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

                       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, 2001

                                       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)

                          22 FOURTH STREET, 16TH FLOOR
                             SAN FRANCISCO, CA 94103
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

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

                                 (415) 645-9200
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      NONE

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                         COMMON STOCK, $0.001 PAR VALUE
                                (TITLE OF CLASS)

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

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

The number of outstanding shares of the Registrant's Common Stock, par value
$0.001 per share, on January 28, 2002 was 14,155,276 shares.
================================================================================
<PAGE>

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FORM 10-Q
SALON MEDIA GROUP, INC.
INDEX
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                                                                           PAGE
PART I    FINANCIAL INFORMATION                                           NUMBER


ITEM 1:   Condensed Consolidated Financial Statements

          Condensed Consolidated Balance Sheets as of December 31, 2001 and
          March 31, 2001 (unaudited)......................................    3

          Condensed Consolidated Statements of Operations for the three and
          nine months ended December 31, 2001 and 2000 (unaudited)........    4

          Condensed Consolidated Statements of Cash Flows for the nine
          months ended December 31, 2001 and 2000 (unaudited).............    5

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

ITEM 2:   Management's Discussion and Analysis of Financial Condition and
          Results of Operations...........................................   10

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

PART II   OTHER INFORMATION

ITEM 1:   Legal Proceedings...............................................   29

ITEM 2.   Changes in Securities and Use of Proceeds.......................   29

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

ITEM 4.   Submission of Matters to a Vote of Security Holders.............   30

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

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

          Signatures......................................................   31

                                       2
<PAGE>

--------------------------------------------------------------------------------
PART I:  FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             SALON MEDIA GROUP, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
               (in thousands, except share and per share amounts)
<TABLE><CAPTION>
                                                            DECEMBER 31,    MARCH 31,
                                                                2001          2001
                                                              --------      --------
<S>                                                           <C>           <C>
ASSETS
    Current assets:
       Cash and cash equivalents                              $  2,080      $  3,047
       Accounts receivable, net                                    457           474
       Prepaid expenses and other current assets                   226           201
                                                              --------      --------
        Total current assets                                     2,763         3,722
    Property and equipment, net                                  1,487         2,731
    Intangible assets                                            1,040         1,395
    Prepaid advertising rights                                   6,469         7,075
    Other assets                                                   798         1,375
                                                              --------      --------
        Total assets                                          $ 12,557      $ 16,298
                                                              ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable and accrued liabilities               $  2,165      $  2,720
       Deferred revenue                                            678           223
                                                              --------      --------
        Total current liabilities                                2,843         2,943
    Long-term liabilities                                          173           478
                                                              --------      --------
       Total liabilities                                         3,016         3,421
                                                              --------      --------
Stockholders' equity:
    Preferred stock, $0.001 par value, 1,250 shares
       authorized, 809 issued and outstanding at
       December 31, 2001 (liquidation value of $6,472
       at December 31, 2001)                                      --            --
    Common stock, $0.001 par value, 50,000,000 shares
       authorized, 14,155,276 and 14,139,626 shares
       issued and outstanding at December 31, 2001
       and March 31, 2001                                           14            14
    Additional paid-in-capital                                  84,871        78,404
    Unearned compensation                                         (101)         (231)
    Accumulated deficit                                        (75,243)      (65,310)
                                                              --------      --------
       Total stockholders' equity                                9,541        12,877
                                                              --------      --------
        Total liabilities and stockholders' equity            $ 12,557      $ 16,298
                                                              ========      ========

 The accompanying notes are an integral part of these condensed consolidated financial statements
</TABLE>
                                       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,
                                                      ----------------------      ----------------------
                                                        2001          2000          2001          2000
                                                      --------      --------      --------      --------
<S>                                                   <C>           <C>           <C>           <C>
Net revenues                                          $  1,128      $  2,270      $  2,668      $  6,226
                                                      --------      --------      --------      --------
Operating expenses:
    Production and content                               1,157         2,500         3,948         7,658
    Sales and marketing                                    585         1,956         2,106         6,110
    Research and development                               162           501           538         1,331
    General and administrative                             417           961         1,601         2,512
    Amortization of intangibles                            121           265           355           944
    Write-down of long-lived assets                       --           1,717           782         1,717
                                                      --------      --------      --------      --------
       Total operating expenses                          2,442         7,900         9,330        20,272
                                                      --------      --------      --------      --------

Loss from operations                                    (1,314)       (5,630)       (6,662)      (14,046)
Other income, net                                            5            25            15           417
                                                      --------      --------      --------      --------
       Net loss                                         (1,309)       (5,605)       (6,647)      (13,629)

Preferred deemed dividend                                 --            --          (3,189)         --
Cumulative cash dividend on preferred stock                (65)         --             (97)         --
                                                      --------      --------      --------      --------
Net loss attributable to common stockholders          $ (1,374)     $ (5,605)     $ (9,933)     $(13,629)
                                                      ========      ========      ========      ========
Basic and diluted net loss per share attributable
       to common stockholders                         $  (0.10)     $  (0.43)     $  (0.73)     $  (1.06)

Weighted average shares used in computing
       basic and diluted net loss per share
       attributable to common stockholders              13,585        13,051        13,535        12,907


       The accompanying notes are an integral part of these condensed consolidated financial statements
</TABLE>
                                       4
<PAGE>

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

<TABLE><CAPTION>
                                                                                     NINE MONTHS ENDED
                                                                                        DECEMBER 31,
                                                                                   ----------------------
                                                                                     2001          2000
                                                                                   --------      --------
<S>                                                                                <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                        $ (6,647)     $(13,629)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Loss on disposal of assets                                                          23          --
     Write-down of long-lived assets                                                    782         1,717
     Stock-based compensation and warrant amortization                                  152           137
     Depreciation and amortization                                                      908         1,585
     Allowance for doubtful accounts                                                    309           200
     Amortization of prepaid advertising rights                                         606           607
     Changes in assets and liabilities:
        Accounts receivable                                                             (56)          896
        Prepaid expenses, other current assets and other assets                         100          (693)
        Accounts payable and accrued liabilities                                       (660)       (1,635)
        Deferred revenue                                                                455            (1)
                                                                                   --------      --------
           Net cash used in operating activities                                     (4,028)      (10,816)
                                                                                   --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                                    (6)         (874)
   Acquisitions, net of liabilities assumed                                            --            (400)
                                                                                   --------      --------
           Net cash used in investing activities                                         (6)       (1,274)
                                                                                   --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of preferred stock, net                                     3,204          --
   Proceeds from exercise of stock options                                                7            73
   Principal payments under capital leases                                             (144)         (125)
   Repayment of short-term borrowings                                                  --             (90)
                                                                                   --------      --------
           Net cash provided by (used in) financing activities                        3,067          (142)
                                                                                   --------      --------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                              (967)      (12,232)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                      3,047        17,982
                                                                                   --------      --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                         $  2,080      $  5,750
                                                                                   ========      ========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Issuance of stock and warrants in connection with acquisition                   $    108      $  1,469
   Issuance of warrants in connection with preferred stock financing                    898          --
   Preferred deemed dividend in connection with preferred stock financing             3,189          --
   Property and equipment purchased under capital lease                                --             221

     The accompanying notes are an integral part of these condensed consolidated financial statements
</TABLE>
                                       5
<PAGE>

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

1.     THE COMPANY

         Salon Media Group, Inc. (Salon) is an Internet media company that
produces a network of ten subject-specific websites, of which one is an audio
streaming website, hosts two online subscription communities, and features Salon
Premium, a paid subscription service. 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

         The 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, 2001 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, as amended, filed with the Securities and Exchange Commission.
Pursuant to the rules of the Securities and Exchange Commission, these financial
statements do not include all disclosures required by generally accepted
accounting principles. The results for the three and nine months ended December
31, 2001 are not necessarily indicative of the expected results for any other
interim period or the fiscal year ending March 31, 2002.

         These condensed consolidated financial statements contemplate the
realization of assets and the satisfaction of liabilities in the normal course
of business. Salon has incurred losses and negative cash flow from operations
since inception and has an accumulated deficit at December 31, 2001 of $75,243.
These factors raise substantial doubt about Salon's ability to continue as a
going concern.

         Salon has reduced expenses, and may reduce them further, to match
anticipated revenues to reach cash-flow breakeven. However, until cash-flow
breakeven is reached, Salon will continue to use its current cash on hand
generated from the net proceeds from the issuance of preferred stock during the
quarter ended September 30, 2001. If Salon is unable to generate sufficient cash
flows from operations or should management determine it to be prudent, Salon may
seek additional sources of capital. There can be no assurance that Salon will be
able to obtain such financing, if necessary, on terms which are favorable or at
all.

