J2 COMMUNICATIONS /CA/, POS AM, 1996-08-22

J2 COMMUNICATIONS /CA/
POS AM, 1996-08-22
MOTION PICTURE & VIDEO TAPE PRODUCTION

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<PAGE> 1

As filed with the Securities and Exchange Commission on August 21, 1996.
Registration Number 33-63662
- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
ON FORM S-1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

J2 COMMUNICATIONS
Exact name of Registrant as specified in the charter

<TABLE>
<S> <C> <C>
California 3652 95-4053296
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization Classification Code Number) Identification No.)
</TABLE>

J2 COMMUNICATIONS
10850 Wilshire Boulevard, Suite 1000
Los Angeles, California 90024
(310) 474-5252

(Address, including Zip Code and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices.)
------------------------------
JAMES JIMIRRO
10850 Wilshire Boulevard, Suite 1000
Los Angeles, California 90024
(310) 474-5252

(Names, address, including zip code and telephone number,
including area code, of agent for service)

Copies to:
BRUCE P. VANN, ESQ.
Kelly & Lytton
1900 Avenue of the Stars,Suite 1450
Los Angeles, California 90067
(310) 282-7031
------------------------------

Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form S-1 are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933, check the following line. x

-------------------------------
CALCULATION OF REGISTRATION FEE
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount
Amount Offering Aggregate of
Title of Each Class of to be Price Per Offering Registration
Securities to be registered Registered Share (1) Price (1) Fee
- - --------------------------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock, no par value(1)(2) 1,753,211 $2.00 $3,506,422 $ (3)
</TABLE>

(1) As required by Rule 757(g) of Regulation C, the offering price for the
shares with respect to the exercise of the outstanding warrants is
$2.00 per share.
<PAGE> 2
(2) These shares of Common Stock are issuable upon exercise of the
Warrants. An indeterminate number of additional shares of Common
Stock are registered hereunder. Such shares may be issued, as
provided in the Warrant Agreement, in the event that provisions
against dilution become operative.

(3) Previously paid pursuant to Registration Statement 33-63662

The registrant hereby amends the Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

2
<PAGE> 3
J2 COMMUNICATIONS
CROSS-REFERENCE SHEET

Pursuant to Item 501(b) of Regulation S-K, showing the location in the
Prospectus of the answers to the items in Part 1 of Form S-1

<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS
- - ----------------------- ---------------------
<S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus Outside Front Cover Page; Cross Reference Sheet

2. Inside Front and Outside Back Cover
Page of Prospectus Inside Front Cover Page; Outside Back Cover Page

3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges Prospectus Summary, Risk Factors

4. Use of Proceeds Prospectus Summary; Use of Proceeds

5. Determination of Offering Price Underwriting

6. Dilution *

7. Selling Security Holders Principal and Selling Stockholders

8. Plan of Distribution Outside Front and Inside Front Cover Pages;
Underwriting

9. Description of Securities to be Registered Description of Company's Securities

10. Interests of Named Experts and Counsel Experts

11. Information with Respect to the Registrant Outside Front and Inside Front Cover Pages;
Prospectus Summary

(a) Description of Business Business
(b) Description of Property Business - Properties
(c) Legal Proceedings Business - Legal Proceedings
(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters Dividends; Description of Company's Securities
(e) Financial Statements Consolidated Financial Statements
(f) Selected Financial Data Selected Financial Data
(g) Supplementary Financial Information Consolidated Financial Statements
(h) Management's Discussion and Analysis
of Financial Condition and Results
of Operations Management's Discussion and Analysis
of Financial Condition and Results of Operations
(i) Disagreements with Accountants on
Accounting and Financial Disclosure *
(j) Directors and Executive Officers Directors and Executive Officers
(k) Management Remuneration Executive Compensation
(l) Security Ownership of Certain Beneficial
Owners and Management Security Ownership of Certain Beneficial
Owners and Management
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities *
- - --------------
</TABLE>

* Not applicable or answer thereto is negative.

3
<PAGE> 4
PRELIMINARY PROSPECTUS DATED AUGUST 14, 1996

1,753,211 Shares

J2 COMMUNICATIONS

This Prospectus relates to 1,753,211 shares of Common Stock, no par
value, (the "Warrant Shares"), which may be issued upon exercise of the Series
A Warrants (the "Warrants") of J2 Communications (the "Company"). The Warrants
and Warrant Shares were issued by the Company in 1990 in connection with the
Company's acquisition of National Lampoon, Inc. The expiration date for
exercising the Warrants has been extended until December 31, 1997. The Holders
of stock issued upon the exercise of the Warrants are referred to as the
"Selling Securityholders".

Pursuant to the terms of the warrant agreement (the "Warrant
Agreement"), dated October 5, 1990, between J2 Communications (the "Company")
and U.S. Stock Transfer & Trust Co. each Warrantholder is entitled to purchase
one share of the Company's Common Stock at an exercise price of $3.00 per share
(the "Exercise Price"). The Company has notified all Warrantholders that the
Exercise Price has been lowered to $2.00 through the remaining period that the
Warrants may be exercised.

The Warrant Shares may be offered to the public from time to time by
holders of Warrants who exercise such warrants (the "Selling Securityholders").
See "The Selling Securityholders". The Company will receive none of the
proceeds from the sale of the Common Stock by the Selling Securityholders. The
Company will receive certain amounts in connection with the exercise of the
Warrants. The Selling Securityholders will bear the commissions and discounts
of any underwriters, dealers and agents and the legal expenses of the Selling
Securityholders. The Common Stock may be sold directly or through
underwriters, dealers or agents in market transactions or privately- negotiated
transaction. See "Plan of Distribution."

The Company's Common Stock and Warrants are traded over-the-counter
and the Common Stock is quoted on the NASDAQ National Market System. On August
12, 1996, the last sale price of the Common Stock on the NASDAQ National Market
System was $1 1/8 per share and the last sale price for the Warrants was $5/16.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is August __, 1996.

4
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more
detailed information and financial data appearing elsewhere in the Prospectus.

The Company

J2 Communications was originally formed primarily to engage in the
acquisition, development and production of entertainment feature film and
special-interest videocassette programs, and the marketing of these programs in
the home video sell-through market. In 1990, the Company acquired National
Lampoon, Inc., a publisher of a national satire and humor magazine and licensor
of feature films. The Company was founded in March, 1986 by its Chairman of
the Board and President, James P. Jimirro, the first President of both the
Disney Channel and Walt Disney Home Video.

Due to the increasing competitiveness of the videocassette market,
resulting in decreasing volume and profitability, the Company has de-emphasized
this segment of its business. The Company is now focusing on expanding the
licensing of the National Lampoon name to virtually every segment of the
entertainment business. The first significant result of this effort was
achieved with the release in February, 1993 of the feature film "National
Lampoon's Loaded Weapon I". This film achieved approximately $28 million of
theatrical revenue in its United States theatrical release. The Company will
participate in the film's revenue as provided by the Company's licensing
agreement with New Line Cinema, the producer and distributor of the film. The
second film produced under this agreement, "National Lampoon's Senior Trip" was
not a commercial success and is not expected to generate any contingent income
for the Company.

The Company expects that its videocassette business, which has been
declining in recent years, will continue to decline, and in the future will not
be a significant part of its operations.

The Offering

<TABLE>
<S> <C>
Common Stock offered hereunder 1,753,211 shares

Common Stock to be outstanding after the Offering 5,353,198 shares

Use of Proceeds (1)

NASDAQ symbol JTWO
</TABLE>

(1) The Company will receive no proceeds from the offering.

5
<PAGE> 6
SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
9 MOS. ENDED APRIL 30, YEAR ENDED JULY 31,
-------------------------- -------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
STATEMENT OF
OPERATIONS DATA:
- - ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues $740,000 $1,121,000 $1,254,000 $1,818,000 $1,693,000 $4,472,000 $5,830,000
Costs and expenses:

Costs of revenue 239,000 150,000 193,000 203,000 969,000 2,614,000 4,709,000
Selling, general
and administrative 544,000 576,000 818,000 1,129,000 2,343,000 2,749,000 4,047,000
Amortization of
intangible assets 180,000 180,000 240,000 240,000 307,000 545,000 256,000
------- ------- ------- ------- ------- ------- ----------

Income (loss) from
operations (223,000) 215,000 3,000 246,000 (1,926,000) (1,436,000) (3,182,000)

Other income:
Settlement of
IRS claims ---- --- --- --- 181,000 --- ---
Settlement of
royalty claims --- ---- --- 84,000 374,000 --- ---
Interest income 54,000 36,000 49,000 15,000 19,000 39,000 243,000
Interest expense --- --- --- (18,000) (18,000) --- ---
------- ------- ------- ------- ------- ------- ---------

Income (loss) before
provision for (benefit
from) income taxes
and extraordinary income (169,000) 251,000 52,000 327,000 (1,370,000) (1,397,000) (2,939,000)

Provision for (benefit
from) income taxes --- (6,000) (14,000) 22,000 9,000 5,000 (205,000)
------- -------- ------- ------- ------ ------ ----------

Income (loss) before
extraordinary item (169,000) 257,000 66,000 305,000 (1,379,000) (1,402,000) (2,734,000)

Extraordinary item -
troubled debt
restructuring --- --- --- --- 69,000 237,000 ---
-------- -------- ------- -------- ----------- ----------- -----------

NET INCOME (LOSS) ($169,000) $257,000 $66,000 $305,000 $(1,310,000) $(1,165,000) $(2,734,000)
======== ======== ======= ======== =========== =========== ===========

INCOME (LOSS) PER
COMMON SHARE:

Income (loss) before
extraordinary income $(0.05) $0.07 $0.02 $0.09 $(0.43) (0.45) (0.95)
Extraordinary income --- ----- --- --- 0.02 0.08 ---
--- ----- --- --- ---- ---- ---
Net income (loss) $(0.05) $0.07 $0.02 $0.09 $(0.41) $(0.37) $(0.95)
======= ===== ===== ===== ======= ======= ------
</TABLE>

6
<PAGE> 7
BALANCE SHEET DATA:

<TABLE>
<CAPTION>
9 mos. ended April 30, Year ended July 31,
----------------------------------- ---------------------------------------------------------------------------

1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $5,555,000 $5,848,000 $5,667,000 $5,801,000 $5,653,000 $7,598,000 $10,286,000
========== ========== ========== ========== ========== ========== ===========
TOTAL DEBT $1,836,000 $1,771,000 $1,779,000 $1,987,000 $2,391,000 $3,313,000 $4,836,000
========== ========== ========== ========== ========== ========== ==========
Shareholders'
equity $3,719,000 $4,077,000 $3,888,000 $3,814,000 $3,262,000 $4,285,000 $ 5,450,000
========== ========== ========== ========== ========== ========== ===========
</TABLE>

7
<PAGE> 8
RISK FACTORS

1. NATIONAL LAMPOON, INC. RESTRUCTURING

In October 1990, J2 Communications ("J2" or the "Company") acquired
all of the outstanding stock of National Lampoon, Inc. ("NLI"), the publisher
of the National Lampoon magazine and a developer of other film and television
comedy programming. NLI had been losing substantial sums of money for the
several years preceding its acquisition by J2 in 1990. Further, it had
considerable sums due and owing to its creditors. In an attempt to minimize
losses, the Company embarked upon a program to restructure NLI's operations and
financial affairs. Towards this end, the National Lampoon magazine temporarily
suspended publication with its April 1992 issue. This step enabled the Company
to close NLI's New York offices, and relocate to Los Angeles and substantially
reduce the NLI staff. In August 1992, the Company provided sufficient capital
to NLI so that NLI was able to offer a settlement to a majority of its
creditors of $.33 cents on the dollar. This plan was substantially
implemented, and payments were made in August 1992. As of December 23, 1992,
approximately $4.0 million had been advanced to NLI by J2 in respect of NLI
operations, including $147,000 which was expended by NLI in connection with the
August offer to creditors.

On December 23, 1992, as the sole secured creditor of NLI, J2
foreclosed against all of NLI's assets and the "National Lampoon" trademark
pursuant to Section 9505 of the Uniform Commercial Code. After this
foreclosure, NLI was left with no remaining assets.

The Company resumed publishing National Lampoon, on an abbreviated
basis in 1993. In 1994 and 1995, the magazine was published through a
sub-license arrangement with a third party. "See Business-Publishing".
Beginning with the 25th Anniversary issue published in May, 1996, the Company
again began publishing the magazine. Under the agreement with Harvard
University, the Company is obligated to publish the magazine once a year. The
Company is reviewing its options regarding further publication and is not yet
determined the number of issues it will directly publish or if a third party
publisher will be retained.

2. DEPENDENCE OF LICENSING OPERATIONS

The Company anticipates that a majority of future revenue will be
dependent on exploiting the "National Lampoon" name. The Company is subject to
several licensing agreements, including a feature film agreement with New Line
Cinema which led to the production of "National Lampoon's Loaded Weapon I" and
"National Lampoon's Senior Trip". The Company, as a profit participant in
these ventures, is substantially dependent on the performance of the parties to
such agreement and upon the commercial success of the licensed products. No
assurance can be given that any of these agreements will lead to significant
revenue for the Company.

8
<PAGE> 9

3. DEPENDENCE ON KEY PERSONNEL

The Company is substantially dependent on the services of James P.
Jimirro, who serves as the Company's Chairman of the Board and President.
Although Mr. Jimirro is party to an employment agreement with the Company, the
loss of his services could have a material adverse effect on the Company.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the Selling
Shareholder Shares.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded in the over-the-counter market on the
NASDAQ under the symbol "JTWO."

The following table sets forth, for the periods indicated, the highest and
lowest last reported sale prices for the Common Stock, as reported on the
NASDAQ:

<TABLE>
<CAPTION>
Common Stock High Low
------------ ---- ---
<S> <C> <C>
Fiscal 1996
First Quarter 1 11/16 1
Second Quarter 1 1/2 1
Third Quarter 1 3/16 1 5/32
Fourth Quarter (through
August 13, 1996)

Fiscal 1995
First Quarter 1 1/2 1
Second Quarter 1 5/8 1 3/16
Third Quarter 1 15/32 1 1/32
Fourth Quarter 1 3/16 1 1/16
</TABLE>

On August 13, 1996, the last reported sale price of the Common Stock on the
NASDAQ was $1 1/8.

9
<PAGE> 10
As of August __, 1996, there were approximately ___ holders of record of the
Company's Common Stock.

SELECTED FINANCIAL DATA

The selected consolidated statement of operations data for the years ended July
31, 1993 and 1994 and the consolidated balance sheet data at July 31, 1994 are
derived from the Company's consolidated financial statements included elsewhere
in this Registration Statement that have been audited by Deloitte & Touche LLP,
independent auditors, as indicated in their report (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to certain
intangible assets) which is also included elsewhere in this Registration
Statement. The selected consolidated statement of operations data for the
years ended July 31, 1995 and the consolidated balance sheet data at July 31,
1995 are derived from the Company's consolidated financial statements included
elsewhere in this Registration Statement that have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
which is also included elsewhere in this Registration Statement. Such selected
consolidated financial data should be read in conjunction with those
consolidated financial statements and the notes thereto. The selected
consolidated income statement data for the years ended July 31, 1991, 1992 and
1993 are derived from audited consolidated financial statements of the Company
which are not included herein. The selected financial data at April 30, 1996
and for the nine months ended April 30, 1996 have been derived from the
unaudited consolidated financial statements of the Company also included herein
and, in the opinion of the Company, included all adjustments (consisting of
normally recurring adjustments) necessary to present fairly the information set
forth therein. The results for the nine months ended April 30, 1996 are not
necessarily indicative of the results for the fiscal year ending July 31, 1996.

