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


                       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, 2003

                                       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 [_]

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

The number of outstanding shares of the Registrant's Common Stock, par value
$0.001 per share, on February 5, 2004 was 14,155,276 shares.
================================================================================
<PAGE>
--------------------------------------------------------------------------------
FORM 10-Q
SALON MEDIA GROUP, INC.
INDEX
--------------------------------------------------------------------------------



                                                                           PAGE
PART I     FINANCIAL INFORMATION                                          NUMBER

ITEM 1:    Condensed Consolidated Financial Statements

           Condensed Consolidated Balance Sheets
           as of December 31, 2003 and March 31, 2003 (unaudited)..........    3

           Condensed Consolidated Statements of Operations
           for the three months and nine months ended
           December 31, 2003 and 2002 (unaudited) .........................    4

           Condensed Consolidated Statements of Cash Flows
           for the nine months ended December 31, 2003
           and 2002 (unaudited) ...........................................    5

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

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

ITEM 3:    Quantitative and Qualitative Disclosures About Market Risk......   30

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




PART II    OTHER INFORMATION

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

ITEM 2.    Changes in Securities and Use of Proceeds.......................   30

ITEM 3.    Defaults upon Senior Securities.................................   31

ITEM 4.    Submission of Matters to a Vote of Security Holders.............   32

ITEM 5.    Other Information...............................................   32

ITEM 6:    Exhibits and Reports on Form 8-K................................   32


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







                                        2
<PAGE>
--------------------------------------------------------------------------------
PART I:  FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             SALON MEDIA GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)



<TABLE><CAPTION>
                                                                   DECEMBER 31,        MARCH 31,
                                                                       2003              2003
                                                                   ------------      ------------
<S>                                                                <C>               <C>
ASSETS
    Current assets:
       Cash and cash equivalents                                   $        922      $        162
       Accounts receivable, net                                             357               227
       Prepaid expenses and other current assets                            473               169
                                                                   ------------      ------------
       Total current assets                                               1,752               558
    Property and equipment, net                                             169               459
    Prepaid advertising rights                                            4,880             5,480
    Goodwill, net                                                           200               200
    Other intangibles, net                                                   78               348
    Other assets                                                            183               545
                                                                   ------------      ------------
       Total assets                                                $      7,262      $      7,590
                                                                   ============      ============


LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Convertible notes payable-related parties                   $         --      $      1,256
       Convertible notes payable-non related parties                         --               458
       Accounts payable and accrued liabilities                           1,283             1,366
       Deferred revenue                                                   1,080               918
                                                                   ------------      ------------
       Total current liabilities                                          2,363             3,998
    Long-term liabilities
       Warrants payable                                                     707               354
       Other long-term liabilities                                           15               215
                                                                   ------------      ------------
       Total liabilities                                                  3,085             4,567
                                                                   ------------      ------------
Stockholders' equity:
       Preferred stock, $0.001 par value, 5,000,000 shares
          authorized, 7,052 issued and outstanding at
          December 31, and 934 issued and outstanding at
          March 31, 2003 (liquidation value of $17,948 at
          December 31, 2003 and $7,472 at March 31, 2003)
       Common stock, $0.001 par value, 50,000,000 shares
          authorized, 14,155,276 shares issued and outstanding
          at December 31, 2003 and March 31, 2003                            14                14
       Additional paid-in capital                                        90,142            85,283
       Accumulated deficit                                              (85,979)          (82,274)
                                                                   ------------      ------------
       Total stockholders' equity                                         4,177             3,023
                                                                   ------------      ------------
       Total liabilities and stockholders' equity                  $      7,262      $      7,590
                                                                   ============      ============

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

                                        3
<PAGE>
                             SALON MEDIA GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)





<TABLE><CAPTION>
                                                 THREE MONTHS ENDED DECEMBER 31,     NINE MONTHS ENDED DECEMBER 31,
                                                 ------------------------------      ------------------------------
                                                     2003              2002              2003              2002
                                                 ------------      ------------      ------------      ------------
<S>                                              <C>               <C>               <C>               <C>
Net revenues                                     $      1,273      $      1,140      $      3,404      $      3,135
                                                 ------------      ------------      ------------      ------------

Operating expenses:
    Production and content                              1,069             1,104             3,214             3,498
    Sales and marketing                                   649               547             1,679             1,858
    Research and development                              150               165               448               488
    General and administrative                            371               401             1,064             1,203
    Amortization of intangibles                            86                93               276               320
                                                 ------------      ------------      ------------      ------------
       Total operating expenses                         2,325             2,310             6,681             7,367
                                                 ------------      ------------      ------------      ------------

Loss from operations                                   (1,052)           (1,170)           (3,277)           (4,232)
Other income (expense), net                              (134)              (43)             (458)              (75)
                                                 ------------      ------------      ------------      ------------
       Net loss                                        (1,186)           (1,213)           (3,735)           (4,307)


Preferred deemed dividend                                  (1)              (43)               30               (93)
                                                 ------------      ------------      ------------      ------------
Net loss attributable to common stockholders     $     (1,187)     $     (1,256)     $     (3,705)     $     (4,400)
                                                 ============      ============      ============      ============

Basic and diluted net loss per share
  attributable to common stockholders            $      (0.08)     $      (0.09)     $      (0.26)     $      (0.32)

Weighted average shares used in computing
  basic and diluted net loss per share
  attributable to common stockholders                  14,155            13,997            14,081            13,919
</TABLE>





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

                                        4
<PAGE>
                             SALON MEDIA GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)



<TABLE><CAPTION>
                                                                                    NINE MONTHS ENDED DECEMBER 31,
                                                                                    ------------------------------
                                                                                        2003              2002
                                                                                    ------------      ------------
<S>                                                                                 <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                        $     (3,735)     $     (4,307)
    Adjustments to reconcile net loss to net cash used in operating activities:
       Loss from retirement of assets, net                                                    43                --
       Stock-based compensation and warrant amortization                                     332                61
       Depreciation and amortization                                                         683               745
       Allowance for (recovery of) doubtful accounts                                          (8)                9
       Amortization of prepaid advertising rights                                            600               647
       Changes in assets and liabilities:
          Accounts receivable                                                               (122)              (98)
          Prepaid expenses, other current assets and other assets                            (97)             (254)
          Accounts payable and other liabilities                                             (31)              173
          Deferred revenue                                                                   162               204
                                                                                    ------------      ------------
             Net cash used in operating activities                                        (2,173)           (2,820)
                                                                                    ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                                                        (1)               --
    Proceeds from asset sales                                                                 15                --
                                                                                    ------------      ------------
             Net cash provided by investing activities                                        14                --
                                                                                    ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from bank borrowing                                                             182                47
    Payments to bank                                                                        (182)              (37)
    Deposit against future transaction from stockholder                                       --               500
    Proceeds from issuance of notes payable                                                2,513             1,094
    Proceeds from issuance of preferred stock, net                                           490                --
    Principal payments under capital leases                                                  (84)             (157)
                                                                                    ------------      ------------
             Net cash provided by financing activities                                     2,919             1,447
                                                                                    ------------      ------------


NET DECREASE IN CASH AND CASH EQUIVALENTS                                                    760            (1,373)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                             162             1,542
                                                                                    ------------      ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $        922      $        169
                                                                                    ============      ============

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
    Issuance of stock and warrants in connection with acquisition                   $          5      $         42
    Issuance of warrants in connection with issuance of notes payable                        262                14
    Issuance of warrants in connection with severance agreement                               31                --
    Issuance of warrants in connection with editorial collaboration                           69                --
    Issuance of warrants in connection with issuance of preferred stock                       31                --
    Preferred deemed dividend in connection with preferred stock financing                   (30)               93
    Adjustment in value of assets purchased under capital lease                               --                17
</TABLE>

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

                                        5
<PAGE>
                             SALON MEDIA GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)




1.   THE COMPANY

     Salon Media Group, Inc ("Salon") is an Internet media company that produces
a total network of nine primary subject-specific Websites and two online
communities. Salon was originally incorporated in July 1995 in the State of
California and reincorporated in Delaware in June 1999. Salon operates in one
business segment.


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,
2003 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 nine months ended December 31, 2003 are not
necessarily indicative of the expected results for any other interim period or
for the fiscal year ending March 31, 2004.

