================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

                                    FORM 10-Q

     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 2007
                                       or

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                        For the transition period from to

                         Commission file number 0-26395

                             SALON MEDIA GROUP, INC.
             (Exact name of Registrant as specified in its charter)

              Delaware                                       94-3228750
  (State or other jurisdiction of                           (IRS Employer
   incorporation or organization)                      Identification Number)

                           101 Spear Street, Suite 203
                             San Francisco, CA 94105
                    (Address of principal executive offices)

                                 (415) 645-9200
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.001 Par Value
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer as defined
in Rule 12b-2 of the Act.
   Large Accelerated Filer |_| Accelerated Filer |_| Non-Accelerated Filer |X|

Indicate by check mark whether the Registrant is a shell company as defined by
Rule 12b-2 of the act.
Yes [ ] No [X]

The number of outstanding shares of the Registrant's Common Stock, par value
$0.001 per share, on February 1, 2008 was 1,939,572 shares.

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<PAGE>

--------------------------------------------------------------------------------
FORM 10-Q
SALON MEDIA GROUP, INC.
INDEX
--------------------------------------------------------------------------------

                                                                           Page
PART I   FINANCIAL INFORMATION                                            Number


ITEM 1:  Condensed Consolidated Financial Statements

         Condensed Consolidated Balance Sheets as of December 31, 2007
         (unaudited) and March 31, 2007.....................................  3

         Condensed Consolidated Statements of Operations for the three
         months and nine months ended December 31, 2007 and 2006
         (unaudited) .......................................................  4

         Condensed Consolidated Statements of Cash Flows for the nine
         months ended December 31, 2007 and 2006 (unaudited) ...............  5

         Notes to Condensed Consolidated Financial Statements (unaudited)...  6

ITEM 2:  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.............................................. 16

ITEM 3:  Quantitative and Qualitative Disclosures About Market Risk......... 23

ITEM 4:  Controls and Procedures............................................ 23

PART II  OTHER INFORMATION

ITEM 1:  Legal Proceedings.................................................. 25

ITEM 1a: Risk Factors....................................................... 25

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds........ 33

ITEM 3.  Defaults upon Senior Securities.................................... 33

ITEM 4.  Submission of Matters to a Vote of Security Holders................ 33

ITEM 5.  Other Information.................................................. 33

ITEM 6:  Exhibits........................................................... 34

         Signatures......................................................... 34


                                       2
<PAGE>

<TABLE>
<S>     <C>
----------------------------------------------------------------------------------------
PART I:  FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------------------------------------------

                                 SALON MEDIA GROUP, INC.
                          CONDENSED CONSOLIDATED BALANCE SHEETS
                   (in thousands, except share and per share amounts)

                                                           December 31,      March 31,
                                                               2007            2007
                                                           ------------    ------------
Assets                                                     (Unaudited)
    Current assets:
       Cash and cash equivalents                           $        180    $        829
       Accounts receivable, net                                   1,851           1,007
       Prepaid expenses and other current assets                     90              53
                                                           ------------    ------------
        Total current assets                                      2,121           1,889
    Property and equipment, net                                     339             115
    Prepaid advertising rights                                    2,225           3,267
    Goodwill, net                                                   200             200
    Other assets                                                    104             134
                                                           ------------    ------------
        Total assets                                       $      4,989    $      5,605
                                                           ============    ============
Liabilities and stockholders' equity
    Current liabilities:
       Short-term borrowing                                $        700     $         -
       Accounts payable and accrued liabilities                     990             762
       Deferred revenue                                             731             792
                                                           ------------    ------------
        Total current liabilities                                 2,421           1,554
    Long-term liabilities
         Other long-term liabilities                                 54              85
         Capital lease                                               36               -
                                                           ------------    ------------
       Total liabilities                                          2,511           1,639
                                                           ------------    ------------
Stockholders' equity:
      Preferred stock, $0.001 par value, 5,000,000
          shares authorized, 9,475 shares issued and
          outstanding at December 31, 2007 and 9,183
          shares issued and outstanding at March 31,
          2007 (liquidation value of $23,295 at
          December 31, 2007)                                          -               -
    Common stock, $0.001 par value, 30,000,000 shares
       authorized, 1,939,572 shares issued and
       outstanding at December 31, 2007 and
       March 31, 2007                                                 2               2
    Additional paid-in-capital                                   97,220          96,788
    Accumulated deficit                                         (94,744)        (92,824)
                                                           ------------    ------------
       Total stockholders' equity
                                                                  2,478           3,966
                                                           ------------    ------------
        Total liabilities and stockholders' equity         $      4,989    $      5,605
                                                           ============    ============

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

                                           3
</TABLE>
<PAGE>

<TABLE>
<S>     <C>
                                           SALON MEDIA GROUP, INC.
                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (in thousands, except per share data)
                                                 (unaudited)

                                                          Three Months Ended          Nine Months Ended
                                                             December 31,                December 31,
                                                       ------------------------    ------------------------
                                                          2007          2006          2007          2006
                                                       ----------    ----------    ----------    ----------

Net revenues                                           $    2,190    $    2,765    $    6,296    $    6,194
                                                       ----------    ----------    ----------    ----------

Operating expenses:
    Production and content                                  1,347         1,317         4,013         3,875
    Sales and marketing                                       748           560         2,371         1,296
    Information technology support                            211           217           582           649
    General and administrative                                432           365         1,175           945
                                                       ----------    ----------    ----------    ----------
        Total operating expenses                            2,738         2,459         8,141         6,765
                                                       ----------    ----------    ----------    ----------

Income (loss) from operations                                (548)          306        (1,845)         (571)

Other income (expense), net                                   (14)            -           (21)            3
                                                       ----------    ----------    ----------    ----------
       Net income (loss)                                     (562)          306        (1,866)         (568)

Preferred deemed dividend                                     (54)         (109)          (54)         (295)
                                                       ----------    ----------    ----------    ----------

Net income (loss) attributable to common
    stockholders                                       $     (616)   $      197    $   (1,920)   $     (863)
                                                       ==========    ==========    ==========    ==========

Basic net income (loss) per share attributable
       to common stockholders                          $    (0.32)   $     0.10    $    (0.99)   $    (0.53)

Diluted net income (loss) per share attributable
       to common stockholders                          $    (0.32)   $     0.02    $    (0.99)   $    (0.53)

Weighted average shares used in computing
       basic net income (loss) per share
       attributable to common stockholders                  1,940         1,888         1,940         1,616

Weighted average shares used in computing
       diluted net income (loss) per share
       attributable to common stockholders                  1,940        11,230         1,940         1,616

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


                                                     4
</TABLE>
<PAGE>

<TABLE>
<S>     <C>
                                           SALON MEDIA GROUP, INC.
                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (in thousands)
                                                 (Unaudited)

                                                                                     Nine Months Ended
                                                                                        December 31,
                                                                                  ------------------------
                                                                                     2007          2006
                                                                                  ----------    ----------
Cash flows from operating activities:
   Net loss                                                                       $   (1,866)   $     (568)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                        69            64
     Share-based compensation                                                            196           169
     Amortization of prepaid advertising rights                                        1,042           185
     Changes in assets and liabilities:
        Accounts receivable                                                             (844)       (1,504)
        Prepaid expenses, other current assets and other assets                           (7)           83
        Accounts payable, accrued liabilities and other long-term liabilities             15           203
        Deferred revenue                                                                 (61)         (157)
                                                                                  ----------    ----------
           Net cash used in operating activities                                      (1,456)       (1,525)
                                                                                  ----------    ----------

Cash flows from investing activities:
   Purchase of property and equipment                                                   (243)          (36)
                                                                                  ----------    ----------
           Net cash used by investing activities                                        (243)          (36)
                                                                                  ----------    ----------

Cash flows from financing activities:
   Proceeds from exercise of common stock warrants and options                             -           763
   Proceeds from issuance of preferred stock, net                                        350           900
   Proceeds from short-term borrowing                                                    900             -
   Repayment of short-term borrowing                                                    (200)            -
                                                                                  ----------    ----------
           Net cash provided by financing activities                                   1,050         1,663
                                                                                  ----------    ----------

Net increase (decrease) in cash and cash equivalents                                    (649)          102

Cash and cash equivalents at beginning of period                                         829           441
                                                                                  ----------    ----------

Cash and cash equivalents at end of period                                        $      180    $      543
                                                                                  ==========    ==========

Supplemental schedule of non-cash investing and financing activities:
   Preferred deemed dividend                                                      $       54    $      295
   Property and equipment purchased with capital lease                            $       50             -

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


                                                     5
</TABLE>
<PAGE>

                             SALON MEDIA GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (amounts in thousands, except share and per share data)
                                   (unaudited)

1.   The Company and Significant Accounting Policies

The Company:

     Salon Media Group, Inc ("Salon") is an Internet media company that produces
a content Website with ten subject-specific sections, one of which includes two
online communities. Salon was originally incorporated in July 1995 in the State
of California and reincorporated in Delaware in June 1999. Salon operates in one
business segment.

Basis of Presentation:

     These interim condensed consolidated financial statements are unaudited and
have been prepared on the same basis as the annual financial statements and, in
the opinion of management, reflect all adjustments, which include only normal
recurring adjustments necessary to present fairly Salon's consolidated financial
position, consolidated results of operations and consolidated cash flows for the
periods presented. The condensed consolidated balance sheet data as of March 31,
2007 is derived from and should be read in conjunction with the audited
financial statements, which are included in Salon's Annual Report on Form 10-K
filed with the Securities and Exchange Commission. Pursuant to the rules of the
Securities and Exchange Commission, these financial statements do not include
all disclosures required by generally accepted accounting principles. The
results for the nine months ended December 31, 2007 are not necessarily
indicative of the expected results for any other interim period or for the
fiscal year ending March 31, 2008.