10
<PAGE> 11
Selected Consolidated Financial Data

<TABLE>
<CAPTION>
9 mos. ended April 30, Year ended July 31,
------------------------- -------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
- - -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues $740,000 $1,121,000 $1,254,000 $1,818,000 $1,693,000 $4,472,000 $5,830,000
Costs and expenses:

Income (loss) from
operations (223,000) 215,000 3,000 246,000 (1,926,000) (1,436,000) (3,182,000)

Other income:
Settlement of
IRS claims ---- --- --- ---- 181,000 ----
Settlement of
royalty claims --- ---- --- 84,000 374,000 ---- ---
Interest income 54,000 36,000 49,000 15,000 19,000 39,000 243,000
Interest expense --- --- --- (18,000) (18,000) --- ---
------- ------- ------- -------- -------- ------- -------

Income (loss) before
provision for (benefit
from) income taxes and
extra ordinary income (169,000) 251,000 52,000 327,000 (1,370,000) (1,397,000) (2,939,000)

Provision for (benefit
from)income taxes --- (6,000) (14,000) 22,000 9,000 5,000 (205,000)
------- -------- -------- ------- ---------- ---------- -----------
Income (loss) before
extraordinary item (169,000) 257,000 66,000 305,000 (1,379,000) (1,402,000) (2,734,000)
Extraordinary item -
troubled debt
restructuring --- --- --- --- 69,000 237,000 ---
-------- -------- ------- -------- ----------- ----------- -----------

NET INCOME (LOSS) ($169,000) $257,000 $66,000 $305,000 $(1,310,000) $(1,165,000) $(2,734,000)
======== ======== ======= ======== =========== =========== ===========

INCOME (LOSS) PER
COMMON SHARE:

Income (loss) before
extraordinary income $(0.05) $0.07 $0.02 $0.09 $(0.43) (0.45) (0.95)
Extraordinary income --- ----- --- --- 0.02 0.08 ---
-------- -------- ------- -------- ----------- ---------- ----------
Net income (loss) $(0.05) $0.07 $0.02 $0.09 $(0.41) $(0.37) $(0.95)
======== ======== ======= ======== =========== ========== ==========

</TABLE>

11
<PAGE> 12
BALANCE SHEET DATA:

<TABLE>
<CAPTION>
9 mos. ended April 30, Year ended July 31,
------------------------------ -------------------------------------------------------------------------

1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $5,555,000 $5,848,000 $5,667,000 $5,801,000 $5,653,000 $7,598,000 $10,286,000
========== ========== ========== ========== ========== ========== ===========
TOTAL DEBT $1,836,000 $1,771,000 $1,779,000 $1,987,000 $2,391,000 $3,313,000 $ 4,836,000
========== ========== ========== ========== ========== ========== ===========
Shareholders'
equity $3,719,000 $4,077,000 $3,888,000 $3,814,000 $3,262,000 $4,285,000 $ 5,450,000
========== ========== ========== ========== ========== ========== ===========
</TABLE>

12
<PAGE> 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS

NINE MONTHS ENDED APRIL 30, 1996 VERSUS APRIL 30, 1995

Total revenues for the period were $740,000 compared with $1,121,000 in the
corresponding prior period. Movies, television and theatrical revenues were
$417,000 compared with $666,000 in the prior period. In the prior year,
payments under a movie licensing agreement of $430,000 were received which were
significantly higher than the $166,000 received in the current period. Video
sales of $240,000 reduced from $262,000 recorded in the corresponding 1995
period. Royalty income from video licensing fell from $72,000 in the prior
year period to $25,000 in the current period. In 1995, a payment from a video
licensee of $40,000 was received which related to revenues from prior years.
The Company has de-emphasized the video segment of its business due to
declining profitability. Other income fell to $54,000 from $116,000 in the
prior year period. In 1995 there was a payment of $50,000 received from the
licensing of a radio tape that did not recur in the current period.

Cost of videocassettes sold as a percentage of sales increased to 48% in the
first nine months of fiscal 1996 compared with 31% in the comparable period of
1995 due primarily to reductions in the sales price of certain films in the
current period as they are in latter stages of their release period.

Cost of magazine primarily covers a claim by the distributor of the magazine
for costs associated with prior editions of the magazine.

Selling, general and administrative expenses were reduced to $544,000 in the
current period, compared with $576,000 in the corresponding prior period. The
decrease primarily reflects a reduction in salary costs of $129,000, offset in
part by an increase in legal expenses of $46,000 and the reversal in 1995 of a
previously established reserve for bad debts of $58,000 which was no longer
required.

There was no provision for income taxes in the current period because of the
utilization of tax loss carryforwards.

The net loss for the current period was $169,000 equal to $0.05 per share
compared with net income of $257,000 in the corresponding prior year period,
equal to $0.07 per share. The loss was due to sharply lower revenues and
higher costs associated with publishing of the magazine, the effect on the
prior year of the reversal of the reserve for bad debts offset in part by lower
salary costs as discussed above.

13
<PAGE> 14
YEAR ENDED JULY 31, 1995 VERSUS JULY 31, 1994

Total revenues for the year were $1,254,000 compared with $1,818,000 in the
prior year. Movies, television and theatrical revenues declined to $706,000
compared with $1,348,000 in 1994. The reduction primarily reflects lower
licensing income from movies. In 1994, substantial contingent income was
received from the revenues of "National Lampoon's Loaded Weapon I," the first
movie released under a movie licensing agreement entered into in 1991. The
amount of contingent income was significantly greater in 1994 than the current
year. Also, the advance payments for the second and third movies to be
produced under the agreement was lower in the current year compared with 1994.

Revenues from video sales increased to $336,000 in the current year from
$245,000 in 1994 due to the successful special promotion of one of the
Company's most popular video titles.

Other income increased to $129,000 from $71,000 in the comparable period of
1994, due mainly to the licensing of a video game and other miscellaneous
items.

Cost of videocassettes sold as a percentage of sales decreased to 31% in 1995
compared with 41% in the prior year. This reflects the fact that in 1995 the
majority of revenue resulted from the sale of the Company's most popular titles
which did not require discounting.

Selling, general and administrative expenses decreased to $818,000 in the
current year compared with $1,129,000 in the prior period. The decline
reflects lower salaries, a sharp reduction in legal and accounting fees and the
reversal of a previously established provision for doubtful accounts
receivable.

Interest income for the year increased to $49,000 compared with $15,000 in
1994. This reflects the fact the Company had more cash to invest during the
year and interest rates were higher than the prior period.

In 1994 there was a settlement of a royalty obligation which resulted in the
reversal of $84,000 in expenses previously accrued. There was no comparable
item in 1995.

Net income for the current year was $66,000 equal to $0.02 per share compared
with a net income of $305,000 in the prior year, or $0.09 per share. The
decline previously reflects lower movie licensing revenues offset in part by
lower selling, general and administrative expenses.

YEAR ENDED JULY 31, 1994 VERSUS JULY 31, 1993

Total revenues for the period were $1,818,000 compared with $1,693,000 in the
prior year. Movies, television and theatrical revenues rose to $1,348,000
compared with $196,000 in the prior year. The increase reflects contingent
royalty incomes from the successful "Loaded Weapon I," which was the first
release under a movie licensing agreement combined with advanced payment of
non-contingent

14
<PAGE> 15
fees for the second movie to be produced under the agreement. The costs
associated with producing incremental licensing fee revenue is very small,
accordingly, increases in license revenue has a significant impact on net
income. Video sales declined to $245,000 compared with $968,000 in fiscal 1993
and royalty income declined to $109,000 from $271,000 in the prior year. The
lower volume and royalties reflects the Company's decision to de-emphasize this
segment of its business due to declining profitability.

Costs of videocassettes sold declined from $725,000 in fiscal 1993 to $100,000
in fiscal 1994. The reduction reflects lower video sales in 1994 and the
absence of any write downs for excess inventory which occurred in 1993.

Selling, general and administrative expenses were reduced to $1,129,000 in the
current year compared with $2,343,000 in the prior period. In the 1993 period
there was a substantial provision for the settlement of litigation claims,
higher legal fees and a significant addition to the bad debt provision not
required in the current year.

Settlement of royalty obligations in 1993 of $374,000 represents the difference
between the $150,000 paid to the owner of certain video product and the amount
previously accrued by the Company. In 1994, there was income from the
settlement of royalty claims of $84,000. Settlement of IRS claims in 1993
resulted from the reversal of a previously proposed income tax assessment. The
$69,000 in 1993 of extraordinary income resulted from the restructuring of
certain liabilities of the Company's wholly-owned subsidiary, National Lampoon,
Inc.

Net income for the year was $305,000 equal to $0.09 per share compared with a
loss of $1,310,000 in the prior year or $(0.41) per share. The improvement
primarily results from higher movie licensing fees and sharply lower general
and administrative expenses.

Inflation has not had a significant effect on the Company's operations;
however, industry wide decreases in sales prices of videos to consumers along
with increased discounts to the Company's video customers has had an effect on
the Company's operations. The retail price of certain titles have been reduced
from $29.95 to $19.95 or $14.95, others have been reduced from $14.95 to $9.95
reflecting industry trends. The trend in the industry is toward higher
discounts and unit price points of $9.95 or $14.95. While the manufacturing
cost of video product has declined over the last few years, this decline has
not kept pace with the decline of unit sales prices.

LIQUIDITY AND CAPITAL RESOURCES

Cash and short term investment at April 30, 1996 totaled $1,191,000, a decrease
of $64,000 from the July 31, 1995 fiscal year end.

Intangible assets consist primarily of the right to license the "National
Lampoon" name and are being amortized straight-line over a twenty- five year
period. Subsequent to its acquisition, the Company continually evaluates
whether later events and circumstances have occurred that indicate the
remaining estimated useful life of intangible assets may warrant revision or
that the remaining

15
<PAGE> 16
balance of intangible assets may not be recoverable. When factors indicate
that intangible assets should be evaluated for possible impairment, the Company
uses an estimate of the related business's undiscounted net income over the
remaining life of the intangible assets in measuring whether the intangible
assets are recoverable.

For the past several years, the Company has not made any significant capital
investment and does not anticipate any significant capital investment
requirements in its current lines of business. The Company feels its current
cash resources combined with cash generated from operations are sufficient to
cover needs through fiscal 1997. The Company is evaluating the possibility of
entering new lines of business which could require significant investment.
Before embarking on any major new venture, it may be necessary for the Company
to raise funds through outside sources.

BUSINESS

The Company was founded in March, 1986 by its Chairman of the Board and
President, James P. Jimirro, the first President of both the Disney Channel and
Walt Disney Home Video. The Company was originally formed primarily to engage
in the acquisition, development and production of entertainment feature film
and special-interest videocassette programs, and the marketing of these
programs in the home video sell-through market. In 1990, the Company acquired
National Lampoon, Inc., a publisher of a national satire and humor magazine and
licensor of feature films.

Due to the increasing competitiveness of the videocassette market, resulting in
declining volume and profitability, the Company has de- emphasized this segment
of their business. The Company expects that its videocassette business, which
has been declining in recent years, will continue to decline, and in the future
will not be a significant part of its operations. The Company is now focusing
on expanding the licensing of the National Lampoon name to virtually every
segment of the entertainment business. The first significant result of this
effort was realized with the release in February, 1993 of the feature film
"National Lampoon's Loaded Weapon I". This film achieved approximately $28
million of theatrical revenue in its United States theatrical release. The
Company will participate in the film's revenue as provided by the Company's
licensing agreement with New Line Cinema, the producer and distributor of the
film. The second picture under this licensed agreement, "National Lampoon's
Senior Trip," was released in September of 1995. The initial theatrical
revenue from this film was disappointing and the Company does not expect any
significant contingent income based on the revenues from this film. In fiscal
1994, a licensing agreement was entered into with Showtime Networks, Inc. which
provides for the production of seven (7) movies made for initial viewing on the
Showtime television channel over the next three (3) years. The first movie
under this agreement was aired in August, 1994 and the second film was aired in
November, 1995.

CURRENT OPERATIONS AND BUSINESS STRATEGIES

The Company's current business strategy is to preserve, to the extent possible,
the Company's cash resources and focus on activities pursuant to which the
Company can license the name "National Lampoon" without investing sums in
either the development or production of any entertainment or

16
<PAGE> 17
related product. In this regard, virtually all development activity taking
place in respect of the Company's feature films, made-for-videos,
made-for-cable and interactive product are done by third parties who license
the name "National Lampoon" in return for initial guarantys and royalty
payments based on the profitability of the particular venture.

17
<PAGE> 18
NATIONAL LAMPOON OPERATIONS

NLI and its subsidiaries were acquired by J2 effective October 24, 1990 upon
approval of the shareholders of both companies. In December 1992, J2
foreclosed on all of the assets of NLI. Since that time, J2 has used the
assets it acquired in such foreclosure in a separate division. This division,
together with the prior NLI entity, is collectively referred to as "NL".

GENERAL

NL is engaged in various aspects of the entertainment business. It is the
publisher of National Lampoon, a magazine of contemporary humor and satire, and
until January, 1992 was the publisher of Heavy Metal, a bi-monthly magazine of
illustrated fantasy and science fiction. NL also creates, develops, and has
produced (but does not finance) the production of motion pictures, television
programs, and other entertainment media.

MOTION PICTURES, TELEVISION AND OTHER ENTERTAINMENT ACTIVITIES - LICENSING

MOTION PICTURES: NL's motion picture activities have consisted principally of
developing ideas for feature films, suggesting script writers, providing
supervision of the scripting, and providing producer services in connection
with the production of such films. NL has not financed the development,
production or distribution of movies; rather, NL has presented its film ideas
to major movie studios for consideration with regard to financing of
development, production, and distribution by such studios. NL has received
production and other fees and a participation in the profits, if any, of the
movie which bears its name. After NL's first movie, "Animal House," NL's
compensation arrangements for its comedy film projects financed and distributed
by studios traditionally fell into a general pattern of cash fees for NL's
producer services and for the use of the name "National Lampoon" in the film
title, and a small percentage of the studio's "net profits" (after a certain
level of revenues has been achieved) from the film.

To date, NL has been involved in the production of eight feature films,
including the highly profitable 1978 film "Animal House," co-produced by NL and
Ivan Reitman. This movie starred John Belushi and was financed and distributed
by Universal Studios. Through 1990, total revenues to NL from this picture
have aggregated in excess of ten million dollars. For the last five years,
revenues from this picture have consisted mainly of NL's share of fees derived
from the licensing of the picture by Universal for showing by various
independent television stations, and from the sale of videocassettes.

NL's other films have included "National Lampoon's Vacation" (released in 1983)
and its sequels, "National Lampoon's European Vacation" (released in 1985), and
"National Lampoon's Christmas Vacation" (released in 1989), all starring Chevy
Chase and Beverly D'Angelo.

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<PAGE> 19
NL and New Line Cinema Corporation ("New Line") entered into an agreement,
dated as of September 11, 1991, regarding the development and production,
financing, and distribution of three (3) National Lampoon motion pictures each
at budgets not greater than $10 million within four and one-half years of
execution of the agreement (the "New Line Agreement"). The New Line Agreement
provides NL with an advance fee for the use of the "National Lampoon" name in
connection with each of the theatrical motion pictures to be produced and
additional contingent compensation based on the revenues produced by the
Picture.

New Line released the first film under this agreement, "National Lampoon's
Loaded Weapon I," in February 1993. The film grossed in excess of $28 million
at the domestic box-office. The second film, "National Lampoon's Senior Trip"
was released in September, 1995 and was not a box office success. The New
Line agreement has now expired.

In March, 1994, the Company signed an agreement with Showtime Networks, Inc.
("Showtime") to produce seven (7) movies over a three (3) year period to be
aired initially on the Showtime Network. The agreement provides for the
payment of a license fee to National Lampoon upon the commencement of principal
photography of each film and contingent compensation based on revenues the
films may generate from all sources. Two made-for-cable pictures have been
produced by third parties under this arrangement, and a payment in respect of
the third film was received in April, 1996.

TELEVISION: In July 1987 NL entered into an exclusive television agreement
with Barris Industries, Inc. ("Barris"), a Los Angeles-based television
production company. Barris is a predecessor of Guber-Peter Entertainment
Company (GPEC), which has been acquired by Sony Pictures (formerly Columbia
Studios). Pursuant to the Barris Agreement, NL granted Barris the exclusive
right to produce television programming of any kind utilizing the name
"National Lampoon" for a term of five years. NL had not previously been
significantly active in creating television programming, and this agreement did
not produce any significant television activity.

Concurrent with the acquisition of NL by J2 Communications, the exclusive right
to produce television programming under the name "National Lampoon" was
re-acquired by NL on October l, 1990 from GPEC ("GPEC Agreement"). The purpose
of this acquisition of rights was to ensure that NL had the ability to control
the use of its name in the valuable medium of television and to develop comedy
programs for broadcast in all areas of television distribution including
network, syndication and cable.

The GPEC Agreement required the re-payment of $1,000,000 to GPEC, which was the
consideration paid by GPEC to NL for the rights in 1987. This sum was payable
by NL, fifty-percent ($500,000) on execution of the contract, and fifty-percent
($500,000) payable out of seventeen and one- half percent (17 1/2%) of the
gross receipts received by NL as a result of the exploitation of any new
television programs bearing the National Lampoon name, with certain minimums
due on commencement of principal photography or taping of the applicable
programs. After this amount has been re-paid, NL shall have no further
obligations to GPEC with respect to television. To date, $52,500 has been paid
under the gross receipts provision of the agreement.

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<PAGE> 20
MADE-FOR-VIDEO MOVIES:

"National Lampoon's Last Resort": a made-for-video movie produced by Rose &
Ruby Productions, completed filming in July, 1993. The picture stars Corey
Feldman & Corey Haim, and in 1994 was distributed internationally by Moonstone
Entertainment and domestically by Vidmark in early 1994.

MOTION PICTURE AND TELEVISION COMPETITION: Motion pictures and television
development activities are highly competitive. NL is in competition with the
major film studios as well as numerous independent motion picture and
television production companies for the acquisition of literary properties, the
services of creative and technical personnel, and available production
financing. NL believes it has been, and will continue to be, aided in these
endeavors by the recognition achieved by the "National Lampoon" magazine and by
the great success achieved by its films, "National Lampoon's Animal House" and
"National Lampoon's Vacation," however, NL cannot guarantee that any project
will actually be produced or if produced, will yield the success of past
projects.

OTHER LICENSING ACTIVITIES

RADIO: A National Lampoon radio show is currently in development.

BOOKS: NL continues the publication of various books, including "National
Lampoon's Treasury of Humor" with Simon and Schuster, and four "True Facts"
books with Contemporary Books. Recently the third edition of "National
Lampoon's Cartoon Book," and "National Lampoon White Bread Snaps" was
published.

Anna and Andy McGregor ("Harvard Lampoon") authored a book titled "National
Lampoon's Underground College Guide." The project is being represented by the
William Morris Agency.

