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                       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, 2002

                                       OR

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

                       FOR THE TRANSITION PERIOD FROM TO

                         COMMISSION FILE NUMBER 0-26395

                             SALON MEDIA GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                       94-3228750
 (STATE OR OTHER JURISDICTION OF                          (IRS EMPLOYER
  INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NUMBER)

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

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

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

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE

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

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

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

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

The number of outstanding shares of the Registrant's Common Stock, par value
$0.001 per share, on February 3, 2003 was 14,155,276 shares.
================================================================================
<PAGE>
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FORM 10-Q
SALON MEDIA GROUP, INC.
INDEX
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                                                                           PAGE
PART I  FINANCIAL INFORMATION                                             NUMBER


ITEM 1: Condensed Consolidated Financial Statements

        Condensed Consolidated Balance Sheets as of December 31, 2002 and
        March 31, 2002 (unaudited)............................................3

        Condensed Consolidated Statements of Operations for the three month
        and nine months ended December 31, 2002 and 2001 (unaudited)..........4

        Condensed Consolidated Statements of Cash Flows for the nine months
        ended December 31, 2002 and 2001 (unaudited)..........................5

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

ITEM 2: Management's Discussion and Analysis of Financial Condition
        and Results of Operations............................................13

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk...........33

ITEM 4. Controls and Procedures..............................................33

PART II OTHER INFORMATION

ITEM 1: Legal Proceedings....................................................33

ITEM 2. Changes in Securities and Use of Proceeds............................33

ITEM 3. Defaults upon Senior Securities......................................34

ITEM 4. Submission of Matters to a Vote of Security Holders..................34

ITEM 5. Other Information....................................................34

ITEM 6: Exhibits and Reports on Form 8-K.....................................34

        Signatures...........................................................35

        Certifications.......................................................36

                                      2
<PAGE>
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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,
                                                                 2002          2002
                                                             -----------   -----------
<S>                                                          <C>           <C>
ASSETS
    Current assets:
       Cash and cash equivalents                             $       169   $     1,542
       Accounts receivable, net                                      415           326
       Prepaid expenses and other current assets                     229           212
       Restricted cash                                               500          --
                                                             -----------   -----------
        Total current assets                                       1,313         2,080

    Property and equipment, net                                      900         1,299
    Prepaid advertising rights                                     5,619         6,266
    Intangible assets                                                641           919
    Other assets                                                     526           778
                                                             -----------   -----------
        Total assets                                         $     8,999   $    11,342
                                                             ===========   ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Convertible promissory notes payable                  $     1,114   $      --
       Deposit from stockholder                                      500          --
       Bank borrowing                                                 10          --
       Accounts payable and accrued liabilities                    1,820         1,773
       Deferred revenue                                              767           563
                                                             -----------   -----------
        Total current liabilities                                  4,211         2,336

    Long-term liabilities:

        Warrants payable                                             292          --

        Other long-term liabilities                                  207           229
                                                             -----------   -----------
       Total liabilities                                           4,710         2,565
                                                             -----------   -----------

Stockholders' equity:
    Preferred stock, $0.001 par value, 5,000,000 shares
      authorized, 934 issued and outstanding at
      December 31, 2002 and March 31, 2002 (liquidation
      value of $7,472 at December 31, 2002)                         --            --
    Common stock, $0.001 par value, 50,000,000 shares
       authorized, 14,155,276 shares issued and
       outstanding at December 31, 2002 and March 31, 2002            14            14
    Additional paid-in-capital                                    85,283        85,416
    Unearned compensation                                            (12  )        (57)
    Accumulated deficit                                          (80,996  )    (76,596)
                                                             -----------   -----------
       Total stockholders' equity                                  4,289         8,777
                                                             -----------   -----------
       Total liabilities and stockholders' equity            $     8,999   $    11,342
                                                             ===========   ===========
</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      NINE MONTHS ENDED
                                                         DECEMBER 31,            DECEMBER 31,
                                                    --------------------    --------------------
                                                      2002        2001        2002        2001
                                                    --------    --------    --------    --------
<S>                                                 <C>         <C>         <C>         <C>
Net revenues                                        $  1,140    $  1,128    $  3,135    $  2,668
                                                    --------    --------    --------    --------
Operating expenses:
    Production and content                             1,104       1,157       3,498       3,948
    Sales and marketing                                  547         585       1,858       2,106
    Research and development                             165         162         488         538
    General and administrative                           401         417       1,203       1,601
    Amortization of intangibles                           93         121         320         355
    Write-down of long-lived assets                     --          --          --           782
                                                    --------    --------    --------    --------
        Total operating expenses                       2,310       2,442       7,367       9,330
                                                    --------    --------    --------    --------
Loss from operations                                  (1,170)     (1,314)     (4,232)     (6,662)

Other income (expense), net                              (43)          5         (75)         15
                                                    --------    --------    --------    --------
       Net loss                                       (1,213)     (1,309)     (4,307)     (6,647)

Preferred deemed dividend                                (43)       --           (93)     (3,189)

Cumulative cash dividend on preferred stock             --           (65)       --           (97)
                                                    --------    --------    --------    --------
Net loss attributable to common stockholders        $ (1,256)   $ (1,374)   $ (4,400)   $ (9,933)
                                                    ========    ========    ========    ========

Basic and diluted net loss per share attributable
       to common stockholders                       $  (0.09)   $  (0.10)   $  (0.32)   $  (0.73)

Weighted average shares used in computing
       basic and diluted net loss per share
       attributable to common stockholders            13,997      13,585      13,919      13,535
</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,
                                                                            ------------------------
                                                                               2002          2001
                                                                            ----------    ----------
<S>                                                                         <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                 $   (4,307)   $   (6,647)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
     Write-down of long-lived assets                                              --             782
     Loss from retirement of assets, net                                          --              23
     Stock-based compensation and warrant amortization                              61           152
     Depreciation and amortization                                                 745           908
     Allowance for doubtful accounts                                                 9           309
     Amortization of prepaid advertising rights                                    647           606
     Changes in assets and liabilities:
        Accounts receivable                                                        (98)          (56)
        Prepaid expenses, other current assets and other assets                   (254)          100
        Accounts payable and other liabilities                                     173          (660)
        Deferred revenue                                                           204           455
                                                                            ----------    ----------
           Net cash used in operating activities                                (2,820)       (4,028)
                                                                            ----------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                             --              (6)
                                                                            ----------    ----------
           Net cash used in investing activities                                  --              (6)
                                                                            ----------    ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of preferred stock, net                                 --           3,204
   Proceeds from issuance of common stock, net                                    --               7
   Proceeds from bank borrowings                                                    47          --
   Payments to bank                                                                (37)         --
   Deposit against a future transaction from stockholder                           500          --
   Proceeds from notes payable, net                                              1,094          --
   Principal payments under capital leases                                        (157)         (144)
                                                                            ----------    ----------
           Net cash provided by financing activities                             1,447         3,067
                                                                            ----------    ----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                       (1,373)         (967)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                 1,542         3,047
                                                                            ----------    ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $      169    $    2,080
                                                                            ==========    ==========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Issuance of stock and warrants in connection with acquisition            $       42    $      108
   Issuance of warrants in connection with issuance of convertible
     notes payable                                                                  14          --
   Preferred deemed dividend in connection with preferred stock financing           93         3,189
   Cash dividend on preferred stock                                               --              97
   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 network of ten primary subject-specific websites, including an audio streaming
website 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 period presented. The condensed consolidated balance sheet data as
of March 31, 2002 is derived from and should be read in conjunction with the
audited financial statements, which are included in Salon's Annual Report on
Form 10-K, as amended, filed with the Securities and Exchange Commission.
Pursuant to the rules of the Securities and Exchange Commission, these financial
statements do not include all disclosures required by generally accepted
accounting principles. The results for the three and nine month periods ended
December 31, 2002 are not necessarily indicative of the expected results for any
other interim period or the fiscal year ending March 31, 2003.