     These consolidated financial statements contemplate the realization of
assets and the satisfaction of liabilities in the normal course of business.
Salon has incurred losses and negative cash flows from operations since
inception and has an accumulated deficit at December 31, 2007 of $94,744. In
addition, Salon expects to incur a net loss from operations for its year ending
March 31, 2008. Because of past losses, and a history of negative cash flows
from operations, Salon's independent registered public accounting firm for the
years ended March 31, 2005, March 31, 2006 and March 31, 2007 has included a
paragraph in its reports indicating substantial doubt as to Salon's ability to
continue as a going concern.

     Based on current projections and after drawing the remaining available
balance of approximately $0.3 million from its Deutsche Bank Securities
borrowing facility, Salon estimates that it will require at least $1.0 million
to meet working capital needs over the next twelve months. To meet this future
cash need, Salon will have to incur additional indebtedness or raise additional
working capital through the sale of equity securities in a private placement.
However, Salon does not currently have an agreement in place to provide such
financing, and there is no certainty that Salon will be able to enter into
definitive agreements for such financing on commercially reasonable terms.

Concentration of Credit Risk

     No customer accounted for more than 10% of total revenue for the three or
nine-month periods ended December 31, 2007 and December 31, 2006. No customer
accounted for more than 10% of the


                                       6
<PAGE>

total accounts receivable as of December 31, 2007. One customer accounted for
13% of the total accounts receivable as of December 31, 2006.

Software Development Costs

     Information technology support expenses to develop new offerings to its
Website visitors are capitalized as software development costs. Salon has
capitalized $86 of expenditures through December 31, 2007. Such development
activity did not occur in prior fiscal years.

Stock-Based Compensation

     Salon accounts for stock-based compensation expenses pursuant to the
provisions of Statement of Financial Accounting Standards No. 123 (revised
2004), Share-Based Payment, or SFAS 123R, which requires that all share-based
payments, including grants of employee stock options, be recognized as an
expense in the statement of operations based on their grant date fair values and
vesting periods, which is generally four years. The fair value of each option
grant was estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions and fair value per share:

<TABLE>
<S>     <C>
                                Three months ended December 31,        Nine months ended December 31,
                               --------------------------------      ---------------------------------
                                    2007               2006                2007              2006
                               --------------    --------------      --------------     --------------
Risk-free interest rates            3.21%              4.47%            3.21%-5.0%        4.47%-4.97%
Expected term (in years)              4                  4                  4                  4
Expected volatility                 144%               212%             116%-144%          116%-212%
Dividend yield                       0%                 0%                  0%                0%
</TABLE>

     The expected term of the options of four years represents the estimated
period of time until exercise and is based on historical experience of similar
awards, including the contractual terms, vesting schedules and expectations of
future employee behavior. The expected stock price volatility is based on
historical volatility of Salon's stock. The risk-free interest rate is based on
the implied yield available on U.S. Treasury securities with a term equivalent
to the service period of the stock options, or four years. Salon has not paid
dividends in the past.

     Stock-based compensation expense recognized under SFAS 123R for the three
and nine months ended December 31, 2007 was $74 and $196, respectively and was
$48 and $169 for the three and nine months ended December 31, 2006,
respectively. As of December 31, 2007, the aggregate stock compensation
remaining to be amortized to expenses was $1,137. Salon expects this stock
compensation balance to be amortized as follows: $95 during the remainder of
fiscal 2008; $377 during fiscal 2009; $377 during fiscal 2010; $223 during
fiscal 2011; and $65 during fiscal 2012. The expected amortization reflects only
outstanding stock awards as of December 31, 2007.

Recent Accounting Pronouncements

     In June 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109" ("FIN
48".) FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in an enterprise's financial statements in accordance with FASB Statement No.
109, "Accounting for Income Taxes," and prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. FIN 48 also
provides guidance on derecognition, classification,


                                       7
<PAGE>

interest and penalties, accounting in interim periods, disclosure, and
transition. FIN 48 is effective for fiscal years beginning after December 15,
2006. The adoption of FIN 48 as of April 1, 2007 did not impact Salon's results
of operations, financial position, or cash flows.

     In September 2006, the FASB issued Statement of Financial Accounting
Standard No. 157, "Fair Value Measurements," ("SFAS 157".) SFAS 157 addresses
how companies should measure fair value when they are required to use a fair
value measure for recognition or disclosure purposes under generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS 157 is effective for fiscal years beginning after November 15, 2007. The
adoption of SFAS 157 as of April 1, 2007 did not impact Salon's results of
operations, financial position, or cash flows.

     In February 2007, the FASB issued Statement of Financial Accounting
Standard No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities - Including an Amendment to FASB Statement No. 115," ("SFAS 159".)
Under SFAS 159 entities will be permitted to measure financial instruments and
certain other assets and liabilities at fair value on an
instrument-by-instrument basis (the fair value option). SFAS 159 is effective
for fiscal years beginning after November 15, 2007 and allows for early
adoption. Salon plans on adopting SFAS 159 in April 2008 and believes that the
adoption of SFAS 159 will not impact Salon's results of operations, financial
position, or cash flows.

     In December 2007, the FASB issued Statement of Financial Accounting
Standard No. 141 (revised 2007), "Business Combinations," ("SFAS 141R") and No.
160, "Noncontrolling Interests in Consolidated Financial Statements," an
amendment of ARB No. 51 ("SFAS 160".) SFAS 141R establishes principles and
requirements during business combinations for how the acquirer:

     a.   Recognizes and measures in its financial statements the identifiable
          assets acquired, the liabilities assumed, and any noncontrolling
          interest in the acquiree,
     b.   Recognizes and measures the goodwill acquired in the business
          combination or a gain from a bargain purchase, and
     c.   Determines what information to disclose to enable users of the
          financial statements to evaluate the nature and financial effects of
          the business combination.

     SFAS 160 sets parameters as to how to report noncontrolling interest in
consolidated financial statements. SFAS 141R and SFAS 160 are effective for
fiscal years beginning after December 15, 2008. Salon believes that the adoption
of SFAS 141R and SFAS 160 will not impact Salon's results of operations,
financial position, or cash flows.

Reclassifications

     Certain reclassifications, not affecting previously reported net income or
loss, have been made to the previously issued consolidated financial statements
to conform to the current period presentation.

2.   Goodwill Amortization and Intangible Assets

     In accordance with FASB No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142), goodwill amortization was discontinued as of March 31, 2002. The
carrying value of goodwill at December 31, 2007 and March 31, 2007 was $200 and
has been found not to be impaired.


                                       8
<PAGE>

3.   Fair Value Measurements

     The fair values of Salon's assets that are valued on a nonrecurring basis
are as follows:

<TABLE>
<S>     <C>
                                       Quoted Prices
                                         in Active        Significant
                                        Markets for          Other         Significant
                           Period        Identical        Observable       Unobservable      Total
                           Ended           Assets           Inputs            Inputs         Gains
Description               12/31/07       (Level 1)         (Level 2)        (Level 3)       (Losses)
--------------------     ----------   ----------------   -------------   ---------------   ----------

Long-lived assets
      held and used        $2,225                                             $2,225            $0

Goodwill                     $200                                               $200            $0
                                                                                           ----------
                                                                                                $0
                                                                                           ==========
</TABLE>

     Salon's long-lived assets held and used are its prepaid advertising rights.
These prepaid advertising rights and goodwill have not been found to be impaired
as of December 31, 2007.

4.   Warrants

     During the nine months ended December 31, 2007, three warrants to purchase
a total of 39,179 shares of common stock with a weighted average exercise price
of $2.60 per share expired. Of the three warrants, two that represented 37,147
shares had been issued to Salon's Chairman. The following are the remaining
outstanding warrants as of December 31, 2007:

<TABLE>
<S>     <C>
                                                Warrant       Exercise       Grant        Expiration
Warrant Holder                                   Shares        Price          Date           Date
------------------------------------------    -----------   -----------   ------------   ------------
Adobe Systems, Inc.                               7,058       $10.400       09/23/98       09/23/08
Dotcom Ventures                                   1,568       $10.400       09/01/98       09/01/08
Silicon Valley Bank                               2,214        $0.862       10/17/02       10/17/09
Michael Doyle                                     5,000        $7.200       02/09/06       02/09/08
Nancy and Timothy Armstrong                      20,225       $10.173       12/21/05       12/21/08
The Hambrecht 1980 Revocable Trust                9,097        $3.115       07/27/06       07/27/09
John Warnock                                      6,040        $3.115       07/27/06       07/27/09
John Warnock                                      3,056        $3.115       07/27/06       07/27/09
The Hambrecht 1980 Revocable Trust               17,599        $2.260       09/21/06       09/21/09
John Warnock                                     17,494        $2.260       09/21/06       09/21/09
John Warnock                                      8,244        $1.495       12/18/06       12/18/09
John Warnock                                     24,536        $1.495       12/18/06       12/18/09
The Hambrecht 1980 Revocable Trust               35,040        $1.840       11/19/07       11/19/10
                                              -----------
                                                157,171
                                              ===========
</TABLE>

5.   Borrowing Agreement

     In May 2007, Salon finalized a borrowing agreement with Deutsche Bank
Securities, Inc. that allows Salon to borrow up to $1.0 million and for Salon's
obligation to be guaranteed in its entirety by Salon's Chairman. The interest
rate under the agreement of prime less 0.25% was initially 8%, and has


                                       9
<PAGE>

declined to 7.0% on December 13, 2007. Salon has recognized $23 of interest
expense under the agreement. As of December 31, 2007, Salon has borrowed $900
and repaid $200. Salon and its Chairman have agreed to lift previously agreed
restrictions on the timing of borrowing to permit borrowing to continue under
the agreement with the guarantee of the Chairman until March 31, 2009. Though
Deutsche Bank Securities may demand repayment of amounts borrowed at any time,
Salon does not believe that it is likely until March 31, 2009.

