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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934



For the Quarterly Period Ended April 30, 2004 Commission File No. 0-15284



NATIONAL LAMPOON, INC.
(Exact name of registrant as specified in its charter)


California 95-4053296
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)


10850 Wilshire Blvd., Suite 1000
Los Angeles, California 90024
(Address of principal executive offices)


Registrant's telephone number: (310) 474-5252


Indicate by check 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.

YES [X] NO [_]


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act. YES [_] NO [X]

As of June 13, 2004 the registrant had 1,533,418 shares of its common stock
outstanding.



PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

NATIONAL LAMPOON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

AS OF AS OF
APR. 30, 2004 JUL. 31, 2003
------------- -------------
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 16,739 $ 140,255
Accounts receivable 109,231 18,390
Prepaid expenses and other current assets 8,428 15,636
------------- -------------
Total current assets 134,398 174,281

NON-CURRENT ASSETS
Capitalized production costs 168,055 27,000
Fixed assets, net of accumulated
depreciation 61,081 42,859
Intangible assets 6,505,732 6,505,732
Accumulated amortization of intangible
assets (4,229,578) (4,049,578)
Other assets 4,459 4,500
------------- -------------
Total non-current assets 2,509,749 2,530,513
------------- -------------
TOTAL ASSETS $ 2,644,147 $ 2,704,794
============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable $ 444,462 $ 183,485
Accrued expenses 826,845 781,023
Notes payable, including related parties
of $4,447,798 4,841,105 1,443,856
Deferred income 100,000 161,000
------------- -------------
TOTAL LIABILITIES 6,212,412 2,569,364
------------- -------------

SHAREHOLDERS' EQUITY (DEFICIT)
Preferred Stock Series B, par value
$.0001, 68,406 shares authorized, 63,607
and 63,607 shares issued respectively. 6 6
Common Stock, no par value, 15,000,000
shares authorized, 1,533,418 and
1,526,795 shares issued, respectively 153 153
Additional paid in capital 17,265,984 17,110,401
Less: Note receivable on common stock (161,540) (157,220)
deferred compensation (676,652) (1,001,066)
Accumulated deficit (19,996,216) (15,816,844)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (3,568,265) 135,430
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,644,147 $ 2,704,794
============= =============


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

2


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



THREE MONTHS NINE MONTHS
ENDED APR. 30, ENDED APR. 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------

REVENUE
Trademark $ 263,824 $ 267,771 $ 879,267 $ 455,436
Consumer products 5,557 5,080 54,130 9,932
Advertising and promotion 231,387 72,063 554,432 82,063
------------ ------------ ------------ ------------
Total revenue 500,768 344,914 1,487,829 547,431
------------ ------------ ------------ ------------

COSTS AND EXPENSES
Costs related to trademark revenue 52,545 68,032 399,152 75,743
Costs related to consumer products
revenue 14,323 3,151 28,337 27,562
Television promotion and
distribution costs 396,758 113,491 1,123,168 469,731
Amortization of intangible assets 60,000 127,625 180,000 337,792
Selling, general & administrative
expenses 1,200,687 1,079,697 3,458,481 2,996,950
Stock, warrants, & options issued
for services 161,881 112,884 479,997 819,366
------------ ------------ ------------ ------------
Total costs and expenses 1,886,194 1,504,880 5,669,135 4,727,144
------------ ------------ ------------ ------------
OPERATING LOSS (1,385,426) (1,159,966) (4,181,306) (4,179,713)
OTHER INCOME
Interest income 1,440 1,446 4,320 5,594
Other income -- -- -- 32,214
------------ ------------ ------------ ------------
Total other income 1,440 1,446 4,320 37,808
------------ ------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST AND
AND INCOME TAXES (1,383,986) (1,158,520) (4,176,986) (4,141,905)
Minority interest in loss of
consolidated subsidiary -- -- -- 99,000

Provision for state income taxes -- 800 2,400 2,424
------------ ------------ ------------ ------------
NET LOSS $ (1,383,986) $ (1,159,320) $ (4,179,386) $ (4,045,329)
============ ============ ============ ============

