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

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

                                    FORM 10-Q

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

                For the quarterly period ended December 31, 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 February 10, 2006 was 18,258,269 shares.

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<PAGE>

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


                                                                           Page
PART I    FINANCIAL INFORMATION                                           Number

ITEM 1:   Condensed Consolidated Financial Statements

          Condensed Consolidated Balance Sheets as of December 31, 2005
          (unaudited) and March 31, 2005.....................................  3

          Condensed Consolidated Statements of Operations for the three
          months and nine months ended December 31, 2005 and 2004
          (unaudited) .......................................................  4

          Condensed Consolidated Statements of Cash Flows for the nine
          months ended December 31, 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.............................................. 14

ITEM 3:   Quantitative and Qualitative Disclosures About Market Risk......... 29

ITEM 4:   Controls and Procedures............................................ 30

PART II   OTHER INFORMATION

ITEM 1:   Legal Proceedings.................................................. 30

ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds........ 30

ITEM 3.   Defaults upon Senior Securities.................................... 30

ITEM 4.   Submission of Matters to a Vote of Security Holders................ 31

ITEM 5.   Other Information.................................................. 31

ITEM 6:   Exhibits and Reports on Form 8-K................................... 31

          Signatures......................................................... 32


                                       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>
                                                                  December 31,       March 31,
                                                                      2005             2005
                                                                 -------------    -------------
                                                                  (Unaudited)
<S>                                                              <C>              <C>
Assets
   Current assets:
      Cash and cash equivalents                                  $         500    $         686
      Accounts receivable, net                                           1,219              623
      Prepaid expenses and other current assets                            115              232
                                                                 -------------    -------------
         Total current assets                                            1,834            1,541
   Property and equipment, net                                             187              191
   Prepaid advertising rights                                            3,797            3,970
   Goodwill, net                                                           200              200
   Other assets                                                            169              167
                                                                 -------------    -------------
         Total assets                                            $       6,187    $       6,069
                                                                 =============    =============
Liabilities and stockholders' equity
   Current liabilities:
      Accounts payable and accrued liabilities                   $         712    $         788
      Deferred revenue                                                     906            1,047
                                                                 -------------    -------------
         Total current liabilities                                       1,618            1,835
   Long-term liabilities
      Other long-term liabilities                                          127               82
                                                                 -------------    -------------
         Total liabilities                                               1,745            1,917
                                                                 -------------    -------------

Stockholders' equity:
   Preferred stock, $0.001 par value, 5,000,000 shares
      authorized, 8,595 shares issued and outstanding at
      December 31, 2005 and 8,386 shares issued and
      outstanding at March 31, 2005 (liquidation value
      of $21,526 at December 31, 2005)                                       -                -
   Common stock, $0.001 par value, 600,000,000 shares
      authorized, 16,485,646 shares issued and outstanding
      at December 31, 2005 and 14,970,622 shares issued
      and outstanding at March 31, 2005                                     15               15
   Additional paid-in-capital                                           96,992           95,430
   Unearned compensation                                                   (51)               -
   Accumulated deficit                                                 (92,514)         (91,293)
                                                                 -------------    -------------
          Total stockholders' equity                                     4,442            4,152
                                                                 -------------    -------------
           Total liabilities and stockholders' equity            $       6,187    $       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          Nine Months Ended
                                                                  December 31,               December 31,
                                                            ------------------------   ------------------------
                                                               2005          2004         2005          2004
                                                            ----------    ----------   ----------    ----------
<S>                                                         <C>           <C>          <C>           <C>
Net revenues                                                $    2,069    $    2,150   $    5,353    $    5,139
                                                            ----------    ----------   ----------    ----------

Operating expenses:
    Production and content                                       1,183         1,131        3,276         3,335
    Sales and marketing                                            389           551        1,054         1,406
    Research and development                                       146           158          519           449
    General and administrative                                     257           163          706           524
                                                            ----------    ----------   ----------    ----------
       Total operating expenses                                  1,975         2,003        5,555         5,714
                                                            ----------    ----------   ----------    ----------

Income (loss) from operations                                       94           147         (202)         (575)
Other income (expense), net                                          1           125           21           572
                                                            ----------    ----------   ----------    ----------
       Net profit (loss)                                            95           272         (181)           (3)

Preferred deemed dividend                                       (1,040)          123       (1,040)          252
                                                            ----------    ----------   ----------    ----------
Net profit (loss) attributable to common stockholders       $     (945)   $      395   $   (1,221)   $      249
                                                            ==========    ==========   ==========    ==========

Basic net profit (loss) per share attributable
       to common stockholders                               $    (0.06)   $     0.03   $    (0.08)   $     0.02
Diluted net profit (loss) per share attributable
       to common stockholders                               $    (0.06)   $     0.00   $    (0.08)   $     0.00
</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>
                                                                                          Nine Months Ended
                                                                                             December 31,
                                                                                      ------------------------
                                                                                         2005          2004
                                                                                      ----------    ----------
<S>                                                                                   <C>           <C>
Cash flows from operating activities:
  Net loss                                                                            $     (181)   $       (3)
  Adjustments to reconcile net loss to net cash used in operating activities:
     Warrant re-valuation                                                                      -          (541)
     Depreciation and amortization                                                           102           299
     Allowance for doubtful accounts                                                           -             2
     Stock compensation expense                                                              132             -
     Gain on issuance of common stock for trade payable                                        -           (25)
     Amortization of prepaid advertising rights                                              173           440
     Changes in assets and liabilities:
        Accounts receivable                                                                 (596)         (824)
        Prepaid expenses, other current assets and other assets                              115             9
        Accounts payable, accrued liabilities, and other long-term liabilities               (31)         (195)
        Deferred revenue                                                                    (141)           12
                                                                                      ----------    ----------
           Net cash used in operating activities                                            (427)         (826)
                                                                                      ----------    ----------

