~~Table of Contents~~UNITED STATES

~~UNITED STATES~~ SECURITIES AND EXCHANGE COMMISSION

~~Washington~~WASHINGTON, D.C. 20549

~~Form~~ FORM 10-Q

~~Quarterly~~T ~~Report~~QUARTERLY REPORT ~~Pursuant~~PURSUANT toTO ~~Section~~ SECTION 13 orOR 15(d) ~~of the~~OF ~~Securities~~THE ~~Exchange~~SECURITIES ~~Act~~EXCHANGE ofACT ~~1934~~OF 1934

For the quarterly ~~Quarterly~~period ~~Period~~ended: ~~Ended~~ April 30, ~~2003 Commission File No. 0-15284~~ 2009

~~NATIONAL LAMPOON, INC.~~ OR

~~(Exact~~o ~~name~~TRANSITION ofREPORT PURSUANT ~~registrant~~TO asSECTION ~~specified~~13 inOR ~~its charter~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~California~~For ~~(State~~the transition orperiod ~~other~~from ~~jurisdiction~~___________________________ ~~of incorporation) 95-4053296 (I.R.S. Employer Identification No.)~~to ______________________________________

~~10850 Wilshire Blvd., Suite 1000~~Commission ~~Los~~file ~~Angeles,~~number: ~~California 90024 (Address of principal executive offices)~~ 0-15284

~~Registrant’s telephone number: (310) 474-5252~~NATIONAL LAMPOON, INC.

~~Indicate by check mark whether the registrant~~ (~~1) has filed all reports~~Exact ~~required~~name ~~to be filed by Section 13 or 15(d)~~ of ~~the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the~~ registrant ~~was~~as ~~required~~specified toin ~~file~~its ~~such reports~~charter)~~, and (2) has been subject to such filing requirements for the past 90 days.~~

~~YES~~Delaware x(State NOor o other jurisdiction of Incorporation or organization) 95-4053296 (I.R.S. Employer Identification No.) 8228 Sunset Boulevard Los Angeles, CA 90046 (Address of principal executive offices) (Zip Code) (310) 474-5252 (Registrant's telephone number including area code)

~~As of June 13~~(Former name, ~~2003~~former ~~the~~address ~~registrant~~and ~~had~~former 1fiscal year,~~510,690~~ ~~shares~~if ofchanged ~~its~~since ~~common stock~~last ~~outstanding.~~ report)

~~TABLE~~Indicate by OFcheck ~~CONTENTS~~mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.

PART I — FINANCIAL INFORMATION
	Item 1 — Financial Statements
NATIONAL LAMPOON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2 — Management’s Discussion and Analysis of Financial Position and Results of Operations
PART II — OTHER INFORMATION
	Item 1 — Legal Proceedings
	Item 6 — Exhibits and Reports on Form 10-K
PART IV.
SIGNATURES
EXHIBIT 99.1

Yes x No o

~~Table~~Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of ~~Contents~~Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No [ (The registrant is not subject to this Regulation.)]

~~PART~~Indicate by Icheck —mark ~~FINANCIAL~~whether ~~INFORMATION~~the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

~~Item 1~~Large —accelerated ~~Financial~~filer ~~Statements~~ o Accelerated filer o Non-accelerated filer o Smaller reporting company x (Do not check if a smaller reporting company)

~~NATIONAL~~Indicate by ~~LAMPOON,~~check ~~INC.~~mark ~~AND~~whether ~~SUBSIDIARIES CONSOLIDATED~~the ~~BALANCE~~registrant ~~SHEETS~~is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

					AS OF			AS OF
					APR. 30, 2003			JUL. 31, 2002
					(UNAUDITED)
CURRENT ASSETS
	Cash and cash equivalents				$	163,201		$	1,024,207
		Accounts receivable				50,213			—
	Prepaid expenses and other current assets					24,090			17,323
				Total current assets		237,504			1,041,530
NON-CURRENT ASSETS
	Capitalized production costs					335,932			—
	Fixed assets, net of accumulated depreciation					49,212			7,123
	Intangible assets					6,505,732			5,964,732
	Accumulated amortization of intangible assets					(3,606,370	)		(3,268,578	)
	Other assets					4,500			—
				Total non-current assets		3,289,006			2,703,277
TOTAL ASSETS					$	3,526,510		$	3,744,807
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
	Accounts payable				$	183,655		$	310,951
	Accrued expenses					403,349			490,244
	Notes payable, including related parties of $576,053					991,053			415,000
	Deferred income					100,000			—
			TOTAL LIABILITIES			1,678,057			1,216,195
MINORITY INTEREST						—			—
SHAREHOLDERS’ EQUITY
	Preferred Stock Series B, par value $.0001, 68,406 shares authorized, 63,607 and 40,244 shares issued respectively					4,921,618			2,585,318
	Common Stock, no par value, 15,000,000 shares authorized, 1,501,190 and 1,385,483 shares issued, respectively					12,087,254			9,986,762
	Less: Note receivable on common stock					(155,780	)		(151,460	)
				deferred compensation		(1,067,301	)		—
	Accumulated deficit					(13,937,338	)		(9,892,008	)
			TOTAL SHAREHOLDERS’ EQUITY			1,848,453			2,528,612
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY					$	3,526,510		$	3,744,807

APPLICABLE ONLY TO CORPORATE ISSUERS

~~The~~Indicate the ~~accompanying~~number ~~notes~~of ~~are~~shares anoutstanding ~~integral~~of ~~part~~each of ~~these~~the ~~consolidated~~issuer's ~~financial~~classes of common ~~statements~~stock, as of the latest practicable date. The registrant had 9,499,495 shares of common stock, $0.0001 par value, issued and outstanding as of September 24, 2009.

2FORWARD LOOKING STATEMENTS

~~Table~~This Quarterly Report on Form 10-Q contains “forward-looking statements”. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “may,” and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of ~~Contents~~future events or circumstances are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to the following:

~~NATIONAL~~· ~~LAMPOON~~a decline in the general state of the economy, ~~INC.~~which ~~AND~~impacts ~~SUBSIDIARIES CONSOLIDATED~~the ~~STATEMENTS~~amount OFof ~~OPERATIONS~~ money spent by consumers for entertainment products,

~~(UNAUDITED)~~ · whether we will be able to raise capital as and when we need it,

				THREE MONTHS						NINE MONTHS
				ENDED APR. 30,						ENDED APR. 30,
				2003			2002			2003			2002
REVENUE
		Trademark		$	267,771		$	426,068		$	455,436		$	796,516
		Consumer products			5,080			17,379			9,932			22,453
		Advertising and promotion			72,063			—			82,063			—
			Total revenue		344,914			443,447			547,431			818,969
COSTS AND EXPENSES
		Costs related to trademark revenue			68,032			53,703			75,743			64,593
		Costs related to consumer products revenue			3,151			6,697			27,562			21,233
		Television promotion and distribution costs			113,491			—			469,731			—
		Amortization of intangible assets			127,625			60,000			337,792			180,000
		Selling, general & administrative expenses			1,079,697			426,583			2,996,950			1,348,821
		Stock, warrants, & options issued for services			112,884			—			819,366			—
		Stock appreciation rights expense/(benefit)			—			—			—			(843,096	)
		Conversion of SAR’s to stock options			—			—			—			140,894
			Total costs and expenses		1,504,880			546,983			4,727,144			912,445
			OPERATING LOSS		(1,159,966	)		(103,536	)		(4,179,713	)		(93,476	)
OTHER INCOME
		Interest income			1,446			2,610			5,594			8,974
		Other income			—			—			32,214			—
			Total other income		1,446			2,610			37,808			8,974
LOSS BEFORE MINORITY INTEREST AND AND INCOME TAXES					(1,158,520	)		(100,926	)		(4,141,905	)		(84,502	)
Minority interest in loss of consolidated subsidiary					—			—			99,000			—
	Provision for state income taxes				800			800			2,424			1,600
			NET LOSS		($1,159,320	)		($101,726	)		($4,045,329	)		($86,102	)
	Net loss per share — basic and diluted				($0.77	)		($0.07	)		($2.76	)		($0.06	)
	Weighted average number of common Shares — basic and diluted				1,501,190			1,381,085			1,463,419			1,379,654

·	whether the entertainment products we produce or to which we license our brand will generate significant sales,

~~The~~· ~~accompanying~~our ~~notes~~overall ~~are~~ability anto ~~integral~~successfully ~~part~~compete ofin ~~these~~our ~~consolidated~~market ~~financial statements.~~ and our industry,

3 · whether we will continue to receive the services of our executive officers and directors, particularly our Chief Executive Officer, Tim Durham,

~~Table~~· the outcome of ~~Contents~~various legal actions to which we are currently a party;

~~NATIONAL~~· ~~LAMPOON~~unanticipated increases in development, ~~INC.~~production ~~AND~~or ~~SUBSIDIARIES CONSOLIDATED~~marketing ~~STATEMENTS~~expenses OFrelated ~~CASH~~to ~~FLOWS (UNAUDITED)~~ our various business activities,

				FOR THE NINE MONTHS
				ENDED APR. 30,
				2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss				($4,045,329	)		($86,102	)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation and amortization			441,264			188,451
		Stock appreciation rights expense/(benefit)			—			(843,096	)
		Conversion of stock appreciation rights to stock options			—			140,894
		Stock, options and warrants issued for services			819,366			146,000
			Minority interest		(99,000	)		—
		Other			(4,320	)		(4,320	)
	Changes in assets and liabilities:
		Increase in accounts receivable			(50,213	)		—
		(Increase)/decrease in other current assets			(6,767	)		1,558
			(Increase) in deferred costs		—			(482,543	)
		(Increase) in other assets			(4,500	)		—
		(Decrease) in accounts payable			(127,295	)		606,184
		(Decrease)/increase in accrued expenses			(86,897	)		373,853
		(Decrease) in settlement payable			—			(203,117	)
		Increase in deferred revenues			100,000			—
		Increase in notes payable			576,053			—
		Increase in extension payments			—			250,000
	NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES				(2,487,638	)		87,762
CASH FLOWS FROM INVESTING ACTIVITIES:
	Acquisition of Burly Bear networks				(200,000	)		—
	Purchase of fixed assets				(56,455	)		—
	Film Library				(267,038	)		—
	NET CASH AND CASH EQUIVALENTS USED IN INVESTING ACTIVITIES				(523,493	)		—
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from Series B preferred stock issuance				2,115,000
	Exercise of stock options				35,125			70,726
	NET CASH AND CASH EQUIVALENTS (USED IN)/ PROVIDED BY FINANCING ACTIVITIES				2,150,125			70,726
NET INCREASE/(DECREASE) IN CASH AND AND CASH EQUIVALENTS					(861,006	)		158,488
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD					1,024,207			324,472
CASH AND CASH EQUIVALENTS END OF PERIOD				$	163,201		$	482,960
Supplemental disclosure of non-cash investing and financing activities:
Stock, warrants, and options issued for services				$	819,366		$	146,000
Common stock issued in Burly Bear Acquisition				$	400,000			—
Conversion of Stock Appreciation Rights					—		$	140,894

and other factors, some of which will be outside our control. You are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K.

~~The~~PART I ~~accompanying~~- ~~notes~~FINANCIAL ~~are an integral part of these consolidated financial statements.~~ INFORMATION

4Item 1 - Condensed Consolidated Financial Statements

NATIONAL LAMPOON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	As of			As of
	April 30,			July 31,
ASSETS	2009			2008
	(UNAUDITED)
CURRENT ASSETS
Cash	$	50,191		$	2,267
Accounts receivable, net of reserves of $545,642 and $181,619, respectively		453,851			1,640,994
Canadian tax credits receivable		215,481			226,729
Prepaid expenses and other current assets		286,492			78,464
Total current assets		1,006,015			1,948,454

Fixed assets, net of accumulated depreciation of $209,954 and $193,738, respectively		29,640			39,283
Capitalized production costs, net of $5,805,980 and $5,709,969 of amortization, respectively		5,141,575			5,017,567
Capitalized publishing costs, net of $607,052 and $496,477 of amortization, respectively		9,251			104,278
Intangible assets, net of accumulated amortization of $5,025,430 and $4,719,119, respectively		1,657,055			1,956,871
Fair value of available-for-sale securities		35,308			588,461
Total non-current assets		6,872,829			7,706,460
TOTAL ASSETS	$	7,878,844		$	9,654,914

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES
Accounts payable	$	1,695,515		$	1,340,157
Accrued expenses		365,219			310,691
Notes payable secured by Canadian tax credits receivable		215,481			226,729
Deferred income		1,737,440			1,007,960
Notes payable - related party, including interest of $126,994 and $64,036, respectively		1,430,426			1,169,015
Production loans – including interest of $8,589 and $0, respectively		158,589			-
Production loans – related party, including interest of $233,251 and $168,837, respectively		1,076,797			1,147,763
Total current liabilities		6,679,467			5,202,315

Production loans – including interest of $ 85,726 and $0, respectively		1,585,726			-
Production loans – related party, including interest of $452,337 and $321,347, respectively		2,130,429			2,145,204
TOTAL LIABILITIES		10,395,622			7,347,519


Accrued dividends payable in common stock		579,675

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY (DEFICIENCY)
Series B Convertible Preferred Stock, par value $.0001 per share, 68,406 shares authorized, 61,832 and 61,832 shares issued and outstanding, respectively		6			6
Series C Convertible Preferred Stock, par value $.0001 per share, 250,000 shares authorized, 190,247 and 190,247 shares issued and outstanding, respectively		18			18
Series D Convertible Preferred Stock, par value $.0001 per share, 500,000 shares authorized, 163,261 and 148,247 shares issued and outstanding, respectively		16			15
Common Stock, par value $.0001 per share, 60,000,000 shares authorized, 9,499,495 and 9,325,087 shares issued and outstanding, respectively		951			933
Common stock issuable, 859,886 and 812,143 shares of common stock, respectively		1,201,468			1,161,364
Additional paid-in capital		43,481,345			43,500,856
Accumulated Other Comprehensive income		35,308			588,461
Accumulated deficit		(47,815,565	)		(42,944,258	)
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY)		(3,096,453	)		2,307,395
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)	$	7,878,844		$	9,654,914

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

~~NATIONAL LAMPOON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ 1

NOTE A — BASIS OF PRESENTATION AND GOING CONCERN

NATIONAL LAMPOON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)


	Three months ended April 30,						Nine months ended April 30,
	2009			2008			2009			2008

REVENUES
Production	$	-		$	265,828		$	49,855		$	265,828
Licensing		14,569			1,717,552			674,026			2,272,968
Advertising & Promotion		92,438			553,019			976,879			1,159,195
Publishing		-			(55,241	)		31,479			(21,091	)
Distribution		100,599			154,772			323,179			159,831
Tours		-			-						110,000
Total revenues		207,606			2,635,930			2,055,418			3,946,731

COSTS AND EXPENSES
Costs related to production revenue		16,810			21,900			78,728			40,948
Costs related to licensing revenue		9,863			41,243			44,804			84,394
Costs related to advertising and promotion revenues		51,371			68,893			337,866			404,506
Costs related to publishing revenues		-			76,080			128,108			124,125
Costs related to distribution revenues		15,499			92,311			139,164			106,811
Amortization of capitalized production costs		9,012			1,208,416			60,005			1,208,937
Amortization of intangible assets		93,226			61,637			306,311			184,021
Impairment of capitalized production costs		-			-			2,371,575			-
Selling, general and administrative expenses		710,758			938,022			3,278,512			4,058,679
Total costs and expenses		906,539			2,508,502			6,745,073			6,212,421
OPERATING INCOME (LOSS)		(698,933	)		127,428			(4,689,655	)		(2,265,690	)

OTHER INCOME (EXPENSE)
Interest expense		(83,086	)		(29,039	)		(212,288	)		(74,745	)
Write off of royalty payable					-			-			396,250
Other income		2,238			(645	)		30,636			25,639
Total other income (expense)		(80,848	)		(29,684	)		(181,652	)		347,144

NET INCOME (LOSS)		(779,781	)		97,744			(4,871,307	)		(1,918,546	)
Preferred stock dividends		(287,339	)		(292,356	)		(872,010	)		(887,898	)
Net loss attributable to common shareholders	$	(1,067,120	)	$	(194,612	)	$	(5,743,317	)	$	(2,806,444	)

Net loss per share attributable to common shareholder - basic and diluted	$	(0.10	)	$	(0.02	)	$	(0.56	)	$	(0.34	)
Weighted average number of common shares - basic and diluted		10,359,380			8,465,847			10,317,169			8,342,931

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

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements. Accordingly, they do not include all of the information and disclosures required for annual financial statements. These financial statements should be read in conjunction with the financial statements and related footnotes for the year ended July 31, 2002 included in the J2 Communications (“Company” or “Registrant”) annual report on Form 10-K for that period. 2

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, 2003, and the results of operations and cash flows for the three and nine month periods ended April 30, 2003 and 2002 have been included.

