**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


**WASHINGTON,
D.C. 20549**





**FORM
10-QSB**





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


EXCHANGE
ACT OF 1934





For the
quarterly period ended: April 30, 2005





OR





o 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
    95-4053296(State
      or other jurisdiction of
    (I.R.S.
      EmployerIncorporation
      or organization)
    Identification
      No.)





10850
Wilshire Boulevard, Suite 1000


Los
Angeles, California


90024


(Address
of principal executive offices)


(Zip
Code)





(310)
474-5252


(Registrant’s
telephone number including area code)





N/A


(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 o





**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 3,464,125 shares of common
stock, $0.001 par value, issued and outstanding as of June 2, 2005.





Transitional
Small Business Disclosure Format (Check one): Yes o No x













**FORWARD
LOOKING STATEMENTS**





Some of
the statements made in this quarterly report on Form 10QSB discuss future events
and developments, including the Company’s future business strategy and its
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,”
“seek 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 the Company’s actual results to
vary from the forward-looking statements include:





·
    the
      Company’s inability to generate revenues sufficient to sustain its
      operations or to raise capital as and when the Company needs it;





·
    the
      Company’s failure to accurately forecast its capital needs;





·
    unanticipated
      increases in development, production or marketing expenses related to the
      Company’s various business activities;





·
    the
      Company’s inability to effectively compete with other providers of comedic
      entertainment in the marketplace;





·
    the
      Company’s inability to protect its intellectual property from infringement
      by others;





·
    the
      Company’s inability to fully implement its business plan for any reason;





·
    the
      loss of the services of the Company’s Chief Executive Officer and its
      President





and other
factors, such as the general state of the U.S. economy, which will be outside of
the Company’s control.





In
evaluating forward-looking statements, you should consider the factors
identified above as well as those risks outlined 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 - Consolidated Financial Statements**





**NATIONAL
      LAMPOON, INC. AND SUBSIDIARIES**CONSOLIDATED
      BALANCE SHEETS
  April
      30,ASSETS
    
    2005(UNAUDITED)CURRENT
      ASSETSCash
      and cash equivalents
    
    $
    516,226Accounts
      receivable
    
    
    394,284Capitalized
      debt issuance costs
    
    
    473,000Prepaid
      expenses and other current assets
    
    
    197,194Total
      current assets
    
    
    1,580,704NON-CURRENT
      ASSETSCapitalized
      production costs
    
    
    379,343Fixed
      assets, net of accumulated depreciation
    
    
    24,320Intangible
      assets
    
    
    5,964,732Accumulated
      amortization of intangible assets
    
    
    (3,928,578
    )Total
      non-current assets
    
    
    2,439,817TOTAL
      ASSETS
    
    $
    4,020,521LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCURRENT
      LIABILITIESAccounts
      payable
    
    $
    232,191Accrued
      expenses
    
    
    1,238,425Accrued
      dividends
    
    
    801,900Notes
      payable - related party, including interest of $80,064
    
    
    2,895,064Deferred
      income
    
    
    10,000TOTAL
      CURRENT LIABILITIES
    
    
    5,177,580MINORITY
      INTEREST
    
    
    —SHAREHOLDERS'
      (DEFICIT) EQUITYSeries
      B Convertible Preferred Stock, par value $.0001 per share, 68,406 shares
      authorized, 63,607 shares issued.
    
    
    6Series
      C Convertible Preferred Stock, par value $.0001 per share, 250,000 shares
      authorized, 229,761 shares issued.
    
    
    23Common
      Stock, par value $.0001 per share, 60,000,000 shares authorized and
      3,417,615 shares issued.
    
    
    342Additional
      paid-in capital
    
    
    29,200,207Less:
      Deferred compensation
    
    
    (187,657
    )Accumulated
      deficit
    
    
    (30,169,980
    )TOTAL
      SHAREHOLDERS' (DEFICIT) EQUITY
    
    
    (1,157,059
    )TOTAL
      LIABILITIES AND SHARESHOLDERS' (DEFICIT) EQUITY
    
    $
    4,020,521The
      accompanying notes are an integral part of these consolidated financial
      statements.

















**NATIONAL
      LAMPOON, INC. AND SUBSIDIARIES**CONSOLIDATED
      STATEMENTS OF OPERATIONS
  Three
      Months
    
    Nine
      MonthsEnded
      April 30,
    
    Ended
      April 30,2005
    
    2004
    
    2005
    
    2004REVENUEProduction
    
    $
    33,333
    
    $
    (39,250
    )
    $
    181,333
    
    $
    335,913Licensing
    
    
    443,443
    
    
    308,632
    
    
    1,614,940
    
    
    597,484Tours
    
    
    83,724
    
    
    —
    
    
    83,724
    
    
    —Advertising
      and promotion
    
    
    581,490
    
    
    231,387
    
    
    1,259,671
    
    
    554,432Total
      revenue
    
    
    1,141,990
    
    
    500,769
    
    
    3,139,668
    
    
    1,487,829COSTS
      AND EXPENSESCosts
      related to production revenue
    
    
    23,626
    
    
    11,688
    
    
    659,097
    
    
    1,123,168Costs
      related to licensing revenue
    
    
    224,607
    
    
    301,022
    
    
    397,004
    
    
    427,489Costs
      related to tours revenues
    
    
    296,290
    
    
    —
    
    
    296,290
    
    
    —Amortization
      of intangible assets
    
    
    60,000
    
    
    60,000
    
    
    180,000
    
    
    180,000Amortization
      capitalized film costs
    
    
    372,451
    
    
    —
    
    
    372,451
    
    
    —Selling,
      general and administrative expenses
    
    
    1,266,807
    
    
    1,351,603
    
    
    3,692,792
    
    
    3,458,481Stock,
      warrants & options issued for services
    
    
    168,505
    
    
    161,881
    
    
    491,038
    
    
    479,997Severance
      costs
    
    
    —
    
    
    —
    
    
    2,577,497
    
    
    —Expense
      associated with modification of warrants
    
    
    —
    
    
    —
    
    
    1,082,695
    
    
    —Total
      costs and expenses
    
    
    2,412,286
    
    
    1,886,194
    
    
    9,748,864
    
    
    5,669,135OPERATING
      LOSS
    
    
    (1,270,296
    )
    
    (1,385,425
    )
    
    (6,609,196
    )
    
    (4,181,306
    )OTHER
      INCOME (EXPENSE)Interest
      income
    
    
    1,343
    
    
    1,440
    
    
    5,994
    
    
    4,320Other
      expense
    
    
    (160,115
    )
    
    —
    
    
    (332,783
    )
    
    —Total
      other income (expense)
    
    
    (158,772
    )
    
    1,440
    
    
    (326,789
    )
    
    4,320LOSS
      BEFORE INCOME TAXES
    
    $
    (1,429,068
    )
    $
    (1,383,985
    )
    $
    (6,935,985
    )
    $
    (4,176,986
    )Provision
      for state income taxes
    
    
    —
    
    
    —
    
    
    9,138
    
    
    2,400NET
      LOSS
    
    $
    (1,429,068
    )
    $
    (1,383,985
    )
    $
    (6,945,123
    )
    $
    (4,179,386
    )Accrued
      Dividends
    
    
    (322,116
    )
    
    —
    
    
    (801,900
    )
    
    —Beneficial
      conversion feature treated as preferred dividend
    
    
    —
    
    
    —
    
    
    (2,280,906
    )
    
    —Net
      loss attributable to common shareholders
    
    $
    (1,751,184
    )
    $
    (1,383,985
    )
    $
    (10,027,929
    )
    $
    (4,179,386
    )Net
      loss per share attributable to common shareholder - basic and
      diluted
    
    $
    (0.52
    )
    $
    (0.45
    )
    $
    (3.14
    )
    $
    (1.36
    )Weighted
      average number of common shares - basic and diluted
    
    
    3,389,104
    
    
    3,066,836
    
    
    3,196,190
    
    
    3,062,620The
      accompanying notes are an integral part of these consolidated financial
      statements.
