Cash flows from investing activities:
  Purchase of property and equipment                                                         (65)         (139)
                                                                                      ----------    ----------
           Net cash used by investing activities                                             (65)         (139)
                                                                                      ----------    ----------

Cash flows from financing activities:
  Proceeds from issuance of common stock                                                      55             2
  Proceeds from issuance of preferred stock, net                                             251           744
  Principal payments under capital lease obligations                                           -           (17)
                                                                                      ----------    ----------
           Net cash provided by financing activities                                         306           729
                                                                                      ----------    ----------

Net decrease in cash and cash equivalents                                                   (186)         (236)
Cash and cash equivalents at beginning of period                                             686           696
                                                                                      ----------    ----------
Cash and cash equivalents at end of period                                            $      500    $      460
                                                                                      ==========    ==========

Supplemental schedule of non-cash investing and financing activities:
  Preferred deemed dividend in connection with preferred stock financing              $    1,040    $      218
  Preferred deemed dividend from warrant re-valuation                                 $        -    $     (470)
  Issuance of common stock for trade payable                                          $        -    $       41
</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 ten subject-specific sections, which includes two online
communities. The Website also allows for audio downloads and video clips. 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 nine months ended December, 31 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 December 31, 2005
of $92,514. 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. To address the negative cash flows, Salon
reduced expenses, evidenced by net cash used in operating activities decreasing
from $5.0 million for the year ended March 31, 2002 to $2.8 million for the year
ended March 31, 2004. The reduction in use of cash facilitated raising capital
during this period, which in turn facilitated being awarded a greater number of
advertisements, as advertisers gained confidence in Salon's survivability.

     The renewed confidence in Salon, plus the resurging Internet ad market,
resulted in advertising revenues increasing from $1.8 million for the year ended
March 31, 2004 to $3.6 million for the year ended March 31, 2005 which in turn
caused the net cash used in operations to decrease to $0.8 million for the year
ended March 31, 2005. This trend has continued for the nine months ended
December 31, 2005 as the cash used in operations was $0.4 million as compared to
$0.8 million for the nine months ended December 31, 2004. As a result of the
cash used in operations, $0.3 million from investing activities and the use of
$0.1 million for capital expenditures, Salon's available cash at December 31,
2005 was $0.5 million.

     Based on projected trade receivable receipts, expense payments, advertising
revenues of a potential high of $0.8 million and total revenues of a potential
high of $1.4 million, Salon estimates that


                                       6
<PAGE>

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

its cash on hand may be as high as $0.4 million at March 31, 2006. If the
anticipated revenue expectations are not met, Salon's cash on hand could be
significantly less. Based on anticipated advertising revenues of a potential
high of $5.3 million and total revenues of a potential high of $8.0 million for
the twelve months ending December 31, 2006, Salon estimates it could have a cash
balance of up to $0.3 million as of December 31, 2006, although the cash balance
is expected to be less if these sales amounts are not attained. However, based
on projections, Salon anticipates a cash balance of $0.1 million as of June 30,
2006, and thereafter periods of extremely limited or no cash. Again, if the
anticipated revenue expectations are not met, Salon's cash on hand could be
significantly less. There is no certainty that Salon will be able to attain any
of the above mentioned projected revenue amounts.

     As Salon projects periods of very limited cash in the next twelve months,
Salon anticipates that it may seek purchasers for some or all of the remaining
1,042 authorized and unissued shares of Series D preferred stock for which Salon
estimates it could receive up to $1.25 million. There is no guarantee that Salon
will be successful in finding buyers for these securities. In addition, Salon
may explore amending the "Securities Purchase Agreement", as amended to date,
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) to allow for the sale of additional shares of Series D. There
is no certainty that Salon will be able to amend these documents or sell any
such additional shares.

     Salon is currently attempting to sell The Well, an on-line community it
purchased in 1999. As of this filing, Salon has not found a suitable buyer for
this asset, which has a book value of approximately $0.2 million, most of which
is goodwill. The potential sale of The Well is not primarily driven by a need to
generate cash to finance Salon's operations, but is primarily intended to free
management to concentrate on Salon's core operations.

3.   Concentrations of Credit Risk

     No customer accounted for more than 10% of total revenue for the three or
nine-month periods ended December 31, 2005 and December 31, 2004. One customer
accounted for 16% of the total accounts receivable balance as of December 31,
2005. One customer accounted for 12% of the total accounts receivable balance as
of December 31, 2004.

4.   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) 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 use upon adoption of SFAS
123R, 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 two
alternative transition methods: the Modified Prospective Application, which
allows for the adoption of SFAS 123R without


                                       7
<PAGE>

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

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 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.

     In May 2005, the FASB issued SFAS 154 "Accounting Changes and Error
Corrections." which replaces APB Opinion No. 20 "Accounting Changes" and SFAS
No. 3, "Reporting Accounting Changes in Interim Financial Statements--An
Amendment of APB Opinion No. 20." SFAS 154 provides guidance on the accounting
for and reporting of accounting changes and error corrections. Specifically,
this statement requires "retrospective application" of the direct effect for a
voluntary change in accounting principle to prior periods' financial statements,
if it is practicable to do so. SFAS 154 also strictly redefines the term
"restatement" to mean the correction of an error by revising previously issued
financial statements. SFAS 154 replaces APB No. 20, which requires that most
voluntary changes in accounting principle be recognized by including in net
income of the period of the change the cumulative effect of changing to the new
accounting principle. SFAS 154 is effective for accounting changes and
correction of errors made in fiscal years beginning after December 15, 2005 and
is required to be adopted by Salon in the first quarter of fiscal 2007. Salon
does not currently believe adoption will have a material impact on its results
of operations, financial position or cash flows.


