,828 in production revenues as compared to $44,500 for the nine months ended
April 30, 2007. The increase in production services revenues primarily resulted
from $250,000 in revenues generated from video production services to a third
party distributor. Additional production service revenues totaling $11,500 were
earned from another third party distributor for a video of a live show that we
are producing. During the nine months ended April 30, 2008, revenues derived
from distribution fees totaled approximately $159,831. The increase was
primarily due to the release of five titles through home video distributors
including $87,600 from Blockbuster, $46,750 from Spectacle Group and $6,521 from
Rentrak.

Costs related to production revenue during the nine months ended April 30, 2008
increased $36,892 to $40,948 from $4,056, or 910% for the nine months ended
April 30, 2007. The increase was primarily due to production costs related to
delivery of video programming to the third party distributor. Costs related to
distribution revenue during the nine months ended April 30, 2008 increased
$106,811, from $0 during the nine months ended April 30, 2007. The increase was
primarily due to $61,072 in residuals accrued, shipping costs to Blockbuster of
$16,500 and $19,239 in delivery materials and $10,000 in servicing agent fees
during the nine months ended April 30, 2008.

Other Costs and Expenses

Amortization of intangible assets, which consists of the costs of protection of
the "National LampoonTM" trademark, was $180,662 during the nine months
ended April 30, 2008. Amortization of intangible assets was $181,337 during the
nine months ended April 30, 2007.

Amortization of intangible assets, which consists of the costs of our
acquisition and protection of websites and domain names, was $3,359 during the
nine months ended April 30, 2008 and $0 during the nine months ended April 30,
2007.

Stock issued for services increased by $70,409, or 16%, to $515,168 during the
nine months ended April 30, 2008, from $444,759 for the nine months ended April
30, 2007. The increase is primarily due to shares of common stock issued to new
consultants hired for investor relations, Internet services and to a former
officer as severance. Expenses from the vesting of options and warrants issued
for services increased $596,615, or 144% to $984,046 during the nine months
ended April 30, 2008 from $414,431 for the nine months ended April 30, 2007. The
increase is primarily due to the implementation of SFAS No. 123R and grants
of options to members of our board of directors and consultants conveying
the right to purchase 468,389 shares of our common stock. In
comparison, during the nine months ended April 30, 2007, grants of options
were made to members of our board of directors and consultants conveying
the right to purchase 375,000 shares of our common stock.

There was no provision for doubtful accounts for the nine months ended April 30,
2008 compared to $78,075 for the nine months ended April 30, 2007. The provision
for the nine months ended April 30, 2007 is primarily attributable to accounts
we deemed to be uncollectible.

Other selling, general and administrative costs decreased by $987,618, or 28%,
to $2,559,465 during the nine months ended April 30, 2008 from $3,547,083 for
the nine months ended April 30, 2007. The decrease in selling, general and
administrative costs resulted from a decrease in payroll and related payroll
taxes of $311,456 due to a reduction in our employee count, a decrease of
$36,731 in employee health benefits, a decrease in fees to financial consultants
and accountants of $91,497, a decrease in office expense of $43,481 and a
decrease in travel and entertainment of $44,621. The decrease in selling,
general and administrative costs was offset by an increase in marketing expense
of $44,878, an increase in rent expense of $53,914 and an increase in
international sales and distribution expenses of $48,469.

29




Other income increased by $395,962 or 1,527% to $421,889 during the nine months
ended April 30, 2008 compared to $25,927 for the nine months ended April 30,
2007. The increase for the nine-month period ended April 30, 2008 was primarily
due to the write off of a stale accrued royalty. In July 1987, NLI granted the
right to produce National Lampoon television programming to GPEC. The royalty
was recognized as an expense in prior years. Approximately $396,250 remained on
the books as a liability and was written off during the nine months ended April
30, 2008.

For the nine months ended April 30,
2008, we had a net loss of $1,918,546, as compared to a net loss of $1,170,667
for the nine months ended April 30, 2007. This represents an increase in net
loss of $747,879, or 63% for the nine months ended April 30, 2008. The increase
in net loss for the nine months ended April 30, 2008 resulted primarily from the
significant increase in revenue we received during the nine months ended
April 30, 2007 which was associated with the settlement of disputed license
fees. Aside from the settlement, other license fees increased while decreases
occurred in revenues for field marketing and live event advertising and
promotion, production and publishing. The decrease in costs and expenses for the
nine months ended April 30, 2008 was a result of decreases in costs related to
advertising and promotion revenue and selling, general and administrative costs
which was partially offset by an increase in the issuance of stock, warrants and
options as compensation. The increase in net loss was further offset by an
increase of $36,155 in interest expense to $74,745 during the nine months ended
April 30, 2008, from $38,590 during the nine months ended April 30, 2007. The
increase in interest expense is primarily due to in increase in production loans
from related parties.