5.   Commitments and Contingencies

     Salon has several non-cancelable operating lease agreements for office
space and to host its servers. In December 2007, Salon entered into a three year
capital lease for computer related equipment. Future minimum payments under
capital lease and non-cancelable operating leases are as follows:

<TABLE>
<S>     <C>
                                                       Capital          Operating
Period ending December 31,                              Lease             Leases
                                                    -------------     -------------
    2008                                            $         21      $        405
    2009                                                      21                98
    2010                                                      21
                                                    -------------     -------------
          Total minimum lease payments                        63      $        503
                                                                      =============
                 Less: interest                              (13)
                                                    -------------
          Present value of minimum lease payments             50
                 Less: current portion                       (14)
                                                    -------------
          Long-term                                 $         36
                                                    =============
</TABLE>

6.   Stock-Based Compensation

     Salon has adopted certain equity incentive plans as described in Note 7,
"Employee Stock Option Plan," of the notes to consolidated financial statements
in Salon's Annual Report on Form 10-K for the fiscal year ended March 31, 2007.

     The following table summarizes activity under Salon's stock option plans
for the nine months ended December 31, 2007:

<TABLE>
<S>     <C>
                                                               Weighted
                                        Outstanding             Average          Aggregate
                                           Stock               Exercise          Intrinsic
                                          Options                Price             Value
                                     ------------------     ---------------   ----------------
Balance as of April 1, 2007              2,205,000               $4.67
Options granted under all plans            338,000               $1.48
Exercised                                        -                   -
Cancelled                                 (254,000)              $3.23
                                     -----------------
Outstanding at December 31, 2007         2,289,000               $4.36              $246
                                     =================
Exercisable at December 31, 2007         1,477,000               $5.80               $51
Expected to vest                           840,000               $1.90              $200
</TABLE>

     The weighted average fair value per share of the stock option awards in the
nine months ended December 31, 2007 and 2006 was $1.06 and $1.63, respectively.
The weighted average fair value of


                                       10
<PAGE>

options vested during the nine months ended December 31, 2007 was $1.79 per
share. No options were exercised during the three and nine month periods ended
December 31, 2007.

     Salon may grant restricted stock awards to officers under the Salon Media
Group, Inc. 2004 Stock Plan, as amended and restated through October 4, 2007
(the "2004 Plan), that typically vest over an approximate four year period.
Restricted stock awards are considered outstanding at the time of grant, as the
stock award holders are entitled to dividends and voting rights. As of December
31, 2007, the number of shares granted but still unvested was 250,000 with a
weighted-average fair value of $1.60.

     As of December 31, 2007, Salon has remaining approximately 837,000 shares
authorized to be issued under the 2004 Plan. Of these shares, approximately
260,000 may not be issued as they have not been properly registered with state
or local regulatory authorities. In addition, approximately 540,000 shares have
previously been granted and are currently outstanding that have also not been
properly registered. As the recipients of these grants are entitled to file a
claim for a cash settlement, the company has classified the value of these
shares of $168 as a liability. The weighted average exercise price of these
option grants is $1.58.

7.   Net Income (Loss) Per Share

     Basic income (loss) per share is computed using the weighted average number
of shares of common stock outstanding during the period. Diluted income (loss)
per share is computed using the weighted average number of common stock and
common stock equivalents outstanding during the period, as follows:

<TABLE>
<S>     <C>
                                                                Three Months Ended              Nine Months Ended
                                                                    December 31                    December 31
                                                            ----------------------------   ----------------------------
                                                                2007            2006           2007            2006
                                                            ------------    ------------   ------------    ------------
Numerator:
   Net income (loss) attributable to common
   stockholders                                             $       (616)   $        197   $     (1,920)   $       (863)

Denominator:
   Weighted average shares used in computing
   basic net income (loss) per share attributable
   to common stockholders                                      1,940,000       1,888,000      1,940,000       1,616,000

   Effect of dilutive convertible preferred stock,
   warrants and employee stock awards                                  -       9,342,000              -               -

   Weighted average shares used in computing
   diluted net income (loss) per share attributable
   to common stockholders                                      1,940,000      11,230,000      1,940,000       1,616,000

   Basic net income (loss) per share attributable
   to common stockholders                                   $      (0.32)   $       0.10   $      (0.99)   $      (0.53)

   Diluted net income (loss) per share attributable
   to common stockholders                                   $      (0.32)   $       0.02   $      (0.99)   $      (0.53)

Antidilutive securities including options, warrants,
   and convertible preferred stock not included in
   net income (loss) attributable to common stockholder
   per share calculation                                      12,442,000       2,467,000     12,442,000      11,994,000
</TABLE>


                                       11
<PAGE>

8.   Preferred Stock

     On November 19, 2007, Salon issued 292 shares of Series D-5 preferred stock
and a warrant to purchase 35,040 shares of common stock for which it received
$350 in cash from a related party. The warrant was issued at an exercise price
of $1.84 per share, subject to adjustment. The financing was effected in
accordance with Amendment No. 8 to the Securities Purchase Agreement dated as of
that date. All shares were sold at a price of $1,200 per share. The 292 shares
of Series D-5 preferred stock are convertible into, and have the voting rights
of 233,600 shares of common stock, subject to adjustment.

     This issuance of preferred stock triggered anti-dilution provisions of
2,434 shares of preferred stock. Before the transaction, these shares were
convertible into and had the voting rights of 2,700,745 shares of common stock,
and after the transaction, were convertible into and had the voting rights of
2,711,079 shares of common stock, an increase of 10,334 shares of common stock.
In addition, the exercise price of the following outstanding warrants were
reduced: the exercise prices of the warrant issued on December 21, 2005 was
reduced from $10.352 to $10.173; the exercise prices of warrants issued on July
27, 2006 were reduced from $3.148 to $3.115; and the exercise prices of warrants
issued on September 21, 2006 were reduced from $2.275 to $2.260.

     The Certificate of Designation of Preferences and Rights of the Series D
preferred stock was amended by the Board of Directors of Salon, a majority of
the Series D preferred stockholders, and a majority of the Series D-5 preferred
stockholders, to stipulate that the conversion price of the 292 shares of Series
D-5 preferred stock be convertible at an effective common stock per share price
of $1.50. The closing price of Salon's common stock on the date of the
transaction was $1.60. As the shares of preferred stock were therefore in the
money on the commitment dates, Salon determined that the value of the beneficial
conversion feature of the shares of preferred stock issued was $54. Since the
shares of preferred stock were immediately convertible into shares of common
stock, Salon recorded a preferred deemed dividend of $54 for the three and nine
month period ended December 31, 2007.

     The warrants issued have a three year life. In the event of a change in
control within the exercise period, Salon will give the warrant holders thirty
(30) days advance notice of the effective date of such transaction, and to the
extent the warrants have not been exercised in full by the effective date of
such transaction, the warrants will terminate. The exercise price of the
warrants may be adjusted downward in the event of certain subsequent Salon stock
issuances.

     Following the transaction, Salon does not have any remaining shares of
Series D preferred stock authorized to be issued.


                                       12
<PAGE>

     The conversion rate and common equivalent shares of Salon's preferred stock
is as follows as of December 31, 2007:

<TABLE>
<S>     <C>
                                                            Per share
                                                   ----------------------------      Common
                                      Shares         Purchase       Conversion     Equivalent
Preferred Stock                     Outstanding        Price          Price          Shares
-----------------------------      ------------    ------------    ------------   ------------
Series A                                683           $4,000          $1.959       1,394,290
Series B                                125           $4,000          $1.588         314,860
Series C                              6,582             $800          $0.800       6,582,000
Series D-1                              417           $1,200          $1.836         272,579
Series D-2                              417           $1,200          $2.156         232,126
Series D-3
   Issued on 12/21/05                   209           $1,200          $1.836         136,616
   Issued on 07/27/06                   208           $1,200          $2.413         103,444
Series D-4
   Issued on 07/27/06                    42           $1,200          $2.413          20,887
   Issued on 09/21/06                   333           $1,200          $1.691         236,277
   Issued on 12/18/06                    42           $1,200          $0.917          54,961
Series D-5
   Issued on 12/18/06                   125           $1,200          $0.917         163,576
   Issued on 11/19/07                   292           $1,200          $1.500         233,600
                                  -------------                                   ------------
Total                                 9,475                                        9,745,216
                                  =============                                   ============
</TABLE>

     The Series A, B, C and D preferred stock conversion rates are subject to
downward adjustment anti-dilution provisions under certain circumstances related
to subsequent Salon stock issuances.

     Warrants outstanding as of December 31, 2007 that have been issued to
holders of Series D preferred stock are as follows:

                                         Exercise         Warrant
                                          Price            Shares
                                       -----------      -----------
Series D-3
   Issued on 12/21/05                    $10.173           20,225
   Issued on 07/27/06                     $3.115           15,137
Series D-4
   Issued on 07/27/06                     $3.115            3,056
   Issued on 09/21/06                     $2.260           35,093
   Issued on 12/18/06                     $1.495            8,244
Series D-5
   Issued on 12/18/06                     $1.495           24,536
   Issued on 11/19/07                     $1.840           35,040
                                                        -----------
                                                          141,331
                                                        ===========

     The exercise prices of warrants issued in conjunction with the issuance of
Series D preferred stock are subject to downward adjustment anti-dilution
provisions under certain circumstances related to subsequent Salon warrant
issuances.


