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

                       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 June 30, 2005
                                       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 [ ] No [X]

Indicate by check mark whether the Registrant is an accelerated filer as defined
by Rule 12b-12 of the act. Yes [ ] No [X]

The number of outstanding shares of the Registrant's Common Stock, par value
$0.001 per share, on August 3, 2005 was 15,452,189 shares.

================================================================================
<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 June 30, 2005
           and March 31, 2005 (unaudited)....................................  3

           Condensed Consolidated Statements of Operations for the
           three months ended June 30, 2005 and 2004 (unaudited) ............  4

           Condensed Consolidated Statements of Cash Flows for the
           three months ended June 30, 2005 and 2004 (unaudited) ............  5

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

ITEM 2:    Management's Discussion and Analysis of Financial Condition
           and Results of Operations......................................... 12

ITEM 3:    Quantitative and Qualitative Disclosures About Market Risk........ 26

ITEM 4:    Controls and Procedures........................................... 27

PART II    OTHER INFORMATION

ITEM 1:    Legal Proceedings................................................. 27

ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds....... 27

ITEM 3.    Defaults upon Senior Securities................................... 27

ITEM 4.    Submission of Matters to a Vote of Security Holders............... 28

ITEM 5.    Other Information................................................. 28

ITEM 6:    Exhibits and Reports on Form 8-K.................................. 28

           Signatures........................................................ 28


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


                                       2
<PAGE>

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)

<TABLE>
<CAPTION>
                                                                       June 30,        March 31,
                                                                         2005            2005
                                                                     ------------    ------------
                                                                      (Unaudited)
<S>                                                                  <C>             <C>
Assets
    Current assets:
        Cash and cash equivalents                                    $        301    $        686
        Accounts receivable, net                                              866             623
        Prepaid expenses and other current assets                             166             232
                                                                     ------------    ------------
        Total current assets                                                1,333           1,541
    Property and equipment, net                                               189             191
    Prepaid advertising rights                                              3,926           3,970
    Goodwill, net                                                             200             200
    Other assets                                                              170             167
                                                                     ------------    ------------
        Total assets                                                 $      5,818    $      6,069
                                                                     ============    ============
Liabilities and stockholders' equity
    Current liabilities:
        Accounts payable and accrued liabilities                     $        633    $        788
        Deferred revenue                                                      947           1,047
                                                                     ------------    ------------
        Total current liabilities                                           1,580           1,835
    Long-term liabilities
        Other long-term liabilities                                           134              82
                                                                     ------------    ------------
        Total liabilities                                                   1,714           1,917
                                                                     ------------    ------------
Stockholders' equity:
    Preferred stock, $0.001 par value, 5,000,000 shares
        authorized, 8,386 shares issued and outstanding at
        June 30, 2005 and March 31, 2005 (liquidation
        value of $20,881 at June 30, 2005)                                      -               -
    Common stock, $0.001 par value, 600,000,000 shares
        authorized, 15,346,609 shares issued and outstanding
        at June 30, 2005 and 14,970,622 shares issued and
        outstanding at March 31, 2005                                          15              15
    Additional paid-in-capital                                             95,531          95,430
    Unearned compensation                                                     (33)

    Accumulated deficit                                                   (91,409)        (91,293)
                                                                     ------------    ------------
        Total stockholders' equity                                          4,104           4,152
                                                                     ------------    ------------
        Total liabilities and stockholders' equity                   $      5,818    $      6,069
                                                                     ============    ============
</TABLE>

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


                                       3
<PAGE>

                             SALON MEDIA GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                                     June 30,
                                                                             ------------------------
                                                                                2005          2004
                                                                             ----------    ----------
<S>                                                                          <C>           <C>
Net revenues                                                                 $    1,630    $    1,733
                                                                             ----------    ----------

Operating expenses:
    Production and content                                                        1,053         1,200
    Sales and marketing                                                             317           468
    Research and development                                                        184           135
    General and administrative                                                      211           228
                                                                             ----------    ----------
        Total operating expenses                                                  1,765         2,031
                                                                             ----------    ----------

Loss from operations                                                               (135)         (298)
Other income (expense), net                                                          19          (273)
                                                                             ----------    ----------
Net loss                                                                           (116)         (571)
Preferred deemed dividend                                                             -          (593)
                                                                             ----------    ----------
Net loss attributable to common stockholders                                 $     (116)   $   (1,164)
                                                                             ==========    ==========

Basic and diluted net loss per share attributable to common stockholders     $    (0.01)   $    (0.08)

Weighted average shares used in computing basic
    and diluted net loss per share                                               15,132        14,155
</TABLE>


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


                                       4
<PAGE>

                             SALON MEDIA GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         Three Months Ended
                                                                                              June 30,
                                                                                     --------------------------
                                                                                         2005           2004
                                                                                     -----------    -----------
<S>                                                                                  <C>            <C>
Cash flows from operating activities:
  Net loss                                                                           $      (116)   $      (571)
  Adjustments to reconcile net loss to net cash used in operating activities:
     Warrant re-valuation                                                                      -            490
     Depreciation and amortization                                                            21             94
     Stock compensation expense                                                               48              -
     Amortization of prepaid advertising rights                                               44            150
     Changes in assets and liabilities:
        Accounts receivable                                                                 (243)          (515)
        Prepaid expenses, other current assets and other assets                               63             42
        Accounts payable, accrued liabilities and other long-term liabilities               (103)           (28)
        Deferred revenue                                                                    (100)           (12)
                                                                                     -----------    -----------
           Net cash used in operating activities                                            (386)          (350)
                                                                                     -----------    -----------

Cash flows from investing activities:
  Purchase of property and equipment                                                         (19)           (64)
                                                                                     -----------    -----------
           Net cash used by investing activities                                             (19)           (64)
                                                                                     -----------    -----------

Cash flows from financing activities:
  Proceeds from issuance of common stock                                                      20              -
  Proceeds from issuance of preferred stock, net                                               -            491
  Principal payments under capital lease obligations                                           -             (8)
                                                                                     -----------    -----------
           Net cash provided by financing activities                                          20            483
                                                                                     -----------    -----------

Net increase (decrease) in cash and cash equivalents                                        (385)            69
Cash and cash equivalents at beginning of period                                             686            696
                                                                                     -----------    -----------
Cash and cash equivalents at end of period                                           $       301    $       765
                                                                                     ===========    ===========

Supplemental schedule of non-cash investing and financing activities:

     Preferred deemed dividend in connection with preferred stock financing          $         -    $       593
</TABLE>


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


                                       5
<PAGE>

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

1.   The Company

     Salon Media Group, Inc ("Salon") is an Internet media company that produces
a content Website with eight primary subject-specific sections and two online
communities. One of the sections provides audio streaming. 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.