5.   Warrant Valuation

     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 of 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, Salon's 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 amendment being filed with 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.


                                       8
<PAGE>

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

     The impact of having an inadequate number of authorized shares of common
stock and its effect on the valuation of warrants resulted in the following
non-cash benefits to Salon's results of operations:

<TABLE>
<CAPTION>
                                       Three Months Ended         Nine Months Ended
                                           December 31,              December 31,
                                     -----------------------   -----------------------
Operating results affected              2005         2004         2005         2004
                                     ----------   ----------   ----------   ----------
<S>                                  <C>          <C>          <C>          <C>
Production and content               $        -   $       21   $        -   $       83
General and administrative                    -           10            -           43
Other income (expense), net                   -          104            -          415

Preferred deemed dividend                     -          123            -          470
                                     ----------   ----------   ----------   ----------
                                     $        -   $      258   $        -   $    1,011
                                     ==========   ==========   ==========   ==========
</TABLE>

6.   Goodwill Amortization and Intangible Assets

     The following table sets forth information concerning Salon's goodwill and
intangible assets as of December 31, 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>

7.   Subsequent Events

     On January 23, 2006, a Director of Salon exercised one warrant to purchase
150,000 shares of common stock at $0.0451 per share and two warrants to purchase
a total of 600,000 shares of common stock at $0.0417 per share. Salon received
$32 for these transactions

     On January 24, 2006, an investor with 25 shares of Series A preferred stock
converted one share to 40,173 shares of common stock. In addition, the same
investor converted 36 shares of Series C preferred stock to 720,000 shares of
common stock. Salon did not receive any cash for these transactions.

     On February 7, 2006, Ironstone Group, Inc. converted a warrant to purchase
300,000 shares of common stock at $0.0451 per share to 262,450 shares of common
stock. The father of Salon's CEO and President has an ownership interest in
Ironstone Group, Inc. Salon did not receive any cash for this transaction.


                                       9
<PAGE>

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

8.   Preferred Stock

     On December 21, 2005, Salon issued 209 shares of Series D-3 preferred stock
and raised $251 in cash from one investor while incurring no expenses. The
financing was effected in accordance with Amendment No. 4 to the Securities
Purchase Agreement dated as of December 21, 2005.

     The 209 shares of Series D-3 preferred stock were sold at a price of $1,200
per share and are convertible into, and have the voting rights of 2,696,774
shares of common stock. The total outstanding shares of common stock, including
shares of common stock issuable upon the conversion of all shares of preferred
stock, all with voting rights, after the transaction, is approximately
200,220,000 shares. As part of the transaction, Salon issued a warrant to
purchase 404,516 shares of common stock at an exercise price of $0.5405 per
share. Warrants to purchase approximately 25,017,000 shares of common stock were
outstanding after the transaction.

     The Certificate of Designation of Preferences and Rights of the Series D
preferred stock stipulates that the conversion price to common stock be equal to
70% of the average closing price of Salon's common stock for the thirty days
prior to the date Salon provides notice to purchasers regarding the sale of
shares of Series D preferred stock. The resulting conversion price on the date
Salon made its announcement to investors was $0.093, subject to downward
adjustment in the event of certain subsequent stock issuances by Salon.
Therefore, the Series D-3 preferred stock is convertible into common stock at
the conversion rate determined by dividing the Series D-3 preferred stock per
share price of $1,200 by the conversion price of $0.093.

     The warrant issued may be exercised at any time until December 21, 2008. In
the event of a change in control within the exercise period, Salon will give the
warrant holders thirty (30) days advance notice of the effective date of such
transaction, and to the extent the warrant has not been exercised in full by the
effective date of such transaction, the warrant will terminate. The exercise
price of the warrant may be adjusted downward in the event of certain subsequent
Salon stock issuances. The warrant to purchase 404,516 shares of common stock
that was issued was valued at $133 using the Black-Scholes option-pricing model,
applying an expected life of three years, a weighted average risk-free interest
rate of 4.41%, a volatility of 120% and a deemed fair value of common stock of
$0.47 per share.

     After Salon gave notice of its intent to sell additional shares of Series
D-3, Salon's common stock price increased sharply to $0.47 per share on the date
of the transaction. We believe the share price increase was due to investors
favorably responding to Salon's ten year anniversary, Google's announced
purchase of a 5% interest in AOL, and other unknown market factors. These
factor, and to a lesser extent the value of the warrants issued in the
transaction, resulted in a preferred deemed dividend of $1,040. The preferred
deemed dividend represents the difference between the offering price of Salon's
Series D-3 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 fair
value of the warrants issued.

     The Purchase Agreement, as amended, and the Certificate of Designation of
Preferences and Rights of the Series D preferred stock allows for the sale and
issuance of an additional 1,042 shares of Series D preferred stock.