     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 flows from operations
since inception and has an accumulated deficit at December 31, 2003 of $85,979.
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. 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. Until cash flow breakeven is reached, Salon will have to rely on
additional investment capital or other financing activities, including notes
from investors and the issuance of preferred stock. There can be no assurance
that Salon will be able obtain additional capital on terms, which are favorable,
or at all. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


3.   CONCENTRATIONS OF CREDIT RISK

     No customer accounted for more than 10% of total revenue for the
three-month or nine-month periods ended December 31, 2003 or December 31, 2002.
Two customers accounted for 20% and 13% of the total accounts receivable balance
as of December 31, 2003. Three customers accounted for 11% each of the total
accounts receivable balance as of December 31, 2002.



                                        6
<PAGE>
                             SALON MEDIA GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)



4.   GOODWILL AMORTIZATION AND INTANGIBLE ASSETS

     The following table sets forth information concerning Salon's goodwill and
intangible assets as of December 31, 2003:
<TABLE><CAPTION>
                                                         Gross                          Net
                                                        Carrying     Accumulated      Carrying
                                                         Amount      Amortization      Amount
                                                      ------------   ------------   ------------
<S>                                                   <C>            <C>            <C>
Trade name                                            $      1,200   $      1,140   $         60
Proprietary technology                                         355            337             18
Audio technology                                               158            158              0
                                                      ------------   ------------   ------------
Total intangible assets subject to amortization       $      1,713   $      1,635   $         78
                                                      ============   ============   ============

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

The weighted average amortization period remaining for all intangible assets
subject to amortization is 0.25 years.


5.   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 DECEMBER 31     NINE MONTHS ENDED DECEMBER 31
                                                     ------------------------------     ------------------------------
                                                         2003              2002             2003              2002
                                                     ------------      ------------     ------------      ------------
<S>                                                  <C>               <C>              <C>               <C>
Numerator:
    Net loss attributable to common stockholders     $     (1,187)     $     (1,256)    $     (3,705)     $     (4,400)
                                                     ------------      ------------     ------------      ------------

Denominator
    Weighted average shares outstanding                14,155,000        14,155,000       14,155,000        14,155,000
    weighted average shares held in escrow
                                                               --          (158,000)         (74,000)         (236,000)
                                                     ------------      ------------     ------------      ------------
    Weighted average shares used in computing
      basic and diluted net loss per share             14,155,000        13,997,000       14,081,000        13,919,000
                                                     ============      ============     ============      ============

Basic and diluted net loss per share attributable
  to common stockholders                             $      (0.08)     $      (0.09)    $      (0.26)     $      (0.32)
                                                     ============      ============     ============      ============

Antidilutive securities including options,
  warrants and convertible preferred stock not
  included in net loss attributable to common
  stockholders per share calculation                  187,699,197       31,875,098      187,699,197       31,875,098
</TABLE>

                                        7
<PAGE>
                             SALON MEDIA GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

If Salon's compensation expense under its stock option plan had been determined
pursuant to Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," Salon's net loss per share would have
been as follows:
<TABLE><CAPTION>
                                                     THREE MONTHS ENDED DECEMBER 31     NINE MONTHS ENDED DECEMBER 31
                                                     ------------------------------     ------------------------------
                                                         2003              2002             2003              2002
                                                     ------------      ------------     ------------      ------------
<S>                                                  <C>               <C>              <C>               <C>
Net loss attributable to common stockholders:
     As reported                                     $     (1,187)     $     (1,256)    $     (3,705)     $     (4,400)
     Add back: stock-based employee compensation
         expense included in reported net loss                 --                15               --                45

     Deduct: total stock-based compensation
         expense determined under the fair value
         based method, net of related tax                     (94)             (166)            (198)             (680)
                                                     ------------      ------------     ------------      ------------
     Pro forma net loss attributable to common
         stockholders                                $     (1,281)     $     (1,407)    $     (3,903)     $     (5,035)
                                                     ============      ============     ============      ============

Basis and diluted net loss per share attributable
  to common stockholders:
         As reported                                 $      (0.08)     $      (0.09)    $      (0.26)     $      (0.32)
         Pro forma net loss per share                $      (0.09)     $      (0.10)    $      (0.28)     $      (0.36)
</TABLE>


6.   RECENT ACCOUNTING PRONOUNCEMENTS

     In November 2002, the Emerging Issues Task Force (EITF) reached a consensus
on Issue No. 00-21 "Accounting for Revenue Arrangements With Multiple
Deliverables" which provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services and/or rights
to use assets. The provisions of EITF No. 00-21 apply to revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The adoption of
EITF No. 00-21 did not have a significant affect on Salon's financial position
and results of operations.

     In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity." This Statement establishes standards for how an
issuer classifies and measures in its statement of financial position certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances) because that financial
instrument embodies an obligation of the issuer. This Statement is effective for
financial instruments entered into or modified after May 31, 2003 and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatorily

                                        8
<PAGE>
                             SALON MEDIA GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)


redeemable financial instruments of nonpublic entities. For nonpublic entities,
mandatorily redeemable financial instruments are subject to the provisions of
this Statement for the first period beginning after December 15, 2003. It is to
be implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
statement and still existing at the beginning of the interim period of adoption.
The adoption of SFAS No. 150 did not have an adverse affect on Salon's financial
position or results of operations.


7.   CONVERTIBLE NOTES PAYABLE AND PREFERRED STOCK

     The following is a recap of convertible notes payable issued by Salon for
working capital and general corporate use:
<TABLE><CAPTION>
           NOTE                             WARRANTS                   INVESTORS
----------------------------   -----------------------------------   --------------
                                           Exercise price per share
                                 Number    ------------------------
    Issue Date        Amount     Issued    Original      Revised(*)  Number    Ref.
------------------   -------   ---------   --------      ---------   ------   -----
<S>                  <C>       <C>         <C>           <C>         <C>      <C>
  April 10, 2003     $   200     600,000   $ 0.0460      $  0.0418      2      2,6
  April 29, 2003         200     600,000     0.0575         0.0454      2      2,6
   May 28, 2003          300     900,000     0.0575         0.0454      1       2
  June 12, 2003          100     300,000     0.0575         0.0454      1       4
  June 26, 2003          100     300,000     0.0575         0.0454      1       1
  July 10, 2003          248     744,015     0.0460         0.0418      3     1,2,5
  July 30, 2003          100     300,000     0.0345         0.0345      1       2
 August 29, 2003         165     495,000     0.0345         0.0345      3     1,2,3
September 12, 2003       100     300,000     0.0575         0.0454      1       2
September 29, 2003       100     300,000     0.0805         0.0526      1       2
 October 6, 2003         100     300,000     0.0805         0.0526      1       6
 October 10, 2003        100     300,000     0.0575         0.0454      1       2
 October 30, 2003        150     450,000     0.0575         0.0454      2      2,6
November 12, 2003        100     300,000     0.0690         0.0490      1       2
November 24, 2003        150     450,000     0.0575         0.0454      2      2,5
December 10, 2003        200     600,000     0.0575         0.0454      1       7
December 11, 2003        100     300,000     0.0575         0.0454      1       2
                     -------   ---------
                     $ 2,513   7,539,015
                     =======   =========
</TABLE>
*    Exercise price revised pursuant to an anti-dilution provision in applicable
     warrant Investor References:
1.   Non-related party investor.
2.   Investment by John Warnock. Director of Salon.
3.   Investment by Salon's President, Chief Financial Officer, Treasurer and
     Secretary.
4.   Investment by the father of Salon's President, Chief Financial Officer,
     Treasurer and Secretary.

                                        9
<PAGE>
                             SALON MEDIA GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)


Investor References (continued):

5.   Investment by entity that Salon's President, Chief Financial Officer,
     Treasurer and Secretary and father have an ownership interest in.
6.   Investment by entity that the father of Salon's President, Chief Financial
     Officer, Treasurer and Secretary has an ownership interest in.
7.   Investment by Wenner Media LLC, which included an additional issuance of
     2,000,000 warrants for editorial collaboration between Wenner Media LLC and
     Salon. On January 15, 2004, the President of Wenner Media LLC joined
     Salon's Board of Directors.

     On December 31, 2003 Salon issued to the same Director mentioned above
warrants to purchase 300,000 shares of common stock at $0.0345 per share for a
promissory note dated October 3, 2002 for which no warrants had previously been
issued.