                                       13
<PAGE>

     The holders of the Series D preferred stock are entitled to dividends of
5.0%, as and if declared by the Board of Directors. In event of a liquidation,
the holders of Series D preferred stock and the holders of the Series C
preferred stock rank in parity, and are entitled to receive, prior and in
preference to any distribution of any assets or property of Salon to the holders
of common stock, and the holders of Series A and B preferred stock, and in the
case of the Series D preferred stock, an amount per share equal to $1,200 plus
an amount equal to all declared but unpaid dividends, and in the case of the
Series C preferred stock, $1,600 per share, plus an amount equal to all declared
but unpaid dividends, based on an annual rate of 8%. If the assets and funds
available for distribution are insufficient to permit the payment to the holders
of Series C and D preferred stock of their full preferential amounts, then the
entire assets and funds of Salon legally available for distribution to
stockholders will be distributed among the holders of Series C and D preferred
stock ratably in proportion to the full preferential amounts which they are
entitled to receive. After an initial distribution to the holders of Series C
and D preferred stock, the holders of the Series A and B preferred stock, who
rank in parity, are entitled to receive, prior and in preference to any
distribution of any assets or property of Salon to the holders of common stock,
an amount per share equal to $8,000 plus an amount equal to all declared but
unpaid dividends, based on an annual rate of 8%. If, after the initial
distribution to holders of Series C and D preferred stock, the remaining assets
and funds available for distribution are insufficient to permit the payment to
the holders of Series A and B preferred stock of the full preferential amounts,
then the entire remaining assets and funds of Salon legally available for
distribution to stockholders will be distributed among the holders of Series A
and B preferred stock ratably in proportion to the full preferential amounts
which they are entitled to receive. As of December 31, 2007, no dividend has
been declared to the holders of preferred stock.

     If, after initial preferential liquidation payments to the holders of
Series A, B, C and D preferred stock, any assets remain available for
distribution, such assets are to be distributed ratably among the holders of
common stock and preferred stock, based on the shares of common stock then held
by them and issuable upon conversion of the shares of preferred stock then held
by them, until aggregate distributions per share reach $12,000 for the holders
of Series A and B preferred stock, $2,400 for the holders of Series C Preferred
Stock and $3,600 for the holders of Series D preferred stock. Salon has
currently outstanding 683 shares of Series A preferred stock, 125 shares of
Series B preferred stock, 6,582 shares of Series C preferred stock and 2,085
shares of Series D preferred stock.

     If, after payment has been made to the holders of common stock and holders
of preferred stock mentioned above, any assets remain available for
distribution, such assets are to be distributed ratably among the holders of
common stock and the holders of Series C preferred stock, based on the number of
shares of common stock then held by them and issuable upon conversion of the
Series C preferred stock then held by them. Based on available information,
Salon estimates that the holders of Series C preferred stock account for
approximately 90% of this group of shareholders.

     The holders of preferred stock are entitled to vote together with the
holders of Salon's common stock as though part of that class, and are entitled
to vote on all matters and to that number of votes equal to the largest number
of whole shares of common stock into which the shares of preferred stock could
be converted. Preferred stockholders as a group own approximately 94% of the
outstanding shares of common stock and common stock issuable upon conversion of
the shares of preferred stock, all with voting rights.

     The aggregate liquidation preferences of all preferred stockholders as of
December 31, 2007 were $19,497 excluding the effect of undeclared dividends, and
$23,295 including the effect of undeclared dividends.


                                       14
<PAGE>

     Neither the Series A, B, C or D preferred stock, the associated warrants,
nor the underlying shares of common stock have been registered for sale under
the Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration under such act or an applicable exemption from
registration requirements.
























                                       15
<PAGE>

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

     This section and other parts of this Form 10-Q contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act)
that involve risks and uncertainties, including, but not limited to, statements
regarding our strategy, plans, objectives, expectations, forecasts, intentions,
financial performance, cash-flow breakeven timing, financing, economic
conditions, on-line advertising, market performance, subscription service plans,
and revenue sources. Although Salon Media Group, Inc. (Salon) believes its
plans, intentions and expectations reflected in such forward-looking statements
are reasonable, Salon gives no assurance those plans, intentions or expectations
will be achieved. Our actual results may differ significantly from those
anticipated or implied in these forward-looking statements as a result of the
factors set forth above and in Salon's public filings. Salon assumes no
obligation to update any forward-looking statements as circumstances change.

     Salon's actual results may differ significantly from those anticipated or
implied in these forward-looking statements as a result of the factors set forth
below and in "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" and "Factors That May Affect Our Future Results and
Market Price of Stock." In this report, the words "anticipates," "believes,"
"expects," "estimates," "forecast," "future," and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof.

Overview

     Salon is an Internet publishing pioneer. Salon's award-winning journalism
combines original investigative stories and provocative personal essays along
with quick-take commentary and staff-written Weblogs about politics, technology,
culture and entertainment. Committed to interactivity, the Website located at
www.salon.com, also hosts two online communities, Table Talk and The Well, and
some user blogs. In 2005, the site automated its "Letters to the Editor" feature
so that readers can post their own comments to stories directly. During the year
ended March 31, 2007, Salon added a daily blog by the independent blogger Glenn
Greenwald, a weekly column by founding member Gary Kamiya, a weekly food feature
"Eat and Drink," brought back culture writer Camille Paglia to do a monthly
column, Literary Guide to the World, and a daily blog by Editor-in-Chief Joan
Walsh. In its editorial product Salon balances two crucial missions: (1)
providing original and provocative content on topics that the mainstream media
overlook, and (2) filtering through the media chatter and clutter to help
readers find the stories that matter.

     This section and other parts of this Form 10-Q should be considered in
conjunction with the audited financial statements, which are included in Salon's
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Matters of interest therein include, but are not limited to, Salon's disclosure
of critical accounting policies.

Sources of Revenue

     The most significant portion of Salon's revenues is derived from the sale
of advertising and promotional space on its Website. Contracts for the sale of
promotional space are generally less than ninety days in duration. Advertising
units sold include "rich media" streaming advertisements, as well as traditional
banner and pop-up advertisements.

     Salon also derives a significant portion of its revenues from its Salon
Premium subscription program. Prior to March 2007, subscriptions to Salon
Premium were generally $35 for one year with no


                                       16
<PAGE>

ads, and during March 2007, the rate was increased to $45. Salon Premium revenue
is recognized ratably over the period that services are provided. This source of
revenue has been decreasing since Salon's quarter ended December 31, 2004 when
paid subscriptions peaked at approximately 89,100, decreased to approximately
47,200 as of March 31, 2007 and to approximately 37,300 as of December 31, 2007.
Salon expects this downward trend to continue, as it has placed greater emphasis
on its advertising sales to generate revenue.

     Through March 31, 2004, Salon offered The Well and Table Talk online
discussion forums as monthly subscription services. During the year ended March
31, 2005, Salon made access to Table Talk free to Salon Premium members. Revenue
from the on-line discussion forums has been recognized ratably over the
subscription period. Salon also generates nominal revenue from the licensing of
content that previously appeared in Salon's Website and for hosting links to a
third party's personals/dating Website.

Expenses

     Production and content expenses consist primarily of salaries and related
expenses for Salon's editorial, artistic, and production staff, online
communities' staff, payments to freelance writers and artists, bandwidth costs
associated with serving pages and hosting our online communities on our Website,
credit card transaction costs and ad serving costs.

     Sales and marketing expenses consist primarily of salaries, commissions and
related personnel costs, travel, and other costs associated with Salon's sales
force, business development efforts and its subscription service. It also
includes the amortization of prepaid advertising rights.

     Information technology support expenses consist primarily of salaries and
related personnel costs associated with the development, testing and enhancement
of Salon's software to manage its Website, and to maintain and enhance the
software utilized in managing Salon Premium, as well as supporting marketing and
sales efforts.

     General and administrative expenses consist primarily of salaries and
related personnel costs, accounting and legal fees, and other fees associated
with operating a publicly traded company. Certain shared overhead expenses are
allocated to other departments.

     On April 1, 2006 Salon adopted the provisions of Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS 123R,
which requires companies to expense their stock option awards. Salon adopted
SFAS 123R using the modified prospective transition method and therefore did not
restate results for prior periods. Salon's expenses include stock-based expenses
related to stock option grants to employees, non-employee Directors and
consultants.

     Salon has incurred significant net losses and negative cash flows from
operations since its inception. As of December 31, 2007, Salon had an
accumulated deficit of $94.7 million. These losses have been funded primarily
through the issuance of common stock from Salon's initial public offering in
June 1999, issuances of preferred stock, the issuance of convertible notes
payable, and bank debt.

     Burr, Pilger & Mayer LLP, Salon's independent accountants for the years
ended March 31, 2007, March 31, 2006 and March 31, 2005 has included a paragraph
in its report indicating that substantial doubt exists as to Salon's ability to
continue as a going concern because of Salon's recurring operating losses,
negative cash flow and accumulated deficit.


                                       17
<PAGE>

Critical Accounting Policies

     The preparation of financial statements in conformity with generally
accepted accounting principles requires Salon to utilize accounting policies and
make estimates and assumptions that affect our reported amounts. Salon's
significant accounting policies are described in Note 2 to the consolidated
financial statements of Salon's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission. Salon believes accounting policies and
estimates related to revenue recognition, prepaid advertising rights and
share-based compensation are the most critical to Salon's financial statements.
Future results may differ from current estimates if different assumptions or
conditions were to prevail.

Revenue Recognition

     Salon recognizes revenues once persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable and
collectibility is reasonably assured. Revenues are recognized ratably in the
period over which Salon's obligations are fulfilled. Payments received before
Salon's obligations are fulfilled are classified as "Deferred revenue" in
Salon's consolidated balance sheet.