                                       10
<PAGE>

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

     The holders of the Series D preferred stock are entitled dividends of 5.0%,
as and if declared by the Board of Directors. In event of a liquidation, the
holders of Series D preferred stock and the holders of the Series C preferred
stock rank in parity, and are entitled to receive, prior and in preference to
any distribution of any assets or property of Salon to the holders of common
stock, Series A and B preferred stock, an amount per share equal to $1,200 plus
an amount equal to all declared but unpaid dividends, and in the case of the
Series C preferred stock, $1,600 per share, plus an amount equal to all declared
but unpaid dividends, based on an annual rate of 8%. If the assets and funds
available for distribution are insufficient to permit the payment to the holders
of Series C and D preferred stock of their full preferential amounts, then the
entire assets and funds of Salon legally available for distribution to
stockholders will be distributed among the holders of Series C and D preferred
stock ratably in proportion to the full preferential amounts which they are
entitled to receive. After an initial distribution to the holders of Series C
and D preferred stock, the holders of the Series A and B preferred stock, who
rank in parity, are entitled to receive, prior and in preference to any
distribution of any assets or property of Salon to the holders of common stock,
an amount per share equal to $8,000 plus an amount equal to all declared but
unpaid dividends, based on an annual rate of 8%. If, after the initial
distribution to holders of Series C and D preferred stock, the remaining assets
and funds available for distribution are insufficient to permit the payment to
the holders of Series A and B preferred stock of the full preferential amounts,
then the entire remaining assets and funds of Salon legally available for
distribution to stockholders will be distributed among the holders of Series A
and B preferred stock ratably in proportion to the full preferential amounts
which they are entitled to receive. As of December 31, 2005, no dividend has
been declared to the holders of preferred stock.

     If, after initial preferential liquidation payments to the holders of
Series A, B, C and D preferred stock, any assets remain available for
distribution, such assets are to be distributed ratably among the holders of
common stock and preferred stock, based on the shares of common stock then held
by them and issuable upon conversion of the shares of preferred stock then held
by them until aggregate distributions per share reach $12,000 for the holders of
Series A and B preferred stock, $2,400 for the holders of Series C Preferred
Stock and $3,600 for the holders of Series D preferred stock. Salon has
previously issued 809 shares of Series A preferred stock, 125 shares of Series B
preferred stock and 6,618 shares of Series C preferred stock. If, after payment
has been made to the holders of common stock and holders of preferred stock
mentioned above, any assets remain available for distribution, such assets are
to be distributed ratably among the holders of common stock and the holders of
Series C preferred stock, based on the number of shares of common stock then
held by them and issuable upon conversion of the Series C preferred stock then
held by them. Based on information currently available, Salon estimates that
preferred stockholders as a group own approximately 95% of the outstanding
shares of common stock and common stock issuable upon conversion of the shares
of preferred stock, all with voting rights.

     In addition, preferred stockholders as a group hold warrants to purchase
approximately 23,911,000 shares of common stock, or 95.6% of the total warrants
issued.


                                       11
<PAGE>

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


9.   Net Profit (Loss) Per Share

     Basic net profit (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               Nine Months Ended
                                                                  December 31                      December 31
                                                         ------------------------------   ------------------------------
                                                              2005             2004            2005             2004
                                                         -------------    -------------   -------------    -------------
<S>                                                      <C>              <C>             <C>              <C>
Numerator:
   Numerator for basic and diluted net profit
   (loss) attributable to common stockholders            $        (945)   $         395   $      (1,221)   $         249

Denominator:
   Weighted average common shares outstanding               16,129,000       14,507,000      15,564,000       14,275,000
   Denominator for basic net profit (loss)
      attributable to common stockholders
                                                         -------------    -------------   -------------    -------------
      Weighted average shares                               16,129,000       14,507,000      15,564,000       14,275,000

   Effect of dilutive preferred stock                                -      178,758,000               -      175,976,000
   Effect of dilutive common stock warrants                          -       10,118,000               -       12,502,000
   Effect of dilutive common stock options                           -            4,000               -            9,000
                                                         -------------    -------------   -------------    -------------
   Denominator for diluted net profit (loss)
      attributable to common stockholders per share         16,129,000      203,387,000      15,564,000      202,762,000

Antidilutive securities including options,
   warrants, and convertible preferred stock not
   included in net loss attributable to common
   stockholder per share calculation                       240,383,914        5,067,000     240,383,914        4,625,000
</TABLE>

     In May 2005, Salon issued options to purchase 393,000 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. The estimated grant date
fair 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. In October 2005, Salon issued options to purchase 1,000,000 shares of
common stock to a consultant. The options were granted at $0.13 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


                                       12
<PAGE>

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

the shares subject to the options vest over a four year period, as long as the
named individuals continue to provide services. The estimated grant date fair
value of $103 was calculated using the Black-Scholes option-pricing model with
the following material assumptions: (i) a risk-free rate of 4.2%, (ii) expected
volatility of 120%, (iii) expected life of 4 years, and (iv) no dividend.
Accordingly, a total of $70 and $132 was charged to operations for the three and
nine months ended December 31, 2005, respectively.

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

<TABLE>
<CAPTION>
                                                                  Three Months Ended           Nine Months Ended
                                                                      December 31                 December 31
                                                               ------------------------    ------------------------
                                                                  2005          2004          2005          2004
                                                               ----------    ----------    ----------    ----------
<S>                                                            <C>           <C>           <C>           <C>
Net profit (loss) attributable to common stockholders:
     As reported                                               $     (945)   $      395    $   (1,221)   $      249
     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                           (476)           (2)       (2,115)          (28)
                                                               ----------    ----------    ----------    ----------
     Pro forma net  profit (loss) attributable to common
          stockholders                                         $   (1,421)   $      393    $   (3,336)   $      221
                                                               ==========    ==========    ==========    ==========

Basic net profit (loss) per share attributable
     to common stockholders:
          As reported                                          $    (0.06)   $     0.03    $    (0.08)   $     0.02
          Pro forma                                            $    (0.09)   $     0.03    $    (0.21)   $     0.02

Diluted net profit (loss) per share attributable
     to common stockholders:
           As reported                                         $    (0.06)   $     0.00    $    (0.08)   $     0.00
           Pro forma                                           $    (0.09)   $     0.00    $    (0.21)   $     0.00
</TABLE>


                                       13
<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, projected cash balances, 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 ten 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, an automated "Letters to the Editor" program, a daily music download
column called Audiofile, video clips column called Videodog, 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 and Nine Months Ended December 31, 2005
Compared To the Three and Nine Months Ended December 31, 2004

Net revenues:

     Net revenues decreased 4% to $2.1 million for the three months ended
December 31, 2005 from $2.2 million for the three months ended December 31, 2004
and increased 4% to $5.4 million for the nine months ended December 31, 2005
from $5.1 million for the nine months ended December 31, 2004.


