Beginning August 1, 2006, the Company records forfeitures in accordance with SFAS No. 123(R) by estimating the forfeiture rates for share-based awards upfront and recording a true-up adjustment for the actual forfeitures. In the three months ended January 31, 2007, the calculation of forfeitures did not have a material effect on the Company's results of operations, financial position or cash flows.

The fair value of each option award is estimated on the date of grant using a closed-form option valuation model (Black-Scholes) based on the assumptions noted in the following table. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The following table represents the assumptions used in the Black-Scholes option-pricing model for options granted during the six months ended January 31, 2007:

	Six Months Ended
	January 31
	2007			2006

Risk-free interest rate		5.5	%		5.5	%

Expected option lives (in years)		6			6

Expected volatility for options		68.4	%		95.7	%

Expected dividend yield		None			None

The following table illustrates the effect on net loss and loss per common share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock options issued and modified under the Company's stock option plans for the three and six months ended January 31, 2006. For purposes of this pro forma disclosure, the value of the options is estimated using a Black-Scholes option-pricing model and amortized to expense over the options' vesting periods.

	Three Months Ended			Six Months Ended
	January 31, 2006			January 31, 2006

Net loss attributable to common shareholders - as reported	$	(1,376,049	)	$	(3,583,240	)
APB 25 expense recognized	$	-		$	-
Stock option compensation under-fair value method	$	(103,267	)	$	(171,293	)
Net loss attributable to common shareholders-pro forma	$	(1,479,316	)	$	(3,754,533	)
Basic and diluted loss per share-as reported	$	(0.20	)	$	(0.54	)
Basic and diluted loss per share-pro forma	$	(0.22	)	$	(0.57	)

On January 30, 2002 our Board of Directors approved the J2 Communications Amended and Restated 1999 Stock Option, Deferred Stock and Restricted Stock Plan (the "Equity Incentive Plan"). The Equity Incentive Plan was approved by our stockholders on April 25, 2002.The Equity Incentive Plan has a term of 10 years and is currently administered by our Board of Directors, which shall be referred to in this discussion as the "Administrator". Pursuant to the Equity Incentive Plan, the Administrator may grant to eligible persons, which include employees, officers, directors, consultants and advisors, awards of options (which may be qualified or non-qualified, depending upon whether or not the eligible person is an employee), stock appreciation rights (commonly known as "SARs") or deferred common stock or restricted common stock. 1,500,000 shares of our common stock were originally set aside for grants made under the Equity Incentive Plan. The number of shares of common stock set aside for grants was increased to 2,500,000 in the 2004 fiscal year. In September 2004 our Board of Directors authorized a two-for-one stock split, making 5,000,000 shares of common stock available for grants.

On October 27, 2005 our Board of Directors adopted the National Lampoon, Inc. 2005 Consultant Plan (the "2005 Plan"). We obtained shareholder approval of the 2005 Plan on January 18, 2006. The purpose of the 2005 Plan is to allow us to use our securities to obtain and retain the consulting services of persons upon whose judgment, initiative, efforts and/or services we rely. We have set aside 250,000 shares of our common stock for awards to be made from the 2005 Plan. Officers, directors and employees of our company are not eligible to receive awards from the 2005 Plan. The term of the 2005 Plan is 10 years.

The 2005 Plan is administered and interpreted by a committee consisting of two or more members of the Board but if no committee is appointed, then the Board administers and interprets the 2005 Plan. The committee has the authority to designate the persons eligible to receive awards, grant awards, impose limitations, restrictions and conditions upon any award, interpret and administer the 2005 Plan and delegate all or a portion of its authority to take these actions to one or more of our executive officers who are also directors. Awards consist of grants of shares of our common stock, either as a bonus or as compensation for services rendered and options. The committee may subject shares of common stock granted as awards to vesting conditions. If vesting conditions are not satisfied, we may require the award recipient to forfeit the unvested shares. Option grants may also be subject to vesting conditions. The exercise price of any option may not be less than 85% of the fair market value of the common stock on the date of grant. Options may only be exercised for cash.

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The Board has the authority, without shareholder approval, to amend the 2005 Plan to increase the number of shares to be reserved and issued under it.

Under the Equity Incentive Plan and the 2005 Plan, we expensed $339,091 and $36,105 during the three month period ended January 31, 2007 and 2006, respectively and $600,332 and $104,840 during the six month period ended January 31, 2007 and 2006, respectively for services rendered by non-employees utilizing the guidance for share based payment transactions with parties other than employees provided in statement 123 as originally issued and EITF No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods and Services".

NOTE F - FILM FINANCING

The Company has formed entities with third parties where it does not own the majority of the entity, but will license the use of the name “National Lampoon” to the entity. However, because of the importance of the National Lampoon(TM) name to the Company, the Company will exercise day-to-day operational control over the entity. This control will include locating operations on the Company's premises, and utilizing both the staff and property of the Company. The Company integrates these entities operations with its operations and makes all the decisions necessary to carry out their business activities. The Company provides all the accounting functions, including making all accounting policy decisions, determining any estimates affecting the carrying amounts of assets and liabilities, and maintaining all accounting records. The Company also establishes credit with vendors or uses its vendors to provide services to the entities. Additionally, the entities use the post-production equipment and other post-production facilities on the Company's premises. Based on the foregoing, the Company has determined that although it does not exercise control by a majority of the voting rights, it has more than a significant influence and accordingly the Company consolidates these entities financial results with the Company's.

The Company seeks to utilize third party financing to produce its films, thereby reducing the financial risk associated with motion picture production. In order to maintain and improve its brand name, the Company maintains control of all business and creative elements associated with film production and distribution. In contrast, when the Company licenses its name to a film, it has little or no operational or creative control. For both produced and licensed films, the Company may also distribute and/or sell the distribution rights throughout the world wide exhibition market. If we determine that we have significant control of a film project throughout the production, finance or distribution, we account for the transactions of the film at gross on its financial statements. Accordingly, for those projects that it has significant control, the Company reports all transactions at gross amounts relating to the production and sale in its consolidated financial statements.

The production financing was recorded against capitalized production costs.