     The notes, of which those issued through August 29, 2003 were amended
effective September 12, 2003 and September 22, 2003 to conform to the terms of
those issued subsequent to that date, could be converted into financing
securities or Salon's common stock and accrued interest on the unpaid principal
at 6.0% per year with such interest and principal due on or before December 31,
2003. The notes were to automatically convert upon the closing of Salon's first
sale of its preferred or common stock with aggregate gross proceeds to Salon of
at least $2,000 (including the conversion of the outstanding principal of the
notes and other converted indebtedness of Salon). In the event that Salon issued
new financing securities by December 31, 2003, the number of shares of the
financing securities to be issued upon conversion of the notes were to equal the
aggregate amount of the Notes and accrued interest divided by the price per
share of the financing securities issued and sold.

     On December 30, 2003 Salon converted $4,227 of notes, which represented all
amounts then owed under various note agreements, $167 of accrued interest on
such notes, and $500 from the Director of Salon mentioned earlier, to 6,118
shares of Salon's Series C preferred stock, based on a purchase price of $800
per share. The approximate net proceeds of $490 raised will be used for working
capital and other general corporate purposes. In addition, warrants to purchase
1,500,000 shares of Salon's common stocks, at an exercise price of $0.0345 per
share, were issued to the Director. As of December 31, 2003, an additional 512
Series C preferred shares are authorized for issuance.

     The issuance of the Series C preferred stock was effected in accordance
with the Securities Purchase Agreement dated as of December 30, 2003 between
Salon and the note holders. The purchasers of Series C Preferred Stock will own
approximately 84% of the aggregate total outstanding voting securities of Salon
on a fully diluted, as converted basis.

     The holders of Series C preferred stock are entitled to the following
rights and preferences: cumulative and accrued dividends of 8.0% annually when,
as and if declared by the Board of Directors; in the event of a liquidation
event of Salon, they will receive prior and in preference to distributions of
assets of Salon made to holders of common stock, Series A preferred stock and
Series B preferred stock, an amount equal to $1,600 per share of Series C
preferred stock; after liquidation distributions of Salon assets to holders of
Series A preferred stock and Series B preferred stock, holders of Series C
preferred stock are entitled to participate with the holders of Series A
preferred stock, Series B preferred stock and common stock in a distribution of
the remaining assets of Salon available to stockholders ratably in proportion to
the shares of common stock held by them and the shares of common stock which
they have

                                       10
<PAGE>
                             SALON MEDIA GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

the right to acquire upon conversion of the shares of preferred stock; and
certain voting rights and redemption rights. The Series C preferred stock can be
converted to common stock after Salon has amended its Certificate of
Incorporation, and upon securing the requisite approval of Salon's Board of
Directors and stockholders, to increase the authorized number of shares of
common stock. The Series C preferred stock is convertible into common stock of
Salon at the conversion rate determined by dividing the Series C Preferred Stock
per share price of $800 by the Series C Conversion Price of $0.04, or at the
rate of one share of Series C preferred stock to 20,000 shares of common stock.
The Series C preferred stock conversion price is subject to downward adjustment
under certain circumstances related to subsequent Salon stock issuances.

     The issuance of Series C preferred stock triggered anti-dilution provisions
of: 1) the Series A and Series B preferred stock, 2) warrants issued to Series A
and B preferred stockholders, and 3) warrants issued to note payable holders.
The 809 shares of Series A preferred stock previously convertible to 13,2896,306
shares of common stock, is now convertible to 31,345,191 shares of common stock.
The 125 shares of Series B preferred stock, previously convertible to 2,829,654
shares of common stock, is now convertible to 6,061,314 shares of common stock.
The exercise price of warrants with an exercise price in excess of $0.04 per
share was reduced in accordance with the provisions of the underlying documents.
The resulting adjusted exercise price per share is noted on the above table for
warrants issued during the nine months ended December 31, 2003 to note payable
holders.

     Salon's charter allows for the issuance of 50,000,000 shares of common
stock, which is insufficient to satisfy all obligations under convertible
instruments, warrant agreements and options. Therefore, the value of warrants
issued is classified as a long-term liability, with the fair value re-measured
at each balance sheet period or upon an anti-dilution triggering event of the
underlying security agreement. The re-measurement of warrants as of December 31,
2003 resulted in a cumulative benefit of $40, of which $30 related to warrants
issued in conjunction with the issuances of preferred stock, and was recorded as
a preferred deemed dividend in Salon's results of operations.


8.   BANK BORROWINGS

     Salon has an Accounts Receivable Purchase Agreement with a bank. Under the
terms of the agreement, the bank can make advances of 60% or 80% of the face
value of acceptable receivables from Salon, depending on the nature of the
receivable. During the nine month period ended December 31, 2003, Salon borrowed
$182 and repaid $182 under the agreement. Subsequent to December 31, 2003, Salon
allowed the Accounts Receivable Purchase Agreement to expire.


9.   EMPLOYEE MATTERS

     On October 1, 2003 Michael O'Donnell, Salon's President and Chief Executive
Officer, resigned. As part of the resignation, Michael O'Donnell received
warrants to purchase one million shares of Salon's common stock at $.05 per
share. The warrants were valued at $31 using the Black-Scholes option-pricing
model, applying a contractual life of two years, a weighted average risk-free
rate of 1.625%, an expected dividend yield of 0%, a volatility of 120% and a
deemed fair value of common stock of $0.05. David Talbot, Salon's Chairman of
the Board and Editor-in-Chief became the Chief Executive Officer and Elizabeth
Hambrecht, Salon's Chief Financial Officer, Treasurer and Secretary became
Salon's President.

                                       11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS

     This section and other parts of this Form 10-Q contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act)
that involve risks and uncertainties, including, but not limited to, statements
regarding our strategy, plans, objectives, expectations, intentions, financial
performance, cash-flow breakeven timing, financing, liquidation preferences,
anticipated sale of television advertising credits, economic conditions, on-line
advertising, market performance, subscription service plans, and revenue
sources. Although Salon Media Group, Inc. (Salon) believes its plans, intentions
and expectations reflected in such forward-looking statements are reasonable, we
can give no assurance those plans, and 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 Media Group, Inc. is an Internet media company that provides online
news and information. An online pioneer, Salon offers award-winning journalism
from breaking news and in-depth analysis to provocative commentary on politics,
technology, culture and entertainment. Salon also offers an audio streaming
Website, and hosts' two online communities - Table Talk and The Well. Salon
believes that its network of Websites combines the thoughtfulness of print, the
timeliness of television and the interactivity of talk radio.

     The main entry and navigation point to Salon's nine subject specific
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 content Websites.

     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.

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


                                       12
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2003
COMPARED TO THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2002

NET REVENUES:

     Net revenues increased 12% to $1.3 million for the three months ended
December 31, 2003 from $1.1 million for the three months ended December 31, 2002
and increased 9% to $3.4 million for the nine months ended December 31, 2003
from $3.1 million for the nine months ended December 31, 2002.

     Advertising revenues increased to $0.6 million for the three months ended
December 31, 2003 from $0.5 million for the three months ended December 31, 2002
and decreased to $1.4 million for the nine months ended December 31, 2003 from
$1.5 million for the nine months ended December 31, 2002. The increase in
quarter to quarter advertising revenues was due to a broader acceptance of
Salon's intercept ad format with rich media that results in a more favorable ad
experience than traditional banner advertising. This quarter increase over last
year's amounts was attributable for advertising revenues to be comparable for
the two nine-month periods. Salon estimates that advertising revenues for the
three months ended March 31, 2004 will be approximately $0.4-0.5 million.

     Subscription revenues increased to $0.6 million for the three months ended
December 31, 2003 from $0.5 million for the three months ended December 31, 2002
and increased to $1.8 million for the nine months ended December 31, 2003 from
$1.3 million for the nine months ended December 31, 2002.

     The increase in subscription revenues is attributable to Salon Premium, as
subscriptions to The Well have remained constant. New and renewal one-year
subscriptions to Salon Premium for the three months ended December 31, 2003 were
approximately 16,600, and approximately 46,000 for the nine months ended
December 31, 2003, compared to approximately 16,100 for the three months ended
December 31, 2002 and 33,000 for the nine months ended December 31, 2002. Even
though subscriptions for the two three-month periods are comparable,
subscriptions for the three months ended December 31, 2003 include approximately
1,000 bonus subscriptions as Salon had a "two for the price of one" promotion
during the Christmas holidays. Deducting the non-paying subscriptions, the
number of new and renewal subscriptions declined for the three months ended
December 31, 2003 compared to the three months ended December 31, 2002. A
contributing factor is a decline in the renewal rate. The renewal rate for
one-year paid subscriptions as of December 31, 2003 is estimated to range from
approximately 60% to 65%, a drop from approximately 70% a year ago. This drop is
attributable to the January 2003 decision to make all of Salon's content
available to non Salon Premium subscribers as long as a website visitor were
willing to view some form of advertising. Salon is reconsidering this strategy
and may in future periods restrict access to content to Salon Premium members
only. As of December 31, 2003, Salon has approximately 74,000 active Salon
Premium subscribers and deferred $0.8 million of revenue, compared to 47,000
active subscribers and deferred revenue of $0.7 million as of December 31, 2002,
representing an approximate increase of 56% in active subscribers from the
comparable period last year. Salon estimates that Salon Premium revenues for the
three months ended March 31, 2004 will be approximately $0.5 million.