COMPUTER GAMES: "National Lampoon's Chess Meister 5 Billion and 1," a computer
game produced by Spectrum HoloByte, is currently available nationwide. Also
available is "The Daily Plan-It", a daily planner featuring National Lampoon's
Joke of the Day, distributed by Media Vision. In 1995, Trimark Interactive
developed and distributed the CD-ROM title "National Lampoon's Blind Date."
Other interactive titles being developed by third parties include "National
Lampoon Goes To Hell" and "National Lampoon's I Can't Believe It's Not A Game
Show".

NL has a number of merchandising arrangements, including a line of trading
cards based upon the National Lampoon magazine.

RECORDINGS: Rhino Records has released a commemorative box set of NL's " Lost
Tapes", a compilation of the best of the former NL's radio hour.

THEME RESTAURANTS: National Lampoon has recently entered into a joint venture
with an owner-operator of restaurants to develop "National Lampoon Cafe", which
will be restaurants with a comedy theme.

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<PAGE> 21
PUBLISHING OPERATIONS

NATIONAL LAMPOON MAGAZINE: First published in March 1970, "National Lampoon"
is distributed at newsstands, bookstores, and other retail outlets and through
subscriptions. Its audience is largely young, college educated, and affluent.
Each issue of the magazine contains articles, artwork, and photographs treating
various matters in a satirical manner.

National Lampoon became a bi-monthly magazine in late 1986 with a $3.95 cover
price for approximately 112 pages per issue. Commencing with the March 1991
issue, National Lampoon increased to a ten (10) times per year frequency and
also reduced its cover price to $2.95 and lowered the page count to 84 pages.
However, the continued economic recession and the advent of the Gulf War
depressed all magazine circulation and related advertising revenues.
Consequently, beginning with the December 1991 issue, the Company reverted back
to bi-monthly issues. In an effort to reverse the trend of NL losses over many
years, in March, 1992, the Company relocated the principal offices of National
Lampoon, Inc. to Los Angeles, California, and closed the New York offices.
After the April 1992 issue, NL temporarily suspended publication of National
Lampoon. NL recommenced publication of National Lampoon on a limited basis
with the spring 1993 issue.

In August, 1993 the Company entered into an agreement with CR Cooper
Publications, Inc., a magazine publisher, to print and distribute the magazine.
Editorial control of the magazine content remained with the Company. The
agreement called for the publication of a minimum of 4 issues during the first
year of the agreement, 6 issues the second year and 10 issues for the third and
subsequent years. A fee equal to 5% of all revenues generated by the magazine
in its first year of publication, 6% in the second year and 7% for each year
thereafter was to be paid to the Company. The agreement was for a period of 3
years; however in February, 1996, the agreement was terminated by the Company
because certain minimum performance targets were not met by the Publisher.
Beginning with the 25th anniversary issue published in May, 1996, the Company
again began publishing the magazine. The Company is reviewing its options
regarding future publications, and is not yet determined the number of issues it
will directly publish, or if a third party publisher will be retained.

An agreement between NL and The Harvard Lampoon, Inc. provides that NL may use
the "Lampoon" name perpetually, subject to, among other things, publication of
the magazine at least once a year. Under the agreement, as amended, NL pays
The Harvard Lampoon, Inc. royalties of up to 2% of all revenues derived from
sales of publications using the name "National Lampoon," and royalties of up to
2% of "pre-tax profits" (as defined in the agreement) derived from
non-publishing activities using such name. The Harvard agreement requires that
NL publish at least one issue of the magazine annually. Except for this
royalty arrangement, there is no connection between National Lampoon and The
Harvard Lampoon. The name "National Lampoon" is a registered trademark of the
Company.

COMPETITION IN PUBLISHING: The magazine publishing industry is intensely
competitive with respect to both readership and advertising. National Lampoon
is one of the few nationally circulated magazines directed to an adult audience
devoted exclusively to contemporary humor and satire.

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<PAGE> 22
There are, however, a number of nationally distributed magazines devoted to
contemporary subjects and events, some of which occasionally contain material
similar to that contained in National Lampoon.

VIDEO OPERATIONS

The Company, which through 1993 was engaged in significant operations in the
sell-through video market, has drastically diminished its video operations.
The Company is currently engaged in the exploitation of "Dorf on Golf", the
rights of which expire next year. After such time, the Company does not expect
that its video operations will generate any major revenue for the Company.

EMPLOYEES

As of June 1, 1996, the Company employed five (5) employees of whom three (3)
are full time and two (2) are part-time.

PROPERTIES

The Company leases office space of approximately 3,912 square feet at 10850
Wilshire Boulevard, Suite 1000, Los Angeles, California 90024 for a five (5)
year period commencing on October 1, 1995. The Company's rental obligation is
$6,454 per month.

LITIGATION

The Company is not a party to any material litigation.

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<PAGE> 23

DIRECTORS AND EXECUTIVE OFFICERS

The information set forth below, as of June 3, 1996, lists each director and
executive officer of the Company, the year in which he first became a director
or executive officer, and his principal occupation during the past five years.
All executive officers of the Company are by, and serve at the pleasure of, the
Board of Directors.
<TABLE>
<CAPTION>
First
Name and Office to which Elected Age Elected
- - -------------------------------- --- -------
<S> <C> <C>
James P. Jimirro 59 1986
Chairman of the Board of Directors,
President and Chief Executive Officer

James Fellows 61 1986
Director

Bruce P. Vann 40 1986
Director

Gary G. Cowan 59 1993
Chief Financial Officer and Director

Duncan Murray 49 1986
Vice President-Marketing
</TABLE>

JAMES P. JIMIRRO has been employed by the Company since its inception. From
1980 to 1985 he was the President of Walt Disney Telecommunications Company,
which included serving as President of Walt Disney Home Video, a producer and
distributor of family home video programming. While in this position, he also
served as Corporate Executive Vice President of Walt Disney Productions. In
addition, from 1983 until 1985, Mr. Jimirro served as the first President of
The Disney Channel, a national pay cable television channel, which Mr. Jimirro
conceived and implemented. Mr. Jimirro continued in a consulting capacity for
the Walt Disney Companies through July, 1986. From 1973 to 1980 he served as
Director of International Sales and then as Executive Vice President of the
Walt Disney Educational Media Company, a subsidiary of The Walt Disney Company.
Before his move to Disney, Mr. Jimirro directed international sales for CBS,
Inc. and later, for Viacom International.

JAMES FELLOWS has been a member of the Board of Directors and the President of
the Central Education Network, Inc., a Chicago, Illinois association of public
television and educational associations, since 1983. From 1962 through 1982,
Mr. Fellows worked in a variety of positions for the National Association of
Educational Broadcasters (NAEB) in Washington, D.C., and became

23
<PAGE> 24
its President and Chief Executive Officer in 1978. NAEB was a non-profit
organization concerned with educational and public telecommunications. Mr.
Fellows is a director of numerous non-profit corporations including the
Educational Development Center in Boston, Massachusetts, a producer of written
and filmed educational materials; the Maryland Public Broadcasting Foundation,
a corporate fund raiser for public television; and American Children's
Television Festival.

BRUCE P. VANN has been a partner in the law firm of Kelly & Lytton since
December, 1995, and from 1989 through December 1995 was a partner in the law
firm of Keck, Mahin & Cate and Meyer & Vann. In all firms (located in Los
Angeles, California), Mr. Vann has specialized in corporate and securities
matters. Mr. Vann also serves, on a non-exclusive basis, as Senior Vice
President of Largo Entertainment, a subsidiary of The Victor Company of Japan.

GARY G. COWAN has been an independent consultant since February 1990
specializing in planning and financing. From 1982 to 1990, he was Senior
Vice-President - Finance for U.S. Vacation Resorts, Inc. Prior to that he held
similar positions with Superscope, Inc. and Leisure and Technology and was
Vice-President Financial Analysis and Planning for Dart Industries, Inc.

DUNCAN MURRAY has been with the Company since August, 1986. Before that, he
worked with The Walt Disney Company for fourteen years in a variety of
capacities including Vice President-Sales Administration for The Disney Channel
and Director of Sales for Walt Disney Telecommunications Company.

EXECUTIVE COMPENSATION

The Summary Compensation Table below includes, for each of the fiscal years
ended July 31, 1995, 1994, and 1993 individual compensation for services to the
Company and its subsidiaries of the Chief Executive Officer (the "Named
Officer").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
-------------------------------------- -------------------------- ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)

Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary ($) Bonus ($) ($)(1) ($) SARs (#) ($) ($)
- - -------- ---- ---------- --------- ------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James P. Jimirro(2)

1995 190,750 100,000(4) (2) (3) 100,000 -- (3)
1994 190,750 100,000 (2) (3) 100,000 -- (3)
1993 190,750 --- (2) (3) 100,000 -- (3)
</TABLE>

____________________

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<PAGE> 25
(1) Does not include amounts paid to certain officers of the Company who
are entitled to be reimbursed for expenses relating to entertainment,
travel and living expenses when away from home.

(2) Does not include $12,500 in 1995, $11,300 in 1994 and $11,000 in 1993
which the Company paid for Mr. Jimirro's health plan. The Company
also provides Mr. Jimirro with a Company-owned vehicle for his use.
Effective June 1, 1992, Mr. Jimirro reduced his annual salary to
$190,750.

(3) Does not include SAR's granted to Mr. Jimirro pursuant to his
employment agreement. See the description of Mr. Jimirro's employment
agreement under "Employment Agreements and Stock Option Plans" below.

(4) The bonus for 1995 was accrued but not paid.

OPTION GRANTS IN LAST FISCAL YEAR

Shown below is information on grants of stock options pursuant to the 1994
Stock Option Plan during the fiscal year ended July 31, 1995, to the Named
Officer who is reflected in the Summary Compensation Table on page __.

________________________________________________________________________________

<TABLE>
<CAPTION>
Potential Realized Value at Assigned
Annual Rates of Stock Price
Individual Grants in 1995 Appreciation for 7 year Option Term
------------------------- -----------------------------------
Percentage
of Total
Options/SARs Exercise 5% 10%
Options/ granted to or Base ----------------- -----------------
SARs Employees in Price Per Expiration Stock Dollar Stock Dollar
Name Granted(#) Fiscal Year Share($) Date Price($) Gains($) Price($) Gains($)
- - ---- ---------- ----------- -------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
James Jimirro 100,000(1) 44.5 $1.312(2) 12-30-2001 $1.85 $53,400 $2.56 $124,500
</TABLE>

___________________
(1) Options/SARs granted are immediately exercisable.

(2) Options/SARs granted with an exercise price (or initial valuation in the
case of SARs) equal to the closing sale price of the Common Stock as quoted on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") on December 30, 1994, the date of grant for Mr. Jimirro.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

Shown below is information with respect to (i) options exercised by the
Named Officer pursuant to the 1994 Plan during fiscal 1995 (of which there were
none); and (ii) unexercised options granted in fiscal 1995 and prior years
under the 1994 Plan to the Named Officers and held by them at July 31, 1995.

<TABLE>
<CAPTION>
Value of
Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
7/31/93 7/31/95(1)
Shares Acquired Value Exercisable/ Exercisable;
Name on Exercise (#) Realized($) Unexercisable(#) Unexercisable($)
- - ---- --------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
James Jimirro -0- -0- 600,000/0 $86,000/0
</TABLE>

(1) Based on the closing sale price as quoted on NASDAQ on that date.

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<PAGE> 26
DIRECTOR COMPENSATION

Directors, with the exception of Mr. Jimirro, receive 4,000 stock options per
year exercisable at the then market price as compensation for their services as
a director.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1995, all matters concerning executive officer compensation were
addressed by the entire Board of Directors as the Company did not have a
compensation committee. Jim Jimirro, James Fellows, Gary Cowan and Bruce Vann
were each directors of the Company during fiscal 1995.

EMPLOYMENT AGREEMENTS AND STOCK OPTIONS

In 1994, the Company entered into a new employment agreement with James P.
Jimirro, effective July 1, 1994 (the "1994 Agreement"). Under the 1994
Agreement, which has a term of seven years, Mr. Jimirro will receive a base
salary plus an incentive bonus following the end of each fiscal year during
which Mr. Jimirro is employed by the Company. Mr. Jimirro's base salary for
the first year will be $475,000 and will be adjusted annually by the greater of
(i) 9% or (ii) 5% plus the percentage increase in the CPI Index. Effective
June 1, 1992, the President reduced the amount of salary he receives to
$191,000. The President does not expect to receive the unpaid portion unless
there is a change in the control of the Company as defined by the agreement.

Mr. Jimirro's bonus is to be an amount equal to 5% of the Company's earnings in
excess of $500,000 and up to $1 million; plus 6% of the next $1 million of
earnings; plus 7% of the next $1 million of earnings; plus 8% of the next $2
million of earnings; and plus 9% of the next $2 million of earnings. If
earnings exceed $7 million, then Executive shall, in addition to foregoing
compensation, be entitled to such additional incentive compensation as may be
determined by the Board based upon Executive's services and performance on
behalf of the Company and the profitability of the Company.

The 1994 Agreement also provides that, on the date of each annual meeting of
shareholders during its term, Mr. Jimirro will be granted stock options with
respect to 50,000 shares of Common Stock and stock appreciation rights (SARs)
with respect to 50,000 shares of Common Stock. The exercise price of each
option and the initial valuation of each SAR will be equal to the fair market
value of the Common Stock of the Company at the date of the grant. The options
and SARs will be immediately exercisable non-statutory stock options, will have
a term of seven years, and will be subject to all other terms identical to
those contained in the Company's 1991 Employee Stock Option Incentive Plan (the
"1991 Plan"). The 1991 Plan specifically provides for the grant of stock
options and SARs to Mr. Jimirro in accordance with his employment agreement.
The 1994 Agreement provides that if Mr. Jimirro's employment is terminated
without cause, or is terminated by Mr. Jimirro for cause or under certain other

26
<PAGE> 27
circumstances, including a change in control of the Company (as defined below),
then Mr. Jimirro generally is entitled to receive all payments and other
benefits which would be due under the 1994 Agreement during its entire term;
provided, that such payments would be reduced to the extent that such payments
would constitute an "excess parachute payment" under the Internal Revenue Code
of 1986, or any successor law applicable to payments of severance compensation
to Mr. Jimirro. A "change in control" would be deemed to occur if (a) any
person or group becomes the direct or indirect owner of securities with 25% or
more of the combined voting power of the Company's then outstanding securities,
(b) if there is a significant change in the composition of the Board of
Directors of the Company, (c) upon the sale of all or substantially all of the
assets of the Company, (d) upon the merger of the Company with any other
corporations if the shareholders of the Company prior to the merger owned less
than 75% of the voting stock of the corporation surviving the merger or (e) in
certain other events. In addition to the foregoing benefits, Mr. Jimirro has
the right, if he terminates his employment under certain circumstances
(including following a change in control or a breach of the 1994 Agreement by
the Company) to serve as a consultant to the Company for a period of five years
(the "Consulting Period"). During the Consulting Period, Mr. Jimirro would be
required to devote no more than 600 hours per year to the affairs of the
Company, and would receive 50% of his salary as in effect on the date of
termination of his employment. As a result of the foregoing, the Company would
incur substantial expenses if Mr. Jimirro terminates his employment with the
Company following a change in control of the Company, which may make the
Company a less attractive acquisition candidate. The 1994 Agreement also
provides Mr. Jimirro with certain registration rights pursuant to which,
beginning in 1992, the Company will be required upon the request of Mr. Jimirro
to register the sale of shares of the Company's Common Stock owned by Mr.
Jimirro under the Securities Act of 1933. The 1994 Agreement is terminable by
the Company only "for cause" as defined therein.

Any employee may participate in any bonus plan which may be established, as
well as all Employee Stock Option Plans.

STOCK OPTION PLANS

In 1994, the Board of Directors approved an Employee Stock Option Plan and a
Stock Option Plan for Non-Employee Directors. Both Plans were approved by
Shareholders at the Shareholders' Meeting held March 2, 1995.

The Employee Stock Option Plan is to be administered by a Committee consisting
of at least two members of the Board of Directors. All prior options granted
under previous stock option plans are to be replaced by options granted under
the 1994 Plan.

The 1994 Plan provides for a maximum number of options to be granted to be the
greater of 1,075,000 or 30% of the Company's outstanding shares less 125,000
shares reserved for issuance under the Non-Employee Director Plan.

27
<PAGE> 28
The term of the options granted shall not exceed 10 years and the exercise
price shall be equal to 100% of the fair market value of the common stock on
the date of grant.

The Non-Employee Directors Stock Option Plan is to be administered by a
Committee consisting of at least two members of the Board of Directors. All
prior options granted under previous stock option plans have been replaced by
options granted under the 1994 Plan.

The 1994 Plan provided for a maximum number of 125,000 options to be granted
and further provides for the granting of 4,000 option shares per year to each
Non-Employee Director as compensation for his services.

A maximum of 125,000 shares may be issued under the Plan at an exercise price
equal to the fair market value of the stock on the date of grant. All options
are to be immediately exercisable.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Bruce P. Vann performed services as attorneys for the Company. For the fiscal
year ended July 31, 1995, Mr. Vann received approximately $16,000. Mr. Vann,
is a director of the Company and, as such, he (or his law firm) may receive
additional compensation for services rendered to the Company.

28
<PAGE> 29
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth the beneficial ownership of Common Stock as of
June 3, 1996. The table shows the beneficial ownership to each person known to
J2 who beneficially own more than 5% of the shares of J2 Common Stock, each
current director, and all directors and officers as a group. Except as
otherwise indicated, J2 believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.