     Advertising revenues, derived from the sale of promotional space on its
Website, comprised 70%, 57% and 54% of Salon's revenues, respectively for the
years ended March 31, 2007, 2006 and 2005. Advertising revenues comprised 75%
and 71% of Salon's revenues, respectively, for the nine months ended December
31, 2007 and December 31, 2006. The duration of the advertisements are generally
short term, usually less than ninety days. Revenues derived from such
arrangements are recognized during the period the advertising space is provided.
Salon's obligations typically include a guaranteed minimum number of
impressions, a set number of Site Pass advertisement viewed, or a set number of
days that a Site Pass advertisement will run. To the extent minimum guaranteed
amounts are not achieved, Salon defers recognition of the corresponding revenue
until the remaining guaranteed amounts are provided, if mutually agreeable to an
advertiser. If these "make good" impressions are not agreeable to an advertiser,
no further revenue is recognized.

     Salon Premium, a pay-for-online content service, provides unrestricted
access to Salon's content with no banners, pop-ups or site pass advertisements,
and includes free magazine subscriptions, free access to Table Talk, an on-line
forum, and the ability to download easily content in text or PDF format, a
convenience that enables readers to view Salon's content when not connected to
the Internet. The subscription duration for Salon Premium is generally one year.
Readers who are not Salon Premium subscribers can gain access to Salon's content
without charge after viewing some form of advertisement.

     Salon offers The Well as a monthly subscription service for access to
on-line discussion forums. Revenue is recognized ratably over the subscription
period.

Prepaid Advertising Rights

     In January 2000, Salon sold 1,125,000 shares of common stock to Rainbow
Media Holdings ("Rainbow") and received $11.8 million of advertising credits
that were to be utilized by December 31, 2009. As the per share price of Salon's
common stock declined from the time the agreement was made and the date the
agreement was finalized and signed, the advertising credits were valued for
financial reporting purposes at $8.1 million. As of December 31, 2007, Salon has
$3.2 million advertising credits resulting from the transaction, valued at $2.2
million for financial reporting purposes. Of the $3.2 million of advertising
credits, approximately $1.9 million remain with Rainbow and approximately $1.3
million are with NBC. Salon believes that it should be able to utilize all the
credits before they expire on December 31, 2009. Salon expects to recover the
full value of all the advertising credits through usage or


                                       18
<PAGE>

settlement in cash, per the terms of the agreement, but there can be no absolute
assurance as to any potential cash settlement.

Accounting for Share-Based Compensation

     Salon accounts for share-based compensation under SFAS 123R and recognizes
the fair value of stock awards on a straight-line basis over the requisite
service period of the award, which is the vesting term of four years.

     Salon recognized stock-based expense of $196,000 and $169,000 during the
nine months ended December 31, 2007 and December 31, 2006, respectively. As of
December 31, 2007, Salon had an aggregate of $1,137,000 of stock compensation
remaining to be amortized to expense over the remaining requisite service period
of the underlying awards. Salon currently expects this stock compensation
balance to be amortized as follows: $95,000 during the remainder of fiscal 2008;
$377,000 during fiscal 2009; $377,000 during fiscal 2010; $223,000 during fiscal
2011; and $65,000 during fiscal 2012. The expected amortization reflects only
outstanding stock awards as of December 31, 2007. Salon expects to continue to
issue share-based awards to our employees in future periods.

     The full impact of SFAS 123R in the future is dependent upon, among other
things, the timing of when Salon hires additional employees, the effect of new
long-term incentive strategies involving stock awards in order to continue to
attract and retain employees, the total number of stock awards granted, the fair
value of the stock awards at the time of grant and the tax benefit that Salon
may or may not receive from stock-based expenses. Additionally, the application
of SFAS 123R requires the use of an option-pricing model to determine the fair
value of stock option awards. This determination of fair value is affected by
Salon's stock price as well as assumptions regarding a number of highly complex
and subjective variables. These variables include, but are not limited to,
Salon's expected stock price volatility over the term of the awards.

Reclassifications

     Certain reclassifications, not affecting previously reported net income or
loss, have been made to the previously issued consolidated financial statements
to conform to the current period presentation.

Results of Operations for the Three and Nine Months Ended December 31, 2007
Compared to the Three and Nine Months Ended December 31, 2006

Net revenues:

     Net revenues decreased 21% to $2.2 million for the three months ended
December 31, 2007 from $2.8 million for the three months ended December 31, 2006
and increased 2% to $6.3 million for the nine months ended December 31, 2007
from $6.2 million for the nine months ended December 31, 2006.

     Advertising revenues decreased to $1.7 million for the three months ended
December 31, 2007 from $2.2 million for the three months ended December 31,
2006, or 24%, and increased to $4.7 million for the nine months ended December
31, 2007 from $4.4 million for the nine months ended December 31, 2006, or 7%.
The decrease for the three months ended December 31, 2007 reflects attrition in
sales staff and resultant lower number of orders. The increase for the nine
months ended December 31, 2007 reflects Salon's shift in emphasis to its more
lucrative advertising business from its subscription business.

     Salon Premium subscription revenues declined 8% to $330,000 for the three
months ended December 31, 2007 compared to $359,000 for the three months ended
December 31, 2006. For the nine


                                       19
<PAGE>

months ended December 31, 2007 Salon Premium revenues were $1.0 million compared
to $1.2 million for the nine months ended December 31, 2006. The current quarter
amounts reflect a concerted effort to induce lapsing subscribers to
re-subscribe, while the nine month results reflect a declining membership base.
Salon expects this decrease to continue as the number of paid subscriptions has
declined from approximately 47,200 as of March 31, 2007 to approximately 37,300
as of December 31, 2007.

     Revenues from all other sources were $0.2 million and $0.6 million,
respectively, for each of the three months and nine months ended December 31,
2007 and the three and nine months ended December 31, 2006. Approximately half
of this revenue is derived from The Well, an on-line discussion forum.

Production and content:

     Production and content expenses were $1.3 million for the three months
ended December 31, 2007 and for the three months ended December 31, 2006.
Production and content expenses were $4.0 million for the nine months ended
December 31, 2007 compared to $3.9 million for the nine months ended December
31, 2006. The modest $0.1 million increase reflected an incremental accretion in
overall expenses.

Sales and marketing:

     Sales and marketing expenses were $0.7 million for the three months ended
December 31, 2007 and $0.5 million for the three months ended December 31, 2006,
an increase of approximately $0.2 million or 34%. The increase reflects the
utilization of $0.3 million of prepaid advertising rights during the period
compared to $0.1 million last year.

     Sales and marketing expenses were $2.4 million for the nine months ended
December 31, 2007 and $1.3 million for the nine months ended December 31, 2006,
an increase of $1.1 million or 83%. The increase in expenses primarily reflects
the utilization of $1.0 million of prepaid advertising rights during the current
year compared to $0.2 million last year.

Information technology support:

     Information technology support expenses were $0.2 million for the three
months ended December 31, 2007 and for the three months ended December 31, 2006.

     Information technology support expenses were $0.6 million for the nine
months ended December 31, 2007 and for the nine months ended December 31, 2006.

General and administrative:

     General and administrative expenses were $0.4 million for the three months
ended December 31 2007 and for the three months ended December 31, 2006.

     General and administrative expenses were $1.2 million for the nine months
ended December 31, 2007 and $1.0 million for the nine months ended December 31,
2006. The $0.2 million increase reflects a general increase in expenses.

Preferred deemed dividend:

     On November 19, 2007, Salon sold 292 shares of Series D-5 preferred stock
that are convertible to common stock at an effective price less than the fair
market value of Salon's common stock on the


                                       20
<PAGE>

commitment date. Salon valued the beneficial conversion feature of the preferred
stock sold at $54,000. As the shares of preferred stock were immediately
convertible, Salon recorded a $54,000 non-cash preferred deemed dividend for its
three and nine month periods ended December 31, 2007, representing the value of
the beneficial conversion feature of the shares issued.

     On December 18, 2006, Salon sold 42 shares of Series D-4 preferred stock
and 125 shares of Series D-5 preferred stock that are convertible to common
stock at an effective price less than the fair market value of Salon's common
stock on the commitment date. Salon valued the beneficial conversion feature of
the preferred stock sold at $0.1 million. As the shares of preferred stock were
immediately convertible, Salon recorded a $0.1 million non-cash preferred deemed
dividend during its three month period ended December 31, 2006, representing the
value of the beneficial conversion feature of the shares issued.

     In addition to the above transaction, on July 27, 2006 and September 21,
2006, Salon sold 208 shares of Series D-3 preferred stock and 375 shares of
Series D-4 preferred stock that are convertible to common stock at an effective
price less than the fair market value of Salon's common stock on the commitment
dates. Salon valued the beneficial conversion feature of these shares of
preferred stock at $0.2 million. As the shares of preferred stock sold on July
27, 2006, September 21, 2006 and December 18, 2006, were immediately
convertible, Salon recorded a total of $0.3 million non-cash preferred deemed
dividend for the nine months ended December 31, 2006, representing the value of
the beneficial conversion feature of the shares issued.

Liquidity and capital resources:

     As of December 31, 2007, Salon had $0.2 million in cash that reflected
receiving $0.3 million on November 19, 2007 from the issuance of preferred
stock, of which $0.2 million was utilized to pay down amounts owed under the
Deutsche Bank Securities borrowing agreement.