Net loss per share - basic and
diluted $ (0.90) $ (0.77) $ (2.73) $ (2.76)
============ ============ ============ ============
Weighted average number of common
shares - basic and diluted 1,533,418 1,501,190 1,531,310 1,463,419
============ ============ ============ ============



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

3


NATIONAL LAMPOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

FOR THE NINE MONTHS
ENDED APR. 30,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,179,386) $(4,045,329)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 202,178 441,264
Stock, options and warrants issued for
services 479,997 819,366
Minority interest -- (99,000)
Other (4,320) (4,320)
Changes in assets and liabilities:
Increase in accounts receivable (90,841) (50,213)
(Increase)/decrease in other current
assets 7,207 (6,767)
Decrease/(increase) in other assets 41 (4,500)
(Increase) in production costs (141,055) (267,038)
Increase/(decrease) in accounts
payable 260,978 (127,295)
Increase/(decrease) in accrued
expenses 45,835 (86,897)
(Decrease)/increase in deferred
revenues (61,000) 100,000
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (3,480,366) (3,330,729)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Burly Bear networks -- (200,000)
Purchase of fixed assets (40,399) (56,455)
----------- -----------
NET CASH AND CASH EQUIVALENTS
USED IN INVESTING ACTIVITIES (40,399) (256,455)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Series B preferred stock -- 2,115,000
issuance
Exercise of stock options -- 35,125
Increase in notes payable 3,397,249 576,053
----------- -----------
NET CASH AND CASH EQUIVALENTS
PROVIDED BY FINANCING ACTIVITIES 3,397,249 2,726,178
----------- -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS (123,516) (861,006)

CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 140,255 1,024,207
----------- -----------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 16,739 $ 163,201
=========== ===========
Supplemental disclosure of non-cash investing
and financing activities:
Stock, warrants, and options issued for services $ 479,997 $ 819,366
=========== ===========
Common stock issued in Burly Bear Acquisition $ -- $ 400,000
=========== ===========


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

4


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

NOTE A - BASIS OF PRESENTATION AND GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC") and in accordance with generally accepted accounting principles for
interim financial statements. Accordingly, they do not include all of the
information and disclosures required for annual consolidated financial
statements. In the opinion of the Company's management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
Company's financial position as of April 30, 2004, and the results of operations
and cash flows for the three and nine month periods ended April 30, 2004 and
2003 have been included. These consolidated financial statements should be read
in conjunction with the consolidated financial statements and related footnotes
for the year ended July 31, 2003 included in the National Lampoon, Inc.
("Company" or "Registrant") annual report on Form 10-K for that period.

The results of operations for the three and nine month periods ended April 30,
2004 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, 2003.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. Since the consummation of the
Reorganization Transactions disclosed in detail in 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 funding received from a group
headed by Daniel S. Laikin, Paul Skjodt and Timothy S. Durham (the "NLAG
Group"), as more fully set forth in disclosures on the Form 10-K for the year
ended July 31, 2003, in the form of securities purchased in connection with the
Reorganization Transactions, and subsequent investment by Messrs. Laikin and
Durham (NLAG Group) in the form of a loan, to fund operations. Since the
consummation of the Reorganization Transactions, in which we received
$2,085,318, subsequent warrant exercises have provided us with $1,305,000,
although $200,000 of this amount was allocated for the Burly Bear transaction,
and we received an additional $4,385,298 as of June 12, 2004 from the NLAG Group
in the form of a loan. We had negotiated a series of agreements with certain
parties, which had been anticipated to close by the end of December 2003 (the
"December Anticipated Financing Transaction"), and would have resulted in
additional investment in the Company of approximately $5.5 million. The December
Anticipated Financing Transaction was not consummated. The Company is pursuing
other investors with the intention of utilizing similar terms and conditions as
those established in the December Anticipated Financing Transaction. Our
consolidated financial statements for the fiscal year ended July 31, 2003
contain an explanatory paragraph as to our ability to continue as a going
concern. This explanatory paragraph may impact our ability to obtain future
financing.