During the nine months ended April 30, 2008 and 2007, we
had no provision for income taxes due to the significant net operating losses
incurred in prior periods and carried forward into the current period. We also
accrued dividends for preferred shareholders of $887,898 during the nine months
ended April 30, 2008 and $932,832 during the same period in 2007. The addition
of the accrued dividends resulted in a net loss attributable to common
shareholders of $2,806,444 or $0.34 per basic and fully diluted share for the
nine months ended April 30, 2008, compared to net loss attributable to common
shareholders of $2,103,499 or $0.28 per basic and fully diluted share for the
nine months ended April 30, 2007.

Liquidity and Capital Resources

With the exception of the first quarter of the fiscal year ended July 31, 2007,
we have not generated positive cash flows from operations over the past few
years. Our principal sources of working capital during the nine months ended
April 30, 2008 consisted of revenues, loans from our officers and directors and
production loans from Red Rock Pictures Holdings, Inc.

Net cash used in operating activities was $952,779 for the nine months ended
April 30, 2008, as compared to $1,188,590 for the nine months ended April 30,
2007. The decrease in cash flow used in operations was primarily attributable to
an increase in accounts receivable, offset by an increase in accounts payable
and an increase in stock, options and warrants issued for services. Cash
provided by financing activities was $1,053,881 for the nine months ended April
30, 2008, as compared to $1,771,493 for the nine months ended April 30, 2007.
The funds for the current period were obtained from officers and directors and
Red Rock Pictures Holdings, Inc. and were partially offset by repayments to each
of them.

As of June 6, 2008, we had cash on hand of approximately $67,152. We believe
revenues we earn as well as collections of $1,036,731 of minimum guarantee and
home video sales payments currently due from domestic and foreign distributors
including Comedy Partner (US), Pueblo Film Distribution (Australia), LCT
Entertainment (Russia), Front Row (Middle East) and Beta Cinema (Germany), and
additional loans from our Chief Executive Officer and one member of our board of
directors will be adequate to fund our ongoing operations and capital
requirements for the next twelve months. Our Chief Executive Officer and
director have expressed their continued support to provide loans to us to meet
any immediate working capital requirements  If we do not receive these loans and
if alternate sources of financing cannot be found, then we may not be able to
continue to operate as a going concern.

As noted above, historically our principal source of
funds used for operations and working capital has been loans received from
Daniel S. Laikin, our Chief Executive Officer, and Timothy Durham, a director,
and a shareholder. The aggregate amount of the loans and accrued interest owed
to these individuals at April 30, 2008 is approximately $1,983,312. These
obligations are payable on demand. We plan to satisfy and pay these obligations
from future revenues. In addition, Red Rock Picture Holdings, Inc. has provided
the Company with funds for movie production. The aggregate amount of the loans
and accrued interest owed to Red Rock at April 30, 2008 is approximately
$3,793,083.



Our financial statements for the fiscal year ended July 31, 2007 contained an
explanatory paragraph as to our ability to continue as a "going concern." This
qualification may impact our ability to obtain future financing.

Commitments for Capital
Expenditures

As of April 30, 2008, our capital expenditures are projected to be $100,000 for
the 2008 fiscal year. These expenditures will relate to the purchase of fixed
assets such as equipment and furniture.

30




Off-Balance Sheet Arrangements

We do not have any off-balance sheet transactions such as guarantees,
commitments, lease and debt agreements or other agreements that could trigger an
adverse change in our credit rating, earnings, cash flows or stock price,
including requirements to perform under standby agreements.

Contractual Obligations

The table below sets forth our contractual obligations as of April 30, 2008.

Payments Due by PeriodMoreLess than

1 - 3

3 - 5

thanTotal

1 year

years

years

5 yearsProduction loan, related party

$
3,867,235

$
1,000,000

$
2,867,235

$
--

$
--Notes Payable, related party


1,909,160


1,909,160


--


--


--Notes Payable

$
223,459

$
223,459

$
--

$
--

$
--




Recent Accounting Pronouncements

In December 2007, the FASB issued FASB Statement
No. 141(R), "Business Combinations" (FAS 141(R)), which establishes
accounting principles and disclosure requirements for all transactions in which
a company obtains control over another business. Statement 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. Earlier adoption is prohibited.