PRODUCTION AND CONTENT:

     Production and content expenses during the three months ended December 31,
2003 and December 31, 2002 was $1.1 million. Production and content expenses
during the nine months ended December 31, 2003 were $3.2 million versus $3.5
million during the nine months ended December 31, 2002, a decline of $0.3
million or 8%. Limited cash on hand to fund operations resulted in product and
content expenses staying steady for the two three-month periods and declining


                                       13
<PAGE>
during the nine months ended December 31, 2003 compared to the nine months ended
December 31, 2002. Salon does not anticipate material future changes in
production and content expenditures.

SALES AND MARKETING:

     Sales and marketing expenses during the three months ended December 31,
2003 were $0.6 million versus $0.5 million for the three months ended December
31, 2002, an increase of $0.1 million or 19%. Even though expenditures requiring
cash declined $0.1 million due to limited cash resources, increased utilization
of prepaid advertising rights resulted in a $0.2 million additional non-cash
amortization charge during the three months ended December 31, 2003 compared to
the three months ended December 31, 2002.

     Sales and marketing expenses during the nine months ended December 31, 2003
were $1.7 million versus $1.9 million for the nine months ended December 31,
2002, a decline of $0.2 million or 10%. The decline is primarily attributable to
a reduction in sales and marketing staff, as the utilization of prepaid
advertising rights was comparable for both periods.

     Salon estimates that expenditures requiring the utilization of cash will be
approximately $0.3 million and the amortization of prepaid advertising rights to
be approximately 0.2 million for the three months ended March 31, 2004.

RESEARCH AND DEVELOPMENT:

     Research and development expenses during the three months and nine months
ended December 31, 2003 were $0.2 million and $0.4 million respectively, and
were comparable to amounts for the three months and nine months ended December
31, 2002. Salon does not anticipate material future changes or reductions in
research and development expenditures.

GENERAL AND ADMINISTRATIVE:

     General and administrative expenses during the three months and nine months
ended December 31, 2003 were $0.4 million and $1.1 million respectively, were
comparable to amounts for the three months and nine months ended December 31,
2002. Even though cash related operating expenditures declined by $0.1 million,
the resignation of Michael O'Donnell, Salon's President and Chief Executive
Officer on October 1, 2003 resulted in a charge of approximately $0.1 million.
The $0.1 million charge included salary and benefits continuation through March
31, 2004 as well as the value of warrants to purchase 1,000,000 shares of
Salon's common stock at $0.05 per share issued to Mr. O'Donnell. Salon does not
anticipate material future changes or reductions in general administrative
expenditures.

AMORTIZATION OF INTANGIBLES:

     Amortization of intangible expenses during the three months and nine months
ended December 31, 2003 were $0.1 million and $0.3 million respectively,
comparable to amounts for the three months and nine months ended December 31,
2002.

OTHER INCOME (EXPENSE), NET:

     Other income, net for the three and nine months ended December 31, 2003 was
$0.1 million and $0.4 million, respectively, compared to none and $0.1 million
for the three and nine months ended September 30, 2002, respectively.


                                       14
<PAGE>
The $0.1 million charge for the three months ended December 31, 2003 was
primarily interest on the issuance of $4.2 million notes payable. The $0.4
million charge for the nine months ended December 31, 2003 included $0.1 million
for interest and $0.3 million attributable to expensing the value of warrants
issued in conjunction with the issuance of notes payable. The majority of the
warrants issued have been to related parties, primarily John Warnock, a Director
of Salon and entities that the father of Salon's President, Chief Financial
Officer, Treasurer and Secretary, has an ownership interest in. On December 30,
2003, the notes payable and accrued interest were converted to Series C
preferred stock.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS:

     As a result of the above factors, Salon recorded a net loss attributable to
common stockholders of $1.2 million, or $0.08 per share for the three months
ended December 31, 2003 compared to a net loss attributable to common
stockholders of $1.3 million, or $0.09 per share for the three months ended
December 31, 2002. In addition, Salon recorded a net loss attributable to common
stockholders of $3.7 million, or $0.26 per share for the nine months ended
December 31, 2003 compared to a net loss attributable to common stockholders of
$4.4 million, or $0.32 per share for the nine months ended December 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES:

     Net cash used in operations was $2.2 million for the nine months ended
December 31, 2003, compared to $2.8 million for the nine months ended December
31, 2002. The principal use of cash during the nine months ended December 31,
2003 was to fund the $3.7 million net loss for the period, which was offset by
$1.7 million of non-cash charges. The principal use of cash during the nine
months ended December 31, 2002 was to fund the $4.3 million net loss for the
period, which was offset by $1.5 million of non-cash charges

     No cash was used in investing activities for the nine months ended December
31, 2003 and December 31, 2002. Salon anticipates incurring approximately
$40,000 of tenant improvements during the three months ended March 31, 2004.

     Net cash from financing activities provided $2.9 million for the nine
months ended December 31, 2003 compared to $1.4 million for the nine months
ended December 31, 2002. For the nine months ended December 31, 2003, Salon
issued $2.5 million of convertible notes payable, of which $2.3 million was to
related parties, borrowed and paid back $0.2 million from a bank, and made
payments under capital leases of $0.1 million and received $0.5 million from the
issuance of Series C preferred stock. For the nine months ended December 31,
2002, Salon issued $1.1 million of convertible notes payable, of which $0.6
million was to related parties, and received a $0.5 million deposit against a
future transaction from a Director, partially offset by $0.2 million of payments
under capital leases.

     Salon's independent accountants through its fiscal year ended March 31,
2003, included a paragraph in their report for the fiscal years ended March 31,
2003 and March 31, 2002 indicating that substantial doubt exists as to Salon's
ability to continue as a going concern because it has recurring operating losses
and negative cash flows, and an accumulated deficit. Salon has eliminated
various positions, has not filled positions opened by attrition, implemented a
wage reduction of 15% effective April 1, 2001, and has cut discretionary
spending, but due to limited visibility of advertising activity, it is unable to
predict accurately if and when it will reach cash-flow break even.

     On December 31, 2003, Salon amended its lease agreement for its office
space at 22 Fourth Street, San Francisco, California. Under the terms of the
revised lease agreement, Salon is to vacate the 16th floor and relocate to the
11th floor by March 31, 2004 and incur all tenant improvement expenditures.

                                       15
<PAGE>
In return, the lessor agrees to forfeit approximately $145,000 of arrears rents
owed. Salon anticipates incurring minimal tenant improvement expenditures by
March 31, 2004 to execute the amendment.

     As of December 31, 2003, Salon has $0.9 million in cash on hand, which
includes $0.5 million from the issuance of Series C preferred stock on December
30, 2003.

     Salon contemplates issuing approximately 500 additional Series C preferred
shares during February 2004 with identical terms to those issued on December 30,
2003, to two investors and receive $0.4 million in cash. The investors include
the father of Salon's President, Chief Financial Officer, Secretary and
Treasurer and a Director of Salon. If such an event were to incur, Salon
estimates that based on its common stock closing price of February 3, 2004, it
will incur a non-cash preferred deemed dividend charge of approximately $2.5
million on its results of operations.

     During the nine months ended December 31, 2003 Salon received $2.3 million
from notes payable issued to related parties. Of the $2.3 million, $1.5 million
was from a Director of Salon, approximately $0.5 million was either from the
father of Salon's President, Chief Financial Officer, Secretary and Treasurer or
entities for which he was an investor, and $0.1 million for which Salon's
President, Chief Financial Officer, Secretary and father had an ownership
interest therein. In addition, Salon received $0.5 million from the same
Director from the issuance of Series C preferred stock. As of this filing, there
is no contractual assurance that the Director, or entities related to Salon's
President, Chief Financial Officer, Secretary and Treasurer will continue to
invest in Salon.