NOTE G - NET INCOME OR LOSS 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 loss per share is $0.28 and $0.09 for the three and six months ended January 31, 2007, respectively. Basic and diluted loss per share is $0.20 and $0.54 for the three and six months ended January 31, 2006, respectively. Basic and diluted loss per share are the same at January 31, 2007 and 2006, as common equivalent shares have been excluded from the computation due to the fact that they are anti-dilutive. Options and warrants to purchase 9,411,822 and 9,715,768 common shares during the three months ended January 31, 2007 and 2006 respectively, and options and warrants to purchase 8,304,039 and 9,859,954 common shares during the six months ended January 31, 2007 and 2006 respectively, are not included in the calculation of diluted earnings per share because their inclusion would be anti-dilutive. 7,450,431 and 8,178,711 shares that would be issuable upon conversion of the convertible preferred stock are not included in the calculation of diluted earnings per share during the six months ended January 31, 2007 and 2006, respectively, because their inclusion would be anti-dilutive.

At January 31, 2007, there are 63,607 Series B Convertible Preferred Shares and 193,347 Series C Convertible Preferred Shares. Upon conversion of the 63,607 Series B Convertible Preferred Shares, 3,583,491common shares would be issuable. Upon conversion of the 193,347 Series C Convertible Preferred Shares, 3,866,940 common shares would be issuable. This would result in a diluted weighted average number of shares of 14,806,851 for the three months ended January 31, 2007 and 14,704,398 for the six months ended January 31, 2007.

Each Series B Convertible Preferred Share is convertible into 56.338 common shares. Each Series C Convertible Preferred Share is convertible into 20 common shares. Warrants attached to the Series B and Series C Convertible Preferred Stock are not included in the calculation of diluted earnings per share during the three and six months ended January 31, 2007 because their inclusion would be anti-dilutive.

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NOTE H - ACCRUED SERIES B AND C DIVIDENDS

Dividends accrue on the Company's Series B and Series C Convertible Preferred Stock. The Company accrued dividends on a daily basis and will continue to do so until the date at which the Series B or Series C Convertible Preferred Stock is converted, until a liquidation event occurs, or, in the case of the Series C Convertible Preferred Stock, until the redemption date (although the redemption date is not defined and there is no right of redemption as to the Series C Convertible Preferred Stock). Dividends accrue at the rate of 9% per annum on the sum of the original purchase price of the Series B or Series C Convertible Preferred Stock plus all accumulated and unpaid dividends thereon (compounding annually). Dividends that accrue on the Company's Series B and Series C Convertible Preferred Stock must be paid with our common stock. During the three and six month periods ended January 31, 2007, the Company accrued $318,029 and $643,031, respectively of Series B and Series C dividends. Upon conversion of 31,414 shares of Series C Convertible Preferred Stock, accrued dividends were reduced by $220,104. At January 31, 2007, the Company had accrued $2,863,970 representing the total value of the dividends for Series B and Series C dividends.

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

NOTE I - NOTES PAYABLE AND ACCRUED INTEREST

Timothy Durham, a director, was owed approximately $60,794 in principal and $1,791 in interest at January 31, 2007.

Dan Laikin, the Company's Chief Executive Officer, was owed approximately $599,447 in principal and $16,345 in interest at January 31, 2007.

Christopher R. Williams, a shareholder, was owed approximately $75,000 in principal and $2,289 in interest at January 31, 2007.

Approximately $17,500 in interest was owed to an investor at January 31, 2007 for the financing of Totally Baked.

Approximately $781,758 was owed at January 31, 2007 to Red Rock Pictures Holdings, Inc. for the funding of various films. No interest expense was recorded due to the short term nature of these loans.

NOTE J - SHAREHOLDERS’ DEFICIT

During the three months ended January 31, 2007, 82,100 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 $131,810.

During the three months ended January 31, 2007, 5,055 shares of the Company’s common stock were issued upon exercise of warrants attached to the Company's Series B Convertible Preferred Stock that resulted in cash proceeds to the Company of approximately $9,000.

In addition, 31,414 shares of the Company's Series C Convertible Preferred Stock and the related accrued dividends of $220,104 were converted to 729,646 shares of the Company’s common stock. Each Series C Convertible Preferred Share is convertible into 20 common shares. The accrued dividends were converted into the Company’s common stock based on the trading value of the Company’s common stock on the conversion date.

Furthermore, 6,200 shares of the Company’s common stock, with a trading value of $13,640 on their date of issuance, were issued to employees as a bonus.

On August 1, 2006, the Company entered into a monthly consulting arrangement whereby the consultant would receive 5,000 common shares per month through November 2006. Commencing December 1, 2006, the consultant received 3,000 common shares per month. During the three month period ended January 31, 2007, the Company issued 11,000 common shares and expensed $23,600, which was equivalent to the trading value of the shares on their date of issuance.

On May 1, 2006, the Company commenced issuing 3,500 common shares to a consultant for each month of service during the engagement period. During the three month period ended January 31, 2007, the Company issued 7,000 common shares and expensed $15,470, which was equivalent to the trading value of the shares on their date of issuance.

On November 1, 2006, the Company commenced compensating a consultant $10,000 in common shares for each month of service during the engagement period. During the three month period ended January 31, 2007, the Company issued 13,964 common shares and expensed $30,000, which was equivalent to the trading value of the shares on their date of issuance.

On November 9, 2006, the Company compensated two consultants $2,000 each in common shares for consulting services rendered. The Company issued 2,116 common shares in total and expensed $4,000, which was at the agreed upon price of $1.89 per share.

On November 29, 2006, the board of directors of the Company granted 2,000 common shares per month to a consultant during the term for services performed by the consultant on behalf of the Company. The board also granted the consultant 100,000 warrants at a $2.50 exercise price vesting over three years with an expiration of 7 years from the date of grant.