                                       14
<PAGE>

     Advertising revenues increased slightly to $1.38 million for the three
months ended December 31, 2005 from $1.33 million for the three months ended
December 31, 2004, or 4%, and increased to $3.2 million for the nine months
ended December 31, 2005 from $2.9 million for the nine months ended December 31,
2004, or 10%. The increase in advertising sales reflects an industry wide trend
of corporations earmarking more funds for Internet advertising. Salon estimates
that advertising revenues for the three months ending March 31, 2006 will be
approximately $0.5 - $0.8 million.

     Salon Premium subscription revenues decreased by $0.1 million to $0.5
million for the three months ended December 31, 2005 from $0.6 million the three
months ended December 31, 2004, or 16%, while staying constant at $1.6 million
for each of the nine month periods ended December 31, 2005 and December 31,
2004. The drop in Salon Premium revenues recognized for the three months ended
December 31, 2005 compared to the same period in the prior year is attributable
to a substantial reduction in the number of new subscribers. Paid one year
subscriptions were approximately 14,800 and 46,700 for the three and nine months
ended December 31, 2005, respectively, compared to approximately 25,700 and
66,000 for the three and nine months ended December 31, 2004. Salon had
approximately 69,700 paying subscribers at December 31, 2005 compared to a peak
of approximately 89,100 at December 31, 2004. The larger number of paid one year
subscribers in 2004 was primarily attributable to capitalizing on reader
interest in Salon's political coverage during the 2004 election year, with no
comparable event taking place this year. Salon is unsure if it will be able to
stem this decline during the first six months of calendar year 2006. Salon
estimates that Salon Premium revenues for the three months ending March 31, 2006
will be approximately $0.4 - $0.5 million.

     As a result of analyzing the decline in Salon Premium memberships, Salon
believes that its Site Pass advertising model, which Salon credits as
instrumental in increasing advertising revenues, and driving memberships to
Salon Premium, inhibits a growth in traffic to its Website. Salon contemplates
further analysis of these relationships and may adjust its Site Pass advertising
model in order to attract a wider audience. While a wider audience is intended
to increase the supply of advertising impressions, and to introduce more
potential members to Salon Premium, Salon cannot estimate when, or if,
membership to Salon Premium will again increase or if it will be successful in
adjusting its Site Pass to achieve desired results.

     Revenues from all other sources were $0.2 million and $0.6 million,
respectively, for each of the three months and nine months ended December 31,
2005 and the three and nine months ended December 31, 2004. Salon estimates that
all other sources of revenue for the three months ending March 31, 2006 will be
approximately $0.2 million. Approximately half of this revenue is derived from
The Well, an on-line discussion forum. Salon is seeking a buyer for this
business, but cannot estimate when, or if, it will be able to find a suitable
buyer.

Production and content:

     Production and content expenses were $1.2 million for the three months
ended December 31, 2005 and $1.1 million for the three months ended December 31,
2004, an increase of $0.1 million. The 5% increase in these expenses is
primarily attributable to stock compensation expenses recognized for grants made
to consultants.

     Production and content expenses were approximately $3.3 million for each of
the nine month periods ended December 31, 2005 and December 31, 2004. The effect
of $0.1 million stock compensation expense incurred in 2005 was offset by a
general reduction of expenses.

     Salon does not expect material changes to production and content
expenditures in the near future.


                                       15
<PAGE>

Sales and marketing:

     Sales and marketing expenses were $0.4 million for the three months ended
December 31, 2005 compared to $0.6 million for the three months ended December
31, 2004, a decrease of $0.2 million. The 29% decrease is primarily attributable
to utilizing fewer advertising credits in 2005 compared to 2004 and reduced
commission expenses.

     Sales and marketing expenses during the nine months ended December 31, 2005
were $1.1 million compared to $1.4 million for the nine months ended December
31, 2004, a decrease of $0.3 million. The 25% decrease is attributable to
utilizing fewer advertising credits in 2005 compared to 2004 and reduced
commission expenses.

     Salon 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 December
31, 2005 of $146,000 were comparable to the $158,000 incurred for the three
months ended December 31, 2004.

     Research and development expenses during the nine months ended December 31,
2005 were $0.5 million compared to $0.4 million for the nine months ended
December 31, 2004. The $0.1 million increase was primarily attributable to
increased consulting and other costs.

     Salon does not anticipate material future changes in research and
development expenditures.

General and administrative:

     General and administrative expenses for the three months ended December 31,
2005 were $0.3 million compared to $0.2 million for the three months ended
December 31, 2004, an increase of $0.1 million. The 58% increase is attributable
to a general increase in corporate expenses.

     General and administrative expenses for the nine months ended December 31,
2005 were $0.7 million compared to $0.5 million for the nine months ended
December 31, 2004, an increase of $0.2 million. The 35% increase between years
is primarily attributable to raises awarded to two officers in February 2005, an
addition of one staff member and a general increase in other corporate expenses.

     Salon does not anticipate material future changes in general and
administrative expenditures.

Other income (expense), net:

     Other income (expense), net was insignificant for the three months ended
December 31, 2005 compared to $0.1 million for the three months ended December
31, 2004. The amount recorded in 2004 primarily reflects a benefit from the
revaluation of previously issued warrants to prior convertible note holders.