     These condensed consolidated financial statements contemplate the
realization of assets and the satisfaction of liabilities in the normal course
of business. Salon has incurred losses and negative cash flow from operations
since inception and has an accumulated deficit at December 31, 2002 of $80,996.
These factors raise substantial doubt about Salon's ability to continue as a
going concern.

     Salon has reduced expenses, and may reduce them further, to match
anticipated revenues to reach cash-flow breakeven. However, until cash-flow
breakeven is reached, Salon will have to rely on additional investment capital.
There can be no assurance that Salon will be able to obtain such additional
capital on terms, which are favorable, or at all.

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

3. CONCENTRATIONS

     No customer accounted for more than 10% of total revenue for the three or
nine months ended December 31, 2002 or December 31, 2001. Three customers
accounted for 11% each of the total accounts receivable balance as of December
31, 2002. Three customers accounted for 10% each of the total accounts
receivable balance as of December 31, 2001.

                                        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

     In accordance with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets"
(SFAS No. 142), goodwill amortization was discontinued as of March 31, 2002,
thereby eliminating annual goodwill amortization of approximately $100 based on
anticipated amortization for fiscal year 2003 that would have been incurred
under the prior accounting standard. The carrying value of goodwill at December
31, 2002 was $200 and has been found not to be impaired. Salon reassessed the
expected useful lives of existing intangible assets and found that no change to
the useful lives of the assets was required.

     The following table reflects consolidated results adjusted as though the
adoption of SFAS No. 142 occurred as of the beginning of the three and nine
months ended December 31, 2001:
<TABLE><CAPTION>
                                                              Three Months Ended          Nine Months Ended
                                                                  December 31,               December 31,
                                                          --------------------------  --------------------------
                                                              2002          2001          2002          2001
                                                          ------------- ------------  ------------  ------------
<S>                                                       <C>           <C>           <C>           <C>
Reported net loss attributable to common stockholders     $      1,256  $      1,374  $      4,400  $      9,933

Goodwill amortization                                             --              35          --              98
                                                          ------------  ------------  ------------  ------------
Adjusted net loss attributable to common stockholders     $      1,256  $      1,339  $      4,400  $      9,835
                                                          ============  ============  ============  ============

Basic and diluted net loss per share attributable
to common stockholders                                    $       0.09  $       0.10  $       0.32  $       0.73

Goodwill amortization                                             --            --            --            --
                                                          ------------  ------------  ------------  ------------
Adjusted basic and diluted net loss per share
attributable to common stockholders                       $       0.09  $       0.10  $       0.32  $       0.73
                                                          ============  ============  ============  ============

     The following table sets forth information concerning Salon's intangible
assets as of December 31, 2002:

                                                             Gross                         Net
                                                            Carrying    Accumulated     Carrying
                                                             Amount     Amortization     Amount
                                                          ------------  ------------  ------------
Trade name                                                $      1,200  $        900  $        300
Proprietary technology                                             355           266            89
Audio technology                                                   158           106            52
                                                          ------------  ------------  ------------
Total intangible assets subject to amortization           $      1,713  $      1,272  $        441
                                                          ============  ============  ============

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

                                        7
<PAGE>

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

The weighted average amortization period remaining for all intangible assets
subject to amortization is 1.25 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          NINE MONTHS ENDED
                                                                  DECEMBER 31,               DECEMBER 31,
                                                          --------------------------  --------------------------
                                                               2002         2001          2002          2001
                                                          ------------  ------------  ------------  ------------
<S>                                                       <C>           <C>           <C>           <C>
Numerator:
  Net loss attributable to common stockholders            $     (1,256) $     (1,374) $     (4,400) $     (9,933)
                                                          ============  ============  ============  ============

Denominator:
  Weighted average shares outstanding                       14,155,000    14,155,000    14,155,000    14,153,000
  Weighted average shares held in escrow                      (158,000)     (570,000)     (236,000)     (618,000)
                                                          ------------  ------------  ------------  ------------
  Weighted average shares used in computing
     basic and diluted net loss per share
     attributable to common stockholders                    13,997,000    13,585,000    13,919,000    13,535,000
                                                          ============  ============  ============  ============
  Basic and diluted net loss per share attributable
     to common stockholders                               $      (0.09) $      (0.10) $      (0.32) $      (0.73)
                                                          ============  ============  ============  ============
  Antidilutive securities including options,
     warrants and convertible preferred stock not
     included in loss per shares calculation                31,875,098    27,388,774    31,875,098    27,388,774
</TABLE>

6. NOTES PAYABLE

     On July 24, 2002, Salon entered into a Note and Warrant Purchase Agreement
with various investors, including three Directors of Salon, for net proceeds of
approximately $696. Under the agreement, Salon issued Convertible Promissory
Notes (Notes) for a gross amount of $714 and issued warrants to purchase
approximately 357,021 shares of common stock at $0.21 per share. The Notes
accrue interest on the unpaid principal at 6.0% per year with such interest and
principal due the earlier of (i) the date of the next meeting of Salon's
stockholders at which a proposal seeking the approval of the sale of the Notes
and the sale of shares of Salon's Series B Preferred Stock is voted upon and is
not approved by Salon's stockholders, or (ii) September 30, 2003.

     On December 18, 2002 Salon entered into a Note and Warrant Purchase
Agreement with an investor for net proceeds of approximately $200. Under the
agreement, Salon issued a Note for a gross

                                        8
<PAGE>

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

amount of $200 and issued warrants to purchase approximately 300,000 shares of
common stock at $0.0575 per share. The Note accrues interest on the unpaid
principal at 6.0% per year with such interest and principal due September 30,
2003.

     The Notes can be converted into financing securities or Salon's common
stock. As of this filing, the holders of the Notes have not elected to convert
their Notes into either financing securities or Salon's common stock.

     The Notes automatically convert upon the closing of the 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 issues new
financing securities by September 30, 2003, the number of shares of the
financing securities to be issued upon conversion of the Notes shall equal the
aggregate amount of the Notes divided by the price per share of the financing
securities issued and sold. If no new financing occurs by September 30, 2003,
the Notes convert to shares of common stock based on the average closing price
of Salon's common stock over the sixty trading days ending on September 30, 2003
as reported on such market(s) and/or exchanges where the common stock has
traded.