In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51". SFAS
No. 160 establishes accounting and reporting standards that require that
the ownership interests in subsidiaries held by parties other than the parent be
clearly identified, labeled, and presented in the consolidated statement of
financial position within equity, but separate from the parent's equity; the
amount of consolidated net income attributable to the parent and to the
non-controlling interest be clearly identified and presented on the face of the
consolidated statement of income; and changes in a parent's ownership interest
while the parent retains its controlling financial interest in its subsidiary be
accounted for consistently. SFAS No. 160 also requires that any retained
non-controlling equity investment in the former subsidiary be initially measured
at fair value when a subsidiary is deconsolidated. SFAS No. 160 also sets
forth the disclosure requirements to identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. SFAS
No. 160 applies to all entities that prepare consolidated financial
statements, except not-for-profit organizations, but will affect only those
entities that have an outstanding non-controlling interest in one or more
subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective
for fiscal years, and interim periods within those fiscal years beginning on or
after December 15, 2008. Earlier adoption is prohibited. SFAS No. 160
must be applied prospectively as of the beginning of the fiscal year in which it
is initially applied, except for the presentation and disclosure requirements.
The presentation and disclosure requirements are applied retrospectively for all
periods presented. The Company does not have a non-controlling interest in one
or more subsidiaries.

Item 3 - Controls and Procedures

We carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief Financial
Officer of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report. The
evaluation was undertaken in consultation with our accounting personnel. Based
on the evaluation, the Chief Financial Officer and the Chief Executive Officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.

As of the end of the period covered by this report, there was no change in our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

31




PART II -
OTHER INFORMATION

Item 1 - Legal Proceedings

On or about April 10, 2008, Raleigh, through his attorneys, filed a Complaint
styled, RP Holdings, Inc. v. National Lampoon Clubhouse, Inc.  et al, CA
No SCO97777, in the Superior Court of Los Angeles County, California, alleging
that National Lampoon breached a contract known as the Raleigh Studios License
Agreement ("Master Agreement"), as well as certain additional claims at common
law and by statute ("Law Suit"). On the 4th day of June, 2008, a Settlement
Agreement and Release ("Agreement") was entered into between RP Holdings, Inc.
dba Raleigh Studios, ("Raleigh"), and National Lampoon Clubhouse, Inc. and
National Lampoon, Inc., (collectively "National Lampoon"). The plaintiffs agreed
to dismiss the complaint against the Company in exchange for a payment of
$15,000 to be made in four installments starting from the date of full execution
of the settlement agreement. The Company's first installment of the payment was
made June 6, 2008.

On or about March 11, 2008, Brightcove, through its attorneys, filed a Complaint
styled, Brightcove Inc. v. National Lampoon, Inc., CA No MICV2008-1006
TRIAL COURT CIVIL ACTION 08-1006, in the Superior Court of Middlesex County,
Massachusetts, alleging that National Lampoon breached a contract between
Brightcove and National Lampoon, as well as certain intentional tort claims at
common law and by statute (the "Lawsuit"). On the 23rd day of May,
2008, a Settlement Agreement and Release ("Agreement") between Brightcove Inc.
("Brightcove") and National Lampoon, Inc. ("National Lampoon") was entered into.
The plaintiffs agreed to dismiss the complaint against the Company in exchange
for a payment of $84,122 to be made in six installments starting from the date
of full execution of the settlement agreement. The Company's first installment
of the payment was made on May 23, 2008.

National Lampoon, Inc. v. Alma Investments(d/b/a Bahia Mar Hotel) (Los
Angeles Superior Court Case No. BC 356118). We filed this complaint on July 27,
2006. The action arises from an agreement we had with Bahia Mar Hotel pursuant
to which we were to provide to Bahia Mar Hotel an entertainment package for the
2006 spring break. We alleged that Bahia Mar Hotel failed to support the program
and that Bahia Mar Hotel diverted some of the business to our competitors. On
February 4, 2008, the Company entered into a settlement agreement with Alma
Investments. The Company agreed to dismiss the complaint against Alma
Investments in exchange for a payment of $110,000 to be made upon execution of
the settlement agreement. The settlement amount was recognized as Tours revenue
and applied entirely towards approximately $143,000 in legal fees directly
related to the case and the remaining balance was written off by our attorneys.