     Net cash used in operations was $1.5 million for the nine months ended
December 31, 2007 and for the nine months ended December 31, 2006. The principal
use of cash during the nine months ended December 31, 2007 was to fund the $1.9
million net loss for the period and the $0.8 million increase in accounts
receivable, offset by $1.3 million of non-cash charges. The principal use of
cash during the nine months ended December 31, 2006 was to fund the $0.6 million
net loss for the period and the $1.5 million increase in accounts receivable,
offset by $0.4 million of non-cash charges. The accounts receivable, net as of
December 31, 2007 of $1.9 million, representing primarily advertising sales
during the year, is expected to be received within the next four months. No
material account receivable balance is delinquent as of this filing.

     Net cash used in investing activities was $0.2 million for the nine months
ended December 31, 2007 to acquire computer related equipment and to develop
in-house software, compared to an immaterial amount during the nine months ended
December 31, 2006. The current year amount excludes approximately $50,000 of
computer related equipment acquired through a capital lease.

     Net cash provided by financing activities of $1.1 million for the nine
months ended December 31, 2007 reflects borrowing $0.9 million and repaying $0.2
million under the Deutsche Bank Securities agreement, and receiving $0.4 million
from the sale of Series D preferred stock. Salon does not have any remaining
shares of Series D preferred stock authorized to be sold.

     Salon expects to borrow approximately $0.3 million from the Deutsche Bank
Securities agreement by March 31, 2008, at which point it will have borrowed the
$1.0 million available under the agreement. As Salon forecasts that it will not
be able to repay amounts borrowed under this agreement by


                                       21
<PAGE>

its originally intended termination date of May 2008, Salon and its Chairman
have agreed that the Deutsche Bank Securities agreement may continue until March
31, 2009. Though Deutsche Bank Securities may demand repayment of amounts
borrowed at any time, Salon does not believe that it is likely until March 31,
2009. During the next twelve months, Salon estimates that it will require at
least $1.0 million to meet working capital needs. To meet this future cash need
and to repay amounts borrowed under the Deutsche Bank Securities agreement,
Salon will have to incur additional indebtedness or raise additional working
capital through the sale of equity securities in a private placement. However,
Salon does not currently have an agreement in place to provide such financing,
and there is no certainty that Salon will be able to enter into definitive
agreements for such financing on commercially reasonable terms.

Recent Accounting Pronouncements

     In June 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in an enterprise's financial statements in accordance with FASB Statement No.
109, "Accounting for Income Taxes," and prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. FIN 48 also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The adoption of FIN 48 as of
April 1, 2007 did not impact Salon's results of operations, financial position,
or cash flows.

     In September 2006, the FASB issued Statement of Financial Accounting
Standard No. 157, "Fair Value Measurements," ("SFAS 157".) SFAS 157 addresses
how companies should measure fair value when they are required to use a fair
value measure for recognition or disclosure purposes under generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS 157 is effective for fiscal years beginning after November 15, 2007. The
adoption of SFAS 157 as of April 1, 2007 did not impact Salon's results of
operations, financial position, or cash flows.

     In February 2007, the FASB issued Statement of Financial Accounting
Standard No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities - Including an Amendment to FASB Statement No. 115," ("SFAS 159".)
Under SFAS 159 entities will be permitted to measure financial instruments and
certain other assets and liabilities at fair value on an
instrument-by-instrument basis (the fair value option). SFAS 159 is effective
for fiscal years beginning after November 15, 2007 and allows for early
adoption. Salon plans on adopting SFAS 159 in April 2008 and believes that the
adoption of SFAS 159 will not impact Salon's results of operations, financial
position, or cash flows.

     In December 2007, the FASB issued Statement of Financial Accounting
Standard No. 141 (revised 2007), "Business Combinations," ("SFAS 141R") and No.
160, "Noncontrolling Interests in Consolidated Financial Statements," an
amendment of ARB No. 51 ("SFAS 160".) SFAS 141R establishes principles and
requirements during business combinations for how the acquirer:

     a.   Recognizes and measures in its financial statements the identifiable
          assets acquired, the liabilities assumed, and any noncontrolling
          interest in the acquiree,
     b.   Recognizes and measures the goodwill acquired in the business
          combination or a gain from a bargain purchase, and
     c.   Determines what information to disclose to enable users of the
          financial statements to evaluate the nature and financial effects of
          the business combination.


                                       22
<PAGE>

     SFAS 160 sets parameters as to how to report noncontrolling interest in
consolidated financial statements. SFAS 141R and SFAS 160 are effective for
fiscal years beginning after December 15, 2008. Salon believes that the adoption
of SFAS 141R and SFAS 160 will not impact Salon's results of operations,
financial position, or cash flows.

Off-Balance-Sheet Arrangements

     Salon has no off-balance-sheet arrangements.

Contractual Obligations

     The following summarizes Salon's contractual obligations as of December 31,
2007, and the effect these contractual obligations are expected to have on
Salon's liquidity and cash flows in future periods (in thousands):

                                        Payments Due By Period
                        ------------------------------------------------------
                                         1 Year                     More than
                           Total         or Less     1 - 3 Years     3 Years
                        ------------  ------------  ------------  ------------
Operating leases        $        503  $        405  $         98  $          -
Capital leases                    63            21            42             -
Short-term borrowings            700           700             -             -
                        ------------  ------------  ------------  ------------
     Total              $      1,266  $      1,126  $        140  $          -
                        ============  ============  ============  ============

Item 3. Quantitative and Qualitative Disclosure About Market Risk

     Salon maintains all of its cash in immediately available cash deposits at
its bank. These funds are not subject to market risk and no interest is paid on
such funds.

     In May 2007, Salon entered into a credit agreement with Deutsche Bank
Securities, Inc. and its Chairman that allows Salon to borrow up to $1.0
million, obligation of which will subject Salon to interest rate risk. The
interest rate under the agreement is prime less 0.25%. The actual interest rate
at the time of the initial borrowing under the agreement was 8%, and as of
December 31, 2007, the interest rate applicable to all borrowings then
outstanding declined to 7.0%. As of December 31, 2007, the interest rate during
the term of the agreement has not been greater than 8% nor less than 7.0% and
has averaged 7.60%. Salon feels that the effect of an interest rate change will
be immaterial over the term of the agreement.

     As Salon conducts all of its business in the United States, Salon is not
subject to foreign exchange risk.

Item 4. Controls and Procedures

Evaluation of Our Disclosure Controls and Internal Controls

     Our management, with the participation of our Chief Executive Officer and
our Chief Financial Officer, have concluded that our disclosure controls and
procedures are effective to ensure that information we are required to disclose
in reports that we file or submit under the Exchange Act is


                                       23
<PAGE>

recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

Changes in Internal Controls Over Financial Reporting

     There was no change in our internal controls over financial reporting that
occurred during the period covered by this Quarterly Report on Form 10-Q that
has materially affected, or is reasonably likely to materially affect, our
internal controls over financial reporting.


























                                       24
<PAGE>

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

PART II: OTHER INFORMATION

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

Item 1.  Legal Proceedings.

     Not applicable.

Item 1a.  Risk Factors.


Factors That May Affect Salon's Future Results and Market Price of Stock

     Salon's business faces significant risks. The risks described below may not
be the only risks Salon faces. Additional risks that are not yet known or that
are currently immaterial may also impair its business operations or have a
negative impact on its stock price. If any of the events or circumstances
described in the following risks actually occurs, its business, financial
condition or results of operations could suffer, and the trading price of its
common stock could decline.

Salon's projected cash flows may not meet expectations

     Salon relies on cash projections to run its business and changes such
projections as new information is made available or events occur. The most
significant component of Salon's cash projections is cash to be generated from
advertising sales and, to a lesser extent, cash to be generated from Salon
Premium. Forecasting advertising revenues and resulting cash receipts for an
extended period of time is problematic due to the short duration of most
advertising sales. If projected cash inflows and outflows do not meet
expectations, Salon's ability to continue as a going concern may be adversely
affected.

     If Salon forecasts or experiences periods of limited, or diminishing cash
resources, Salon may need to sell additional securities or incur additional
indebtedness. There is no guarantee that Salon will be able to issue additional
securities in future periods or incur indebtedness on commercially reasonable
terms to meet its cash needs. Salon's ability to continue as a going concern may
be adversely affected if it is unable to raise additional cash from sources it
has relied upon in the past.

Salon has relied on related parties for significant investment capital

     Salon has been relying on cash infusions from related parties to fund
operations. The related parties are primarily John Warnock, Chairman of the
Board of Salon, and William Hambrecht. William Hambrecht is the father of
Elizabeth Hambrecht, a Salon Director and a former President and Chief Executive
Officer of the company. During the year ended March 31, 2007, these related
parties invested $0.9 million in Salon. In November 2007, William Hambrecht
purchased 292 shares of series D-5 preferred stock for which Salon received
$350,400. In May 2007, John Warnock guaranteed an agreement between Salon and
Deutsche Bank Securities, Inc. that will allow Salon to borrow up to $1.0
million at an interest rate of prime less 0.25%.

     Curtailment of cash investments and borrowing guarantees by related parties
could detrimentally impact Salon's cash availability and its ability to fund its
operations.


                                       25
<PAGE>

Salon's principal stockholders can exercise a controlling influence over Salon's
business affairs and may make business decisions with which non-principal
stockholders disagree and may affect the value of their investment

     Based on information available to Salon, the holders of Salon's Series A,
B, C and D preferred stock collectively own approximately 92% of all voting
securities. These stockholders therefore own a controlling interest in Salon. Of
this amount, approximately 70% is held by former Directors and related parties,
of which approximately 22% is controlled directly or indirectly by William
Hambrecht and approximately 40% by Chairman and Director John Warnock.
Therefore, related parties by themselves own a controlling interest in Salon.

     If these stockholders were to act together, they would be able to exercise
control over all matters requiring approval by other stockholders, including the
election of Directors and approval of significant corporate transactions. This
concentration of ownership could also have the effect of accelerating, delaying
or preventing a change in control of Salon, which could cause Salon's stock
price to decline.