     Other income (expense), net was insignificant for the nine months ended
December 31, 2005 compared to $0.6 million for the nine months ended December
31, 2004. The amount recorded in 2004 includes a $0.4 million benefit from the
revaluation of warrants previously issued to prior convertible note holders and
approximately $0.2 million of realized income, derived primarily from grant
monies received by Salon to finance editorial content, for which Salon's
obligations were met during the period.


                                       16
<PAGE>

Preferred deemed dividend:

     Salon recorded a non-cash preferred deemed dividend charge of $1.0 million
for each of the three and nine months ended December 31, 2005. Salon recorded
non-cash preferred deemed dividend benefits of $0.1 million and $0.3 million for
the three and nine month periods ended December 31, 2004, respectively.

     The $1.0 million charge in 2005 was a result of Salon's issuance of 209
shares of Series D-3 preferred stock for which it received approximately
$251,000 in cash. The Certificate of Designation of Preferences and Rights of
the Series D preferred stock stipulate that the conversion price to common stock
be equal to 70% of the average closing price of Salon's common stock for the
thirty days prior to the date Salon provides notice to purchasers regarding the
intended sale of shares of Series D preferred stock. The resulting conversion
price on the date Salon gave notice of its intent to sell additional shares of
Series D-3 preferred stock to investors was $0.093. Thereafter, Salon's common
stock price rose sharply to $0.47 per share on the date of the transaction,
which we believe is attributable to investors favorably responding to the
announcement of Salon's ten-year anniversary, Google's announced purchase of a
5% interest in AOL and other unknown market factors. The increase in our common
stock price and to a lesser extent the value of the warrants issued in the
transaction, resulted in the non-cash preferred deemed dividend charge of $1.0
million. The preferred deemed dividend represents the difference between the
offering price of Salon's Series D-3 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 fair value of the warrants issued.

     The non-cash preferred deemed dividend benefit of $0.1 million for the
three months ended December 31, 2004 represents a decrease in value of
previously issued warrants to prior purchasers of preferred stock.

     The non-cash preferred deemed dividend benefit of $0.3 million for the nine
months ended December 31, 2004 includes a benefit of $0.5 attributable to a
decrease in value of previously issued warrants to prior purchasers of preferred
stock, offset by a $0.2 million non-cash preferred deemed dividend charge
primarily from the June 4, 2004 issuance of 417 shares of Series D-1 preferred
stock, which represented 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 value
of the warrants issued in the transaction.

Net loss attributable to common stockholders:

     Salon recorded a net loss attributable to common stockholders of $0.9
million, or ($0.06) per share for the three months ended December 31, 2005
compared to a net profit attributable to common stockholders of $0.4 million, or
$0.03 per basic share, or $0.00 per diluted share, for the three months ended
December 31, 2004. Also as a result of the above factors, Salon recorded a net
loss attributable to common stockholders of $1.2 million, or ($0.08) per share
for the nine months ended December 31, 2005 compared to a net profit
attributable to common stockholders of $0.2 million, or $0.02 per basic share,
or $0.00 per diluted share, for the nine months ended December 31, 2004.

Liquidity and capital resources:

     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. To address the negative cash flows, Salon
reduced expenses, evidenced by net cash used in operating activities decreasing
from $5.0


                                       17
<PAGE>

million for the year ended March 31, 2002 to $2.8 million for the year ended
March 31, 2004. The reduction in use of cash facilitated raising capital during
this period, which in turn facilitated being awarded a greater number of
advertisements, as advertisers gained confidence in Salon's survivability.

     The renewed confidence in Salon, plus the resurging Internet ad market,
resulted in advertising revenues increasing from $1.8 million for the year ended
March 31, 2004 to $3.6 million for the year ended March 31, 2005 which in turn
caused the net cash used in operations to decrease to $0.8 million for the year
ended March 31, 2005. This trend has continued for the nine months ended
December 31, 2005 as the cash used in operations was $0.4 million as compared to
$0.8 million for the nine months ended December 31, 2004. As a result of the
cash used in operations, $0.3 million from investing activities and the use of
$0.1 million for capital expenditures, Salon's available cash at December 31,
2005 was $0.5 million.

     Based on projected trade receivable receipts, expense payments, advertising
revenues of a potential high of $0.8 million and total revenues of a potential
high of $1.4 million, Salon estimates that its cash on hand may be as high as
$0.4 million at March 31, 2006. If the anticipated revenue expectations are not
met, Salon's cash on hand could be significantly less. Based on anticipated
advertising revenues of a potential high of $5.3 million and total revenues of a
potential high of $8.0 million for the twelve months ending December 31, 2006,
Salon estimates it could have a cash balance of up to $0.3 million as of
December 31, 2006, although the cash balance is expected to be less if these
sales amounts are not attained. However, based on projections, Salon anticipates
a cash balance of $0.1 million as of June 30, 2006, and thereafter periods of
extremely limited or no cash. Again, if the anticipated revenue expectations are
not met, Salon's cash on hand could be significantly less. There is no certainty
that Salon will be able to attain any of the above mentioned projected revenue
amounts.

     As Salon projects periods of very limited cash in the next twelve months,
Salon anticipates that it may seek purchasers for some or all of the remaining
1,042 authorized and unissued shares of Series D preferred stock for which Salon
estimates it could receive up to $1.25 million. There is no guarantee that Salon
will be successful in finding buyers for these securities. In addition, Salon
may explore amending the "Securities Purchase Agreement", as amended to date,
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) to allow for the sale of additional shares of Series D. There
is no certainty that Salon will be able to amend these documents or sell any
such additional shares.