<TABLE>
<CAPTION>
Shares Beneficially Shares
Owned Prior to Being
Offering Offered
------------------------------------------

Number Percent
<S> <C> <C>
James P. Jimirro(2)(3) 1,086,000 26.2%
Gary Cowan(7) 70,000 1.68%
James Fellows(4) 31,000 (1)
Bruce P. Vann(5) 26,000 (1)
All Warrantholders (8) 1,753,211 (1)
All Directors and Officers
as a group
(5 persons)(6) 1,237,500 29.8%
</TABLE>

______________________________

(1) Less than 1 percent.

(2) The address for each shareholder listed is 10850 Wilshire Boulevard,
Suite 1000, Los Angeles, California 90024.

(3) Includes 400,000 stock options (See "Stock Option" section) as well as
60,000 Warrants purchased in the open market.

(4) Includes 31,000 shares of Common Stock purchasable under the Company's
Stock Option Plan.

(5) Includes 26,000 shares of Common Stock purchasable under the Company's
Stock Option Plan.

(6) Includes 24,500 options granted to officers not listed on stock table.

29
<PAGE> 30
(7) Consists of 70,000 shares of Common Stock purchasable under the
Company's Stock Option Plan of which 57,000 shares are immediately
exercisable.

(8) Attached as Exhibit A hereto is a list of all warrantholders of the
Company as of July 24, 1996. Such holders are selling shareholders
hereunder.

DESCRIPTION OF THE COMPANY'S SECURITIES

Common Stock

The Company is authorized to issue 8,000,000 shares of Common Stock, no par
value, and 2,000,000 shares of Preferred Stock, no par value. As of June 1,
1996, the Company has issued an outstanding 3,599,987 shares of its Common
Stock. Holders of Common Stock have full voting rights, one vote for each
shares held of record, and in the election of directors they are entitled to
cumulate their votes; however, cumulative voting may occur only if a
stockholder announces his intention to cumulate his votes prior to the voting,
in which case all stockholders may cumulate their votes. Holders of Common
Stock are entitled to receive such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefore, and they are
entitled to share equally and ratably in the assets, if any, remaining after
payment of all debts and liabilities and after any liquidation preference which
is established with respect to any outstanding shares of Preferred Stock. The
stockholders have no preemptive or other rights to subscribe for or to purchase
additional shares of any class, and they have no right to convert shares of
Common Stock into other securities.

Preferred Stock

Preferred Stock can be issued in one or more series, with such designations,
voting powers, preferences and relative, participating, optional or other
special rights, qualifications, limitations and restrictions thereof as the
Company's Board of Directors may determine. These would include (a) the
distinctive designation of each series and the number of shares that will
constitute such series; (b) the dividend rate for such service; (c) the price
at which, and the terms and conditions on which, the shares of such series may
be redeemed, if such shares are redeemable; (d) the purchase of sinking fund
provisions, if any, for the purchase or redemption of shares of such series;
(e) any preferential amount payable upon each share of such series in the event
of the liquidation, dissolution or winding up of the Company; (f) the voting
rights, if any, of shares of such series; (g) the terms and conditions, if any,
upon which shares of such series may be converted into shares of other classes
or series of shares of the Company or other securities; and (h) the relative
rights of priority of each series of series preferred stock as to dividends and
assets. The issuance of Preferred Stock could be used, under certain
circumstances, as a method of preventing a takeover of the Company and could
permit the Board of Directors, without any action by the holders of Common
Stock, to issue Preferred Stock which could have a detrimental effect on the
rights of the holders of Common Stock, including loss of voting control.

30
<PAGE> 31
There are currently no shares of any class of Preferred Stock outstanding and
the Company currently has no plans to designate or issue any additional shares
of Preferred Stock.

Transfer Agent and Registrar

The transfer agent and registrar for the Common Stock is U.S. Stock Transfer &
Trust Co., Glendale, California.

Description of Series A Warrants

The Series A Warrants are to be issued under a Warrant Agreement to be dated as
of October 15, 1990 (the "Warrant Agreement") between the Company and U.S.
Stock Transfer & Trust Co., as Warrant Agent. The statements under this
caption are summaries that do not purport to be complete. They are qualified
by reference to the various documents mentioned, all of which have been filed
as exhibits to the Registration Statement of which this Prospectus is a part.
Whenever defined terms of the Warrant Agreement are referred to, such defined
terms are incorporated by reference as part of the statement made, and the
statement is qualified in its entirety by such reference.

Rights to Purchase Common Stock

Each Series A Warrant entitles the registered owner ("Warrantholder") to
purchase one share of the Company's Common Stock at $2.00 per share, subject to
adjustment at any time on or after October 15, 1990 and before 5:00 p.m., New
York time, on December 31, 1997. (That exercise price was established by the
agreement between the Company and the Warrant Agent lowering the exercise price
from $3.00 to $2.00. The price at which a Warrantholder may purchase one share
of J2 Common Stock on exercise of a Series A Warrant as well as the number of
shares of J2 Common Stock purchasable on exercise of a Series A Warrant, or at
the Company's option, the number of Series A Warrants outstanding, are subject
to adjustment in certain events referred to below (see "Adjustments"). The
price per share at which a Warrantholder may purchase one share of J2 Common
Stock on exercise of a Series A Warrant, as so adjusted from time to time, is
referred to in the Warrant Agreement as the "Warrant Price." If the last day
for the exercise of the Series A Warrants is not a Business Day, then the
Series A Warrants may be exercised on the next succeeding Business Day.

The certificates evidencing the Series A Warrants are to be issued in temporary
or definitive fully registered form. Each Warrantholder may exercise such
Series A Warrants by surrendering to the Warrant Agent the certificate
evidencing such Series A Warrants, with the form of election to exercise all or
a portion of the Series A Warrants evidenced thereby on the

31
<PAGE> 32
reverse side of such certificate duly filled in and signed, together with
payment of the Warrant Price, and any applicable transfer tax.

Payment of the Warrant Price may be made, at the holder's option, in the form
of cash or a certified or official bank check.

As soon as practicable after the exercise of any Series A Warrants and payment
of the Warrant Price therefor and any applicable transfer tax, the Warrant
Agent shall deliver, to or upon the order of the exercising Warrantholder,
certificates representing the number of shares of J2 Common Stock so purchased.
If fewer than all of the Series A Warrants evidenced by a Series A Warrant
certificate are exercised, a new certificate will be issued for the remaining
number of Series A Warrants. The Company is not required to issue fractional
shares of J2 Common Stock or a Warrant Certificate representing a fractional
Series A Warrant upon exercise of the Series A Warrants, and in lieu of
fractional shares of J2 Common Stock or a Warrant Certificate representing a
fractional Series A Warrant, the Company shall make a cash adjustment for such
fractional shares on the basis of the then-current market value (as defined) of
a share of J2 Common Stock.

The Company has agreed to endeavor to cause the shares of J2 Common Stock
issuable on exercise of the Series A Warrants to be duly registered, approved
and listed with any federal or state governmental authority or national
securities exchange, as the case may be, requiring such registration, approval
or listing.

Call

On or after October 15, 1992, all or any portion of the Series A Warrants are
callable at the option of the Company at a Call Price of $2.00 per Series A
Warrant, in the event that the reported last sale price of the Company's Common
Stock on its principal trading market was at least 175% of the then effective
Warrant Price during a period of at least 20 of 30 successive trading days
ending within 15 calendar days prior to the date notice of redemption shall
have been given to the Warrant Agent by the Company. If less than all warrants
are to be redeemed, selection of Series A Warrants to be redeemed will be made
by the Warrant Agent in such manner as it deems to be fair and appropriate.
Notice of redemption will be mailed to the registered Warrantholders by the
Warrant Agent not more than 60 days nor less than 30 days before the date
scheduled for redemption (the "Call Date"). Any Series A Warrants so called
for redemption may be exercised until 5:00 p.m., California time, on the fifth
business day preceding the Call Date. The Call Price set forth above is
subject to proportionate adjustment upon changes in the Warrant Price in the
event that the Company elects to adjust the number of Series A Warrants rather
than to change the number of shares of J2 Common Stock issuable upon exercise
of outstanding Series A Warrants. See "Adjustments" below. The Company shall
not be required (i) to issue, transfer, exchange or permit to be exercised any
Series A Warrants for a period of 15 days immediately preceding any selection
of Series A Warrants to be redeemed or thereafter until after the mailing of
the notice of redemption or (ii) transfer or exchange any Series A Warrants
called or being called for redemption.

32
<PAGE> 33
Adjustments

The Warrant Price and, at the Company's option, either the number of shares of
J2 Common Stock purchasable on the exercise of each Series A Warrant or the
number of Series A Warrants outstanding, are subject to adjustment in certain
events, including (a)(i) the subdivision or combination of outstanding shares
of J2 Common Stock, (ii) the payment of any dividend or distribution on J2
Common Stock in shares of J2 Common Stock; (iii) the combination of outstanding
shares of J2 Common Stock into a smaller number of shares, or (iv) the issuance
by reclassification of its shares of J2 Common Stock other securities of the
Company (b) the issuance of rights or warrants to all holders of J2 Common
Stock entitling them (for a period expiring within 45 days after the record
date for determining shareholders entitled to receive them) to acquire shares
of J2 Common Stock at less than the then-current market price per share (as
defined) of J2 Common Stock; or (c) the distribution to all holders of J2
Common Stock of evidences of indebtedness or assets (excluding cash dividends
or distributions) or shares of capital stock of the Company of any class other
than J2 Common Stock or grant rights to subscribe for securities (other than
those referred to above): provided, however, that no adjustment described in
clause (c) or (d) will be made (y) if the Company issues or distributes to each
holder of Series A Warrants would have been entitled to receive had the Series
A Warrants been exercised prior to the record date for the determination of
stockholders entitled to receive such rights or warrants or (z) if the Company
grants to each holder of Series A Warrants the right to receive, upon the
exercise thereof at any time after the distribution of the evidences of
indebtedness or assets or shares of capital stock of the Company of any class
other than J2 Common Stock referred to in clause (d) above, the evidences of
indebtedness or assets or shares of capital stock of the Company of any class
other than J2 Common Stock that such holder would have been entitled to receive
had the Series A Warrants been exercised prior to the record date for
determination of stockholders entitled to receive such distribution. The
Closing Price for each trading day shall be the last reported sales price
regular way or, in case no such reported sale takes place on such trading day,
the average of the closing bid and asked prices regular way for such day, in
each case on the principal national securities exchange on which the Series A
Warrants are listed or admitted to trading as designated by the Board of
Directors of the Company or, if not listed or admitted to trading, the last
sale price regular way for the Series A Warrants as published by NASDAQ. If
the prices of the Series A Warrants were not so reported on any such market,
the price of the Series A Warrants shall be the average of the closing bid and
ask prices as furnished by any member of the New York Stock Exchange selected
from time to time by the Company for that purpose.

In the event that the Company elects to adjust the number of warrants
outstanding rather than the number of shares of J2 Common Stock purchasable on
the exercise of each Series A Warrant in connection with a change of the
Warrant Price, as described above the Company will not be required to issue
fractional Series A Warrants or Warrant Certificates evidencing fractional
Series A Warrants; and, in lieu of fractional Series A Warrants, the Company
shall make a cash adjustment for such fractional Series A Warrant on the basis
of the then-current market value (as defined) of one Series A Warrant.

33
<PAGE> 34
Notwithstanding the foregoing, in case of any consolidation, merger (other than
a merger or consolidation in which the Company is the continuing corporation),
sale or lease of the property or the Company as an entirety or substantially as
an entirety, or certain reclassifications of changes of the shares of J2 Common
Stock, the successor, leasing or purchasing corporation, as the case may be,
shall execute a supplemental agreement providing that the holder of each Series
A Warrant upon exercise thereof shall have the right to receive, in lieu of
each share of J2 Common Stock deliverable upon exercise prior thereto, only the
kind and amount of shares and/or other securities and/or property and/or cash
receivable upon such consolidation, merger, lease, sale, conveyance,
reclassification or change by a holder of one share of J2 Common Stock.

Modification of the Warrant Agreement

The Warrant Agreement and the rights of Warrantholders thereunder may be
modified by the Company and Warrant Agent with the consent of the holders of
not less than a majority in number of the Series A Warrants then outstanding.
However, no modification that adversely affects the terms upon which the Series
A Warrants are exercisable or may be redeemed or reduces the percentage
required for modification will be effective against any Warrantholder without
his consent. The Warrant Agreement contains provisions permitting the Company
and the Warrant Agent, Without the consent or concurrence of any Warrantholder,
to supplement or amend the Warrant Agreement in order to cure any ambiguity, to
correct or supplement any provision contained therein that may be defective or
inconsistent with any other provision therein or to correct any clerical
omission or mistake or manifest error contained therein.

Transfer Agent

The transfer agent for the Company's Series A Warrants is U.S. Stock Transfer
Corporation, which also is responsible for recordkeeping functions in
connection with the same.

PLAN OF DISTRIBUTION

The Common Stock offered hereby will be sold in one or more market transactions
effected by the individual holders thereof. The Company will not be involved
in any such transaction.

The Common Shares may be offered from time to time by the selling shareholders.
Any sales may be made on one or more exchanges or in the over- the-counter
market or otherwise at prices and at terms then prevailing or at prices related
to the then market prices, or in negotiated transactions. The Common Shares
may be sold by one or more of the following: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) an
exchange distribution in accordance with the rules of such exchange; and (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers.

34
<PAGE> 35
In effecting sales, brokers or dealers engaged by the selling shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from the selling shareholders in amounts to be
negotiated immediately prior to the sale. Such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters"
within the meaning of the Securities Act, in connection with such sales. In
addition, any Common Shares covered by this Prospectus that qualifies for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
Prospectus.

At the time a particular offer of Common Shares is made, to the extent
required, a supplement to this Prospectus will be distributed that will set
forth the aggregate number of Common Shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other items constituting compensation from the
selling stockholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers.

The selling shareholders will be subject to applicable provisions of the
Exchange Act and rules and regulations thereunder, including without
limitation, Rules 10b-2, 10b-6 and 10b-7, which provisions may limit the timing
of purchases and sales of any of the Common Shares by the selling shareholders.

35
<PAGE> 36
Experts

The consolidated financial statements and related financial statement schedules
as of July 31, 1995, and for the year then ended, included in this Prospectus
and elsewhere in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.

The consolidated financial statements as of July 31, 1994, and for each of the
two years in the period ended July 31, 1994, included in this Prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein (which report expresses an unqualified opinion and
includes an explanatory paragraph related to certain intangible assets) and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

Certain legal matters in connection with the validity of the shares of Common
Stock being offered hereby will be passed upon for the Company by Kelly &
Lytton, 1900 Avenue of the Stars, Suite 1450, Los Angeles, California 90067.
Bruce P. Vann, a member of Kelly & Lytton, is a director of the Company.

Additional Information

The Company has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement and the exhibits and schedules filed as a part
thereof. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and,
in each instance, if such contract or document is filed as an exhibit,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference to such exhibit. The Registration Statement,
including exhibits and schedules thereto, may be inspected without charge at
the Commission's principal office in Washington, D.C., and copies of al or any
part thereof may be obtained from such office after payment of fees prescribed
by the Commission.