     In the event of bankruptcy or insolvency proceedings, the Notes become
immediately due and payable. Salon granted the purchasers of the Notes a
security interest in substantially all of Salon's assets. The indebtedness of
the Notes is subordinated to certain future bank indebtedness, if incurred.

     The warrants issued in conjunction with the Notes issued on July 24, 2002
were valued at $6 using the Black-Scholes option-pricing model, applying an
contractual life of three years, a weighted average risk-free rate of 2.75%, an
expected dividend yield of 0%, a volatility of 120% and a deemed fair value of
common stock of $0.04. The warrants issued in conjunction with the Notes issued
on December 18, 2002 were valued at $8 using the Black-Scholes option-pricing
model, applying an expected life of three years, a weighted average risk-free
rate of 2.17%, an expected dividend yield of 0%, a volatility of 120% and a
deemed fair value of common stock of $0.04. However, since the Notes do not
stipulate a maximum number of shares issuable upon conversion, Salon may
potentially have insufficient shares authorized to satisfy all obligations under
convertible instruments, warrant agreements and options. Accordingly, as of July
24, 2002 all outstanding warrants were classified as long-term liabilities at
their fair value of $175 on that day, along with $16 from the valuation of all
new warrants issued. The warrants' fair value has been remeasured as of December
31, 2002 resulting in a charge of $101. Of this charge, $93 related to warrants
issued in conjunction with prior issuances of preferred stock, and was recorded
as a preferred deemed dividend in Salon's results of operations for the nine
months ended December 31, 2002.

     On October 3, 2002, Salon sold and issued an unsecured promissory note to a
director of Salon and raised gross proceeds of $200. The unsecured promissory
note accrues interest on the unpaid principal at 6.0% per year, with such
interest and principal due the earlier of (i) the date of the next meeting of
Salon's stockholders at which a proposal seeking the approval of the sale of the
convertible promissory notes and the sale of shares of Salon's Series B
Preferred Stock is voted upon and is not approved by Salon's stockholders, or
(ii) September 30, 2003. The terms of the note stipulate that Salon shall
undertake reasonable efforts to amend the terms of the note to be consistent
with the rights and privileges to the convertible promissory notes issued on
July 24, 2002.

                                        9
<PAGE>

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

7. DEPOSIT AGAINST A FUTURE TRANSACTION FROM STOCKHOLDER

     On December 19, 2002, Salon received a $500 deposit against a future
transaction from a stockholder who is also a Director of Salon. The $500 deposit
is included as a component of current assets in Salon's balance sheet as of
December 31, 2002. In January 2003, Salon finalized a Note and Warrant Purchase
Agreement with the stockholder. Under the agreement, Salon issued a Convertible
Promissory Note (Note) for a gross amount of $100 which it kept, issued warrants
to purchase approximately 150,000 shares of common stock at $0.0575 per share
and transferred $400 to a segregated account. The Note accrues interest on the
unpaid principal at 6.0% per year, with such interest and principal due
September 30, 2003. The Note can be converted into financing securities or
Salon's common stock.

     The Note automatically converts upon the closing of the 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 Note
and other converted indebtedness of Salon). In the event that Salon issues new
financing securities by September 30, 2003, the number of shares of the
financing securities to be issued upon conversion of the Note shall equal the
aggregate amount of the Note divided by the price per share of the financing
securities issued and sold. If no new financing occurs by September 30, 2003,
the Note convert to shares of common stock based on the average closing price of
Salon's common stock over the sixty trading days ending on September 30, 2003 as
reported on such market(s) and/or exchanges where the common stock has traded.

8. SUBSEQUENT EVENTS

     On February 11, 2003, Salon finalized a Note and Warrant Purchase Agreement
with an investor who is a related party of Salon. Under the agreement, Salon
issued a Convertible Promissory Note (Note) for a gross amount of $100 and
issued warrants to purchase approximately 300,000 shares of common stock at
$0.0575 per share. The Note accrues interest on the unpaid principal at 6.0% per
year, with such interest and principal due September 30, 2003. The Note can be
converted into financing securities or Salon's common stock.

     The Note automatically converts upon the first closing of Salon's proposed
Series D Preferred Stock Financing ("Financing") and, if no such Financing shall
have occurred by the close of business on September 30, 2003, then the Note
shall automatically convert into shares of Salon's common stock. In the event of
an automatic conversion of the Note upon a subsequent Financing, the number of
shares of preferred or common stock to be issued upon conversion of this and
other notes shall equal the aggregate amount of the Note obligation divided by
the price per share of the securities issued and sold in the Financing. In the
event of an automatic Note conversion into common stock absent a Financing, the
number of shares of the Common Stock to be issued upon conversion of Notes shall
equal the aggregate amount of the Note obligations divided by the average
closing price of the Company's common stock over the sixty (60) trading days
ending on September 30, 2003, as reported on such market(s) and/or exchange(s)
where the common stock has traded during such sixty trading days.

                                       10
<PAGE>

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

9. BANK BORROWING

     In October 2002, Salon entered into 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. The aggregate advances on receivables
outstanding under the agreement cannot exceed $1.0 million, however the amount
is capped at $0.3 million until such time as Salon has $2.5 million of
unrestricted cash. Amounts advanced under this agreement accrue interest at
prime plus 1% per annum on the average daily balance outstanding and are subject
to a fee of 1.25% per month on the average daily balance outstanding. Upon
collection of the outstanding receivable used as collateral for the advance, the
corresponding advance is paid back to the bank along with applicable fees. As
part of the agreement, Salon issued 37,500 warrants to the bank. The warrants
were valued at $2 using the Black-Scholes option-pricing model, applying a
contractual life of seven years, a weighted average risk-free rate of 4.375%, an
expected dividend yield of 0%, a volatility of 120% and a deemed fair value of
common stock of seven cents. The prime interest rate charged by the bank during
the quarter ended December 31, 2002 was 4.25%. Salon has received $47 under this
agreement of which it has paid back $37 as of December 31, 2002. Salon received
approximately $10 net during the month of January 2003.

10. RECENT ACCOUNTING PRONOUNCEMENTS

     In October 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
(SFAS No. 144). SFAS No. 144 supersedes "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No.121), however
it retains the fundamental provisions of SFAS No. 121 for (1) the recognition
and measurement of the impairment of long-lived assets to be held and used and
(2) the measurement of long-lived assets to be disposed of by sale. SFAS No. 144
develops a single accounting model for long-lived assets to be disposed of by
sale, whether previously held and used or newly acquired assets and consequently
amends Accounting Principles Board Opinion No. 30, "Reporting Results of
Operations -Reporting the Effects of Disposal of a Division of a Business."
Additionally, SFAS No. 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years. The adoption of this standard did not have an
effect on Salon's financial statements.