2.   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,
2005 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, as amended. 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 three months ended June 30, 2005 are not
necessarily indicative of the expected results for any other interim period or
for the fiscal year ending March 31, 2006.

     These condensed consolidated financial statements contemplate the
realization of assets and the satisfaction of liabilities in the normal course
of business. Salon has incurred annual losses and negative cash flows from
operations since inception and has an accumulated deficit at June 30, 2005 of
$91,409. These factors raise substantial doubt about Salon's ability to continue
as a going concern.

     Salon's independent accountants for the years ended March 31, 2003, 2004
and 2005 have included a paragraph in their reports indicating substantial doubt
as to Salon's ability to continue as a going concern due to recurring operating
losses and negative cash flows. Due to the recurring losses, Salon has reduced
expenses that have resulted in the net cash used in operating activities
decreasing from $5.0 million for the year ended March 31, 2002 to $2.9 million
for the year ended March 31, 2003 and to $2.8 million for the year ended March
31, 2004. During this time period, advertisers were reluctant to place
advertisements on Salon's Website due to concerns over Salon's ability to
continue as a going concern. However, with the reduction in expenses, investors
were willing to invest additional capital in Salon. The resulting infusion of
cash from the issuance of convertible and promissory notes and preferred stock
resulted in advertisers becoming more willing to place advertisements with
Salon. As a consequence, advertising revenues increased from $1.8 million for
the year ended March 31, 2004 to $3.6 million for the year ended March 31, 2005
and the net cash used in operations decreased to $0.8 million for the year ended
March 31, 2005. Due to the increased willingness of advertisers to place
advertisements on Salon's Website, Salon's forecast of a modest increase in
advertising revenue to $4.1 million should be achievable.

     Salon's current forecast of total revenue of $7.0 million for the year
ending March 31, 2006 includes $4.1 million of advertising revenue, $2.1 million
of Salon Premium revenue and $0.5 million attributable to The Well on-line
discussion forum. The current assumption in attaining $2.1 million of


                                       6
<PAGE>

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

Salon Premium revenue assumes that Salon will not continue to experience an
accelerated decline in Salon premium memberships that it has recently
experienced. The revenue impact of a decline in Salon Premium memberships are
mitigated as the revenues from this source are recognized ratably over the
period the revenue is earned, generally over a one year period. Salon cannot
accurately estimate at this time the future impact on cash flow or revenue
recognition of the downward trend in Salon Premium memberships.

     Salon purchased The Well, an on-line community, in 1999. Even though this
line of business has generated positive cash-flow since its acquisition, and is
forecast to generate $0.5 million of revenue for the year ending March 31, 2006,
Salon is evaluating what role, if any, this business will have in the future. As
such, Salon has begun to explore the potential sale of the on-line community.
The assets of The Well are predominately $0.2 million of goodwill. If The Well
operation is sold, Salon will most likely not attain its forecasted revenue of
$7.0 million. The potential sale of The Well is not driven by a need to generate
cash to finance Salon's operations.

     Based on current forecasted advertising revenues and a weakening in Salon
Premium memberships, Salon projects that it may experience a cash flow deficit
of approximately $0.2 million for the year ending March 31, 2006 after deducting
non-cash charges. Salon also forecasts that it will incur periods of limited
cash, primarily in late August 2005 and early September 2005, during which total
cash resources on hand may be less than $0.2 million. Salon cannot accurately
predict the amount of near-term cash that it will have on hand after that point
due to the unpredictability in securing advertising campaigns and the attrition
being experienced in membership to Salon's subscription services.

     A major risk factor in attaining the $4.1 million in advertising revenue
will be the ability of Salon to generate a sufficient number of advertising
impressions from unique Website visitors to satisfy order requirements during
the time periods that advertisements are slated to run on Salon's Website. Salon
therefore has to increase the number of unique Website visitors who generate
page views and resulting advertising impressions in order to lessen this
potential limiting factor. Salon has recently finalized an agreement with Yahoo,
Inc. in an attempt to increase the number of unique Website visitors to Salon's
Website for which Salon will provide its content to Yahoo, Inc. In return,
Yahoo, Inc. will include Salon's content in search results from its Yahoo News
site, which when "clicked on" will divert a Yahoo Website visitor to a Salon
webpage. In addition, Salon will implement a Yahoo search box on its web pages.
Salon cannot predict what effect, if any, this agreement will have on Salon's
results of operations or in increasing the number of unique visitors to Salon's
Website.

     The "Purchase Agreement" and the "Certificate of Designation of Preferences
and Rights of the Series D-1 Preferred Stock, Series D-2 Preferred Stock, Series
D-3 Preferred Stock, Series D-4 Preferred Stock and Series D-5 Preferred Stock,"
collectively, the "Series D preferred stock," allow Salon to sell and issue an
additional 1,251 shares of Series D preferred stock, for which Salon could
receive approximately $1.5 million in cash. As Salon currently forecasts periods
of limited cash and a cash flow deficit of $0.2 million for the year ending
March 31, 2006 after deducting non-cash charges, Salon anticipates that it will
seek purchasers for some or all of the remaining 1,251 shares of Series D-2
preferred stock. There is no guarantee that Salon will be successful in finding
buyers for these securities.