**NATIONAL
      LAMPOON, INC. AND SUBSIDIARIES**CONSOLIDATED
      STATEMENTS OF CASH FLOWS(UNAUDITED)FOR
      THE NINE MONTHSENDED
      APRIL 30,2005
    
    2004CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (loss)
    
    $
    (6,945,123
    )
    $
    (4,179,386
    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and Amortization
    
    
    25,357
    
    
    22,178Amortization
      of intangible assets
    
    
    180,000
    
    
    180,000Amortization
      of debt issuance costs
    
    
    167,000
    
    
    —Stock,
      options and warrants issued for services
    
    
    772,453
    
    
    479,997Expense
      associated with the modification of warrants
    
    
    1,082,695
    
    
    —Other
    
    
    4,410
    
    
    (4,320
    )Changes
      in assets and liabilities:(Increase)
      in accounts receivable
    
    
    (341,945
    )
    
    (90,841
    )(Increase)
      in prepaid expenses and other assets
    
    
    (167,631
    )
    
    7,248(Increase)
      in production costs
    
    
    (225,197
    )
    
    (141,055
    )Increase/(decrease)
      in accounts payable
    
    
    (170,947
    )
    
    260,978Increase
      in accrued expenses
    
    
    264,677
    
    
    45,835Increase/(decrease)
      in deferred revenues
    
    
    (110,000
    )
    
    (61,000
    )NET
      CASH AND CASH EQUIVALENTS USED IN OPERATING ACTIVITIES
    
    
    (5,464,251
    )
    
    (3,480,366
    )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of fixed assets
    
    
    (1,075
    )
    
    (40,399
    )NET
      CASH AND CASH EQUIVALENTS USED IN INVESTING ACTIVITIES
    
    
    (1,075
    )
    
    (40,399
    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from Series C convertible preferred stock issuance
    
    
    3,648,879
    
    
    —Exercise
      of stock options
    
    
    90,533
    
    
    —Elimination
      of note receivable on common stock
    
    
    162,980
    
    
    —Payments
      on notes payable
    
    
    (635,124
    )
    
    —SEC
      filing fees
    
    
    (1,200
    )
    
    —Proceeds
      from notes payable
    
    
    2,715,000
    
    
    —Increase
      in notes payable
    
    
    —
    
    
    3,397,249NET
      CASH AND CASH EQUIVALENTS PROVIDED BY FINANCING ACTIVITIES
    
    
    5,981,068
    
    
    3,397,249NET
      INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    515,742
    
    
    (123,516
    )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    484
    
    
    140,255CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    516,226
    
    $
    16,739Supplemental
      disclosures of cash flow information:Stock
      and options issued for services and debt issuance costs
    
    $
    1,412,453
    
    $
    479,997Conversion
      of loans to Series C Convertible Preferred stock with warrants
      attached
    
    $
    4,649,775
    
    
    —The
      accompanying notes are an integral part of these consolidated financial
      statements.









**NATIONAL
LAMPOON, INC. AND SUBSIDIARIES**





**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
A — BASIS OF PRESENTATION AND GOING CONCERN**





The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
consolidated financial statements. Accordingly, they do not include all of the
information and disclosures required for annual financial statements. In the
opinion of the Company’s management, all adjustments (consisting of normal
recurring accruals) necessary to present fairly the Company’s financial position
as of April 30, 2005, and the results of operations and cash flows for the three
and nine month periods ended April 30, 2005 and 2004, have been included. These
consolidated financial statements should be read in conjunction with the
financial statements and related footnotes for the year ended July 31, 2004
included in the National Lampoon, Inc. (the “Company”) annual report on Form
10-K for that period.





The
results of operations for the three and nine month periods ended April 30, 2005
are not necessarily indicative of the results to be expected for the full fiscal
year. For further information, refer to the financial statements and related
footnotes included in the Company’s annual report on Form 10-K for the year
ended July 31, 2004.





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. The Company’s net losses of $5,127,107
and $5,924,836 in the prior two years and net loss of $6,945,123 during the
first nine months of the 2005 fiscal year, as well as negative working capital
of $3,596,876 and accumulated deficit of $30,169,980 at April 30, 2005, raise
substantial doubt about its ability to continue as a going concern. In order to
fund operations, the Company has relied on the purchase of securities by Daniel
S. Laikin, the Company’s Chief Executive Officer and a director, and Paul Skjodt
and Timothy S. Durham, directors, (collectively referred to as the “NLAG Group”)
and on loans made by Mr. Laikin and Mr. Durham that were subsequently converted
to securities. Subsequent to the reorganization transaction that occurred on May
17, 2002, when a group of individuals that included the NLAG Group gained voting
control of the Company, the Company received approximately $4.6 million in loans
from Mr. Laikin and Mr. Durham. These loans were subsequently converted to
securities.





On
December 9, 2004 the Company completed the sale of units consisting of Series C
Convertible Preferred Stock with warrants attached. Through this offering, the
Company received approximately $8.2 million consisting of approximately $3.6
million in cash and approximately $4.6 million from the conversion of debt owed
to Mr. Laikin and Mr. Durham and salary and accrued expenses owed to Mr.
Laikin.





On
January 28, 2005 the Company borrowed $2.7 million from N. Williams Family
Investments, L.P. The loan was used to fund a payment in the amount of
$2,532,800 due to James P. Jimirro, the Company’s former President and CEO and
the current Chairman of the Board of Directors, on his separation from service.
The balance of the funds was used for working capital.








Management
believes the following should alleviate the substantial doubt about the
Company’s ability to continue as a going concern. On March 10, 2005 the Company
filed a registration statement for a proposed public offering of an as-yet
undetermined number of shares of its common stock. The registration statement
has not yet been declared effective. The Company intends to raise at least $10
million in this offering, although there is no guarantee that the Company will
raise any money. This information does not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.





The
Company’s consolidated financial statements for the fiscal year ended July 31,
2004 contain an explanatory paragraph as to its ability to continue as a going
concern. This explanatory paragraph may impact its ability to obtain future
financing.





**NOTE
B - STOCK OPTIONS**





The
Company has adopted SFAS No. 123, “Accounting for Stock Based Compensation”,
issued in October 1995. In accordance with SFAS No. 123, the Company has elected
to follow Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock issued to Employees”, and related interpretation in accounting for its
employee stock options. Under APB Opinion No. 25, because the exercise price of
the Company’s employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized. There is no
current-period compensation expense to disclose in relation to previously issued
employee stock options, as required under SFAS 148, and there were no employee
stock options granted during the nine months ended April 30, 2005. If the
Company elected to recognize compensation expense based on the fair value of the
options granted on the grant date as prescribed by SFAS No. 123, the Company’s
net income/(loss) and earnings/(loss) per share would have been reduced to the
pro forma amounts as follows:








Three
      Months Ended April 30,
    
    Nine
      Months Ended April 30,2005
    
    2004
    
    2005
    
    2004Net
      loss attributable to common shareholders- as reported
    
    $
    (1,751,184
    )
    $
    (1,383,985
    )
    $
    (10,027,929
    )
    $
    (4,179,386
    )APB
      25 expense recognized
    
    
    —
    
    
    —
    
    
    —
    
    
    —Stock
      option compensation under-fair value method
    
    
    106,468
    
    
    78,415
    
    
    397,515
    
    
    258,186Net
      loss attributable to common shareholders-pro forma
    
    $
    (1,857,652
    )
    $
    (1,462,400
    )
    $
    (10,425,444
    )
    $
    (4,437,572
    )Basic
      and diluted earnings/(loss) per share-as reported
    
    $
    (0.52
    )
    $
    (0.45
    )
    $
    (3.14
    )
    $
    (1.36
    )Basic
      and diluted earnings/(loss) per share-pro forma
    
    $
    (0.55
    )
    $
    (0.48
    )
    $
    (3.26
    )
    $
    (1.45
    )







**NOTE
C - NOTES PAYABLE**





On May
17, 2003, two notes payable totaling approximately $442,000 at April 30, 2002
were due to be paid in full. The notes represented money owed to legal firms
relating to work done in connection with the reorganization transaction that
took place in May 2002. Timothy Durham, a director, has paid one of these notes
in full and the liability is now owed to him. As of October 31, 2004,
approximately $115,000 in principal remained unpaid. The obligation to Mr.
Durham is payable on demand. To date, no demand has been made. The Company plans
to pay this obligation with revenues earned by its operations. The other
note was renegotiated and paid in full in December 2004.





On
January 28, 2005 the Company borrowed the sum of $2,700,000 from N. Williams
Family Investments, L.P. The loan accrues interest at the rate of 7% per year.
The maturity date of the loan is the earlier of January 28, 2006 or the date the
Company closes an offering in which the gross cash proceeds to the Company equal
or exceed $2,700,000. The lender may also demand that the loan be immediately
repaid if the Company defaults in its obligations under the promissory note. The
Company is required to prepay the loan to the extent of any proceeds the Company
receives from an equity offering raising less than $2.7 million. The loan is
secured by a lien against all of the Company’s assets. The amount of $2,523,800
from the loan proceeds was used to pay benefits to James P. Jimirro, the
Chairman of the Company’s Board of Directors and the Company’s former Chief
Executive Officer and President, upon his separation from service as required by
his employment agreement dated May 17, 2002. The remaining proceeds were used
for working capital.