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NOTE K - SEGMENT INFORMATION

Segment Reporting - SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information results in the use of a management approach in identifying segments of an enterprise. The Company operates in five business segments: licensing and exploitation of the National Lampoon(TM) trademark and related properties including the sale of products to consumers; advertising and promotions on its websites, field marketing, live events and the distribution of television programming on college campuses; production of television, and DVD products; the sale of sponsorships and advertising at "Spring Break" events; and production of motion pictures through National Lampoon Clubhouse, Inc. Segment operating income/(loss) excludes the amortization of intangible assets, interest income, and income taxes. Selling, general and administrative expenses not specifically attributable to any segment have been prorated based on revenue among the five segments. Summarized financial information for the three and six months ended January 31, 2007 and January 31, 2006 concerning the Company's segments is as follows:

		Licensing & Publishing			Advertising & Promotion			Production			Travel Services			Clubhouse			Total

Three Months Ended January 31, 2007
Segment revenue	$	343,796		$	638,092		$	5,500		$	-		$	-		$	987,388
Segment operating income (loss)	$	(336,457	)	$	(946,675	)	$	(409,734	)	$	-		$	-		$	(1,692,866	)
Depreciation expense	$	1,767		$	1,623		$	-		$	-		$	-		$	3,390

Three Months Ended January 31, 2006
Segment revenue	$	300,318		$	427,429		$	92,250		$	-		$	-		$	819,997
Segment operating (loss)	$	(317,889	)	$	(451,723	)	$	(121,096	)	$	(90,366	)	$	(40,629	)	$	(1,021,703	)
Depreciation expense	$	-		$	4,440		$	-		$	-		$	-		$	4,440

Six Months Ended January 31, 2007
Segment revenue	$	3,591,839		$	1,480,822		$	44,500		$	-		$	-		$	5,117,161
Segment operating income (loss)	$	1,649,131		$	(1,145,460	)	$	(388,158	)	$	-		$	-		$	115,513
Depreciation expense	$	3,129		$	3,199		$	-		$	-		$	-		$	6,328

Six Months Ended January 31, 2006
Segment revenue	$	495,318		$	1,021,429		$	143,250		$	2,500		$	-		$	1,662,497
Segment operating (loss)	$	(1,222,889	)	$	(1,049,723	)	$	(464,096	)	$	(153,366	)	$	(40,629	)	$	(2,930,703	)
Depreciation expense	$	-		$	8,879		$	-		$	-		$	-		$	8,879

A reconciliation of segment operating income (loss) to net loss before minority interest and income taxes for the three and six month periods ended January 31, 2007 and 2006 is as follows:

	FOR THE THREE MONTHS ENDED						FOR THE SIX MONTHS ENDED
	31-Jan-07			31-Jan-06			31-Jan-07			31-Jan-06

Total segment operating income (loss)	$	(1,692,866	)	$	(1,021,524	)	$	115,513		$	(2,930,704	)

Amortization of intangible assets	$	(60,000	)	$	(60,000	)	$	(121,140	)	$	(120,000	)

Interest Income	$	4,501		$	35,291		$	4,501		$	68,962

Interest expense	$	(14,926	)	$	(22,958	)	$	(28,838	)	$	(25,433	)

Equity in investee loss	$	(800	)	$	-		$	(800	)	$	-

Other income/expense	$	21,412		$	977		$	21,413		$	7,672

Net loss before minority interest and income taxes	$	(1,742,679	)	$	(1,068,214	)	$	(9,351	)	$	(2,999,503	)

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A reconciliation of reportable segment assets to consolidated total assets as of January 31, 2007 and 2006 is as follows:

	AS OF
	31-Jan-07		31-Jan-06

Total assets for reportable segments	$	3,332,357	$	1,472,829

Intangible assets not allocated to segments	$	1,659,861	$	1,856,154

Cash	$	645,123	$	1,907,999

Other unallocated amounts	$	-	$	453,048


Total assets	$	5,637,341	$	5,690,030

NOTE L - RELATED PARTY TRANSACTIONS

In October 2006, the Company invested $800 in Red Rock Pictures Holdings, Inc., (“Red Rock”) which was then merged into a publicly traded entity classified as a development stage company. The investment represents approximately 11,769,236 shares or 19.5% of the total outstanding shares of Red Rock Pictures Holdings, Inc. Three members of National Lampoon’s board of directors, Robert Levy, Tim Durham and Daniel Laikin, also own stock in Red Rock Pictures Holdings, Inc. The Company recorded the transaction under the equity method due to the determination they had significant influence, and recognized its proportionate share of the investee’s losses not to exceed the $800 investment. In addition, the Company’s investment had been determined to not be a variable interest entity in accordance with FIN46(R) since Red Rock Pictures Holdings, Inc. was not formed for the primary benefit of the Company, and the Company does not have an obligation to absorb the losses, nor receive any return. The fair market value of each share of Red Rock Pictures Holdings, Inc. is $2.53 as of January 31, 2007. Included in the accompanying balance sheet as of January 31, 2007 are notes payable to Red Rock Pictures Holdings, Inc. of $781,758. In September 2006, Red Rock entered into a sub lease agreement with National Lampoon, Inc. for office space at $2,000 per month.

NOTE M - COMMITMENTS AND CONTINGENCIES

Hinchy v. Collison, Lovett, National Lampoon, etc. (San Bernardino Superior Court Case No. RCV098387). The Complaint was filed on October 5, 2006. We were served with the Complaint in November 2006. We filed an answer on December 11, 2006. The plaintiff claims that our negligence caused property damage to a recreational vehicle he owned. The matter is presently in the discovery stage and no trial date has been set. We strongly dispute the claims asserted and are vigorously defending this action.

Cinergy Creative, Inc. and Leslie Allen v. National Lampoon Clubhouse, Inc., National Lampoon, Inc., Majestic Entertainment, Inc. and Lorenzo Doumani (Los Angeles Superior Court Case No. SC091496). This complaint was filed on October 20, 2006. The plaintiffs allege causes of action for alter ego, breach of written contract, breach of oral contract, breach of the implied covenant of good faith and fair dealing, quantum merit, fraud and deceit based on promises made without intention to perform, intentional misrepresentation, slander per se, libel per se, breach of confidence, declaratory relief, conversion, untrue or misleading advertising, unfair competition and negligence. Specifically, the plaintiffs allege that we and our co-defendants induced them to set aside other projects so that they would spend their time working on projects for the benefit of us and our co-defendants. The plaintiffs also allege that they were promised a share of profits from the projects and/or a "partnership" interest in them. The plaintiffs allege that their damages are in excess of $2,000,000. A mandatory settlement conference is scheduled for March 2007 where we intend to vigorously defend this action as we believe that it is without merit.