                                       7
<PAGE>

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

3.   Concentrations of Credit Risk

     No customers accounted for more than 10% of total revenue for the
three-month periods ended June 30, 2005 and June 30, 2004. One customer
accounted for 11% of the total accounts receivable balance as of June 30, 2005.
Two customers accounted for 11% and 10%, respectively, of the total accounts
receivable balance as of June 30, 2004.

4.   Goodwill Amortization and Intangible Assets

     The following table sets forth information concerning Salon's goodwill and
intangible assets as of June 30, 2005 and March 31, 2005:

<TABLE>
<CAPTION>
                                                             Gross                          Net
                                                            Carrying     Accumulated      Carrying
                                                             Amount      Amortization      Amount
                                                          ------------   ------------   ------------
<S>                                                       <C>            <C>                      <C>
Trade name                                                $      1,200   $      1,200   $          -
Proprietary technology                                             355            355              -
Audio technology                                                   158            158              -
                                                          ------------   ------------   ------------
Total intangible assets subject to amortization           $      1,713   $      1,713   $          -
                                                          ============   ============   ============

Goodwill                                                  $      3,555   $      3,355   $        200
                                                          ------------   ------------   ------------
Total intangible assets not subject to amortization       $      3,555   $      3,355   $        200
                                                          ============   ============   ============
</TABLE>

5.   Recent Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 123R (revised 2004),
"Share-Based Payment" (SFAS 123R). In annual periods beginning after June 15,
2005, as amended by the Securities and Exchange Commission (SEC), SFAS 123R
would eliminate the ability to account for equity-based compensation using the
intrinsic value-based method under Accounting Principles Board (APB)25. SFAS
123R requires companies to calculate equity-based compensation expense for stock
compensation awards based on the fair value of the equity instrument at the time
of grant. Salon currently uses, and will upon adoption of SFAS 123R, utilize the
Black-Scholes option pricing model to determine the value of its stock
compensation awards, but may later determine that an alternative model may be
more appropriate.

     Under SFAS 123R, public companies are allowed to select from three
alternative transition methods: the Modified Prospective Application, which
allows for the adoption of SFAS 123R without restatement of prior interim
periods in the year of adoption; and the Modified Retrospective Application
which allows companies to restate prior financial statements. Salon expects to
adopt SFAS 123R beginning in the first quarter of fiscal year 2007, as required,
using the Modified Prospective method, and will not restate prior periods for
the adoption of SFAS 123R.

     Currently, Salon discloses pro forma net income (loss) and related pro
forma net income (loss) per share in accordance with SFAS 123 "Accounting for
Stock-Based Compensation" and SFAS 148 "Accounting for Stock-Based
Compensation-Transition and Disclosure-An Amendment of FASB


                                       8
<PAGE>

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

Statement No. 123". Under SFAS 123R, equity-based compensation expense is
required to be recognized in companies' financial statements.

     The amounts disclosed within the footnotes are not necessarily indicative
of the amounts that will be expensed upon the adoption of SFAS No. 123R.
Compensation expense calculated under SFAS No. 123R may differ materially from
amounts currently disclosed within the footnotes, as a result of changes in the
fair value of our common stock, the term in which the options vest, changes in
the number of options granted, the treatment of tax benefits that may result,
and changes in interest rates or other factors.

6.   Net Loss Per Share

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

<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                          June 30,
                                                                               ------------------------------
                                                                                    2005             2004
                                                                               -------------    -------------
<S>                                                                            <C>              <C>
Numerator:
    Net loss attributable to common stockholders                               $        (116)   $      (1,164)
                                                                               =============    =============

Denominator:
    Weighted average shares used in computing
      basic and diluted net loss per share                                        15,132,000       14,155,000
                                                                               =============    =============

    Basic and diluted net loss per share attributable to common
    stockholders                                                               $       (0.01)   $       (0.08)
                                                                               =============    =============
    Antidilutive securities including options, warrants and convertible
      preferred stock not included in net loss attributable to common
      stockholders per share calculation                                         238,572,838      205,229,651
</TABLE>

     In May 2005, Salon issued options to purchase 196,500 shares of common
stock to two consultants. The options were granted at $0.26 per share, which was
the closing price of Salon's common stock on the date of grant. Of the options
granted, 50% of the shares subject to options vested on the date of grant and
50% of the shares subject to the options vest on February 7, 2006, as long as
the named individuals continue to provide services as a consultant. The
estimated grant date present value of $80 was calculated using the Black-Scholes
option-pricing model with the following material assumptions: (i) a risk-free
rate of 3.8%, (ii) expected volatility of 120%, (iii) expected life of 4 years,
and (iv) no dividend. Of the $80 value, $48 was charged to operations and is
included in the reported net loss of $116 for the three month period ended June
30, 2005.


                                       9
<PAGE>

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

     If Salon's compensation expense under its stock option plan had been
determined pursuant to SFAS No. 123R, Salon's net loss per share would have been
as follows:

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                      June 30,
                                                              ------------------------
                                                                 2005          2004
                                                              ----------    ----------
<S>                                                           <C>           <C>
Net loss attributable to common stockholders:
      As reported                                             $     (116)   $   (1,164)
      Add back: stock-based employee compensation
      expense included in reported net loss                            -             -

      Deduct: total stock-based compensation expense
      determined under the fair value based method, net
      of related tax                                              (1,159)          (16)
                                                              ----------    ----------
      Pro forma net loss attributable to common
      stockholders                                            $   (1,275)   $   (1,180)
                                                              ==========    ==========

Basic and diluted net loss per share attributable
to common stockholders:
      As reported                                             $    (0.01)   $    (0.08)
      Pro forma net loss per share                            $    (0.08)   $    (0.08)
</TABLE>

7    Warrant Valuation

     Up until November 22, 2004, Salon had an inadequate number of authorized
common shares to satisfy all convertible preferred shares, warrant agreements
and option grants, which required Salon to record as an additional liability the
value any new warrants issued, and to re-measure the value of all warrants
issued at each balance sheet period, with such change recorded in Salon's
results of operations. At Salon's Annual Meeting of Stockholders held on
November 17, 2004, the stockholders approved an amendment to the certificate of
incorporation to increase the number of authorized common shares from 50,000,000
to 600,000,000, with such certificate being filed by the Delaware Secretary of
State on November 22, 2004. As of that day, Salon was relieved of the
requirement to record the value of warrants as a long-term liability and
corresponding charges or benefits to its results of operations.