**NOTE
D - RECENT ACCOUNTING PRONOUNCEMENTS**





In
November 2004, the FASB issued SFAS No. 151 “Inventory Costs, an amendment of
ARB No. 43, Chapter 4.” The amendments made by Statement 151 clarify that
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period charges and require
the allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities. The guidance is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005. Earlier
application is permitted for inventory costs incurred during fiscal years
beginning after November 23, 2004. Management has evaluated the impact of the
adoption of SFAS 151, and does not believe the impact will be significant to the
Company’s overall results of operations or financial position.





In
December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate
Time-Sharing Transactions—an amendment of FASB Statements No. 66 and 67” (“SFAS
152). This Statement amends FASB Statement No. 66, “Accounting for Sales of Real
Estate,” to reference the financial accounting and reporting guidance for real
estate time-sharing transactions that is provided in AICPA Statement of Position
(SOP) 04-2, “Accounting for Real Estate Time-Sharing Transactions.” This
Statement also amends FASB Statement No. 67, “Accounting for Costs and Initial
Rental Operations of Real Estate Projects,” to state that the guidance for
incidental operations and costs incurred to sell real estate projects does not
apply to real estate time-sharing transactions. The accounting for those
operations and costs is subject to the guidance in SOP 04-2. This Statement is
effective for financial statements for fiscal years beginning after June 15,
2005, with earlier application encouraged. Management has evaluated the impact
of the adoption of SFAS 152, and does not believe the impact will be significant
to the overall results of the Company’s operations or financial
position.








In
December 2004, the FASB issued SFAS No.153, “Exchanges of Non-monetary Assets,
an amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions.”
The amendments made by Statement 153 are based on the principle that exchanges
of non-monetary assets should be measured based on the fair value of the assets
exchanged. Further, the amendments eliminate the narrow exception for
non-monetary exchanges of similar productive assets and replace it with a
broader exception for exchanges of non-monetary assets that do not have
commercial substance. Previously, Opinion 29 required that the accounting for an
exchange of a productive asset for a similar productive asset or an equivalent
interest in the same or similar productive asset should be based on the recorded
amount of the asset relinquished. Opinion 29 provided an exception to its basic
measurement principle (fair value) for exchanges of similar productive assets.
The Financial Accounting Standards Board believes that exception required that
some non-monetary exchanges, although commercially substantive, be recorded on a
carryover basis. By focusing the exception on exchanges that lack commercial
substance, the Financial Accounting Standards Board believes this Statement
produces financial reporting that more faithfully represents the economics of
the transactions. The Statement is effective for non-monetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. Earlier application
is permitted for non-monetary asset exchanges occurring in fiscal periods
beginning after the date of issuance. The provisions of this Statement shall be
applied prospectively. Management has evaluated the impact of the adoption of
SFAS 152, and does not believe the impact will be significant to the Company’s
overall results of operations or financial position.





In
December 2004, the FASB issued SFAS No.123 (revised 2004), “Share-Based
Payment.” Statement 123(R) will provide investors and other users of financial
statements with more complete and neutral financial information by requiring
that the compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability instruments issued. Statement 123(R) covers a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. Statement 123(R) replaces FASB Statement No. 123,
“Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25,
“Accounting for Stock Issued to Employees.” Statement 123, as originally issued
in 1995, established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, that Statement
permitted entities the option of continuing to apply the guidance in Opinion 25,
as long as the footnotes to financial statements disclosed what net income would
have been had the preferable fair-value-based method been used. Public entities
(other than those filing as small business issuers) will be required to apply
Statement 123(R) as of the first interim or annual reporting period that begins
after December 15, 2005. Management has evaluated the impact of the adoption of
SFAS 123(R) and, although it has not yet finished its estimates to enable it to
quantify the impact, based on contractual obligations, recurring customary
grants such as those to the Board of Directors, and vested options in place,
management believes the impact will be significant to the Company’s overall
results of operations and financial position.








**NOTE
E - EARNINGS PER SHARE**





Diluted
earnings per share amounts are calculated using the treasury method and are
based upon the weighted average number of common and common equivalent shares
outstanding during the period. Basic and diluted earnings per share are the
same, as common equivalent shares have been excluded from the computation, due
to the fact they are anti-dilutive. Options and warrants to purchase 7,487,262
and 43,791 common shares during the three months ended April 30, 2005 and 2004,
and 6,319,425 and 113,987 for the nine months ended April 30, 2005 and 2004,
respectively, are not included in the calculation of diluted earnings per share
because their inclusion would be anti-dilutive. 8,178,711 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 three months and nine
months ended April 30, 2005 and 2004 respectively because their inclusion would
be anti-dilutive.





**NOTE
F - STOCKHOLDER EQUITY**





On
September 15, 2004 the Company’s Board of Directors and stockholders holding a
majority of the Company’s common stock approved a two-for-one split of the
Company’s common stock. The effect of this stock split has been reflected in all
reported periods.





On
October 14, 2004, the Company issued to Erick Richardson 15,230 shares of common
stock and issued to Richardson & Patel, LLC 5,115 shares of common stock.
The common stock was issued in exchange for legal services valued at $79,561
that were rendered to the Company.





On
December 9, 2004 the Company closed an offering of units consisting of Series C
Convertible Preferred Stock and warrants to purchase the Company’s common stock.
The Company received approximately $8.2 million for the units, consisting of
approximately $3.6 million in cash, $4.6 million from the conversion of debt,
and approximately $492,000 for payment of salaries. At the commitment date, each
unit was purchased for $35.50. Holders of Series C Convertible Preferred Stock
earn a dividend of 9% per annum payable in the form of the Company’s common
stock at the time the holder converts the Series C Convertible Preferred Stock
to common stock. Attached to each share of Series C Convertible Preferred Stock
is a warrant to purchase ten shares of the Company’s common stock.





As part
of the offering of units of Series C Convertible Preferred Stock with warrants
attached, the terms of the warrants granted to the holders of Series B
Convertible Preferred Stock were made identical to the terms of the Series C
Convertible Preferred Stock warrants. Therefore, the term of the warrants
attached to the Series B Convertible Preferred Stock was modified to extend four
years from the issuance of the Series C Convertible Preferred Stock, and the
exercise price was reduced to $1.775 from $2.50. The excess of the value of the
modified warrants as compared to the original warrants was calculated according
to paragraph 188 of FAS 123. The excess amount, which included the right to
purchase 3,583,491 shares of the Company’s common stock, totaled $904,897, which
has been recognized as a charge to operations.








Each
share of Series C Convertible Preferred Stock is convertible at the option of
the holder into 20 shares of the Company’s common stock. Attached to each share
of Series C Convertible Preferred Stock is a warrant to purchase 10 shares of
the Company’s common stock. The warrants have a term of four years and an
exercise price of $1.775 on a post-split basis. The
relative fair value of the warrants of $1,271,904 was
estimated using the Black-Scholes option pricing model with the following
assumptions: average risk-free interest of 5.50%; dividend yield of 0%; average
volatility factor of the expected market price of the Company’s common stock of
95.7%; and a term of 4 years . The
value of the warrants plus the value of the conversion feature total $3,552,810
and exceeded the proceeds of the offering. Pursuant to EITF 98-5, “Accounting
for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios,” as the terms of the Series C Convertible
Preferred Stock are convertible upon issuance, the discount attributable to the
beneficial conversion feature of $2,280,906 was expensed immediately during the
nine months ended April 30, 2005 in a manner similar to a dividend at the date
of issuance and is included in the Statement of Operations as a preferred
dividend.





On
January 28, 2005 the Company borrowed $2,700,000 from N. Williams Family
Investments, L.P. As part of the loan transaction, N. Williams Family
Investments, L.P. was issued 80,000 shares of the Company’s common stock, and
Christopher Williams, a party related to N. Williams Family Investments, L.P.,
was issued 20,000 shares. In addition Daniel Laikin and Timothy Durham
personally guaranteed certain obligations of the Company relating to the
security for the loan, and as part of this guarantee were each issued 50,000
shares of the Company’s common stock. The expense associated with these stock
grants totaled $640,000, was recognized as debt issuance costs and capitalized.
These costs will be amortized over the one year term of the note, or upon
repayment if earlier.