         In the event that Salon is unable to increase revenues or financing is
unavailable, management can explore further reductions of expenses to levels
that could be financed by the revenues generated. There can be no assurance that
a further cost cutting exercise will be successful in completely eliminating the
difference between expenditures and revenues or that such actions would not have
a harmful effect on Salon's business and results of operations. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

                                       6
<PAGE>


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

3.     SALON PREMIUM

         In April 2001, Salon launched Salon Premium, a paid subscription
service. Salon Premium offers readers who pay $6 for a one-month subscription,
$30 for a one year subscription or $50 for a two year subscription, access to
exclusive new content; the option to view Salon content without advertising
banners and pop-ups; access to select unabridged content that is currently
offered for free (abridged versions are available free for non-subscribers) and
the ability to easily download content in text format, a convenience that will
enable readers to view additional Salon articles when not connected to the
internet. Revenue is recognized ratably over the period that services are
provided.

4.     CONCENTRATIONS

         No customer accounted for more than 10% of total revenue for the three
or nine months ended December 31, 2001. Two customers accounted for 13% and 10%
of total revenues for the three months ended December 31, 2000 and no customer
accounted for more than 10% of total revenue for the nine months ended December
31, 2000. Salon did not record any barter revenues for the three or nine months
ended December 31, 2001. Salon did not record any barter revenues for the three
months ended December 31, 2000, but recorded $63 of barter revenue or 1% of
total revenue for the nine months ended December 31, 2000. Three customers each
accounted for 10% of the total accounts receivable balance at December 31, 2001,
and one customer accounted for 10% of the total accounts receivable balance at
December 31, 2000.

5.     SOFTWARE DEVELOPMENT COSTS

         During the fiscal year ended March 31, 2001 Salon capitalized $674 of
expenditures incurred to enhance Salon's proprietary software as Salon
contemplated marketing the software. Salon has since discontinued all
development and dedicated internal marketing efforts to focus on its core
content, production and maintenance. Accordingly, Salon determined that this
asset was impaired and recorded an impairment charge of $674 in the nine month
period ended December 31, 2001.

6.     PREFERRED STOCK

         On August 9, 2001 and September 13, 2001, Salon issued approximately
809 shares of Series A Redeemable Convertible Preferred Stock (Preferred Stock)
at $4,000 per share and issued warrants to purchase approximately 6,472,000
shares of common stock for $0.2875 per share, for net proceeds of approximately
$3,204. The holders of the Preferred Stock are entitled to the following rights
and preferences: cumulative and accrued dividends of 8.0% annually; in the event
of a liquidation, they will receive prior and in preference to distributions
made to holders of common stock, an amount equal to $8,000 per share of Series A
Convertible Preferred Stock, and then participate with the holders of common
stock up to an aggregate return of $12,000 per share of Preferred Stock; certain
voting rights and terminable redemption rights. The Preferred Stock can be
converted into approximately 12,944,000 shares of common stock at the discretion
of the Preferred Stock holders. On October 24, 2001, the redemption feature was
automatically terminated by Salon's shareholders in accordance with the terms of
the Certificate of Designation of Preferences and Rights of the Series A
Preferred Stock dated as of August 8, 2001.

                                       7
<PAGE>

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

         The difference between the offering price of the Preferred Stock and
the fair value of the common stock into which the Preferred Stock is convertible
on the dates of the transactions, resulted in a beneficial conversion feature in
the amount of $2,257. The allocation of proceeds between Preferred Stock and
warrants and the immediate redemption feature of the Preferred Stock resulted in
an immediate accretion of the Preferred Stock in the amount of $932. The
aggregate value of the beneficial conversion feature and immediate accretion, of
$3,189, is reflected as a preferred dividend in the consolidated statements of
operations. In addition, an 8% cash dividend of $97 has accrued to the holders
of the Preferred Stock as of December 31, 2001. As of this date, such cash
dividend was not paid.

7.     NET LOSS PER SHARE

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

<TABLE><CAPTION>
                                                               THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                   DECEMBER 31,                       DECEMBER 31,
                                                         ------------------------------      ------------------------------
                                                             2001              2000              2001              2000
                                                         ------------      ------------      ------------      ------------
<S>                                                      <C>               <C>               <C>               <C>
Numerator:
  Net loss applicable to common stockholders             $     (1,374)     $     (5,605)     $     (9,933)     $    (13,629)
                                                         ============      ============      ============      ============

Denominator:
  Weighted average shares outstanding                      14,155,000        13,939,000        14,153,000        13,559,000
  Weighted average shares held in escrow                     (570,000)         (888,000)         (618,000)         (652,000)
                                                         ------------      ------------      ------------      ------------
  Weighted average shares used in computing
     basic and diluted net loss per share applicable
     to common stockholders                                13,585,000        13,051,000        13,535,000        12,907,000
                                                         ============      ============      ============      ============
  Basic and diluted net loss per share applicable
     to common stockholders                              $      (0.10)     $      (0.43)     $      (0.73)     $      (1.06)
                                                         ============      ============      ============      ============
  Antidilutive securities including options,
     warrants and convertible preferred stock not
     included in loss per shares calculation               27,388,774         4,761,401        27,388,774         4,761,401
</TABLE>

8.     RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133 (SFAS), "Accounting for
Derivatives and Hedging Activities" (SFAS No. 133). SFAS No. 133, as amended,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities, SFAS No. 133, requires that all derivative instruments be
recognized at fair value as either assets or liabilities in the statement of
financial position. The accounting for changes in the fair value

                                       8
<PAGE>

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

(i.e., gains or losses) of a derivative instrument depends on whether it has
been designated and qualifies as a part of a hedging relationship and further,
on the type of hedging relationship. Salon adopted SFAS No. 133, as amended,
effective April 1, 2001 with no impact on its consolidated financial statements.
To date, Salon has not engaged in derivative or hedging activities.

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations"
(SFAS No. 141). This standard eliminates the pooling-of-interests method of
accounting for business combinations, except for qualifying business
combinations that were initiated prior to July 1, 2001, and applies to all
business combinations accounted for under the purchase method that are completed
after June 30, 2001. The implementation of SFAS No. 141 is not expected to have
a significant impact on Salon's financial condition or results of operations.

         In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets" (SFAS No. 142). This standard eliminates the amortization of
goodwill, and requires goodwill to be reviewed at least annually for impairment,
the useful lives of previously recognized intangible assets to be reassessed and
the remaining amortization periods to be adjusted accordingly. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. The implementation
of this standard is not expected to have a significant impact on Salon's
financial condition or results of operations.

         In October 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). SFAS No. 144
supersedes "Accounting for the Impairment of Long- Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS No.121), however it retains the
fundamental provisions of SFAS No. 121 for (1) the recognition and measurement
of the impairment of long-lived assets to be held and used and (2) the
measurement of long-lived assets to be disposed of by sale. SFAS No. 144
develops a single accounting model for long-lived assets to be disposed of by
sale, whether previously held and used or newly acquired assets and consequently
amends Accounting Principles Board Opinion No. 30, "Reporting Results of
Operations -Reporting the Effects of Disposal of a Division of a Business."
Additionally, SFAS No. 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years. Salon is currently assessing the impact of
its adoption on its financial statements.

         In November 2001, the Emerging Issues Task Force (EITF) reached a
consensus on Issue 1(a) of EITF Issue 00-18, "Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees" that
an asset acquired in exchange for the issuance of fully vested, non-forfeitable
equity instruments should be displayed in the balance sheet of the grantor as an
asset rather than as a reduction of stockholders' equity. While no specific
transition guidance was provided in connection with this consensus, Salon has
adopted this consensus effective immediately and such adoption resulted in
reclassifying prepaid advertising rights received from a stockholder in exchange
for common stock as a non-current asset as of December 31, 2001. The March 31,
2001 balance sheet has been reclassified to conform with this presentation. The
impact of this reclassification was to increase total assets by 6,469 and 7,075
at December 31, 2001 and March 31, 2001 respectively, and to increase total
stockholders' equity and total liabilities and stockholders' equity by similar
amounts at the same dates. In connection with this reclassification, Salon has
updated its assessment of the carrying value of this long-lived asset and
believes, based on current cash flow forecasts and expectations, that the asset
is

                                       9
<PAGE>

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

not impaired at December 31, 2001. If Salon were not to meet its cash flow
expectations, this asset would be reviewed for potential impairment and a
write-down may be required in the future.