                                       10
<PAGE>

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

     The June 30, 2004 re-measurement of value of all warrants then outstanding
resulted in a non-cash charge to operations of $888 recapped as follows:

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                     ------------------
Purpose of issuance of warrants:     Operating results affected         June 30, 2004
                                                                     ------------------
<S>                                                                  <C>
   Editorial collaboration           Production and content          $       (72)
   Employee severance agreement      General and administrative              (35)
   Issuance of convertible notes     Other income (expense), net            (383)
   Issuance of preferred stock       Preferred deemed dividend              (398)
                                                                     ------------------
                                                                     $      (888)
                                                                     ==================
</TABLE>



                                       11
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Conditions 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, 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 media company. The main entry and navigation point to
Salon's eight primary subject-specific sections is Salon's home page at
www.salon.com. The Website provides 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 also hosts two online communities, Table Talk and The
Well, a user blogging program, a daily music download column Audiofile, and the
Daou Report, an opinionated guide to the blogosphere.

     Salon believes that its original, award-winning content allows it to
attract and retain users who are more affluent, better educated and more likely
to make online purchases than typical Internet users. Salon believes its user
profile makes its Website a valuable media property for advertisers and
retailers who are allocating marketing resources to target consumers online.

     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, as amended, filed with the Securities and Exchange
Commission. Matters of interest therein include, but are not limited to, Salon's
disclosure of critical accounting policies.

Results of Operations for the Three Months Ended June 30, 2005 Compared To the
Three Months Ended June 30, 2004

Net revenues:

     Net revenues decreased 6% to $1.6 million for the three months ended June
30, 2005 from $1.7 million for the three months ended June 30, 2004.

     Advertising revenues decreased to $0.9 million for the three months ended
June 30, 2005 from $1.0 million for the three months ended June 30, 2004. The
$0.1 million decrease reflects the adverse


                                       12
<PAGE>

effect of the medical leave of absence of Salon's Senior Vice President
effective June 1, 2005. Subsequent to June 30, 2005, Salon promoted a staff
member to a sales position and a second individual accepted a similar sales
position. Included in the results for the three months ended June 30, 2005 is
$13,000 of barter revenue. Salon does not anticipate incurring barter revenue
next quarter. Salon estimates that advertising revenues for the three months
ended September 30, 2005 will be approximately $0.7 - $0.9 million.

     Salon Premium subscription revenues for the three months ended June 30,
2005 and June 30, 2004 were constant at $0.5 million. Total paid subscriptions
dropped from approximately 20,900 for the three months ended June 30, 2004 to
approximately 15,300 for the three months ended June 30, 2005. The downward
trend in subscriptions resulted in the total number of active subscribers
declining from approximately 84,500 as of March 31, 2005, to approximately
80,600 as of June 30, 2005 and to approximately 78,900 as of this filing. Even
though the renewal rate for one year paid subscriptions stayed constant at 69%
as of June 30, 2004 and March 31, 2005, the rate declined to approximately 66%
as of June 30, 2005, reflecting the recent decline of subscribers. Salon cannot
predict if these trends will continue. Salon estimates that it will recognize
$0.5 million of Salon Premium revenue for the three months ended September 30,
2005.

     Revenues from all other sources were $0.2 million for the three months
ended June 30, 2005 and June 30, 2004. Salon does not anticipate material
changes to this amount for the three months ended September 30, 2005.

Production and content:

     Production and content expenses during the three months ended June 30, 2005
were $1.1 million compared to $1.2 million for the three months ended June 30,
2004, a decline of $0.1 million or 12%. The decline between periods reflects
reduced ad serving charges and the absence of warrant related charges this year
as compared to last year. The current quarter results include nominal charges
for the value of stock options that were granted to consultants. Salon does not
anticipate material changes to production and content expenditures in the near
future.

Sales and marketing:

     Sales and marketing expenses during the three months ended June 30, 2005
were $0.3 million compared to $0.5 million for the three months ended June 30,
2004, a decline of $0.2 million or 32%. The decline between periods reflects
utilizing $0.1 million fewer adverting credits this quarter compared to last
year and $0.1 million from reduced payroll related costs. The current period
results include $13,000 of barter related expenses. Salon does not anticipate
incurring barter related expenses in future period results and does not expect
material changes to sales and marketing expenditures in the near future.

Research and development:

     Research and development expenses during the three months ended June 30,
2005 of $184,000 were comparable to the $135,000 incurred for the three months
ended June 30, 2004. The nominal change between periods reflects the addition of
an additional staff member between periods and expenses to re-design Salon's
Website. Salon does not anticipate material future changes in research and
development expenditures.


                                       13
<PAGE>

General and administrative:

     General and administrative expenses for the three months ended June 30,
2005 and June 30, 2004 were $0.2 million. Salon does not anticipate material
future changes in general and administrative expenditures.

Other income (expense), net:

     The results for the three months ended June 30, 2004 include a non-cash
charge of $0.4 million due to a change in value of warrants issued to former
convertible note holders, offset by $0.1 million of realized income, derived
from grant monies received by Salon to finance editorial content, for which
Salon's obligation was met during the period. No comparable amounts were
incurred during the three months ended June 30, 2005.

Preferred deemed dividend:

     On June 4, 2004 Salon issued 417 shares of Series D-1 preferred stock and
received net proceeds of approximately $0.5 million. The transaction resulted in
a $0.2 million non-cash charge ensuing from the difference between the offering
price of Salon's Series D-1 preferred stock and the fair value of Salon's common
stock into which the preferred stock is convertible on the date of the
transaction and the warrants issued.