In
conjunction with his separation from service, the Company agreed to extend the
stock options granted to James P. Jimirro that would otherwise have expired 90
days after the termination of his employment. The excess of the value of the
modified options as compared to the original options was calculated according to
paragraph 188 of FAS 123. The excess amount totaled $177,798, which has been
recognized as a charge to operations for the quarter ended January 31,
2005.





On
February 17, 2005, the Company issued to Andy Gruenberg 1,413 shares of common
stock in exchange for film distribution services valued at $4,000. On February
18, 2005 employee bonuses were paid in the form of 2,900 shares of common stock
valued at $10,150. On March 1, 2005, the Company issued to Erick Richardson
39,421 shares of common stock and issued to Richardson & Patel, LLC 8,400
shares of restricted common stock with 8,400 warrants for the purchase of common
stock at an exercise price ranging from $2.95 and $4.09 per share. The common
stock was issued in exchange for legal services valued at $152,853 that were
rendered to the Company. On March 23, 2005, the Company issued to Porter LeVay
& Rose 9,104 shares of common stock valued at $32,500 and issued to Regal
Growth Fund 3,666 shares of common stock valued at $12,500. The common stock was
issued in exchange for public relations services that were rendered to the
Company.








**NOTE
G - SEGMENT INFORMATION**





The
Company operates in four business segments: the production of motion picture,
television, and video/DVD products; the licensing and exploitation of the
“National Lampoon®” trademark and related properties including the sale of
products to consumers; television production and distribution to college
campuses from which advertising and promotion revenues are derived and travel
services. Segment operating income/(loss) excludes the amortization of
intangible assets, interest income, and income taxes. Selling, general and
administrative expenses not specifically attributable to any segment have been
allocated equally among the four segments. Summarized financial information for
the three month and nine month periods ended April 30, 2005 and 2004 concerning
the Company’s segments is as follows:





Licensing
    
    Advertising
      & Promotion
    
    Production
    
    Travel
      Services
    
    TotalThree
      Months Ended April 30, 2005Segment
      revenue
    
    $
    443,443
    
    $
    581,490
    
    $
    33,333
    
    $
    83,724
    
    $
    1,141,990Segment
      operating (loss)
    
    $
    (216,734
    )
    $
    (88,740
    )
    $
    (900,826
    )
    $
    (222,768
    )
    $
    (1,429,068
    )Three
      Months Ended April 30, 2004Segment
      revenue
    
    $
    308,632
    
    $
    231,387
    
    $
    (39,250
    )
    $
    —
    
    $
    500,769Segment
      operating (loss)
    
    $
    (149,827
    )
    $
    (532,315
    )
    $
    (701,843
    )
    $
    —
    
    $
    (1,383,985
    )Nine
      Months Ended April 30, 2005Segment
      revenue
    
    $
    1,614,940
    
    $
    1,259,671
    
    $
    181,333
    
    $
    83,724
    
    $
    3,139,668Segment
      operating (loss)
    
    $
    (1,863,734
    )
    $
    (1,204,739
    )
    $
    (3,653,882
    )
    $
    (222,768
    )
    $
    (6,945,123
    )Nine
      Months Ended April 30, 2004Segment
      revenue
    
    $
    597,484
    
    $
    554,432
    
    $
    335,913
    
    $
    —
    
    $
    1,487,829Segment
      operating (loss)
    
    $
    (591,827
    )
    $
    (2,162,316
    )
    $
    (1,425,243
    )
    $
    —
    
    $
    (4,179,386
    )





A
reconciliation of segment operating loss to net income before income taxes for
the three and nine month periods ended April 30, 2005 and 2004 is as
follows:





FOR
      THE THREE MONTHS ENDEDAPRIL
      30, 2005
    
    APRIL
      30, 2004Total
      segment operating (loss)
    
    $
    (1,429,068
    )
    $
    (1,383,985
    )Amortization
      of intangible assets
    
    $
    432,451
    
    $
    60,000Interest
      income
    
    $
    (1,343
    )
    $
    (1,440
    )Net
      loss before income taxes
    
    $
    (997,960
    )
    $
    (1,325,425
    )
  FOR
      THE NINE MONTHS ENDEDAPRIL
      30, 2005
    
    APRIL
      30, 2004Total
      segment operating (loss)
    
    $
    (6,945,123
    )
    $
    (4,179,386
    )Amortization
      of intangible assets
    
    $
    180,000
    
    $
    180,000Interest
      income
    
    $
    (5,994
    )
    $
    (4,320
    )Net
      loss before income taxes
    
    $
    (6,771,117
    )
    $
    (4,003,706
    )








**NOTE
H - LITIGATION**





On
February 17, 2004, plaintiff Trustin Howard filed a lawsuit against defendants
In-finn-ity Productions, Bud Friedman, National Lampoon Productions, and Game
Show Network LLC in the United States District Court for the Central District of
California. The plaintiff alleged that the Company, along with the other
defendants, stole his idea for the show Funny Money and also alleged, among
other things, copyright infringement. The complaint sought damages and
injunctive relief. This action was settled as of February 28, 2005. The Company
was not required to pay any consideration for the settlement.





On
October 27, 2004 Far Horizon Sales and Leasing LLC filed a complaint against the
Company’s subsidiary, National Lampoon Networks, Inc., in the Superior Court for
the County of Los Angeles. The plaintiff alleges that it suffered damages for
breach of contract, negligence and trespass to chattel related to the rental of
a coach bus and damage thereto. The plaintiff alleges damages in excess of
$79,000. Noting the extent of the damages, the value of the vehicle, and the
fact that there is insurance coverage, the Company in an effort to be
conservative, has accrued $50,000 on its books .





**NOTE
I - SUBSEQUENT EVENTS**





Between
May 1, 2005 and June 2, 2005, options to purchase 46,510 shares of common were
exercised by employees.





On May
31, 2005 the Company filed an amendment to the registration statement that was
filed on March 10, 2005 with the Securities and Exchange Commission. The Company
intends to use the net proceeds from the offering for the payment of the loan
made to the Company by N. Williams Family Investments, L.P. as well as for other
corporate purposes. The registration statement has not yet been declared
effective and there is no guarantee that the registration statement will ever be
declared effective. This information does not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.





On May
12, 2005, All Comedy Networks, Inc. filed a complaint in the Superior Court for
the State of California, County of Los Angeles against eight defendants,
including National Lampoon Radio Networks and National Lampoon Networks. The
complaint alleges that one of the defendants, Kent Emmons, was a founder,
shareholder, promoter and fiduciary of All Comedy Networks, Inc. The complaint
alleges that Mr. Emmons negotiated an agreement with National Lampoon Networks
to use the Company’s trademark in competition with All Comedy Networks, Inc. All
Comedy Networks, Inc. seeks actual damages in an amount to be proved at trial,
punitive damages, and an injunction to prohibit any of the defendants from
contacting its employees, investors and advertisers. Because this action was
filed only recently, no discovery has been undertaken. The Company believes this
was brought as a nuisance action against National Lampoon Radio Networks and
National Lampoon Networks and the Company intends to vigorously defend any
attempt by All Comedy Networks, Inc. to prosecute the action against those
entities.











**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**





The
Company is a media and entertainment company that creates and distributes
comedic content. The National Lampoon® brand was initially developed through
years of publication of National Lampoon magazine and the production of motion
pictures, including *National
Lampoon’s Animal House* and *National
Lampoon’s Vacation* . The
Company’s current business objective is to expand the use of the National
Lampoon® brand through motion picture and television development, production and
distribution of entertainment through its subsidiary, National Lampoon Networks,
Inc., a network of affiliated college television stations, expansion into the
home entertainment markets, and licensing our name.





The
Company’s primary business areas are comprised of:





**National
Lampoon Networks**





National
Lampoon Networks develops, produces and distributes comedic television
programming. National Lampoon Networks reaches nearly 4.8 million college
students in their dormitories and other places of residence through a network of
603 affiliated college and other television stations. For advertisers targeting
the young adult audience, National Lampoon Networks sells commercial and field
marketing services, such as product sampling and live promotional events hosted
on college and university campuses.