36
<PAGE> 37
J2 COMMUNICATIONS
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Reports F-1/F-2

Consolidated Balance Sheets
at July 31, 1995, and 1994 F-3

Consolidated Statements of Operations for the years ended
July 31, 1995, 1994, and 1993 F-4/F-5

Consolidated Statements of Shareholders' Equity for the
years ended July 31, 1995, 1994 and 1993 F-6

Consolidated Statements of Cash Flows for the years ended
July 31, 1995, 1994, and 1993 F-7/F-8

Notes to Consolidated Financial Statements F-9/F-17

Consolidated Balance Sheet - April 30, 1996 F-20

Consolidated Statement on Operations for the
nine months ended April 30, 1996 F-21

Consolidated Statement of Cash Flows for the
nine months ended April 30, 1996 F-22
</TABLE>

F-1
<PAGE> 38

J2 COMMUNICATIONS AND SUBSIDIARIES

FINANCIAL STATEMENTS
AS OF JULY 31, 1995 AND 1994
TOGETHER WITH AUDITOR'S REPORT
<PAGE> 39

J2 COMMUNICATIONS AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

JULY 31, 1995

<TABLE>
<CAPTION>
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS PAGE
<S> <C>
FINANCIAL STATEMENTS:

Consolidated Balance Sheets,
July 31, 1995 and 1994. 29-30

Consolidated Statements of Operations
for the Years Ended July 31, 1995, 1994 and 1993 31-32

Consolidated Statements of Shareholders Equity
for the Years Ended July 31, 1995, 1994 and 1993 33

Consolidated Statements of Cash Flows
for the Years Ended July 31, 1995, 1994 and 1993 34-35

Notes to Consolidated Financial Statements 36-45
</TABLE>
<PAGE> 40

J2 COMMUNICATIONS AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - JULY 31, 1995 AND 1994

ASSETS

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 301,000 $ 311,000
Short-term investments at cost (market value
$982,000 and $842,000 at July 31, 1995,
and 1994, respectively) (Note 1) 954,000 830,000
Other current assets 36,000 40,000
---------- ----------
Total current assets 1,291,000 1,181,000
---------- ----------

NONCURRENT ASSETS:
Intangible assets, less accumulated
amortization of $1,589,000 in 1995 and
$1,349,000 in 1994 (Notes 1, 4 and 8) 4,376,000 4,616,000
Other assets - 4,000
---------- ----------
Total noncurrent assets 4,376,000 4,620,000
---------- ----------
Total assets $5,667,000 $5,801,000
========== ==========

</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE> 41

J2 COMMUNICATIONS AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - JULY 31, 1995 AND 1994

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 109,000 $ 212,000
Accrued expenses (Notes 3 and 4) 724,000 727,000
Accrued royalties (Note 4) 503,000 475,000
Deferred revenues (Note 2) 209,000 219,000
Income taxes (Note 8) 31,000 109,000
Common stock payable (Note 4) 203,000 203,000
---------- ----------
Total current liabilities 1,779,000 1,945,000
---------- ----------

NONCURRENT LIABILITIES:
Notes payable (Note 3) - 42,000
---------- ----------
Total liabilities 1,779,000 1,987,000
---------- ----------

COMMITMENTS AND CONTINGENCIES (Notes 1 and 4)

SHAREHOLDERS' EQUITY
(Notes 3, 4, 5 and 6):
Preferred stock, no par value:
Authorized--2,000,000 shares
None issued and outstanding
in 1995 and 1994
Common stock, no par value:
Authorized--8,000,000 shares
Issued and outstanding --
3,600,000 shares in 1995
and 3,602,000 shares in 1994 8,643,000 8,630,000
Notes receivable on common stock (110,000) (105,000)
Accumulate deficit (4,645,000) (4,711,000)
---------- ----------
Total shareholders' equity 3,888,000 3,814,000
---------- ----------
Total liabilities and
shareholders' equity $5,667,000 $5,801,000
========== ==========

</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE> 42
J2 COMMUNICATIONS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 31, 1995

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES (Note 1):
Movies, television and theatrical $ 706,000 $ 1,348,000 $ 196,000
Videocassette sales, net of returns 336,000 245,000 968,000
Royalty income 83,000 109,000 271,000
Publishing - 45,000 62,000
Other 129,000 71,000 196,000
---------- ---------- -----------
Total revenues 1,254,000 1,818,000 1,693,000
---------- ---------- -----------
EXPENSES:
Cost of videocassettes sold 105,000 100,000 725,000
Costs of movies and television
(Note 4) 26,000 36,000 -
Magazine editorial, production and
distribution - - 171,000
Royalty expense 62,000 67,000 73,000
Selling, general and administrative
(Note 7) 818,000 1,129,000 2,343,000
Amortization of intangible assets
(Notes 1 and 2) 240,000 240,000 307,000
---------- ---------- -----------
Total expenses 1,251,000 1,572,000 3,619,000
---------- ---------- -----------
Income (loss) from operations 3,000 246,000 (1,926,000)

OTHER INCOME (EXPENSE):
Settlement of IRS claims (Note 8) - - 181,000
Settlement of royalty claims (Note 4) - 84,000 374,000
Interest income 49,000 15,000 19,000
Interest expense - (18,000) (18,000)
---------- ---------- -----------
Income (loss) before provision
for income taxes and
extraordinary income 52,000 327,000 (1,370,000)

PROVISION FOR (BENEFIT FROM) INCOME TAXES
(Notes 1 and 8) (14,000) 22,000 9,000
---------- ---------- -----------
Income (loss) before
extraordinary income 66,000 305,000 (1,379,000)

EXTRAORDINARY INCOME--troubled debt
restructuring (Note 4) - - 69,000
---------- ---------- -----------
NET INCOME (LOSS) $ 66,000 $ 305,000 $(1,310,000)
========== ========== ===========
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
INCOME (LOSS) PER COMMON SHARE
Primary (Note 1):
Income (loss) before
extraordinary income $ 0.02 $ 0.09 $ (0.43)
Extraordinary income - - 0.02
---------- ---------- ----------
$ 0.02 $ 0.09 $ (0.41)
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 44
J2 COMMUNICATIONS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 31, 1995

<TABLE>
<CAPTION>
Notes
Common Stock Receivable
---------------------- on Common Accumulated
Shares Amount Stock Deficit Total
------ ------ ----- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCES, July 31, 1992 3,134,000 $8,084,000 $(93,000) $(3,706,000) $4,285,000

Shares issued (Notes 3 and 6) 254,000 287,000 - - 287,000
Accrued interest on notes
receivable(Note 5) - 6,000 (6,000) - -
Net loss - - - (1,310,000) (1,310,000)
--------- --------- --------- ---------- ----------
BALANCES, July 31, 1993 3,388,000 8,377,000 (99,000) (5,016,000) 3,262,000

Shares issued (Note 6) 214,000 247,000 - - 247,000
Accrued interest on notes
receivable (Note 5)- 6,000 (6,000) - -
Net income - - - 305,000 305,000
--------- --------- --------- ---------- ----------
BALANCES, July 31, 1994 3,602,000 8,630,000 (105,000) (4,711,000) 3,814,000

Shares issued (Note 6) 8,000 8,000 - - 8,000
Shares retired (10,000) - - - -
Accrued interest on
notes receivable (Note 5) - 5,000 (5,000) - -
Net income - - - 66,000 66,000
--------- ---------- --------- ----------- ----------

BALANCES, July 31, 1995 3,600,000 $8,643,000 $(110,000) $(4,645,000) $3,888,000
========= ========== ========= =========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 45

J2 COMMUNICATIONS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 31, 1995

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 66,000 $ 305,000 $(1,310,000)
Adjustments to reconcile net income
(loss) to net cash provided
by (used in) operating activities:
Amortization of film acquisition
costs - - 109,000
Amortization of intangible assets 240,000 240,000 307,000
Settlement of IRS claims - - (181,000)
Settlement of royalty claims - (84,000) (374,000)
Extraordinary income--troubled
debt restructuring - - (69,000)
Changes in assets and liabilities,
Accounts receivable, net 10,000 (3,000) 398,000
Accounts payable (103,000) 12,000 (167,000)
Accrued expenses 25,000 (48,000) 219,000
Accrued income taxes and
related interest (78,000) 14,000 17,000
Deferred revenues (10,000) (27,000) 39,000
Other (2,000) 27,000 416,000
----------- ----------- ------------
Net cash provided by (used in)
operating activities 148,000 436,000 (596,000)
----------- ----------- ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (1,492,000) (1,028,000) -
Sale of short-term investment 1,368,000 198,000
----------- ----------- ------------

Net cash used in investing
activities (124,000) (830,000) -
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (42,000) (35,000) (10,000)
Proceeds from exercise of
stock options 8,000 12,000 111,000
----------- ----------- ------------
Net cash (used in) provided
by financing activities (34,000) (23,000) 101,000
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Net decrease in cash and cash
equivalents $ (10,000) $ (417,000) $ (495,000)

CASH AND CASH EQUIVALENTS,
beginning of year 311,000 728,000 1,223,000
----------- ----------- ------------
CASH AND CASH EQUIVALENTS,
end of year $ 301,000 $ 311,000 $ 728,000
=========== =========== ============

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION--
Cash paid during the year for:
Interest $ - $ - $ -
========== ========== ===========
Income taxes $ 9,000 $ 5,000 $ 14,000
========== ========== ===========
</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: During the
year ended July 31, 1994, the Company issued common stock to pay legal fees.
A total of 197,000 shares of common stock was originally issued. The total
was subsequently amended to 187,000 shares during the year ended July 31,
1995. The common stock was issued to relieve the following liabilities:

<TABLE>
<S> <C>
Accounts payable $ 129,000
Accrued expenses 106,000
----------
Stock issued $ 235,000
==========
</TABLE>

During the year ended July 31, 1993, the Company issued common stock as partial
payment of obligations owed to a vendor (Note 3). A total of 157,000
shares of common stock was issued to relieve the accounts payable totaling
$176,000.

The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 47
J2 COMMUNICATIONS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 1995

1. Summary of Significant Accounting Policies

Organization and Principles of Consolidation

J2 Communications (the "Company") was formed in March, 1986, and was
primarily engaged in the acquisition, development and production of
entertainment and special-interest videocassette programs and the
marketing, distribution and licensing of these programs for retail
sale in the home video market. In fiscal 1991, the Company acquired
all of the outstanding shares of National Lampoon Inc. ("NLI" - See
Note 2). NLI was incorporated in 1967 and was primarily engaged in
various aspects of the publishing and entertainment industries. In
December, 1992, in consideration for the default of certain
intercompany notes from NLI to the Company, NLI assigned the rights to
the majority of its assets in full satisfaction of the notes.
Included in these assets was NLI's 100 percent ownership interest in
NL Communications, Inc. and Heavy Metal, Inc. which, upon this
assignment, became subsidiaries of the Company.

Currently, the Company is primarily engaged in the licensing of the
name "National Lampoon" in a variety of areas including motion
pictures, home video, television and other entertainment media. The
Company's revenues and income have and will continue to fluctuate
based on the size, nature and timing of transactions whereby its names
and trademarks are licensed. Despite the existence of working capital
deficits of $488,000 and $764,000 at July 31, 1995 and 1994,
respectively, the Company believes that its cash flows in fiscal 1996
will be adequate to pay its liabilities as they become due.

The consolidated financial statements include the accounts of the
Company and its majority owned subsidiaries since the date of their
acquisition. All significant intercompany accounts and transactions
have been eliminated.

Cash Equivalents

Cash equivalents include certificates of deposit with original
maturity dates of three months or less.

Short-Term Investments

Short-term investments consist of treasury bills and notes with
original maturities of between three and twelve months. No provision
has been made for the change in market value for these securities as
the Company intends to hold them until maturity.

The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 115 during the year ended July 31, 1995. The adoption did not
have a material effect on the financial statements.
<PAGE> 48

Revenue Recognition

The Company recognizes licensing revenues based upon information
provided by the licensee with the exception of non-refundable advances
for revenues from the licensing of the "National Lampoon" name, which
are recognized when received. Revenues from the sale of
videocassettes, net of estimated provisions for sales returns, are
recognized when the units are shipped. Advances for future sales of
videocassettes are deferred until the units are shipped. Single copy
magazine sales are recognized as income in the month the issue becomes
available for sale at the newsstand. Subscription revenues are
apportioned equally over the subscription period.

Intangible Assets

Intangible assets consist primarily of the right to license the
"National Lampoon" name and are being amortized straight-line over a
twenty-five year period. The Company continually evaluates whether
events and circumstances have occurred that indicate the remaining
estimated useful life of intangible assets may warrant revision or
that the remaining balance of intangible assets may not be
recoverable. When factors indicate that intangible assets should be
evaluated for possible impairment, the Company uses an estimate of the
related business's undiscounted net income over the remaining life of
the intangible assets in measuring whether the intangible assets are
recoverable.

Intangible assets consist primarily of the right to license the
"National Lampoon" name and are being amortized straight-line over a
twenty-five year period.

The Company has made a significant investment in the "National
Lampoon" name and other intangible assets through its acquisition of
NLI. Realization of these acquired assets ($4,376,000 and $4,616,000
net of accumulated amortization at July 31, 1995 and 1994
respectively) is dependent on the continued licensing of the name for
use in feature films, video, television and audio distribution and
merchandising of other appropriate opportunities. The Company has
received approximately $4,042,000 in licensing revenues (including
revenues received in connection with an agreement for the licensing of
the name for three feature films - See Note 4) since the acquisition
of the "National Lampoon" name in 1991. The Company is in the process
of negotiating other licensing agreements and the development of other
concepts, programs, etc. that could generate additional licensing fees
in the future. If these and other licensing agreements that the
Company may enter into in the future do not result in sufficient
revenues to recover these acquired intangible assets over a reasonable
period of time, the Company's future results of operation may be
adversely affected by a write-off of or adjustment to these acquired
intangible assets.

Per Share Information

Primary earnings per share are computed by dividing net earnings by
the weighted average common shares outstanding and common share
equivalents during the period. Common stock equivalents include, if
dilutive, the number of shares issuable on exercise of the outstanding
options less the number of shares issuable on exercise of the
outstanding options less the number of shares that could have been
purchased with the proceeds from the exercise of the options based on
the average price of common stock during the year. The assumed
exercise of all options and warrants during the years ended July 31,
1995, 1994 and 1993 was not dilutive and, therefore, was not included
in the computation of weighted average shares outstanding. The
weighted average common shares outstanding and common share
equivalents used to calculate fully diluted earnings per share were
3,597,000, 3,554,000 and 3,221,000 in 1995, 1994 and 1993.
<PAGE> 49

Income Taxes

In 1992, the Financial Accounting Standards Board issued SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 is effective for fiscal
years beginning after December 15, 1992, and requires an asset and
liabilities approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statements and tax
bases of assets and liabilities that will result in taxable or
deductible amounts in the future. Such deferred income tax asset and
liability computations are based on enacted tax laws and rates
applicable to periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the period
plus or minus the change during the period in deferred tax assets and
liabilities.

The Company adopted SFAS No. 109 during the year ended July 31, 1994.
The effect of the impact did not have a material effect on the
consolidated financial statements.

Reclassifications

Certain items in the 1994 financial statements have been reclassified
to conform with the 1995 presentation.

2. Deferred Revenues

Deferred revenues consist of the following:

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred videocassette revenues $127,000 $138,000
Unearned subscription revenues, net 82,000 76,000
Other - 5,000
-------- --------
$209,000 $219,000
======== ========
</TABLE>

3. Notes Payable

The Company has its videocassettes for the domestic market duplicated primarily
by an independent duplication company, Technicolor Videocassette, Inc.
("Technicolor"), which warehouses the videocassettes and fulfills and ships
orders for the Company. In April 1993, the Company issued to Technicolor
157,000 shares of its common stock valued at $176,000, and a note in the amount
of $87,000 to satisfy obligations owed to Technicolor. The Company paid the
balance of the note in full as of July 31, 1994. The agreement provides for an
additional cash payment in the event that such common stock is sold, within a
specified time period, for less than $2 per share. The Company has recorded a
liability at July 31, 1995, and 1994, included in accrued expense, in the
amount of $158,000 as a reserve against such contingent payments.
<PAGE> 50

4. Commitments and Contingencies

Motion Picture Agreement

NLI and New Line Cinema Corporation ("New Line") entered into an
agreement, dated as of September 11, 1991, regarding the development
and production, financing, and distribution of three "National
Lampoon" motion pictures, each at budgets not greater than $10
million, within four and one-half years of execution of the agreement
(the "New Line Agreement"). The New Line Agreement provided NLI with
a non-refundable advance of $375,000 upon the execution of the
agreement.

The compensation to be received by NLI as a result of the use of its
name is $250,000 for each of three motion pictures (payable on
commencement of principal photography of the applicable film) plus
2-1/2 percent of distributors' gross receipts ("Gross Receipts") from
all media in connection with the motion pictures. The definition of
Gross Receipts allows New Line to recoup only the actual production
cost of the film plus "prints and advertising" (both within specified
limits) with NLI deferring its participation until such recoupment.
After such amounts have been recouped, NLI shall receive its
participation of Gross Receipts at an accelerated rate (5 percent of
all Gross Receipts without deduction) until such time as the amount
received by NLI equals 2-1/2 percent of all Gross Receipts of the
film. Thereafter, NLI shall receive 2-1/2 percent of Gross Receipts
derived from the exploitation of the applicable film in all media
without deduction of any kind.

In connection with subsequent films to be produced by New Line, NLI
shall receive a nonrefundable advance of $125,000 against its
prospective share of the contingent compensation in connection with
the applicable films, payable on commencement of principal photography
of the applicable film, if New Line is recouped on the previous films
produced. Revenues recognized under this agreement totaled $430,000,
$1,058,000 and $0 for the years ended July 31, 1995, 1994 and 1993,
respectively.

Joint Venture

As part of the acquisition of NLI (see Note 1), the Company acquired a
75% interest in a joint venture, which receives revenues derived from
the licensing of a certain "National Lampoon" motion picture. At July
31, 1995, and 1994, the Company had a recorded liability of $47,000
and $1,000, respectively, owed to the minority interest of the joint
venture.

Leases

The Company is obligated under an operating lease for its office
facility in Los Angeles, which expires on September 30, 2001. The
facility lease includes certain provisions for rent adjustments based
upon changes in the lessor's operating costs and increases in the
Consumer Price Index.
<PAGE> 51
The Company is also obligated under several operating leases for
equipment located at its office facility in Los Angeles.

The Company is committed to future minimum lease payments for the
following years:

<TABLE>
<CAPTION>
Building Equipment Total
-------- --------- -----
<S> <C> <C> <C>
1996 $ 81,000 $ 15,000 $ 96,000
1997 79,000 7,000 86,000
1998 82,000 - 82,000
1999 86,000 - 86,000
2000 89,000 - 89,000
Thereafter 15,000 - 15,000
-------- -------- --------
Total $432,000 $ 22,000 $454,000
======== ======== ========
</TABLE>

Rent expense totaled $86,000, $90,000 and $74,000, net of sublease
income of $30,000, $27,000 and $25,000 for the years ended July 31,
1995, 1994 and 1993, respectively.

Equipment lease expense totaled $31,000, $31,000 and $29,000 for the
years ended July 31, 1995, 1994 and 1993, respectively.