     Effective January 13, 2004 Salon and Rolling Stone, an entity of Wenner
Media LLP, entered into an editorial collaboration agreement for which both
entities agreed to jointly finance, produce and publish content. On January 15,
2004, the President of Wenner Media LLP joined Salon's Board of Directors. At
this time, it is not known to what extent the editorial collaboration agreement
will result in new content.

     On December 30, 2003 Salon converted $4.2 million of notes payable, $0.2
million of accrued interest and $0.5 million in cash to 6,118 shares of Series C
preferred stock at $800 per share and issued warrants to purchase 1,500,000
shares of Salon's common stock at $0.0345 per share. The issuance of Series C
preferred stock greatly diluted potential liquidation preferences of Salon's
assets and voting interest of Salon's common stockholders, and to a lesser
extent, Series A and Series B preferred stockholders. Series C preferred
stockholders have potential liquidation preference rights of $1,600 per share,
or $9.8 million in the aggregate, prior and in preference to any potential
distribution to Series A and Series B preferred stockholders and common
stockholders and control approximately 82% of the voting securities of Salon as
of December 31, 2003. The Series A and B preferred stockholders have potential
liquidation preference rights of $8,000 per share plus accrued dividends, or
$8.2 million in the aggregate, prior and in preference to any potential
distribution to common stockholders. After a potential initial distribution to
the preferred stockholders as a group, any remaining assets would be available
ratably in proportion to the shares of common stock held by them and the shares
of common stock which they have the right to acquire upon the conversion of the
shares of preferred stock, limited to $4,000 per share, or $3.7 million in
aggregate for the Series A and B preferred stockholders. The preferred
stockholders as a group, own approximately 95% of the outstanding common stock
and common stock that they have the right to acquire upon the conversion of the
shares of preferred stock, excluding common stock from the potential exercise of
warrants.

     In early 2003, Salon began to market its prepaid advertising rights to
generate additional working capital. Any agreement would have involved Salon,
NBC, which had to agree to the transfer of rights to a third party, and a third
party willing to acquire the rights. In October 2003, Salon concluded that it
could not immediately market the rights and suspended all activity to market the
rights.

                                       16
<PAGE>
     Salon needs to raise additional funds until it reaches cash flow break
even. If Salon does not secure additional funds from the issuance of equity
securities or instruments that convert into equity securities, Salon may be
unable to continue as a going concern and cease operations. Salon cannot
determine at this time whether or not, or to what extent, it will be successful
in securing additional cash resources in future periods to meet operating
requirements.

RECENT ACCOUNTING PRONOUNCEMENTS

     In November 2002, the Emerging Issues Task Force (EITF) reached a consensus
on Issue No. 00-21 "Accounting for Revenue Arrangements With Multiple
Deliverables" which provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services and/or rights
to use assets. The provisions of EITF No. 00-21 apply to revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The adoption of
EITF No. 00-21 did not have a significant affect on Salon's financial position
and results of operations.

     In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity." This Statement establishes standards for how an
issuer classifies and measures in its statement of financial position certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances) because that financial
instrument embodies an obligation of the issuer. This Statement is effective for
financial instruments entered into or modified after May 31, 2003 and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatorily redeemable financial instruments of nonpublic
entities. For nonpublic entities, mandatorily redeemable financial instruments
are subject to the provisions of this Statement for the first period beginning
after December 15, 2003. It is to be implemented by reporting the cumulative
effect of a change in an accounting principle for financial instruments created
before the issuance date of the statement and still existing at the beginning of
the interim period of adoption. The adoption of SFAS No. 150 did not have an
adverse affect on Salon's financial position or results of operations.


RISK FACTORS

FACTORS THAT MAY AFFECT SALON'S FUTURE RESULTS AND MARKET PRICE OF STOCK

SALON WILL VERY LIKELY CEASE OPERATIONS IN ITS CURRENT FORM IF IT IS UNABLE TO
RAISE ADDITIONAL CASH RESOURCES

     Salon has $0.9 million in cash as of December 31, 2003. These funds, in
conjunction with collections of accounts receivable and Salon Premium
subscriptions, have been used to fund operations as of this filing. Salon
anticipates receiving $0.4 million from the issuance of approximately 500 shares
of Series C preferred shares during the month of February 2004, but needs to
secure additional cash resources in order to continue as a going concern. Salon
is attempting to secure additional funds from the issuance of equity securities
and instruments that convert into equity securities.

                                       17
<PAGE>
     If Salon does not secure additional funds from the issuance of equity
securities and instruments that convert into equity securities, Salon may be
unable to continue as a going concern and cease operations. Salon cannot
determine at this time whether, or to what extent, it will be successful in
securing additional cash resources to meet operating requirements until it
reaches cash flow breakeven.

SALON MAY ISSUE ADDITIONAL PREFERRED STOCK AT EFFECTIVE PRICES LOWER THAN
CURRENT COMMON STOCK MARKET PRICES THAT MAY RESULT IN NON CASH CHARGES TO
OPERATIONS

     Salon contemplates issuing approximately 500 Series C preferred shares
during the month of February 2004 with terms identical to those of its issuance
of Series C preferred stock on December 30, 2003. If such an event were to
occur, based on Salon's common stock closing price of February 3, 2004, the
issuance could result in a non cash preferred deemed dividend charge of
approximately $2.5 million to Salon's results of operations. Issuance of
securities with an effective common stock per share price of less than current
common stock market per share prices could result in other non cash preferred
deemed dividend charges to Salon's results of operations. Such issuance will
trigger anti-dilution protection for the holders of Series A and B preferred
stock and related warrants which will result in an increase in the number of
shares of common stock issuable upon conversion of such shares and the exercise
of the related warrants. Additionally, existing common stock holders will suffer
significant, additional dilution.

SALON HAS RELIED ON RELATED PARTIES FOR SIGNIFICANT INVESTMENT CAPITAL

     Salon has been relying on cash from related parties to fund operations. The
related parties are primarily John Warnock, a Director of Salon, and the father
or entities that the father of Salon's President, Chief Financial Officer,
Secretary and Treasurer is an investor. Out of $2.3 million of cash received by
Salon from the issuance of convertible notes payable for the nine months ended
December 31, 2003, $2.1 million was from related parties. In addition, the $0.5
million received from the issuance of Series C preferred stock as of December
31, 2003 was from Salon Director John Warnock. Curtailment of cash investments
by related parties could detrimentally impact Salon's ability to continue its
operations and Salon may be unable to continue as a going concern.

SALON'S PRINCIPAL STOCKHOLDERS CAN EXERCISE A CONTROLLING INFLUENCE OVER SALON'S
BUSINESS AFFAIRS AND THEY MAY MAKE BUSINESS DECISIONS WITH WHICH NON-PRINCIPAL
STOCKHOLDERS DISAGREE THAT WILL AFFECT THE VALUE OF THEIR INVESTMENT

     The holders of Salon's Series A, B and C preferred stock collectively own
approximately 95% of all voting securities as of January 15, 2004. These
stockholders therefore own a controlling interest in Salon. Of this amount,
approximately 67% is by related parties, of which approximately 18% is
controlled directly or indirectly by the father of Salon's President, Chief
Financial Officer, Secretary and Treasurer and approximately 43% by a Director
of Salon. Therefore, related parties by themselves own a controlling interest in
Salon.

     If these stockholders were to act together, they would be able to exercise
control over most matters requiring approval by other stockholders, including
the election of directors and approval of significant corporate transactions.
These actions may be taken even if principal stockholders oppose non-principal
stockholders. This concentration of ownership may also have the effect of
delaying or preventing a change in control of Salon, which could cause Salon's
stock price to decline.


                                       18
<PAGE>
SALON'S PREFERRED STOCKHOLDERS ARE ENTITLED TO POTENTIALLY SIGNIFICANT
LIQUIDATION PREFERENCES OF SALON'S ASSETS OVER COMMON STOCKHOLDERS IN THE EVENT
OF SUCH AN OCCURRENCE

     Salon's preferred stockholders have liquidation preferences of Salon's
assets over common stockholders of a minimum of approximately $17.9 million. In
the event of a liquidation event, these holders would have preference over
common stockholders of $17.9 million, or more, and therefore could affect the
value of an investment in Salon's common stock. Future issuance of preferred
stock will increase this liquidation preference.

SALON LACKS SIGNIFICANT REVENUES AND HAS A HISTORY OF LOSSES

     Salon has a history of significant losses and expects to incur operating
losses in the near future. For the nine months ended December 31, 2003, Salon
had net losses attributable to common stockholders of $3.7 million and had an
accumulated deficit of $86.0 million. If and when Salon does achieve
profitability, Salon may not be able to sustain or increase profitability on a
quarterly or annual basis in the future. If revenues grow more slowly than Salon
anticipates or operating expenses exceed expectations, financial results will
most likely be severely harmed and the ability of Salon to continue its
operations will be seriously jeopardized.