**Motion
Picture and Television Programming**





The
Company develops and produces made for television movies and programs and
provides production services, such as writing, project development and casting
assistance, for motion pictures that carry our brand. In recent years, the
Company has derived the bulk of its revenues from license fees relating to the
production of new motion pictures and from contingent compensation for motion
pictures previously produced by it including such movies as *National
Lampoon’s Animal House* and *National
Lampoon’s Vacation* . The
Company does not finance the production or distribution of any National Lampoon®
motion pictures. Instead, the Company relies on third parties to provide motion
picture financing and distribution. Prior to 2005, 20 motion pictures were
released using the National Lampoon® name. In March 2005 *National
Lampoon’s Going the Distance* was
released and two additional motion pictures are planned for release by the end
of 2005.








The
Company is involved in the production of television programs for broadcast
networks, cable channels, pay-per-view or the syndicated marketplace. The
Company anticipates that television production will continue to be part of its
business plan, as it creates or acquires new comedic content to be marketed
under the National Lampoon® name and to promote the National Lampoon®
trademark.





**Home
Entertainment**





The
Company is aggressively expanding into the home entertainment market by
repackaging existing material and developing and producing original material for
DVD distribution. The Company has agreements with Image Entertainment, Genius
Productions and Ventura Distribution, entities which are unrelated to it, to
produce and distribute several new titles in 2005. The agreements with these
entities require the Company to provide creative services for the projects, such
as writing or development. The products that result from these partnerships may
include shows for broadcast on National Lampoon Networks as well as original
National Lampoon® productions.





**Licensing**





In
addition to motion picture and television programming and publishing, the
Company licenses the National Lampoon® brand and content from its library for
use in a wide variety of products including radio broadcasts, recordings,
electronic games, videos and other consumer products and live
events.





**Publishing**





The
Company has been publishing books since 1972 and, to date, it has published over
28 titles including four recent publications, *1964
High School Reunion Year Book, National Lampoon’s Book of Love, National
Lampoon’s Big Book of True Facts* and *National
Lampoon’s Encyclopedia of Humor* . The
Company plans to publish approximately three books each year.





**Radio**





The
Company is a holder of a 25% interest in NL Radio, LLC, which was formed in
March 2005. The plan is to launch a radio network that will program an
entertainment radio format under the Company’s brand. The Company has licensed
the content of its radio library, as well as certain domain names, urls and
websites, to NL Radio, LLC for this purpose.








**Internet**





The
Company uses its Internet operations as an integral part of its business to
attract fresh comedic content from unrelated writers and contributors. The
Company uses this content in the development of stories, characters and
animation that will be converted into other media. The Company also operates a
web store through which consumers can purchase branded items directly from the
Company.





**National
Lampoon Tours**





The
Company recently began to offer group travel and entertainment packages. The
Company intends to achieve a market position in selected high volume, high
margin travel destinations that appeal to college students. The Company
initially prepared packages for Cabo San Lucas, Mexico and Las Vegas. The
packages include professional entertainment, theme parties and other attractions
for young adults. The Company markets these travel packages directly through
National Lampoon Networks, its website and third party agents.





**The
Company’s Revenue Sources**





The
sources of revenue from the Company’s business areas include:





·
    NATIONAL
      LAMPOON NETWORKS. The Company earns revenues from the sale of on-air
      advertising and from marketing fees earned through product sampling,
      promotional events and other live events.





·
    MOTION
      PICTURE AND TELEVISION PROGRAMMING. Besides licensing revenues, the
      Company earns revenues derived from participation in the profits of motion
      pictures, which varies from project to project, and from license fees for
      its television programming, which is produced for broadcast networks,
      cable channels and the syndicated marketplace. The Company also earns
      revenues from contingent compensation, such as compensation for providing
      producer services.





·
    LICENSING.
      The Company earns revenues based on royalties generated from licensing the
      National Lampoon® brand.





·
    HOME
      ENTERTAINMENT. The Company earns revenues based on royalties from the sale
      and rental of its branded comedic content on
DVD.





·
    PUBLISHING.
      The Company earns revenues based on royalties generated from the sale of
      its print products.





·
    INTERNET.
      The Company generates revenues from its website from the sale of banner
      ads, e-commerce, sponsorships, syndication of content originally developed
      for its website and the sale of branded
merchandise.





·
    RADIO.
      The Company expects to earn revenues from commissions for advertisement
      sales and trademark and licensing fees.








·
    TRAVEL
      SERVICES. The Company earns revenues from the sale of travel packages
      which are oriented to young adults and marketed on college campuses and
      through its website.





**Strategic
Objectives**





The
Company seeks to continue to provide National Lampoon® comedic content and
products to as many consumers as possible. The following describes the ways the
Company intends to achieve this goal.





·
    The
      Company plans to continue to expand National Lampoon Networks by adding
      new college and university affiliate stations, increasing advertising and
      marketing revenue and producing new television shows. The Company
      currently has six employees and one independent contractor who continually
      market to college and university affiliate stations to carry its
      programming and it intends to continue this practice for the foreseeable
      future. As the Company adds new stations, it expects its advertising and
      marketing revenue to increase. However, the Company does not have
      long-term agreements with college and university affiliate stations, and
      these stations may terminate their relationships with the Company at any
      time.





·
    The
      Company intends to expand its video and DVD library by increasing the
      number of products the Company produces and has distributed for home
      entertainment. The Company currently works primarily with three
      distributors, Genius Productions, Image Entertainment and Ventura
      Distribution. The Company’s distributors pay it to provide the creative
      content for designated projects. This requires the Company to find new
      content on an on-going basis. Once the project is completed, the
      distributor is not required to work with the Company on additional
      projects therefore the Company is continually seeking to build
      relationships with additional distributors.





·
    The
      Company plans to capitalize on its reputation and relationships with major
      studios and other multimedia companies to expand the use of the National
      Lampoon® brand;





·
    The
      Company plans to create new licensing opportunities in markets outside of
      publishing, film and television, such as games, records, radio programming
      and live events;





·
    The
      Company intends to attract an increased number of college students
      purchasing travel packages created by National Lampoon Tours. Because it
      took the Company more time than expected to organize National Lampoon
      Tours, it was unable to take full advantage of the 2004-2005 academic year
      college and university spring break travel season. The organizing
      activities are now complete, and the Company expects to be able to fully
      promote the travel packages during the 2005-2006 academic year. The
      Company expects to do this by advertising on its website and through field
      marketing.





·
    The
      Company plans to capitalize on opportunities provided by the Internet to
      merchandise its home entertainment and other
products.








·
    NL
      Radio, LLC plans to launch a radio network that will program an
      entertainment radio format and broadcast 24 hours a day, seven days a
      week. The Company owns a 25% interest in NL Radio,
LLC.





**Results
of Operations**





**Three
Months Ended April 30, 2005 as compared to the Three Months Ended April
30,**  **2004**





Summarized
financial information for the three month periods ended April 30, 2005 and 2004
for the Company’s segments is as follows:








Licensing
    
    Advertising
      & Promotion
    
    Production
    
    TravelServices
    
    TotalThree
      Months Ended April 30, 2005Segment
      revenue
    
    $
    443,443
    
    $
    581,490
    
    $
    33,333
    
    $
    83,724
    
    $
    1,141,990Segment
      operating (loss)
    
    $
    (216,734
    )
    $
    (88,740
    )
    $
    (900,826
    )
    $
    (222,768
    )
    $
    (1,429,068
    )Three
      Months Ended April 30, 2004Segment
      revenue
    
    $
    308,632
    
    $
    231,387
    
    $
    (39,250
    )
    $
    —
    
    $
    500,769Segment
      operating (loss)
    
    $
    (149,827
    )
    $
    (532,315
    )
    $
    (701,843
    )
    $
    —
    
    $
    (1,383,985
    )





**Licensing
Revenues**





Licensing
revenues for the three months ended April 30, 2005 were $443,443 as compared to
$308,632 for the three months ended April 30, 2004, representing an increase of
44%. This increase was attributable to the receipt of $22,500 that was paid for
branded products the Company delivered pursuant to its agreement with Genius
Productions, $80,000 paid by First Look Entertainment for DVD royalty upon
release of the film *National
Lampoon’s Black Ball* and
$15,000 paid by NL Radio, LLC for the license of *National
Lampoon® Radio Hour* programming. The Company also recognized $100,000 in revenues previously
classified as deferred revenues. These revenues were paid to the Company by
Multimedia Games, Inc./Create Tours Corp. for delivery of three concepts.
Multimedia Games, Inc./Create Tours Corp. has accepted one of the concepts for
development. During the three months ended April 30, 2005, the Company also
recognized $70,000 in revenues from the completion and delivery of 70 episodes
of television programming to An Eye for an Eye Productions LLC, $50,000 from
Buena Vista Internet Group for licensing National Lampoon® content for
distribution over wireless devices, and $32,000 from Hill & Brand for video
sales. These increases were offset by a decrease in the amount of $256,208 in
the annual royalty payment from the film *National
Lampoon’s Vacation* . During
the three months ended April 30, 2005, the Company received an annual royalty
payment of $47,206 as compared to a royalty payment of approximately $303,414
received during the three months ended April 30, 2004.