Royalty Agreements

NLI is required to pay The Harvard Lampoon, Inc. a royalty of up to 2
percent on all revenues derived from sales of any magazine or other
publication using the name "Lampoon" as part of its title, and a
royalty of up to 2 percent of pretax profits, as defined in the
agreement, on non-publishing activities using such name. Royalties
payable under this agreement totaled $15,000, $25,000 and $14,000 for
the years ended July 31, 1995, 1994, and 1993, respectively.

The Company has entered into various royalty agreements with the
producers of videocassettes distributed by the Company. The Company
is required to pay a royalty, according to each individual agreement,
of a percentage of gross receipts, less certain expenses. Royalties
payable under these agreements totaled $47,000, $42,000 and $59,000
for the years ended July 31, 1995, 1994, and 1993, respectively.

Employment Agreement

The Company has entered into an employment agreement dated July 1,
1994 with its President and Chief Executive Officer. The agreement is
for seven years and provides annual base compensation of $475,000 with
annual increases of the greater of 9 percent, or 5 percent plus the
percentage increase in the Consumer Price Index. Effective June 1,
1992, the President reduced the amount of salary he receives to
$191,000. The President does not expect to receive the unpaid portion
unless there is a change in control of the Company as defined by the
agreement.

In addition, an annual bonus is payable to the President if the
Company's pretax income exceeds specified levels. The amount is based
on pretax earnings of the Company ranging from 5 percent to 9 percent
over certain minimums. In addition, if earnings exceed $7,000,000,
the President, in addition to the foregoing compensation, shall be
entitled to such additional
<PAGE> 52
incentive compensation as may be determined by the Board of Directors
based upon the President's service and performance on behalf of the
Company and the profitability of the Company. A bonus of $100,000 was
earned during the years ended July 31, 1995, and 1994. No bonuses
were earned during the year ended July 31, 1993. Deferred bonuses for
the President totaled $100,000 and $83,000 at July 31, 1995, and July
31, 1994, respectively, included in accrued expenses. In addition,
certain officers have deferred $99,000 in salary at July 31, 1995 and
1994, also included in accrued expenses.

The Company has also granted the President options to purchase 50,000
shares of its common stock and 50,000 stock appreciation rights for
each year of his employment contract. The price for each will be
based on the fair value of the stock at the date of issuance.

NLI Debt Restructure

In July 1992, NLI initiated a plan to restructure its and its
subsidiaries' substantial debt. NLI and its creditors entered into
agreements whereby the creditors received one-third of their
outstanding amount due immediately, in return for the release of NLI
from any additional liability. The resulting effect was the reduction
of NLI's accounts payable by $237,000 during the fourth quarter of
1992 and $69,000 in the first quarter of 1993 (included as
extraordinary income in the 1993 accompanying statement of
operations).

Licensing of Magazine

In August 1993, the Company entered into an agreement for a magazine
publisher to print and distribute the National Lampoon magazine. The
Company will retain editorial control of the magazine's content and
will receive a fee equal to 5 percent of all revenues generated by the
magazine in its first year of publication, 6 percent in the second
year and 7 percent for each year thereafter. The agreement is for a
period of three years and may be extended to five years if certain
minimum performance targets are met. The Company earned revenues of
$8,000 and $25,000 under this agreement during the years ended July
31, 1995, and 1994.

As part of this agreement, the publisher agreed to assume the
Company's liabilities relating to the magazine, including unearned
subscription revenues (see Note 2) and accrued retail display
allowances of $79,000 owed to various vendors for magazine shelf
space. Because the Company holds title to the "National Lampoon"
name, the Company continues to record liabilities for these amounts at
July 31, 1995, and 1994.

Litigation

a. The Company, NLI and the officers and directors of NLI became
the defendants in a lawsuit in regard to the acquisition of
NLI by the Company. The shareholders of NLI ("Plaintiffs")
filed the claim in respect to the tax treatment of the
transaction to the individual shareholders of NLI. The
Company entered into a settlement agreement in August 1991
(which must still be approved by the courts) under which the
Company will issue an additional 125,000 shares of its common
stock to the Plaintiffs and for the payment of attorneys'
fees. The value of the shares to be paid has been accounted
for as a liability of $203,000 at July 31, 1995, and 1994, as
the shares have not yet been issued.
<PAGE> 53
b. In July 1992, ITC Entertainment Group ("ITC"), from which the
Company licensed movie titles, commenced an action against the
Company, alleging breach of contract and breach of fiduciary
duty. The action sought declaratory and injunctive relief and
an accounting of royalties due. The Company subsequently
filed a cross complaint and in September 1992 obtained a
temporary restraining order against ITC's foreclosure and
attempted sale of the name and logo "National Lampoon." On
November 9, 1992, the Company and ITC entered into a
settlement agreement which terminated all agreements as of
that date with ITC and paid ITC the sum of $150,000 for
royalties due. Pursuant to this proposed settlement, the
Company ceased distributing ITC product. Under the terms of
the settlement the Company recognized a gain of approximately
$374,000 for reductions in accrued royalties during the year
ended July 31, 1993.

c. NLI had a motion picture development and consulting agreement
with a former officer of NLI. In November 1992, Matty Simmons
Productions, Inc. and Matty Simmons (collectively "Simmons")
filed a complaint against the Company alleging breach of
contract. In December 1993, this litigation was settled. The
terms of the settlement agreement provide for the Company to
pay Simmons a percentage (not to exceed $240,000 in total) of
any amounts earned by the Company from certain previously
released National Lampoon films. A total of $62,000 and
$46,000 was paid to Simmons during the years ended July 31,
1995, and 1994, respectively.

5. Notes Receivable on Common Stock

In 1986, the Company issued 800,000 shares of common stock to certain of its
officers and directors pursuant to its Restated Stock Purchase Plan. The
shares were issued with 50 percent of the purchase price payable at the time of
issuance and the remainder due in five years. The unpaid balance is due from
the Company's President and Chief Executive Officer and bears interest at the
rate of 10 percent, under promissory notes secured by the stock in favor of the
Company.

6. Stock Options, Warrants and Stock Appreciation Rights

Stock Option Plans

In March, 1995, shareholders approved the 1994 Employee Stock Option
Plan and the 1994 Option Plan for Non-Employee Directors. These plans
replaced the 1991 Stock Option Plan. All stock options subject to the
Plans are granted at the fair market value of the common stock at the
time of the grant, except that in the case of the incentive stock
options granted to a holder of 10 percent or more of the outstanding
shares of common stock, such exercise price may not be less than 110
percent of the fair market value and may not be exercisable after the
expiration of five years versus ten years for regular stock options.
The 1991 Plan has other restrictions and is administered by the Stock
Option Committee of the Board, which has sole discretion on the terms
and conditions of granting such options.
<PAGE> 54

A summary of the stock options outstanding is below:

<TABLE>
<CAPTION>
Number of Option
Options Price
Outstanding Range
------------- -------------
<S> <C> <C>
Balance, July 31, 1992 459,000 $0.56 - $3.25
Granted 207,000 $0.66 - $1.18
Exercised (97,000) $0.56 - $1.56
Canceled (17,000) $0.68 - $2.50
------------- -------------

Balance, July 31, 1993 552,000 $0.56 - $3.25
Granted 101,000 $1.13 - $1.48
Exercised (17,000) $0.65 - $1.19
Canceled (77,000) $1.19 - $3.25
------------- -------------

Balance, July 31, 1994 559,000 $0.56 - $2.63
Granted 174,000 $1.06 - $1.37
Exercised (8,000) $0.72 - $1.10
Canceled (193,000) $0.69 - $2.63
------------- -------------
Balance, July 31, 1995 532,000 $0.56 - $1.48
============= =============
</TABLE>

Warrants

In 1988, the Company entered into an agreement with ITC whereby the
Company would distribute certain videocassette titles owned by ITC in
exchange for a distribution fee. Litigation arose involving this
agreement (see Note 4). In conjunction with the earlier agreements,
the Company granted warrants to ITC to purchase up to 150,000 shares
of common stock at prices ranging from $3.50 - $3.63, expiring through
May 1996.

In connection with its acquisition of NLI in 1990, the Company issued
1,753,000 Series A warrants (including 148,000 warrants issued to
certain creditors). The warrants entitle each holder to exchange one
warrant for a share of the Company's common stock at a price of $2.00
per share as of August 30, 1995. The Series A warrants expire on
December 31, 1995 and are callable on or after October 15, 1992 at the
option of the Company. The call price is $2.00 per warrant in the
event that the sales price of the Company's common stock on its
principal trading market was at least 175 percent of the
then-effective warrant price during a period of at least 20 of the 30
days ending within 15 days prior to the date notice of redemption
shall have been given by the Company. There were 1,737,000 Series A
warrants outstanding at July 31, 1995.
<PAGE> 55
Stock Appreciation Rights

As of July 31, 1995, the President and Chief Executive Officer of the
Company has stock appreciation rights which entitle the officer to
receive cash equal to the difference between the fair market value and
the appreciation base of the rights when they are exercised.

At July 31, 1995, a total of 250,000 rights were outstanding with
appreciation basis of between $0.56 and $1.48 per share.

7. Related Party Transactions

Legal fees of $16,000, $31,000 and $145,000 were incurred during 1995, 1994 and
1993, respectively, for services from legal firms, one of whose partners is a
director of the Company.

See Note 5 for discussion of a note receivable from the Company's President and
Chief Executive Officer.

8. Income Taxes

The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- ------
<S> <C> <C> <C>
Current:
state $ 11,000 $22,000 $9,000
federal 1,000 - -
Adjustment to valuation allowance:
state (26,000) - -
-------- ------- ------
$(14,000) $22,000 $9,000
======== ======= ======
</TABLE>

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

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Statutory federal
income tax rate 34% 34% 34%
State income taxes 15% 2% (1%)
Benefit of unrecognized prior
year losses (40%) (57%) (27%)
Amortization of intangible
assets 124% 26% (8%)
Recognition of previously
unrecognized deferred tax asset (117%) - -
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ------
<S> <C> <C> <C>
Adjustment to prior year accrual (36%) - -
Other (1%) 2% 1%
--------- -------- -------
Reported provision for income
taxes (21%) 7% (1%)
--------- -------- -------
</TABLE>

At July 31, 1995, the tax effect of deductible timing differences and
carryforwards is comprised of the following:

<TABLE>
<S> <C>
Net operating loss carryforwards $ 1,030,000
Accrued liabilities and contingencies 299,000
Royalty reserves 201,000
Deferred income 83,000
-----------
1,613,000
Valuation allowance (1,613,000)
-----------
Net deferred tax asset -
===========
</TABLE>

At July 31, 1995, the Company had available for federal and state income tax
purposes net operating loss carryforwards of approximately $1,903,000 and
$671,000, respectively, expiring at various dates through 2008. Certain of the
state net operating losses may be limited through statutory provisions.

The Company was informed by the Internal Revenue Service ("IRS") that it was
disallowing certain deductions taken on NLI's 1981 and 1983 federal income tax
returns. The tax effect of approximately $182,000 plus accrued interest was
being protested by the Company. In April 1993 the Company was informed by the
IRS that NLI had won the protest and no additional taxes or interest were due.
Accordingly, in 1993 the Company reduced the amount of accrued taxes of
$182,000, which was reversed against the purchase price of NLI, thereby
reducing the intangible asset created in the acquisition. The accrued interest
in the amount of $181,000 was reversed against operations in 1993.

9. Major Customers

During the year ended July 31, 1995, the Company received $430,000 and $188,000
in revenues from two motion picture licensees representing 34% and 15% of total
revenues respectively. During the year ended July 31, 1994, the Company
received $1,003,000 from one motion picture licensee representing 55% of total
revenues. During the year ended July 31, 1993, the Company did not receive
revenues from any one customer or licensee totaling ten percent or more of net
revenues.
<PAGE> 57
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
4/30/96 7/31/95
Unaudited Audited
--------- -------
Assets
- - ------
<S> <C> <C>
Cash and cash equivalents $ 373,000 $ 301,000
Short term investments 818,000 954,000
Accounts receivable - net 91,000 19,000
Inventories - net 15,000 17,000
Intangible assets, less accumulated
amortization of $1,768,000 and
$1,588,000 as of 4/30/96 and
7/31/95, respectively 4,196,000 4,376,000
Other assets 62,000 -

---------- ----------
Total assets $5,555,000 $5,667,000
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------

LIABILITIES:

Accounts payable $ 149,000 $ 109,000
Accrued expenses 766,000 724,000
Accrued royalties 480,000 503,000
Accrued income taxes 29,000 31,000
Deferred income 209,000 209,000
Common stock payable 203,000 203,000

---------- ----------
Total liabilities 1,836,000 1,779,000
---------- ----------

SHAREHOLDERS' EQUITY:

Preferred stock, no par value; authorized
2,000,000 shares; none issued and outstanding - -

Common stock, no par value; authorized 8,000,000
shares; issued and outstanding, 3,599,987
as of 4/30/96 and 7/31/95 8,647,000 8,643,000
Less: notes receivable on common stock (114,000) (110,000)
Accumulated deficit (4,814,000) (4,645,000)

----------- ----------
Total shareholders' equity 3,719,000 3,888,000

----------- ----------
Total liabilities and shareholders' equity $5,555,000 $5,667,000
========== ==========
</TABLE>

1
<PAGE> 58
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS AND NINE MONTHS ENDED APRIL 30, 1996 AND 1995

<TABLE>
<CAPTION>
3 mos. ended 3 mos. ended 9 mos. ended 9 mos. ended
4/30/96 4/30/95 4/30/96 4/30/95
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Movies, television, and theatrical $ 201,000 $ 182,000 $ 417,000 $ 666,000
Video sales, net of returns 115,000 93,000 240,000 262,000
Royalty income 7,000 42,000 25,000 72,000
Magazine 0 0 4,000 5,000
Other 20,000 61,000 54,000 116,000

------------ ------------ ------------ ------------
Total revenues 343,000 378,000 740,000 1,121,000

------------ ------------ ------------ ------------

Costs and expenses:
Cost of videocassettes sold 58,000 33,000 115,000 81,000
Royalty expense 23,000 18,000 43,000 43,000
Cost of movies, television and 26,000 26,000 26,000 26,000
theatrical
Cost of magazine 0 0 55,000 0
Selling, general and administrative 190,000 175,000 544,000 576,000
Amortization of intangible assets 60,000 60,000 180,000 180,000

------------ ------------ ------------ ------------
Total expenses 357,000 312,000 963,000 906,000

------------ ------------ ------------ ------------
Income from operations ( 14,000) 66,000 (223,000) 215,000

Other income:
Interest income 20,000 13,000 54,000 36,000

------------ ------------ ------------ ------------

Income before income taxes 6,000 79,000 (169,000) 251,000

Benefit from income taxes 0 0 0 6,000

------------ ------------ ------------ ------------
Net income $ 6,000 $ 79,000 ($169,000) $257,000
=========== ============ ============ ============

Income per common share:

Net income per share $0.00 $0.02 ($0.05) $0.07
------------ ------------ ------------ ------------

Weighted average number of shares
of common stock outstanding 3,600,000 3,596,000 3,600,000 3,596,000
============ =============== ============ ============

</TABLE>

2
<PAGE> 59
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED APRIL 30, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Cash flows from operating activities:

Net (loss) income ($169,000) $257,000
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:

Amortization of intangible assets 180,000 180,000
Changes in assets and liabilities:
Accounts receivable, net (72,000) 15,000
Inventory 2,000 (2,000)
Accounts payable 40,000 (98,000)
Accrued expenses 42,000 (49,000)
Accrued taxes (2,000) (25,000)
Accrued royalties (23,000) 8,000
Deferred revenues - (10,000)
Other assets (62,000)

--------- --------
Net cash (used in) provided by
operating activities (64,000) 276,000

--------- --------

Cash flows from investing activities:

Sale (purchase) of short-term 136,000 (252,000)
investments
--------- --------
Net cash provided by (used in) investing
activities 136,000 (252,000)
--------- --------

Cash flows from financing activities:

Payments on notes payable - (42,000)
Proceeds from exercise of stock options - 6,000

--------- --------
Net cash used in financing
activities - (36,000)

--------- --------
Net increase (decrease) in cash
and cash equivalents 72,000 (12,000)
Cash and cash equivalents,
beginning of period 301,000 311,000

--------- --------
Cash and cash equivalents,
end of period $ 373,000 $299,000
========= ========

</TABLE>

3
<PAGE> 60

EXHIBIT A

<TABLE>
<CAPTION>
Name # of Warrant Shares Name # of Warrant Shares
<S> <C> <C> <C>
Cede & Co 1,466,549 Donald Boico & 2,500
P.O. Box 20 Hanna Boico JT TEN
Bowling Green Station 11 Nassau Rd.
New York, NY 10274 Great Neck, NY 11021

Philadep & Co 160,215 Hughby Wilson Bonds III & 100
1900 Market St. Hughby Wilson Bonds II &
2nd Floor Emerald D. Bonds JT TEN
Philadelphia, PA 19103 804 Bankhead Blvd.
Talladega, AL 35160
George S. Agoglia 120
3575 Brokenwoods Dr., #701 Kidder, Peabody & Co., Inc. 4
Coral Springs, FL 33065-1659 2 B Way
New York, NY 10004
Norma K. Allee & 258
Robert J. Allee, TEN COM George S. Agoglia & 170
830 Threadneedle #239 Jeanette Agoglia JT TEN
Houston, TX 77079 3575 Brokenwoods Dr., #701
Coral Springs, FL 33065-1659
Carolyn V. Arnold 1
700 N. Water St. Salvatore Agoglia 300
Milwaukee, WI 53202 522 W. Colfax Ave.
Roselle Park, NY 07204
James F. Ball & 200
Stephanie J. Ball JT TEN Matthew Alper 400
14516 Dogwood Pl. 826 President St.
Plattsmouth, NE 68048-5103 Brooklyn, NY 11215