5


NOTE B - STOCK OPTIONS

The Company has adopted SFAS No. 123, "Accounting for Stock Based Compensation",
issued in October 1995. In accordance with SFAS No. 123, The Company has elected
to follow Accounting Principles Board ("APB) Opinion No. 25, "Accounting for
Stock issued to Employees", and related interpretation in accounting for its
employee stock options. Under APB Opinion No. 25, because the exercise price of
the company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized. 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 have been reduced to the
pro forma amounts as follows:



3 Months Ended 9 Months Ended
April 30 April 30
2004 2003 2004 2002
---- ---- ---- ----


Net income/(loss) - as reported $(1,383,986) $(1,159,320) $(4,179,386) $(4,045,326)
APB 25 expense recognized -- -- -- --
Stock option compensation under-fair value method 78,415 67,160 258,186 203,876
Net income/(loss)-pro forma $(1,462,401) $ (1226,480) (4,437,572) $(4,276,202)
Basic & diluted earnings/(loss) per share-as reported $ (0.90) $ (0.77) $ (2.73) $ (2.76)
Basic & diluted earnings/(loss) per share-pro forma $ (0.95) $ (0.82) $ (2.90) $ (2.92)



NOTE C - RECENT ACCOUNTING PRONOUNCEMENTS:

In January 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin (ARB) No. 51". This
interpretation clarifies the application of ARB No. 51, "Consolidated Financial
Statements", to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. In December 2003, the FASB
revised FASB Interpretation No. 46 (FIN 46R) which allowed companies with
certain types of variable interest entities to defer implementation until March
31, 2004.

In December 2003, the FASB issued a revised SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" which replaces the
previously issued Statement. The revised Statement increases the existing
disclosures for defined benefit pension plans and other defined benefit
postretirement plans. However, it does not change the measurement or recognition
of those plans as required under SFAS No. 87, "Employers' Accounting for
Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
Specifically, the revised Statement requires companies to provide additional
disclosures about pension plan assets, benefit obligations, cash flows, and
benefit costs of defined benefit pension plans and other defined benefit
postretirement plans. Also, companies are required to provide a breakdown of
plan assets by category, such as debt, equity and real estate, and to provide
certain expected rates of return and target allocation percentages for these
asset categories. The Company has implemented this pronouncement and has
concluded that the adoption has no material impact to the financial statements.

6


In December 2003, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 104, "Revenue Recognition." SAB 104 supersedes
SAB 101, "Revenue Recognition in Financial Statements." SAB 104's primary
purpose is to rescind accounting guidance contained in SAB 101 related to
multiple element revenue arrangements, superseded as a result of the issuance of
EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables."
Additionally, SAB 104 rescinds the SEC's Revenue Recognition in Financial
Statements Frequently Asked Questions and Answers ("the FAQ") issued with SAB
101 that had been codified in SEC Topic 13, Revenue Recognition. Selected
portions of the FAQ have been incorporated into SAB 104. While the wording of
SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue
recognition principles of SAB 101 remain largely unchanged by the issuance of
SAB 104, which was effective upon issuance. The adoption of SAB 104 did not
impact the consolidated financial statements


NOTE D - CAPITALIZED FILM COSTS

Pursuant to Statement of Position ("SOP") 00-2, "Accounting by Producers or
Distributors of Films", issued by the Accounting Standards Executive Committee
of the American Institute of Certified Public Accountants, the Company values
its film costs at the lower of unamortized cost or net realizable value on an
individual title basis in accordance with generally accepted accounting
principles. Capitalized film costs represent those costs incurred in the
development, production and distribution of television projects. Amortization of
film cost is charged to expense, and third party participations are accrued,
using the individual film forecast method whereby expense is recognized in the
proportion that current period revenues bear to an estimate of ultimate
revenues. These estimates of revenues are prepared and reviewed periodically by
management.