Costs
related to licensing revenues decreased to $224,607 during the three months
ended April 30, 2005 from $301,022 in costs during the three-month period ended
April 30, 2004, representing a decrease of 25%. These costs include a decrease
in website development and maintenance of $32,000 and $15,000 in live events
costs.





**Advertising
and Promotion Revenues**





During
the three months ended April 30, 2005, National Lampoon Network’s revenues
increased to $581,490 from $231,387 earned during the three months ended April
30, 2004, representing an increase of 151%. National Lampoon Network’s
advertising revenues totaled approximately $129,000 during the three months
ended April 30, 2005 as compared to $120,000 in advertising revenues earned
during the three months ended April 30, 2004, and its promotional and
sponsorship revenues totaled approximately $432,000 during the three months
ended April 30, 2005 as compared to promotional and sponsorship revenues of
approximately $123,000 earned during the three months ended April 30,
2004.





**Production
Revenues**





For the
three months ended April 30, 2005 production revenues were $33,333 compared to
$(39,250) for the three months ended April 30, 2004. This increase resulted from
the Company’s receipt of sponsorship revenues from SJD Media, as well as from an
adjustment to revenues previously recognized from Image Entertainment. This
adjustment reduced production revenues recognized during the three months ended
April 30, 2004 by $35,500.





Costs
related to production revenue for the three months ended April 30, 2005 were
$23,626 as compared to costs related to production revenue of $11,688 for the
three months ended April 30, 2004.





**Travel
Services Revenues**





During
the three months ended April 30, 2005, National Lampoon Tours recognized
revenues of $83,724. National Lampoon Tours began business in December 2004.





Costs
related to National Lampoon Tours’ revenues were $296,000 during the three
months ended April 30, 2005 as compared to $0 costs during the three-months
ended April 30, 2004. These costs included $190,000 for entertainment included
in the Las Vegas tour package, $76,000 for advertising and marketing the Las
Vegas tour package and $25,000 for advertising and marketing the Cabo San Lucas
tour package.





**Other
Costs and Expenses**





Amortization
of intangible assets, which consists of the costs of the Company’s acquisition
of the “National Lampoon®” trademark, was $60,000 during the three months ended
April 30, 2005 and April 30, 2004.








Selling,
general and administrative costs decreased to $1,266,807 during the three months
ended April 30, 2005 from $1,351,603 during the three months ended April 30,
2004. This decrease of approximately $84,796 or 6% resulted primarily from a
$57,000 decrease in corporate expenses including insurance, telephone, taxes and
licenses, a decrease of $60,000 in consulting fees, a $12,000 decrease in
marketing and promotion expenses, a $13,000 decrease in travel and a $10,000
decrease in rent expense. These decreases were offset by increased salaries
which included a bonus in the amount of $74,393 accrued for the Company’s
President, Douglas S. Bennett, pursuant to an employment agreement that
terminated on January 31, 2005, and bonuses of $25,000 accrued to the Company’s
Chief Executive Officer, Daniel Laikin, and to Mr. Bennett pursuant to
employment agreements that took effect on February 1, 2005.





During
the three months ended April 30, 2005, nonrecurring expenses totaling $65,000
were incurred for fees to register with the American Stock Exchange.





During
the three months ended April 30, 2005, expenses totaling $168,505 were incurred
from grants of stock, options and warrants to advisors and consultants as
compared to expenses totaling $161,881 attributable to grants of stock, options
and warrants that were incurred during the three-months ended April 30, 2004.





Interest
income of $1,343 was earned during the three months ended April 30, 2005 as
compared to interest income of $1,440 earned during the three months ended April
30, 2004. Other expense of $160,115 incurred during the three months ended April
30, 2005 resulted from the amortization of capitalized debt issuance costs.





For the
three months ended April 30, 2005, the Company had a net loss of $(1,429,068) as
compared to a net loss of $(1,383,985) for the three months ended April 30,
2004.





**Nine
Months Ended April 30, 2005 as compared to the Nine Months Ended April 30,
2004**





Summarized
financial information for the nine month periods ended April 30, 2005 and 2004
for the Company’s segments is as follows:





Licensing
    
    Advertising
      & Promotion
    
    Production
    
    TravelServices
    
    TotalNine
      Months Ended April 30, 2005Segment
      revenue
    
    $
    1,614,940
    
    $
    1,259,671
    
    $
    181,333
    
    $
    83,724
    
    $
    3,139,668Segment
      operating (loss)
    
    $
    (1,863,734
    )
    $
    (1,204,739
    )
    $
    (
      3,653,882
    )
    $
    (222,768
    )
    $
    (6,945,123
    )Nine
      Months Ended April 30, 2004Segment
      revenue
    
    $
    597,484
    
    $
    554,432
    
    
    335,913
    
    $
    —
    
    $
    1,487,829Segment
      operating (loss)
    
    $
    (591,827
    )
    $
    (2,162,316
    )
    
    (1,425,243
    )
    $
    —
    
    $
    (4,179,386
    )








**Licensing
Revenues**





Licensing
revenues of $1,614,940 for the nine months ended April 30, 2005 represent an
increase of approximately $1,017,000 or 170% over licensing revenues of $597,484
for the nine months ended April 30, 2004. Revenues from the film *National
Lampoon’s Animal House* increased by approximately $185,000,
to $365,000 for the nine months ended April 30, 2005 from $180,000 for the nine
months ended April 30, 2004. Since June 2000, these revenues have been paid
directly to the Company. Prior to June 2000, the revenues were paid to Yearbook
Movie Company, a partnership. Following a dispute between J2 Communications Inc.
and Heathdale Productions, Inc., the successors in interest to the original
partners of Yearbook Movie Company, and as part of a settlement agreement
between them, J2 Communications Inc. and Heathdale Productions, Inc. agreed to
allow Universal Pictures, Inc. to distribute the partnership’s share of the
revenues earned from *National
Lampoon’s Animal House* directly
to each partner, rather than to the partnership. The partnership continues to
exist and to hold the rights pursuant to which the partners are paid.  Additional
licensing revenues earned during the nine months ended April 30, 2005 included
$209,000 from Genius Productions for videos, $130,000 for use of the National
Lampoon® name on three feature films, $50,000 from Buena Vista Internet Group
for licensing National Lampoon® content for distribution over wireless devices,
$80,000 from Paramount Network Television as part of a television programming
arrangement and $15,000 paid by NL Radio, LLC for the license of *National
Lampoon® Radio Hour* programming. During the nine months ended April 30, 2005, the Company also
recognized $100,000 in revenues previously classified as deferred revenues from
Multimedia Games, Inc./Create Tours Corp., which paid this money to the Company
for delivery of three concepts. Multimedia Games, Inc./Create Tours Corp. has
accepted one of the concepts for development. During the nine months ended April
30, 2005, the Company also recognized $70,000 in revenues from the completion
and delivery of 70 episodes of television programming to An Eye for an Eye
Productions LLC and approximately $16,000 in video, Internet merchandise and
Internet advertising sales. During the nine months ended April 30, 2004, in
addition to $180,000 in licensing revenues from the film *National
Lampoon’s Animal House* , the
Company received approximately $20,000 from Activision for use of the National
Lampoon® name for a video game, $23,000 for Internet merchandise and
advertising, $27,000 from use of the name for television programs and
approximately $26,000 in publishing.





Costs
related to licensing revenues of $397,004 decreased by $30,485 or 7% in the nine
months ended April 30, 2005 from $427,489 in the nine months ended April 30,
2004. The primary reason for this decrease relates to a decrease of
approximately $33,000 in website writers’ fees. Amortization of intangible
assets, namely the costs of the Company’s acquisition of the “National Lampoon®”
trademark, was $180,000 during the nine months ended April 30, 2005 and April
30, 2004.