The Screen Actor’s Guild (“SAG”) has filed claims against National Lampoon Clubhouse, Inc. ("Clubhouse") for unpaid wages and pension, health and welfare benefits incurred for the filming of “Monster House” aka “Trick or Treat”. SAG alleges that certain actors were not paid in full and are owed more compensation, expenses and benefits under the SAG agreement. Clubhouse disputes these claims and intends to vigorously defend this action.

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NOTE N - SUBSEQUENT EVENTS

On February 28, 2007, the board of directors of the Company granted 360,000 stock options at a $2.00 exercise price vesting over three years with an expiration of 7 years from the date of grant to various individuals that had rendered services to the Company.

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

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

Overview

We are a media and entertainment company that creates and distributes comedic content. The National Lampoon(TM) 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 are pursuing this plan as follows:

Motion Picture Production

We produce feature films. We have interests in production related two entities, National Lampoon Clubhouse, Inc., which produced the film “Monster Night” aka “Trick or Treat”, and Totally Baked, LLC, which is producing the film currently titled “Totally Baked”. “Monster Night” was released in the fall of 2006 and “Totally Baked” is expected to be released in April 2007. The Company is also currently in production on a feature film currently titled “Bag Boy” which was financed by National Lampoon and Red Rock Picture Holdings, Inc. and is expected to be released during the second half of 2007. We are in preproduction for the film “Ratko, The Dictator’s Son” and are expected to commence production in May 2007. We also earn revenues from providing producer/manager services for films that do not carry our brand.

We also own 19% of Red Rock Picture Holdings, Inc. (sometimes referred to in this report as “Red Rock”), a development stage company formed in August 2006. Red Rock was formed for the purpose of providing financing and consulting services to the production and exploitation of motion pictures. It is our intention to enter into a non-exclusive agreement whereby Red Rock will provide financing for National Lampoon motion picture productions.

During the three and six months ended January 31, 2007, respectively revenues derived from producer and management fees totaled approximately $6,000 and $45,000 or less than 1% of all the revenues we earned during the respective periods.

Licensing

We derive 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. With the exception of one film in production as of January 31, 2007 and a film produced by National Lampoon Clubhouse, Inc., motion pictures that carry our brand have been produced and financed by third parties. We license the National Lampoon(TM) brand, as well as content from our library, for use in a wide variety of products including movies, television programming, live events, radio broadcasts, recordings, electronic games, and other consumer products. We anticipate granting fewer new licenses as we begin increasing the number of our own productions in the future.

For the three and six months ended January 31, 2007, revenues derived from our licensing and royalties (exclusive of revenues derived from our publishing activities) totaled approximately $312,000 and $3,422,000 or approximately 32% and 67% of the revenues we earned during the period. A significant portion of this revenue was realized from a settlement relating to royalties earned during periods prior to September 30, 2004 for a National Lampoon licensed film.

National Lampoon Networks

National Lampoon Networks, Inc. (sometimes referred to in this report as "NLN") includes the National Lampoon Network, which is made up of four internet destination sites with the names National Lampoon.com, TOGA TV, the National Lampoon Humor Network and Knucklehead video. We sell advertising space on these sites in the form of video streamed commercials along with banner advertisements. We believe that we provide an appealing platform to those advertisers who want their commercial messages to reach the college age market. For those businesses targeting the college market, NLN provides an integrated marketing platform that includes internet advertisers, on-air advertising, and field marketing.

We recently entered into a content distribution agreement with AOL whereby we launched the National Lampoon Video Channel on the AOL video service. We sell advertising space, including video streaming, on AOL's service.

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NLN also has more than 200 affiliated college and other television stations, reaching nearly 2 million college students in their dormitories and other places of residence.

Aside from providing an outlet for advertisers targeting the college market, NLN develops, produces and distributes comedic television programming to college audiences through its network. AV Squad, Greek Games, College Town and Master Debaters are among some of the television and internet programming that we developed and produced and are now distributing in the retail market.

For the three and six month period ended January 31, 2007, revenues derived from National Lampoon Networks, exclusive of licensing revenues, totaled approximately $638,000 and $1,481,000 or approximately 65% and 29% of all the revenues we earned during the respective periods.

Travel Services

During the academic year we may market, advertise and promote products for corporate customers at major spring break locations utilizing our market expertise in the college and young adult market.

Since spring break activities begin in the third quarter of our 2006 fiscal year, no revenue was earned during this three or six month period ending January 31, 2007.

Publishing

In October 2002, we entered into an agreement with Rugged Land LLC to publish six National Lampoon books over a three-year period based on new and established National Lampoon comedic content. We have released four books under this agreement, including 1964 High School Reunion Year Book, National Lampoon's Book of Love, National Lampoon's Big Book of True Facts and National Lampoon's Encyclopedia of Humor.

During the 2006 fiscal year we began publishing our books. As of January 31, 2007, we have released five books including National Lampoon's Saddam Dump[Saddam Hussein's Trial Blog], National Lampoon's Magazine Rack, National Lampoon's Jokes Jokes Jokes, National Lampoon’s Not Fit For Print and National Lampoon Favorite Cartoons of the 21^st Century. Eight other books are currently in development for future release.

For the three and six months ending January 31, 2007, revenues derived from our publishing activities totaled approximately $32,000 and $170,000, respectively, or approximately 3% of all the revenues we earned during the respective periods.

Radio

In March 2005, NL Radio, LLC was formed. We hold a 25% interest in this entity. NL Radio, LLC launched an entertainment radio format under our brand. We have licensed the content of our radio library, as well as certain domain names, URL's and websites, to NL Radio, LLC for this purpose. NL Radio, LLC used samples of the programming, called "pilot programming," to introduce the format and content to radio networks and local stations. If the programming is sold to a network it may be syndicated, meaning that it would be distributed to stations affiliated with the network. Purchasers of the programming may broadcast segments of the programming at their discretion, such as during "drive time" or as late night programming. Programming was launched on XM radio in fiscal 2007. Our radio library includes approximately 80 hours of National Lampoon radio programming consisting primarily of one to two minute short comedy routines and one hour comedy sketches and parodies. Revenue will be earned from ad sales, direct response advertising and product promotion arrangements. We will receive a licensing fee equal to 8% of the gross receipts received by NL Radio, LLC from all sources in connection with any use of our brand. No revenue has been realized from NL Radio, LLC.