NOTE E - EARNINGS PER SHARE

Diluted earnings per share amounts are calculated using the treasury method and
are based upon the weighted average number of common and common equivalent
shares outstanding during the period. Basic and diluted earnings per share are
the same as common equivalent shares and are excluded from the computation, as
they would have an anti-dilutive effect. Options and warrants to purchase 43,791
and 218,239 common shares during the three months ended April 30, 2004 and 2003,
and 113,987 and 278,724 for the nine months ended April 30, 2004 and 2003
respectively are not included in the calculation of diluted earnings per share
respectively because their inclusion would be anti-dilutive.


NOTE F - SEGMENT INFORMATION

The Company operates in three business segments: licensing and exploitation of
the "National Lampoon" trademark and related properties; sale of consumer
products from the nationallampoon.com website and other consumer product sales;
and television production and distribution from the National Lampoon Network .
Segment operating income/(loss) excludes the amortization of intangible assets,
stock appreciation rights costs, interest income, certain corporate expenses
related to prior year Recent Developments - which led to the Reorganization
Transaction and income taxes. Selling, general and administrative expenses not
specifically attributable to any segment have been allocated equally between the
trademark and internet segments. Summarized financial information for the three
and nine month periods ended April 30, 2004 and 2003 concerning the Company's
segments is as follows:

7




Trademark Consumer Prod Television Total
-------------------------------------------------------------------

Three Months Ended April 30, 2004
Segment revenue $ 264,000 $ 6,000 $ 231,000 $ 501,000
Segment operating (loss)/income (223,000) (502,000) (600,000) (1,325,000)

Three Months Ended April 30, 2003
Segment revenue $ 268,000 $ 5,000 $ 72,000 $ 345,000
Segment operating income/(loss) (130,000) (385,000) (517,000) (1,032,000)

Nine Months Ended April 30, 2004
Segment revenue $879,000 $ 54,000 $ 555,000 $ 1,488,000
Segment operating (loss)/income (566,000) (1,207,000) (2,230,000) (4,003,000)

Nine Months Ended April 30, 2003
Segment revenue $ 456.000 $ 9,000 $ 82,000 $ 547,000
Segment operating income/(loss) (1,098,000) (1,596,000) (1,019,000) (3,713,000)



A reconciliation of segment operating loss to net income before income taxes for
the three and nine month periods ended April 30, 2004 and 2003 is as follows:


FOR THE THREE MONTHS ENDED
APR. 30, 2004 APR. 30, 2003
------------- -------------
Total segment operating (loss)/income $ (1,325,000) $ (1,032,000)
Amortization of intangible assets 60,000 128,000
Interest income (1,000) (1,000)
------------- -------------
Net (loss)/income before income taxes $ (1,384,000) $ (1,159,000)
============= =============


FOR THE NINE MONTHS ENDED
APR. 30, 2004 APR. 30, 2003
------------- -------------
Total segment operating loss $ (4,003,000) $ (3,713,000)
Amortization of intangible assets 180,000 338,000
Interest income (4,000) (6,000)
------------- -------------
Net (loss)/income before income taxes $ (4,179,000) $ (4,045,000)
============= =============



NATIONAL LAMPOON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G - LITIGATION

On August 18, 2003, a lawsuit was filed against us by Duncan Murray in Los
Angeles Superior Court, case number BC300908. Mr. Murray claimed that he was
unjustly terminated and was owed severance. The matter was sent to arbitration
on February 17, 2004 and was settled on that date. According to the terms of the
Settlement and General Release Agreement, the Company paid to Mr. Murray and his
lawyer a total of approximately $42,500, of which all has been accrued for
during prior quarters.

8


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

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

Revenue Recognition. The Company's trademark licensing revenues are generally
recognized when received or when earned under the terms of the associated
agreement and when the collection of such revenue is reasonably assured.
Revenues from the sale of videocassettes and DVDs, net of estimated provisions
for returns (which are not material for any period presented) are recognized
when the units are shipped. Revenues from Internet operations are recognized
when earned under the terms of the associated agreement and the collection of
such revenue is reasonably assured. Revenues from advertising and promotion are
recognized when earned under the terms of the associated agreement or when the
advertisement has been broadcast and the collection of such revenues are
reasonably assured.