NATIONAL LAMPOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE NINE MONTHS ENDED APRIL 30, 2009
(UNAUDITED)

																		Accumulated
							Preferred				Common		Common		Additional			Other
	Series B		Series C		Series D		Stock		Common		Stock		Stock		Paid-in			Comprehensive			Accumulated
	Shares		Shares		Shares		Amount		Shares		Amount		Issuable		Capital			Income			Deficit			Total
Balance at August 1, 2008		61,832		190,247		148,247	$	39		9,325,087	$	933	$	1,161,364	$	43,500,856		$	588,461		$	(42,944,258	)	$	2,307,395
Fair value of stock issued for services		-		-		-		-		89,086		9		-		93,721			-			-			93,730
Exercise of warrants for common stock		-		-		-		-		85,322		9		-		151,429			-			-			151,438
Fair value vesting of options and warrants issued to consultants		-		-		-		-		-		-		-		16,429			-			-			16,429
Fair value of vesting of employee stock options		-		-		-		-		-		-		-		338,690			-			-			338,690
Preferred stock dividend accrual		-		-		-		-		-		-		-		(872,010	)		-			-			(872,010	)
Payment of Series B and Series C dividends into Series D Shares		-		-		15,014		1		-				-		252,230			-			-			252,231
Common stock issuable on conversion of accrued dividends on preferred stock into Common Shares		-		-		-		-				-		40,104		-			-			-			40,104
Decrease in fair value of available-for-sale securities		-		-		-		-		-		-		-		-			(553,153	)		-			(553,153	)
Net Loss for the period		-		-		-		-		-		-		-		-			-			(4,871,307	)		(4,871,307	)
Balance at April 30, 2009		61,832		190,247		163,261	$	40		9,499,495	$	951	$	1,201,468	$	43,481,345		$	35,308		$	(47,815,565	)	$	(3,096,453	)

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

The results of operations for the three and nine month periods ended April 30, 2003 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, 2002. 3

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. Since the consummation of the Reorganization Transactions (see the Company’s Annual Report on Form 10-K for the year ended July 31, 2002), we have initiated a number of new business activities, and significantly increased our overhead by the hiring of new employees and consultants. To date, these operations have provided limited operating revenue, and we have been relying on capital received from NLAG Group in connection with the securities purchased in connections with the Reorganization Transaction, and the subsequent investment by the NLAG Group, and Messrs. Laikin, Skjodt and Durham, to fund operations. Since the consummation of the Reorganization Transaction, in which we received $2,085,318, subsequent NLAG investments have provided us with and additional $3,331,000, including $200,000 of this amount which was allocated for the Burly Bear transaction. We are currently exploring other transactions to secure additional financing, although in the near term expect to continue to rely on the funding provided by NLAG and its affiliates. Our audited financial statements for the year ended July 31, 2002 include a going concern explanatory paragraph, which could make any additional financing transaction more difficult to consummate.

NATIONAL LAMPOON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
	Nine months ended
	April 30,
	2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(4,871,307	)	$	(1,918,546	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		16,402			13,164
Amortization of intangible assets		306,311			184,021
Loss on disposal of fixed assets		925			3,145
Fair value of shares issued for services		93,730			515,168
Fair value of vested stock, options and warrants		355,119			984,046
Amortization of capitalized production costs		60,005			1,208,937
Provision for doubtful accounts		375,668			-
Write off of royalty payable		-			(396,250	)
Impairment of capitalized film costs		2,371,575			-
Changes in assets and liabilities
Decrease / (Increase) in accounts receivable		811,475			(1,202,832	)
Decrease / (Increase) in Canadian tax credits receivable		11,248			(223,459	)
(Increase) in prepaid expenses and other assets		(208,028	)		(20,215	)
Decrease / (Increase) in publishing costs		95,027			(36,763	)
(Increase) in production costs		(2,555,588	)		(1,093,877	)
Increase in accounts payable		355,358			428,243
Increase in accrued expenses		54,528			142,903
Increase in deferred revenues		729,480			459,536
NET CASH USED IN OPERATING ACTIVITIES		(1,998,072	)		(952,779	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(7,684	)		(13,096	)
Purchase of intangible assets		(6,495	)		(158,781	)
NET CASH USED IN INVESTING ACTIVITIES		(14,179	)		(171,877	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable, secured by Canadian tax credits receivable		(11,248	)
Borrowings on notes payable, secured by Canadian tax credits receivable					223,459
Borrowings on production loans		1,744,315
Payments of notes payable, related party		(183,490	)		(388,709	)
Proceeds from notes payable, related party		444,901			1,039,007
Borrowings on production loans, related party		1,074,558			581,181
Payments on production loans, related party		(1,160,299	)		(450,491	)
Proceeds from the exercise of stock options		-			8,000
Proceeds from the exercise of warrants		151,438			33,434
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,060,175			1,053,881

NET (DECREASE)/INCREASE IN CASH		47,924			(70,775	)
CASH AT BEGINNING OF PERIOD		2,267			85,706
CASH AT END OF PERIOD	$	50,191		$	14,931

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Taxes	$	-		$	-
Interest	$	7,660		$	2,472
Non-cash investing and financing activities:
Accrued dividends on preferred stock payable in common shares and Series D convertible preferred stock	$	872,010		$	887,898
Conversion of accrued dividends on Convertible Preferred Stock to common stock	$	-		$	58,612
Common stock to be issued as payment of accrued dividends on preferred stock	$	40,104		$	-
Stock issued in exchange for intangible assets	$	-		$	11,425
(Decrease) / Increase in fair value of available-for-sale securities	$	(553,153	)	$	882,692
Series D preferred stock issued as payment for accrued dividends on preferred stock	$	252,231		$	-

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

~~NOTE B — INTANGIBLE ASSETS~~ 4

~~There was no reclassification necessary of intangible assets related to the~~NOTE ~~adoption~~A of- ~~SFAS~~BUSINESS ~~142~~ORGANIZATION ~~since~~AND ~~all~~SUMMARY ~~balances~~OF ~~were~~SIGNIFICANT ~~previously classified as~~ACCOUNTING ~~intangible assets. The implementation of SFAS 142 had no material impact on the Company’s financial statements.~~ POLICIES

~~NOTE~~Basis Cof Presentation. —The interim ~~CAPITALIZED~~condensed ~~FILM~~consolidated ~~COSTS~~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, 2009 and the results of operations for the three and nine months ended April 30, 2009 and 2008 and cash flows for the nine months ended April 30, 2009 and 2008.

~~Pursuant~~Certain information toand ~~Statement~~footnote ofdisclosures ~~Position~~normally ~~(“SOP”)~~included ~~00-2,~~in ~~“Accounting~~financial bystatements that ~~Producers~~have orbeen presented in accordance with generally accepted accounting ~~Distributors~~principles ofhave ~~Films”,~~been ~~issued~~condensed byor ~~the~~omitted ~~Accounting~~pursuant ~~Standards~~to ~~Executive~~the ~~Committee~~rules and regulations of the ~~American~~Securities ~~Institute~~and ofExchange ~~Certified~~Commission ~~Public~~with ~~Accountants~~respect to interim financial statements, although management of the Company ~~values~~believes that the disclosures ~~its~~contained ~~film~~in ~~costs~~these atfinancial ~~the~~statements ~~lower~~are ofadequate ~~unamortized~~to ~~cost~~make orthe ~~net~~information presented ~~realizable~~therein ~~value~~not onmisleading. For anfurther information, refer to ~~individual~~the ~~title~~consolidated ~~basis~~financial statements and notes thereto included in ~~accordance~~the Company’s ~~with~~Annual ~~generally~~Report ~~accepted~~on Form 10-K for the fiscal year ended July 31, 2008, as filed with the Securities and Exchange Commission.

5The Company’s results of operations for the three and nine months ended April 30, 2009 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending July 31, 2009.

~~Table~~The condensed consolidated financial statements of ~~Contents~~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. 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.

~~accounting~~Going ~~principles~~Concern. ~~Capitalized~~The ~~film~~accompanying ~~costs~~condensed ~~represent~~consolidated ~~those~~financial ~~costs~~statements have ~~incurred~~been inprepared assuming the Company will continue as a going concern. The ~~development~~Company had a net loss of $4,871,307 for the nine months ended April 30, 2009, ~~production~~as well as negative working capital of $5,673,452 and ~~distribution~~a stockholders’ deficiency of ~~television~~$3,096,453 ~~projects~~as of April 30, 2009, along with net losses for the prior two years of $1,686,974 and $2,504,170. ~~Amortization~~Additionally, on December 15, 2008 the United States Securities and Exchange Commission issued a release, and the United States Attorney for the Eastern District of ~~film~~Pennsylvania ~~cost~~announced, that isthey had charged seven individuals and two corporations with engaging in three separate fraudulent schemes to ~~expense~~manipulate the market for publicly traded securities through the payment of prearranged kickbacks. The defendants include National Lampoon, Inc. and ~~third~~Daniel ~~party~~S. ~~participation~~Laikin ~~are~~(See ~~accrued~~Note G). Also on December 15, 2008, ~~using~~the United States Attorney for the ~~individual~~ ~~film~~Eastern ~~forecast~~District ~~method~~of ~~whereby~~Pennsylvania separately ~~expense~~announced iscriminal ~~recognized~~charges ininvolving the ~~proportion~~same conduct. Furthermore, ~~that~~on ~~current~~January ~~period~~9, ~~revenues~~2009 ~~bear~~our board of directors decided to anvoluntarily ~~estimate~~delist ofour common ~~ultimate~~stock, ~~revenues~~par value $0.0001 per share, from NYSE Amex Equities. These ~~estimates~~factors ofraise ~~revenues~~substantial ~~are~~doubt ~~prepared~~about ~~and~~the ~~reviewed~~Company's ~~periodically~~ability byto ~~management~~continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

~~NOTE D — EARNINGS PER SHARE~~ 5

NATIONAL LAMPOON, INC. AND SUBSIDIARIES

~~Diluted earnings per share amounts are calculated using the treasury~~NOTES ~~method~~TO ~~and~~CONDENSED ~~are~~CONSOLIDATED ~~based~~FINANCIAL ~~upon~~STATEMENTS the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares are excluded from the computation in periods in which they would have an anti-dilutive effect. The difference between basic and diluted earnings per share is solely attributable to stock options, which are considered anti-dilutive when option exercise prices exceed the weighted average market price per share of common stock during the period. (CONTINUED)

~~Options to purchase 1,703,298 common shares are not included in the~~NINE ~~calculation~~MONTHS ofENDING ~~diluted~~APRIL ~~earnings per share for the nine month period ended April~~ 30, ~~2003,~~2009 ~~because~~AND ~~they are anti-dilutive. There are also 1,791,746 shares convertible to common and 1,791,746 warrants exercisable to common stock that are excluded from the calculation because they are antidilutive.~~ 2008

~~NOTE E — SEGMENT INFORMATION~~ (UNAUDITED)

~~The~~Historically, our ~~Company~~principal ~~operates~~sources inof ~~three~~funds ~~business~~used ~~segments:~~for ~~licensing~~operations and ~~exploitation~~ ofworking ~~the~~capital ~~“National~~have ~~Lampoon”~~been revenues ~~trademark~~ and ~~related~~loans ~~properties;~~received ~~sale of consumer products~~ from ~~the~~Daniel ~~nationallampoon~~S.~~com~~ ~~website~~Laikin, ~~and~~our ~~other~~former ~~consumer~~Chief Executive ~~product~~Officer, ~~sales;~~ and ~~television~~Timothy ~~production~~Durham, ~~and~~our ~~distribution~~current ~~from~~Chief ~~the~~Executive ~~National Lampoon Network~~Officer. ~~Segment~~The ~~operating~~aggregate amount ~~income/(loss)~~of ~~excludes~~ the ~~amortization~~loans ~~of intangible~~and ~~assets,~~accrued ~~stock appreciation rights costs,~~ interest ~~income,~~owed ~~certain corporate expenses related~~ to ~~prior~~Mr. ~~year~~Laikin ~~Recent~~and ~~Developments~~Mr. —Durham ~~which led to the~~at ~~Reorganization~~April ~~Transaction~~30, ~~and~~2009 ~~income~~was ~~taxes. Selling~~$1,508,594 ~~general~~as ~~and administrative~~compared ~~expenses not specifically attributable~~ to ~~any~~$1,244,178 ~~segment~~at ~~have~~July ~~been allocated~~31, ~~equally between the trademark and internet segments~~2008. ~~Summarized~~These ~~financial~~two ~~information~~individuals ~~for~~have ~~the~~made ~~three~~no ~~and~~further ~~nine~~commitment ~~month~~to ~~periods~~provide ~~ended~~loans ~~April 30,~~to ~~2003 and~~us ~~2002~~to ~~concerning~~meet any ~~the~~immediate ~~Company’s~~working ~~segments~~capital ~~is as follows:~~ requirements.

		Trademark			Consumer Prod			TV			Total
Three Months Ended April 30, 2003
	Segment revenue	$	268,000		$	5,000		$	72,000		$	345,000
	Segment operating (loss)/income		(130,000	)		(385,000	)		(517,000	)		(1,032,000	)
Three Months Ended April 30, 2002
	Segment revenue	$	426,000		$	17,000		$	0		$	443,000
	Segment operating income/(loss)		241,000			(139,000	)		0			102,000
Nine Months Ended April 30, 2003
	Segment revenue	$	456.000		$	9,000		$	82,000		$	547,000
	Segment operating (loss)/income		(1,098,000	)		(1,596,000	)		(1,019,000	)		(3,713,000	)
Nine Months Ended April 30, 2002
	Segment revenue	$	797.000		$	22,000		$	0		$	819,000
	Segment operating income/(loss)		410,000			(481,000	)		0			(71,000	)

Our ability to continue as a going concern is dependent upon our ability to develop additional sources of capital and revenue. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our capital requirements for the next 12 months will continue to be significant. We will need to obtain financing to fund our cash needs and continue our operations. Additional financing may not be available, or if available, may be on terms unacceptable to us. Our ability to maintain sufficient liquidity to continue our operations is dependent on our ability to raise additional capital. We currently have no committed sources of capital.

6As of April 30, 2009, we had cash totaling $50,191 and receivables totaling $453,851. We are currently delivering ten films for which the minimum guarantees, license fees and home video sales revenues are due upon notice of delivery, acceptance of delivery or home video accounts receivables payments received. During the third quarter ended April 30, 2009, we received $674,026 in license fees and we expect additional payments to be received by the end of the 2009 fiscal year.

~~Table~~Additionally, although we had completed an audit of ~~Contents~~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 are currently reviewing those results to determine how we will proceed. The Company has not recorded an estimate of any amount that it believes may be owed.

ARevenue Recognition. Royalty ~~reconciliation~~income from film contracts is derived from the sale of ~~segment~~DVDs ~~operating~~or ~~loss~~from the licensing of film rights to ~~net~~third ~~income~~parties. ~~before~~A significant portion of royalty income ~~taxes for~~is paid to the ~~three~~Company based on the timetable associated with royalty statements generated by third party processors, and ~~nine~~is ~~month~~not ~~periods~~typically ~~ended~~known ~~April 30~~by the Company on a timely basis. Consequently, ~~2003~~this ~~and~~revenue ~~2002~~is not recognized until the amount is aseither known or ~~follows:~~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.

	FOR THE THREE MONTHS ENDED
	APR. 30, 2003			APR. 30, 2002
Total segment operating (loss)/income		($1,032,000	)	$	102,000
Amortization of intangible assets		128,000			60,000
Stock appreciation rights expense/(benefit)		—			—
Interest income		(1,000	)		(3,000	)
Corporate expenses incurred related to Recent Developments		—			144,000
Net (loss)/income before income taxes		($1,159,000	)		($99,000	)

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 received from buyers or licensees are included in the condensed consolidated financial statements as a component of deferred revenue.

	FOR THE NINE MONTHS ENDED
	APR. 30, 2003			APR. 30, 2002
Total segment operating loss		($3,713,000	)		($707,000	)
Amortization of intangible assets		338,000			180,000
Stock appreciation rights expense/(benefit)		—			521,000
Interest income		(6,000	)		(50,000	)
Corporate expenses incurred related to Recent Developments		—			1,183,000
Net (loss)/income before income taxes		($4,045,000	)		($2,541,000	)

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.

7Use 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.

~~Table~~Concentration. 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 $250,000. The Company may be exposed to risk for the amounts of ~~Contents~~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.

~~NATIONAL LAMPOON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ 6

~~Note~~NATIONAL LAMPOON, FINC. —AND ~~Burly Bear Acquisition~~ SUBSIDIARIES

~~On August 30, 2002, the Company, through its wholly owned subsidiary National~~NOTES ~~Lampoon~~TO ~~Networks,~~CONDENSED ~~Inc~~CONSOLIDATED ~~(NLNI),~~FINANCIAL ~~entered~~STATEMENTS ~~into an agreement to purchase substantially all the assets, mainly consisting of the film library and production costs of Burly Bear Networks, Inc.~~ (~~Burly Bear~~CONTINUED), a privately owned entity, to enhance it business operations. Consideration exchanged in the acquisition consisted of $200,000 in cash, less certain transaction expenses; shares of the Companys common stock having an aggregate market value of $400,000 on the effective date; and 150 shares of NLNI Common Stock, representing fifteen percent of NLNIs issued and outstanding shares of Common Stock at the same value per share. The purchase price allocation reflects managements estimates at the date of acquisition. Management has not established a final allocation of the purchase price, when the final allocation is established, adjustments will be made pursuant to SFAS 141. In establishing a final appraisal it appears that the value of the Burly Bear trademark may be of limited value, and so there is the issue of impairment. While the Company retains a large library of Burly Bear programs, the distribution system, the contact, agreements, and new product development utilize the National Lampoon trademark instead of Burly Bear. The impairment issue will most likely effect the final appraisal of the intangible asset.