     The results for the three months ended June 30, 2004 also includes a
non-cash charge of $0.4 million resulting from revaluing warrants issued to
preferred stockholders. The change in value charge was precipitated by Salon not
having at that time an adequate number of authorized common shares to satisfy
all convertible preferred shares, warrant agreements and option grants, which
therefore required Salon to re-measure the value of warrants issued at each
balance sheet period, with the difference being charged to operating results.
The charge for the three months ended June 30, 2004 was primarily driven by an
increase in Salon's per share market price of $0.14 per share on March 31, 2004
to $0.18 per share on June 30, 2004.

Net loss attributable to common stockholders:

     As a result of the above factors, Salon recorded a net loss attributable to
common stockholders of $0.1 million, or ($0.01) per share for the three months
ended June 30, 2005 compared to a net loss attributable to common stockholders
of $1.2 million, or ($0.08) per share for the three months ended June 30, 2004.

Liquidity and capital resources:

     As of June 30, 2005, Salon had approximately $0.3 million in available
cash.

     Net cash used in operations was $0.4 million for the three months ended
June 30, 2005 and June 30, 2004. The principal use of cash during the three
months ended June 30, 2005 was to fund the $0.1 million net loss for the period
and the $0.2 million increase in accounts receivable, offset by $0.1 million of
non-cash charges. The principal use of cash during the three months ended June
30, 2004 was to fund the $0.6 million net loss for the period and the $0.5
million increase in accounts receivable, offset by $0.7 million of non-cash
charges.


                                       14
<PAGE>

     Net cash used in investing activities was an immaterial amount during the
three months ended June 30, 2005 and $0.1 million for the three months ended
June 30, 2004 to acquire computer related equipment.

     Net cash from financing activities provided an immaterial amount for the
three months ended June 30, 2005 and $0.5 million for the three months ended
June 30, 2004. For the three months ended June 30, 2004, Salon received $0.5
million from the issuance of Series D-1 preferred stock, practically all of
which was from related parties.

     Salon's independent accountants for the years ended March 31, 2003, 2004
and 2005 have included a paragraph in their reports indicating substantial doubt
as to Salon's ability to continue as a going concern due to recurring operating
losses and negative cash flows. Due to the recurring losses, Salon has reduced
expenses that have resulted in the net cash used in operating activities
decreasing from $5.0 million for the year ended March 31, 2002 to $2.9 million
for the year ended March 31, 2003 and to $2.8 million for the year ended March
31, 2004. During this time period, advertisers were reluctant to place
advertisements on Salon's Website due to concerns over Salon's ability to
continue as a going concern. However, with the reduction in expenses, investors
were willing to invest additional capital in Salon. The resulting infusion of
cash from the issuance of convertible and promissory notes and preferred stock
resulted in advertisers becoming more willing to place advertisements with
Salon. As a consequence, advertising revenues increased from $1.8 million for
the year ended March 31, 2004 to $3.6 million for the year ended March 31, 2005
and the net cash used in operations decreased to $0.8 million for the year ended
March 31, 2005. Due to the increased willingness of advertisers to place
advertisements on Salon's Website, Salon's forecast of a modest increase in
advertising revenue to $4.1 million should be achievable.

     Salon's current forecast of total revenue of $7.0 million for the year
ending March 31, 2006 includes $4.1 million of advertising revenue, $2.1 million
of Salon Premium revenue and $0.5 million attributable to The Well on-line
discussion forum. The current assumption in attaining $2.1 million of Salon
Premium revenue assumes that Salon will not continue to experience an
accelerated decline in Salon premium memberships that it has recently
experienced. The revenue impact of a decline in Salon Premium memberships are
mitigated as the revenues from this source are recognized ratably over the
period the revenue is earned, generally over a one year period. Salon cannot
accurately estimate at this time the future impact on cash flow or revenue
recognition of the downward trend in Salon Premium memberships.

     Salon purchased The Well, an on-line community, in 1999. Even though this
line of business has generated positive cash-flow since its acquisition, and is
forecast to generate $0.5 million of revenue for the year ending March 31, 2006,
Salon is evaluating what role, if any, this business will have in the future. As
such, Salon has begun to explore the potential sale of the on-line community.
The assets of The Well are predominately $0.2 million of goodwill. If The Well
operation is sold, Salon will most likely not attain its forecasted revenue of
$7.0 million. The potential sale of The Well is not driven by a need to generate
cash to finance Salon's operations.

     Based on current forecasted advertising revenues and a weakening in Salon
Premium memberships, Salon projects that it may experience a cash flow deficit
of approximately $0.2 million for the year ending March 31, 2006 after deducting
non-cash charges. Salon also forecasts that it will incur periods of limited
cash, primarily in late August 2005 and early September 2005, during which total
cash resources on hand may be less than $0.2 million. Salon cannot accurately
predict the amount of near-term cash that it will have on hand after that point
due to the unpredictability in securing advertising campaigns and the attrition
being experienced in membership to Salon's subscription services.


                                       15
<PAGE>

     A major risk factor in attaining the $4.1 million in advertising revenue
will be the ability of Salon to generate a sufficient number of advertising
impressions from unique Website visitors to satisfy order requirements during
the time periods that advertisements are slated to run on Salon's Website. Salon
therefore has to increase the number of unique Website visitors who generate
page views and resulting advertising impressions in order to lessen this
potential limiting factor. Salon has recently finalized an agreement with Yahoo,
Inc. in an attempt to increase the number of unique Website visitors to Salon's
Website for which Salon will provide its content to Yahoo, Inc. In return,
Yahoo, Inc. will include Salon's content in search results from its Yahoo News
site, which when "clicked on" will divert a Yahoo Website visitor to a Salon
webpage. In addition, Salon will implement a Yahoo search box on its web pages.
Salon cannot predict what effect, if any, this agreement will have on Salon's
results of operations or in increasing the number of unique visitors to Salon's
Website.