     Salon's independent accountants for the years ended March 31, 2003, 2002
and 2001 provided a "going-concern" audit opinion on the consolidated financial
statements for those years. The audit opinion reported substantial doubt about
Salon's ability to continue as a going concern, citing issues such as the
history of losses and absence of current profitability. As a result of the
"going-concern" opinion, Salon's stock price and investment prospects may be
adversely affected, thus limiting financing choices and raising concerns about
the realization of value on assets and operations.

SALON HAS ENTERED INTO THIRD-PARTY SUBSCRIPTION BUNDLING SERVICES

     Salon has entered into two agreements with third parties who contemplate
combining Salon's content with other content providers, with the resulting
bundled content sold to individuals for a set monthly fee. Of the monthly fee,
Salon would earn a nominal amount. As of this filing, Salon's has not earned any
revenue from these agreements and contemplates immaterial amounts through June
30, 2004. Salon cannot estimate how much revenue it may earn under these
agreements.

SALON'S OPERATIONS REQUIRE ATTRACTIVE CONTENT, SUBSCRIBER INTEREST, AND
CONFIDENCE BY SUBSCRIBERS AND SUPPLIERS THAT THE SUBSCRIPTION OFFERING WARRANTS
THEIR LONG-TERM SUPPORT AND INVESTMENT. THE ABSENCE OF ANY OF THESE FACTORS
COULD IMPAIR THE RESULTS, REVENUE AND CASH FLOW FROM SUBSCRIPTIONS.

     Salon is under severe budgetary constraints to limit expenditures. These
constraints affect editorial staffing levels and the purchase of content from
freelance writers. These constraints affect the amount and quality of content
published on Salon's Websites and consequently, the positive experience of
Website visitors. The positive experience leads to reoccurring Website visits,
new subscriptions to Salon Premium, and corresponding high renewal rates of
Salon Premium subscribers. For the nine months ended December 31, 2003 Salon's
estimated renewal rate for one-year paid subscription to Salon Premium ranges
from 60% to 65%. Salon cannot predict if this rate will continue in the future
or how many new Salon Premium subscriptions it will acquire.


                                       19
<PAGE>
SALON HAS DEPENDED ON ADVERTISING SALES FOR MUCH OF ITS REVENUES, AND ITS
INABILITY TO MAINTAIN OR INCREASE ADVERTISING REVENUES WILL HARM ITS BUSINESS

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

     o    successfully sell and market it new content access advertisements;

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

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

     o    maintain a significant number of sellable impressions available to
          advertisers;

     o    successfully sell and market it network to advertisers;

     o    increase the amount of revenues it receives per advertisement;

     o    increase awareness of the Salon brand;

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

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

     o    attract and retain key sales personnel.

THE LENGTH OF SALON'S SALES CYCLE IS UNCERTAIN AND VARIABLE AND MAY LEAD TO
SHORTFALLS IN REVENUES AND FLUCTUATIONS IN ITS OPERATING RESULTS

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

     o    advertisers' budgets;

     o    the acceptability of "access passes" and rich media to advertisers;

     o    internal acceptance reviews by advertisers and their agencies;

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



                                       20
<PAGE>
OUR STOCK HAS BEEN AND WILL LIKELY CONTINUE TO BE SUBJECT TO SUBSTANTIAL PRICE
AND VOLUME FLUCTUATIONS DUE TO A NUMBER OF FACTORS, MANY OF WHICH WILL BE BEYOND
OUR CONTROL, THAT MAY PREVENT OUR STOCKHOLDERS FROM RESELLING OUR COMMON STOCK
AT A PROFIT

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

IF OUR SHARE PRICE IS VOLATILE, WE MAY BE THE TARGETS OF SECURITIES LITIGATION,
WHICH IS COSTLY AND TIME-CONSUMING TO DEFEND

     In the past, following periods of market volatility in the price of a
company's securities, security holders have instituted class action litigation.
Our share price has, in the past, experienced price volatility, and may continue
to do so in the future. Many companies have been subject to this type of
litigation. If the market value of our common stock experiences adverse
fluctuations and we become involved in this type of litigation, regardless of
the merits or outcome, we could incur substantial legal costs and our
management's attention could be diverted, causing our business, financial
condition and operating results to suffer. To date, Salon has not been subject
to such litigation.

SALON'S QUARTERLY OPERATING RESULTS ARE VOLATILE AND MAY ADVERSELY AFFECT ITS
COMMON STOCK PRICE

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

     o    Salon's ability to attract and retain advertisers and subscribers;
     o    Salon's ability to attract and retain a large number of users;
     o    the introduction of new Websites, services or products by Salon or by
          its competitors;
     o    the timing and uncertainty of Salon's advertising sales cycles;
     o    the mix of advertisements sold by Salon or its competitors;
     o    the economic and business cycle and the recovery speed;
     o    the level of Internet usage;
     o    Salon's ability to attract, integrate and retain qualified personnel;
     o    technical difficulties or system downtime affecting the Internet
          generally or the operation of Salon's Websites;


                                       21
<PAGE>
     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 Salon's user base, Salon 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 Salon's revenues in a particular
quarter are lower than it anticipates, Salon may be unable to reduce spending in
that quarter. As a result, any shortfall in revenues would likely harm its
quarterly operating results.

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

THE CONTROVERSIAL CONTENT OF SALON'S WEBSITES MAY LIMIT ITS REVENUES

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

SALON'S PROMOTION OF THE SALON BRAND MUST BE SUCCESSFUL IN ORDER TO ATTRACT AND
RETAIN USERS AS WELL AS ADVERTISERS AND STRATEGIC PARTNERS

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

SALON NEEDS TO HIRE, INTEGRATE AND/OR RETAIN QUALIFIED PERSONNEL BECAUSE THESE
INDIVIDUALS ARE IMPORTANT TO ITS GROWTH

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

     Salon's future success depends to a significant extent on the continued
services David Talbot, the loss of which would likely have a significantly
adverse effect on its business.

                                       22
<PAGE>
     Due to Salon's current operating difficulties, Salon may experience
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications. Salon may be unable to retain its current key employees or
attract, integrate or retain other qualified employees in the future. If Salon
does not succeed in attracting new personnel or integrating, retaining and
motivating its current personnel, its business could be harmed.

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

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

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

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

SALON'S TECHNOLOGY DEVELOPMENT EFFORTS MAY NOT BE SUCCESSFUL IN IMPROVING THE
FUNCTIONALITY OF ITS NETWORK, WHICH COULD RESULT IN REDUCED TRAFFIC ON ITS
NETWORK OR RETENTION OF SALON PREMIUM SUBSCRIBERS

     Salon has developed a proprietary online publishing system and has
developed software to manage its Salon Premium subscription service. If these
systems do not work as intended, or if Salon is unable to continue to develop
these systems to keep up with the rapid evolution of technology for content
delivery and subscription management, including advertising on the Internet, its
network of Websites or subscription management may not operate properly which
could harm Salon's business. Additionally, software product design, development
and enhancement involve creativity, expense and the use of new development tools
and learning processes. Delays in software development processes are common, as
are project failures, and either factor could harm Salon's business. Moreover,
complex software products like its online publishing and subscription management
systems frequently contain undetected errors or shortcomings, and may fail to
perform or scale as expected. Although Salon has tested and will continue to
test its systems, errors or deficiencies may be found in these systems that may
impact its business adversely.


                                       23
<PAGE>
SALON RELIES ON THIRD PARTIES FOR SEVERAL CRITICAL FUNCTIONS RELATING TO
DELIVERY OF ADVERTISING AND ITS WEBSITE PERFORMANCE, AND THE FAILURE OF THESE
THIRD PARTIES TO SUPPLY THESE SERVICES IN AN EFFICIENT MANNER COULD LIMIT ITS
GROWTH AND IMPAIR ITS BUSINESS

     Salon relies on a number of third party suppliers for various services.
While Salon believes that it could obtain these services from other qualified
suppliers on similar terms and conditions, a disruption in the supply of these
services by its current suppliers could severely harm its business.

     Salon uses third-party software to manage and measure the delivery of
advertising on its 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 its network, Salon's advertising revenues could be
reduced, and its business could be harmed.

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

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

     Salon's success is highly dependent on an increase in the use of the
Internet. If the markets for Internet advertising or electronic commerce do not
continue to develop, its business may be severely harmed.