     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS No. 146). SFAS No. 146
nullifies the guidance of the Emerging Issues Task Force (EITF) in EITF Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". Under EITF Issue No. 94-3, an entity recognized a liability for
an exit cost on the date that the entity committed itself to an exit plan. In
SFAS 146, the Board acknowledges that an entity's commitment to a plan does not,
by itself, create a present obligation to other parties that meets the
definition of a liability and requires that a liability for a cost that is
associated with an exit or disposal activity be recognized when the liability is
incurred. It also establishes that fair value is the objective for the initial
measurement of the liability. SFAS No. 146 will be effective for exit or
disposal activities that are initiated after December 31, 2002. Salon does not
expect a material impact on its financial position and results of operating from
the adoption of SFAS No. 146.

                                       11
<PAGE>

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

     In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN 45 requires disclosures about the guarantees that an entity has
issued, including a reconciliation of changes in the entity's product warranty
liabilities. The initial recognition and initial measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantor's fiscal year-end. The
disclosure requirements of FIN 45 are effective for financial statements of
interim or annual periods ending after December 15, 2002. Salon believes that
the adoption of this standard will have no material impact on its financial
statements.



















                                       12
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     This section and other parts of this Form 10-Q contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that involve risks and uncertainties, including, but not limited to,
statements regarding our strategy, plans, objectives, expectations, intentions,
financial performance, cash-flow breakeven timing, financing, economic
conditions, on-line advertising, market performance, subscription service plans,
and revenue sources. Although Salon Media Group, Inc. (Salon) believes its
plans, intentions and expectations reflected in such forward-looking statements
are reasonable, we can give no assurance that 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 is an Internet media company providing online news and information
for the sophisticated reader. 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. Salon
believes that its 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.

     On June 22, 1999, Salon had its initial public offering, with its common
stock quoted on the NASDAQ National Market under the symbol SALN. Due to Salon's
inability to meet the continued listing requirements of the NASDAQ Market, on
November 21, 2002 Salon's common stock instead began trading in the OTC
(Over-The-Counter) Bulletin Board marketplace under the symbol SALN.OB

     The main entry and navigation point to Salon's ten websites is Salon's home
page at www.salon.com. The websites provide news, features, interviews and
regular columnists on specific topics, from politics and arts and entertainment
to parenting and health, while Salon's online communities allow users to
interact and discuss Salon content and other topics via electronic messaging.
Salon's users can access Table Talk or The Well through www.salon.com or through
Salon's ten content websites. Prior to January 22, 2003, Salon offered its
unabridged News and Politics website to Salon Premium subscribers only, with an
abridged form available to all users. Effective January 22, 2003, Salon began
restricting access to substantially all of its content to either Salon Premium
subscribers, or to non Salon Premium subscribers willing to view some form of
advertisement. Access for non Salon Premium

                                       13
<PAGE>

subscribers is restricted to a time-sensitive pass which allows access to
Salon's content for a specific period of time from an imbedded cookie.

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

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2002
COMPARED TO THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2001

NET REVENUES:

     Net revenues for the three months ended December 31, 2002 and December 31,
2001 were $1.1 million. Net revenues increased 18% to $3.1 million for the nine
months ended December 31, 2002 from $2.7 million for the nine months ended
December 31, 2001.

     Advertising revenues decreased to $0.5 million, subscription revenues
increased to $0.5 million and miscellaneous other revenues stayed constant at
$0.1 million for the three months ended December 31, 2002 compared to
advertising revenues of $0.7 million, subscription revenues of $0.3 million and
other revenues of $0.1 million for the three months ended December 31, 2001.
Advertising revenues stayed constant at $1.5 million, subscription revenues
increased to $1.3 million and miscellaneous other revenues increased slightly to
$0.3 million for the nine months ended December 31, 2002 compared to advertising
revenues of $1.5 million, subscription revenues of $0.8 million and
miscellaneous other revenues of $0.2 million for the nine months ended December
31, 2001. The nine months ended December 31, 2001 results included $0.2 million
of website management software sales with no comparable amounts this year as
Salon has suspended all efforts to market its website management software.

     The decrease in advertising revenues for the three months ended December
31, 2002 reflects the continuing trend of the majority of advertising dollars
being allocated by advertisers to the largest websites and apprehension by
advertisers of Salon's financial viability. Even though advertising revenues for
the nine months ended December 31, 2002 and December 31, 2001 are constant, this
year's results continue to be impaired by the majority of advertising dollars
being allocated by advertisers to the largest websites and related concerns by
advertisers about Salon's financial viability. Last year's results were also
impacted by these same factors, along with the negative effects of the September
11, 2001 terrorist acts.

     Subscription revenues increased for both the three months and nine months
ended December 31, 2002 compared to December 31, 2001 as Salon continues to
convert more website visitors to Salon Premium subscriptions. During the three
months ended December 31, 2002 Salon generated approximately 20,400 new and
renewed subscriptions for Salon Premium compared to 12,400 new subscriptions
only during the three months ended December 31, 2001. The increase in
subscription revenue for the nine months ended December 31, 2002 compared to the
nine months ended December 31, 2001 is attributable to an increase in new
subscribers, renewals of prior subscribers and the fact that Salon Premium was
operating for nine months this year, whereas Salon Premium was only operational
for approximately eight months last year. As of December 31, 2002, Salon has
approximately 47,300 active Salon Premium subscribers and is experiencing an
approximate 71% renewal rate for one-year subscriptions. Salon cannot predict
what its renewal rate will be in the future. As of December 31, 2002, Salon has
deferred $0.7 million of Salon Premium revenue. During September 2002, Salon
discontinued its two-year subscription plan and implemented a new $18.50 per
year plan, which gives a subscriber access to all of Salon's content, with
advertising. All other subscription plans enable a

                                       14
<PAGE>

subscriber to view Salon's content without advertising. Effective January 22,
2003, Salon began restricting access to substantially all of its content to
either Salon Premium subscribers, or to non Salon Premium subscribers willing to
view some form of advertisement. Content access for general viewers is planned
to be time-limited and authorized after passing through an advertising
experience. Salon cannot predict what effect, if any, the restriction to Salon
content will have on Salon's results of operations.

PRODUCTION AND CONTENT:

     Production and content expenses during the three months ended December 31,
2002 were $1.1 million versus $1.2 million during the three months ended
December 31, 2001, a decline of $0.1 million or 5%. The slight reduction in
product and content expenses is the net result of a general reduction of all
costs in order to preserve Salon's limited cash resources.

     Production and content expenses during the nine months ended December 31,
2002 were $3.5 million versus $3.9 million during the nine months ended December
31, 2001, a decline of $0.4 million or 11%. The decrease in production and
content costs is primarily attributable to an approximate $0.3 million decrease
in salaries and benefits from the elimination of fifteen staff positions between
periods, $0.1 million from switching to a new Internet site service provider,
and $0.1 decrease in depreciation as assets became more fully depreciated, and
other general cost reductions. Salon does not anticipate material future
reductions in production and content expenditures.

SALES AND MARKETING:

     Sales and marketing expenses during the three months ended December 31,
2002 were $0.5 million versus $0.6 million for the three months ended December
31, 2001, a decline of $0.1 million. The slight decrease in sales and marketing
expenses was primarily attributable to lower amortization of prepaid advertising
due to a decrease in the utilization of this asset to offset the increase during
the three months ended June 30, 2002 and a general reduction in all costs to
preserve Salon's limited cash resources. Last year's results included the
benefit of a $0.1 million reversal of an accrual no longer deemed necessary with
no comparable amount this year.