     The "Purchase Agreement" and the "Certificate of Designation of Preferences
and Rights of the Series D-1 Preferred Stock, Series D-2 Preferred Stock, Series
D-3 Preferred Stock, Series D-4 Preferred Stock and Series D-5 Preferred Stock,"
collectively, the "Series D preferred stock," allow Salon to sell and issue an
additional 1,251 shares of Series D preferred stock, for which Salon could
receive approximately $1.5 million in cash. As Salon currently forecasts periods
of limited cash and a cash flow deficit of $0.2 million for the year ending
March 31, 2006 after deducting non-cash charges, Salon anticipates that it will
seek purchasers for some or all of the remaining 1,251 shares of Series D-2
preferred stock. There is no guarantee that Salon will be successful in finding
buyers for these securities.

Recent Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board (FASB) issued
Standard Financial Accounting Standard (SFAS) No. 123R (revised 2004),
"Share-Based Payment" (SFAS 123R). In annual periods beginning after June 15,
2005, as amended by the Securities and Exchange Commission (SEC), SFAS 123R
would eliminate the ability to account for equity-based compensation using the
intrinsic value-based method under Accounting Principles Board (APB) Opinion No.
25. SFAS 123R requires companies' to calculate equity-based compensation expense
for stock compensation awards based on the fair value of the equity instrument
at the time of grant. Salon currently uses, and will upon adoption of SFAS 123R,
utilize the Black-Scholes option pricing model to determine the value of its
stock compensation awards, but may later determine that an alternative model may
be more appropriate.

     Under SFAS 123R, public companies are allowed to select from three
alternative transition methods: the Modified Prospective Application, which
allows for the adoption of SFAS 123R without restatement of prior interim
periods in the year of adoption and the Modified Retrospective Application which
allows companies to restate prior financial statements. Salon expects to adopt
SFAS 123R beginning in the first quarter of fiscal year 2007, as required, using
the Modified Prospective method, and will not restate prior periods for the
adoption of SFAS 123R.

     Currently, Salon discloses pro forma net income (loss) and related pro
forma net income (loss) per share in accordance with SFAS 123 and SFAS 148
"Accounting for Stock-Based Compensation-Transition and Disclosure - An
Amendment of FASB Statement No. 123". Under SFAS 123R, equity-based compensation
expense is required to be recognized in companies' financial statements.

     The amounts disclosed within the footnotes are not necessarily indicative
of the amounts that will be expensed upon the adoption of SFAS123R. Compensation
expense calculated under SFAS No. 123R may differ materially from amounts
currently disclosed within the footnotes, as a result of changes in the fair
value of our common stock, the term in which the options vest, changes in the
number of options granted, the treatment of tax benefits that may result, and
changes in interest rates or other factors.


                                       16
<PAGE>

RISK FACTORS

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

Salon's projected cash flows may not meet expectations

     Salon relies on projections of cash to be generated from operations to run
its operations. The most significant component of its cash projections is cash
to be generated from advertising sales, and to a lesser extent, cash projected
to be generated from subscription services. Forecasting cash receipts from
advertising sales for an extended period of time is problematic due to the short
duration of most advertising sales. If projected amounts of cash do not meet
expectations, Salon's ability to continue as a going concern may be adversely
affected.

     If Salon forecasts that it will experience periods of limited, or
diminishing cash resources, Salon may need to issue additional securities. There
is no guarantee that Salon will be able to issue additional securities in future
periods to meet cash needs, and if it is unable to raise additional cash,
Salon's ability to continue as a going concern may be adverse affected.

Salon may issue additional preferred stock at effective prices lower than
current common stock market prices that may result in non-cash charges to
operations

     The certificate of designation and preferences and rights of the Series D
preferred stock stipulates that the Series D conversion price will be equal to
70% of the average closing sales price of Salon's common stock for the thirty
days prior to the date the issue of Series D preferred stock is called by Salon.
Such a discount may trigger a non-cash preferred deemed dividend charge. Salon
cannot predict to what extent it may incur preferred deemed dividend charges for
subsequent issuances of Series D preferred stock, if any.

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, a Director of Salon,
and William Hambrecht. William Hambrecht is the father of Salon's President and
Chief Executive Officer. Curtailment of cash investments by related parties
could detrimentally impact Salon's cash availability and its ability to fund its
operations.

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

     The holders of Salon's Series A, B, C and D preferred stock collectively
own approximately 95% of all voting securities as of June 30, 2005. These
stockholders therefore own a controlling interest in Salon. Of this amount,
approximately 69% is held by related parties, including former directors, of
which approximately 21% is controlled directly or indirectly by William
Hambrecht and approximately 41% by 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 delaying or preventing
a change in control of Salon, which could cause Salon's stock price to decline.


                                       17
<PAGE>

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 to common stockholders of the first approximately $20.9 million in
potential sales proceeds as of June 30, 2005, which includes the effect of
undeclared dividends of $1.8 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 $20.9 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 $20.9 million and if preferred stock dividends were to be
declared, the holders of preferred stock would be entitled to receive a
relatively large distribution than the holders of common stock would be entitled
to receive.

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 for its fiscal year ending March 31, 2006 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, 2004 and March 31, 2005, 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's operations require attractive content, subscriber interest, and
confidence by subscribers and suppliers that the subscription offering warrants
their long-term support and investment. The absence of any of these factors
could impair the results, revenue and cash flow from subscriptions.

     Salon is under severe budgetary constraints to limit expenditures. These
constraints affect editorial staffing levels and the purchase of content from
freelance writers. These constraints affect the amount and quality of content
published on Salon's Website and consequently, the positive experience of
Website visitors. The positive experience leads to recurring Website visits, new
subscriptions to Salon Premium, and corresponding high renewal rates of Salon
Premium subscribers. As of June 30, 2005 Salon's renewal rate for one-year paid
subscription to Salon Premium was approximately 66%. Salon cannot predict if
this rate will continue in the future or how many new Salon Premium
subscriptions it will acquire.