     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 its future advertising
rates and revenues. Any failure to adapt to pricing models that develop or
respond to competitive pressures could reduce its 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 its 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 Salon 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 Website to effectively deliver, track
and report new products. New product design, development and launch involve
creativity, expense, technology modifications and learning processes. While
Salon has integrated this activity into its existing operations, the rate of
change could create an environment where Salon 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 Salon to precisely identify future
revenues.

                                       24
<PAGE>
TRACKING AND MEASUREMENT STANDARDS FOR INTERNET BASED ADVERTISING MAY NOT EVOLVE
TO THE EXTENT NECESSARY TO SUPPORT INTERNET ADVERTISING, THEREBY CREATING
UNCERTAINTY ABOUT THE VIABILITY OF SALON'S BUSINESS MODEL

     Measurement standards for Internet based advertising are evolving. In
addition, software to track Internet usage is also evolving. The development of
such software or other methodologies may not keep pace with Salon's information
needs, particularly to support Salon's internal business requirements and those
of its advertisers. The absence or insufficiency of this information could limit
Salon's ability to attract and retain advertisers.

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

IF USE OF THE INTERNET DOES NOT GROW, SALON'S BUSINESS COULD BE HARMED

     Salon's 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, it may not be able to
increase revenues from advertising and this may harm Salon's 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, its
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 ITS
ADVERTISING SALES OR MARKET SHARE, THEREBY HARMING ITS BUSINESS

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

     Increased competition could result in advertising price reductions or loss
of market share, any of which could harm Salon's business. Competition is likely
to increase significantly as new companies enter the market and current
competitors expand their services. Many of Salon's present and potential

                                       25
<PAGE>
competitors are likely to enjoy substantial competitive advantages over Salon.
If Salon does not compete effectively or if it experiences any pricing pressures
or loss of market share resulting from increased competition, its business could
be harmed.

SALON MAY BE HELD LIABLE FOR CONTENT OR THIRD PARTY LINKS ON ITS WEBSITES OR
CONTENT DISTRIBUTED TO THIRD PARTIES

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

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

     A significant barrier to sale of subscriptions and electronic commerce is
the secure transmission of confidential information over public networks. Any
breach in Salon's security could expose it to a risk of loss or litigation and
possible liability. Salon relies on encryption and authentication technology
licensed from third parties to provide secure transmission of confidential
information. As a result of advances in 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 its security could severely harm its business. A party who is able
to circumvent our security measures could misappropriate proprietary
information, including customer credit card information, or cause interruptions
in the operation of its network of Websites.

     Salon may be required to expend significant capital and other resources to
protect against the threat of security breaches or to alleviate problems caused
by these breaches. However, protection may not be available at a reasonable
price or at all. Concerns over the security of electronic commerce and the
privacy of users may also inhibit the growth of the Internet as a means of
conducting commercial transactions.

SALON'S INTERNALLY DEVELOPED SOFTWARE AND SOFTWARE PLATFORMS PROVIDED BY A THIRD
PARTY TO MANAGE SALON'S SUBSCRIPTION BUSINESS MIGHT FAIL RESULTING IN LOST
SUBSCRIPTION INCOME

     Salon's software to manage its subscription business was developed
internally to interface with the software provided by a third party. The third
party's software provides a gateway to authenticate credit card transactions. If
these systems were to fail or not function as intended, credit card transactions
might not be processed and Salon's revenues would therefore be harmed.


                                       26
<PAGE>
SALON'S SYSTEMS MAY FAIL DUE TO NATURAL DISASTERS, TELECOMMUNICATIONS FAILURES
AND OTHER EVENTS, ANY OF WHICH WOULD LIMIT USER TRAFFIC

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

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

HACKERS MAY ATTEMPT TO PENETRATE SALON'S SECURITY SYSTEM; ONLINE SECURITY
BREACHES COULD HARM ITS BUSINESS

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

GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES OF THE INTERNET MAY RESTRICT
SALON'S 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
Salon's costs of operations and harm Salon's 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

                                       27
<PAGE>
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 its business.

PRIVACY CONCERNS COULD IMPAIR SALON'S BUSINESS

     Salon has a policy against using personally identifiable information
obtained from users of its Websites and services without the user's permission.
In the past, the Federal Trade Commission has investigated companies that have
used personally identifiable information without permission or in violation of a
stated privacy policy. If Salon uses this information without permission or in
violation of its policy, Salon may face potential liability for invasion of
privacy for compiling and providing information to its corporate customers and
electronic commerce merchants. In addition, legislative or regulatory
requirements may heighten these concerns if businesses must notify Internet
users that the data may be used by marketing entities to direct product
promotion and advertising to the user. Other countries and political entities,
such as the European Union, have adopted such legislation or regulatory
requirements. The United States may adopt similar legislation or regulatory
requirements. If consumer privacy concerns are not adequately addressed, our
business, financial condition and results of operations could be materially
harmed.

POSSIBLE STATE SALES AND OTHER TAXES COULD ADVERSELY AFFECT SALON'S RESULTS OF
OPERATIONS

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

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

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

     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

                                       28
<PAGE>
     o    on or after this date, the merger or sale is approved by the board of
          directors and the holders of at least two-thirds of the outstanding
          voting stock that is not owned by the stockholder.

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

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

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

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

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

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

     In addition, offer letters with executive officers 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.









                                       29
<PAGE>
ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

     Salon does not have an exposure to market risk for changes in interest
rates.


ITEM 4.  CONTROLS AND PROCEDURES

     Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer we evaluated
the effectiveness of our disclosure controls and procedures, as such term is
defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934,
as amended. Based on this evaluation, our chief executive officer and chief
financial officer concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this quarterly report.



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

ITEM 1.  LEGAL PROCEEDINGS.

     Not Applicable

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

Recent Sales of Unregistered Securities:

     On October 6, 2003 Salon finalized a Note and Warrant Purchase agreement
with an investors for $0.1 million and issued warrants to purchase 300,000
shares of common stock at $0.0805 per share. The investor was an entity of which
the father of Salon's President, Chief Financial Officer, Treasurer and
Secretary, has an ownership interest in. On October 10, 2003 Salon finalized a
Note and Warrant Purchase agreement with a Director, for $0.1 million and issued
warrants to purchase 300,000 shares of common stock at $0.0575 per share. On
October 30, 2003 Salon finalized a Note and Warrant Purchase agreement with two
investors for $150,000 and issued warrants to purchase 450,000 shares of common
stock at $0.0575 per share. The investors included a the same Director
previously mentioned, as well as an entity that the father of Salon's President,
Chief Financial Officer, Treasurer and Secretary, has an ownership interest in.
On November 12, 2003 Salon finalized a Note and Warrant Purchase agreement with
a the Director previously mentioned, for $0.1 million and issued warrants to
purchase 300,000 shares of common stock at $0.069 per share. On November 24,
2003 Salon finalized a Note and Warrant Purchase agreement with two investors
for $150,000 and issued warrants to purchase 450,000 shares of common stock at
$0.0575 per share. The investors included the Director previously mentioned, and
an entity that Salon's President, Chief Financial Officer, Treasurer and
Secretary have an ownership interest in. On December 10, 2003 Salon finalized a
Note and Warrant Purchase agreement with an investor for $0.2 million and issued
warrants to purchase 2,600,000 shares of common stock at $0.0575 per share. Of
the warrants issued, 2,000,000 were for editorial collaboration between the
investor and Salon, and 600,000 were for the convertible note issued. The
President of the investor, Jann Wenner, subsequently joined Salon's Board of
Directors, effective January 15, 2004. On December 11, 2003 Salon finalized a
Note and Warrant Purchase agreement with a the Director previously mentioned,
for $0.1 million and issued warrants to purchase 300,000 shares of common stock
at $0.0575 per share. On December 31, 2003, Salon issued to the same Director
mentioned prior to the December 10, 2003 transaction, warrants

                                       30
<PAGE>
to purchase 300,000 shares of common stock at $0.0345 per share for a promissory
note dated October 3, 2002 for which no warrants had previously been issued.

     On December 30, 2003 Salon converted $4,227,000 of notes, which represented
all amounts then owed under various note agreements, $167,000 of accrued
interest on such notes, and $500,000 from the Director of Salon mentioned
earlier, to 6,118 shares of Salon's Series C preferred stock, based on a
purchase price of $800 per share. The approximate net proceeds of $490,000
raised will be used for working capital and other general corporate purposes. In
addition, warrants to purchase 1,500,000 shares of Salon's common stock, at an
exercise price of $0.0345 per share, was issued to the Director.