~~The aggregate purchase price was $600,000 consisting of $200,000 cash and~~NINE ~~common~~MONTHS ~~stock~~ENDING ~~valued~~APRIL ~~at $400~~30,~~000.~~ ~~The~~2009 ~~following~~AND ~~summarizes the estimated fair values of the assets acquired:~~ 2008

Personal property	$	58,000
Film library		100,000
Intangible assets (to be finalized based upon appraisal)		541,000
Minority Interest		(99,000	)
	$	600,000

(UNAUDITED)

~~Operating~~During the ~~result~~nine ofmonths ~~Burly~~ended ~~Bear~~April ~~have been included from August~~ 30,~~2002.~~ ~~Pro forma~~2009 ~~financial~~one ~~information~~customer asaccounted iffor ~~the~~$ ~~acquisition~~465,522 ~~had taken place at the~~(23%) ~~beginning~~ of ~~the~~total ~~reporting period have not been presented~~revenue. ~~Burly~~During ~~Bear~~the ~~did~~nine ~~not have~~months ~~significant~~ended ~~operations~~April ~~during August 2002~~30, so2008 ~~the~~three ~~amounts~~customers accounted ~~would~~for ~~not materially~~$750,000 ~~differ~~(19%), ~~from~~$617,411 ~~the~~(16%) ~~first~~and ~~quarter~~$485,411 ~~operating~~(12%) ~~results.~~of total revenue.

8During the three months ended April 30, 2009, three customers accounted for $28,973 (14%), $25,000 (12%), and $39,195 (19%) of total revenue. 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.

~~Table~~As of April ~~Contents~~30, 2009, the Company had $100,000 (22%), $73,980 (16%) and $86,784 (19%) of accounts receivable from its largest customers.

~~Note~~The Company Gcurrently —does ~~Stock~~not ~~Options~~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 Company ~~has~~partially adopted SFAS ~~No. 123~~157, “~~Accounting~~Fair Value ~~for~~of ~~Stock~~Financial ~~Based Compensation”~~Instruments,” ~~issued~~on ~~in October 1995. In accordance with SFAS No.~~January ~~123~~1, ~~The Company has elected to follow Accounting Principles Board (“APB) Opinion No. 25~~2008, ~~“Accounting~~delaying application for ~~Stock~~non-financial ~~issued~~assets ~~to Employees”,~~ and ~~related~~non-financial ~~interpretation~~liabilities ~~in accounting~~as ~~for its employee stock options~~permitted. ~~Under APB Opinion No. 25, because~~This ~~the~~statement ~~exercise~~establishes ~~price~~a offramework ~~the~~for ~~company’s~~measuring ~~employee stock options equal the market price of the underlying stock on the date of grant, no compensation expense is recognized. If the Company elected to recognize compensation expense based on the~~ fair value ~~of the options granted on their grant date as prescribed by SFAS No. 123~~, ~~the Company’s net income/(loss)~~ and ~~earnings/(loss) per share would~~expands ~~have~~disclosures ~~been~~about ~~reduced~~fair tovalue ~~the pro forma amounts as follows:~~ measurements.

	3 Months Ended						9 Months Ended
	2003			2002			2003			2002
Net income/(loss) — as reported	$	(1,159,320	)	$	(101,726	)	$	(4,045,326	)	$	(86,102	)
Stock option compensation under-fair value method		67,160			0			203,876			1,530,723
Net income/(loss)-pro forma	$	(1,226,480	)	$	(101,726	)		(4,276,202	)	$	(1,616,825	)
Basic & diluted earnings/(loss) per share-as reported	$	(0.77	)	$	(0.07	)	$	(2.76	)	$	(0.06	)
Basic & diluted earnings/(loss) per share-pro forma	$	(0.82	)	$	(0.07	)	$	(2.92	)	$	(1.17	)

SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

9Level 1: quoted prices (unadjusted) in active markets for identical asset or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities and exchange-based derivatives.

~~Table~~Level of2: inputs ~~Contents~~other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

~~Item 2~~Level —3: unobservable ~~Management’s~~inputs ~~Discussion~~for ~~and~~the ~~Analysis~~asset ofor liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial ~~Position~~assets and ~~Results~~liabilities ofutilizing ~~Operations~~Level 3 inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.

~~Results~~In accordance ofwith ~~Operations~~SFAS 157, the Company determines the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety.

The following ~~Three~~table ~~Months~~represents ~~Ended~~certain ~~April 30,~~financial ~~2003~~instruments ~~vs.~~of the ~~Three~~Company ~~Months~~measured and ~~Ended~~recorded at fair value on the Company’s condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy as of April 30, ~~2002~~ 2009:

For the three months ended April 30, 2003 trademark revenues were $267,771 as compared to $426,068 for the quarter ended April 30, 2002. The decrease in trademark revenues of 37% resulted primarily from decreased receipts from the three “National Lampoon’s Vacation” films. Prior year revenues were increased by the initial release of the Vacation series on DVD. Consumer product revenues, which consists of merchandise sold via the National Lampoon web site and video sales of $5,080 for the 3rd fiscal quarter of 2003 were 71% lower than the $17,379 earned during the same period in the prior year. This decrease was due primarily to an international sale of all four volumes of the “Mother Goose Video Treasury” in the prior year. Advertising and promotional revenues of $72,063 in the current fiscal quarter were generated by the wholly owned subsidiary, National Lampoon Networks. National Lampoon Networks began operations in August of the current fiscal year as a result of the asset purchase of Burly Bear Networks, Inc. Therefore there was no corresponding advertising and promotion income in the prior fiscal year.


	Level 1			Level 2			Level 3			Total
Assets:
Available for sale securities at fair value		$	35,308		$	—		$	—		$	35,308

~~Costs related to trademark revenue during the quarter ended April 30, 2003~~Comprehensive ~~increased~~Income ~~to $68,032 from $53,703 for the quarter ended April 30, 2002, representing a 27% increase~~(Loss). ~~Costs~~SFAS ~~associated with generating television revenues account for this increase~~No. ~~Costs related to consumer product revenues decreased to $3~~130,~~152~~ ~~during~~"Reporting ~~the~~Comprehensive ~~quarter ended April 30~~Income", ~~2003 from~~ ~~$6,697~~established rules for the ~~same~~reporting ~~period in fiscal 2002. The decrease is due to lower website maintenance~~ and ~~content~~display ~~costs. Television promotion and distribution costs~~ of ~~$113,491~~comprehensive inincome ~~the current fiscal year are costs associated with promotional revenues~~ and ~~the cost of delivering and broadcasting the National~~its ~~Lampoon~~components. ~~Network~~SFAS ~~programs~~No. ~~National~~130 ~~Lampoon~~requires ~~Network~~unrealized ~~began~~gains ~~operations~~or inlosses ~~August of~~on ~~this fiscal year and so there were no corresponding promotion and distribution costs in~~ the ~~prior fiscal year. Amortization of intangible assets, the costs of the~~ Company’'s ~~acquisition of the “National Lampoon”~~ ~~trademark,~~available-for-sale ~~was~~securities ~~$60,000~~adjustments ~~during~~to ~~each~~be ofreported ~~the~~as ~~quarters ended April 30, 2003 and 2002. The Burly Bear intangible asset recognized at $541,000 is being currently being amortized over~~ a ~~two~~separate ~~year period. For the quarter ended April~~component ~~30,~~(comprehensive ~~2003,~~income/loss) ~~$67,625~~of ~~was~~shareholders' ~~amortized~~equity. ~~Based~~The ~~upon~~components ~~a possible impairment, the~~of ~~amortization~~comprehensive ofincome ~~the~~(loss) ~~Burly~~are ~~Bear~~as ~~intangible assets may be accelerated in the following period.~~ follows:

Selling, general and administrative costs increased to $1,079,697 during the quarter ended April 30, 2003 versus $426,583 during the same period last year. This increase of approximately $653,000 or 153% resulted primarily from increased personnel costs of $512,000, travel and entertainment of $41,000, and National Lampoon Networks marketing and promotion costs of $100,000. These increases were incurred since the Reorganization Transaction where the level of operations were increased significantly and the start up of operations of National Lampoon Networks, which includes opening offices in New York City. During the current fiscal year stock, warrants, and options were issued for services, resulting in the cost during the current quarter of $112,884. There was no corresponding cost in the prior fiscal years

	Three months ended April 30,					Nine months ended April 30,
	2009			2008		2009			2008
Net Income (Loss)	$	(779,781	)	$	97,744	$	(4,871,307	)	$	(1,918,546	)
Fair value adjustment on available-for-sale securities		(247,154	)		882,692		(553,153	)		882,692
Comprehensive Income (Loss)	$	(1,026,935	)	$	980,436	$	(5,424,460	)	$	(1,035,854	)

Interest income during the quarter ended April 30, 2003 decreased to $1,446 versus approximately $2,610 during the quarter ended April 30, 2002. This decrease resulted from a decrease in cash and cash equivalents held during the quarter versus the same period last year. 7

10NATIONAL LAMPOON, INC. AND SUBSIDIARIES

~~Table~~NOTES TO ofCONDENSED ~~Contents~~CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~For the three months ended April 30, 2003, the Company had a net loss of~~NINE ~~$1,159,329,~~MONTHS orENDING ~~$0.77~~APRIL ~~per share, versus net loss of $101,726, or $0.07 per share, for the three months ended April~~ 30, ~~2002.~~2009 ~~This~~AND increase in net loss resulted primarily from (i) the decrease in revenues of approximately $99,000, (ii) the increase of SG& A costs of $653,000 due to increased personnel costs and increased operation (iii) stock, warrants and options issued for services, and (iv) amortization of intangible assets and promotion and distribution costs associated with the operations on National Lampoon Networks. During the quarter ended April 30, 2003 and 2002, the Company had no significant provision for income taxes due to the losses incurred. 2008

~~The Nine Months Ended April 30, 2003 vs. the Nine Months Ended April 30, 2002~~ (UNAUDITED)

~~For~~Recent ~~the~~Accounting Pronouncements. ~~nine~~In ~~months ended April~~December 302007, ~~2003 trademark revenues were $455,436 as compared to $796,516 for~~ the ~~nine~~FASB ~~months~~issued ~~ended~~FASB ~~April~~Statement No. 30141(R), ~~2002. The decrease in trademark revenues of approximately 43% resulted primarily from decreases in revenues from the films~~ “~~National~~Business ~~Lampoon’s Animal House~~Combinations” of(FAS ~~$67~~141(R)),~~000,~~ ~~the~~which ~~three~~establishes ~~“National~~accounting ~~Lampoon’s~~principles ~~Vacation”~~and ~~films~~disclosure ofrequirements ~~$143,000 due to the release of the Vacation movies in DVD~~ for ~~the~~all ~~first~~transactions ~~time~~ in ~~the prior year, and the payment~~which ~~received~~a ~~for~~company ~~the~~obtains ~~film~~control ~~“Van~~over ~~Wilder”~~another ofbusiness. ~~$135,000~~Statement in141(R) ~~the prior fiscal year.~~applies ~~Consumer~~prospectively ~~products~~to ~~revenues~~business ~~including~~combinations ~~sale~~for ofwhich ~~videos and website merchandise of $9,932 in~~ the ~~nine~~acquisition ~~months~~date ~~ended~~is ~~April 30,~~on ~~2003 represents a 56% decrease from~~or ~~consumer~~after ~~products revenues of $22,453 during~~ the ~~same~~beginning ~~period in the prior fiscal year. The decrease was due primarily to a decrease in sales~~ of the ~~“Mother~~ ~~Goose~~first ~~Video~~annual ~~Treasury”~~reporting ~~video~~period ~~during~~beginning ~~the~~on ~~current~~or ~~fiscal year.~~after ~~Advertising and promotion revenues of $82~~December 15,~~063~~ ~~were generated by the National Lampoon Networks, which began operation in August of the current fiscal year~~2008. ~~Therefore~~ ~~there~~Earlier ~~are~~adoption nois ~~comparable revenues in the prior year~~prohibited.

~~Costs~~In December ~~related~~2007, tothe ~~trademark~~FASB ~~revenue~~issued ~~during~~SFAS ~~the~~No. 160, ~~nine~~“Non-controlling ~~months~~Interests ~~ended~~in Consolidated ~~April 30~~Financial Statements, an amendment of ARB No. 51”. SFAS ~~2003~~No. 160 ~~increased~~establishes toaccounting ~~$75,743~~and ~~from~~reporting ~~$64,593~~standards ~~for~~that require that the ~~same~~ownership ~~period~~interests ~~ended~~in ~~April 30,~~subsidiaries held by parties other than the parent be ~~2002~~clearly identified, ~~representing~~labeled, anand ~~increase~~presented in the consolidated statement of financial ~~17%.~~position ~~This~~within ~~was~~equity, ~~primarily~~but ~~due~~separate tofrom ~~increased~~the parent’s equity; the ~~costs~~amount ~~associated~~of ~~with~~consolidated ~~generating~~net ~~television~~income ~~revenues.~~attributable ~~Costs~~to ~~related~~the parent and to the ~~consumer~~non-controlling ~~product~~interest ~~revenues~~be ~~increased~~clearly toidentified ~~$27,562~~and ~~during~~presented ~~fiscal~~on ~~2003~~the ~~from~~face ~~$21,233 for~~of the consolidated ~~same~~statement ~~period~~of inincome; ~~fiscal~~and ~~2002.~~changes ~~These~~in ~~costs~~a ~~include~~parent’s ~~website~~ownership ~~development~~interest ~~and~~while ~~maintenance,~~the ~~content~~parent ~~creation~~retains ~~and~~its ~~cost~~controlling offinancial ~~video~~interest ~~duplication.~~in ~~Increased~~its subsidiary be ~~costs~~accounted offor ~~web~~consistently. ~~site~~SFAS ~~writing~~No. 160 ~~costs~~also ~~and~~requires ~~merchandise~~that ~~accounted~~any ~~for~~retained non-controlling equity investment in the ~~majority~~former ofsubsidiary be initially measured ~~the~~at ~~increase~~fair value when a subsidiary is deconsolidated. ~~Costs~~SFAS ~~associated~~No. 160 ~~with~~also sets forth the ~~production,~~disclosure ~~distribution,~~requirements to identify and distinguish between the ~~broadcasting~~interests of ~~National~~the ~~Lampoon~~parent ~~Network~~and ~~programming~~the ~~was~~interests of the ~~main~~non-controlling ~~factor~~owners. SFAS ~~accounting~~No. 160 applies to all entities that prepare consolidated financial statements, except not-for-profit ~~the~~organizations, ~~television~~but ~~promotion~~will ~~and~~affect ~~distribution~~only ~~costs~~those entities that have an outstanding non-controlling interest in ~~the~~one ~~current~~or more ~~fiscal~~subsidiaries ~~year~~or ofthat ~~$469,731~~deconsolidate a subsidiary. ~~National~~SFAS ~~Lampoon~~No. 160 ~~Networks~~is ~~began~~effective for ~~operations~~fiscal inyears, ~~August of~~and ~~the~~interim ~~current~~periods within those fiscal ~~year~~years, ~~therefore~~beginning ~~there~~on ~~were~~or after noDecember 15, ~~corresponding~~2008. ~~costs~~Earlier inadoption ~~the prior~~is ~~year~~prohibited. ~~Amortization~~SFAS ofNo. 160 must ~~intangible~~be ~~assets,~~applied ~~the~~prospectively ~~costs~~as of the ~~Company’s acquisition~~beginning of the ~~“National~~fiscal ~~Lampoon”~~year ~~trademark,~~in ~~was~~which ~~$180~~it is initially applied,~~000~~ ~~during~~except ~~each~~for of the ~~nine~~presentation ~~months~~and ~~ended~~disclosure ~~April 30,~~requirements. The ~~2003~~presentation and ~~2002,~~disclosure ~~and~~requirements ~~the~~are ~~amortization~~applied ofretrospectively ~~the~~for all ~~Burly~~periods ~~Bear~~presented. ~~trademark~~The ~~was~~Company ~~$157,792~~does ~~during~~not ~~the~~have ~~current~~a ~~fiscal~~non-controlling ~~year.~~interest in one or more subsidiaries.