Cinergy Creative, Inc. and Leslie Allen v. National
Lampoon Clubhouse, Inc., National Lampoon, Inc., Majestic Entertainment, Inc.
and Lorenzo Doumani(Los Angeles Superior Court Case No. SC091496). This
complaint was filed on October 20, 2006. The plaintiffs allege causes of action
for breach of written contract, breach of oral contract, breach of the implied
covenant of good faith and fair dealing, quantum meruit, fraud and deceit based
on promises made without intention to perform, intentional misrepresentation,
slander per se, libel per se, breach of confidence, declaratory relief,
conversion, untrue or misleading advertising, unfair competition and negligence.
Specifically, the plaintiffs allege that we and our co-defendants induced them
to set aside other projects so that they would spend their time working on
projects for the benefit of us and our co-defendants. The plaintiffs also allege
that they were promised a share of profits from the projects and/or a
"partnership" interest in them. The plaintiffs allege that their damages are in
excess of $2,000,000. The Company entered into a settlement agreement with the
plaintiffs dated November 5, 2007. The plaintiffs agreed to dismiss the
complaint against the Company in exchange for a payment of $50,000 to be made
within 90 days from the execution of the settlement agreement. The Company's
portion of the payment was made during February 2008. The remaining defendants
have reached settlements as well.

Screen Actor's Guild v. National Lampoon Clubhouse, Inc. During late 2006, the
Screen Actor's Guild ("SAG") filed claims against National Lampoon Clubhouse,
Inc. ("Clubhouse") for unpaid wages and pension, health and welfare benefits
incurred for the filming of "Monster House" aka "Trick or Treat". SAG alleges
that certain actors were not paid in full and are owed approximately $30,000
more in compensation, expenses and benefit payments under the SAG agreement.
Clubhouse disputes these claims and intends to vigorously defend this action.
Due to recent changes within SAG the arbitration with SAG is being rescheduled
to take place on a date to be determined some time during the fourth quarter
2008.

American Cinema Distribution Corporation v. National Lampoon, Inc. In August
2007, the American Cinema Distribution Corporation ("ACDC") filed claims against
National Lampoon, Inc. for costs incurred on the release of "National Lampoon's
Pucked". ACDC alleges that the Company did not perform distribution services as
agreed and that ACDC should be reimbursed for distribution costs it incurred
which are estimated to be approximately $65,000. ACDC also alleges that it does
not owe distribution fees to the Company for marketing, publicity, promotional
and advertising services the Company provided which services the Company alleges
have a value in excess of $290,000. The Company disputes these claims, has filed
for arbitration against ACDC as the agreement calls for and intends to
vigorously defend this action.






Item 2 - Unregistered Sales of Equity
Securities and Use of Proceeds

During the three months ended April 30, 2008, 99,999 shares of restricted stock
were issued to Daniel Laikin upon the conversion of 1,775 Series B Convertible
Preferred Stock and 32,563 shares of restricted stock were issued to Daniel
Laikin upon the conversion of the related accrued dividends of $58,612 at a
market price of $1.80. We relied on section 3(a)(9) of the Securities Act of
1933, as amended, to issue these securities.

During the three months ended April 30, 2008, we entered into an agreement with
Rivalfish to issue 5,000 restricted shares at a market price of $2.00 with a
total value of $10,000 for the purchase of intangible assets.

In March 2007 we entered into an agreement
with Sam Elhag to provide consulting services to us. In exchange for his
services, we will issue 10,000 shares of restricted common stock to the
consultant during the service period. During the three months ended April 30,
2008 we issued a total of 835 shares of restricted common stock to Mr. Elhag
having a total value of $1,770.



In September 2007 we entered into an agreement with American Capital Ventures to
provide consulting services to us. In exchange for their services, we will issue
60,000 shares of restricted common stock to the consultant during the twelve
month service period. The consultant received 20,000 restricted common shares
upon execution of the agreement with the balance being issued monthly at the
rate of 3,636 shares per month. During the three months ended April 30, 2008 we
issued a total of 3,636 shares of restricted common stock having a total value
of $7,708. The consultant will also be paid a fee of $3,500 per month over the
twelve month service period. In addition, the consultant will be issued warrants
to purchase 40,000 shares of restricted common stock over the twelve month
service period.

Unless otherwise noted, we relied on section 4(2) of the
Securities Act of 1933 to issue the securities inasmuch as the common stock was
issued without any form of general solicitation or general advertising and the
acquirers were accredited investors.

Item 3 - Defaults Upon Senior Securities

None.

Item 4 - Submission of Matters to a
Vote of Security Holders

None.

Item 5 - Other Information

None.