Salon has depended on advertising sales for much of its revenues, and its
inability to maintain or increase advertising revenues will 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 Site Pass advertisements;


                                       18
<PAGE>

     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 network to advertisers;

     o    increase the amount of the advertising order it receives;

     o    increase awareness of the Salon brand;

     o    improve the technology for serving advertising on our 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.

Legislative Action and Potential New Accounting Pronouncements are likely to
cause our general and administrative expenses and other operating expenses to
increase

     In order to comply with the newly adopted Sarbanes-Oxley Act of 2002 and
proposed accounting changes by the Securities and Exchange Commission, Salon may
be required to hire additional personnel and utilize additional outside legal,
accounting and advisory services, all of which will cause our general and
administrative costs to increase. Recently adopted changes in the accounting
rules for employee stock options as a compensation expense, among other
accounting rule, could materially increase the expenses that we report under
generally accepted accounting principles and adversely affect our operating
results.

Complying with the Data Security Standard known as the Payment Card Industry
Data Security Standard is likely to cause our general and administrative
expenses and other operating expenses to increase and potential financial harm
to Salon for non-compliance in the event of a breach in credit card data
security

     Salon, as a merchant who conducts business with credit card data, must
comply with the Payment Card Industry (PCI) Data Security Standard as
promulgated by all major issuers of credit cards. The deadline for compliance of
June 30, 2005 was not met by Salon, which could cause severe harm to Salon if a
breach in credit card data were to occur before Salon attains compliance.
Salon's credit card processor for its Salon Premium services has requested for
it to comply by September 30, 2005. At this time, Salon is seeking an extension
to this deadline, which it may not be able to do so. Not attaining an extension
may adversely affect our cash position and results of operations. Salon is
taking steps to comply with the PCI Data Security Standard and to minimize its
exposure to unauthorized access to credit card data. Complying with the
directive could materially increase the expenses that we report under generally
accepted accounting principles and adversely affect our operating results.


                                       19
<PAGE>

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 our reputation
and expose us to a risk of loss or litigation. Experienced programmers or
"hackers" have successfully penetrated sectors of our 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 us to
significant liability. Salon's insurance policies may not be adequate to
reimburse us for losses caused by security breaches. Salon also faces risks
associated with security breaches affecting third parties with whom it has
relationships.

The length of Salon's sales cycle is uncertain and variable and may lead to
shortfalls in revenues and fluctuations in its operating results

     Salon's dependence on advertising subjects it to the risk of revenue
shortfalls because the sales cycles for advertising vary significantly, and
during these cycles Salon may expend substantial funds and management resources
while not obtaining advertising revenues. If sales are delayed or do not occur,
Salon's financial results for a particular period may be harmed. The time
between the date of initial contact with a potential customer and the signing of
an advertising order may range from as little as one week to up to several
months. Sales of advertising are subject to factors, over which Salon has little
or no control, including:

     o    advertisers' budgets;

     o    the acceptability of the Website Site Pass and other forms of rich
          media advertisements;

     o    internal acceptance reviews by advertisers and their agencies;

     o    the possibility of cancellation or delay of projects by advertisers.

Salon's stock has been and will likely continue to be subject to substantial
price and volume fluctuations due to a number of factors, many of which will be
beyond our control, that may prevent our stockholders from reselling our common
stock at a profit

     The securities markets have experienced significant price and volume
fluctuations. This market volatility, as well as general economic, market or
political conditions have, and may continue to reduce the market price of our
common stock, regardless of our operating performance. In addition, Salon's
operating results could be below the expectations of public market analysts and
investors, and in response, the market price of our common stock could decrease
significantly.

With a volatile share price, Salon may be the targets of securities litigation,
which is costly and time-consuming to defend

     In the past, following periods of market volatility in the price of a
company's securities, security holders have instituted class action litigation.
Our share price has, in the past, experienced price volatility,


                                       20
<PAGE>

and may continue to do so in the future. Many companies have been subject to
this type of litigation. If the market value of our common stock experiences
adverse fluctuations and we become involved in this type of litigation,
regardless of the merits or outcome, we could incur substantial legal costs and
our management's attention could be diverted, causing our business, financial
condition and operating results to suffer. To date, Salon has not been subject
to such litigation.

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

     Salon's future revenues and operating results 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 and the recovery speed;

     o    the level of Internet usage;

     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.

     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 in 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.


                                       21
<PAGE>

Salon's promotion of the Salon brand must be successful in order to attract and
retain users as well as advertisers and strategic partners

     The success of the Salon brand depends largely on its ability to provide
high quality content and services. If Internet users do not perceive Salon's
existing content and services to be of high quality, or if it introduces new
content and services or enters into new business ventures that are not favorably
perceived by users, it may not be successful in promoting and maintaining our
brand. Any change in the focus of its operations creates a risk of diluting our
brand, confusing consumers and decreasing the value of our user base to
advertisers. If Salon is unable to maintain or grow the Salon brand, its
business could be severely harmed.

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 take 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 this content may be freely
licensed to us, other parties may assert claims of infringement against us
relating to this 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 our intellectual property
assets. Salon does not have a registered trademark on the address, and therefore
it may be difficult for us to prevent a third party from infringing on our
intellectual property rights in the address. If Salon fails to adequately
protect its rights in the Website address, or if a third party infringes its
rights in the address, or otherwise dilutes the value of www.salon.com, its
business could be harmed.

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

     Salon has developed a proprietary online publishing system and has
developed software to manage its Salon Premium subscription service. If these
systems do not work as intended, or if Salon is unable to


                                       22
<PAGE>

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 like 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
impact its business adversely.

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

Measurement standards for Internet based advertising may not evolve to the
extent necessary to support Internet advertising, thereby creating uncertainty
about the viability of Salon's business model

     It is important to Salon's advertisers that Salon accurately presents the
demographics of its user base and the delivery of advertisements on its Website.
Salon depends on third parties to provide certain of the advertiser-requested
services. If they were unable to provide these services in the future, Salon
would need to perform this function itself or obtain them from another provider,
if available. This could cause Salon to incur additional costs or lose revenue
due to a lower level of service. Companies may choose to not advertise on Salon
or may pay less for advertising if they do not perceive our measurements or
measurements made by third parties to be reliable.