~~Selling~~In March 2008, ~~general~~the ~~and~~FASB ~~administrative~~issued ~~costs~~SFAS ~~increased~~No. 161, to“Disclosures ~~$2,996,950~~about ~~during~~Derivative ~~the~~Instruments ~~nine~~and ~~months~~Hedging ~~ended~~Activities—an ~~April~~amendment of FASB Statement No. ~~30,~~133” (SFAS ~~2003~~161). ~~versus~~This ~~$1,348,821~~statement ~~during~~requires ~~the~~enhanced ~~same~~disclosures ~~period~~about an entity’s inderivative ~~the~~and ~~prior~~hedging ~~year.~~activities, ~~This~~including ~~increase~~(a) how ofand ~~approximately~~why $1an entity uses derivative instruments,~~648,000~~ or(b) how ~~122%~~derivative ~~resulted primarily~~instruments ~~from~~and ~~increased~~related ~~personnel~~hedged items ~~costs~~are ofaccounted ~~approximately~~for $1under SFAS No. 133,~~263,000,~~“Accounting ~~increased~~for Derivative ~~marketing~~Instruments and ~~promotion~~Hedging ~~costs~~Activities” of(SFAS ~~approximately $142~~133),~~000,~~ ~~rent~~and its related interpretations, and ~~other~~(c) how ~~costs~~derivative ~~associated~~instruments ~~with~~and ~~the~~related ~~significant~~hedged ~~increase~~items ofaffect an ~~operations~~entity’s ~~following~~financial ~~the~~position, ~~Reorganization~~financial ~~Transaction~~performance, and ~~the~~cash ~~start~~flows. upSFAS of161 is ~~National~~effective ~~Lampoon~~for ~~Networks.~~financial statements issued for fiscal years and interim periods beginning after November 15, 2008.

~~Stock,~~In ~~warrants~~May 2008, ~~and~~the ~~options~~FASB issued ~~for~~SFAS ~~services~~No. in162, ~~the~~“The ~~current~~Hierarchy ~~fiscal~~of Generally Accepted ~~year~~Accounting ~~totaled~~Principles.” ~~$819~~This standard is intended to improve financial reporting by identifying a consistent framework,~~366.~~ Noor ~~similar~~hierarchy, ~~transaction~~for ~~occurred~~selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the ~~prior~~United ~~fiscal~~States ~~year~~for non-governmental entities. ~~During~~SFAS ~~the~~No. ~~nine~~162 ~~months~~is ~~ended~~effective ~~April 30,~~60 ~~2002,~~days following approval by the ~~Company~~U.S. ~~recorded~~Securities aand ~~net benefit~~Exchange Commission of ~~$843,096~~the ~~related~~Public Company Accounting Oversight Board's amendments to ~~stock~~AU ~~appreciation~~Section ~~rights~~411, (“~~SARs”)~~The ~~granted~~Meaning toof ~~the~~Present ~~Company’s~~Fairly ~~chief~~in ~~executive~~Conformity ~~officer.~~with ~~This~~Generally ~~benefit~~Accepted Accounting Principles.”

11In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 concludes that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”).

~~Table~~In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosure about Fair Value of ~~Contents~~Financial Instruments” (FSP 107-1/APB 28-1). FSP 107-1/APB 28-1 requires interim disclosures regarding the fair values of financial instruments that are within the scope of FAS 107, “Disclosures about the Fair Value of Financial Instruments.” Additionally, FSP 107-1/APB 28-1 requires disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments on an interim basis as well as changes of the methods and significant assumptions from prior periods. FSP 107-1/APB 28-1 does not change the accounting treatment for these financial instruments

~~resulted~~In ~~from~~April 2009, athe ~~decrease~~FASB inissued ~~the~~FSP ~~Company’s~~FAS ~~stock~~157-4, ~~price~~“Determining ~~during~~Fair Value When Volume and Level of Activity for the ~~nine~~Asset ~~months~~or Liability Have Significantly Decreased and ~~ended~~Identifying ~~April 30,~~Transactions ~~2002~~That ~~that~~Are ~~decreased~~Not ~~the~~Orderly” ~~amount~~(FSP ~~payable~~157-4). FSP by157-4 provides ~~the~~guidance ~~Company~~on how to determine the ~~chief~~ ~~executive~~fair ~~officer~~value ~~upon~~of assets and liabilities when the ~~exercise~~volume ofand ~~any~~level of activity for the ~~outstanding~~asset/liability ~~SARs.~~has significantly ~~During~~decreased. FSP ~~the~~157-4 ~~prior~~also ~~fiscal~~provides ~~year~~guidance ~~ended~~on ~~April 30~~identifying circumstances ,that ~~2002~~indicate ~~the~~a ~~company~~transaction ~~recorded~~is annot orderly. In ~~expense~~addition, ofFSP ~~$140,894~~157-4 ~~associated~~requires ~~with~~disclosure ~~the~~in ~~conversion~~interim ofand ~~the~~annual ~~stock~~periods ~~appreciation~~of the ~~rights~~inputs toand ~~stock~~valuation ~~options~~techniques ~~granted~~used to ~~the~~measure ~~Company’s~~fair ~~chief~~value ~~executive~~and ~~officer.~~a discussion of changes in valuation techniques

~~Interest~~In ~~income~~June 2009, ~~during~~ the ~~nine~~FASB ~~months~~issued ~~ended~~SFAS ~~April 30~~No. 168, ~~2003~~"The ~~decreased~~FASB toAccounting Standards ~~$5,594~~CodificationTM ~~versus~~and $8the Hierarchy of Generally Accepted Accounting Principles,~~974~~ ~~during~~a ~~the~~replacement ~~nine~~of ~~months~~FASB Statement ~~ended~~No. ~~April 30~~162," ~~2002.~~and ~~This decrease~~approved—the ~~resulted~~FASB ~~from~~Accounting aStandards ~~decrease~~CodificationTM in(Codification) ~~cash~~as ~~and~~the ~~cash~~single source ~~equivalents~~of ~~held~~authoritative ~~during~~nongovernmental ~~the~~US GAAP. The Codification does not ~~nine~~change ~~months~~current ~~ended~~US ~~April 30~~GAAP, ~~2003~~but ~~versus~~is ~~the~~intended ~~same~~to ~~period~~simplify inuser ~~the~~access ~~prior~~to ~~year.~~all ~~Other~~authoritative ~~income~~US ofGAAP ~~$32,214~~by inproviding all the ~~current~~authoritative ~~fiscal~~literature ~~year~~related ~~resulted~~to ~~from~~a particular ~~the~~topic ~~collection of~~in ~~monies~~one ~~from~~place. anAll ~~insurance~~existing ~~company~~accounting ~~due~~standard todocuments ~~the~~will be ~~loss~~superseded ofand ~~equipment~~all ~~that~~other ~~was insured.~~accounting ~~The~~literature ~~minority~~not ~~interest~~included in ~~income~~the Codification ofwill ~~consolidated~~be ~~subsidiary~~considered ofnon-authoritative. ~~$99~~For the Company,~~000~~ the ~~represents~~Codification ~~15%~~is ofeffective ~~the~~July ~~loss~~1, of2009 ~~National~~and ~~Lampoon~~will ~~Networks~~require ~~reflecting~~future ~~the~~references ~~15%~~to ~~ownership~~authoritative ofUS ~~National~~GAAP ~~Lampoon~~to ~~Networks~~coincide bywith athe ~~third~~appropriate ~~party.~~section of the Codification.

For the nine months ended April 30, 2003, the Company had a net loss of $4,045,329, or $2.76 per share, versus a net loss of $86,102, or $.06 per share, for the nine months ended April 30, 2002. This increase in net loss resulted primarily from (i) an decrease in revenues of approximately $341,000 due to greater trademark revenues from the Company’s films, (ii) the increase in personnel and other SG&A costs associated with the increased operations since the Reorganization Transaction, (iii) costs associated with the operating of National Lampoon Networks in the current fiscal year, (iv) the issuing of approximately $819,000 in stock, warrants, and options for services in the current year, and (v) the net benefit in the prior year of $843,000 regarding stock appreciation. During the nine months ended April 30, 2003 and 2002, the Company had no significant provision for income taxes due to the losses incurred. 8

~~Liquidity~~NATIONAL LAMPOON, ~~and~~INC. ~~Capital~~AND ~~Resources~~ SUBSIDIARIES

~~The Company’s principal source of working capital during the year to date~~NOTES ~~ended~~TO ~~April 30,~~CONDENSED ~~2003~~CONSOLIDATED ~~was~~FINANCIAL ~~trademark~~STATEMENTS ~~income and proceeds from Series B preferred stock issuance and notes payable to the NLAG.~~ (CONTINUED)

~~For the nine months ended January 31, 2003, the Company’s net cash flow~~NINE ~~used~~MONTHS inENDING ~~its~~APRIL ~~operating activities was approximately $2,488,000 versus $88,000 of net cash flow provided by operating activities during the nine months ended April~~ 30, ~~2002.~~2009 ~~This~~AND decrease results primarily from and increase in personnel and other costs as part of the increase in activities since the NLAG Transaction. At April 30, 2003, the Company had cash and cash equivalents of $163,201 as compared to $1,024,207 at July 31, 2002. 2008

Since the completion of the Reorganization Transactions, our operations have been characterized by ongoing capital shortages caused by expenditures in initiating several new business ventures. We are also actively seeking private sources of financing, or obtaining additional equity from third party sources. There is no assurance that such financing will be available on commercially acceptable terms, if at all. Our existing capital resources are insufficient to fund our activities for the next six to twelve months. Unless our revenues from new business activities significantly increase during that period, we will need to raise additional capital to continue to fund our planned operations or, in the alternative, significantly reduce or even eliminate certain operations. There can be no assurance that we will be able to raise such capital on reasonable terms, or at all. As of June 11, 2003 we had cash on hand of approximately $296,000, and no significant receivables. This amount is not sufficient to fund current operations, which we estimate to be approximately $450,000 per month. Further, notes payable to certain law firms as part of the Reorganization Transaction, totaling approximately $442,000 at April 30, 2002 were due to be paid in full at May 17, 2003. The Board has directed (UNAUDITED)

12In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)," which revised the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity.

~~Table~~The Company does not believe that the adoption of ~~Contents~~the above recent pronouncements will have a material effect on the Company’s condensed consolidated results of operations, financial position, or cash flows.

Other recent ~~that~~accounting ~~discussions~~pronouncements ~~begin~~issued ~~with~~by the ~~various~~FASB ~~parties~~(including inits ~~order to establish a~~Emerging ~~payment~~Issues ~~schedule~~Task ~~with~~Force), ~~each note holder. There can be no assurance that any such arrangement can be worked out. We anticipate that any shortfall in cash needs will be covered by~~ the ~~additional~~AICPA, ~~exercise~~and of the ~~Series B~~SEC ~~Warrants~~did ~~held by~~not ~~the NLAG Group~~ or ~~other~~are ~~investments~~not bybelieved ~~NLAG. If NLAG declines to make~~by ~~additional~~management ~~investments, or should we be unable~~ to ~~secure~~have ~~additional~~a ~~financing, we~~material ~~could~~impact beon ~~forced~~the toCompany's ~~immediately~~present ~~curtail~~or ~~much, if not all, of our current~~future ~~plans.~~consolidated ~~Our~~ financial statements ~~for the fiscal year ended July 31, 2002 contain an explanatory paragraph as to our ability to continue as a “going concern”~~. ~~This qualification may impact our ability to obtain future financing.~~

~~Future~~Net ~~Commitments~~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, 2009 and 2008, as common equivalent shares have been excluded from the computation due to the fact that they are anti-dilutive. Options and warrants to purchase 6,171,056 and 6,358,722 common shares during the nine months ended April 30, 2009 and 2008, respectively, are not included in the calculation of diluted earnings per share because their inclusion would be anti-dilutive. 7,288,432 and 7,302,431 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, 2009 and 2008, respectively, because their inclusion would be anti-dilutive. Basic earnings per share for the nine months ended April 30, 2009 includes 859,886 common shares to be issued.

~~Forward-Looking~~At ~~Statements~~April 30, 2009, there are 61,832 Series B Convertible Preferred Shares outstanding, 190,247 Series C Convertible Preferred Shares outstanding and 163,261 Series D 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 190,247 Series C Convertible Preferred Shares, 3,804,940 common shares would be issuable. Upon conversion of the 163,261 Series D Convertible Preferred Shares, 3,265,220 common shares would be issuable.

~~The~~Each Series ~~foregoing~~B ~~discussion,~~Convertible asPreferred ~~well~~Share asis ~~the~~convertible ~~other~~into ~~sections~~56.338 ofcommon ~~this Quarterly~~shares. ~~Report~~Each onSeries ~~Form 10-Q,~~C ~~contains~~Convertible ~~forward-looking~~Preferred ~~statements~~Share ~~within~~is ~~the~~convertible ~~meaning~~into ~~of the~~20 ~~Private~~common ~~Securities Litigation Reform Act of 1995 that reflect the Company’s~~shares. ~~current~~Warrants ~~views~~attached ~~with respect~~ to ~~future events and financial results. Forward-looking statements usually include~~ the ~~verbs~~Series ~~“anticipates,”~~B ~~“believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “understands”~~ and ~~other verbs~~Series ~~suggesting~~C ~~uncertainty.~~Convertible ~~The~~Preferred ~~Company~~Stock ~~reminds shareholders that forward-looking statements~~ are ~~merely predictions and therefore inherently~~ ~~subject~~not toincluded ~~uncertainties~~in ~~and other factors which could cause~~ the ~~actual~~calculation ~~results to~~of ~~differ~~diluted ~~materially~~earnings ~~from~~per ~~the~~share ~~forward-looking~~during ~~statements. Potential factors that could affect forward-looking statements include, among other things,~~ the ~~Company’s~~ ~~ability to identify, produce and complete projects that are~~nine ~~successful~~months inended ~~the~~April ~~marketplace~~30, to2009 ~~resolve~~because ~~litigation~~their oninclusion ~~acceptable~~would ~~terms, to~~be ~~arrange financing, distribution and promotion for these projects on favorable terms in various markets and to attract and retain qualified personnel~~anti-dilutive.

~~ITEM~~NOTE B 4- .CAPITALIZED ~~CONTROLS~~PRODUCTION ~~AND PROCEDURES.~~ COSTS

The ~~Company’s~~following ~~management,~~table ~~under~~summarizes the ~~supervision~~net ~~and with the participation of~~capitalized ~~the~~film ~~Company’s~~costs principal executive officer and principal financial officer, has evaluated the Company’s disclosure controls and procedures within 90 days prior to the filing date of this Quarterly l Report on Form 10-Q . Based upon that evaluation, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective. There were no significant changes in ~~the~~various ~~Company’s~~stages ~~internal controls or in other factors that could significantly affect these controls subsequent to the date~~ of ~~their~~production ~~evaluation,~~at: ~~including any corrective actions with regard to significant deficiencies and material weaknesses.~~

PART II — OTHER INFORMATION

	April 30,		July 31,
	2009		2008
In development - theatrical	$	2,112,554	$	2,677,872
Completed - theatrical		3,029,021		2,339,695
Total film costs	$	5,141,575	$	5,017,567

~~Item~~ The Company expects to amortize within three to five 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, 2009 was $9,012 and $60,005, respectively, and during the three and nine months ended April 30, 2008, was $1,208,937 —and ~~Legal~~$1,208,416, respectively. ~~Proceedings~~During the nine months ended April 30, 2009, the Company also reflected an impairment charge of $2,371,575 based upon a revision of its forecasted film revenues. The portion of the costs of the Company's films that are expected to be amortized during the upcoming 12 months is approximately $932,552.

~~A former employee has been terminated by the Company, and is pursuing a~~NOTE ~~severance~~C in- ~~excess~~NOTES ofPAYABLE ~~$100,000.~~TO ~~The~~RELATED ~~Company~~PARTIES ~~believes~~AND itACCRUED ~~will prevail in this matter.~~ INTEREST

~~Item 6~~Notes payable —to ~~Exhibits~~related parties and ~~Reports~~accrued oninterest ~~Form 10-K~~consist of the following at:

	April 30,		July 31,
	2009		2008
(A) Payable to Daniel Laikin	$	472,079	$	412,070
(B) Payable to Timothy Durham		958,347		756,945

	$	1,430,426	$	1,169,015

~~Table of Contents~~9

~~PART~~NATIONAL LAMPOON, IVINC. AND SUBSIDIARIES

~~ITEM~~NOTES TO ~~14.~~CONDENSED ~~EXHIBITS,~~CONSOLIDATED FINANCIAL ~~STATEMENT~~STATEMENTS ~~SCHEDULES AND REPORTS ON FORM 8-K.~~ (CONTINUED)

~~(A) EXHIBITS~~NINE MONTHS ~~(NUMBERED~~ENDING INAPRIL ~~ACCORDANCE~~30, ~~WITH~~2009 ~~ITEM~~AND ~~601 OF REGULATION S-K)~~ 2008

3.1		Company’s Second Amended and Restated Articles of Incorporation (1)
3.2		Company’s Amended and Restated Bylaws (1)
4.1		NLAG Registration Rights Agreement, dated May 17, 2002, among the Company, the members of the NLAG Group, and GTH Capital, Inc. (1)
4.2		Jimirro Registration Rights Agreement, dated May 17, 2002, between the Company and James P. Jimirro (1)
4.3		Amended and Restated 1999 Stock Option, Deferred Stock and Restricted Stock Plan (2)
4.4		Piggyback Registration Rights Agreement, dated September 3, 2002 (5)
10.1		First Amendment to Preferred Stock and Warrant Purchase Agreement, dated as of May 17, 2002 (1)
10.2		2002 Employment Agreement Between J2 Communications and James P. Jimirro, dated May 17, 2002 (1)
10.3		Note Termination Agreement, dated May 17, 2002, between the Company and James P. Jimirro (1)
10.4		Security Agreement, dated May 17, 2002, between the Company and James P. Jimirro (1)
10.5		Absolute Assignment, dated May 17, 2002, between the Company and James P. Jimirro (1)
10.6		Termination of Stock Appreciation Rights Agreement, dated May 17, 2002, between the Company and James P. Jimirro (1)
10.7		Mutual Release, dated May 17, 2002, among the Company, James P. Jimirro and the members of the NLAG Group (1)
10.8		Restated Indemnification Agreement, dated May 17, 2002, between the Company and James P. Jimirro (1)
10.9		2002 Employment Agreement Between J2 Communications and Daniel S. Laikin, dated May 17, 2002 (1)
10.10		Non-Qualified Stock Option Agreement, dated May 17, 2002, between the Company and Daniel S. Laikin (1)
10.11		Indemnification Agreement, dated May 17, 2002, between the Company and Daniel S. Laikin. (2)
10.12		Letter, dated May 17, 2002, regarding Termination of Surviving Provisions of Letter Agreement, from the Company to Daniel S. Laikin and Paul Skjodt (1)
10.13		Warrant Agreement, dated May 17, 2002, between the Company and GTH Capital, Inc (1)
10.14		Voting Agreement, dated May 17, 2002, among each of the members of the NLAG Group and James P. Jimirro (1)
10.15		Promissory Notes issued May 17, 2002, by the Company to law firms (1)
10.16		Form of Common Stock Warrant (including Schedule identifying material terms (1)
10.17		Agreement between Registrant and Harvard Lampoon, Inc. dated October 1, 1998 (3)
10.18		First Amendment to Office Lease between Registrant and Avco Center Corporation dated April 21, 2000 (4)
10.19		Letter Agreement between Registrant and Batchelder & Partners, Inc., dated August 16, 2000 (4)
10.20		Amendment to Letter Agreement between Registrant and Batchelder & Partners, Inc. dated August 16, 2000 (4)

(UNAUDITED)

14(A) As of April 30, 2009, the Company owed Daniel Laikin, the Company's former Chief Executive Officer, $407,223 in principal and $64,856 in interest. As of July 31, 2008, the Company owed Mr. Laikin $369,720 in principal and $42,350 in interest. The loans bear interest at the rate of 6% per annum. The obligations to Mr. Laikin are unsecured and payable on demand. During the nine months ending April 30, 2009, the Company made payments of $139,440 to Mr. Laikin.