Production Costs. As provided by SOP 00-2, production costs are not capitalized
unless there are advertising agreements in place from which the production will
generate revenues. As a result, since there were limited advertising agreements
in place for particular programs, the production costs incurred by National
Lampoon Networks during the nine months ended April 30, 2004 were capitalized
only to the extent of the revenues generated by those agreements. The balance of
the production costs was expensed during the period.

RECENT DEVELOPMENTS

The Company had negotiated a series of agreements with Avalon Equity Partners,
Golden International Group, Tim Durham and Daniel Laikin, which had been
anticipated to close by the end of December 2003 (the "December Anticipated
Financing Transaction"), and would have resulted in additional investment in the
Company of approximately $5.5 million. The December Anticipated Financing
Transaction was not consummated. The Company is pursuing other investors with
the intension of utilizing similar terms and condition as those established in
the December Anticipated Financing Transaction.

OVERVIEW

National Lampoon, Inc. creates and provides cutting-edge comedic entertainment
to its audiences, which are primarily young adults between the ages of 18 and
25. We believe that the National Lampoon brand is one of the strongest in the
comedic entertainment market. Our business was reorganized in May 2002 for the
purpose of expanding the use of the brand. The costs related to the
reorganization of the business and the expansion into wider markets have been
substantial. To date, we have been unable to generate enough revenue to sustain
our operations and we have been dependent on investments and loans provided to
us by a group that includes Mr. Daniel Laikin, our Chief Operating Officer and a
director, and Mr. Timothy Durham, a director. This group is referred to in the
discussions below as "NLAG" or "the NLAG Group". We are not certain when or if
we will ever be profitable. If the NLAG Group ceases to provide loans to us and
we are not able to raise funds through sales of our securities, we would have to
significantly scale back our operations and, possibly, curtail them altogether.

9


Overall, during the past three month and nine month periods, our revenues have
increased over the same periods in the last fiscal year by 45% and 172%,
respectively, from approximately $345,000 to $501,000 for the three months, and
from $547,000 to $1,487,829 for the nine months ended April 30 2003 and 2004.
Our costs and expenses during these same periods have increased only by 25% and
20%, respectively, from approximately $1,505,000 to $1,886,000 for the three
month period, and from $4,727,000 to $5,669,000 for the nine month period ended
April 30, 2003 and 2004 respectively. Overall for the three months ended April
30, 2004 and 2003, the Company had a net loss of $1,383,986, or $0.90 per share,
versus net loss of $1,159,320, or $0.77 per share and for the nine months ended
April 30 2004 and 2003, the Company had a net loss of $4,179,386 or $2.73 per
share, versus a net loss of $4,045,329, or $2.76 per share respectively. This
was due primarily to increased losses from the National Lampoon Networks and an
increase of personnel and interest costs in the current fiscal year.


RESULTS OF OPERATIONS

THE THREE MONTHS ENDED APRIL 30, 2004 VS. THE THREE MONTHS ENDED APRIL 30, 2003

For the three months ended April 30, 2004 trademark revenues were $263,824
as compared to $267,771 for the quarter ended April 30, 2003 representing a
decrease of 1%. Trademark revenues from the "National Lampoon Vacation" films
increased by $87,000 or 40% versus fiscal 2003, but this increase was offset by
revenues from AMC for the production of a pilot program and publishing royalties
received in the prior year. Consumer product revenues, which consists of
merchandise sold via the National Lampoon web site along with video sales of
$5,557 for the 3rd fiscal quarter of 2004 were 9% higher than the $5,080 earned
during the same period in the prior year. A slight increase in Internet
merchandize sales explains this variance. Advertising and promotional revenues
of $231,387 represents an increase of 221% over the $72,063 earned in the 3rd
fiscal quarter of 2003. These revenues were generated by the wholly owned
subsidiary, National Lampoon Networks. National Lampoon Networks began
operations in August of the prior fiscal year as a result of the asset purchase
of Burly Bear Networks, Inc. Greater operating experience and a greater sales
effort resulted in increased advertising and promotion income in the 3rd quarter
of the current fiscal year.