     The issuance of the Series C preferred stock was effected in accordance
with the Securities Purchase Agreement dated as of December 30, 2003 between
Salon and the note holders. The purchasers of Series C Preferred Stock own
approximately 82% of the aggregate total outstanding voting securities of Salon.
The Purchase Agreement allows for the sale and issuance of an additional 512
shares, which if such sale and issuance were to occur, would result in the
purchasers owning approximately 83% of the aggregate total outstanding voting
securities.

     The holders of Series C preferred stock are entitled to the following
rights and preferences: cumulative and accrued dividends of 8.0% annually when,
as and if declared by the Board of Directors; in the event of a liquidation
event of Salon, they will receive prior and in preference to distributions of
assets of Salon made to holders of common stock, Series A preferred stock and
Series B preferred stock, an amount equal to $1,600 per share of Series C
preferred stock; after liquidation distributions of Salon assets to holders of
Series A preferred stock and Series B preferred stock, holders of Series C
preferred stock are entitled to participate with the holders of Series A
preferred stock, Series B preferred stock and common stock in a distribution of
the remaining assets of Salon available to stockholders ratably in proportion to
the shares of common stock held by them and the shares of common stock which
they have the right to acquire upon conversion of the shares of preferred stock;
and certain voting rights and redemption rights. The Series C preferred stock
can be converted to common stock after Salon has amended its Certificate of
Incorporation, and upon securing the requisite approval of Salon's Board of
Directors and stockholders, to increase the authorized number of shares of
common stock. The Series C preferred stock is convertible into common stock of
Salon at the conversion rate determined by dividing the Series C Preferred Stock
per share price of $800 by the Series C Conversion Price of $0.04, or at the
rate of one share of Series C preferred stock to 20,000 shares of common stock.
The Series C preferred stock conversion price is subject to downward adjustment
under certain circumstances related to subsequent Salon stock issuances.

     The capital raised from the issuance of notes, warrants and Series C
preferred stock were for working capital and other general corporate purposes.

     The issuance of the shares of notes, warrants, and Series C preferred stock
were deemed exempt from registration under the Securities Act as a transaction
by an issuer not involving public offering. The investors represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the securities issued in the transactions.

ITEM 3.  DEFAULT UPON SENIOR SECURITIES.

     Not Applicable


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<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Not Applicable

ITEM 5.  OTHER INFORMATION.

     Not Applicable

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

(A)  EXHIBITS.

4.2.53(1)      Note and Warrant Purchase Agreement dated October 6, 2003

4.2.54(1)      Convertible Promissory Note dated October 6, 2003 by Salon Media
               Group, Inc.

4.2.55(1)      Common Stock Purchase Warrant dated October 6, 2003 by Salon
               Media Group, Inc.

4.2.56(2)      Note and Warrant Purchase Agreement dated October 10, 2003

4.2.57(2)      Convertible Promissory Note dated October 10, 2003 by Salon Media
               Group, Inc.

4.2.58(2)      Common Stock Purchase Warrant dated October 10, 2003 by Salon
               Media Group, Inc.

4.2.59(3)      Note and Warrant Purchase Agreement dated October 30, 2003

4.2.60(3)      Convertible Promissory Note dated October 30, 2003 by Salon Media
               Group, In. with Ironstone Group, Inc.

4.2.61(3)      Common Stock  Purchase  Warrant dated October 30, 2003 by Salon
               Media Group,  Inc. with Ironstone Group, Inc.

4.2.62(3)      Convertible Promissory Note dated October 30, 2003 by Salon Media
               Group, In. with John Warnock

4.2.63(3)      Common Stock Purchase Warrant dated October 30, 2003 by Salon
               Media Group, Inc. with John Warnock

4.2.64(3)      Note and Warrant Purchase Agreement dated November 12, 2003

4.2.65(3)      Convertible Promissory Note dated November 12, 2003 by Salon
               Media Group, Inc.

4.2.66(3)      Common Stock Purchase Warrant dated November 12, 2003 by Salon
               Media Group, Inc.

4.2.67(4)      Note and Warrant Purchase Agreement dated November 24, 2003

4.2.68(4)      Convertible Promissory Note dated November 24, 2003 by Salon
               Media Group, In. and John Warnock

4.2.69(4)      Common Stock Purchase Warrant dated November 24, 2003 by Salon
               Media Group, Inc. for John Warnock

4.2.70(4)      Convertible Promissory Note dated November 24, 2003 by Salon
               Media Group, In. and HAMCO Capital Corporation

4.2.71(4)      Common Stock Purchase Warrant dated November 24, 2003 by Salon
               Media Group, Inc. for HAMCO Capital Corporation


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<PAGE>
4.2.72(5)      Note and Warrant Purchase Agreement dated December 10, 2003

4.2.73(5)      Convertible  Promissory  Note dated December 10, 2003 by Salon
               Media Group, Inc. and Wenner Media LLC

4.2.74(5)      Common Stock Purchase Warrant dated December 10, 2003 by Salon
               Media Group, Inc. Wenner Media LLC

4.2.75(5)      Note and Warrant Purchase Agreement dated December 11, 2003

4.2.76(5)      Convertible Promissory Note dated December 10, 2003 by Salon
               Media Group, In. and John Warnock

4.2.77(5)      Common Stock Purchase Warrant dated December 10, 2003 by Salon
               Media Group, Inc. and John Warnock

10.27          Ammended Office Lease between Salon's San Francisco landlord and
               Salon dated December 31, 2003.

16.1(6)        Letter from PricewaterhouseCoopers LLP to the Securities and
               Exchange Commission

16.2(7)        Letter from PricewaterhouseCoopers LLP to the Securities and
               Exchange Commission

31.1           Certification of David Talbot, Chairman and Chief Executive
               Officer of the Registrant pursuant to Section 302, as adopted
               pursuant to the Sarbanes-Oxley Act of 2002

31.2           Certification of Elizabeth Hambrecht, President, Chief Financial
               Officer, Treasurer and Secretary of the Registrant pursuant to
               Section 302, as adopted pursuant to the Sarbanes-Oxley Act of
               2002

32.1           Certification of David Talbot, Chairman and Chief Executive
               Officer of the Registrant pursuant to Section 906, as adopted
               pursuant to the Sarbanes-Oxley Act of 2002

32.2           Certification of Elizabeth Hambrecht, President, Chief Financial
               Officer, Treasurer and Secretary of the Registrant pursuant to
               Section 906, as adopted pursuant to the Sarbanes-Oxley Act of
               2002


(1)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on October 14, 2003

(2)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on October 27, 2003

(3)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on November 14, 2003

(4)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on December 9, 2003

(5)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on December 24, 2003

(6)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on November 17, 2003

(7)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K filed on November 26, 2003


                                       33
<PAGE>
(B)  REPORTS ON FORM 8-K.

     On October 27, 2003 Salon filed a Current Report on Form 8-K under Item 5
announcing the sale of convertible promissory notes and warrants for which it
received $100,000 in cash.

     On November 6, 2003 Salon filed a Current Report on Form 8-K under Item 4
announcing that PricewaterhouseCoopers LLC declined to stand for reappointment
as the independent accountants of Salon and that Burr, Pilger & Meyer LLP was
its new independent accountant.

     On November 14, 2003 Salon filed a Current Report on Form 8-K under Item 5
announcing the sale of convertible promissory notes and warrants for which it
received $250,000 in cash.

     On November 17, 2003 Salon filed a Current Report on Form 8-K/A amending
its Current Report filed November 6, 2003 so as to include Exhibit 16.1.

     On November 26, 2003 Salon filed a Current Report on Form 8-K/A amending
its Current Report filed November 6, 2003 so as to clarify certain statements
made therein.

     On December 9, 2003 Salon filed a Current Report on Form 8-K under Item 5
announcing the sale of convertible promissory notes and warrants for which it
received $150,000 in cash.

     On December 24, 2003 Salon filed a Current Report on Form 8-K under Item 5
announcing the sale of convertible promissory notes and warrants for which it
received $300,000 in cash.


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:  2/6/04                               /s/ David Talbot
                                             ----------------------------------
                                             David Talbot, Chairman and
                                             Chief Executive Officer



Dated:  2/6/04                               /s/ Elizabeth Hambrecht
                                             ----------------------------------
                                             Elizabeth Hambrecht, President,
                                             Chief Financial Officer, Secretary
                                             and Treasurer




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