     Sales and marketing expenses during the nine months ended December 31, 2002
were $1.9 million versus $2.1 million for the nine months ended December 31,
2001, a decline of $0.2 million. The decline in sales and marketing expenses was
attributable to a $0.1 million decrease in salary related costs from the
elimination of eight positions between periods and $0.1 million from a general
reduction in expenditures in order to preserve Salon's limited cash resources.
Amortization of prepaid advertising rights was $0.6 million for both periods.
Salon does not anticipate material future reductions in sales and marketing
expenditures and expects future amortization of prepaid advertising to be
approximately $100 to $200 per quarter for the remainder of the fiscal year.

RESEARCH AND DEVELOPMENT:

     Research and development expenses were constant for both the three months
and nine months ended December 31, 2002 and December 31, 2001 at $0.2 million
and $0.5 million, respectively. Salon does not anticipate material future
reductions in research and development expenditures.

GENERAL AND ADMINISTRATIVE:

     General and administrative expenses were constant at $0.4 million for the
three months ended December 31, 2002 and December 31, 2001. General and
administrative expenses were $1.2 million for the nine months ended December 31,
2002 versus $1.6 million during the nine months ended December

                                       15
<PAGE>

31, 2001, a decline of $0.4 million or 25%. The decline between periods
primarily reflects a $0.2 million write-off of a long-term note receivable from
a customer last year that was deemed un-collectable, along with $0.1 million in
additional bad debt charges, with no comparable amounts this year. Salon does
not anticipate material future reductions in general and administrative
expenditures.

AMORTIZATION OF INTANGIBLES:

     Amortizations of intangible expenses were $0.1 million for the three months
ended December 31, 2002 and December 31, 2001.

     Amortization of intangible expenses during the nine months ended December
31, 2002 were $0.3 million, comparable to the $0.4 million during the nine
months ended December 31, 2001. The decline in amortization of $0.1 million
reflects the adoption of Financial Accounting Standards Board (FASB) Statement
of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets"
(SFAS No. 142), in which goodwill amortization was discontinued as of March 31,
2002, eliminating annual goodwill amortization of approximately $0.1 million.
Salon does not anticipate any significant changes to the amortization of its
intangibles the remainder of the fiscal year.

WRITE-DOWN OF LONG-LIVED ASSETS:

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

     In May 2000, Salon acquired MP3Lit.com in a transaction that included
contingently issueable common stock. As a consequence, Salon issued 317,000
shares of common stock valued at $0.1 million in May 2001 resulting in
additional purchase consideration classified as goodwill. As determined during
the fiscal year ended March 31, 2001, all the goodwill associated with the
acquisition was impaired, and as a result the additional goodwill resulting from
this additional stock award was written off during the three month period ended
June 30, 2001. Additional contingent shares of 412,100 were issued in May 2002
and the additional goodwill of $42 resulting from this additional stock award
was written off during the three month period ended June 30, 2002. An additional
158,500 contingent shares are to be issued in May 2003. Salon cannot predict at
this time the financial impact of issuing these additional contingent shares.

PREFERRED DEEMED DIVIDEND:

     On July 24, 2002 and December 18, 2002, Salon entered into Note and Warrant
Purchase Agreements with various investors, received gross amounts of $0.9
million and issued warrants to purchase approximately 657,021 shares of common
stock. The convertible redeemable feature of the Note and Warrant Purchase
Agreements did not stipulate a maximum number of shares issuable upon
conversion, which could potentially result in Salon having insufficient shares
authorized to satisfy all obligations under convertible instruments, warrant
agreements and options. Accordingly, as of July 24, 2002 all outstanding
warrants were reclassified to long-term liabilities at their fair value of $175
on that day, along with $16 from the valuation of the new warrants issued. The
fair values of all warrants issued were remeasured as of December 31, 2002,
resulting in a charge of $101. Of this charge, $93 related to warrants issued in
conjunction with prior issuances of preferred stock, and was recorded as a
preferred deemed dividend in Salon's results of operations for nine months ended
December 31, 2002. Of the $93, $43 is the change in value of warrants during the
three months ended December 31, 2002.

                                       16
<PAGE>

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

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS:

     As a result of the above factors, Salon recorded a net loss of $1.3
million, or $0.09 per share for the three months ended December 31, 2002
compared to a net loss of $1.4 million, or $0.10 per share for the three months
ended December 31, 2001. In addition, Salon recorded a net loss of $4.4 million,
or $0.32 per share for the nine months ended December 31, 2002 compared to a net
loss of $9.9 million, or $0.73 per share for the nine months ended December 31,
2001.

LIQUIDITY AND CAPITAL RESOURCES:

     As of December 31, 2002, Salon had $0.2 million in available cash remaining
from the issuance of a convertible redeemable note issued in December 2002.
Salon also had $0.5 million of restricted cash held primarily as deposits for
various lease arrangements and $0.5 million of restricted cash from a deposit
against a future transaction from a stockholder who is also a director of Salon.

     Net cash used in operations was $2.8 million for the nine months ended
December 31, 2002, compared to $4.0 million for the nine months ended December
31, 2001. 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 and $0.5 million to
restrict the cash deposit received from a stockholder, offset partly by non-cash
charges of $1.5 million. The principal use of cash during the nine months ended
December 31, 2001 was to fund the $6.6 million net loss for the period and a
$0.7 million decrease in liabilities, offset partly by non-cash charges of $2.8
million and $0.5 million in deferred revenue, primarily from the implementation
of Salon Premium subscriptions in April 2001.

     No cash was used in investing activities for the nine months ended December
31, 2002, compared to an immaterial amount for the nine months ended December
31, 2001. Salon does not expect any significant capital expenditures during the
current fiscal year.

     Net cash provided from financing activities was $1.4 million for the nine
months ended December 31, 2002, compared to $3.1 million for the nine months
ended December 31, 2001. The principal source of funds for the nine months ended
December 31, 2002 was $0.9 million from the issuance of convertible redeemable
notes, $0.2 million from the issuance of a promissory note, a $0.5 million
deposit against a future transaction from a stockholder, partly offset by $0.2
million of lease payments. The principal source of funds for the nine months
ended December 31, 2001 was $3.2 million from the issuance of Series A
convertible preferred stock, partly offset by $0.1 million of lease payments.

     As of December 31, 2002, Salon's available cash resources were sufficient
to meet working capital needs for approximately one month. Subsequent to
December 31, 2002, Salon finalized an agreement with a stockholder who had made
a $0.5 million deposit against a future transaction with Salon. Under the terms
of the agreement, $0.1 million was made available for general operating use and
$0.4 million was transferred to a segregated account. On February 11, 2003 Salon
finalized an additional agreement with another investor and received $0.1
million. Effective January 22, 2002, Salon began to restrict access to
predominately all of Salon's content to either Salon Premium subscribers or to
website visitors who are willing to view some form of advertisement. The
additional restriction to Salon content

                                       17
<PAGE>

is anticipated to increase Salon Premium subscriptions with a corresponding
increase in cash receipts from the new subscriptions. Since this is a
substantial change of Salon's business strategy, Salon cannot predict how much
and when new cash will be generated from the change. Salon believes with the
cash on hand on December 31, 2002, $0.2 million from the above mentioned
agreements, incremental new cash to be generated from the restriction of Salon's
content, together with collections of accounts receivable, that it will be
difficult to meet working capital needs during February 2003.