Costs related to trademark revenue during the quarter ended April 30, 2004
decreased to $52,545 from $68,032 for the quarter ended April 30, 2003,
representing a 23% decrease. Costs associated with television productions in the
prior year account for this decrease. Costs related to consumer product revenues
increased to $14,323 during the quarter ended April 30, 2004 from $3,151 for the
same period in fiscal 2003. Increased expenditures on website content accounts
for this variance. Production costs of $396,758 represent an increase of
$283,267 or 250% over the 3rd fiscal 2003 cost of $113,491. These costs are
associated with the cost of producing, delivering, and broadcasting the National
Lampoon Network programs via cable and directly by college campuses. National
Lampoon Network began operations in September of fiscal 2003 and so costs and
operations increased during the 3rd quarter of the current fiscal year from the
same period in the prior year.

Amortization of intangible assets, the costs of the Company's acquisition
of the "National Lampoon" trademark, was $60,000 during each of the quarters
ended April 30, 2004 and $127,625 for the 3rd fiscal quarter of 2003. The
additional amounts in fiscal 2003 relate to the Burly Bear intangible asset
recognized at $541,000 which was being amortized over a two year period during
most of the prior fiscal year. For the quarter ended April 30, 2003, $67,625 was
amortized, resulting in an increase in the amortization of intangible assets for
the 3rd fiscal quarter of 2003 by that amount. Impairment of the Burly Bear
intangible assets was recognized at the end of fiscal 2003, and so was written
off in full by the end of that fiscal year.

10


Selling, general and administrative costs increased to $1,200,687 during
the quarter ended April 30, 2004 versus $1,079,697 during the same period last
year. This increase of approximately $121,000 or 11% resulted primarily from
increased personnel costs of $82,000 and increased interest costs of $45,000
from continued borrowing from the NLAG to fund operations. These increases were
incurred since the Reorganization Transaction where the level of operations were
increased significantly along with the start up of operations of National
Lampoon Networks, which includes opening offices in New York City. During the
3rd quarter of the current fiscal year stock, increased vesting of warrants and
options issued for services resulted in a cost during the current quarter of
$161,881 versus $112,884 during the same period of the prior fiscal year.

For the three months ended April 30, 2004, the Company had a net loss of
$1,383,986, or $0.90 per share, versus net loss of $1,159,320, or $0.77 per
share, for the three months ended April 30, 2003. This increase in net loss of
approximately $223,000 or 19% resulted primarily from an increase in the net
loss attributable to National Lampoon Network of approximately $124,000, and an
increase of selling general and administrative costs of approximately $122,000
due to increased personnel costs and interest expense. During the quarter ended
April 30, 2004 and 2003, the Company had no significant provision for income
taxes due to the losses incurred.

THE NINE MONTHS ENDED APRIL 30, 2004 VS. THE NINE MONTHS ENDED APRIL 30, 2003

For the nine months ended April 30, 2004 trademark revenues were $879,267
as compared to $455,436 for the nine months ended April 30, 2003. The increase
in trademark revenues of approximately $424,000 or 93% resulted primarily from
increases in revenues from the films "National Lampoon's Animal House" of
approximately $48,000, the three "National Lampoon's Vacation" films of
approximately $86,000, the production of 4 videos for Image Entertainment for
$114,500 and a pilot for AMC which brought in approximately $198,000. Consumer
products revenues including sale of videos and website merchandise of $54,130 in
the nine months ended April 30, 2004 represents an increase of $44,198 or 445%
increase from consumer products revenues of $9,932 during the same period in the
prior fiscal year. The increase was due primarily to revenues of $20,000 from
Activision for the production of a video game, and internet advertising revenues
of approximately $22,500 Advertising and promotion revenues of $554,432
represents an increase of $472,369 or 576% from the $82,063 generated by the
National Lampoon Networks during the same nine month period in the prior fiscal
year. National Lampoon Networks began operations in September of the prior
fiscal year, and so revenues were deminimus for a number of months as programs
were produced and sales people were hired.