Future sales of significant number of shares of Salon's common stock by
principal stockholders could cause its stock price to decline

     Salon's preferred stockholders can convert their 9,475 shares of preferred
stock to approximately 9.7 million shares of common stock at any time. As
Salon's common stock is normally thinly traded, if these stockholders were to
convert their shares of preferred stock to common stock and sell the resulting
shares, the per share price of Salon's common stock may be adversely affected.
For example, effective July 31, 2006, a Series A preferred stockholder converted
62 shares of Series A preferred stock to 124,536 shares of common stock, and
shortly thereafter converted a warrant to 7,840 shares of common stock, for a
total of 132,376 shares of common stock. Between July 31, 2006 and October 30,
2006, the shareholder sold approximately 84,460 of these shares, and during the
same period of time, Salon's common stock dropped from $3.20 to $1.80 per share.

Salon may not be able to receive the full value of its advertising credits

     As of December 31, 2007, Salon has $3.2 million of advertising credits
which it has valued at $2.2 million that expire on December 31, 2009. Of the
$3.2 million, approximately $1.9 million are the obligation of Rainbow Media
Holdings ("Rainbow") and approximately $1.3 million are the obligation of NBC.
Salon feels that it should be able to fully utilize the credits before they
expire. Salon expects to recover the full value of all the advertising credits
through usage or settlement in cash, per the terms of the agreement, but there
can be no absolute assurance as to any potential cash settlement.

Salon's preferred stockholders are entitled to potentially significant
liquidation preferences of Salon's assets over common stockholders in the event
of such an occurrence

     Salon's Series A, B, C and D preferred stockholders have liquidation
preferences over common stockholders of the first approximately $23.3 million in
potential sales proceeds as of December 31, 2007, which includes the effect of
undeclared dividends of $3.8 million. If a liquidation event were to occur, and
preferred stock dividends were declared, the holders of preferred stock would be
entitled to the first $23.3 million of cash distributions, while the holders of
common stock would receive none of this amount. If a liquidation event were to
occur in excess of $23.3 million and if preferred stock dividends were to be
declared, the holders of preferred stock would be entitled to receive a
relatively larger distribution than the holders of common stock would be
entitled to receive.


                                       26
<PAGE>

Salon has historically lacked significant revenues and has a history of losses

     Salon has a history of significant losses and expects to incur a loss from
operations, based on generally accepted accounting principals, for its fiscal
year ending March 31, 2008 and potentially in future years. Once Salon attains
profitability, it may not be able to sustain or increase profitability on a
quarterly or annual basis in the future. If revenues grow slower than Salon
anticipates or operating expenses exceed expectations, financial results will
most likely be severely harmed and the ability of Salon to continue its
operations will be seriously jeopardized.

     Burr, Pilger & Mayer LLP, Salon's independent registered public accounting
firm for the years ended March 31, 2005, March 31, 2006, and March 31, 2007,
included a "going-concern" audit opinion on the consolidated financial
statements for those years. The audit opinions report substantial doubt about
Salon's ability to continue as a going concern, citing issues such as the
history of losses and absence of current profitability. As a result of the
"going-concern" opinions, Salon's stock price and investment prospects have been
and will continue to be adversely affected, thus limiting financing choices and
raising concerns about the realization of value on assets and operations.

Salon Premium memberships have been declining and will most likely continue to
decline, adversely affecting revenues and available cash

     Salon has relied on the revenues and cash generated from Salon Premium
subscriptions since its implementation in April 2002. Salon Premium
subscriptions grew from nothing to a high of approximately 89,100 as of December
31, 2004. However, since the peak experienced in December 31, 2004,
subscriptions have been declining to approximately 47,200 as of March 31, 2007
and to approximately 37,300 as of December 31, 2007. Salon forecasts that these
memberships will continue to decline to approximately 34,000 as of March 31,
2008. If the decline were to be in excess of anticipated amounts, Salon's
operations and available cash could be adversely affected.

Salon is dependent on advertising sales for much of its revenues, and its
inability to maintain or increase advertising revenues could harm its business

     Maintaining or increasing Salon's advertising revenues depends upon many
factors, including whether it will be able to:

     o    successfully sell and market its Website auto start Site Pass or other
          rich media advertisements;

     o    entice non Salon Premium Website visitors to view and advertisers to
          sell new ad units and formats;

     o    maintain a significant number of unique Website visitors and
          corresponding significant reach of Internet users;

     o    maintain a significant number of sellable impressions generated from
          Website visitors available to advertisers;

     o    successfully sell and market its Website to advertisers;

     o    increase the dollar amount of the advertising orders it receives;


                                       27
<PAGE>

     o    increase awareness of the Salon brand;

     o    improve the technology for serving advertising on its Website;

     o    handle temporary high volume traffic spikes to its Website;

     o    accurately measure the number and demographic characteristics of its
          users; and

     o    attract and retain key sales personnel.

Hackers may attempt to penetrate Salon's security system; online security
breaches could harm its business

     Consumer and supplier confidence in Salon's Website depends on maintaining
relevant security features. Security breaches also could damage its reputation
and expose it to a risk of loss or litigation. Experienced programmers or
"hackers" have successfully penetrated sectors of its systems and Salon expects
that these attempts will continue to occur from time to time. Because a hacker
who is able to penetrate network security could misappropriate proprietary
information or cause interruptions in its products and services, Salon may have
to expend significant capital and resources to protect against or to alleviate
problems caused by these hackers. Additionally, Salon may not have a timely
remedy against a hacker who is able to penetrate its network security. Such
security breaches could materially affect Salon. In addition, the transmission
of computer viruses resulting from hackers or otherwise could expose it to
significant liability. Salon's insurance policies may not be adequate to
reimburse it for losses caused by security breaches. Salon also faces risks
associated with security breaches affecting third parties with whom it has
relationships.

Salon's quarterly operating results are volatile and may adversely affect its
common stock price

     Salon's future revenues and operating results, both GAAP and non GAAP, are
likely to vary significantly from quarter to quarter due to a number of factors,
many of which are outside Salon's control, and any of which could severely harm
Salon's business. These factors include:

     o    Salon's ability to attract and retain advertisers and subscribers;

     o    Salon's ability to attract and retain a large number of users;

     o    the introduction of new Websites, services or products by Salon or by
          its competitors;

     o    the timing and uncertainty of Salon's advertising sales cycles;

     o    the mix of advertisements sold by Salon or its competitors;

     o    the economic and business cycle;

     o    Salon's ability to attract, integrate and retain qualified personnel;

     o    technical difficulties or system downtime affecting the Internet
          generally or the operation of Salon's Website; and

     o    the amount and timing of operating costs.


                                       28
<PAGE>

     Due to the factors noted above and the other risks discussed in this
section, one should not rely on quarter-to-quarter comparisons of Salon's
results of operations as an indication of future performance. It is possible
that some future periods' results of operations may be below the expectations of
public market analysts and investors. If this occurs, the price of its common
stock may decline.

The controversial content of Salon's Website may limit its revenues

     Salon's Website contains, and will continue to contain, content that is
politically and culturally controversial. As a result of this content, current
and potential advertisers, potential Salon Premium subscribers, or third parties
who contemplate aggregating content, may refuse to do business with Salon.
Salon's outspoken stance on political issues has and may continue to result in
negative reactions from some users, commentators and other media outlets. From
time to time, certain advocacy groups have successfully targeted Salon's
advertisers in an attempt to persuade such advertisers to cease doing business
with Salon. These efforts may be a material impediment to Salon's ability to
grow and maintain advertising revenue.

Salon needs to hire, integrate and/or retain qualified personnel because these
individuals are important to its growth

     Salon's success significantly depends on key personnel. In addition,
because Salon's users must perceive the content of Salon's Website as having
been created by credible and notable sources, Salon's success also depends on
the name recognition and reputation of its editorial staff. Due to Salon's
history of losses, Salon may experience difficulty in hiring and retaining
highly skilled employees with appropriate qualifications. Salon may be unable to
retain its current key employees or attract, integrate or retain other qualified
employees in the future. If Salon does not succeed in attracting new personnel
or retaining and motivating its current personnel, its business could be harmed.

Salon may expend significant resources to protect its intellectual property
rights or to defend claims of infringement by third parties, and if Salon is not
successful it may lose rights to use significant material or be required to pay
significant fees

     Salon's success and ability to compete are significantly dependent on its
proprietary content. Salon relies exclusively on copyright law to protect its
content. While Salon actively takes steps to protect its proprietary rights,
these steps may not be adequate to prevent the infringement or misappropriation
of its content, which could severely harm its business. Salon also licenses
content from various freelance providers and other third-party content
providers. While Salon attempts to ensure that such content may be freely
licensed to it, other parties may assert claims of infringement against it
relating to such content.

     Salon may need to obtain licenses from others to refine, develop, market
and deliver new services. Salon may not be able to obtain any such licenses on
commercially reasonable terms or at all or rights granted pursuant to any
licenses may not be valid and enforceable.

     In April 1999 Salon acquired the Internet address www.salon.com. Because
www.salon.com is the address of the main home page to its Website and
incorporates its company name, it is a vital part of its intellectual property
assets. Salon does not have a registered trademark on the address, and therefore
it may be difficult for it to prevent a third party from infringing on its
intellectual property rights to the address. If Salon fails to adequately
protect its rights to the Website address, or if a third party infringes its
rights to the address, or otherwise dilutes the value of www.salon.com, its
business could be harmed.