--------------------------------------------------------------------------------
PART I:       FINANCIAL INFORMATION
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

         This section and other parts of this Form 10-Q contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that involve risks and uncertainties, including, but not limited to,
statements regarding our strategy, plans, objectives, expectations, intentions,
financial performance, cash-flow breakeven timing, financing, economic
conditions, on-line advertising, market performance, subscription service plans,
and revenue sources. Although Salon believes its plans, intentions and
expectations reflected in such forward-looking statements are reasonable, we can
give no assurance that such 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," "intends," "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 that produces a network of ten
subject-specific websites, of which one is an audio streaming website, and hosts
two online subscription communities, Table Talk and The Well, and features Salon
Premium, a paid subscription service. Salon believes that its network of
websites combines the thoughtfulness of print, the timeliness of television and
the interactivity of talk radio.

                                       10
<PAGE>

         The main entry and navigation point to Salon's ten websites is Salon's
home page at www.salon.com. The websites provide news, features, interviews and
regular columnists on specific topics, from politics and arts and entertainment
to parenting and health, while Salon's online communities allow users to
interact and discuss Salon content and other topics via electronic messaging.
Salon's users can access Table Talk or The Well through www.salon.com or through
Salon's ten content websites. Salon offers two websites, News and Politics, in
which substantially all content is only offered to Salon Premium subscribers,
with an abridged form available to all users.

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

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2001
COMPARED TO THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2000

NET REVENUES:

            Net revenues decreased 50% to $1.1 million for the three months
ended December 31, 2001 from $2.3 million for the three months ended December
31, 2000 and decreased 57% to $2.7 million for the nine months ended December
31, 2001 from $6.2 million for the nine months ended December 31, 2000.
Advertising revenues declined to $0.7 million for the three months ended
December 31, 2001 from $2.0 million the prior year while subscription revenue
increased from $0.1 million to $0.3 million in the same period. Advertising
revenues declined to $1.5 million for the nine months ended December 31, 2001
from $5.5 million the prior year. Subscription revenues doubled from $0.4
million for the nine months ended December 31, 2000 to $0.8 million for the nine
months ended December 31, 2001. In addition, Salon recognized $0.2 million of
website management software sales during the nine months ended December 31, 2001
and no comparable amounts last year. Salon cannot predict when or if it may
generate additional software sales. The decrease in advertising revenue was
attributable to an overall contraction in the United States economy, e-commerce
or Internet businesses reducing advertising without compensating increases from
more established advertisers, most advertisers choosing to place advertisements
in the largest media portal sites, the September 11, 2001 terrorist acts and
advertisers' concern with Salon's financial viability.

         In April 2001, Salon began Salon Premium, a paid subscription service.
Salon Premium offers readers who pay either $30 for a one year subscription or
$50 for a two year subscription, access to exclusive new content; the option to
view Salon content without advertising banners and pop-ups; access to select
unabridged content that is currently offered for free (abridged versions will
continue to be available free for non-subscribers) and the ability to easily
download content in text format, a convenience that enables readers to view
additional Salon articles when not connected to the Internet. In October 2001,
Salon began featuring its unabridged stories found in its News and Politics
websites exclusively to Salon Premium members. In December 2001, Salon began
offering one-month subscriptions for $6.

         Salon Premium revenue is recognized ratably over the period that
services are provided. Salon recognized $0.2 million of Salon Premium revenue
for the three months ended December 31, 2001 and $0.3 million of revenue for the
nine months ended December 31, 2001. As of December 30, 2001, Salon has
approximately 28,000 paid subscribers and has deferred $0.6 million of revenue
over the remaining subscription periods. Salon estimates that it will generate
approximately $1.0 million of Salon Premium

                                       11
<PAGE>
revenue in its first year of operation. Salon cannot predict how much revenue
will be generated in the second year of operation.

         There was no barter revenue recognized for either the three months or
nine months ended December 31, 2001. There was no barter for the three months
ended December 31, 2000 and barter was not a significant source of revenue for
the nine months ended December 31, 2000.

PRODUCTION AND CONTENT:

         Production and content expenses during the three months ended December
31, 2001 were $1.2 million versus $2.5 million for the three months ended
December 31, 2000, a decline of $1.3 million or 54%. The decrease in production,
content and product costs for the three months ended September 30, 2001 versus
September 30, 2000, is primarily attributable to a $0.8 million decrease in
salaries and benefits from staff reductions between periods, the benefit of a
15% salary reduction this year and $0.2 from reduced purchases of freelance
articles.

         Production and content expenses during the nine months ended December
31, 2001 were $3.9 million versus $7.7 million for the nine months ended
December 31, 2000, a decline of $3.8 million or 48%. The decrease between years
is primarily due to an elimination of approximately thirty-five positions and
the effect of a 15% salary reduction this year, which combined to reduce
expenses by $2.2 million. Reduced purchases of freelance articles yielded
additional savings of $0.8 million and curtailment of travel activities reduced
expenses an additional $0.2 million.

SALES AND MARKETING:

         Sales and marketing expenses during the three months ended December 31,
2001 were $0.6 million versus $2.0 million for the three months ended December
31, 2000, a decline of $1.4 million or 70%. The decrease in sales and marketing
is primarily attributable to staff reductions between periods and the effect of
a 15% salary reduction this year, which combined to reduce expenses by $0.8
million, $0.2 million from the curtailment of non-essential advertising and
marketing efforts, and $0.1 million from the reversal of an accrual no longer
deemed necessary.

         Sales and marketing expenses during the nine months ended December 31,
2001 were $2.1 million versus $6.1 million for the nine months ended December
31, 2000, a decline of $4.0 million or 66%. The decrease in sales and marketing
expenses is primarily attributable to an elimination of approximately thirty
positions and the effect of a 15% salary reduction this year, which combined
reduced expenses by $2.2 million. Curtailment of non-essential advertising and
marketing expenditures resulted in saving an additional $1.0 million, and a
reduction in travel reduced expenses an additional $0.2 million.

         Included in sales and marketing expenses are non-cash advertising
expenses related to an investment in Salon by Rainbow Media Holdings, Inc. in
the form of prepaid advertising rights valued at $8.1 million which is being
amortized over a ten year period. Amortized amounts were $0.2 million for both
the three months ended December 31, 2001 and 2000 and $0.6 million for both the
nine months ended December 31, 2001 and 2000.

RESEARCH AND DEVELOPMENT:

         Research and development expenses during the three months ended
December 31, 2001 were $0.2 million versus $0.5 million for the three months
ended December 31, 2000, a decline of $0.3 million or 68%. The decrease is
primarily attributable to staff reductions between periods and the effect of a
15% salary reduction this year.
                                       12
<PAGE>

         Research and development expenses during the nine months ended December
31, 2001 were $0.5 million versus $1.3 million for the nine months ended
December 31, 2000, a decline of $0.8 million or 60%. Of the decrease, $0.4
million is attributable to an elimination of approximately fourteen positions
and the effect of a 15% salary reduction this year and $0.3 million is due to a
general contraction in spending.

GENERAL AND ADMINISTRATIVE:

         General and administrative expenses during the three months ended
December 31, 2001 were $0.4 million versus $1.0 million for the three months
ended December 31, 2000, a decline of $0.6 million or 57%. The decrease is
primarily attributable to staff reductions between periods and the effect of a
15% salary reduction this year and a decline in general corporate expenses.

         General and administrative expenses during the nine months ended
December 31, 2001 were $1.6 million versus $2.5 million for the nine months
ended December 31, 2000, a decline of $0.9 million or 36%. The decrease is
primarily attributable to an elimination of approximately five positions and the
effect of a 15% salary reduction this year, a decline in general corporate
expenses, partially offset by an increase in bad debt expense due to the
write-off of a $0.2 million long-term note receivable in the quarter ended
September 30, 2001.

AMORTIZATION OF INTANGIBLES:

         Amortization of intangible expenses during the three months ended
December 31, 2001 was $0.1 million versus $0.3 million for the three months
ended December 31, 2000, a decline of $0.2 million or 54%. During the fiscal
year ended March 31, 2001 goodwill resulting from the acquisition of The Well
was written-down as impaired and goodwill resulting from the acquisition of
MP3Lit.com was written-off as impaired. The resulting reduction in this class of
asset as a component of intangible assets is attributable for the $0.2 million
decline in amortization expense between periods.

         Amortization of intangible expenses during the nine months ended
December 31, 2001 was $0.4 million versus $0.9 million for the nine months ended
December 31, 2000, a decline of $0.5 million or 62%. During the fiscal year
ended March 31, 2001 goodwill resulting from the acquisition of The Well and
MP3Lit.com was written-off as impaired. The resulting reduction in this class of
asset as a component of intangible assets is attributable for the $0.5 million
decline in amortization expense between periods.