Costs related to trademark revenue during the nine months ended April 30,
2004 increased to $399,152 from $75,743 for the same period ended April 30,
2003, representing an increase of approximately $323,000 or 427%. This was
primarily due to increased costs associated with the Image Entertainment videos
and the AMC pilot together costing $304,000, as well as costs associated with a
Live Event in Sundance, costing approximately $30,000. There were no
corresponding costs during the prior fiscal year. Costs related to consumer
product revenues increased to $28,337 during fiscal 2004 from $27,562 for the
same period in fiscal 2003, representing an increase of 3%. These costs include
website development and maintenance, content creation and cost of video
duplication. Increased costs of web site writing costs accounted for the
majority of the increase.

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Costs associated with the production, distribution, and broadcasting of
National Lampoon Network programming was the main factor accounting for
production costs in the current fiscal year of $1,123,168 versus $469,731 in the
first nine months of fiscal 2003, representing an increase of approximately
$553,000 or 139%. National Lampoon Networks began operations in September of the
prior fiscal year, and it took a number of months to hire personnel, establish
offices and set the general operations in motion.

Amortization of intangible assets, the costs of the Company's acquisition
of the "National Lampoon" trademark, was $180,000 during each of the nine months
ended April 30, 2004 and 2003. In addition during the prior fiscal year, the
Company amortized $157,792 of the Burly Bear intangible asset, established with
the acquisition of the assets of the Burly Bear Networks, Inc. in August of
2002. Impairment of the Burly Bear intangible asset was recognized during the
prior fiscal year, and so it was fully written off by July 31, 2003.

Selling, general and administrative costs increased to $3,458,481 during
the nine months ended April 30, 2004 versus $2,996,950 during the same period in
the prior year. This increase of approximately $462,000 or 15% resulted
primarily from increased personnel costs of approximately $587,000, increased
interest costs of approximately $101,000 associated with the NLAG loan to the
Company, and increased general office costs of approximately $79,000. These
increases were offset somewhat by a reduction in marketing costs of
approximately $40,000, and no costs associated with the acquisition of Burly
Bear or the Reorganization Transaction of May of 2002 in the current year. Burly
Bear acquisition and Reorganization Transaction costs during the prior fiscal
year totaled approximately $265,000.

Stock, warrants, and options issued for services in the nine months of the
current fiscal year totaled $479,997 versus $819,366 in the prior fiscal year,
representing a decrease of approximately 339,000 or 41%. Fewer warrants and
options were granted and vested during the current fiscal year.

Interest income during the nine months ended April 30, 2004 decreased to
$4,321 versus $5,594 during the nine months ended April 30, 2003. This decrease
resulted from a decrease in cash and cash equivalents held during the nine
months ended April 30, 2004 versus the same period in the prior year. Other
income of $32,214 in the prior fiscal year resulted from the collection of
monies from an insurance company due to the loss of insured equipment. The
minority interest in income of consolidated subsidiary of $99,000 represents 15%
of the loss of National Lampoon Networks reflecting the 15% ownership of
National Lampoon Networks by a third party. The minority interest share of the
losses cannot exceed $99,000, and so there was no corresponding benefit in the
current fiscal year.