     Salon needs to raise additional funds and is currently in the process of
exploring financing options. If it is unable to complete the financial
transactions it is pursuing or if it is unable to otherwise fund its liquidity
needs, then it may not be able to continue as a going concern. Liquidity
continues to be a constraint on business operations, including Salon's ability
to react to competitive pressures or to take advantage of unanticipated
opportunities. If Salon raises additional funds by selling equity securities, or
instruments that convert into equity securities, the percentage ownership of
Salon's current stockholders will be reduced and its stockholders will most
likely experience additional dilution. Given Salon's recent low stock price, any
dilution will likely be very substantial for existing stockholders.

     Salon is contemplating selling its prepaid advertising rights valued at
$5.6 million as of December 31, 2002. It is possible that the rights might be
sold for $1 million to $3 million in cash, which would result in recording a
loss of $2.6 million to $4.6 million. Salon cannot predict when and if such a
sale will occur.

     Salon has a ten-year operating lease for office space at its San Francisco
location with approximately seven years remaining. Salon is attempting to reduce
this commitment and has suspended applicable lease payments effective December
2002. On January 29, 2003 Salon received a demand letter for $0.2 million from
the landlord. Payment of this demand would have a great adverse effect on
Salon's current financial position. To a lesser extent, Salon has an operating
lease for office space in New York, NY with approximately two years remaining.
Salon is currently negotiating with the landlord to reduce this commitment.

     Salon's independent accountants have included a paragraph in their report
for the fiscal years ending March 31, 2002 and 2001 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, not filled positions opened by
attrition, implemented a wage reduction of 15% effective April 1, 2001, and has
cut discretionary spending to minimal amounts.

     In October 2002, Salon entered into 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. The aggregate advances on receivables
outstanding under the agreement cannot exceed $1.0 million, however the amount
is capped at $0.3 million until such time as Salon has $2.5 million of
unrestricted cash. Amounts advanced under this agreement accrue interest at
prime plus 1% per annum on the average daily balance outstanding and are subject
to a fee of 1.25% per month on the average daily balance outstanding. Upon
collection of the outstanding receivable used as collateral for the advance, the
corresponding advance is paid back to the bank along with applicable fees. As
part of the agreement, Salon issued 37,500 warrants to the bank. The warrants
were valued at $2,000 using the Black-Scholes option-pricing model, applying an
contractual life of seven years, a weighted average risk-free rate of 4.375%, an
expected dividend yield of 0%, a volatility of 120% and a deemed fair value of
common stock of seven cents. The prime interest rate charged by the bank during
the quarter ended December 31, 2002 was 4.25%. Salon has received $47,000 under
this agreement of which it has paid back $37,000 as of December 31, 2002. Salon
received has approximately $10,000 net during the month of January 2003.

                                       18
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

     In October 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
(SFAS No. 144). SFAS No. 144 supersedes "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No.121), however
it retains the fundamental provisions of SFAS No. 121 for (1) the recognition
and measurement of the impairment of long-lived assets to be held and used and
(2) the measurement of long-lived assets to be disposed of by sale. SFAS No. 144
develops a single accounting model for long-lived assets to be disposed of by
sale, whether previously held and used or newly acquired assets and consequently
amends Accounting Principles Board Opinion No. 30, "Reporting Results of
Operations -Reporting the Effects of Disposal of a Division of a Business."
Additionally, SFAS No. 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years. The adoption of this standard did not have an
effect on Salon's financial statements.

     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS No. 146). SFAS No. 146
nullifies the guidance of the Emerging Issues Task Force (EITF) in EITF Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". Under EITF Issue No. 94-3, an entity recognized a liability for
an exit cost on the date that the entity committed itself to an exit plan. In
SFAS 146, the Board acknowledges that an entity's commitment to a plan does not,
by itself, create a present obligation to other parties that meets the
definition of a liability and requires that a liability for a cost that is
associated with an exit or disposal activity be recognized when the liability is
incurred. It also establishes that fair value is the objective for the initial
measurement of the liability. SFAS No. 146 will be effective for exit or
disposal activities that are initiated after December 31, 2002. Salon does not
expect a material impact on its financial position and results of operating from
the adoption of SFAS No. 146.

     In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN 45 requires disclosures about the guarantees that an entity has
issued, including a reconciliation of changes in the entity's product warranty
liabilities. The initial recognition and initial measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantor's fiscal year-end. The
disclosure requirements of FIN 45 are effective for financial statements of
interim or annual periods ending after December 15, 2002. Salon believes that
the adoption of this standard will have no material impact on its financial
statements.



                                       19
<PAGE>

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 WORKING CAPITAL DURING FEBRUARY 2003

     As of December 31, 2002 Salon has $0.2 million of available cash and
received $0.2 million from finalizing two Note and Warrant Purchase Agreements,
with a stockholder who is also a Director of Salon in January 2003 and a related
party investor in February 2003. With this limited cash resource, Salon needs to
raise additional working capital within February 2003 to remain in operation. If
Salon raises additional funds by selling equity securities, or instruments that
convert into equity securities, the percentage ownership of Salon's existing
stockholders will be reduced and its stockholders will likely experience
substantial dilution. Salon cannot be sure that additional financing will be
available on terms favorable to Salon, or at all.

     The "going-concern" opinion from Salon's independent accountants limits
Salon's ability to access certain types of financing, and the circumstances
which prompted this opinion may limit or prevent Salon from obtaining suitable
financing, if at all.

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, 2002, Salon
had net losses attributable to common stockholders of $4.4 million and had an
accumulated deficit of $81.0 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 believes with its cash on hand, together with collections of accounts
receivable, $0.2 million from finalizing two Note and Warrant Purchase Agreement
in January and February 2003, that it will be difficult to meet working capital
needs during February 2003. Salon needs to raise additional funds within
February 2003 and is currently in the process of exploring financing options. If
Salon is unable to complete the financial transactions it is pursuing or if it
were unable to fund its liquidity needs, then Salon would not be able to
continue operations.

     Salon's independent accountants provided a "going-concern" audit opinion on
the consolidated financial statements for the years ended March 31, 2002 and
2001. 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.

IN JANUARY 2003 SALON INSTITUTED SITE CHANGES THAT WILL AFFECT ITS REVENUE

     In January 2003, Salon began to restrict access to substantially all of its
new content to Salon Premium subscribers or to non Salon Premium subscribers
willing to view some form of advertising. It is anticipated that the number of
unique visitors to Salon's websites will decrease with a corresponding

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decrease in page views. Salon estimates that within the last six months it has
been generating monthly unique visitors of between 2.5 million and 3.3 million.
The decrease in page views is anticipated to equate to a decrease in the number
of impressions available to sell to general advertisers with offsetting new
revenues from rich media presentations which create a "day pass" to view the
site and an increase in Salon Premium subscriptions. Considering these factors,
the future revenue picture is uncertain. Salon believes advertisers are very
receptive to rich media presentations that create a "day pass". Salon believes
that restricting access to its content will substantially increase Salon Premium
subscriptions, but cannot estimate to what extent.