     Salon is currently attempting to sell The Well, an on-line community it
purchased in 1999. As of this filing, Salon has not found a suitable buyer for
this asset, which has a book value of approximately $0.2 million, most of which
is goodwill. The potential sale of The Well is not primarily driven by a need to
generate cash to finance Salon's operations, but is primarily intended to free
management to concentrate on Salon's core operations.


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 use upon adoption


                                       18
<PAGE>

of SFAS 123R, 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 two
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 SFAS 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.

     In May 2005, the FASB issued SFAS 154 "Accounting Changes and Error
Corrections." which replaces APB Opinion No. 20 "Accounting Changes" and SFAS
No. 3, "Reporting Accounting Changes in Interim Financial Statements--An
Amendment of APB Opinion No. 20." SFAS 154 provides guidance on the accounting
for and reporting of accounting changes and error corrections. Specifically,
this statement requires "retrospective application" of the direct effect for a
voluntary change in accounting principle to prior periods' financial statements,
if it is practicable to do so. SFAS 154 also strictly redefines the term
"restatement" to mean the correction of an error by revising previously issued
financial statements. SFAS 154 replaces APB No. 20, which requires that most
voluntary changes in accounting principle be recognized by including in net
income of the period of the change the cumulative effect of changing to the new
accounting principle. SFAS 154 is effective for accounting changes and
correction of errors made in fiscal years beginning after December 15, 2005 and
is required to be adopted by Salon in the first quarter of fiscal 2007. Salon
does not currently believe adoption will have a material impact on its results
of operations, financial position or cash flows.


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 cash projections to run its business. The most significant
component of Salon's cash projections is cash to be generated from advertising
sales and, to a lesser extent, cash projected to be generated from Salon
Premium. 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 or experiences 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


                                       19
<PAGE>

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 adversely
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 Salon provides notice to purchasers of its intent to sell
additional shares of Series D preferred stock. Such a discount, and the time lag
between the date of the notice and the date a transaction is consummated, may
trigger a non-cash preferred deemed dividend charge. In connection with the sale
of 209 shares of Series D-3 in December 2005, we incurred a preferred deemed
dividend charge of $1.0 million. Currently, there are 1,042 shares of authorized
and unissued shares of Series D preferred that we may sell. Salon cannot predict
to what extent it may incur future preferred deemed dividend charges, 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

     Based on information available to Salon, the holders of Salon's Series A,
B, C and D preferred stock collectively own approximately 95% of all voting
securities as of December 31, 2005. These stockholders therefore own a
controlling interest in Salon. Of this amount, approximately 68% is held by
related parties, including former Directors, of which approximately 20% is
controlled directly or indirectly by William Hambrecht and approximately 40% 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 accelerating, delaying
or preventing a change in control of Salon, which could cause Salon's stock
price to decline.

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 $21.5 million in
potential sales proceeds as of December 31, 2005, which includes the effect of
undeclared dividends of $2.2 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 $21.5 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 $21.5 million and if preferred stock dividends were to be
declared, the holders of preferred stock would be entitled to receive a
relatively larger distribution than the holders of common stock would be
entitled to receive.


                                       20
<PAGE>

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

     Salon has a history of significant losses and expects to incur a loss from
operations, based on generally accepted accounting principals, for its fiscal
year ending March 31, 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 that the subscription offering warrants their
long-term support and investment

     Salon is under budgetary constraints to control expenditures. These
constraints affect editorial staffing levels and the purchase of content from
freelance writers. These constraints affect the quantity of content published on
Salon's Website and consequently, the positive experience of Website visitors.
The positive experience leads to recurring Website visits and new subscriptions
to Salon Premium. The absence of any of these factors could impair the results,
revenue and cash flow from subscriptions. Salon cannot predict if how many new
Salon Premium subscriptions it will acquire.

Salon's Site Pass advertising model may inhibit traffic to our Website, which
would harm our revenues and business

     As a result of analyzing the decline in Salon Premium memberships, Salon
believes that its Site Pass advertising model, which Salon credits as
instrumental in increasing advertising revenues, and driving memberships to
Salon Premium, inhibits a growth in traffic to its Website. Salon contemplates
further analysis of these relationships and may adjust its Site Pass advertising
model in order to attract a wider audience. While a wider audience is intended
to increase the supply of advertising impressions, and to introduce more
potential members to Salon Premium, Salon cannot estimate when, or if,
membership to Salon Premium will again increase or if it will be successful in
adjusting its Site Pass to achieve desired results.

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

     Salon has been relying on the revenues and cash generated from Salon
Premium subscriptions since its implementation in April 2002. Salon Premium
subscriptions grew from nothing to a high of approximately 89,100 as of December
31, 2004. However, since the high experienced in December 31, 2004,
subscriptions have been declining to approximately 69,700 as of December 31,
2005. If this decline were to continue, Salon's operations and available cash
could be adversely affected.


                                       21
<PAGE>

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;

     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 dollar 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 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. Even though the SEC Advisory Committee on
Smaller Public Companies has recommended to the SEC that companies of Salon's
size be exempted from complying with Section 404 of the Sarbanes-Oxley Act of
2002, the SEC has not approved such a recommendation as of this filing and may
not do so in future periods. Recently adopted changes in the accounting rules
for employee stock options as a compensation expense, among other accounting
rules, could materially increase the expenses that we report under generally
accepted accounting principles and adversely affect our operating results.


                                       22
<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.

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.
Salon's share price has, in the past, experienced price volatility, 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, both GAAP and non GAAP, are
likely to vary significantly from quarter to quarter due to a number of factors,
many of which are outside Salon's control, and any of which could severely harm
Salon's business. These factors include:

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

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

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

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


                                       23
<PAGE>

     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 period's results of operations may be below the expectations
of public market analysts and investors. If this occurs, the price of its common
stock may decline.