For the nine months ended April 30, 2004, the Company had a net loss of
$4,179,386 or $2.73 per share, versus a net loss of $4,045,329, or $2.76 per
share, for the nine months ended April 30, 2003. This increase in net loss of
approximately $135,000 or 3% resulted primarily from (i) an increase of the
losses attributable to National Lampoon Networks of approximately $181,000, (ii)
the increase in personnel, interest costs, and general office costs of
approximately $767,000, (iii) offset somewhat by reduced amortization costs of
approximately $158,000, reduced expenses associated with the issuing of stock,
warrants, and options of approximately $340,000, and reduced professional fees
associated with corporate acquisitions and reorganizations. of approximately
$265,000. During the nine months ended April 30, 2004 and 2003, the Company had
no significant provision for income taxes due to the losses incurred.

12


LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of working capital during the year to date
ended April 30, 2004 was trademark income and loans received from the NLAG.

For the nine months ended January 31, 2004, the Company's net cash flow
used in its operating activities was approximately $3,480,000 versus $3,331,000
of net cash flow used in operating activities during the nine months ended April
30, 2003. This decrease of $149,000 results primarily from an increase in the
Company's net loss during the current fiscal year. At April 30, 2004, the
Company had cash and cash equivalents of $16,739 as compared to $140,255 at July
31, 2003.

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 $4,000, and no significant receivables. This amount is not
sufficient to fund current operations, which we estimate to be approximately
$350,000 per month. The Company expects a decrease in funding needs for the
spring and part of summer of 2004 due to the fact that National Lampoon Networks
has significantly reduced its operation. It is anticipated that with additional
funding, National Lampoon Networks will resume prior levels of production and
operations when the school year begins in the fall. 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. As of April 30, 2004 approximately $254,000 was owing to a law firm
resulting from the Reorganization Transaction. The Board has directed that
discussions begin with the various parties in order to establish a payment
schedule with the 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 investments by NLAG. If NLAG declines to make
additional investments, or should we be unable to secure additional financing,
we could be forced to immediately curtail much, if not all, of our current
plans. Our financial statements for the fiscal year ended July 31, 2003 contain
an explanatory paragraph as to our ability to continue as a "going concern".
This qualification may impact our ability to obtain future financing.


FORWARD-LOOKING STATEMENTS

The foregoing discussion, as well as the other sections of this Quarterly
Report on Form 10-Q, contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 that reflect the Company's
current views with respect to future events and financial results.
Forward-looking statements usually include the verbs "anticipates," "believes,"
"estimates," "expects," "intends," "plans," "projects," "understands" and other
verbs suggesting uncertainty. The Company reminds shareholders that
forward-looking statements are merely predictions and therefore inherently
subject to uncertainties and other factors which could cause the actual results
to differ materially from the forward-looking statements. Potential factors that
could affect forward-looking statements include, among other things, the
Company's ability to obtain financing, either in the form of loans or from
investments in its securities, to continue its operations, the Company's ability
to identify, produce and complete projects that are successful in the

13


marketplace, the Company's ability to resolve past due obligations that were
incurred during its reorganization, the Company's ability to arrange financing,
distribution and promotion for its projects on favorable terms in various
markets and the Company's ability to retain qualified personnel. 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 our Form 10-K and in future
documents we file with the Securities and Exchange Commission.


ITEM 4 - CONTROLS AND PROCEDURES.

The Company's management, under the supervision and with the participation of
the Company's principal executive officer and principal financial officer, has
evaluated the Company's disclosure controls and procedures as of the end of the
period covered by this report. . 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 Company's internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.



PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

None

ITEM 2 - CHANGES IN 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 AND REPORTS ON FORM 8-K

No current reports on Form 8-K were filed during the quarter ended April 30,
2004.

14


PART IV.

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(A) EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K)

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)

15


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)
31.1 Certification by Chief Executive Officer under Rule 13a-14(a)/15d-14(a)
(6)
31.2 Certification by Chief Financial Officer under Rule 13a-14(a)/15d-14(a)
(6)
32 Certification by Chief Executive Officer and Chief Financial Officer under
18 USC 1350 (6)

- --------------------
(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


(B) FORMS 8-K

16


SIGNATURES

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



Date: June 14, 2004 National Lampoon, Inc.


By: /s/ James Toll
------------------------------------
James Toll
Chief Financial Officer

17