~~Table~~(B) As of April ~~Contents~~30, 2009, the Company owed Timothy Durham, who is currently its Chief Executive Officer, $896,209 in principal and $62,138 in interest. As of July 31, 2008, the Company owed Mr. Durham $735,259 in principal and $21,686 in interest. The loans bear interest at the rate of 6% to 6.75% per annum. The obligations to Mr. Durham are unsecured and payable on demand. During the nine months ending April 30, 2009, the Company made payments of $44,050 to Mr. Durham.

10.21		Warrant Issued by Registrant to George Vandemann dated August 18, 2000 (4)
10.22		Asset Purchase Agreement dated August 30, 2002 between National Lampoon Networks, Inc., Burly Bear Network, Inc., Constellation Venture Capital, L.P. and J2 Communications (5)
10.23		Consulting Agreement with Zelnick Media and related Warrant Agreements (6)
10.24		Advisory Agreement with SBI USA and related Warrant Agreement (6)
11		Statement re: computation of Per Share Earnings
12		Statement re: computation of Ratios
27		Financial Data Schedule (7)
99.1		[Certification pursuant to Section 906 of Sarbanes-Oxley]

NOTE D - PRODUCTION LOANS FROM RELATED PARTIES AND ACCRUED INTEREST

(1)		Incorporated by reference to Form 8-K filed on May 31, 2002.
(2)		Incorporated by reference to Form S-8 filed on June 26, 2002.
(3)		Incorporated by reference to Form 10-Q for the period ended October 31, 1998.
(4)		Incorporated by reference to Form 10-K for the fiscal year ended July 31, 1999.
(5)		Incorporated by referenced to Form 8-K filed on September 9, 2002.
(6)		Filed herewith
(7)		Filed electronically herewith with the Securities and Exchange Commission, omitted in copies distributed to shareholders or other persons.

Outstanding production loans from related parties and accrued interest consist of the following as of:

(b) Forms 8-K

	April 30,			July 31,
Related Party	2009			2008
(A) Red Rock Productions, Inc. - Bag Boy Productions, Inc.	$	806,199		$	1,070,854

(B) Red Rock Productions, Inc. - Ratko Productions, Inc.		2,189,687			2,146,950

(C) Dan Laikin		78,168			75,163

(D) Reno Rolle		133,172			-

		3,207,226			3,292,967
Less current portion		(1,076,797	)		(1,147,763	)
	$	2,130,429		$	2,145,204

~~Registrant’~~(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 National Lampoon's ~~Current~~Bag ~~Report~~Boy. Red Rock's parent, Red Rock Pictures Holdings, Inc., is a publicly traded company and related party. In accordance with the initial 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 on ~~Form 8-K~~an ~~filed~~approved cash flow as provided by the Company. Red Rock will be entitled to recoup its investment plus interest at 10% accruing on ~~August 2~~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 a result of a modification to this financing agreement that was entered into on October 31, ~~2001~~2008, payment of this loan will now be made no later than March 14, 2011. The payments are to be made from the proceeds from the release of the film over an estimated revenue cycle of three years, as follows: first the Company is to receive a 20% distribution fee; thereafter, the Company is to receive recoupment of all prints and advertising expenses incurred in connection with the distribution of the picture. The remaining gross receipts are to be split equally between the Company and Red Rock until such time as Red Rock has recouped its investment entirely. As of April 30, 2009, the Company had a loan balance of $508,498 in principal and $297,701 in interest under this financing agreement for a total of $806,199. Under the terms of the agreement and based on the expected cash flows of the film, the loan is expected to be repaid as follows: $268,733 as of April 30, 2010, $357,017 as of April 30, 2011, and $180,449 as of April 30, 2012. As of July 31, 2008, the Company owed $813,756 in principal and $257,098 in interest under this financing agreement.

~~Registrant’~~(B) 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 National Lampoon's ~~Current~~Ratko. ~~Report~~Red Rock's parent, Red Rock Pictures Holdings, Inc., is a publicly traded company and related party. In accordance with the initial agreement, Red Rock agreed to loan the Company $2,000,000 (unless otherwise agreed to by both parties) to fund this film, with payments to be made on ~~Form 8-KA~~an ~~filed~~approved cash flow as provided by the Company. Red Rock will be entitled to recoup its investment plus interest at 10% accruing on ~~November 18~~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 a result of a modification to this financing agreement that was entered into on October 31, ~~2002~~2008, payment of this loan will now be made no later than January 31, 2012. The payments are to be made from the proceeds from the release of the film over an estimated revenue cycle of three years, as follows: first the Company is to receive a 20% distribution fee; thereafter, the Company is to receive recoupment of all prints and advertising expenses incurred in connection with the distribution of the picture. The remaining gross receipts are to be split equally between the Company and Red Rock until such time as Red Rock has recouped its investment entirely. As of April 30, 2009, the Company had a loan balance of $1,821,141 in principal and $368,546 in interest under this financing agreement for a total of $2,189,687. Under the terms of the agreement and based on the expected cash flows of the film, the loan is expected to be repaid as follows: $729,896 as of April 30, 2010, $969,680 as of April 30, 2011, and $490,111 as of April 30, 2012. As of July 31, 2008, the Company owed $1,922,028 in principal and $224,922 in interest under this financing agreement.

15 10

~~Table~~NATIONAL LAMPOON, ofINC. ~~Contents~~AND SUBSIDIARIES

~~SIGNATURES~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Pursuant to the requirements of Section 13 or 15(d) of the Securities~~NINE ~~Exchange~~MONTHS ~~Act~~ENDING ofAPRIL ~~1934~~30, ~~the~~2009 ~~Registrant~~AND ~~has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.~~ 2008

Date: June 14, 2003	J2 COMMUNICATIONS
	By:	/s/James Toll
		James Toll Chief Financial Officer

(UNAUDITED)

16 (C) Mr. Laikin, the Company's former Chief Executive Officer, has made various loans to us for film financing. As of April 30, 2009, he was owed $67,000 in principal and $11,168 in interest for a total of $78,168 in production loans. The loans bear interest at the rate of 6% per annum. As of July 31, 2008, he was owed $67,000 in principal and $8,163 in interest for production loans.

~~Table~~(D) Mr. Rolle, an officer and shareholder of ~~Contents~~Red Rock, made a loan to the Company for the financing of the film National Lampoon’s the Legend of Awesomest Maximus. As of April 30, 2009, he was owed $125,000 in principal and $8,172 in interest for a total of $133,172 in production loans. Under the terms of the agreement the loan bears interest at the rate of 10% per annum and Mr. Rolle will also be entitled to contingent participation of 11.5% of all net contingent proceeds from the picture. Mr. Rolle 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. The loan is to be repaid in full on June 30, 2010.

~~CERTIFICATION~~The aggregate ~~PURSUANT~~maturities ~~TO 18~~of ~~U.S.C.~~production ~~SECTION~~loans ~~1350,~~from related parties and accrued ASinterest ~~ADOPTED~~for ~~PURSUANT~~each TOof ~~SECTION~~the ~~906 OF~~next ~~THE~~five ~~SARBANES-OXLEY~~years ~~ACT~~and OFthereafter ~~2002~~are as follows as of April 30, 2009:

In connection with the Quarterly Report of National Lampoon, Inc.. (the “Company”) on Form 10Q for the period ending April 30, 2003 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, James Toll, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec .906 of the Sarbanes-Oxley Act of 2002, that:

Year	Amount
2010	$	1,076,797
2011		1,459,869
2012		670,560

	$	3,207,226

~~1. The Report fully complies with the requirements of section 13(a) or~~NOTE ~~15(d)~~E of- ~~the~~PRODUCTION ~~Securities~~LOANS ~~Exchange~~AND ~~Act~~ACCRUED ~~of 1934, as amended; and~~ INTEREST

~~2. The information contained in the Report fairly presents, in all~~Production ~~material~~loans ~~respects, the financial condition~~ and ~~result~~accrued ofinterest ~~operations~~consist of the ~~Company.~~ following at:

Dated: June 16, 2003

	April 30,			July 31,
Non-Related Party	2009			2008
(A) Gerald Daigle	$	637,425		$	-

(B) VS Investments B, LLC (VSIB)		628,109			-

(B) Voodoo Production Services		478,780			-

		1,744,315			-
Less current portion		(158,589	)		-
	$	1,585,726		$	-

~~By:~~(A) /Mr. Daigle made a loan to the Company for the financing of the film National Lampoon’s/ ~~James~~the ~~Toll~~Legend ~~James~~of Awesomest ~~Toll~~Maximus. ~~Chief~~As ~~Financial~~of ~~Officer~~April 30, 2009, he was owed $600,000 in principal and $37,425 in interest for a total of $637,425 in production loans. Under the terms of the agreement the loans bear interest at the rate of 10% per annum and Mr. Daigle will also be entitled to contingent participation of 11.5% of all net contingent proceeds from the picture. Mr. Daigle 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. The loans are to be repaid as follows: $158,589 as of April 30, 2010 and $478,836 as of April 30, 2011.

~~Table~~(B) VS Investments B, LLC (VSIB) made loans to the Company for the financing of ~~Contents~~the film National Lampoon’s the Legend of Awesomest Maximus. As of April 31, 2009, VSIB was owed $600,000 in principal and $28,109 in interest for a total of $628,109 in production loans. Under the terms of the agreement the loans bear interest at the rate of 10% per annum and VSIB will also be entitled to contingent participation of 11.5% of all net contingent proceeds from the picture. VSIB 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. The loan is expected to be repaid as of April 30, 2011.

~~CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002~~ 11

~~In connection with the Quarterly Report of National Lampoon, Inc. (the~~NATIONAL ~~“Company”) on Form 10Q for the period ending April 30~~LAMPOON, ~~2003 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, James P~~INC. ~~Jimirro,~~AND ~~Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec .906 of the Sarbanes-Oxley Act of 2002, that:~~ SUBSIDIARIES

~~1. The~~NOTES TO ~~Report~~CONDENSED ~~fully~~CONSOLIDATED ~~complies~~FINANCIAL ~~with~~STATEMENTS ~~the requirements of section 13~~(aCONTINUED) ~~or 15(d) of the Securities Exchange Act of 1934, as amended; and~~

~~2. The~~NINE MONTHS ~~information~~ENDING ~~contained~~APRIL ~~in the Report fairly presents~~30, in2009 ~~all material~~AND ~~respects, the financial condition and result of operations of the Company.~~ 2008

~~Dated: June 16, 2003~~ (UNAUDITED)

~~By:~~(C) VooDoo /Production Services made loans to the Company for the financing of the film National Lampoon’s/ ~~James~~the Legend Pof Awesomest Maximus. ~~Jimirro~~As ~~James~~of PApril 31, 2009, VooDoo was owed $450,000 in principal and $28,780 in interest for a total of $478,780 in production loans. ~~Jimirro~~Under ~~President~~the ~~Chief~~terms ~~Executive~~of ~~Officer~~the agreement the loans bear interest at the rate of 10% per annum and Voo Doo Production Services will also be entitled to contingent participation of 11.5% of all net contingent proceeds from the picture. Voo Doo Production Services 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. The loan is expected to be repaid as of April 30, 2011.

The aggregate maturities of production loans from non-related parties and accrued interest for each of the next five years and thereafter are as follows as of April 30, 2009:

Year	Amount
2010	$	158,589
2011		1,585,726
	$	1,744,315

NOTE F - SHAREHOLDERS’ EQUITY (DEFICIENCY)

Preferred Stock

During the nine-month periods ended April 30, 2009 and 2008, the Company accrued $872,010 and $887,898, respectively, of Series B Stock and Series C Stock dividends.

During the nine months ended April 30, 2009, the Company issued 15,014 shares of Series D Stock, valued at $252,231. In addition 47,743 common shares valued at $40,104 were issuable in connection with the payment of the Series B Stock and Series C Stock dividends. The shares issued and issuable are as follows:

During the nine months ended April 30, 2009, accrued dividends of the Company's Series B Stock of $17,399 were converted to 20,713 shares of the Company’s common stock and accrued dividends of the Company's Series B Stock of $121,722 were converted to 7,246 shares of the Company’s Series D stock. The accrued dividends were converted into the Company’s common stock based on the closing price of the Company’s common stock on the trading day preceding the payment date.

During the nine months ended April 30, 2009, accrued dividends of the Company's Series C Stock of $22,705 were converted to 27,030 shares of the Company’s common stock and accrued dividends of the Company's Series C Stock of $130,509 were converted to 7,768 shares of the Company’s Series D stock. The accrued dividends were converted into the Company’s common stock based on the closing price of the Company’s common stock on the trading day preceding the payment date.

During the nine months ended April 30, 2009, 64,058 shares of the Company’s common stock were issued upon the exercise of 1,137 warrants that were issued in conjunction with the Company’s sale of its Series B Stock. The warrants had an exercise price of $1.775 resulting in cash proceeds to the Company of approximately $113,702.

During the nine months ended April 30, 2009, 21,264 shares of the Company’s common stock were issued upon the exercise of 2,126 warrants that were issued in conjunction with the Company’s sale of its Series C Stock. The warrants had an exercise price of $1.775 resulting in cash proceeds to the Company of approximately $37,736.

During the nine months ended April 30, 2008, warrants issued in conjunction with the sale of the Series C Stock were exercised to purchase 18,835 shares of the Company’s common stock. The exercise price per share was $1.775. The proceeds received from the exercise of the warrants totaled $33,434.

During the nine months ended April 30, 2008, 1,775 shares of the Company’s Series B Stock and related accrued dividends of $58,613 were converted to 132,562 shares of the Company’s common stock. The accrued dividends were converted into the Company’s common stock based on the closing price of the Company’s common stock on the trading day preceding the conversion date.

Common Stock

During the nine months ended April 30, 2009, 89,086 shares of common stock with a value of $93,730 were issued for services as follows: 70,323 shares of restricted common stock at stock prices ranging from $0.70 to $1.39 per share with a value of $68,630 were issued to consultants for monthly consulting services, 15,000 shares of common stock at stock prices ranging from $0.92 to $1.70 per share with a value of $21,600 were issued to consultants for one-time consulting fees, and 3,763 shares of common stock at a price of $0.93 per share with a value of $3,500 were issued to an employee as a bonus.

NATIONAL LAMPOON, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NINE MONTHS ENDING APRIL 30, 2009 AND 2008

(UNAUDITED)

During the nine months ended April 30, 2008, 237,043 shares of common stock with a value of $515,168 were issued for services as follows: 155,623 shares of common stock at stock prices ranging from $1.52 to $2.55 with a value of $341,645 were issued to various consultants for monthly consulting services, 4,171 shares of common stock at a stock price of $2.15 per share with a value of $8,969 were issued to Board members for fees owed, 43,389 shares at a stock price of $2.00 per share valued at $86,778 were issued to a professional services firm for services they provided, 7,826 shares of common stock at a stock price of $2.40 per share with a value of $18,782 were issued to a former executive for services provided, 15,600 shares of common stock at stock prices ranging from $2.00 to $2.52 with a value of $35,880 were issued to consultants for one-time consulting fees, and 10,434 shares of common stock at stock prices ranging from $1.80 to $2.34 per share with a value of $23,114 were issued to employees as a bonus.