Arthur R Bauer & 700 David F. Baker 1
Phyllis Ann Bauer JT TEN c/o Coldwell Banker
13215 Pineview Dr. Third Financial Center
Des Moines, IA 50325-8825 Ste. 1500
Nashville, TN 37219
Kathleen Biggs & 200
Louis Biggs JT TEN
302 Jamestown Ct.
Collinsville, IL 62234

</TABLE>

A-1
<PAGE> 61
<TABLE>
<S> <C> <C> <C>
Frank C. Banys, Jr 50 Ned Davis Cust 15
2803 E. 2nd St. Evan Francis Davis
Sioux City, IA 51105 Unif Gift Min Act Fl
P.O. Box 1287
Michael P. Berman 200 Nokomis, FL 34274
29391 Candlewood
Southfield, MI 48076 Jerry R. Dempsey 53
60 Silver Lake Drive
Lee J. Boelter & 200 Summit, NJ 07901
Barbara A. Boelter JT TEN
910 West Ave. Anthony M. Devilbiss 1,400
Gibbon, NE 68840 9602 River Rd.
Richmond, VA 23229
Donald Boico & Hanna Boico 2,500
& Jeff H. & Fara & Jim Dickinson 100
Andrew Scott Boico TEN COM 1301 E. Washington
11 Nassau Rd. Bloomington, IL 61701
Great Neck, NY 11201
Patrick T. Dilullo 200
Judith C. Breen 50 716 Ecton Rd.
6 Washington Ave. Akron, OH 44303
South Amboy, NJ 08879
Patricia Dowling CUST 10
Leland M. Campbell & 20 Dana Marie Dowling UNIF GIFT
Mary Jane Campbell JTTEN MIN ACT NY
3401 E. Sunnyside Dr. 1133 70th St.
Phoenix, AZ 85028 Brooklyn, NY 11228

Alexander D. Clarkson 30 John Cicione 100
76 Shoreham Terrace 839 W. Plantation Circle
Fairfield, CT 06430 Plantation, FL 33324

Peter V. Cucinotta 200 Peter Cucinotta, Jr. 100
7317 Powhatan St. 700 SE 6th Ave., Apt. 217
Lanham, MD 20801 Deerfield Beach, FL 33441-4802

DPB Enterprises Inc. 1,000 Jeff H. Curtis & 100
3059 Zane Circle Robin A. Hunter JT TEN
Las Vegas, NV 89121 3100 Ashe Rd. #83
Bakersfield, CA 93309
Bill Daniels 1
15723 Plummer
Sepulveda, CA 91343

</TABLE>

A-2
<PAGE> 62
<TABLE>
<S> <C> <C> <C>
John T. Dalton & 100 Merle K. Evey 10
Roberta J. Dalton JT TEN 401-03 Allegheny ST.
3374 NE 19th Ave. P.O. Box 415
Ft. Lauderdale, FL 33306-1029 Hollidaysburg, PA 16648-0415

William H. Davis & 104 Nicholas J. Fedak & 5
Bessie Davis TEN ENT A. Jean Fedak JT TEN
Rd. 1 Box 156 7297 Pearl Rd.
Imler, PA 16655 Cleveland, OH 44130

Craig E. Dawson 100 John Ferry 100
N104W14643 Heritage Hills Pky. 1025 E. Bowman
Germantown, WI 53022-4378 South Bend, IN 46613

Robert W. Dempsey 53 Mike Foister 580
60 Silver Lake Dr. 1516 Aztec Circle
Summit, NJ 07901 Sioux City, IA 51104

Rebecca Di Virgilio 25 Nasib Gannam 1,000
310 Ave. W 9436 Friendly Woods Ln.
Brooklyn, NY 11223 Whittier, CA 90605-1657

Denver D. Dillard & 1,000 Seymour Gaylinn 220
Carol H. Dillard TEN COM 79 W. Fenimore St.
405 S. 3rd St. West Valley Stream, NY 11580
Mt. Vernon, IA 52314

Leoba Donahue 52 Louise Gikow 4
50 Templar Way 321 278th St., #7C
Summit, NJ 07901 New York, NY 10024

John Drapas 500 Anne Gluck 20
555 Memorial Pkwy 138 Birchwood Rd.
Niagara Falls, NY 14301 Coram, NY 11727

Norman R. Eason & 100 Gertrude C. Golla 500
Bertha J. Eason JT TEN 2117 Woodburn Loop South
Box 26 Lakeland, FL 33813
Alton, IA 51003
Denise Elliott 100
Miriam Emmerich 100 8140 Hollyridge Rd.
2881 NW 47th Terrace Jacksonville, FL 32256-7104
Ft. Lauderdale, FL 33313

</TABLE>

A-3
<PAGE> 63
<TABLE>
<S> <C> <C> <C>
Anthony Esposito 25 Ronald Gorr 200
310 Ave. W Rd 1 Box 32
Brooklyn, NY 11223 Callicoon, NY 12723

Norma J. Fagan TR 100 Ronald J. Graff 400
UA DTD Mar. 6, 1990 P.O. Box 83
FBO Norma J. Fagan 717 Courtside Dr. Irene, SD 57037
Naples, FL 33999
J. Michael Greer 100
Allen Feinberg Cust 5 1380 Grayland Hills Trail
Eric Feinberg Unif Gift Lawrenceville, GA 30245
Min Act MD
3303 Garrison Farms Rd. Stephen Halpern 4,800
Baltimore, MD 21208 P.O. Drawer 5
Hilton Head Island, SC 29938-0005
Michael D. Foister 565
1516 Aztec Circle Gaylin R. Harmes & 600
Sioux City, IA 51104 Greta S. Harmes JT TEN
Box 61
Moville, IA 51039
Frank O. Fredricks 20
14 Dewart Rd. David G. Hast 1,500
Greenwich, CT 06830 210 Grant St., 4th floor
Pittsburgh, PA 15219
Walter K. Garibalki 100
24 14 150th St. Hindman-Steele Post 492 440
Whitestone, NY 11357 American Legion
c/o Leonard Muller
Paul J. Gaynor 100 Hornick, IA 51026
3732 Jo Ann Dr.
Sacramento, CA 95821 Donald W. Hubbard & 100
Helen M. Hubbard JT TEN
Nancy Giroski Cust 50 136 Amherston Dr.
Emily Michele Berman Williamsville, NY 14221
Unif Gift Min Act PA
516 Baldwin Ave. Marjorie G. Inman 700
Sharon, PA 16146 27478 Orsini Ave.
Canyon Country, CA 91351-3718
Richard Goldie 1,000
768 Pico Ruth A. Jacobs 150
San Mateo, CA 94403 5225 NE 96th St.
Altoona, IA 50009
</TABLE>

A-4
<PAGE> 64
<TABLE>
<S> <C> <C> <C>
S. Meredith Johnson JR CUST 10 David Jablin 600
Matthew T. Johnson Unif Gift 2222 The Terrace
Min Act KY Los Angeles, CA 90049-1171
1802 Cherokee Rd.
Louisville, KY 40205

Amy B. Greenberg 500 Gilbert L. Jesch & 200
P.O. Box 1114 Donna M. Jesch Jt Ten
Sioux City, IA 51102 P.O. Box 1588
Waterloo, IA 50704-1588

Raymond I Greenberg TR 2,000 Norbert P. Kazinski & 20
UA DTD Oct 15, 1992 Janet C. Kazinski Ten Ent
Raymond I. Greenberg Rev Tr 12 Maple St.
P.O. Box 1114 Hollidaysburg, PA 16648
Sioux City, IA 51102
Kenneth M. Keane 2,000
Margaret Ann Gustafson 2,100 2616 Pierce St.
515 S. Cedar St. Sioux City, IA 51104
Boone, IA 50036

Mark O. Halverson & 900 Ron Klein & Karl Klein 200
Marge N. Halverson Jt Ten Marlene Davis & Gertrude
11014 Alcott Dr. Klein Jt Ten
Denver, CO 80234-3131 353 W. Terry
Pocatello, ID 83204-3407

Harvard Lampoon Project Fund 100 Robert C. Knapp & 50
Dtd Sept. 22, 1980 Rose M. Knapp Jt Ten
c/o Eric Rayman 14206 London Lane
48 E. 13th Street Rockville, MD 20853-2026
New York, NY 10003
Carl N. Koseff 250
Headache & Pain Control Ctr. 3,750 15427 Talbot Dr.
PC Pension Plan La Mirada, CA 90638
700 Jennings St.
Sioux City, IA 51105
James R. Krause & 100
Robert K. Hoffman 100 Gloria P. Krause Jt Ten
Coca-Cola Bottling Group 230 N. Adams St.
1999 Bryan St., Ste. 3300 Allentown, PA 18104
Dallas, TX 75201

Vernon Huseman & 500 Loretta Lanting Cust 100
Joyce Huseman Jt Ten Theodore T. Lanting
1162 N. 26th Street Unif Gift Min Act NY
Fort Dodge, IA 50501 59 Morse Ave.
Staten Island, NY 10314

</TABLE>

A-5
<PAGE> 65
<TABLE>
<S> <C> <C> <C>
Steven G. Levin 1,000 Harry G. Lartz & 100
2440 Lakeview Ave., Apt. 10E Mary K. Lartz Jt Ten
Chicago, IL 60614 1201 Nw 13th St., #422
Boca Raton, FL 33486

Glen M. Lloyd Tr 8,000 Nelson Levine 100
UA Dtd 7/20/90 1305 E. 18th Street
Glen M. Lloyd Revocable Living Trust Brooklyn, NY 11230
3630 Pierce Place
Sioux City, IA 51104
Anne Macenzzak 210
Stanley Mack 104 60 Silver Lake Rd.
708 Grenwich St., #6A Summit, NJ 07901
New York, NY 10014
Gerald V. Maher & 10
Gregory P. Makuch Cust 50 Lorna D. Maher Jt Ten
Brian J. Makuch Unif Gift 26 Oxford Lane
Min Act CT Palm Coast, FL 32137
184 Hubbard St.
Middlefield, CT 06455
Gregory P. Makuch Cust 50
Hugh E. Kirkwood III 15 Nicholas Makuch Unif Gift
4262 Mac Duff Pl. Min Act CT 184 Hubbard St.
Dublin, OH 43017 Middlefield, CT 06455

Bennett J. Kleinberg 75 Steven H. Malach Cust 10
34 Mountain Rd. Daniel Scott Malach Unif Gift
Verona, NJ 07044 Min Act MI
6224 Bromley Ct.
Adam Ross Kolodny 10 W. Bloomfield, MI 48322
21 Hereford Rd.
Great Neck, NY 11020-1712 Charles A. Mamone & 20
Barbara A. Mamone JT Ten
Larry E. Krakau 1,000 128 Sherman Ave.
Box 38 Troy, NY 12180
Boxholm, IA 50040-0038
Nancy Manteiga 700
Robert Krumwiede 200 212 W. 22nd Street
P.O. Box 764 Deer Park, NY 11729
North Sioux City, SD 57049-0764
Daniel J. Marro 200
5866 Boecraft St.
Los Angeles, CA 90016
</TABLE>

A-6
<PAGE> 66
<TABLE>
<S> <C> <C> <C>
Thomas P. McBride 400 Cesar Manteiga & 400
P.O. Box 152 Pilar Manteiga JT Ten
Danbury, IA 51019 212 W. 22nd St.
Deer Park, NY 11729

Milberg Weiss Bershad 20,000 Matthew Margolis 2,000
Specthrie & Lerach 3265 W. Market St.
1 Penn Plaza Akron, OH 44333-3337
New York, NY 10011
Tina Matney 100
Linda Morgan 10 1822 W. 16th St.
650 Palm Ave. Sioux City, IA 51103
Los Altos, CA 94022-3954
Anthony Mian & 200
Mortimer Nidetch 630 Amalia Main JT Ten
Winston Tower Apt. 520 1181 Neill Ave.
301 174th St. Bronx, NY 10461
Miami Beach, FL 33160

Caroline M O Kane 200 Susan T. Miller 2
P.O. Box 2025 1641 Third Ave NBR 29A
Sioux City, IA 51102 New York, NY 10128-3632

Martin L. Otterson 200 Lindsay Lee Naythons 5
5052 North Melvina 1850 N. Harvard Blvd., #1
Chicago, IL 60630 Hollywood, CA 90027-3634

Daniel M. Palensky 330 Thomas C. Noddings 10
5616 Grant St. c/o John Noddings
Omaha, NE 68104-4150 Two Mid America Plaza Ste 920
Oakbrook Terrace, IL 60181-4719
Mary C. Maloy 200
P.O. Box 576 Richard A. Orland 1
Manilla, IA 51454 2706 Woodlawn Dr.
Nashville, Tn 37212-5224

</TABLE>

A-7
<PAGE> 67
<TABLE>
<S> <C> <C> <C>
David S. Paget 1 Gary Schaunaman 300
1070 Saxony Drive Rte 1 Box 6
Highland Park, IL 60035 Warner, SD 57479

Stephen Scheffer Cust 15
Lynette Paliobeis 500 Andrew W. Scheffer
623 Brook Ln. Unif Gift Min Act NY
Bay Village, OH 44140 923 Fifth Avenue
Apt. 12A
Stefanie Pashman Cust 100 New York, NY 10021
David Pashman Unif Gift Min Act NY
27 Evergreen Dr. Evelyn Perkins 300
Lincoln Park, NJ 07035 2035 Norhardt Dr.,
#118 Brookfield, WI 53045
Chris B. Peterson 1,000
6024 Country Club Oaks Pl. Linda Joy Piccirillo 500
Omaha, NE 68152 607 Carrol St.
Brooklyn, NY 11215
Dolores Pick & 65
Maurice Pick Jt Ten Ralph F. Pignataro 500
601 Dodge 696 Fisher Rd.
Evanston, IL 60202 West Seneca, NY 14224

Maurice Pikowsky 35 Randall Enterprises 1,000
601 Dodge P.O. Box 511
Evanston, IL 60202 Platte, SD 57369-0511

Sam Rebotsky 10 Gary Reierson & 100
2500 Johnson Ave., Apt. 16K Georganne Reierson Jt Ten
Riverdale, NY 10463-4925 1810 Valley Curve Rd.
Mendota Heights, MN 54118-4330
Barbara S. Rickord 4,000
25126 Genesee Spring Rd. Lois K. Rieger & John D. Rieger 200
Golden, CO 80401 Ricky A Rieger & Steven L.
Rieger Tr UA Dtd 1/6/86
Sylvan Rosensweig & 314 The Lois K. Rieger Family Tr
Ruth Rosensweig Jt Ten 745 Lynkaylee
468 Sterling St. Waterloc, IA 50701
Lakehurst, NJ 08733-5535

Richard G. Rypkema & 400
Elaine C. Rypkema Jt Ten
158 Louise Dr.
Mandeville, LA 70448
</TABLE>

A-8

<PAGE> 68
<TABLE>
<S> <C> <C> <C>
Stephen Rossi 60 Robert G. Strange 310
572 Coventry Ln. P.O. Box 2070
W. Chester, PA 19382 Jesup, GA 31598

Gertrude M. Samore 250 Jerrold Strickland 100
712 32nd Street 1907 Sunset Drive
Sioux City, IA 51104 Ontario, Oregon 97914

Lee A. Schaunaman 100 Peter Jordan Swan 50
Route 1 Box 5 2220 S. 66th
Warner, SD 57479 Fort Smith, Arkansas 72903-3927

John P. Schirra 200 Fred B. Sendik & Eleanor Sendik 200
384 Wyoga Lake Blvd. 6530 N. Greenvale Road
Stow, OH 44224-1110 Milwaukee, Wisconsin 53217

Scott G. Semple 100 Mary Sheehan 52
2050 150th St. 65 Rotary Drive
Lawton, IA 51030-8042 Summit, New Jersey 07901

William Senkel III Cust 75 Esther Slovak 4
Tara Lynn Senkel 145-78 9th Avenue
Unif Gift Min Act NJ Whitestone, New York 11357
P.O. Box 62
Bay Head, NJ 08742 Richard H. Spiegal & Bertha Spiegal 500
5305 Blondo Street
Matty Simmons 10,000 Omaha, Nebraska 68104-4260
555 S. Barrington Ave., Ste 323
Los Angeles, CA 90049
Richard P. Stark, Cust. 2,000
Merle C. Snodgrass Cust 4 Megan M. Stark Unif Gift
James Stevphen Thompson Min Act Wi
Unif Gift Min Act MD 7433 Farmington Way
10505 Bunch Berry Ln. Madison, Wisconsin 53717
Upper Marlboro, MD 20772-6320
Janet Stiffler 104
Richard P. Stark Cust 2,000 308 Boyle Street
Colin P. Stark Unif Gift Bellwood, PA 16617
Min Act WI
7433 Farmington Way Lavern Stodden 200
Madison, WI 53717 1700 S. Hennepin Street
Sioux City, IA 51106
David F. Stark 2,000
166 Siesta Circle James Strauss Jr. 30
Evergreen, CO 80439 18 Pearson Drive
Newark, De 19713-2834
Joanne Stigna 150
1875 E. 2nd St. Robina Lise Suwol 25
Brooklyn, NY 11223-2822 Box 2123
Toluca Lake, Ca. 91602
</TABLE>