Library

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

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Business Objective

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

We plan to continue to expand National Lampoon Networks by adding new internet sites and driving traffic to these sites. We will concentrate our efforts on measured marketing and sell available advertising and marketing space on our expanding network. We will continue to create, produce and acquire programming for all of our web sites as well as our college network and capitalize on our expertise in the college and young adult market to continue to grow revenue in these areas.

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

·	We plan to capitalize on our reputation and relationships with independent studios and other multimedia companies to expand the use of the National Lampoon(TM) brand.

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

·	National Lampoon Networks continues to provide field marketing campaigns for various advertisers.

·	We started publishing and distributing books we created to continue capitalizing on the National Lampoon brand.

·	NL Radio, LLC plans to launch an entertainment radio format using our brand. We own a 25% interest in NL Radio, LLC.

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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 consolidated financial statements.

Production Costs

We capitalize all television production costs. In accordance with the guidance set forth in SOP 00-2 paragraphs 33 and 39(b) for episodic television series, ultimate revenue can include estimates for the secondary markets once we can demonstrate through our history or through industry norms that the number of episodes produced, plus those for which a firm commitment exists, can be licensed in the secondary market. In the 2005 fiscal year we determined, in accordance with the guidelines of paragraph 39(b), that we had produced enough episodes to allow us to license the series in a secondary market. We made this determination based on historical sales for similar projects, with a similar number of episodes produced, and management estimates the ultimate revenues using this data.

We began to capitalize production costs in accordance with SOP 00-2 paragraphs 38 to 40, based on the ultimate revenues we estimated using historical data that would be generated from the initial and secondary markets by each episodic television series for produced episodes. Using SOP 00-2, we amortize such capitalized production costs in accordance with the provisions included in paragraphs 34 through 37 by the film forecast method, revising the estimates of ultimates each period as necessary to reflect the most current information available. We evaluate such costs for impairment in accordance with paragraph 44 if any events or circumstances, such as those set forth in paragraph 43, indicate that the fair value of the project may be less than the unamortized amounts remaining on the books.

Revenue Recognition

Our revenue from National Lampoon Networks and film distribution is derived from broadcast licensing agreements, royalties, distribution fees, the sale of distribution rights and the sale of home videos. Revenue is recognized in accordance with the requirements of SOP 00-2. Revenue from broadcast licensing agreements, together with related costs, are recognized once the licensing periods have commenced, the programs are delivered and collection is reasonably assured. Revenue from internet advertising sales is recognized once the flight or advertisement campaign is completed based on the terms of the contract. We have not engaged in any barter transactions. Revenue from royalties and distribution fees is recognized when received. Revenue from the sale of distribution rights is recognized when the film or television programs are substantially complete, the investors have irrevocably committed to acquire distribution rights and there is reasonable assurance of collecting the proceeds.

Impairment

We test our trademark for impairment in accordance with SFAS 142 and 144 paragraphs 16 to 21, by estimating the future cash flows from the trademark to test the recoverability of the intangible asset. The valuation of the trademark includes estimates of cash flows over the remaining expected life based on prior revenues generated from the film library using the trademark and trademark licensing fees.

We evaluate capitalized production costs for impairment in accordance with paragraph 44 of SOP 00-2 if any events or circumstances, such as those set forth in paragraph 43 of SOP 00-2 indicate that the fair value of the project may be less than the unamortized amounts remaining on our books.

Reorganization Transaction

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

Page 17

Results of Operations

We operate in five business segments, namely,

·	licensing and exploitation of the National Lampoon(TM) trademark and related properties including the sale of products to consumers;

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

·	production television and DVD products;

·	sale of corporate sponsorships at spring break events; and

·	production of motion pictures.

Segment operating loss excludes the amortization of intangible assets, interest income, minority interest and income taxes. Selling, general and administrative expenses not specifically attributable to any segment have been prorated among the five segments.

		Licensing & Publishing			Advertising & Promotion			Production			Travel Services			Clubhouse			Total

Three Months Ended January 31, 2007
Segment revenue	$	343,796		$	638,092		$	5,500		$	-		$	-		$	987,388
Segment operating loss	$	(336,457	)	$	(946,675	)	$	(409,734	)	$	-		$	-		$	(1,692,866	)

Three Months Ended January 31, 2006
Segment revenue	$	300,318		$	427,429		$	92,250		$	-		$	-		$	819,997
Segment operating loss	$	(317,889	)	$	(451,723	)	$	(121,096	)	$	(90,366	)	$	(40,629	)	$	(1,021,703	)

Three and Six Months Ended January 31, 2007 as compared to the Three and Six Months Ended January 31, 2006

Licensing and Publishing Revenues

Licensing and publishing revenues for the three and six months ended January 31, 2007 were approximately $344,000 and $3,592,000 compared to $300,000 and $495,000 for the three and six months ended January 31, 2006, representing an increase of 15% and 626%, respectively. The increase for the three month period ending January 31, 2007 was primarily attributable to increased royalties. The increase for the six month period was primarily attributable to a settlement of outstanding royalties. We also realized $5,000 and $45,000 in revenue in the three and six months ending January 31, 2007, respectively from the publication of our books. There was no comparative publishing revenue in the three and six months ending January 31, 2006 because the initial books were released during the fourth quarter of the 2006 fiscal year.

Costs related to licensing revenues increased to $97,000 and $158,000 during the three and six months ending January 31, 2007 compared to ($2,000) and $85,000 for the three and six months ended January 31, 2006. This represents an increase of 4,950% and 86%, respectively. The increase for the three month period ending January 31, 2007 is in line with the increase in licensing revenue. For the six months ending January 31, 2007, the increase is primarily due to royalties we owe to artists from the $2.9 million settlement of outstanding royalties due to us.