WRITE-DOWN OF LONG-LIVED ASSETS:

         Effective October 1, 2000 Salon determined that no significant revenue
could be generated in the near future from the sale of digital downloadable
spoken word recordings which was Salon's intent in acquisition of MP3Lit.com,
Inc in May 2000. Accordingly, Salon wrote off the unamortized balance of
goodwill associated with the acquisition of $1.7 million in the three months
ended December 31, 2000.

         During the fiscal year ended March 31, 2001 Salon capitalized $0.7
million of expenditures to enhance Salon's proprietary software as Salon
contemplated marketing the software. During the quarter ended June 30, 2001
Salon discontinued all development and dedicated internal marketing efforts to
focus on its core content, production and maintenance. Accordingly, Salon
determined that this asset was impaired and recorded an impairment charge of
$0.7 million during the nine month period ended December 31, 2001.

                                       13
<PAGE>

         In May 2000, Salon acquired MP3Lit.com in a transaction that included
contingently issueable common stock. As a consequence, Salon issued 317,000
shares of common stock valued at $0.1 million in May 2001 resulting in
additional purchase consideration classified as goodwill. As determined during
the fiscal year ended March 31, 2001, all the goodwill associated with the
acquisition was impaired, and as a result the additional goodwill resulting from
this additional stock award was written off during the nine month period ended
December 31, 2001. Additional contingent shares of 412,100 and 158,500 are to be
issued in May 2002 and May 2003, respectively. Salon cannot predict at this time
the financial impact of issuing these additional contingent shares.

OTHER INCOME, NET:

         Other income, net was zero in both the three and nine month periods
ended December 31, 2001 and was zero for the three months ended December 31,
2000 and $0.4 million for the nine months ended December 31, 2000. The decrease
in other income, net is primarily attributable to a decrease in interest income
as a result of a decrease in cash between periods, as Salon has been utilizing
its cash to fund operations.

PREFERRED DEEMED DIVIDEND:

         The preferred deemed dividend of $3.2 million for the nine months ended
December 31, 2001 represents a one-time non-cash charge resulting from the
difference between the offering price of Salon's Series A redeemable convertible
preferred stock sold in August and September 2001 and the fair value of Salon's
common stock into which the preferred stock is convertible on the dates of the
transactions, as well as the effect of an immediate redemption right of the
preferred stock issued, after allocating the proceeds between preferred stock
and warrants.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS:

         As a result of the above factors, Salon recorded a net loss
attributable to common stockholders of $1.4 million, or $0.10 per share for the
three months ended December 31, 2001 compared to a net loss of $5.6 million, or
$0.43 per share for the three months ended December 31, 2000. In addition, Salon
recorded a net loss attributable to common stockholders of $9.9 million, or
$0.73 per share for the nine months ended December 31, 2001 compared to a net
loss of $13.6 million, or $1.06 per share for the nine months ended December 31,
2000. Salon does not anticipate any significant changes in the amount of
expenditures in the near future.

LIQUIDITY AND CAPITAL RESOURCES:

         As of December 31, 2001 Salon had approximately $2.1 million in
available cash from the issuance of Salon's Series A Redeemable Convertible
Preferred Stock in August and September 2001. Salon also has $0.7 million of
restricted cash held primarily as deposits for various lease arrangements.

         Net cash used in operations was $4.0 million for the nine months ended
December 31, 2001, compared to $10.8 million for the nine months ended December
31, 2000. The principal use of cash during the nine months ended December 31,
2001 was to fund the $6.6 million net loss for the period and a $0.7 million
decrease in liabilities, offset partly by non-cash charges of $2.8 million and
an increase in deferred revenue of $0.5 million. The principal use of cash
during the nine months ended December 31, 2000 was to fund the $13.6 million net
loss for the period and a $1.6 million decrease in liabilities, offset partly by
non-cash charges of $4.2 million and a decrease of $0.9 million in receivables.

                                       14
<PAGE>

         Net cash used in investing activities was immaterial for the nine
months ended December 31, 2001, compared to $1.3 million for the nine months
ended December 31, 2000. Salon does not expect any significant capital
expenditures during the current fiscal year. During the nine months ended
December 31, 2000, net cash used for investing activities consisted of $0.4
million for an acquisition and $0.9 million for the purchase of property and
equipment.

         Net cash from financing activities provided $3.1 million for the nine
months ended December 31, 2001 from the issuance of Series A Redeemable
Convertible Preferred Stock with net proceeds of approximately $3.2 million,
offset by $0.1 million from nominal payments for capital lease obligations. This
compares to an outflow of $0.1 million for the nine months ended December 31,
2000 primarily for nominal payments of capital lease obligations.

         As of December 31, 2001 Salon's available cash resources were
sufficient to meet working capital needs for approximately five to six months.
Salon has eliminated various positions, not filled positions opened by
attrition, implemented a wage reduction of 15% effective April 1, 2001 and has
cut discretionary spending to minimal amounts, but due to a weak U.S. economy in
general, and limited visibility of advertising activity, it is unable to predict
when it will reach cash-flow break even.

         Salon may continue to raise additional funds, for which additional
stock, such as Series A Preferred Stock, may be issued to fund its operations.
If Salon raises additional funds by selling equity securities, or securities
which convert into equity securities, the percentage ownership of Salon's
stockholders will be reduced and its stockholders will most likely experience
additional dilution. Given Salon's recent low stock price, any dilution will
likely be very substantial for existing shareholders. Salon cannot be sure that
additional financing will be available on terms favorable to Salon, or at all.
If adequate funds are not available on acceptable terms, if at all, Salon's
ability to continue operations, react to competitive pressures, or take
advantage of unanticipated opportunities will be more limited than if additional
capital was available. Liquidity continues to be a constraint on business
operations.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivatives and Hedging Activities" (SFAS No. 133). SFAS No. 133, as amended,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities, SFAS No. 133, requires that all derivative instruments be
recognized at fair value as either assets or liabilities in the statement of
financial position. The accounting for changes in the fair value (i.e., gains or
losses) of a derivative instrument depends on whether it has been designated and
qualifies as a part of a hedging relationship and further, on the type of
hedging relationship. Salon adopted SFAS No. 133, as amended, effective April 1,
2001 with no impact on its consolidated financial statements. To date, Salon has
not engaged in derivative or hedging activities.

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations"
(SFAS No. 141). This standard eliminates the pooling-of-interests method of
accounting for business combinations, except for qualifying business
combinations that were initiated prior to July 1, 2001, and applies to all
business combinations accounted for under the purchase method that are completed
after June 30, 2001. The implementation of SFAS No. 141 is not expected to have
a significant impact on Salon's financial condition or results of operations.

         In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets" (SFAS No. 142). This standard eliminates the amortization of
goodwill, and requires goodwill to be reviewed at least annually for impairment,
the useful lives of previously recognized intangible assets to be reassessed

                                       15
<PAGE>

and the remaining amortization periods to be adjusted accordingly. SFAS No. 142
is effective for fiscal years beginning after December 15, 2001. The
implementation of this standard is not expected to have a significant impact on
Salon's financial condition or results of operations.

         In October 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). SFAS No. 144
supersedes "Accounting for the Impairment of Long- Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS No.121), however it retains the
fundamental provisions of SFAS No. 121 for (1) the recognition and measurement
of the impairment of long-lived assets to be held and used and (2) the
measurement of long-lived assets to be disposed of by sale. SFAS No. 144
develops a single accounting model for long-lived assets to be disposed of by
sale, whether previously held and used or newly acquired assets and consequently
amends Accounting Principles Board Opinion No. 30, "Reporting Results of
Operations -Reporting the Effects of Disposal of a Division of a Business."
Additionally, SFAS No. 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years. Salon is currently assessing the impact of
its adoption on its financial statements.

         In November 2001, the Emerging Issues Task Force (EITF) reached a
consensus on Issue 1(a) of EITF Issue 00-18, "Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees" that
an asset acquired in exchange for the issuance of fully vested, non-forfeitable
equity instruments should be displayed in the balance sheet of the grantor as an
asset rather than as a reduction of stockholders' equity. While no specific
transition guidance was provided in connection with this consensus, Salon has
adopted this consensus effective immediately and such adoption resulted in
reclassifying prepaid advertising rights received from a stockholder in exchange
for common stock as a non-current asset as of December 31, 2001. The March 31,
2001 balance sheet has been reclassified to conform with this presentation. The
impact of this reclassification was to increase total assets by 6,469 and 7,075
at December 31, 2001 and March 31, 2001 respectively, and to increase total
stockholders' equity and total liabilities and stockholders' equity by similar
amounts at the same dates. In connection with this reclassification, Salon has
updated its assessment of the carrying value of this long-lived asset and
believes, based on current cash flow forecasts and expectations, that the asset
is not impaired at December 31, 2001. If Salon were not to meet its cash flow
expectations, this asset would be reviewed for potential impairment and a
write-down may be required in the future.