**Advertising
and Promotion Revenues**





Advertising
and promotion revenues from National Lampoon Networks totaled $1,259,671 during
the nine months ended April 30, 2005 as compared to $554,432 for the nine months
ended April 30, 2004, representing an increase of $705,239 or 127%. Advertising
revenues increased to approximately $436,422 during the nine months ended April
30, 2005, from $278,656 during the nine months ended April 30, 2004, which
represents an increase of $157,000 or 57%. Promotional revenues of $803,248 for
the nine months ended April 30, 2005 represents an increase of approximately
$514,972 or 179% from the $288,276 in promotional revenues the Company received
during the nine months ended April 30, 2004.





**Production
Revenues**





For the
nine months ended April 30, 2005, production revenues were $181,333 as compared
to $335,913 for the same period in 2004. This decrease in production revenues of
approximately $154,000 or 46% resulted primarily from a decrease in projects.
During the nine months ended April 30, 2005, the Company recognized
approximately $33,333 from sponsorship revenues from SJD Media, $30,000 for
television production from Fox Sports, $68,000 for videos produced for Image
Entertainment and $50,000 for videos produced for Genius Productions as compared
to revenues recognized during the nine months ended April 30, 2004 of
approximately $197,000 for the production of a television pilot for American
Movie Classics, $150,000 for comedy videos produced for Image Entertainment and
$28,000 for the production of a live event as well as a decrease of $(39,250)
from an adjustment to revenues previously recognized from Image Entertainment.





Costs
related to production revenues of $659,097 for the nine months ended April 30,
2005 represented a 42% decrease from the $1,123,168 in costs related to
production revenues for the nine months ended April 30, 2004. During the nine
months ended April 30, 2004, costs associated with the television pilot for
American Movie Classics totaled approximately $188,000, costs associated with
the video production for Image Entertainment totaled approximately $115,000 and
National Lampoon Networks’ live event sponsorship revenue costs totaled
approximately $16,000, accounting for the higher costs related to production
revenues for the period. During the nine months ended April 30, 2005, production
costs included approximately $46,000 associated with the videos produced for
Image Entertainment and $29,000 associated with the pilot for Fox Sports
Network. The remaining production costs consisted of production personnel
costs.





**Travel
Services Revenues**





During
the nine months ended April 30, 2005, National Lampoon Tours recognized revenues
of $83,724. National Lampoon Tours began business in December 2004.





**Other
Costs and Expenses**





Amortization
of capitalized production costs for National Lampoon Networks was $372,451
during each of the nine months ended April 30, 2005 and April 30,
2004.








Selling,
general and administrative costs during the nine months ended April 30, 2005
were $3,692,792 as compared to $3,458,481 for the nine months ended April 30,
2004. Selling, general and administrative costs for the nine months ended April
30, 2005 consisted primarily of bonuses totaling $220,000 paid to two employees.
These bonuses were paid with units of Series C Convertible Preferred Stock,
which the Company valued at $35.50 per unit. During the nine months ended April
30, 2005, the Company also accrued a bonus of $149,393 to its President, Douglas
S. Bennett, pursuant to an employment agreement that terminated on January 31,
2005, and bonuses of $25,000 were accrued to the Company’s Chief Executive
Officer, Daniel Laikin, and to Mr. Bennett, pursuant to employment agreements
that took effect on February 1, 2005.





In
addition, legal costs increased to $219,000 during the nine months ended April
30, 2005 from $166,000 incurred during the nine months ended April 30, 2004, an
increase of $53,000, and investor public relations costs increased during the
nine months ended April 30, 2005 to $138,000 from $29,000 incurred during the
nine months ended April 30, 2004, an increase of $109,000. These increases were
off-set by a decrease in accrued vacation of approximately $41,000 due to a new
vacation accrual policy and reduced interest expense of $25,000 due to the
conversion of loans to units of Series C Convertible Preferred Stock with
warrants attached. General and administration expenses were further offset by a
decrease in consulting fees of $182,000, marketing and promotion costs of
$77,000 and rent expense of $13,000.





During
the nine months ended April 30, 2005, the Company recorded expenses of $491,038
associated with the granting of stock, options and warrants to advisors and
consultants as compared to expenses of $479,997 incurred for the nine months
ended April 30, 2004. Expenses associated with the modification of warrants was
approximately $1,082,000 for the nine months ended April 30, 2005 as compared to
no expense for the nine months ended April 30, 2004. Warrants for the purchase
of common stock issued in May 2002 in connection with the sale of units of the
Company’s Series B Convertible Preferred Stock were modified to be identical in
price and term with the warrants issued in conjunction with the offering of the
Company’s Series C Convertible Preferred Stock. The excess of the value of the
modified warrants as compared to the original warrants was calculated according
to paragraph 188 of FAS 123. The excess amount, which included the right to
purchase 3,583,491 shares of the Company’s common stock, totaled $904,897, which
has been recognized as a charge to operations. Further, during the nine months
ended April 30, 2005, the Company modified certain options for the purchase of
common stock granted to James P. Jimirro. Pursuant to the terms of the J2
Communications Amended and Restated 1999 Stock Option, Deferred Stock and
Restricted Stock Plan, the options would have expired, if not exercised, 90 days
following Mr. Jimirro’s separation from service. The option agreements have been
amended so that they are not subject to this section of the J2 Communications
Amended and Restated 1999 Stock Option, Deferred Stock and Restricted Stock Plan
and will instead expire in accordance with the terms of the original grant. The
expense associated with this modification was $177,798. There was no
corresponding expense during the nine months ended April 30, 2004. On January
28, 2005 the Company recorded an expense of $2,577,497 representing costs
related to Mr. Jimirro’s separation from service, including a salary cost of
$2,523,800 and a payment of $53,697 to a leasing company in order to transfer
ownership of an automobile to Mr. Jimirro. There were no corresponding expenses
during the nine months ended April 30, 2004.








Interest
income during the nine months ended April 30, 2005 increased to approximately
$6,000 from $4,300 in interest income earned during the nine months ended April
30, 2004. This increase of $1,700 or 39% resulted from an increase in cash and
cash equivalents held during the nine months ended April 30, 2005 as compared to
the nine months ended April 30, 2004. Other expense of $332,783 in the nine
months ended April 30, 2005 resulted from forgiveness of a loan having an unpaid
balance of approximately $162,000 that was due from James P. Jimirro to the
Company. This loan forgiveness was part of the benefits paid or transferred to
Mr. Jimirro upon his separation from service in accordance with the terms of his
employment agreement. Other expense also includes the amortization of the
capitalized debt issuance costs of $167,000.





For the
nine months ended April 30, 2005, the Company had a net loss of $6,945,123 as
compared to a net loss of $4,179,386 for the nine months ended April 30, 2004,
representing an increase in loss of $2,765,737 or 67%. The increase in net loss
resulted primarily from costs of approximately $2,600,000 paid to Mr. Jimirro on
his separation from service, and the expense of approximately $1,082,695
associated with modifying the terms of stock options and warrants. An increase
in revenues of $1,651,000, to $3,139,000 earned during the nine months ended
April 30, 2005 as compared to $1,487,000 earned during the nine months ended
April 30, 2004, offset the increase of net loss. During the nine-month periods
ended April 30, 2005 and 2004, the Company had no significant provision for
income taxes due to the utilization of deferred tax valuation allowances. For
the nine months ended April 30, 2005, the Company recognized the beneficial
conversion feature attributable to the Series C Convertible Preferred Stock of
$2,280,906, which is treated as preferred dividend, as well as accrued dividends
of $801,900, as compared to no such expenses during the nine months ended April
30, 2004. The addition of the discount and dividend resulted in a net loss
attributable to common shareholders of $10,027,929 or $3.14 per share versus a
net loss attributable to common shareholders of $4,179,386 or $1.36 per share
for the nine months ended April 30, 2004.














**Liquidity
and Capital Resources**





Our
principal source of working capital during the nine months ended April 30, 2005
was proceeds from the issuance of units of our Series C Convertible Preferred
Stock with warrants attached.





For the
nine months ended April 30, 2005, the Company’s net cash flow used in operating
activities was ($5,464,251) as compared to $(3,480,366) of net cash flow used in
operating activities during the nine months ended April 30, 2004. The decreased
results are primarily attributable to the payout made to James P. Jimirro, the
Company’s former Chief Executive Officer and President, upon his separation from
service. Because the decrease of the expense associated with the granting of
stock, warrants, and options and the expense associated with the modification of
stock options and warrants are not cash related expenses, they were eliminated
from the calculation of cash flow used in operating activities for the nine
months ended April 30, 2005. The Company had cash and cash equivalents of
$516,226 at April 30, 2005 as compared to cash and cash equivalents of $484 at
April 30, 2004. The increase in cash is primarily due to the offering of units
of Series C Convertible Preferred Stock with warrants attached which resulted in
an infusion of approximately $3 million in cash.