SALON 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.

     As of December 31, 2002 Salon has experienced a renewal rate for one-year
subscription to Salon Premium of approximately seventy-one percent. Salon cannot
predict if this rate will continue in the future. In addition, Salon will not
know what renewal rate it can expect for individuals who have signed up for the
now terminated two-year Salon Premium subscription plan, or if they will switch
to the one year plan, until the quarter ending June 30, 2003, when those
renewals are set to begin.

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

     Salon has historically depended on the sale of advertising for the majority
of its revenue. The January 2003 site changes will change the mix of revenue,
lowering traditional forms of advertising, increasing new forms and changing
subscription patterns. The net effect is currently unknown and could be negative
or positive.

     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 access-permitting advertisements;

     o    entice non Salon Premium website visitors to view new ad 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    grow the number of Salon Premium subscribers willing to view website
          advertisements

     o    successfully sell and market it network to advertisers;

     o    maintain or increase its user base;

     o    increase the amount of revenues it receives per advertisement;

     o    increase awareness of the Salon brand;

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<PAGE>

     o    successfully sell new ad units and formats;

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

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

     o    retain sales personnel.

THE LENGTH OF SALON'S SALES CYCLES 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 "day passes" to advertisers;

     o    internal acceptance reviews by advertisers and their agencies;

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

SALON'S ADVERTISING CREDITS MAY BE SOLD AT A DISCOUNT, RESULTING IN A
SIGNIFICANT CHARGE TO OPERATING RESULTS

     Salon has $5.6 million of remaining prepaid advertising rights generated
from the sale of 1,125,000 of shares of Salon's common stock to Rainbow Media
Holdings, Inc., a subsidiary of Cablevision Systems Corp. in December 1999.
Salon continues to use these rights, but is also contemplating selling the
advertising rights at a discount, which may result in a substantial charge to
operations. Rainbow Media Holdings views the rights as non-assignable and this
may affect the action taken.

CABLEVISION SYSTEMS CORP. FINANCIAL STRUCTURE HAS CHANGED, POTENTIALLY AFFECTING
THE UTILIZATION OF ADVERTISING CREDITS OR THE ABILITY TO SELL THE CREDITS

     On December 9, 2002 Cablevision Systems Corp. concluded a sale of its Bravo
network to NBC. The Bravo network was part of Rainbow Media Holdings, Inc., a
subsidiary of Cablevision Systems Corp., which Salon used to run its
advertisements and utilize its advertising credits. Salon does not know what
effect this ownership change will have in its ability to utilize its advertising
credits or how it may impact Salon's efforts to sell these credits.

                                       22
<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 technology 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 often instituted class action
litigation. Our share price has, in the past, experienced price volatility, and
may continue to do so in the future. Many technology 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.

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

     Salon has one officer and seven directors, one of which is associated with
a company that has an investment in Salon, that in the aggregate, beneficially
own approximately 36 percent of the voting rights granted by ownership of common
and preferred stock as of December 31, 2002. If Salon were to aggregate this
class of ownership with all other 5 percent and greater shareholders, this
combined group of shareholders would beneficially own approximately 57 percent
of the voting rights granted by ownership of common and preferred stock as of
December 31, 2002. If the principal stockholders were to act together, these
stockholders 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.

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;

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<PAGE>

     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;

     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.

SALON HAS VARIOUS OFFICE LEASE AGREEMENTS THAT HAVE SUBSTANTIAL CASH DEMANDS.
ASSOCIATED LEASEHOLD IMPROVEMENTS, DEPOSITS AND RESTRICTED CASH THAT MAY BE
ADVERSELY IMPACTED IF LEASE TERMS WERE SHORTENED FOR ANY REASON

     As of December 31, 2002 Salon had leasehold improvements recorded at cost
at $1.0 million with a net book value of $0.6 million, as well as $0.5 million
of office lease deposits and restricted cash. The leasehold improvements are
being depreciated over the term of its respective lease. If Salon were to
shorten the lease term of various lease agreements for any reason, or terminate
lease agreements, these assets could be adversely affected. In Salon's San
Francisco offices, in particular, Salon subleased approximately 50 percent of
its office space to a third party, offsetting Salon's overall costs. This
agreement will not be present in March 2003 and should Salon be unable to find a
replacement tenant, Salon would be adversely affected.

SALON MUST CONTINUALLY DEVELOP COMPELLING CONTENT TO ATTRACT INTERNET USERS

     Salon's success depends upon its ability to attract and retain a large
number of users by delivering original and compelling Internet content and
services. If Salon is unable to develop content and services that allow it to
attract, retain and expand a loyal user base possessing high-value demographic

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<PAGE>

characteristics, Salon will be unable to generate advertising or subscription
revenues, and its revenues and operating results will be severely harmed. The
content and services Salon provides on its websites may not appeal to a
sufficient number of Internet users to generate advertising or subscription
revenues. Salon's ability to develop compelling content depends on several
factors, including:

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

     o    the quality of Salon's editorial staff;

     o    the technical expertise of Salon's production staff; and

     o    working capital constraints of Salon.

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

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

     Many of our websites contain, and will continue to contain, content that is
politically and culturally controversial. As a result of this content, current
and potential advertisers and Salon Premium subscribers may refuse to do
business with 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 a 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 and design
personnel. In addition, because its users must perceive the content of its
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 and Editor-in-Chief.

                                       25
<PAGE>

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

     Due to our 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 our
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

     Salon has developed a proprietary online publishing system. If this system
does not work as intended, or if Salon is unable to continue to develop this
system to keep up with the rapid evolution of technology for content delivery
including advertising on the Internet, its network of websites may not operate
properly which could harm its 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 its
business. Moreover, complex software products like its online publishing system
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
publishing system, errors or deficiencies may be found in the system that may
impact its business adversely.

                                       26
<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,
including web hosting and advertising delivery. 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.

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

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 does
not continue to develop, its business may be severely harmed.

     Currently, demand and market acceptance for Internet advertising is
uncertain and may not increase as necessary for our business to grow or succeed.
Many advertisers have little or no experience using the Internet for advertising
purposes. The adoption of Internet advertising, particularly by companies that
have historically relied on traditional media, requires the acceptance of a new
way of conducting business, exchanging information and advertising products and
services. Potential advertisers may believe Internet advertising to be
undesirable or less effective for promoting their products and services relative
to traditional advertising media. If the Internet advertising market fails to
develop or develops more slowly than Salon expects, its business could be
harmed. Within the industry, its advertising audience may be low and inhibit its
ability to sell advertising.

     Different pricing models are used to sell Internet advertising. It is
difficult to predict which pricing models, if any, will emerge as the industry
standard. This uncertainty makes it difficult to project 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.