RISK FACTORS

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS AND MARKET PRICE OF STOCK:

WE LACK SIGNIFICANT REVENUES, AND HAVE A HISTORY OF LOSSES

         We have not achieved profitability and expect to incur operating losses
in the near future. If and when Salon does achieve profitability, we may not be
able to sustain or increase profitability on a quarterly or annual basis in the
future. If our revenues grow more slowly than we anticipate or if our operating
expenses exceed our expectations, financial results will most likely be severely
harmed and the ability of Salon to continue its operations will be seriously
jeopardized.

                                       16
<PAGE>

ADDITIONAL FINANCING MAY BE REQUIRED AND NOT BE AVAILABLE

         During August and September, 2001 Salon raised approximately $3.2
million in a private placement of Series A Redeemable Convertible Preferred
Stock. Even though Salon has eliminated various positions, not filled positions
opened by attrition, implemented a wage reduction of 15% effective April 1, 2001
and has cut discretionary spending to minimum amounts, due to a weak U.S.
economy in general, and a weak advertising market in particular, it is unable to
predict when it will reach cash-flow break even. Salon may therefore need to
raise additional funds in the future, possibly within five to six months. If
Salon raises additional funds by selling equity securities, or securities which
convert into equity securities, the percentage ownership of Salon's stockholders
will be reduced and its stockholders will most likely experience additional
dilution. Given Salon's recent low stock price, any dilution will likely be very
substantial for existing shareholders. Salon cannot be sure that additional
financing will be available on terms favorable to Salon, or at all. If adequate
funds are not available on acceptable terms, if at all, Salon's ability to
continue operations, react to competitive pressures, or take advantage of
unanticipated opportunities will be substantially limited. In addition, Salon's
business could be significantly adversely affected. In the event that Salon is
unable to increase revenue levels or financing is unavailable, management will
have to reduce its workforce, reduce discretionary costs, and reduce the size of
its website and corresponding website offerings to match revenue levels.

OUR STOCK LISTING HAS CHANGED AND MAY CHANGE AGAIN

         Salon listed its stock on the NASDAQ National Market until August 31,
2001, at which time it commenced listing on the NASDAQ Small Cap Market due to
Salon's inability to meet continued listing requirements in the NASDAQ National
Market. Listing retention on the NASDAQ Small Cap Market requires continuing
compliance with NASDAQ listing standards. As of December 31, 2001, Salon has
complied with the net tangible assets requirement for continued listing on
NASDAQ's Small Cap Market. While NASDAQ has provided that companies may have
until June 2002 to meet the $1.00 minimum bid price requirement, Salon's present
stock price is under $1.00. Salon cannot predict whether the price of the stock
will meet the minimum bid requirements in that time period, which creates a risk
of possible future delisting proceedings due to Salon's inability to meet the
minimum bid requirements.

         If the market price for our common stock remains below $1.00 per share,
our common stock may be deemed to be penny stock. If our common stock were
considered penny stock, it would be subject to rules that impose additional
sales practices on broker-dealers who sell our securities. For example, broker
dealers must make a special suitability determination for the purchaser, receive
the purchaser's written consent to the transaction prior to sale, and make
special disclosures regarding sales commissions, current stock price quotations,
recent price information and information on the limited market in penny stock.
Because of these additional obligations, some brokers may not effect
transactions in penny stocks, which could adversely affect the liquidity of our
common stock.

         If our stock is delisted from NASDAQ SmallCap Market, it will likely be
traded on the over-the-counter bulletin board (OTCBB). If our stock is traded on
the OTCBB, its value may be negatively impacted because stocks which trade
over-the-counter tend to be less liquid and trade with larger variations between
the bid and ask price.

                                       17
<PAGE>

OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY REGARDLESS OF OUR ACTUAL OPERATING
PERFORMANCE

         Salon's common stock is listed for trading on the NASDAQ SmallCap
Market. The trading price of Salon's common stock may be highly volatile.
Salon's stock price may be subject to wide fluctuations in response to a variety
of factors, including:

     o   the presence of a bid price under $1.00;

     o   actual or anticipated variations in quarterly operating results and
         announcements of technological innovations;

     o   new products or services offered by Salon or its competitors;

     o   changes in financial estimates by securities analysts;

     o   conditions or trends in the Internet services industry and the online
         content segment in particular;

     o   Salon's announcement of significant acquisitions, strategic
         partnerships, joint ventures or capital commitments;

     o   additions or departures of key personnel;

     o   sales of common stock; and

     o   other events that may be beyond Salon's control.

         In addition, the NASDAQ SmallCap Market has recently experienced
extreme price and volume fluctuations. These broad market and industry factors
may materially adversely affect the market price of Salon's common stock,
regardless of Salon's actual operating performance. In the past, following
periods of volatility in the market price of an individual company's securities,
securities class action litigation often has been instituted against that
company. This type of litigation, if instituted, could result in substantial
costs and a diversion of management's attention and resources.

REVENUE GENERATED FROM SUBSCRIBERS TO SALON PREMIUM MAY NOT BE SUFFICIENT TO
OFFSET POTENTIAL LOWER ADVERTISING REVENUE DUE TO A DECREASE IN AVAILABLE
IMPRESSIONS TO ADVERTISERS

         With a recent decrease in advertising revenue, Salon has begun to
depend more on cash generated from Salon Premium, a paid subscription service
implemented in April 2001. Salon estimates that as of January 2002 approximately
thirty to thirty-five percent of its content is available to Salon Premium
subscribers only. The implementation of Salon Premium may therefore adversely
restrict and reduce the number of impressions available to sell to advertisers.
Salon believes recent content restrictions and reduction in sellable impressions
have reduced theoretical advertising capacity but have not created practical
shortages in practice, and Salon has the means to create useful space as demand
increases.

WE HAVE AN ACTIVE SUBSCRIPTION PROGRAM BUT THE REVENUE RESULTS ARE NOT CERTAIN

         Salon has had a subscription business since it acquired The Well, an
online forum, in March 1999. The Well has now been in operation for over ten
years. In July 2001, Salon's previously free Table Talk online forum, which it
developed internally, was transitioned to a subscription service. In April 2001,
Salon launched Salon Premium, which provides Salon readers with certain benefits
in

                                       18
<PAGE>

exchange for a subscription for a year or more. In October 2001, Salon continued
its efforts to expand its subscriber base, in part, by making unabridged News
and Politics stories only available to Salon Premium members. In December 2001,
Salon began offering one-month subscriptions to Salon Premium. Salon Premium
members for the most part, however, choose to view Salon's content without any
advertisements. While traditional media properties commonly operate with
advertising within subscriber-purchased pages, Salon has not implemented this
model. Dividing some of our Websites between abridged content accompanied by
advertising and unabridged content accompanied by subscription revenue may not
achieve acceptable circulation or revenue goals.

WE DO NOT KNOW WHAT SALON PREMIUM'S RENEWAL RATE WILL BE

         Salon began offering one and two year subscriptions to Salon Premium in
April 2001. In December 2001, Salon began offering one-month subscriptions to
Salon Premium. Since Salon Premium is still within its first year of operation,
Salon does not have operating history to utilize in predicting renewal rates.

OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND MAY ADVERSELY AFFECT OUR STOCK
PRICE

         Our future revenues and operating results are likely to vary
significantly from quarter to quarter due to a number of factors, many of which
are outside our control, and any of which could severely harm our business.
These factors include:

     o   our ability to attract and retain advertisers and subscribers;

     o   our ability to attract and retain a large number of users;

     o   the introduction of new Websites, services or products by us or by our
         competitors;

     o   the timing and uncertainty of our advertising and sponsorship sales
         cycles;

     o   the mix of advertisements and sponsorships sold by us or our
         competitors;

     o   the economic and business cycle and the recovery speed;

     o   the level of Internet usage;

     o   our ability to attract, integrate and retain qualified personnel;

     o   technical difficulties or system downtime affecting the Internet
         generally or the operation of our Websites;

     o   the impact of national economic and diplomatic concerns on the
         advertising and news business; and,

     o   the amount and timing of operating costs.

         In order to attract and maintain our user base, we may incur
expenditures on sales and marketing, content development, technology and
infrastructure. These types of expenditures are planned or committed in advance
and in anticipation of future revenues. If our revenues in a particular quarter
are lower than we anticipate, we may be unable to reduce spending in that
quarter. As a result, any shortfall in revenues would likely harm our quarterly
operating results.