A-9
<PAGE> 69
<TABLE>
<S> <C> <C> <C>
Leon Thikoll Cust. 70 Theodore J. Tingelhoff Cust 125
David A. Thikoll Unif Heather L. Tingelhoff
Gift Min Zct Az Unif Gift Min Act IA
5511 E. Burns 126 Golden Dr.
Tucson, Arizona 85711 Sergeant Bluff, IA 51054

John R. Thompson 1 Alfred V. Tjarks Jr. 2,000
80 Haku Pl. Tr UA DTD 2/18/85
Lahaina Maui, HI 96761 FBO Alfred V. Tjarks
Retirement Plan
Theodore J. Tingelhoff Cust 125 3625 Terrace View Dr.
Scott R. Tingelhoff Encino, CA 91436
Unif Gift Min Act IA
126 Golden Dr. James Vande Werken 100
Sergeant Bluff, IA 51054 9412 South Tulley Ave.
Oak Lawn, IL 60453
Carmelo Torrano 300
413 Santa Barbara Donald P. Warren 2,500
Daly City, CA 94014 7 Thomas Dr.
Cumberland, RI 02864
Robert M. Wallace & 500
Carol A. Wallace Jt Ten Betty Jean Wettermark 60
7012 Burnside Dr. 410 Pierce St., #404
San Jose, CA 95120-3218 Sioux City, IA 51101

Steven W. Westlie 5 Gary J. Wolf Cust 100
W296 N. 3026 Franciscan Rd. Kenneth Wolf
Pewaukee, WI 53072 Unif Gift Min Act NY
1731 Vestal Dr.
Thomas C. Wick 60 Coral Springs, FL 33071
232 S. Dellwood
St. Louis, MO 63135 Elliott W. Wooldridge & 500
Nancy L. Wooldridge JtTen
Gary J. Wolf Cust 100 P.O. Box 1048
Laura Wolf Sioux City, IA 51102
Unif Gift Min Act NY
1731 Vestal Dr. Michael E. Ziarko & 190
Coral Springs, FL 33071 Jacqueline R. Ziarko Jt Ten
515 Marquardt Ne
Robert B. Zeigler 50 N. Canton, OH 44720
Rte 200
Claysburg, PA 16625

</TABLE>

A-10
<PAGE> 70
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer
to sell or the solicitation of any offer to buy any security other than the
shares of Common Stock offered by this Prospectus, nor does it constitute an
offer to sell or a solicitation of an offer to buy the shares of Common Stock
by anyone in any jurisdiction in which such offer or solicitation is not
authorized, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such an
offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any impression that the
information herein is correct as of any time subsequent to the date hereof.

1,753,211 Shares

J2 Communications

Common Stock

____________________

PROSPECTUS
____________________

August __, 1996

<PAGE> 71
PART II

EXHIBITS

Item 13. Other Expenses of Issuance and Distribution

The expenses in connection with the issuance and distribution of the
securities being registered are as follows (estimated except as noted):

<TABLE>
<S> <C>
SEC registration fee (actual) . . . . . . . . . . . . . . N/A

NASD filing fee (actual) . . . . . . . . . . . . . . . . . NA

Printing and engraving expenses . . . . . . . . . . . . . $2,500

Legal fees and expenses . . . . . . . . . . . . . . . . . $ 5,000

Accounting fees and expenses . . . . . . . . . . . . . . . $ _____

Blue sky qualification fees and expenses . . . . . . . . . NA

Miscellaneous . . . . . . . . . . . . . . . . . . . . . . NA

Total . . . . . . . . . . . . . . . . . . . . . . . $ _____
</TABLE>

Item 14. Indemnification of Directors and Officers

Directors of the Company are presently entitled to indemnification as
expressly authorized under Section 317 of the California General Corporation
Law ("Section 317") and the Bylaws of the Company (which generally authorize
the Company to indemnify its Agents where such indemnification is authorized by
Section 317). Section 317 provides a detailed statutory framework covering
indemnification of any agent of a corporation who is threatened to be made a
party to any legal proceeding by reason of his or her actions on behalf of the
corporation.

Article V ("Article V") of the Company's Articles of Incorporation,
which was adopted and approved by the Company's Shareholders in 1989, provides
that a director will not be liable for monetary damages arising out of the
director's breach of his or her fiduciary duties to the Company and the
Shareholders to the fullest extent permissible under the California Law.
Liability for breach of a director's fiduciary duty arises when the director
has failed to exercise sufficient care in reaching decisions or otherwise
attending to his responsibilities as a director and in other circumstances.
Article V does not eliminate these duties; it only eliminates monetary damage
awards occasioned by a breach of these duties. Accordingly, a breach of
fiduciary duty is still a valid basis for a suit seeking to stop a proposed
transaction from occurring. However, after a transaction has occurred, the
Shareholders do not have a claim

I-2
<PAGE> 72
against directors for monetary damages based on a breach of fiduciary duty,
even if that breach involves negligence on the part of the directors.
Additionally, as a practical matter, equitable remedies such as rescission may
not be available after a transaction has already been consummated or in other
circumstances.

The Directors are parties to Indemnification Agreements with the
Company that attempt to provide the maximum indemnification allowed under the
California Law. The Indemnification Agreements make mandatory indemnification
which is permitted by California Law in situations in which the Indemnitee
would otherwise be entitled to indemnification only if the Board of Directors,
the Shareholders, independent legal counsel retained by the Company or a court
in which an action was or is pending made a discretionary determination in a
specific case to award such indemnification. However, in part because the
California Law was only recently enacted, the extent to which the
indemnification permitted by the California Law may be expanded by
indemnification agreements is unsettled and has yet to be the subject of any
judicial interpretation.

The Indemnification Agreement provides that the Company will be
obligated to indemnify an Indemnitee in the following circumstances:

Third Party Actions. In case of any action other than one by or in
the right of the Company, an Indemnitee will be entitled to indemnity if the
Indemnitee's actions were of a type for which the Indemnitee would not have
monetary liability as a result of the Article V of the Articles of
Incorporation of the Company, or if the Indemnitee acted in good faith and in a
manner he or she reasonably believed to be in the best interests of the Company
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful. Indemnification would include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the Indemnitee. Absent an
agreement or success on the merits of a case, an Indemnitee would be entitled
to indemnification only if it is determined in a specific case by the Board of
Directors, the shareholders, independent legal counsel retained by the Company
or a court in which an action is or was pending that the Indemnitee has met the
applicable standard of care.

Derivative Actions. With respect to actions by or in the right of the
Company an Indemnity will be entitled to indemnification if the Indemnitee
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the Company and the Shareholders, and, whether or not the act
is one in the Indemnitee's capacity as a director, to the extent that an action
concerns the breach of an Indemnitee's duty to the Company and the Shareholders
in circumstances under which a director's monetary liability has been
eliminated. However, indemnification may not be made where such
indemnification is expressly prohibited by Section 317. Section 317 currently
prohibits indemnification in respect of (a) any claim, issue or matter as to
which the Agent has been adjudged to be liable to the Company in the
performance of the Agent's duty to the Company and the Shareholders, unless and
only to the extent that the court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, the Agent is fairly and reasonably

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<PAGE> 73
entitled to indemnity for expenses and then only to the extent that the court
shall determine (b) amounts paid in settling or otherwise disposing of a
pending action without court approval; or (c) expenses incurred in defending a
pending action which is settled or otherwise disposed of without court
approval. Absent an agreement or success on the merits of a case, an
Indemnitee would be entitled to indemnification only if it is determined in a
specific case by the Board of Directors, the Shareholders, independent legal
counsel retained by the Company or a court in which an action is or was pending
that the Indemnitee has met the applicable standard of care.

Mandatory Payment of Expenses. To the extent that an Indemnitee has
been successful on the merits or otherwise in defense of any action or the
defense of any claim, issue or matter therein, the Indemnitee will be entitled
to indemnification against expenses (including attorneys' fees) actually and
reasonably incurred in connection with the matter, Section 317 requires
indemnification in such circumstances.

Advances of Expenses. The Indemnification Agreement provides that the
Company must advance all reasonable expenses incurred by an Indemnitee in
connection with any proceeding (but not any amounts actually paid in settlement
of any proceeding). The Indemnitee undertakes to repay the amounts advanced
only if, and to the extent that, it is ultimately determined that the
Indemnitee is not entitled to be indemnified for those expenses pursuant to the
Indemnification Agreement. Absent an agreement, the Company would not be
required, but would be allowed to advance expenses upon receipt of such an
undertaking by Indemnitee.

Procedure for Enforcement of Rights. If an Indemnitee is not paid any
indemnification or advance within forty-five (45) days after requesting
payment, the Indemnitee may bring an action to recover the payments. The
Company may defend an action to recover indemnification (but not expenses) on
the basis that the Indemnitee is not entitled to indemnification under the
Indemnification Agreement. To the extent allowed by law the question of
whether an Indemnitee is entitled to indemnification will be determined by a
court, and not by the Company, the Board of Directors, independent legal
counsel or the Shareholders.

Partial Indemnification. The Indemnification Agreement provides for
partial indemnification of costs and expenses if any Indemnitee is entitled to
indemnification only with respect to certain aspects of a pending or threatened
action. The California Law does not specifically address this issue. It does
however, provide that to the extent that an indemnified party has been
successful on the merits he is entitled to indemnification.

Future Changes in the Law. The Indemnification Agreement
automatically incorporates future changes in the law which increase the
protection available to the Indemnitee. These changes will apply to the
Company without future Shareholders' approval and, in the absence of liability
insurance, may further impair Shareholders' rights or subject the Company's
assets to risk of loss in the event of large indemnification claims.

Exceptions. The Indemnification Agreement provides that the Company
will not be obligated: (a) to indemnify or advance expenses to the Indemnitee
with respect to proceedings

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<PAGE> 74
or claims initiated or brought voluntarily by the Indemnitee and not be way of
defense, except with respect to proceedings brought to establish or enforce a
right to indemnification (but indemnification or advancement of expenses may be
provided in specific cases); (b) to indemnify the Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by the
Indemnitee to enforce or interpret the Indemnification Agreement, if a court of
competent jurisdiction determines that each of the material assertions made by
the Indemnitee in such proceeding was not made in good faith or was frivolous;
(c) to indemnify the Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
or penalties, and amounts paid in settlement) which have been paid directly to
Indemnitee by an insurance carrier under a policy or officers' and directors'
liability insurance maintained by the Company; or (d) to indemnify the
Indemnitee for expenses and the payment of profits arising from the purchase
and sale by the Indemnitee of securities in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any similar successor statute.

Item 15. Recent Sales of Unregistered Securities.

None.

Item 16. (a) Exhibits

1.1 Settlement Agreement between J2 Communications, Inc.
and National Lampoon, Inc., and FilmAccord Corp.
dated September 11, 1991. (1)

1.2 "National Lampoon" License Agreement Termination
between National Lampoon, Inc. and Guber-Peters
Entertainment Company, previously named Barris
Industries, Inc., dated October 1, 1990. (1)

2.1 Acquisition Agreement, dated as of July 31, 1990
between the Company, J2 Acquisition Corp., National
Lampoon, Inc., Daniel L. Grodnik, and Tim Matheson,
and related Agreement and Plan of Merger. (2)

3.1 Restated Articles of Incorporation. (3)

3.2 By-laws of the Company. (3)

4.1 Warrant Agreement dated as of October 15, 1990
between the Company and U.S. Stock of Transfer
Corp. (2)

5.0 Opinion and Consent of Kelly & Lytton regarding
legality of securities (to be filed by amendment).

10.1 Employment Agreement, dated as of July 16, 1986,
between the Company and James P. Jimirro. (2)

I-5
<PAGE> 75
10.2 Amendment to Employment Agreement between the Company
and James P. Jimirro, dated as of May 26, 1983. (3)

10.3 Agreement between National Lampoon, Inc. and New Line
Cinema Corporation, dated as of April 20, 1990. (2)

10.4 Lease between the Company and Pacific Properties. (5)

10.5 Amended lease between the Company and Pacific
Properties. (4)

10.6 Second amended lease between the Company and Pacific
Properties. (1)

10.7 Severance Agreement and General Release by and
between National Lampoon, Inc., Tim Matheson, the
Grodnik/Matheson Limited Partnership and the
Grodnik/Matheson Company. (2)

10.8 J2 Communications Stock Option Agreement, dated as of
July 13, 1990, by and between the Company and Tim
Matheson. (2)

10.9 Severance Agreement and General Release by and
between National Lampoon, Inc., Dan Grodnik, the
Grodnik/Matheson Limited Partnership, and the
Grodnik/Matheson Company. (2)

10.10 Stock Option Agreement, dated as of July 13, 1990, by
and between J2 and Dan Grodnik. (2)

10.11 Restated Employment Agreement between J2
Communications and James P. Jimirro dated as of
December 1, 1990.

10.12 Settlement and Release between J2 Communications and
Larry Finley dated as of June 14, 1991. (1)

10.13 Agreement with Technicolor Video Services, Inc. (6)

10.14 Settlement and Shareholders Agreement with (7)
(a) Jeffer, Mangels, Butler & Marmaro
(b) Hill, Wynne, Troop & Meisinger
(c) Stroock & Stroock & Lavan
(d) Lavely & Singer
(e) Chrystie & Berle.

10.15 Agreement with CR Cooper Publications, Inc.

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<PAGE> 76
23.1 Consent of Deloitte & Touche LLP (8).

23.2 Consent of Arthur Andersen LLP.

(1) Filed as exhibit to the Company's Annual Report on
Form 10-K for the Fiscal Year ended July 31, 1991.

(2) Filed as an exhibit to Company Registration Statement
on Form S-4, File No. 33-36203

(3) Filed as an exhibit to that certain Form S-1
Registration Statement of the Company as filed with
the Securities and Exchange Commission on July 28,
1986, September 22, 1986 and October 2, 1986 (The
"S-1 Registration Statement").

(4) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the Fiscal Year Ended July 31, 1988.

(5) Filed as an exhibit to the Company's Annual Report of
Form 10-K for the Fiscal Year Ended as of July 31,
1989.

(6) File as an exhibit to that certain Form S-1
Registration Statement of the Company filed with the
Securities and Exchange Commission on May 28, 1993.

(7) Filed as an exhibit to that certain Form S-1
Registration Statement of the Company filed with the
Securities and Exchange Commission on October 28,
1993.

(8) Included herewith.

Item 16(b) Financial Statements Schedules

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions of the Bylaws cited in
Item 13, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of

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<PAGE> 77
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

I-8
<PAGE> 78
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by its
duly authorized officers.

Date August 16, 1996 By: /s/ JAMES P. JIMIRRO
------------------- ------------------------
JAMES P. JIMIRRO
Chairman of the Board
President

Date August 16, 1996 By: /s/ GARY G. COWAN
------------------- -------------------------
GARY G. COWAN
Chief Financial Officer

<PAGE> 79
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Los Angeles, State of California, on this 16th day of August, 1996.

J2 COMMUNICATIONS

BY: /s/ JAMES P. JIMIRRO
------------------------
JAMES P. JIMIRRO
CHAIRMAN OF THE BOARD,
PRESIDENT, AND CHIEF
EXECUTIVE OFFICER

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<PAGE> 80
POWER OF ATTORNEY

KNOW ALL MAY BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James P. Jimirro, as true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
or all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that said attorney-in-fact and agent,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Capacity Date
- - --------- -------- ----
<S> <C> <C>
/s/ JAMES P. JIMIRRO Chairman of the Board, August 16, 1996
- - --------------------- President, Chief Executive
JAMES P. JIMIRRO Officer and Director

Director August __, 1996
- - ----------------------
JAMES FELLOWS

/s/ BRUCE P. VANN Director August 16, 1996
- - ----------------------
BRUCE P. VANN

/s/ GARY G. COWAN Director August 16, 1996
- - ----------------------
GARY G. COWAN

</TABLE>

<PAGE> 1
EXHIBIT 23.1

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
J2 Communications and Subsidiaries
Los Angeles, California

We have audited the accompanying consolidated balance sheets of J2
Communications and subsidiaries (the "Company") as of July 31, 1994 and 1993,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended July 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide reasonable basis for
our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at July 31, 1994 and
1993, and the results of its operations and its cash flows for each of the
three years in the period ended July 31, 1994, in conformity with generally
accepted accounting principles.

As discussed in Note 1 to consolidated financial statements, a significant
portion of the Company's assets is composed of certain intangible assets.

/s/ Deloitte & Touche LLP

September 9, 1994
Los Angeles, California
<PAGE> 2
CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement of J2 Communications on
Form S-1 of our report dated September 9, 1994 (which report expresses an
unqualified opinion and contains an emphasis paragraph related to certain
intangible assets) appearing in the Prospectus which is part of the Registration
Statement and to the reference to us under the headings "Selected Financial
Data" and "Experts" in the Registration Statement.

/s/ Deloitte & Touche LLP

Los Angeles, California
August 8, 1996

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the inclusion in the
Form S-1 Registration Statement of our reports dated October 3, 1995 included
in J2 Communications' Form 10-K for the year ended July 31, 1995.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Los Angeles, California
August 8, 1996