Increasing competition among Internet content providers could reduce Salon's
advertising sales or market share, thereby harming its business

     The market for Internet content is relatively new, rapidly changing and
intensely competitive. Salon expects competition for Internet content to
continue to increase, and if it cannot compete effectively, its business could
be harmed. The number of Websites competing for the attention and spending of
users and advertisers may continue to increase with the most trafficked Websites
receiving a disproportionate share of advertising dollars. Salon is not one of
the most trafficked Websites, or even one of the top fifty Websites.

     Increased competition could result in advertising price reductions or loss
of market share, any of which could harm Salon's business. Competition is likely
to increase significantly as new companies enter the market and current
competitors expand their services. Many of Salon's present and potential
competitors are likely to enjoy substantial competitive advantages over Salon.
If Salon does not compete effectively or if it experiences any pricing pressures
or loss of market share resulting from increased competition, its business could
be harmed.


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<PAGE>

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 on Salon's online communities and links to third party
Websites that may be accessible through Salon.com, 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 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 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 we use 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 our 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. However, protection may not be available at a reasonable
price or at all. Concerns over the security of electronic commerce and the
privacy of users may also inhibit the growth of the Internet as a means of
conducting commercial transactions.

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. If
these systems 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 facilities in San Francisco, California. 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


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<PAGE>

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 any
losses that may occur due to any failures of or interruptions in our 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 it 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 this information without permission or in
violation of its policy, Salon may face potential liability for invasion of
privacy for compiling and providing 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, our
business, financial condition and results of operations could be materially
harmed.

Possible state sales and other taxes could adversely affect Salon's results of
operations

     Salon generally does not collect sales or other taxes from individuals who
sign up for Salon subscriptions. During the year ended March 31, 2003, the State
of California audited Salon's sales tax returns and found Salon in compliance
with its filings and did not object to the fact that it did not collect sales
tax on subscriptions. However, one or more other states may seek to impose sales
tax collection obligations on out-of-state companies, including Salon, which
engage in or facilitate electronic commerce. State and local governments have
discussed and made proposals imposing taxes on the sale of goods and services
through the Internet. Such proposals, if adopted, could substantially impair the
growth of electronic commerce and could reduce Salon's ability to derive revenue
from electronic commerce. Moreover, if any state or foreign country were to
assert successfully that Salon should collect sales or other taxes on the
exchange of merchandise on its network or to tax revenue generated from Salon
subscriptions, its financial results could be harmed.

Provisions in Delaware law and our 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:


                                       25
<PAGE>

     o    the board of directors approved the transaction where the stockholder
          acquired 15% or more of the corporation's assets;

     o    after the transaction where 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. We have 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.

     In addition, offer letters with executive officers, though none are in
effect as of March 31, 2005, may provide for the payment of severance and
acceleration of options upon the termination of these executive officers
following a change of control of Salon. These provisions in offer letters could
have the effect of discouraging potential takeover attempts.


Item 3. Qualitative and Quantitative 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. Salon has no debt arrangements that expose Salon to market risk in
the event of changes in interest rates. As Salon conducts all of its business in
the United States, Salon is not subject to foreign exchange risk.


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<PAGE>

Item 4. Controls and Procedures

Evaluation of Our Disclosure Controls and Internal Controls

     Our management evaluated, with the participation of our Chief Executive
Officer and our Chief Financial Officer, the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and
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 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.




--------------------------------------------------------------------------------
PART II: OTHER INFORMATION
--------------------------------------------------------------------------------

Item 1. Legal Proceedings.

     Not applicable.

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

     During the three months ending June 30, 2005, warrants to acquire 125,950
shares of common stock with an exercise price of $0.09 per share were exercised
by three investors for which Salon received $11,310 in cash. The funds received
will be used for working capital and other general corporate purposes. The
investors included John Warnock, a Director of Salon, who received 99,345 shares
of common stock and Brian Dougherty, who served as a Director of Salon until
April 2003, who received 25,000 shares of common stock.

     During the three months ending June 30, 2005, warrants for 314,172 shares
of common stock were converted to 186,037 shares of common stock by four
investors for which Salon did not receive any consideration. The exercise prices
per share of the shares converted were $0.11 for 200,000 shares and $0.09 for
114,172 shares.

     The securities were issued to "accredited investors" as that term is
defined in Rule 501(a) under the Securities Act. of 1933 and pursuant to an
exemption from the registration requirements of the Securities Act of 1933 set
forth in Section 506 of Regulation D.

Item 3. Default upon senior securities.

     Not applicable.


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<PAGE>

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

     Not applicable.

Item 5. Other Information.

     Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits.


99.4(1)   Press Release dated May 17, 2005.

31.1      Certification of Elizabeth Hambrecht, President and Chief Executive
          Officer of the Registrant pursuant to Section 302, as adopted pursuant
          to the Sarbanes-Oxley Act of 2002

31.2      Certification of Conrad Lowry, Chief Financial Officer and Secretary
          of the Registrant pursuant to Section 302, as adopted pursuant to the
          Sarbanes-Oxley Act of 2002

32.1      Certification of Elizabeth Hambrecht, President and Chief Executive
          Officer of the Registrant pursuant to Section 906, as adopted pursuant
          to the Sarbanes-Oxley Act of 2002

32.2      Certification of Conrad Lowry, Chief Financial Officer and Secretary
          of the Registrant pursuant to Section 906, as adopted pursuant to the
          Sarbanes-Oxley Act of 2002

(1)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on May 18, 2005.


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:  8/15/05          /s/ Elizabeth Hambrecht
                         --------------------------------------
                         Elizabeth Hambrecht
                         President and Chief Executive Officer



Dated:  8/15/05          /s/ Conrad Lowry
                         --------------------------------------
                         Conrad Lowry
                         Chief Financial Officer and Secretary


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