                                       19
<PAGE>

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

WE DEPEND ON ADVERTISING SALES FOR MUCH OF OUR REVENUES, AND OUR INABILITY TO
INCREASE ADVERTISING REVENUES WILL HARM OUR BUSINESS

         Revenues depend substantially on sales of advertising. In order to
increase revenues, Salon needs to attract additional significant advertisers on
an ongoing basis. We may not be able to attract or retain a sufficient number of
advertisers in the future, and if we cannot, our business would likely be
severely harmed. If we do not sell a sufficient number of advertisements or do
not engage a sufficient number of advertisers during a particular period, our
business could be severely harmed.

         Increasing our advertising revenues depends upon many factors,
including whether we will be able to:

     o   successfully sell and market our network to advertisers;

     o   increase our user base;

     o   increase the amount of revenues we receive per advertisement;

     o   have a sufficient number of impressions available to advertisers;

     o   increase awareness of the Salon brand;

     o   successfully sell new ad units and formats;

     o   target advertisements and electronic commerce opportunities to users
         with appropriate interests;

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

     o   retain sales personnel; and

     o   convince advertisers that Salon will continue as a going concern.

THE LENGTH OF OUR SALES CYCLES IS UNCERTAIN AND VARIABLE AND MAY LEAD TO
SHORTFALLS IN REVENUES AND FLUCTUATIONS IN OUR OPERATING RESULTS

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

     o   advertisers' budgets;

                                       20
<PAGE>

     o   internal acceptance reviews by advertisers and their agencies;

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

WE MUST DETERMINE WHETHER TO ESTABLISH OR MAINTAIN DISTRIBUTION RELATIONSHIPS TO
ATTRACT MORE USERS AND SUBSCRIBERS TO OUR NETWORK

         In past periods we have depended on distribution relationships with
high-traffic Websites to increase our user base. There has been intense
competition for relationships with these sites, and we may not be able to, or
want to, enter into such relationships on favorable terms or at all. Even if we
enter into distribution relationships with these Websites, their sites may not
attract significant numbers of users, and our Websites may not attract
additional users from these relationships. Moreover, we have paid, and may in
the future pay, significant fees to establish these relationships. We also have
instituted relationships designed to promote and sell subscriptions to Salon
Premium. These relationships are new and we cannot now say whether they will
prove effective and economic.

WE MUST CONTINUALLY DEVELOP COMPELLING CONTENT TO ATTRACT INTERNET USERS

         Our success depends upon our ability to attract and retain a large
number of users by delivering original and compelling Internet content and
services. If we are unable to develop content and services that allow us to
attract, retain and expand a loyal user base possessing high-value demographic
characteristics, we will be unable to generate advertising revenues, and our
revenues and operating results will be severely harmed. The content and services
we provide on our Websites may not appeal to a sufficient number of Internet
users to generate advertising revenues. Our ability to develop compelling
content depends on several factors, including:

     o   the quality and number of writers and artists who create content for
         Salon;

     o   the quality of our editorial staff;

     o   the technical expertise of our production staff; and

     o   working capital constraints of Salon.

         Consumer tastes and preferences change rapidly and we may not be able
to anticipate, monitor, and successfully respond to these changes to attract and
retain a sufficient number of users for our network of Websites. Internet users
can freely navigate and instantly switch among a large number of Websites, many
of which offer content and services that compete with Salon. In addition, many
Websites offer very specific, highly targeted content that could have greater
appeal than our network to particular subsets of our target user base.

THE CONTROVERSIAL CONTENT OF OUR WEBSITES MAY LIMIT OUR REVENUES

         Many of our Websites contain, and will continue to contain, content
that is politically and culturally controversial. As a result of this content,
current and potential advertisers and Salon Premium subscribers may refuse to do
business with us. Our outspoken stance on political issues has and may continue
to result in negative reactions from some users, commentators and other media
outlets.

                                       21
<PAGE>

OUR 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 our ability to
provide high quality content and services. If Internet users do not perceive our
existing content and services to be of high quality, or if we introduce new
content and services or enter into new business ventures that are not favorably
perceived by users, we may not be successful in promoting and maintaining our
brand. Any change in the focus of our operations creates a risk of diluting our
brand, confusing consumers and decreasing the value of our user base to
advertisers. If we are unable to maintain or increase the Salon brand, our
business could be severely harmed.

WE NEED TO HIRE, INTEGRATE AND/OR RETAIN QUALIFIED PERSONNEL BECAUSE THESE
INDIVIDUALS ARE IMPORTANT TO OUR GROWTH

         Our success significantly depends on key editorial and design
personnel. In addition, because our users must perceive the content of our
Websites as having been created by credible and notable sources, our success
also depends on the name recognition and reputation of our editorial staff, in
particular David Talbot, Salon's founder and Editor-in-Chief.

         Our future success depends to a significant extent on the continued
services of key personnel, particularly, David Talbot, Salon's Editor-in-Chief
and Michael O'Donnell, Chief Executive Officer. We currently have no employment
agreement with Mr. Talbot and we do not maintain "key person" life insurance for
any of our personnel. The loss of the services of Mr. Talbot, Mr. O'Donnell, or
other key employees would likely have a significantly adverse effect on our
business.

         Due to recurring operating losses, our current financial position and
potential NASDAQ SmallCap delisting, we may experience difficulty in hiring and
retaining highly skilled employees with appropriate qualifications. We may be
unable to retain our current key employees or attract, integrate or retain other
qualified employees in the future. If we do not succeed in attracting new
personnel or integrating, retaining and motivating our current personnel, our
business could be harmed.

WE MAY EXPEND SIGNIFICANT RESOURCES TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
OR TO DEFEND CLAIMS OF INFRINGEMENT BY THIRD PARTIES, AND IF WE ARE NOT
SUCCESSFUL WE MAY LOSE RIGHTS TO USE SIGNIFICANT MATERIAL OR BE REQUIRED TO PAY
SIGNIFICANT FEES

         Our success and ability to compete are significantly dependent on our
proprietary content. We rely exclusively on copyright law to protect our
content. While we actively take steps to protect our proprietary rights, these
steps may not be adequate to prevent the infringement or misappropriation of our
content. Infringement or misappropriation of our content or intellectual
property could severely harm our business. We also license content from various
freelance providers and other third-party content providers. While we attempt to
insure that this content may be freely licensed to us, other parties may assert
claims of infringement against us relating to this content.

         We may need to obtain licenses from others to refine, develop, market
and deliver new services. We 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 we acquired the Internet address www.salon.com. Because
www.salon.com is the address of the main home page to our network of Websites
and incorporates our company name, it is a vital part of our intellectual
property assets. We do not have a registered trademark on the address, and
therefore it may be difficult for us to prevent a third party from infringing
our intellectual property rights

                                       22
<PAGE>

in the address. If we fail to adequately protect our rights in the address, or
if a third party infringes our rights in the address or otherwise dilutes the
value of www.salon.com, our business could be harmed.

OUR TECHNOLOGY DEVELOPMENT EFFORTS MAY NOT BE SUCCESSFUL IN IMPROVING THE
FUNCTIONALITY OF OUR NETWORK, WHICH COULD RESULT IN REDUCED TRAFFIC ON OUR
NETWORK

         We have developed a proprietary online publishing system. If this
system does not work as intended, or if we are unable to continue to develop
this system to keep up with the rapid evolution of technology for content
delivery on the Internet, our network of Websites may not operate properly which
could harm our 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 our business. Moreover, complex
software products like our online publishing system frequently contain
undetected errors or shortcomings, and may fail to perform or scale as expected.
Although we have tested and will continue to test our publishing system, errors
or deficiencies may be found in the system that may impact our business
adversely.

WE RELY ON THIRD PARTIES FOR SEVERAL CRITICAL FUNCTIONS RELATING TO DELIVERY OF
ADVERTISING AND OUR WEBSITE PERFORMANCE, AND THE FAILURE OF THESE THIRD PARTIES
TO SUPPLY THESE SERVICES IN AN EFFICIENT MANNER COULD LIMIT OUR GROWTH AND
IMPAIR OUR BUSINESS

         We rely on a number of third party suppliers for various services,
including Web hosting, advertising delivery, and Internet traffic measurement.
While we believe that we could obtain these services from other qualified
suppliers on similar terms and conditions, a disruption in the supply of these
services by our current suppliers could severely harm our business.

         We use third-party software to manage and measure the delivery of
advertising on our network of Websites. This type of software may fail to
perform as expected. If this software malfunctions or does not deliver the
correct advertisements to our network, our advertising revenues could be
reduced, and our business could be harmed.

         We use third-party software to measure traffic on our network of
Websites. This type of software does not always perform as expected. If this
software malfunctions or does not accurately measure our user traffic, we may
not be able to justify our advertising rates, and our advertising revenues could
be reduced.