During the nine months ended April 30, 2008, 5,750 shares of common stock at stock prices ranging from $1.90 to $2.00 with a value of $11,425 were issued to various parties in connection with the acquisition of intangible assets.

During the nine months ended April 30, 2008, 5,000 shares of the Company’s common stock were purchased through the exercise of stock options that resulted in cash proceeds to the Company of approximately $8,000.

NOTE G - COMMITMENTS AND CONTINGENCIES

Litigation

United States Securities and Exchange Commission v. National Lampoon, Inc. On December 15, 2008 the United States Securities and Exchange Commission (the "Commission") issued a release stating that it had charged seven individuals and two corporations with engaging in three separate fraudulent schemes to manipulate the market for publicly traded securities through the payment of prearranged kickbacks. The defendants include National Lampoon, Inc. and Daniel S. Laikin, our former Chief Executive Officer, as well as stock promoters, a consultant, and an officer of another company. Also on December 15, 2008, the United States Attorney for the Eastern District of Pennsylvania separately announced criminal charges involving the same conduct.

The Commission's complaint alleges that, from at least March 2008 through June 2008, Mr. Laikin and others engaged in a fraudulent scheme to manipulate the market for the Company's common stock. Specifically, the Commission has charged that Mr. Laikin and others paid kickbacks in exchange for generating or causing purchases of the Company's common stock to a stock promoter and others to give the false impression of a steady demand for the stock.

The complaint alleges that Mr. Laikin and others paid at least $68,000 to cause the purchase of at least 87,500 shares of the Company's common stock. In addition to paying others to purchase the stock, the complaint alleges that Mr. Laikin shared confidential financial information regarding the Company, non-public news releases, and confidential shareholder lists, and coordinated the release of news with the illegal purchases in the stock. The complaint also alleges that the Company and Mr. Laikin made materially misleading statements in a tender offer.

The complaint alleges violations of Section 17(a) of the Securities Act of 1933, Sections 9(a)(2), 10(b) and 13(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13e-4 thereunder. The complaint seeks permanent injunctions against all defendants, disgorgement of ill-gotten gains, together with prejudgment interest and civil penalties from the individual defendants, and an officer and director bar against Mr. Laikin. On September 23, 2009 Mr. Laikin pled guilty to a charge of conspiring to violate Title 17, Code of Federal Regulations, Section 240.10b-5.

Trading in the Company's common stock was suspended by the Securities and Exchange Commission through December 29, 2008. Trading in the Company’s common stock resumed on the Pink Sheets on February 5, 2009

David Weisburd, derivatively on behalf of Nominal Defendant National Lampoon, Inc. v The Board of Directors and National Lampoon, Inc. On or about February 24, 2009, David Weisburd filed a Shareholder Derivative Complaint for Breach of Fiduciary Duty, CA No BC408377, in the Superior Court of the State of California County of Los Angeles, alleging breach of fiduciary duty by the Company’s board of directors (“defendants”) and the Company, which is designated as a “nominal defendant”. Damages sought include: a finding that the defendants have violated their fiduciary duties to the Company and its shareholders; an Order requiring the Company to comply with applicable rules and regulations regarding management and oversight procedures and/or controls; a finding against the defendants for an amount of damages sustained by the Company as a result of the defendants’ breaches of fiduciary duty in an amount to be determined at trial, together with prejudgment interest; an award to the plaintiff of reasonable attorneys’ fees, expert fees and other reasonable costs and expenses; and an Order granting all such additional and different relief as this Court deems just and proper.

During the quarter ended April 30, 2009, there were no material developments relating to other legal actions to which we are a party.

NOTE H - STOCK OPTIONS AND WARRANTS

A)	Stock Options

On January 30, 2002, the Company’s board of directors adopted the Amended and Restated 1999 Stock Option, Deferred Stock and Restricted Stock Plan (the "1999 Plan"), as approved by the Company's shareholders at its annual meeting on April 25, 2002 . The options are 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 will have a fixed price, which will not be less than 100% of the fair market value per share on the grant date. The total number of options authorized is 11,000,000.

NATIONAL LAMPOON, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NINE MONTHS ENDING APRIL 30, 2009 AND 2008

(UNAUDITED)

During the nine months ended April 30, 2009, the Company did not grant options to purchase shares of the Company's common stock to employees and consultants under the 1999 Plan. During the nine months ended April 31, 2008, the Company granted options to purchase 1,063,389 shares of the Company's common stock at $2.16 per share to employees and consultants under the 1999 Plan. The aggregate value of the options vesting during the nine months ended April 30, 2009 and 2008 was $355,119 and $961,847, respectively, and has been reflected as compensation cost. As of April 30, 2009, the aggregate value of unvested options was $401,054, which will be amortized as compensation cost as the options vest, over 3 years.

The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatility is based on the volatility of the Company’s share price during the year preceding the issuance date of the option. For purposes of determining the expected life of the option, the full contract life of the option is used; average risk-free interest of 5.50%; and dividend yield of 0%.

The weighted-average grant-date fair value of options granted during the nine months ended April 30, 2009 and 2008 was $0.00 and $0.98, respectively.

	Nine months ended April 30, 2009			Nine months ended April 30, 2008
Expected volatility		-	%	39.5% - 55.6	%
Weighted average volatility		-	%	49.25	%
Expected dividends		-	%	0	%
Expected term (in years)		-		4-7
Risk free rate		-	%	5.5	%

A summary of option activity as of April 30, 2009 and changes during the nine months then ended is presented below:

	Shares			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (1)
Outstanding at August 1, 2008		5,760,995		$	2.44
Granted		-			-
Exercised		-			-
Forfeited or expired		(237,666	)		2.32
Outstanding at April 30, 2009		5,523,329		$	2.45		3.37	$	-
Exercisable at April 30, 2009		4,976,997		$	2.48		3.10	$	-

(1) The aggregate intrinsic value was calculated, as of April 30, 2009, as the difference between the market price and the exercise price of the Company’s stock for the options outstanding and exercisable which were in the money. As of April 30, 2009 there were no options outstanding and exercisable which were in the money.

Additional information regarding options outstanding as of April 30, 2009 is as follows:

NATIONAL LAMPOON, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NINE MONTHS ENDING APRIL 30, 2009 AND 2008

(UNAUDITED)

Options outstanding							Options exercisable
Exercise price		Number outstanding		Weighted average remaining contractual life (years)	Weighted average exercise price		Number exercisable	Weighted average exercise price
$	1 to $2		2,193,940	2.73	$	1.75	2,117,273	$	1.75
$	2 to $3		2,024,389	5.17		2.26	1,564,726		2.28
$	3 to $4		973,000	1.39		3.26	963,000		3.26
$	4 to $5		132,000	3.36		4.13	132,000		4.13
$	5 to $6		-	-		-	-		-
$	6 to $7		100,000	1.82		6.41	100,000		6.41
$	7 to $8		100,000	0.66		7.38	100,000		7.38
Total			5,523,329	3.37	$	2.45	4,976,999	$	2.48

A summary of the status of the Company’s non-vested shares granted under the Company’s stock option plan as of April 30, 2009 and changes during the nine months ended April 30, 2009 is presented below:

Non-vested Shares	Shares			Weighted-Average Grant Date Fair Value
Non-vested at August 1, 2008		986,332		$	1.10
Granted		-			-
Vested		(366,667	)		1.14
Forfeited		(73,333	)		1.12
Non-vested at April 30, 2009		546,332		$	1.04

Warrants

During the nine months ended April 30, 2009, the Company did not grant warrants to purchase the Company’s common stock. During the nine months ended April 30, 2008, the Company granted warrants to purchase 40,000 shares of the Company’s common stock at $1.75 per share. The aggregate value of the warrants vesting during the nine months ended April 30, 2009 and 2008 was $0 and $22,199, respectively, and has been reflected as compensation cost. As of April 30, 2009, the aggregate value of unvested warrants was $0.

The fair value of each warrant is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatility is based on the volatility of the Company’s share price during the year preceding the issuance date of the warrant. For purposes of determining the expected life of the warrant, the full contract life of the warrant is used; average risk-free interest of 5.50%; and dividend yield of 0%.

	Nine months ended April 30, 2009			Nine months ended April 30, 2008
Expected volatility		-	%		43.5	%
Weighted average volatility		-	%		43.5	%
Expected dividends		-	%		-	%
Expected term (in years)		-			2
Risk free rate		-	%		5.50	%

The weighted-average grant date fair value of warrants granted during the three-month periods ended April 30, 2009 and 2008 was $0.00 and $0.60 respectively.

A summary of warrant activity as of April 30, 2009 and changes during the nine months then ended is presented below:

	Shares			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (1)
Outstanding at August 1, 2008		747,727		$	3.08
Granted		-
Exercised		-
Forfeited or expired		(100,000	)	$	3.00
Outstanding at April 30, 2009		647,727		$	3.09		2.52		-
Exercisable at April 30, 2009		647,727		$	3.09		2.52

(1) The aggregate intrinsic value was calculated, as of April 30, 2009, as the difference between the market price and the exercise price of the Company’s stock for warrants which were in-the-money. As of April 30, 2008, there were no warrants outstanding or exercisable which were in-the-money.

Additional information regarding warrants outstanding as of April 30, 2009 is as follows:

Warrants outstanding							Warrants exercisable
Exercise price		Number outstanding		Weighted average remaining contractual life (years)	Weighted average exercise price		Number exercisable	Weighted average exercise price
$	1 to $2		60,000	0.61	$	1.83	60,000	$	1.83
$	2 to $3		175,000	6.57		2.58	175,000		2.58
$	3 to $4		412,727	1.09		3.49	412,727		3.49
Total			647,727	2.52	$	3.09	647,727	$	3.09

A summary of the status of the Company’s non-vested shares granted as warrants as of April 30, 2009 and changes during the nine months then ended is presented below:

Non-vested Shares	Shares	Weighted-Average Grant
Non-vested Shares	Shares	Date Fair Value
Non-vested at August 1, 2008	66,667	$	0.48
Granted	-		-
Vested	-		-
Forfeited	(66,667)		0.48
Non-vested at April 30, 2009		$

NOTE I - 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 has been operating in five business segments: (i) licensing and exploitation of the National Lampoon™ 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) distribution; and (v) travel services, which we no longer offer. 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. Amortization of capitalized production costs and impairment of capitalized production costs have been prorated based upon revenue among the licensing and publishing, production and distribution segments.

Summarized financial information for the three and nine months ended April 30, 2009 and 2008 concerning the Company's segments is as follows:

	Licensing			Advertising
	&			&
	Publishing (1)			Promotion (2)			Productio (3)			Travel Services (4)			Distribution (5)			Total
Three Months Ended April 30, 2009
Segment revenue	$	14,569		$	92,438		$	-		$	-		$	100,599		$	207,606
Segment operating (loss)	$	(46,312	)	$	(275,404	)	$	(16,810	)	$	-		$	(267,181	)	$	(605,707	)
Depreciation expense	$	4,742		$	381		$	-					$	-		$	5,123

Three Months Ended April 30, 2008
Segment revenue	$	1,662,311		$	553,019		$	265,828		$	-		$	154,772		$	2,635,930
Segment operating income (loss)	$	(10,964	)	$	287,329		$	(4,892	)	$	-		$	(82,408	)	$	189,065
Depreciation expense	$	3,227		$	1,341		$	-		$	-		$	-		$	4,568

Nine Months Ended April 30,2009
Segment revenue	$	705,505		$	976,879		$	49,855		$	-		$	323,179		$	2,055,418
Segment operating (loss)	$	(1,626,425	)	$	(917,377	)	$	(243,744	)	$	-		$	(1,595,798	)	$	(4,383,344	)
Depreciation expense	$	15,148		$	1,254		$	-		$	-		$	-		$	16,402

Nine Months Ended April 30, 2008
Segment revenue	$	2,251,877		$	1,159,195		$	265,828		$	110,000		$	159,831		$	3,946,731
Segment operating (loss)	$	(921,130	)	$	(813,703	)	$	(24,460	)	$	(215,556	)	$	(106,821	)	$	(2,081,670	)
Depreciation expense	$	10,056		$	3,108		$	-		$	-			-		$	13,164

NATIONAL LAMPOON, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NINE MONTHS ENDING APRIL 30, 2009 AND 2008

(UNAUDITED)

NOTE J – SUBSEQUENT EVENTS

Subsequent to April 30, 2009 the following legal actions were filed against the company:

Majestic Entertainment, Lorenzo Doumani and Eleonore Doumani v. National Lampoon, Inc. and Dan Laikin - This case was filed on July 31, 2009 in Los Angeles Superior Court (Case No. SC104240), with causes of action for breach of contract, fraud, negligent misrepresentation, breach of fiduciary duty, unfair business practices and violation of Corporations Code section 25400, involving two different contracts dated in 2004 - one involving a joint venture entitled National Lampoon Clubhouse and the other involving a preferred share agreement.

Breaking the Rules, LLC v. National Lampoon, Inc. - On or about July 30, 2009, the claimant served a Demand for Arbitration with the Independent Film & Television Alliance, claiming breach of contract and fraud, involving a distribution agreement for a film titled "One Two Many." Claimant seeks the termination of the agreement, unspecified compensatory and exemplary damages, attorneys' fees and costs.

Chermak v. Emmons, et al. – This action is pending in the Los Angeles Superior Court, West District, Beverly Hills Courthouse and bears case number (LASC Case No. 07C02106). This action was originally filed on May 29, 2007 against Kent Emmons, Emmons Media Group, NL Radio, LLC, Comedy Express Networks, Studio Funny Films, K Tahoe Investments, National Lampoon Networks, Inc. and National Lampoon Radio Networks for failure to pay invoices for legal services allegedly provided. On or about November 25, 2008, a judgment was entered against all named defendants for the principal sum of $101.298.49. On or about August 17, 2009, the plaintiff filed a motion seeking to enforce her judgment against National Lampoon, Inc. The plaintiff’s motion was granted on September 30, 2009. We are currently evaluating whether we will appeal this order.

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 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 Lampoon™ brand was initially developed in 1970 through publication of National Lampoon Magazine and later through the use of our name on motion pictures, including National Lampoon's Animal House and 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 earn the majority of our revenues from the following business activities:

Motion Picture Production and Distribution

We produce feature films. Historically, motion pictures that carry our brand had been produced and financed by third parties. We decided to develop, produce and distribute motion pictures under the National Lampoon name in order to control both the creative process and the distribution of the films and also to build a film library and to expand our brand visibility.

As part of our plan to increase the visibility of our brand in the film industry and to expand our film library we also began acquiring and branding third-party films for distribution in the U.S. and internationally. For third party films we pay finishing and prints and advertising costs that are recouped through U.S. theatrical, home entertainment and international sales.

In October 2006 we invested in Red Rock Pictures Holdings, Inc. (“Red Rock”). We currently own approximately 14% of Red Rock’s outstanding capital stock. Red Rock was formed for the purpose of providing financing and consulting services related to the production and exploitation of motion pictures. We have completed production on two films in partnership with Red Rock, National Lampoon’s Bag Boy and National Lampoon’s Ratko, The Dictator’s Son. National Lampoon’s Bag Boy was delivered during the year ended July 31, 2008 and National Lampoon’s Ratko, The Dictator’s Son is currently expected to be delivered the second quarter of 2010.

We are also in post production on our third title, National Lampoon’s The Legend of Awesomest Maximus. We expect to deliver this motion picture during the second or third quarter of the 2010 fiscal year.

We acquired distribution rights for seven 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 Apricot, National Lampoon Presents One, Two Many, National Lampoon’s Robodoc and National Lampoon’s Bar Starz. By releasing these films through various media channels, including theatrical, home entertainment, foreign distribution and digital distribution, we earn distribution fees.

During the nine months ended April 30, 2009, we released 2 motion pictures, National Lampoon's “Stoned Aged / Homo Erectus” which is being distributed by Paramount Pictures and “Bag Boy” which is being distributed by National Lampoon and Arts Alliance.

We have an interest in National Lampoon Clubhouse, Inc., a production entity, which produced the film Monster Night aka Trick or Treat. Monster Night was released in the fall of 2006. During the 2007 fiscal year we licensed the domestic and foreign video sales to a sub-distributor and terminated our production agreement with Majestic Entertainment. We will no longer produce films through National Lampoon Clubhouse, Inc.

The following is a list of the 11 motion pictures in our library that we either produced or acquired:

	Year
Title	Released	Financier/Distributor

National Lampoon’s Monster Night	2006	National Lampoon Clubhouse, Inc.
National Lampoon’s Bag Boy	2008	National Lampoon, Inc.
National Lampoon’s Ratko the Dictator’s Son	2009	National Lampoon, Inc.
National Lampoon’s Jake’s Booty Call	2006	The Romp, Inc.
National Lampoon’s Electric Apricot: The Quest for Festaroo	2007	Bait Productions
National Lampoon’s Beach Party at the Threshold of Hell	2008	Threshold Productions, LLC
National Lampoon’s Homo Erectus	2009	Burnt Orange Development, LLC
National Lampoon’s One, Two, Many	2008	Breaking the Rules, LLC
National Lampoon’s Robodoc	2009	Robodoc, LLC.
National Lampoon’s Bar Starz	2009	OBX Productions
National Lampoon’s The Legend of Awesomest Maximus	2009	National Lampoon, Inc.