As of
June 2, 2005 the Company had cash on hand of approximately $415,221 and
receivables totaling $326,842. This amount may not be sufficient to fund
operations through this fiscal year. The Company anticipates that any shortfall
will be covered by the sale of additional securities. If the Company is
successful in raising at least $11.25 million in an offering of its securities,
management believes that its cash on hand, along with the proceeds of the
offering and cash flow from operations, will provide the Company with adequate
cash to fund its operations for a period of at least 24 months.





The
Company’s principal source of working capital has been loans received from
Daniel Laikin, its Chief Executive Officer and a director and Timothy Durham, a
director. The aggregate amount of the loans owed to Mr. Laikin and Mr. Durham
was $4.6 million. These loans were paid with Series C Convertible Preferred
units, as described below.





During
the nine months ended April 30, 2005, the Company received $3.6 million in cash
proceeds from the offering of units composed of Series C Convertible Preferred
Stock and warrants to purchase common stock and the Company issued additional
units of these securities to pay the loans discussed above and to pay expenses
owed to Mr. Laikin.





On
January 28, 2005 the Company received a loan in the amount of $2.7 million from
N. Williams Family Investments, L.P. The proceeds of this loan were primarily
used to pay certain benefits to James P. Jimirro, the Company’s former Chief
Executive Officer and President, due upon his separation from service. The loan
accrues interest at the rate of 7% and is due to be repaid on the earlier of
January 28, 2006 or the date the Company closes an offering in which the gross
cash proceeds to it equals or exceeds $2,700,000. (The Company is required to
prepay the loan to the extent of any proceeds the Company receives from an
equity offering raising less than $2.7 million.) The loan is secured by a lien
against all of the Company’s assets.








On May
17, 2003, two notes payable totaling approximately $442,000 at April 30, 2002
were due to be paid in full. The notes represented money owed to legal firms
relating to work done in connection with the reorganization transaction that
took place in May 2002. The Company reached a settlement with one note holder in
December 2004 and paid that note, as it was re-negotiated, in full. Timothy
Durham, a director, paid the second note holder in full and the liability is now
owed to him. As of April 30, 2005, approximately $115,000 in principal remained
unpaid. The obligation to Mr. Durham is payable on demand. To date, no demand
has been made. The Company plans to pay this obligation with revenues earned by
its operations.





In recent
years, the Company’s operations have been characterized by ongoing capital
shortages caused by expenditures related to the initiation of several new
business activities. The Company has met these capital shortages by borrowing
money from members of the NLAG Group, which includes three of its directors, and
by selling its securities.





The
Company’s financial statements for the fiscal year ended July 31, 2004 contain
an explanatory paragraph as to its ability to continue as a “going concern.”
This qualification may impact the Company’s ability to obtain future financing.





**Commitments
For Capital Expenditures**





As of
April 30, 2005, the Company had no commitments for capital
expenditures.





**Off-Balance
Sheet Arrangements**





The
Company does 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 its credit rating, earnings, cash flows or stock price,
including requirements to perform under standby agreements.





**ITEM
3 - CONTROLS AND PROCEDURES**





Management,
including the Company’s Chief Executive Officer, President and its Chief
Financial Officer, carried out an evaluation of the effectiveness of the design
and operation of its disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive
Officer, President and the Chief Financial Officer concluded that the Company’s
disclosure controls and procedures are effective to ensure that information
required to be disclosed in its reports that it files or submits 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.





There
were no significant changes in the Company’s internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of their evaluation.














**PART
II - OTHER INFORMATION**





**Item
1 - Legal Proceedings**





Not
applicable.





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





On March
1, 2005 the Company issued to its attorneys, Richardson & Patel LLP, in
exchange for legal services rendered in connection with capital raising
transactions, 8,400 shares of common stock and a warrant to purchase 8,400
shares of its common stock. The warrant is exercisable through May 3, 2006 and
the exercise price is $4.09 as to 1,638 shares, $3.26 as to 4,377 shares and
$2.95 as to 2,385 shares. The Company issued these securities in reliance on
Section 4(2) of the Securities Act of 1933. There was no form of general
solicitation or general advertising undertaken and, as the Company’s legal
counsel, the acquirer occupies a status that affords it effective access to the
information registration would otherwise provide.





On March
23, 2005, the Company issued to Porter, LeVay & Rose 9,104 shares of
restricted common stock and issued to Regal Growth Funding, Inc. 3,666 shares of
restricted common stock. The common stock was issued for consulting services
that were rendered to the Company. The value of the common stock on the date of
grant was $3.20. The Company 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.




On April
13, 2005 the Company authorized for issuance to Porter, LeVay & Rose 4,536
shares of restricted common stock and issued to Regal Growth Funding, Inc. 2,268
shares of restricted common stock. The common stock was issued for consulting
services that were rendered to the Company. The per share value of the common
stock on the date of grant was $4.48. The Company 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.





On April
13, 2005 the Company authorized for issuance to Richardson & Patel LLP
19,186 shares of restricted common stock in exchange for legal services
rendered. The per share value of the common stock on the date of grant was
$4.25. The Company issued these securities in reliance on Section 4(2) of the
Securities Act of 1933. There was no form of general solicitation or general
advertising undertaken and, as the Company’s legal counsel, the acquirer
occupies a status that affords it effective access to the information
registration would otherwise provide.




On April
13, 2005 the Company authorized for issuance of 20,000 shares of restricted
common stock to Stephan Latieyre, an investor relations consultant, in exchange
for services rendered. The per share value of the common stock on the date of
grant was $4.25. The Company issued these securities in reliance on Section 4(2)
of the Securities Act of 1933. There was no form of general solicitation or
general advertising undertaken and the acquirer was an accredited
investor.








On April
13, 2005 the Company authorized for issuance of 20,000 shares of restricted
common stock to George Vandemann, a consultant, in exchange for services
rendered. The per share value of the common stock on the date of grant was
$4.25. The Company issued these securities in reliance on Section 4(2) of the
Securities Act of 1933. There was no form of general solicitation or general
advertising undertaken and the acquirer was an accredited investor.





**Item
3 - Defaults Upon Senior Securities**





None.














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





Not
applicable.





**Item
5 - Other Information**





On May
12, 2005, All Comedy Networks, Inc. filed a complaint in the Superior Court for
the State of California, County of Los Angeles against eight defendants,
including National Lampoon Radio Networks and National Lampoon Networks. The
complaint alleges that one of the defendants, Kent Emmons, was a founder,
shareholder, promoter and fiduciary of All Comedy Networks, Inc. The complaint
alleges that Mr. Emmons negotiated an agreement with National Lampoon Networks
to use the Company’s trademark in competition with All Comedy Networks, Inc. All
Comedy Networks, Inc. seeks actual damages in an amount to be proved at trial,
punitive damages, and an injunction to prohibit any of the defendants from
contacting its employees, investors and advertisers. Because this action was
filed only recently, no discovery has been undertaken. The Company believes this
was brought as a nuisance action against National Lampoon Radio Networks and
National Lampoon Networks and the Company intends to vigorously defend any
attempt by All Comedy Networks, Inc. to prosecute the action against those
entities.





**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)10.1
    Operating
      Agreement for NL Radio, LLC dated March 2, 2005 among K-Tahoe Investments,
      Ltd., Front Row Films, Inc. and National Lampoon, Inc.*
  (6)10.2
    Letter
      Agreement between NL Radio, LLC and National Lampoon,
  Inc.*31.1
    Certification
      by Chief Executive Officer pursuant to section 302 of the Sarbanes Oxley
      Act of 2002*31.2
    Certification
      by President/Chief Financial Officer pursuant to section 302 of the
      Sarbanes Oxley Act of 2002*32
    Certification
      by Chief Executive Officer and President/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, 2004 filed with the Securities and Exchange Commission on October
29, 2004.


(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, 2004.


(6) The
Registrant has omitted certain portions of this exhibit pursuant to a request
for confidential treatment. The omitted material has been filed separately with
the Securities and Exchange Commission.











**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.





Date: June 14, 2005
    NATIONAL LAMPOON,
      INC.By:
    /s/ Daniel S.
  LaikinDaniel S. Laikin, Chief Executive OfficerTitle


****By:
    /s/ Douglas S.
    BennettDouglas S. Bennett, Chief Financial Officer