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

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

Salon'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 Salon introduces new
content and services or enters into new business ventures that are not favorably
perceived by users, Salon may not be successful in promoting and maintaining the
Salon brand. Any change in the focus of its operations creates a risk of
diluting its 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


                                       24
<PAGE>

retain other qualified employees in the future. If Salon does not succeed in
attracting new personnel or retaining and motivating its current personnel, its
business could be harmed.

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

     Salon's success and ability to compete are significantly dependent on its
proprietary content. Salon relies exclusively on copyright law to protect its
content. While Salon actively takes steps to protect its proprietary rights,
these steps may not be adequate to prevent the infringement or misappropriation
of its content, which could severely harm its business. Salon also licenses
content from various freelance providers and other third-party content
providers. While Salon attempts to ensure that 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, and continues to improve, the software to manage its Salon Premium
subscription service. If these systems do not work as intended, or if Salon is
unable to continue to develop these systems to keep up with the rapid evolution
of technology for content delivery and subscription management, its Website or
subscription management systems may not operate properly, which could harm
Salon's business. Additionally, software product design, development and
enhancement involve creativity, expense and the use of new development tools and
learning processes. Delays in software development processes are common, as are
project failures, and either factor could harm Salon's business. Moreover,
complex software products 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.


                                       25
<PAGE>

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 such third parties are unable to provide these services in the
future, Salon will need to perform this function itself or obtain such services
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 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.

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

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


                                       26
<PAGE>

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 Salon uses to
protect customer transaction data may occur. A compromise of Salon's security
could severely harm its business. A party who is able to circumvent 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.
Even though Salon is Payment Card Industry (PCI) compliant, 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 a facility in San Francisco, California that
has been extensively retrofitted to withstand a major earthquake. Fire, floods,
earthquakes, power loss, telecommunications failures, break-ins, supplier
failure to meet commitments, and similar events could damage these systems and
cause interruptions in its services. Computer viruses, electronic break-ins or
other similar disruptive problems could cause users to stop visiting Salon's
Website and could cause advertisers to terminate any agreements with Salon. In
addition, Salon could lose advertising revenues during these interruptions and
user satisfaction could be negatively impacted if the service is slow or
unavailable. If any of these circumstances occurred, Salon's business could be
harmed. Salon's insurance policies may not adequately compensate it for 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.


                                       27
<PAGE>

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

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

     o    the board of directors approved the transaction 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.


                                       28
<PAGE>

     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, employment agreements with active executive officers, though
currently not in effect, may provide for the payment of severance and
acceleration of options in the event of 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.


                                       29
<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.

     In October 2005, a warrant to acquire 1,000,000 shares of common stock with
an exercise price of $0.05 per share that was issued to a former CEO of Salon,
was converted by the former CEO to 642,857 shares of common stock. Salon did not
receive any proceeds from this transaction.

     In November 2005, a warrant to acquire 300,000 shares of common stock with
an exercise price of $0.04506 per share was exercised by an investor for which
Salon received $13,518 in cash. The funds received will be used for working
capital and other general corporate purposes.

     The securities were 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.



                                       30
<PAGE>

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

     At Salon's Annual Meeting of Stockholders held on October 20, 2005, the
following individuals were elected to the Board of Directors as Class I
directors:

                                   Votes For         Votes Withheld
                                   ---------         --------------
     George Hirsch                 174,730,567           76,093
     John Warnock                  174,751,910           54,750
     Deepak Desai                  174,727,810           78,850

The following proposals were approved at the Annual Meeting of Stockholders:

<TABLE>
<CAPTION>
                                                         Affirmative      Negative       Votes          Not
                                                            Votes          Votes        Withheld       Voted
                                                         -----------    -----------   -----------   -----------
<S>                                                      <C>              <C>          <C>           <C>
     1.  Approve an amendment to the Salon Media
         Group, Inc. 2004 Stock Plan increasing the
         aggregate number of share that may be
         issued to 16,000,000                            163,060,564      325,023      3,171,331     8,249,542

     2.  Effect a Reverse Stock Split of Outstanding
         Common Stock by a Ratio of 1:10                 168,750,207      191,602       5,864,851        -

     3.  Effect a Reverse Stock Split of Outstanding
         Common Stock by a Ratio of 1:12                 168,714,419      227,990       5,864,251        -

     4.  Effect a Reverse Stock Split of Outstanding
         Common Stock by a Ratio of 1:15                 168,637,744      214,765       5,954,151        -

     5.  Effect a Reverse Stock Split of Outstanding
         Common Stock by a Ratio of 1:20                 174,303,155      200,089         303,416        -

     6.  Ratify the Appointment of Burr, Pilger &
         Mayer LLP as the Independent Registered
         Public Accountants of the Company for
         The Year Ending March 31, 2006                  174,788,899        5,815          11,946        -
</TABLE>

Item 5. Other Information.

     Not applicable.


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

(a)  Exhibits.

4.2.88(1)      Amendment No. 3 to Securities Purchase Agreement dated November
               9, 2005

4.2.89(2)      Amendment No. 4 to Securities Purchase Agreement dated December
               21, 2005

4.2.90(2)      Common Stock Purchase Warrant dated December 21, 2005 issued by
               Salon Media Group, Inc


                                       31
<PAGE>

99.6(1)        Press Release dated November 10, 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 November 10, 2005.

(2)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on December 22, 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:  2/13/06          /s/ Elizabeth Hambrecht
                         -------------------------------------
                         Elizabeth Hambrecht
                         President and Chief Executive Officer



Dated:  2/13/06          /s/ Conrad Lowry
                         -------------------------------------
                         Conrad Lowry
                         Chief Financial Officer and Secretary



                                       32