        For certain clients, we use third-party services to deliver advertising
features and/or measure advertising delivery. This type of service is outside
our direct control, and if the service arrangement under performs, our
advertising delivery may perform below expectations and our advertising revenues
could be adversely affected.

ACCEPTANCE AND EFFECTIVENESS OF INTERNET ADVERTISING IS EVOLVING AND, TO THE
EXTENT IT DOES NOT GROW, OUR MARKET MAY NOT DEVELOP ADEQUATELY AND OUR BUSINESS
COULD BE HARMED

         Our success is highly dependent on an increase in the use of the
Internet for advertising and electronic commerce. If the markets for Internet
advertising or electronic commerce does not continue to develop, our business
may be severely harmed.

         Currently, demand and market acceptance for Internet advertising is
uncertain and may not increase as necessary for our business to grow or succeed.
Many advertisers have little or no experience using the Internet for advertising
purposes. The adoption of Internet advertising, particularly by companies that

                                       23
<PAGE>

have historically relied on traditional media, requires the acceptance of a new
way of conducting business, exchanging information and advertising products and
services. Potential advertisers may believe Internet advertising to be
undesirable or less effective for promoting their products and services relative
to traditional advertising media. If the Internet advertising market fails to
develop or develops more slowly than we expect, our business could be harmed.
Within the industry, our advertising audience may be low and inhibit our ability
to sell advertising.

         Different pricing models are used to sell Internet advertising. It is
difficult to predict which pricing models, if any, will emerge as the industry
standard. This uncertainty makes it difficult to project our future advertising
rates and revenues. Any failure to adapt to pricing models that develop or
respond to competitive pressures could reduce our advertising revenues.
Moreover, "filter" software programs that limit or prevent advertising from
being delivered to an Internet user's computer are commonly available.
Widespread use of this software could adversely affect the commercial viability
of Internet advertising and our business.

ADVERTISING PRODUCT OFFERINGS CONTINUE TO CHANGE AND THIS CREATES ADDITIONAL
EFFORT AND UNCERTAINTY ABOUT THIS REVENUE STREAM

         Advertisers continue to be attracted by new products, promotional
vehicles and offerings delivered via the Internet. This interest in new products
requires that the company identify advertiser interests, develop and launch new
advertising products or formats, create appropriate pricing schedules, train the
sales force in the use and sale of new products, manage the obsolescence of
earlier products, and restructure the Salon.com site to effectively deliver,
track and report new products. New product design, development and launch
involves creativity, expense, technology modifications and learning processes.
While the company has integrated this activity into its existing operations, the
rate of change could create an environment where the company is unable to
effectively develop, deliver or track the delivery of products acceptable to the
market.

         Advertisers are increasingly selecting shorter campaign lengths with
less lead time until launch. These campaigns have less flexibility in delivery
requirements and limit the ability of the company to precisely identify future
revenues.

TRACKING AND MEASUREMENT STANDARDS FOR ADVERTISING MAY NOT EVOLVE TO THE EXTENT
NECESSARY TO SUPPORT INTERNET ADVERTISING, THEREBY CREATING UNCERTAINTY ABOUT
THE VIABILITY OF OUR BUSINESS MODEL

         There are currently no standards for the measurement of the
effectiveness of advertising on the Internet, and the industry may need to
develop standard measurements in order to sustain advertising volume or attract
new advertisers. Standardized measurements may not develop and if they do not,
our business could be harmed. In addition, currently available software programs
that track Internet usage and other tracking methodologies are rapidly evolving.
The development of such software or other methodologies may not keep pace with
our information needs, particularly to support our internal business
requirements and those of our advertisers and sponsors. The absence or
insufficiency of this information could limit our ability to attract and retain
advertisers and sponsors.

         It is important to our advertisers that we accurately measure the
demographics of our user base and the delivery of advertisements on our
Websites. We depend on third parties to provide certain of these measurement
services. If they were unable to provide these services in the future, we would
need to perform them ourselves or obtain them from another provider, if
available. This could cause us to incur additional costs or cause interruptions
in our business while we are replacing these services. 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.

                                       24
<PAGE>

IF USE OF THE INTERNET DOES NOT GROW, OUR BUSINESS COULD BE HARMED

         Our success is highly dependent upon continued growth in the use of the
Internet generally and in particular as a medium for content, advertising and
electronic commerce. If Internet usage does not grow, we may not be able to
increase revenues from advertising and this may harm our business. A number of
factors may inhibit the growth of Internet usage, including the following. If
these or any other factors cause use of the Internet to slow or decline, our
results of operations could be harmed.

     o   inadequate network infrastructure;

     o   security concerns;

     o   charging for content;

     o   inconsistent quality of service; and

     o   limited availability of cost-effective, high-speed access.

INCREASING COMPETITION AMONG INTERNET CONTENT PROVIDERS COULD REDUCE OUR
ADVERTISING SALES OR MARKET SHARE, THEREBY HARMING OUR BUSINESS

         The market for Internet content is relatively new, rapidly changing and
intensely competitive. We expect competition for Internet content to continue to
increase, and if we cannot compete effectively, our 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 Ten Websites.

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

WE MAY BE HELD LIABLE FOR CONTENT ON OUR WEBSITES

         As a publisher and distributor of content over the Internet, including
user-generated content on our online communities, we face potential liability
for defamation, negligence, copyright, patent or trademark infringement and
other claims based on the nature and content of the material that is published
or distributed on our network of Websites. These types of claims have been
brought, sometimes successfully, against online services, Websites and print
publications in the past. Although we carry general liability insurance, our
insurance may not be adequate to indemnify us for all liability that may be
imposed. Any liability that is not covered by our insurance or is in excess of
our insurance coverage could severely harm our financial condition and business.

WE MAY BE LIABLE FOR OUR LINKS TO THIRD-PARTY WEBSITES

         We could be exposed to liability with respect to the selection of
third-party Websites that may be accessible through Salon.com. These claims
might include, among others, that by linking to Websites

                                       25
<PAGE>

operated by third parties, we may be liable for copyright or trademark
infringement or other unauthorized actions by these third-party Websites. Other
claims may be based on errors or false or misleading information provided on
linked sites, including information deemed to constitute professional advice
such as legal, medical, financial or investment advice. Other claims may be
based on our links to sexually explicit Websites and our provision of sexually
explicit advertisements when this content is displayed. Our business could be
seriously harmed due to the cost of investigating and defending these claims;
even to the extent these claims do not result in liability. Implementing
measures to reduce our exposure to this liability may require us to spend
substantial resources and limit the attractiveness of our service to users.

CONCERNS ABOUT TRANSACTIONAL SECURITY MAY HINDER ANY ELECTRONIC COMMERCE
PROGRAMS BY SUBJECTING US TO LIABILITY OR BY DISCOURAGING COMMERCIAL
TRANSACTIONS OVER THE INTERNET

         A significant barrier to electronic commerce is the secure transmission
of confidential information over public networks. Any breach in our security
could expose us to a risk of loss or litigation and possible liability. We rely
on encryption and authentication technology licensed from third parties to
provide secure transmission of confidential information. As a result of advances
in computer capabilities, new discoveries in the field of cryptography or other
developments, a compromise or breach of the algorithms we use to protect
customer transaction data may occur. A compromise of our security could severely
harm our 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 our network of Websites.

         We 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.

OUR SYSTEMS MAY FAIL DUE TO NATURAL DISASTERS, TELECOMMUNICATIONS FAILURES AND
OTHER EVENTS, ANY OF WHICH WOULD LIMIT USER TRAFFIC

         Substantially all of our communications hardware and computer hardware
operations for our Websites are located at Verio Inc. facilities in San
Francisco, California. Fire, floods, earthquakes, power loss, telecommunications
failures, break-ins, supplier failure to meet commitments, and similar events
could damage these systems and cause interruptions in our services. Computer
viruses, electronic break-ins or other similar disruptive problems could cause
users to stop visiting our network of Websites and could cause advertisers to
terminate any agreements with us. In addition, we 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, our business could be harmed. Our insurance policies may not
adequately compensate us for any losses that may occur due to any failures of or
interruptions in our systems. We do not presently have a formal disaster
recovery plan.

         Our Websites must accommodate a high volume of traffic and deliver
frequently updated information. It is possible that we will experience systems
failures in the future and that such failures could harm our business. In
addition, our users depend on Internet service providers, online service
providers and other Website operators for access to our Websites. 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 our systems. Any of these system failures could harm our business.