                                       29
<PAGE>

Salon's technology development efforts may not be successful in improving the
functionality of its network, which could result in reduced traffic on its
Website, reduced advertising revenues, or a loss of Salon Premium subscribers

     Salon is constantly upgrading its technology to manage its Website and its
Salon Premium program. In addition, it is creating technology for new products
that Salon hopes to launch within the next three months. If these systems do not
work as intended, or if Salon is unable to continue to develop these systems to
keep up with the rapid evolution of technology for content delivery and
subscription management, its Website or subscription management systems may not
operate properly, which could harm Salon's business. Additionally, software
product design, development and enhancement involve creativity, expense and the
use of new development tools and learning processes. Delays in software
development processes are common, as are project failures, and either factor
could harm Salon's business. Moreover, complex software products such as its
online publishing and subscription management systems frequently contain
undetected errors or shortcomings, and may fail to perform or scale as expected.
Although Salon has tested and will continue to test its systems, errors or
deficiencies may be found in these systems that may adversely impact its
business.

Salon relies on software, purchased from an independent supplier, to deliver and
report some of its advertising, the failure of which could impair its business

     Salon uses software, purchased from an independent supplier, to manage and
measure the delivery of advertising on its Website. The software is essential to
Salon whenever an advertiser does not stipulate ad serving from a third party
such as Doubleclick. This type of software may fail to perform as expected. If
this software malfunctions, advertisements may not be served correctly on its
Website, or if the software does not accurately capture impression information,
then Salon's advertising revenues could be reduced, and its business could be
harmed.

Salon may be held liable for content or third party links on its Website or
content distributed to third parties

     As a publisher and distributor of content over the Internet, including
user-generated content, links to third party Websites that may be accessible
through Salon.com, or content that includes links or references to a third
party's Website, Salon faces potential liability for defamation, negligence,
copyright, patent or trademark infringement and other claims based on the
nature, content or ownership of the material that is published on or distributed
from its Website. These types of claims have been brought, sometimes
successfully, against online services, Websites and print publications in the
past. Other claims may be based on errors or false or misleading information
provided on linked Websites, including information deemed to constitute
professional advice such as legal, medical, financial or investment advice.
Other claims may be based on links to sexually explicit Websites. Although Salon
carries general liability and media insurance, its insurance may not be adequate
to indemnify Salon for all liabilities imposed. Any liability that is not
covered by its insurance or is in excess of its insurance coverage could
severely harm its financial condition and business. Implementing measures to
reduce its exposure to these forms of liability may require Salon to spend
substantial resources and limit the attractiveness of Salon's service to users.

Concerns about transactional security may hinder electronic commerce on Salon's
Website and may expose Salon to potential liability

     A significant barrier to sale of subscriptions and electronic commerce is
the secure transmission of confidential information over public networks. Any
breach in Salon's security could expose it to a risk


                                       30
<PAGE>

of loss or litigation and possible liability. Salon relies on encryption and
authentication technology licensed from third parties to provide secure
transmission of confidential information. As a result of advances in the
capabilities of Internet hackers, or other developments, a compromise or breach
of the algorithms Salon uses to protect customer transaction data may occur. A
compromise of Salon's security could severely harm its business. A party who is
able to circumvent Salon's security measures could misappropriate proprietary
information, including customer credit card information, or cause interruptions
in the operation of its Website.

     Salon may be required to expend significant capital and other resources to
protect against the threat of security breaches or to alleviate problems caused
by these breaches. Protection may not be available at a reasonable price or at
all.

Salon's internally developed software and software platforms provided by a third
party to manage Salon's subscription business might fail resulting in lost
subscription income

     Salon's software to manage its subscription business was developed
internally to interface with the software provided by a third party. The third
party's software provides a gateway to authenticate credit card transactions.
Even though Salon's system to manage its Salon Premium program is Payment Card
Industry (PCI) compliant, if this system were to fail or not function as
intended, credit card transactions might not be processed and Salon's cash
resources and revenues would therefore be harmed.

Salon's systems may fail due to natural disasters, telecommunications failures
and other events, any of which would limit user traffic

     Substantially all of Salon's communications hardware and computer hardware
operations for its Website are in a facility in Sacramento, California, away
from active earthquake fault lines. Fire, floods, earthquakes, power loss,
telecommunications failures, break-ins, supplier failure to meet commitments,
and similar events could damage these systems and cause interruptions in its
services. Computer viruses, electronic break-ins or other similar disruptive
problems could cause users to stop visiting Salon's Website and could cause
advertisers to terminate any agreements with Salon. In addition, Salon could
lose advertising revenues during these interruptions and user satisfaction could
be negatively impacted if the service is slow or unavailable. If any of these
circumstances occurred, Salon's business could be harmed. Salon's insurance
policies may not adequately compensate it for losses that may occur due to any
failures of or interruptions in its systems. Salon does not presently have a
formal disaster recovery plan.

     Salon's Website must accommodate a high volume of traffic and deliver
frequently updated information. It is possible that Salon will experience
systems failures in the future and that such failures could harm its business.
In addition, its users depend on Internet service providers, online service
providers and other Website operators for access to its Website. Many of these
providers and operators have experienced significant outages in the past, and
could experience outages, delays and other difficulties due to system failures
unrelated to its systems. Any of these system failures could harm its business.

Privacy concerns could impair Salon's business

     Salon has a policy against using personally identifiable information
obtained from users of its Website and services without the user's permission.
In the past, the Federal Trade Commission has investigated companies that have
used personally identifiable information without permission or in violation of a
stated privacy policy. If Salon uses personal information without permission or
in violation of its policy, Salon may face potential liability for invasion of
privacy for compiling and providing


                                       31
<PAGE>

information to its corporate customers and electronic commerce merchants. In
addition, legislative or regulatory requirements may heighten these concerns if
businesses must notify Internet users that the data may be used by marketing
entities to direct product promotion and advertising to the user. Other
countries and political entities, such as the European Union, have adopted such
legislation or regulatory requirements. The United States may adopt similar
legislation or regulatory requirements. If consumer privacy concerns are not
adequately addressed, its business, financial condition and results of
operations could be materially harmed.

Provisions in Delaware law and Salon's charter, stock option agreements and
offer letters to executive officers may prevent or delay a change of control

     Salon is subject to the Delaware anti-takeover laws regulating corporate
takeovers. These anti-takeover laws prevent Delaware corporations from engaging
in a merger or sale of more than 10% of its assets with any stockholder,
including all affiliates and associates of the stockholder, who owns 15% or more
of the corporation's outstanding voting stock, for three years following the
date that the stockholder acquired 15% or more of the corporation's assets
unless:

     o    the Board of Directors approved the transaction in which the
          stockholder acquired 15% or more of the corporation's assets;

     o    after the transaction in which the stockholder acquired 15% or more of
          the corporation's assets, the stockholder owned at least 85% of the
          corporation's outstanding voting stock, excluding shares owned by
          directors, officers and employee stock plans in which employee
          participants do not have the right to determine confidentially whether
          shares held under the plan will be tendered in a tender or exchange
          offer; or

     o    on or after this date, the merger or sale is approved by the Board of
          Directors and the holders of at least two-thirds of the outstanding
          voting stock that is not owned by the stockholder.

     A Delaware corporation may opt out of the Delaware anti-takeover laws if
its certificate of incorporation or bylaws so provide. Salon has not opted out
of the provisions of the anti-takeover laws. As such, these laws could prohibit
or delay mergers or other takeover or change of control of Salon and may
discourage attempts by other companies to acquire Salon.

     Salon's certificate of incorporation and bylaws include a number of
provisions that may deter or impede hostile takeovers or changes of control or
management. These provisions include:

     o    Salon's Board is classified into three classes of Directors as nearly
          equal in size as possible with staggered three year-terms; and

     o    special meetings of the stockholders may be called only by the
          Chairman of the Board, the Chief Executive Officer or the Board of
          Directors.

These provisions may have the effect of delaying or preventing a change of
control.

     Salon's certificate of incorporation and bylaws provide that it will
indemnify officers and Directors against losses that they may incur in
investigations and legal proceedings resulting from their services to Salon,
which may include services in connection with takeover defense measures. These
provisions may have the effect of preventing changes in Salon's management.


                                       32
<PAGE>

     In addition, employment agreements with Salon's Chief Executive Officer and
Chief Financial Officer provide for the payment of severance and acceleration of
the vesting of options and/or restricted stock in the event of termination of
the executive officer following a change of control of Salon. These provisions
in offer letters could have the effect of discouraging potential takeover
attempts.

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

     Not applicable.

Item 3.  Defaults Upon Senior Securities.

     Not applicable.

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

     Not applicable

Item 5.  Other Information.

     Not applicable.



















                                       33
<PAGE>

Item 6.  Exhibits

(a)  Exhibits.

31.1      Certification of Christopher Neimeth, Chief Executive Officer of the
          Registrant pursuant to Section 302, as adopted pursuant to the
          Sarbanes-Oxley Act of 2002

31.2      Certification of Norman Blashka, Chief Financial Officer of the
          Registrant pursuant to Section 302, as adopted pursuant to the
          Sarbanes-Oxley Act of 2002

32.1      Certification of Christopher Neimeth, Chief Executive Officer of the
          Registrant pursuant to Section 906, as adopted pursuant to the
          Sarbanes-Oxley Act of 2002

32.2      Certification of Norman Blashka, Chief Financial Officer of the
          Registrant pursuant to Section 906, as adopted pursuant to the
          Sarbanes-Oxley Act of 2002


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 the
undersigned, thereunto duly authorized.


                             SALON MEDIA GROUP, INC.


Dated:  February 12, 2008            /s/ Christopher Neimeth
                                     ------------------------------
                                     Christopher Neimeth
                                     Chief Executive Officer



Dated:  February 12, 2008            /s/ Norman Blashka
                                     ------------------------------
                                     Norman Blashka
                                     Chief Financial Officer


                                       34