We also earn revenues from providing production services on our own productions as well as third party productions that we acquire. Our production services are included in the production budget and are recorded as the production’s capitalized production costs.

We are currently developing for production and/or acquiring approximately four projects per year which will carry the National Lampoon name. We have motion picture output agreements with a domestic home video distributor and a cable television broadcast company. An output agreement guarantees a negotiated payment or advance for the distribution rights for films in development. The minimum guarantee or advance may be paid over various points of production of the film or upon full delivery of the finished product.

We have agreements with independent third parties for the limited platform theatrical release and subsequent distribution of our films to home entertainment. During the nine months ended April 30, 2009, we released two films as “platform theatrical releases” which is the release of a motion picture in a small number of theaters in order to promote the home entertainment sales.

For the nine months ended April 30, 2009, revenues derived from motion picture production and distribution totaled approximately $373,034 or approximately 18% of all the revenues we earned during the period.

Licensing

We license our National Lampoon trademark for use in the titles of films. We receive a license fee at the time we enter into an agreement allowing use of the National Lampoon trademark. Depending on our agreement with the motion picture studio or distributor, we also may receive royalties. Some of our agreements provide us with “first dollar gross” participation, meaning that we receive a percentage of all money received by the distributor from the distribution of the motion picture in any type of media, while other agreements provide for participation solely in net profits or in gross profits. Net profit participation is based upon a negotiated definition of net revenues after deducting certain costs of a film, including distribution fees, financing costs and general corporate expenses, while gross profit participation is based upon gross revenues, before any costs such as distribution fees, financing costs and other corporate costs are deducted. It may take years for the studio or the distributor to recoup the license fee, minimum guarantee or advance and the expenses, or these costs may never be recovered by the studio.

We currently are a party to 31 feature film branding agreements. Pursuant to these agreements, once the film is released and begins earning revenues, the studio or distributor is entitled to recoup any licensing fee, minimum guarantee or advance it paid to us under the agreement and, if included in the agreement, interest. Once this amount is recouped, our participation in the revenues earned by the film may begin.

The following is a list of the 31 motion pictures bearing our brand:

	Year
Title	Released	Financier/Distributor

National Lampoon’s Animal House	1979	Universal Studios
National Lampoon Goes to the Movies	1981	United Artists
National Lampoon’s Class Reunion	1982	ABC/Disney
National Lampoon’s Vacation	1983	Warner Bros.
National Lampoon’s European Vacation	1985	Warner Bros.
National Lampoon’s Class of ’86	1986	Paramount
National Lampoon’s Christmas Vacation	1989	Warner Bros.
National Lampoon’s Loaded Weapon I	1993	New Line Cinema
National Lampoon’s Last Resort	1994	Trimark Studios
National Lampoon’s Attack of the 52 Women	1994	Showtime
National Lampoon’s Senior Trip	1995	New Line Cinema
National Lampoon’s Favorite Deadly Sins	1995	Showtime
National Lampoon’s Dad’s Week Off	1997	Paramount
National Lampoon’s The Don’s Analyst	1997	Paramount
National Lampoon’s Men in White	1998	Fox
National Lampoon’s Golf Punks	1998	Fox
National Lampoon’s Van Wilder	2001	Artisan
National Lampoon Presents Dorm Daze	2003	Independent
National Lampoon’s Gold Diggers	2005	Lady P&A LLC
National Lampoon’s Blackball	2005	First Look Entertainment
National Lampoon’s Going the Distance	2005	Think Films
National Lampoon’s Adam & Eve	2006	MRG Ent.
National Lampoon’s Barely Legal	2006	Motion Picture Corp./Sony Pic. Rel.
National Lampoon’s Cattle Call	2006	Cattle Call LLC
National Lampoon’s RepliKate	2003	Silver Nitrate
National Lampoon’s Pledge This!	2006	Street Alien/Silver Nitrate
National Lampoon’s Pucked (formerly Trouble with Frank)	2006	National Lampoon, Inc,
National Lampoon’s Jake’s Booty Call	2006	National Lampoon, Inc.
National Lampoon’s Dorm Daze II	2006	Independent
National Lampoon’s Van Wilder II	2006	Lion’s Gate
National Lampoon’s Van Wilder III: Freshman Year	2009	Tapestry Films, Inc./Paramount

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 House and 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.

For the nine months ended April 30, 2009, revenues derived from licensing, exclusive of publishing revenues, totaled $674,026 or approximately 32% of all the revenues we earned during the period.

Internet Activities

Our Internet properties comprise several Internet destination sites. These include NationalLampoon.com, DrunkUniversity.com, TOGATV.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 200 of the most popular humor and college lifestyle destination sites on the Internet. We sell advertising space on our websites 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 for these Internet destinations.

In May 2007 we announced the launch of the National Lampoon Video Network where we entered into content distribution agreements with several Internet video portals including AOL, Joost, Veoh, Yahoo!, YouTube and others. These partners sell advertising space including video streaming and we receive a portion of the revenues earned.

For the nine months ended April 30, 2009, revenues derived from our Internet activities totaled $627,169 or approximately 31% of all the revenues we earned during the period.

Discontinued Operations

In the past we also earned revenues from National Lampoon Networks, which delivered college television programming and performed field marketing activities, from publishing books and from NL Radio, LLC. While we earned some revenues from these operations during the nine months ended April 30, 2009, as of various dates from January 2009 to May 2009 we are no longer engaged in any of these activities and we do not expect to re-enter these markets in the future.

Trends, Events and Uncertainties

We have experienced a number of challenges during the nine months ended April 30, 2009. In December 2008 the Securities and Exchange Commission and the U.S. Department of Justice brought actions against us and Daniel Laikin, our former Chief Executive Officer, for alleged fraudulent schemes to manipulate the market for our securities. As a result, in December 2008 Mr. Laikin resigned and Timothy Durham was appointed as our Chief Executive Officer. On September 23, 2009 Mr. Laikin pled guilty to a charge of conspiring to violate Title 17, Code of Federal Regulations, Section 240.10b-5. The defense of these legal actions, as well as other legal actions that have been filed since December 2008, continues to require a significant amount of management’s time and attention. Mr. Laikin and Mr. Durham were also our primary sources of financing for many of our operations,however, neither Mr. Laikin nor Mr. Durham is required to continue providing funding to us. Since December 2008 Mr. Laikin has provided no further financing to us. Our operations have also been adversely effected by the global economic recession, which resulted in slower payment of fees owed to us and, in at least 3 cases, the failure to pay fees owed to us at all, as well as fewer distribution arrangements. We expect these matters to continue to impact our operations for at least the next 12 months.

Aside from the legal actions we have disclosed in this and in previous reports, since April 30, 2009 we have been made a party to the following material legal actions:

Majestic Entertainment, Lorenzo Doumani and Eleonore Doumani v. National Lampoon, Inc. and Daniel Laikin. This case was filed on July 31, 2009 in Los Angeles Superior Court (Case No. SC104240), with causes of action for breach of contract, fraud, negligent misrepresentation, breach of fiduciary duty, unfair business practices and violation of Corporations Code section 25400, involving two different contracts dated in 2004. One contract involved a joint venture entitled National Lampoon Clubhouse and the other contract involved a purchase of preferred stock.

Breaking the Rules, LLC v. National Lampoon, Inc. On or about July 30, 2009, the claimant served a Demand for Arbitration with the Independent Film & Television Alliance, claiming breach of contract and fraud, involving a distribution agreement for the film titled National Lampoon’s One, Two Many. The claimant seeks the termination of the agreement, unspecified compensatory and exemplary damages, attorneys' fees and costs.

Chermak v. Emmons, et al. This action is pending in the Los Angeles Superior Court, West District and bears case number (LASC Case No. 07C02106). This action was originally filed on May 29, 2007 against Kent Emmons, Emmons Media Group, NL Radio, LLC, Comedy Express Networks, Studio Funny Films, K Tahoe Investments, National Lampoon Networks, Inc. and National Lampoon Radio Networks for failure to pay invoices for legal services allegedly provided. On or about November 25, 2008, a judgment was entered against all named defendants for the principal sum of $101.298.49. On or about August 17, 2009, the plaintiff filed a motion seeking to enforce her judgment against National Lampoon, Inc. The plaintiff’s motion was granted on September 30, 2009. We are currently evaluating whether we will appeal this order.

The defense of these actions will be both costly and time consuming. We cannot be certain that we will successfully defend or settle any of the actions that have not been resolved.

Other trends, events and uncertainties that may impact our operations are included in the discussion of our results of operations.

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.

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. We account for our investments in equity securities under SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” We have classified our 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).

Results of Operations

We operate in five business segments, namely, licensing and exploitation of the National Lampoon trademark and related properties including the sale of products to consumers and publishing of copyrighted material; advertising and promotion through our Internet websites, field marketing, live events and television programming on college campuses; production of film and television products; travel services; and distribution.

Segment operating income (loss) excludes the amortization of intangible assets, interest income, interest expense, other income and expenses, minority interest, equity in investee loss and income taxes. Selling, general and administrative expenses not specifically attributable to any segment have been prorated among the five segments. Amortization of capitalized production costs and impairment of capitalized production costs have been prorated based upon revenue among the licensing and publishing, production and distribution segments.

Summarized financial information for the three and nine months ended April 30, 2009 and 2008 for our segments is as follows:

	Licensing			Advertising
	&			&						Travel
	Publishing (1)			Promotion (2)			Production (3)			Services (4)			Distribution (5)			Total
Three Months Ended April 30, 2009
Segment revenue	$	14,569		$	92,438		$	-		$	-		$	100,599		$	207,606
Segment operating (loss)	$	(46,312	)	$	(275,404	)	$	(16,810	)	$	-		$	(267,181	)	$	(605,707	)
Depreciation expense	$	4,742		$	381		$	-		$	-		$	-		$	5,123

Three Months Ended April 30, 2008
Segment revenue	$	1,662,311		$	553,019		$	265,828		$	-		$	154,772		$	2,635,930
Segment operating income (loss)	$	(10,964	)	$	287,329		$	(4,892	)	$	-		$	(82,408	)	$	189,065
Depreciation expense	$	3,227		$	1,341		$	-		$	-		$	-		$	4,568

Nine Months Ended April 30,2009
Segment revenue	$	705,505		$	976,879		$	49,855		$	-		$	323,179		$	2,055,418
Segment operating (loss)	$	(1,626,425	)	$	(917,377	)	$	(243,744	)	$	-		$	(1,595,798	)	$	(4,383,344	)
Depreciation expense	$	15,148		$	1,254		$	-		$	-		$	-		$	16,402

Nine Months Ended April 30, 2008
Segment revenue	$	2,251,877		$	1,159,195		$	265,828		$	110,000		$	159,831		$	3,946,731
Segment operating (loss)	$	(921,130	)	$	(813,703	)	$	(24,460	)	$	(215,556	)	$	(106,821	)	$	(2,081,670	)
Depreciation expense	$	10,056		$	3,108		$	-		$	-		$	-		$	13,164

In the table above, licensing and publishing revenues include the licensing of our name and sale of our books; advertising and promotion revenues include online and cable advertising as well as advertising and promotion of the films released; production revenues include films, television and home entertainment; travel services represents the revenue earned by National Lampoon Tours, Inc however we no longer offer travel services; and distribution revenues includes theatrical, home entertainment and digital distribution of our titles.

A reconciliation of segment operating loss to net loss before income taxes for the periods ended April 30, 2009 and 2008 is as follows:

	April 30, 2009			April 30, 2008
Total segment operating (loss)	$	(4,383,344	)	$	(2,081,670	)
Amortization of intangible assets		(306,311	)		(184,021	)
Interest expense		(212,288	)		(74,745	)
Other income/expense		30,636			421,890
Net loss	$	(4,871,307	)	$	(1,918,546	)

Three months ended April 30, 2009 as compared to the three months ended April 30, 2008

Licensing and Publishing Revenues

Licensing and publishing revenues were $14,569 for the three months ended April 30, 2009, as compared to $1,662,311 for the three months ended April 30, 2008, representing a decrease of $1,647,742 or 99%.

The decrease for the three-month period was primarily attributable to a decrease in television revenues, which were $0 for the three months ended April 30, 2009, as compared to $750,000 for the three months ended April 30, 2008, representing a decrease of $750,000 or 100%. This decrease was primarily due to the timing of receipts.

The decrease for the three-month period was also attributable to a decrease in revenues derived from sales of international distribution licenses for our various titles, which totaled $0 during the three months ended April 30, 2009 as compared to $690,410 for the three months ended April 30, 2008. The prior year revenue was derived from National Lampoon's Bag Boy as well as from National Lampoon Presents Beach Party on the Threshold of Hell and National Lampoon's Homo Erectus.

Motion picture royalties decreased from $171,585 for the three months ended April 30, 2008 to $0 for the three months ended April 30, 2009. The royalties paid during the three months ended April 30, 2008 related to a settlement that we reached with Universal Studios during the 2007 fiscal year for unpaid royalties related to the exploitation of National Lampoon’s Animal House.

Publishing revenues net of reserve for returns were $0 for the three months ended April 30, 2009, as compared to $(55,241) for the three months ended April 30, 2008. The loss in revenue for the three-month period ended April 30, 2008 was due to returns that exceeded publishing revenues.

Costs related to licensing revenues were $9,863 for the three months ended April 30, 2009, as compared to $41,243 for the three months ended April 30, 2008, representing a decrease of $31,380 or 76%.The decrease in costs related to licensing revenues resulted primarily from a decrease in license fees during the three months ended April 30, 2009.

Amortization of capitalized production costs was $9,012 for the three months ended April 30, 2009 compared to $1,208,416 for the three months ended April 30, 2008. Amortization for current productions begins upon theatrical and/or home video release.

Costs related to publishing revenues were $0 for the three months ended April 30, 2009, compared to $76,080 for the three months ended April 30, 2008, representing a decrease of $76,080 or 100 %. The decrease in costs related to amortization of publishing costs.

Advertising and Promotion Revenues

Advertising and promotion revenues totaled $92,438 during the three months ended April 30, 2009, as compared to $553,019 for the three months ended April 30, 2008, representing a decrease of $460,581 or 83%. The decrease in revenue was the result of a decrease in promotion revenues mainly due to Internet advertising on our new websites and a decrease in prints and advertising revenues charged on the release of our titles. Going forward, we expect to focus our resources on increasing revenues generated from our Internet websites and from product placement. We do not intend to continue providing field promotion services at events held by third parties or to produce field promotion events in the future.

Costs of advertising and promotion revenue were $51,371 during the three months ended April 30, 2009 compared to $68,893 for the three months ended April 30, 2008, representing a decrease of $17,522 or 25%. The decrease in costs of advertising and promotion was primarily due to the decrease in internet design fees of $15,000.

Production Revenues

For the three months ended April 30, 2009, production revenue was $0, as compared to $265,828 for the same period in 2008. During the three months ended April 30, 2008, production revenues were earned from live events and for post production services while during the three months ended April 30, 2009 we earned no such revenues. We traditionally do not produce product unless we have a presale, minimum guarantee or co-production agreement in place. This reduces our financial risk as productions tend to be capital intensive. As these output arrangements are signed, we will allocate additional internal resources to this segment of our business.

Costs related to production revenues were $16,810 during the three months ended April 30, 2009, compared to $21,900 for the three months ended April 30, 2008, for a difference of $5,090. Although there were no production revenues during the three months ended April 30, 2009, there were remaining costs related to revenues from prior periods.

Distribution Revenues

For the three months ended April 30, 2009, distribution revenue was $100,599 as compared to $154,772 for the same period in 2008. Distribution revenues primarily resulted from the DVD release of five of our titles on our distribution network, which includes theatrical, home entertainment and digital distribution.

For the three months ended April 30, 2009, costs related to distribution revenues were $15,499 as compared to $92,311 for the same period in 2008. Costs related to distribution revenues are primarily due to the distribution fees plus the costs of manufacturing, marketing and pick, pack and ship directly related to the DVD release.

Other Costs and Expenses

Selling, general and administrative expenses during the three months ended April 30, 2009 were $710,758 as compared to $938,022 for the three months ended April 30, 2008, a decrease of $227,264 or approximately 24%. During the three months ended April 30, 2009, approximately 59% of our selling, general and administrative expenses consisted of salary expense totaling $418,757, as compared to salary expense of approximately $526,010, which represented 56% of selling, general and administrative expenses for the three months ended April 30, 2008. The decrease of $107,253, or 20%, in salary expense for the three months ended April 30, 2009 was primarily due to the separation from service of various employees as well as the closure of our New York office. During the three months ended April 30, 2009, selling, general and administrative expenses also included consulting fees of $33,297 as compared to $59,417 during the same period in the prior year for a decrease of $26,120 as we continued to reduce our reliance on consultants. Legal fees increased by $76,641, or 397%, from $19,296 during the three months ended April 30, 2008 to $95,937 for the same period in 2009. Investor and public relations costs decreased by $78,646, or 100%, from $78,646 during the three months ended April 30, 2008 to $0 for the same period in 2009.

Selling, general and administrative expenses not specifically attributable to any segment have been allocated among the five segments pro-rata according to percent of revenues. Segment operating income (loss) excludes the amortization of intangible assets, interest income and income taxes.