Advertising and Promotion Revenues

During the three and six months ended January 31, 2007, National Lampoon Network's combined advertising and promotion revenues were $638,000 and $1,481,000 compared to $478,000 and $1,021,000 for the three and six months ended January 31, 2006. This represents an increase of 49% and 45%, respectively. The increase in revenue for both the three and six month periods ending January 31, 2006 was a result of increased advertising revenue on internet websites, partially offset by a decrease in promotion revenues.

Costs related to advertising revenues include bandwidth usage fees, website development costs, and content conversion costs along with some amortization of capitalized television production costs. We incur costs related to promotion revenues based on direct costs of live events and promotion of third-party feature films, which are expensed as they are incurred. Cost of advertising and promotion revenue was approximately $502,000 and $1,217,000 during the three and six month period ending January 31, 2007 compared to $486,000 and $1,147,000 for the three and six month period ending January 31, 2006, representing an increase of 3% and 6%, respectively. This increase in costs is the result of lower costs associated with advertising revenue mostly offset by costs associated with promotional revenue.

Page 18

Production Revenues

For the three and six months ended January 31, 2007, production revenues were approximately $6,000 and $45,000 as compared to $92,000 and $144,000 for the three and six months ended January 31, 2006 or a decrease of 93% and 69%, respectively. We traditionally do not produce product unless we have a presale, minimum guarantee or co-production agreement in place. This reduces our risk as productions tend to be capital intensive. However, we are planning on expanding our productions and we have negotiated an output arrangement with a domestic cable provider which guarantees us a cable distribution outlet for our new product along with a minimum return on each new motion picture release. The output arrangement provides for a pre-negotiated minimum guarantee or sales price for the licensing of a specific media and territory. We have also negotiated home video distribution with a number of domestic retailers and distributors and have licensed international rights in several territories with minimum guarantees. For the video distribution, there is no minimum price guarantee but the arrangement provides us a video distribution outlet for our new product. In addition, we are negotiating with Red Rock to provide production financing. As these output and financing arrangements are signed, we will allocate additional internal resources to this segment of our business. For the three months and six months ending January 31, 2007, production revenues decreased due to the allocation of internal resources directed to the production of a feature film.

Amortization of capitalized film production costs for the three and six months ending January 31, 2007 was approximately $406,000 and $420,000, respectively. This represents the write-down during the three months ending January 31, 2007 of a “Trick or Treat” aka “Monster Night”, a film produced in the prior year. The write-down reflects our estimate of a revised and lower ultimate revenues. These lower revised ultimates are based on the results realized during film’s domestic release during the period and unsuccessful marketing efforts to international territories. Amortization of capitalized television production costs was approximately $0 and $14,000 during the three and six months ended January 31, 2007, as compared to approximately $57,000 and $152,000 during the three and six months ended January 31, 2006. The net book value and revised ultimates for “Trick or Treat” aka “Monster Night” is approximately $100,000.

Travel Services Revenues

We earned no revenue from this segment of our business during the six months and quarter ended January 31, 2007 as sponsorship and advertising revenues for travel related services are typically earned during spring break, which generally occurs in the third quarter of our fiscal year.

Other Costs and Expenses

Amortization of intangible assets, which consists of the costs of our acquisition of the "National Lampoon(TM)" trademark, was approximately $60,000 and $120,000 during the three and six months ended January 31, 2007 and 2006, respectively.

Selling, general and administrative costs decreased by $22,000 and $267,000 or 2% and 10% to $1,154,000 and $2,325,000 during the three and six months ended January 31, 2007 from $1,176,000 and $2,592,000 for the three and six months ended January 31, 2006. For the six month period ending January 31, 2007, the decrease resulted from a $313,000 decrease in the amortized of debt issuance costs which were fully amortized in the prior year, from lower rent, a result of the move of our Corporate headquarters in May 2006 to a building with lower occupancy costs and the closing of a New York office. For the three month period ending January 31, 2007, the savings realized from lower occupancy costs and headcount were partially offset by the higher information technology costs incurred as a result setting up our technology needs after our recent move of our corporate headquarters.

The provision for doubtful accounts for the three and six months ending January 31, 2007 totaled $122,000 and $156,000, compared to no provision and $76,000 for the three and six months ending January 31, 2006. The increase is primarily attributable to the uncollectability of advertising and promotion sales and for producer fees recognized in the prior year for “Trick or Treat” aka “Monster Night”.

During the three and six months ended January 31, 2007, expenses totaling $400,000 and $723,000 were incurred from grants of options and warrants to employees, advisors and consultants as compared to expenses totaling $36,000 and $105,000 attributable to grants of options and warrants that were incurred during the three and months ended January 31, 2006. The increase is primarily due to the implementation of SFAS No. 123R and grants of options to our chief executive officer pursuant to his employment contract and our former president pursuant to his severance and consulting agreement.

Interest income earned during the three and six months ended January 31, 2007 totaled $5,000 compared to interest income of $35,000 and $69,000 during the three and six months ended January 31, 2006. Interest income was realized in the prior period due to our increased cash position during the three and six month period ended January 31, 2006 as a result of the public offering completed on August 8, 2005. No similar capital infusion occurred during the period ended January 31, 2007.

For the three and six month periods ended January 31, 2007, we had net loss of $1,743,000 and $9,000 as compared to a net loss of $1,048,000 and $2,927,000 for the three and six month period ended January 31, 2006. This represents an increase in net loss of $695,000 or 66% for the three months ending January 31, 2007 and a decrease in net loss of 2,918,000 or 100% for the six months ending January 31, 2007. The decrease in net loss for the six month period resulted primarily from the significant increase in revenue associated with license fees from a settlement along with the increase in internet related advertising revenue. The increase in net loss for the three months ending January 31, 2007 was a result of increased costs for the issuance of stock, warrants and options, the write down of unamortized production costs and increased costs related licensing partially offset by an increase in advertising and promotion revenue.

Page 19

During the three and six months ended January 31, 2007 and 2006, 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 for preferred shareholders of $322,000 and $643,000 during the three and six month period ended January 31, 2007 and $328,000 and $656,000 during the same period in 2006. The addition of the accrued dividend resulted in a net loss attributable to common shareholders of $2,065,000 and $652,000 or $0.28 and $0.09 per basic and fully diluted share for the three and six month period ended January 31, 2007, versus a net loss attributable to common shareholders of $1,376,000 and $3,583,000 or $0.20 and $0.54 per basic and fully diluted share for the three and six month period ended January 31, 2006.