                                       27
<PAGE>

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.

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

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

     It is important to its 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 our business. A number of
factors may inhibit the growth of Internet usage, including the following. If
these or any other factors cause use of the Internet to slow or decline, its
results of operations could be harmed.

     o    inadequate network infrastructure;

     o    security concerns;

     o    charging for content;

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<PAGE>

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

SALON MAY BE HELD LIABLE FOR CONTENT 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, 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. Although Salon carries
general liability insurance, its insurance may not be adequate to indemnify us
for all liability that may be 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.

SALON MAY BE LIABLE FOR ITS LINKS TO THIRD-PARTY WEBSITES

     Salon could be exposed to liability with respect to the selection of
third-party websites that may be accessible through Salon.com. These claims
might include, among others, that by linking to websites operated by third
parties, Salon may be liable for copyright or trademark infringement or other
unauthorized actions by these third-party websites. Other claims may be based on
errors or false or misleading information provided on linked 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. Salon's business could be seriously harmed due
to the cost of investigating and defending these claims; even to the extent
these claims do not result in liability. Implementing measures to reduce its
exposure to this liability may require us to spend substantial resources and
limit the attractiveness of our service to users.

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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 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

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<PAGE>

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 its
costs of operations and harm its business. For example, the Communications
Decency Act of 1996 sought to prohibit the transmission of certain types of
information and content over the web. Additionally, several telecommunications
companies have petitioned the Federal Communications Commission to regulate
Internet service providers and online service providers in a manner similar to
long distance telephone carriers and to impose access fees on these companies.
Imposition of access fees could increase the cost of transmitting data over the
Internet. Moreover, it may take years to determine the extent to which existing
laws relating to issues such as property ownership, obscenity, libel and
personal privacy are applicable to the Internet or the application of laws and
regulations from jurisdictions whose laws do not currently apply to 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. The State of California recently audited
Salon's sales tax returns and found Salon in compliance with its filings and did
not object to the fact that it does 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. A number of proposals have been made at the
state and local level that would impose additional taxes on the sale of goods
and services through the Internet. Such proposals, if adopted, could
substantially impair the growth of electronic commerce and could reduce our
ability to derive revenue from electronic commerce. Moreover, if any state or
foreign country were to successfully assert that 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.

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<PAGE>

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

     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.

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.

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<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 Salon's management,
including Salon's principal executive officers and principal financial officer,
Salon conducted an evaluation of its disclosure controls and procedures, as such
term is defined under Rule 13a-14(c) promulgated under the Securities Exchange
Act of 134, as amended, within the 90 day period prior to the filing date of
this report. Based Salon's evaluation, Salon's principal executive officer and
principal financial officer concluded that Salon's disclosure controls and
procedures are effective.

     There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in Salon's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced above.


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

ITEM 1. LEGAL PROCEEDINGS.

     Not Applicable

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

     On December 18, 2002, Salon issued a Convertible Promissory Note (Note) to
an investor, and issued warrants to purchase approximately 300,000 shares of
common stock at $0.0575 per share, for net proceeds of approximately $0.2
million. The proceeds from the issuance of the Note are to be used for working
capital and other general corporate purposes. The Note and warrants were issued
pursuant to Regulation D promulgated under the Securities Act of 1933, as
amended.

     The Note can be converted into financing securities or Salon's common
stock. The holder of the Note has not elected to convert the Note into financing
securities or Salon's common stock

     The Note automatically converts upon the closing of the Salon's first sale
of its preferred or common stock with aggregate gross proceeds to Salon of at
least $2.0 million (including the conversion of the outstanding principal of the
Note and other converted indebtedness of Salon). In the event that Salon issues
new financing securities by September 30, 2003, the number of shares of the
financing securities to be issued upon conversion of the Note shall equal the
aggregate amount of the Note divided by the price per share of the financing
securities issued and sold. If no new financing occurs by September 30, 2003,
the Note converts to shares of common stock based on the average closing price
of Salon's common stock over the sixty trading days ending on September 30, 2003
as reported on such market(s) and/or exchanges where the common stock has
traded.

     In the event of bankruptcy or insolvency proceedings, the Note becomes
immediately due and payable. Salon granted the purchaser of the Note a security
interest in substantially all of Salon's assets. The indebtedness of the Note is
subordinated to certain bank indebtedness, as incurred.

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<PAGE>

ITEM 3. DEFAULT UPON SENIOR SECURITIES.

     Not Applicable

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.


4.2.13*       Note Dated as of October 3, 2002

4.2.14***     Note and Warrant Purchase Agreement, dated as of December 18, 2002

4.2.15***     Form of Convertible Promissory Note, dated December 18, 2002

4.2.16***     Form of Common Stock Purchase Warrant, dated December 18, 2002

99.6          Certification of Michael O'Donnell, Chief Executive Officer and
              President of the Registrant pursuant to 18 U.S.C.ss. 1350, as
              adopted pursuant to the Sarbanes-Oxley Act of 2002

99.7          Certification of Robert O'Callahan, Chief Financial Officer of the
              Registrant pursuant to 18 U.S.C.ss. 1350, as adopted pursuant to
              the Sarbanes-Oxley Act of 2002

99.8**        Press release dated November 20, 2002


*   Incorporated by reference to the exhibit filed with the Registrant's Current
    Report on Form 8-K filed on October 15, 2002

**  Incorporated by reference to the exhibit filed with the Registrant's Current
    Report on Form 8-K filed on December 2, 2002

*** Incorporated by reference to the exhibit filed with the Registrant's Current
    Report on Form 8-K filed on December 31, 2002


(B) REPORTS ON FORM 8-K.

     On October 15, 2002 Salon filed a Current Report on Form 8-K under Item 5
announcing the sale of unsecured promissory notes for which it received gross
proceeds of $200,000 in cash.

                                       34
<PAGE>

     On December 2, 2002 Salon filed a Current Report on Form 8-K under Item 5
announcing that Salon's common stock began trading in the Over-The-Counter (OTC)
Bulletin Board effective November 21, 2002.

     On December 31, 2002 Salon filed a Current Report on Form 8-K under Item 5
announcing the sale of a convertible promissory note and warrants for which it
received gross proceeds of $200,000 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: 2/14/03                      /s/ Michael O'Donnell
                                    -------------------------------------------
                                    Michael O'Donnell, Chief Executive Officer
                                      and President


Dated: 2/14/03                     /s/ Robert O'Callahan
                                   --------------------------------------------
                                   Robert O'Callahan, Chief Financial Officer,
                                     Treasurer and Secretary




                                       35
<PAGE>


I, Robert O'Callahan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Salon Media Group,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   Presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a)   All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: February 13, 2002

/s/ Robert O'Callahan
---------------------------
Robert O'Callahan
Chief Financial Officer,
Treasurer and Secretary

                                       36
<PAGE>

I, Michael O'Donnell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Salon Media Group,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   Presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a)   All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses. Date:
February 13, 2002


/s/ Michael O'Donnell
-----------------------------
Michael O'Donnell
Chief Executive Officer and President


                                       37