33




Item 6 - Exhibits

3.1
Certificate of Incorporation of National Lampoon, Inc. (1)3.2
Bylaws of National Lampoon, Inc. adopted August 27, 2002 (1)3.3
First Amendment of Certificate of Incorporation of National Lampoon, Inc. (2)4.1
Certificate of Designations, Preferences, Rights and Limitations of Series C
Convertible Preferred Stock of National Lampoon, Inc. (2)4.2
NLAG Registration Rights Agreement dated May 17, 2002 among the Registrant and
members of the NLAG Group and GTH Capital, Inc. (3)4.3
Jimirro Registration Rights Agreement dated May 17, 2002 (3)4.4
Piggyback Registration Rights Agreement dated September 3, 2002 between the
Registrant and Constellation Venture Capital, L.P. as agent for certain
individuals. (4)4.5
Piggyback Registration Rights Agreement entered into among the Registrant and
the purchasers of Series C Convertible Preferred Stock (5)4.6
J2 Communications Voting Agreement dated May 17, 2002 among members of the NLAG
Group and James P. Jimirro (3)4.7
First Amendment to Voting Agreement dated June 7, 20024.8
Series C Voting Agreement entered into among the Registrant and purchasers of
Series C Convertible Preferred Stock (5)31.1
Certification by Chief Executive Officer pursuant to section 302 of the Sarbanes
Oxley Act of 2002*31.2
Certification by Chief Financial Officer pursuant to section 302 of the
Sarbanes Oxley Act of 2002*32
Certification by Chief Executive Officer and Chief Financial Officer pursuant to
section 906 of the Sarbanes Oxley Act of 2002*


*Filed herewith.

(1)
Incorporated by reference from the Registrant's Form 10-K/A for the fiscal year
ended July 31, 2003 filed with the Securities and Exchange Commission on
December 19, 2003.(2)
Incorporated by reference from the Registrant's Form 10-K for the fiscal year
ended July 31, 2005 filed with the Securities and Exchange Commission on October
29, 2005.(3)
Incorporated by reference from the Registrant's Form 8-K filed with the
Securities and Exchange Commission on May 31, 2002.(4)
Incorporated by reference from the Registrant's Form 8-K filed with the
Securities and Exchange Commission on September 9, 2002.(5)
Incorporated by reference from the Registrant's Form 10-QSB filed with the
Securities and Exchange Commission on December 22, 2006.




34




SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

NATIONAL LAMPOON, INC.June 18, 2008
By:
/s/ Daniel S. LaikinDaniel S. Laikin,Chief Executive Officer




June 18, 2008
By:
/s/ Lorraine EvanoffLorraine Evanoff,Chief Financial Officer






35




EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14 AND 15d-14

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Daniel S. Laikin, Chief Executive Officer and President of National Lampoon,
Inc. (the "registrant"), certify that:

I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-QSB of
National Lampoon, Inc.

Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.

Based on my knowledge, the financial statements, and other financial information
included in the report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods, presented in the report.

The registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)
designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the periodic report is being prepared;(b)
evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and(c)
disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and


The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and to the audit committee of the board of directors (or
persons fulfilling the equivalent function):

(a)
all significant deficiencies in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and(b)
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal control over financial
reporting.




Dated:  June 18, 2008

/s/Daniel S. Laikin

Daniel S. Laikin

Chief Executive Officer

36




EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER

PURSUANT TO RULES 13a-14 AND 15d-14

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Lorraine Evanoff, Chief Financial Officer of National Lampoon, Inc. (the
"registrant"), certify that:

I have reviewed this Amendment No.1 to the Quarterly Report on Form 10-QSB of
National Lampoon, Inc.

Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.

Based on my knowledge, the financial statements, and other financial information
included in the report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods, presented in the report.

The registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)
designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the periodic report is being prepared;(b)
evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and(c)
disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and




The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and to the audit committee of the board of directors (or
persons fulfilling the equivalent function):

(a)
all significant deficiencies in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and(b)
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal control over financial
reporting.




Dated:  June 18, 2008

/s/ Lorraine Evanoff

Lorraine Evanoff

Chief Financial Officer

37




EXHIBIT 32

CERTIFICATION OF OFFICERS

OF NATIONAL LAMPOON, INC.

PURSUANT TO 18 USC § 1350

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code) each of the
undersigned officers of National Lampoon, Inc. (the "Company") does hereby
certify, to such officer's knowledge, that:

(a)
The Amendment No. 1 to the Quarterly Report on Form 10-QSB for the period ended
April 30, 2008 of the Company fully complies with the requirements of section
13(a) or 15(b) of the Securities Exchange Act of 1934; and(b)
Information contained in the Form 10-QSB/A fairly presents, in all material
respects, the financial condition and results of operations of the Company.




Dated: June 18, 2008

/s/Daniel S. Laikin

Daniel S. Laikin

Chief Executive Officer

/s/ Lorraine Evanoff

Lorraine Evanoff

Chief Financial Officer

38