Liquidity and Capital Resources

With the exception of the first quarter of the fiscal year ending July 31, 2007, we have not generated positive cash flow from operations over the past few years. Our principal sources of working capital during the six month period ended January 31, 2007 consisted of loans from our officers and directors.

For the six month period ended January 31, 2007, our net cash used in operating activities was $532,000 as compared to $3,493,000 during the period ended January 31, 2006. The decrease in cash flow usage from operations was primarily attributable to the increase in revenue partially offset by an increase in cash used for operations. Cash provided by financing activities was $1,118,000 for the six month period ended January 31, 2007, as compared to $5,295,000 for the six months ended January 31, 2006. The funds for the current period were obtained from officers and directors and a related party for film financing partially offset by loan repayments for loans from officers and directors. The funds for the period ended January 31, 2006 were primarily obtained from a note offering offset by the partial payment of notes payable to officers and directors.

As of January 31, 2007, we had cash on hand of approximately $645,000, which includes the payment of a settlement. We believe these funds along with additional loans from our Chief Executive Officer and one member of our board of directors will be adequate to fund our ongoing operations and capital requirements for the next twelve months. We have no commitment for said funds. If no funds are made available, then we may not be able to continue to operate as a going concern.

Historically, our principal source of funds used for operations and working capital has been loans received from Daniel S. Laikin, our Chief Executive Officer, and Timothy Durham, a director, and a shareholder. During the six months ended January 31, 2007 our principal source of funds used for operations and working capital has been the payment of a settlement. The aggregate amount of the loans and accrued interest owed to these individuals at January 31, 2007, is approximately $678,000. These obligations are payable on demand; we plan to pay these obligations from future revenues.

Our financial statements for the fiscal year ended July 31, 2006 contained an explanatory paragraph as to our ability to continue as a "going concern." This qualification may impact our ability to obtain future financing.

Commitments for Capital Expenditures

As of January 31, 2007, our capital expenditures are projected to be $100,000 for the 2007 fiscal year. These expenditures will relate to the purchase of fixed assets such as equipment and furniture.

Off-Balance Sheet Arrangements

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

Item 3 - Controls and Procedures

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

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

Our previous interim Chief Financial Officer resigned effective December 15, 2006. In January 2007, we contracted with another consultant to serve as our new interim Chief Financial Officer.

Page 20

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

Page 21

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

During the three months ended January 31, 2007, the Company issued 34,080 common shares to consultants for services with a fair value of $73,069. The Company also entered into an agreement to issue 2,000 common shares per month beginning November 2006 to a consultant for services performed by the consultant on behalf of the Company. As of Janaury 31, 2007 no shares had been issued to this consultant. These issuance were exempt from federal securities registration due to the use of an exemption under Section 4(2) of the Securities Act of 1933.

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)

4.1 Certificate of Designations, Preferences, Rights and Limitations of Series C Convertible Preferred Stock of National Lampoon, Inc. (2)

4.2 NLAG Registration Rights Agreement dated May 17, 2002 among the Registrant and members of the NLAG Group and GTH Capital, Inc. (3)

4.3 Jimirro Registration Rights Agreement dated May 17, 2002 (3)

4.4 Piggyback Registration Rights Agreement dated September 3, 2002 between the Registrant and Constellation Venture Capital, L.P. as agent for certain individuals. (4)

4.5 Piggyback Registration Rights Agreement entered into among the Registrant and the purchasers of Series C Convertible Preferred Stock (5)

4.6 J2 Communications Voting Agreement dated May 17, 2002 among members of the NLAG Group and James P. Jimirro (3)

4.7 First Amendment to Voting Agreement dated June 7, 2002

4.8 Series C Voting Agreement entered into among the Registrant and purchasers of Series C Convertible Preferred Stock (5)

Page 22

31.1	Certification by Chief Executive Officer pursuant to section 302 of the Sarbanes Oxley Act of 2002*
31.2	Certification by President pursuant to section 302 of the Sarbanes Oxley Act of 2002*
31.3	Certification by Interim Chief Financial Officer pursuant to section 302 of the Sarbanes Oxley Act of 2002*
32	Certification by Chief Executive Officer and President/Chief Financial Officer pursuant to section 906 of the Sarbanes Oxley Act of 2002*

*Filed herewith.

(1) Incorporated by reference from the Registrant's Form 10-K/A for the fiscal year ended July 31, 2003 filed with the Securities and Exchange Commission on December 19, 2003.

(2) Incorporated by reference from the Registrant's Form 10-K for the fiscal year ended July 31, 2005 filed with the Securities and Exchange Commission on October 29, 2005.

(3) Incorporated by reference from the Registrant's Form 8-K filed with the Securities and Exchange Commission on May 31, 2002.

(4) Incorporated by reference from the Registrant's Form 8-K filed with the Securities and Exchange Commission on September 9, 2002.

(5) Incorporated by reference from the Registrant's Form 10-QSB filed with the Securities and Exchange Commission on December 22, 2006.

Page 23

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.

March 15, 2007	By:	/s/ Daniel S. Laikin
		Daniel S. Laikin, Chief Executive Officer


March 15, 2007	By:	/s/ Bruce K. Long
		Bruce K. Long, President


March 15, 2007	By:	/s/ David M. Kane
		David M. Kane, Interim Chief Financial Officer

Page 24

NATIONAL LAMPOON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
____________

	As of
ASSETS	January 31, 2007

CURRENT ASSETS
Cash	$	645,123
Accounts receivable, net of reserves of $285,067		645,270
Prepaid expenses and other current assets		37,782
Total current assets		1,328,175
NON-CURRENT ASSETS
Fixed assets, net of accumulated depreciation		21,945
Capitalized production costs, net of $3,763,734 of amortization (Note B)		2,595,460
Capitalized publishing costs, net of $217,564 of amortization		31,900
Investment in equity securities (Note L)		-
Intangible assets, net of accumulated amortization of $4,350,424		1,659,861
Total non-current assets		4,309,166
TOTAL ASSETS	$	5,637,341

LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable	$	818,929
Accrued expenses		237,963
Payroll accrual		37,625
Accrued royalties		477,636
Accrued dividends (Note H)		2,863,970
Notes payable (Note I ) - related party, including interest of $20,425		1,596,924
Deferred income		500,000
TOTAL CURRENT LIABILITIES		6,533,047

COMMITMENTS AND CONTINGENCIES (Note M)

MINORITY INTEREST

SHAREHOLDERS' DEFICIT
Series B Convertible Preferred Stock, par value $.0001 per share, 68,406 shares authorized,
63,607 shares issued and outstanding		6
Series C Convertible Preferred Stock, par value $.0001 per share, 250,000 shares authorized,
193,347 shares issued and outstanding		19
Common Stock, par value $.0001 per share, 60,000,000 shares authorized,
8,053,363 shares issued and outstanding		805
Additional paid-in capital		37,865,929
Accumulated deficit		(38,762,465	)
TOTAL SHAREHOLDERS' DEFICIT		(895,706	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	5,637,341

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

NATIONAL LAMPOON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
____________

	Three Months						Six Months
	Ended January 31,						Ended January 31,
	2007			2006			2007			2006
	(UNAUDITED)			(UNAUDITED)			(UNAUDITED)			(UNAUDITED)
REVENUE
Production	$	5,500		$	92,250		$	44,500		$	143,583
Licensing		311,842			300,318			3,421,637			490,637
Advertising & Promotion		638,092			427,429			1,480,822			1,021,430
Tours		-			-			-			2,534
Publishing		31,954			-			170,202			4,643
Total revenue		987,388			819,997			5,117,161			1,662,827

COSTS AND EXPENSES
Costs related to production revenue		-			22,910			3,000			22,910
Costs related to licensing revenue		96,621			(1,752	)		157,816			84,688
Costs related to tours revenue		-			65,307			-			100,171
Costs related to advertising and promotion revenue		501,532			485,832			1,217,000			1,146,997
Amortization of capitalized production costs		405,897			57,145			420,269			152,495
Amortization of intangible assets		60,000			60,000			121,140			120,000
Amortization debt issuance costs		-			-			-			313,000
Provision for doubtful accounts		122,075			-			156,075			76,345
Selling, general and administrative expenses		1,153,734			1,175,974			2,324,547			2,592,085
Stock, warrants & options issued for services		400,395			36,105			722,940			104,840
Total costs and expenses		2,740,254			1,901,521			5,122,787			4,713,531
OPERATING LOSS		(1,752,866	)		(1,081,524	)		(5,626	)		(3,050,704	)
OTHER INCOME (EXPENSE)
Interest income		4,501			35,291			4,501			68,962
Interest expense		(14,926	)		(22,958	)		(28,838	)		(25,433	)
Equity in investee loss		(800	)		-			(800	)		-
Other income		21,412			977			21,412			7,672
Total other income (loss)		10,187			13,310			(3,725	)		51,201
NET LOSS BEFORE MINORITY INTEREST	$	(1,742,679	)	$	(1,068,214	)	$	(9,351	)	$	(2,999,503	)
MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARY					20,315			-			72,564
LOSS BEFORE INCOME TAXES	$	(1,742,679	)	$	(1,047,899	)	$	(9,351	)	$	(2,926,939	)
Provision for income taxes		-			-			-			-
NET LOSS		(1,742,679	)		(1,047,899	)		(9,351	)		(2,926,939	)
Accrued dividends (Note H)		(322,040	)		(328,150	)		(643,015	)		(656,301	)
Net loss attributable to common shareholders	$	(2,064,719	)	$	(1,376,049	)	$	(652,366	)	$	(3,583,240	)

Net loss per share attributable to common shareholder
- basic and diluted	$	(0.28	)	$	(0.20	)	$	(0.09	)	$	(0.54	)
Weighted average number of common shares
- basic and diluted		7,356,420			6,775,812			7,253,967			6,630,941

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

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

____________
	Six Months Ended
	January 31,
	2007			2006

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(9,351	)	$	(2,926,939	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		6,328			8,879
Amortization of intangible assets		121,140			120,000
Amortization of debt issuance costs		-			313,000
Amortization of capitalized production costs		424,519			152,499
Stock, options and warrants issued for services		901,565			104,840
Provision for losses on accounts receivable		149,566			76,345
Undistributed loss of equity investment		800			-
Changes in assets and liabilities:
(Increase)/decrease in accounts receivable		(44,426	)		83,510
Decrease/(increase) in prepaid expenses and other assets		21,041			(86,279	)
Decrease in publishing costs		53,952			-
Increase in production costs		(2,331,174	)		(878,890	)
(Decrease)/Increase in accounts payable		(132,031	)		46,063
Increase/(Decrease) in accrued expenses		62,008			(514,379	)
Increase in deferred revenues		243,732			8,774
NET CASH USED IN OPERATING ACTIVITIES		(532,331	)		(3,492,577	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(10,702	)		(4,988	)
Purchase of intangible assets		(3,652	)		-
Investment in equity securities		(800	)		-
NET CASH USED IN INVESTING ACTIVITIES		(15,154	)		(4,988	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Film financing		5,034			444,250
Minority interest		-			(72,565	)
Proceeds from issuance of common stock		-			9,600,000
Payments related to the issuance of common stock		-			(1,288,505	)
Payments of notes payable (Note I)		(623,933	)		(3,407,418	)
Proceeds from the exercise of stock options		131,810			19,107
Proceeds from the exercise of warrants		9,000			-
Proceeds from notes payable		1,596,096			-
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,118,007			5,294,869
NET INCREASE IN CASH		570,522			1,797,304
CASH AT BEGINNING OF PERIOD		74,601			110,695
CASH AT END OF PERIOD		645,123			1,907,999
Supplemental disclosures of cash flow information:
Cash paid for Taxes	$	6,850		$	-
Interest paid	$	45,294		$	111,847
Stock and options issued for services and debt issuance costs	$	901,565		$	104,840
Supplemental schedule of noncash investing and financing activities:
Conversion of accrued dividends on Series C Convertible Preferred Stock to common stock	$	220,104		$	-

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

Delaware (State or 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)