Amortization of intangible assets, which consists of the costs of our acquisition and protection of the “National Lampoon” trademark, as well as the acquisition of websites, domain names and other intangible assets was approximately $93,226 during the three months ended April 30, 2009 and $61,637 for the three months ended April 30, 2008. The increase was due to the acquisition of websites.

There was an increase of $54,047 in interest expense to $83,086 during the three months ended April 30, 2009, from $29,039 during the three months ended April 30, 2008. The increase in interest expense is primarily due to an increase in production and prints and advertising loans from related parties.

Other income increased by $2,883 or 447% to $2,238 during the three months ended April 30, 2009 compared to $(645) for the three months ended April 30, 2008.

For the three months ended April 30, 2009, we had a net loss of $779,781 as compared to net income of $97,744 for the three months ended April 30, 2008, representing an increase in net loss of $877,525 or 448%. The increase in net loss for the three-month period resulted primarily from significant decreases in revenues from advertising and promotion along with a decrease in distribution and licensing and a decrease in expenses for the quarter.

During the quarters ended April 30, 2009 and 2008, we had no provision for income taxes due to the significant net operating losses incurred in prior periods and related carry forward to the current period. We also accrued dividends of $287,339 during the three months ended April 30, 2009 and $292,356 during the same period in 2008. The decrease was primarily due to the conversion of our Series B or Series C Convertible Preferred Stock to common stock.

Nine months ended April 30, 2009 as compared to the nine months ended April 30, 2008

Licensing and Publishing Revenues

Licensing and publishing revenues were $705,505 for the nine months ended April 30, 2009, as compared to $2,251,877 for the nine months ended April 30, 2008, representing a decrease of $ 1,546,372 or 69 %.

The decrease for the nine-month period was primarily attributable to decreases in television revenue of $750,000, motion picture revenue of $301,000 and international sales of $654,000. This was offset with an increase in royalties for video of $128,000 and publishing of $53,000.

Costs related to licensing revenues were $44,804 for the nine months ended April 30, 2009, as compared to $84,394for the nine months ended April 30, 2008, representing a decrease of $39,590 or 88%. The decrease in costs related to license revenues resulted primarily from a decrease to $31,000 in royalties accrued to Harvard Lampoon during the nine months ended April 30, 2009.

Amortization of capitalized production costs was $60,005 for the nine months ended April 30, 2009 compared to $1,208,937 for the nine months ended April 30, 2008. Amortization for current productions begins upon theatrical and/or home video release. The increase was primarily due to the amortization of capitalized production costs of $64,501 due to revenue recognition for domestic and international licensing of six film titles. The amortization was offset by a decrease in the amount of ($4,496) in the disposal of Totally Baked due to a refund of production costs that was received during the nine months ended April 30, 2009. Impairment of capitalized production costs was $2,371,575 for the nine months ending April 30, 2009 compared to $0 for the nine months ending April 30, 2008. The impairment of capitalized production costs was due to the write down of domestic and international licensing ultimate revenues from the release of National Lampoon’s Bagboy and National Lampoon’s Ratco, The Dictator’s Son based upon a review of our estimates with current contracts, and was expensed to “impairment of capitalized production costs”. The remaining amount of $465,971 in capitalized production costs for National Lampoon’s Bagboy will be expensed during the 2009 and 2010 fiscal years.

Costs related to publishing revenues were $128,108 for the nine months ended April 30, 2009, compared to $124,125 for the nine months ended April 30, 2008, representing an increase of $3,982 or 3 %. The increase in costs related to publishing revenues consisted of miscellaneous publishing costs during the nine months ended April 30, 2009.

Advertising and Promotion Revenues

Advertising and promotion revenues totaled $976,879 during the nine months ended April 30, 2009, as compared to $1,159,195 for the nine months ended April 30, 2008, representing a decrease of $182,316 or 16%. The decrease in revenue was primarily the result of a $90,000 decrease in promotion revenues, mainly from Internet advertising on our websites, as well as a decrease of $90,000 in sponsored production shoots and field promotion events. Going forward, we expect to focus our resources on increasing revenues generated from our Internet websites and from product placement.

Costs of advertising and promotion revenue were $337,866 during the nine months ended April 30, 2009 compared to $404,506 for the nine months ended April 30, 2008, representing a decrease of $66,640 or 16%. The decrease in costs of advertising and promotion was the result of a number of factors. Due to an improvement of our Internet capabilities, web development and Internet service fees decreased by $12,000 and sales promotions declined by $50,000.

Production Revenues

For the nine months ended April 30, 2009, production revenue was $49,855, as compared to $265,828 for the same period in 2008. Production revenues decreased by $215,973 or 81%, primarily due to a decrease of video production during the nine months ended April 30, 2009 and the timing of the contracts. We traditionally do not produce product unless we have a presale, minimum guarantee or co-production agreement in place. This reduces our financial risk as productions tend to be capital intensive. However, we are planning to expand our productions and we are negotiating with domestic pay television broadcasters and home video distributors for output arrangements. The output arrangement guarantees a pre-negotiated minimum guarantee or sales price for the licensing of a specific media and territory. As these output arrangements are signed, we will allocate additional internal resources to this segment of our business.

Costs related to production revenues were $78,728 during the nine months ended April 30, 2009, compared to $40,948 for the nine months ended April 30, 2008, for a difference of $37,780.

Distribution Revenues

For the nine months ended April 30, 2009, distribution revenue was $323,179 as compared to $159,831 for the same period in 2008, an increase of approximately 102%. Distribution revenues primarily resulted from the DVD release of five of our titles on our distribution network, which includes theatrical, home entertainment and digital distribution, during the nine months ended April 30, 2009.

For the nine months ended April 30, 2009, costs related to distribution revenues were $139,164 as compared to $106,811 for the same period in 2008. Costs related to distribution revenues are primarily due to the distribution fees plus the costs of manufacturing, marketing and pick, pack and ship directly related to the DVD release.

Travel Services Revenues

During the nine months ended April 30, 2008, travel services revenues were $110,000 compared to $0 for the nine months ended April 30,2 009. During the six months ended January 31, 2008 we agreed to dismiss a legal action 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 we discontinued our travel services business and no further revenues are expected to be earned from this segment.

Other Costs and Expenses

Selling, general and administrative expenses during the nine months ended April 30, 2009 were $3,278,512 as compared to $4,058,679 for the nine months ended April 30, 2008, a decrease of $780,167 or approximately 19%. During the nine months ended April 30, 2009, approximately 49% of our selling, general and administrative expenses consisted of salary expense totaling $1,618,817, as compared to salary expense of approximately $2,379,669, which represented 59% of selling, general and administrative expenses for the nine months ended April 30, 2008. The decrease of $760,852, or 32%, in salary expense for the nine months ended April 30, 2009 was primarily due to the separation from service of various employees as well as the closure of our New York office. During the nine months ended April 30, 2009, selling, general and administrative expenses also included consulting fees of $183,758 as compared to $295,713 during the same period in the prior year for a decrease of $111,955 as we continued to reduce our reliance on consultants. Legal fees increased by $123,744, or79%, from $155,857 during the nine months ended April 30, 2008 to $279,601 for the same period in 2009. Investor and public relations costs decreased by $254,758, or 73%, from $349,042 during the nine months ended April 30, 2008 to $94,284 for the same period in 2009.

Selling, general and administrative expenses not specifically attributable to any segment have been allocated among the five segments pro-rata according to percent of revenues.

Amortization of intangible assets, which consists of the costs of our acquisition and protection of the “National Lampoon” trademark, as well as the acquisition of websites, domain names and other intangible assets was approximately $306,311 during the nine months ended April 30, 2009 and $184,021 for the nine months ended April 30, 2008. The increase was due to the acquisition of websites.

During the nine months ended April 30, 2009, we recorded expenses of $355,119 associated with the granting of stock options and warrants to employees, advisors and consultants as compared to expenses of $984,046 incurred for the nine months ended April 30, 2008, for a decrease of $628,927 or 64%. The decrease is primarily due to a reduced number of grants of options to our directors, employees and consultants.

During the nine months ended April 30, 2009, we recorded expenses of $93,730 associated with stock issued for services as compared to expenses of $515,168 incurred for the nine months ended April 30, 2008, for a decrease of $421,438 or 82%. The decrease is primarily due to the reduction in the number of consultants and vendors being paid with shares of our common stock.

There was an increase of $137,543 in interest expense to $212,288 during the nine months ended April 30, 2009, from $74,745 during the nine months ended April 30, 2008. The increase in interest expense is primarily due to an increase in production and prints and advertising loans from related parties.

Other income decreased by $391,253 or 93% to $30,636 during the nine months ended April 30, 2009 compared to $421,889 for the nine months ended April 30, 2008. 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, 2009, we had a net loss of $4,871,307 as compared to a net loss of $1,918,546 for the nine months ended April 30, 2008, representing an increase in net loss of $2,952,761 or 154%. The increase in net loss for the nine-month period resulted primarily from a significant decrease in revenues from advertising and promotion along with a decrease in licensing and production revenues and an increase in expenses. The increase in expenses was a result of the impairment of capitalized production costs of $2,371,575, partially offset by decreases in costs related to SG&A, advertising and promotion costs, and amortization.

During the nine months ended April 30, 2009 and 2008, we had no provision for income taxes due to the significant net operating losses incurred in prior periods and related carry forward to the current period. We also accrued dividends of $872,010 during the nine months ended April 30, 2009 and $887,898, during the same period in 2008.

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, 2009 consisted of revenues, loans from our officers and directors and production loans.

Net cash used in operating activities was $1,998,072 for the nine months ended April 30, 2009, as compared to $952,779 for the nine months ended April 30, 2008. The increase in cash flow used in operations was primarily attributable to an increase in production costs, offset by a decrease in accounts receivable, and increases in accounts payable and deferred revenues. Cash provided by financing activities was $2,060,175 for the nine months ended April 30, 2009, as compared to $1,053,881 for the nine months ended April 30, 2008. The funds were obtained from officers and directors, Red Rock Pictures Holdings, Inc. and investors and were partially offset by repayments to each of them.

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company had a current net loss of $4,871,307 for the nine months ended April 30, 2009, as well as negative working capital of $5,673,452 and a stockholders’ deficiency of $3,096,453 as of April 30, 2009, along with net losses for the prior two years of $1,686,974 and $2,504,170. Additionally, on December 15, 2008 the United States Securities and Exchange Commission issued a release, and the United States Attorney for the Eastern District of Pennsylvania announced, that they had charged seven individuals and two corporations with engaging in three separate fraudulent schemes to manipulate the market for publicly traded securities through the payment of prearranged kickbacks. The defendants include National Lampoon, Inc. and Daniel S. Laikin. Furthermore, on January 9, 2009 our board of directors decided to voluntarily delist our common stock, par value $0.0001 per share, from NYSE Amex Equities. These factors raise substantial doubt about the Company's ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Historically, our principal sources of funds used for operations and working capital have been revenues and loans received from Daniel S. Laikin, our former Chief Executive Officer, and Timothy Durham, our current Chief Executive Officer. The aggregate amount of the loans and accrued interest owed to Mr. Laikin and Mr. Durham at April 30, 2009 was $1,508,594 as compared to $1,244,178 at July 31, 2008. These two individuals have made no further commitment to provide loans to us to meet any immediate working capital requirements.

Our ability to continue as a going concern is dependent upon our ability to develop additional sources of capital and revenue. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our capital requirements for the next 12 months have been and will continue to be significant. We will need to obtain financing to fund our cash needs and continue our operations. Additional financing, whether through public or private equity or debt financing or loans from our stockholders or other sources may not be available, or if available, may be on terms unacceptable to us. We do not currently have any committed sources of financing available. Our ability to maintain sufficient liquidity to continue our operations is dependent on our ability to raise additional capital.

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.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (SFAS 161). This statement requires enhanced disclosures about an entity’s derivative and hedging activities, including (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities” (SFAS 133), and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” This standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for non-governmental entities. SFAS No. 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission of the Public Company Accounting Oversight Board's amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.”

In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 concludes that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”).

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosure about Fair Value of Financial Instruments” (FSP 107-1/APB 28-1). FSP 107-1/APB 28-1 requires interim disclosures regarding the fair values of financial instruments that are within the scope of FAS 107, “Disclosures about the Fair Value of Financial Instruments.” Additionally, FSP 107-1/APB 28-1 requires disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments on an interim basis as well as changes of the methods and significant assumptions from prior periods. FSP 107-1/APB 28-1 does not change the accounting treatment for these financial instruments

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP 157-4). FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities when the volume and level of activity for the asset/liability has significantly decreased. FSP 157-4 also provides guidance on identifying circumstances that indicate a transaction is not orderly. In addition, FSP 157-4 requires disclosure in interim and annual periods of the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques

In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162," and approved—the FASB Accounting Standards CodificationTM (Codification) as the single source of authoritative nongovernmental US GAAP. The Codification does not change current US GAAP, but is intended to simplify user access to all authoritative US GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. For the Company, the Codification is effective July 1, 2009 and will require future references to authoritative US GAAP to coincide with the appropriate section of the Codification.

In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)," which revised the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity.

The Company does not believe that the adoption of the above recent pronouncements will have a material effect on the Company’s condensed consolidated results of operations, financial position, or cash flows.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company we are not required to provide this information.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) as of April 30, 2009, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of April 30, 2009, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

In October 2008, we engaged an internal controls consultant to assist in our compliance with the Sarbanes-Oxley Act of 2002. Specifically, the consultant was engaged to document our system of internal controls, identify material weaknesses, propose and implement remediation of the weaknesses, develop tests of our key controls, analyze the testing and train our personnel to maintain the system and tests. In October 2008, we received a report from our internal controls consultant that stated we have material weaknesses in our system of internal controls. A material weakness, as defined in standards established by the Public Company Accounting Oversight Board (United States), is a deficiency in internal control over financial reporting that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Based upon the report of the consultant and management assessment, we have identified the following material weaknesses:

Insufficient disaster recovery or backup of core business functions,

Lack of segregation of duties,

Lack of a purchase order system or procurement process, and

Lack of documented and reviewed system of internal controls.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Changes in Internal Control

No change in internal control over financial reporting was made during the third quarter of the 2009 fiscal year that materially affected, or is likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

Information relating to the settlement of the action titled American Cinema Distribution Corporation v. National Lampoon, Inc. is included in our Quarterly Report on Form 10-Q for the three months ended October 31, 2008.

Information relating to the action titled United States Securities and Exchange Commission v. National Lampoon, Inc. is included in our Quarterly Report on Form 10-Q for the three months ended January 31, 2009. On September 23, 2009 Mr. Laikin pled guilty to a charge of conspiring to violate Title 17, Code of Federal Regulations, Section 240.10b-5.

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

None

Item 3 - Defaults Upon Senior Securities

None.

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

None.

Item 5 - Other Information

None.

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)
3.4	Second Amendment to Certificate of Incorporation of National Lampoon, Inc. (6)
3.5	Third Amendment to Certificate of Incorporation of National Lampoon, Inc. (6)
4.1	Certificate of Designations, Preferences, Rights and Limitations of Series C Convertible Preferred Stock of National Lampoon, Inc. (2)
4.2	First Amendment to Certificate of Designations, Preferences, Rights and Limitations of Series C Convertible Preferred Stock of National Lampoon, Inc. (6)
4.3	Second Amendment to Certificate of Designations, Preferences, Rights and Limitations of Series C Convertible Preferred Stock of National Lampoon, Inc. (6)
4.4	Certificate of Designations, Preferences, Rights and Limitations of Series D Convertible Preferred Stock (6)
4.5	NLAG Registration Rights Agreement dated May 17, 2002 among the Registrant and members of the NLAG Group and GTH Capital, Inc. (3)
4.6	Jimirro Registration Rights Agreement dated May 17, 2002 (3)
4.7	Piggyback Registration Rights Agreement dated September 3, 2002 between the Registrant and Constellation Venture Capital, L.P. as agent for certain individuals. (4)
4.8	Piggyback Registration Rights Agreement entered into among the Registrant and the purchasers of Series C Convertible Preferred Stock (5)
4.9	J2 Communications Voting Agreement dated May 17, 2002 among members of the NLAG Group and James P. Jimirro (3)
4.10	First Amendment to Voting Agreement dated June 7, 2002
4.11	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*
32.1	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 Annual Report on Form 10-K/A for the fiscal year ended July 31, 2003 filed with the Securities and Exchange Commission on December 19, 2003, file no. 001-32584.
(2)	Incorporated by reference from the registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 2005 filed with the Securities and Exchange Commission on October 29, 2005, file no. 001-32584.
(3)	Incorporated by reference from the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 31, 2002, file no. 001-32584.
(4)	Incorporated by reference from the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 9, 2002, file no. 001-32584.
(5)	Incorporated by reference from the registrant's Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on December 22, 2006, file no. 001-32584.
(6)	Incorporated by reference from the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 10, 2008, file no. 001-32584.
(7)	Incorporated by reference from the registrant’s Current Report on Form 8-K filed on October 30, 2008, file no. 001-32584.

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.

October 1, 2009	By:	/s/ Timothy Durham
		Timothy Durham, Chief Executive Officer


October 1, 2009	By:	/s/ Rick Snow
		Rick Snow, Interim Chief Financial Officer

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