                                       26
<PAGE>

HACKERS MAY ATTEMPT TO PENETRATE OUR SECURITY SYSTEM; ONLINE SECURITY BREACHES
COULD HARM OUR BUSINESS

         Consumer and supplier confidence in our Websites 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 we expect that
these attempts will continue to occur from time to time. Because a hacker who is
able to penetrate our network security could misappropriate proprietary
information or cause interruptions in our products and services, we may have to
expend significant capital and resources to protect against or to alleviate
problems caused by these hackers. Additionally, we may not have a timely remedy
against a hacker who is able to penetrate our network security. Such security
breaches could materially adversely affect our company. In addition, the
transmission of computer viruses resulting from hackers or otherwise could
expose us to significant liability. Our insurance policies may not be adequate
to reimburse us for losses caused by security breaches. We also face risks
associated with security breaches affecting third parties with whom we have
relationships.

GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES OF THE INTERNET MAY RESTRICT OUR
BUSINESS OR RAISE ITS COSTS

         There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future, however, that address issues including content, copyrights,
distribution, antitrust matters, user privacy, pricing, and the characteristics
and quality of products and services. An increase in regulation or the
application of existing laws to the Internet could significantly increase our
costs of operations and harm our business. For example, the Communications
Decency Act of 1996 sought to prohibit the transmission of certain types of
information and content over the Web. Additionally, several telecommunications
companies have petitioned the Federal Communications Commission to regulate
Internet service providers and online service providers in a manner similar to
long distance telephone carriers and to impose access fees on these companies.
Imposition of access fees could increase the cost of transmitting data over the
Internet. Moreover, it may take years to determine the extent to which existing
laws relating to issues such as property ownership, obscenity, libel and
personal privacy are applicable to the Internet or the application of laws and
regulations from jurisdictions whose laws do not currently apply to our
business.

PRIVACY CONCERNS COULD IMPAIR OUR BUSINESS

         We have a policy against using personally identifiable information
obtained from users of our site 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 we use this information without permission or in
violation of our policy, we may face potential liability for invasion of privacy
for compiling and providing information to our 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 OUR RESULTS OF
OPERATIONS

         We generally do not collect sales or other taxes from individuals who
sign up for Salon subscriptions. However, one or more states may seek to impose
sales tax collection obligations on out-of-

                                       27
<PAGE>

state companies, including Salon, which engage in or facilitate electronic
commerce. A number of proposals have been made at the state and local level that
would impose additional 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 our ability to derive revenue from
electronic commerce. Moreover, if any state or foreign country were to
successfully assert that we should collect sales or other taxes on the exchange
of merchandise on our network or to tax revenue generated from Salon
subscriptions, our financial results could be harmed.

PROVISIONS IN DELAWARE LAW AND OUR CHARTER, STOCK OPTION AGREEMENTS AND OFFER
LETTERS TO EXECUTIVE OFFICERS MAY PREVENT OR DELAY A CHANGE OF CONTROL

         We are 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.

         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 us.

         Our 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 our 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.

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

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

                                       28
<PAGE>

         In addition, offer letters with executive officers provide for the
payment of severance and acceleration of options upon the termination of these
executive officers following a change of control of Salon. These provisions in
offer letters could have the effect of discouraging potential takeover attempts.

--------------------------------------------------------------------------------
PART I:  FINANCIAL INFORMATION
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------------------

         Salon's exposure to market risk for changes in interest rates relates
primarily to Salon's investment portfolio. Salon places its investments with
high credit issuers in short-term securities with maturities of less than three
months. The portfolio includes only marketable securities with active secondary
or resale markets to ensure portfolio liquidity. Salon has no investments
denominated in foreign currencies and therefore is not subject to foreign
exchange risk.

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

ITEM 1.  LEGAL PROCEEDINGS.

         Salon has been named as a defendant in Superior Court of California,
County of Santa Clara case number CV801807 dated September 28, 2001 by Pentech
Financial Services, Inc. alleging breach of contract for failure to pay monthly
lease payments and seeking damages of $412,348.75 plus interest and attorney
fees. This matter is at an early stage and Salon's position is currently being
evaluated. Salon believes it has meritorious defenses and plans to vigorously
defend itself in this matter, and while the results of such claim cannot be
predicted with certainty, Salon believes that the resolution of this matter will
not have a material adverse effect on its consolidated financial position,
consolidated statements of operations or consolidated cash flows.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         On August 9, 2001 and September 13, 2001, Salon issued for cash
approximately 809 shares of Series A Redeemable Convertible Preferred Stock
(Preferred Stock) at $4,000 per share and issued warrants to purchase
approximately 6,472,000 shares of common stock for $0.2875 per share, for net
proceeds of approximately $3.2 million. The proceeds from the issuance of
preferred stock is to be used for working capital and other general corporate
purposes. A total of fifteen investors, comprised of venture capital firms and
individual investors, acquired the stock. The Preferred Stock and warrants were
issued pursuant to Regulation D promulgated under the Securities Act of 1933 as
amended.

         The holders of the Preferred Stock are entitled to the following rights
and preferences: cumulative and accrued dividends of 8.0% annually; in the event
of a liquidation, they will receive prior and in preference to distributions
made to holders of common stock, an amount equal to $8,000 per share of Series A
Convertible Preferred Stock, and then participate with the holders of common
stock up to an aggregate return of $12,000 per share of Preferred Stock; certain
voting rights and terminable redemption rights. The Preferred Stock will become
convertible into approximately 12,992,000 shares of common stock subject to
stockholders' approval. On October 24, 2001 Salon's stockholders' approved the
conversion to common stock feature of the Preferred Stock and the redemption
feature of the Preferred Stock was automatically terminated in accordance with
the Certificate of Designation of Preferences and Rights of the Series A
Preferred Stock dated as of August 8, 2001.

                                       29
<PAGE>

ITEM 3.  DEFAULT UPON SENIOR SECURITIES.

         Not Applicable

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         At our Annual Meeting of Stockholders held on October 24, 2001, the
following individuals were elected to the Board of Directors:

                                          VOTES FOR        VOTES AGAINST
                                          ---------        -------------
         Robert Ellis                     8,424,909              121,137
         David Talbot                     8,519,518               26,528

The following proposals were approved at our Annual Meeting:

<TABLE><CAPTION>
                                                         VOTES         VOTES          VOTES            NON
                                                          FOR         AGAINST       ABSTAINED         VOTES
                                                     ------------- -------------- -------------- --------------
<S>                                                     <C>              <C>              <C>        <C>
1.  To  approve  the   issuance  of  shares  of  the    5,023,393        135,436          4,749      3,382,468
Company's  Common stock upon (i) the  conversion  of
the Company's issued and issuable Series A Preferred
Stock,  and (ii) the  exercise of  warrants  for the
purchase  of shares of the  Company's  Common  Stock
issued and issuable in connection  with the issuance
of the Series A Preferred Stock

2. To approve an amendment to the Company's  Amended    8,347,147        190,106          8,793              0
and Restated  Certificate of Incorporation to effect
a reverse split of the Company's  outstanding Common
Stock  by  a  ratio  of  between   one-for-five  and
one-for-twenty

3. Amend the  Company's  1995 Stock  Option  Plan to    4,861,985        228,957         72,636      3,382,468
increase  the  number  of  shares  of  Common  Stock
reserved for issuance under such Plan by 3,000,000

4. Ratify the appointment of  PricewaterhouseCoopers    8,537,486          5,960          2,600              0
LLP as the  independent  auditors of the Company for
the fiscal year ending March 31, 2002
</TABLE>


                                       30
<PAGE>

ITEM 5.  OTHER INFORMATION.

         Not applicable

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      EXHIBITS.

         None

(b)      REPORTS ON FORM 8-K.

         On November 5, 2001 Salon filed a Current Report on Form 8-K under Item
5 announcing the results of its Annual Meeting held on October 24, 2001 for
which stockholders approved (a) the issuance of common stock upon (i) the
conversion of Series A Preferred stock and (ii) the exercise of warrants for the
purchase of common stock issued and issuable in connection with the issuance of
Series A Preferred stock and (b) allowing the Company's Board of Directors the
option of effecting a reverse split of our common stock.

         On November 15, 2001 Salon filed a Current Report on Form 8-K under
Item 5 announcing that the redemption feature of the Company's Redeemable
Convertible Preferred Stock was removed as a result of stockholder action taken
at the 2001 Annual Meeting held October 24, 2001 and an exhibit showing, on a
proforma basis, the effect of such a removal on Salon's balance sheet as if this
event had occurred as of September 30, 2001.

SIGNATURES

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

                    SALON MEDIA GROUP, INC.

Dated:  1/31/02     /s/ Michael O'Donnell
                    --------------------------------------------
                    Michael O'Donnell, Chief Executive Officer and President

Dated:  1/31/02     /s/ Robert O'Callahan
                    --------------------------------------------
                    Robert O'Callahan, Chief Financial Officer



                                       31