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

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

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

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2004

                                       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, 11TH FLOOR
                             SAN FRANCISCO, CA 94103
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

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

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

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

                                      NONE

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.  [_]

Indicate by check mark whether the registrant is an accelerated filer as defined
in Rule 12b-2 of the Act.  Yes [_] No [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the closing sale price of the registrant's common stock on
September 30, 2003 was approximately $500,000. Shares of common stock held by
each then current executive officer and director and by each person who is known
by the registrant to own 5% or more of the outstanding common stock have been
excluded from this computation in that such persons may be deemed to have been
affiliates of Salon. This determination of affiliate status is not a conclusive
determination for other purposes.

The number of outstanding shares of the Registrant's Common Stock, par value
$0.001 per share, on June 21, 2004 was 14,155,276 shares.

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<PAGE>

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FORM 10-K
SALON MEDIA GROUP, INC.
INDEX
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                                                                           PAGE
PART I                                                                    NUMBER

ITEM 1.   Business........................................................   4

ITEM 2.   Properties......................................................  12

ITEM 3.   Legal Proceedings................................................ 12

ITEM 4.   Submission of Matters to a Vote of Security Holders.............. 12

PART II

ITEM 5.   Market for Registrant's Common Equity and Related
           Stockholder Matters............................................. 13

ITEM 6.   Selected Consolidated Financial Data............................. 14

ITEM 7.   Management's Discussion and Analysis of Financial Condition
           and Result of Operations........................................ 16

ITEM 7A.  Quantitative and Qualitative Disclosures about Market Risk....... 37

ITEM 8.   Consolidated Financial Statements and Supplementary Data......... 38

ITEM 9.   Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosures....................................... 68

ITEM 9A.  Controls and Procedures.......................................... 68

PART III

ITEM 10.  Directors and Executive Officers of the Registrant............... 69

ITEM 11.  Executive Compensation........................................... 73

ITEM 12.  Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters...................... 75

ITEM 13.  Certain Relationships and Related Transactions................... 84

ITEM 14.  Principal Accountant Fees and Services........................... 86

PART IV

ITEM 15.  Exhibits, Financial Statement Schedules and Reports on
           Form 8-K........................................................ 86

SIGNATURES................................................................. 94


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FORM 10-K
SALON MEDIA GROUP, INC.
INDEX - (CONTINUED)
--------------------------------------------------------------------------------

Consent of Independent Registered Public Accounting Firms.................... 96































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PART I

     This report contains "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, non-web opportunities and revenue
sources. Although Salon Media Group, Inc. (Salon) believes its plans, intentions
and expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such plans, intentions or expectations will be
achieved. 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 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 Condition and
Result of Operations" and "Factors That May Affect Salon's 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.


ITEM 1. BUSINESS

OVERVIEW

     Salon Media Group, Inc. is an Internet media company. 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 was originally incorporated in July 1995 in the state of California
and reincorporated in Delaware in June 1999. On June 22, 1999, Salon had its
initial public offering, with its common stock quoted on the NASDAQ National
Market under the symbol SALN. Effective May 16, 2001, Salon adopted the name
Salon Media Group, Inc. Due to Salon's inability to meet the continued listing
requirements of the NASDAQ Market, on November 21, 2002, Salon's common stock
began trading in the OTC (Over-The-Counter) Bulletin Board marketplace under the
symbol SALN.OB.

WEBSITE CONTENT AREAS

     The main entry and navigation point to Salon's eight primary
subject-specific sections is Salon's home page at www.salon.com. Salon's content
provides a regularly updated array of news, features,

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interviews and regular columnists and include the following:

News & Politics                     Salon News & Politics features breaking
                                    stories,  investigative  journalism and
                                    commentary, as well as interviews with
                                    newsmakers, politicians and pundits.

Opinion                             Provocative commentary on timely issues,
                                    including regular columns by Sidney
                                    Blumenthal and Joe Conason. In addition,
                                    author and broadcaster Arianna Huffington
                                    contributes regularly to the Website.

Technology                          & Business Smart, opinionated coverage of
                                    Internet news and digital culture from
                                    today's best technology writers, along with
                                    in-depth features about the business world
                                    and the economy. Featuring Patrick Smith's
                                    regular Ask the Pilot column.

Arts                                & Entertainment Arts & Entertainment
                                    features movie, music and television reviews
                                    and interviews. The section includes
                                    frequent television features; extended film
                                    coverage including actor and director
                                    interviews.

Life                                Life features articles by thought-provoking
                                    writers about family life, motherhood and
                                    women's lives and issues. Cary Tennis'
                                    popular advice column, Since You Asked,
                                    appears daily.

Books                               Books include ahead-of-the-curve daily book
                                    reviews and interviews with today's most
                                    interesting writers.

Comics                              The Comics section features the works of
                                    comic luminaries Tom Tomorrow, Ruben
                                    Bolling, Carol Lay and Keith Knight.

Salon Audio                         Salon Audio offers hundreds of free
                                    recordings of short stories, novel excerpts,
                                    poems, essays, and interviews.


     Salon has two online subscription communities, The Well and Table Talk,
which allow users to discuss Salon content and interact with other users. The
Well is a member-only discussion community in which members use their real names
to post and only members can view the postings. Table Talk is available for all
Internet users to read, but only subscribers may post. The two online
communities had a total of approximately 3,900 paying subscribers as of March
31, 2004.

     Salon believes that its original, award-winning content allows Salon to
attract and retain users who are more affluent, better educated and more likely
to make online purchases than typical Internet users. Salon believes its user
profile makes its Website a valuable media property for advertisers and
retailers who are allocating marketing resources to target consumers online. Web
awards that Salon has won since 2000 include:

2004

David Talbot, Salon's Chairman and CEO received Carr Van Anda Award for
"Outstanding Journalist"
"Outstanding Digital Journalism Article" - GLAAD

2003

"Top 100 Classics - News and Entertainment Categories" - PC Magazine
"Feature Journalism - Independent" - Online Journalism Awards

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2002

"Best 50 Websites" - Time Magazine
"Best Print and Zine" - Webby Awards
"Best of the Web - Book Clubs" - Forbes
"Outstanding Digital Journalism Overall Coverage" - GLAAD

2001

"Best Online Magazine" - Yahoo Internet Life
"Best Independent Enterprise Journalism" - Online Journalism Awards
"Top 100 Websites" - PC Magazine

2000

"General Excellence in Online Journalism Original to the Web" - Online
Journalism Awards
"Enterprise Journalism Original to the Web" - Online Journalism Awards
"Best Technology Website" and "Best Parenting Website" - Forbes


TRAFFIC AND DEMOGRAPHICS


     The number of unique visitors to a Website is used as a measure of it
vitality and popularity. Salon analyzes its server log files to determine this
metric. As defined by Salon, a unique visitor is an individual (non-duplicated)
visitor to its Website. Unique visitors during the years ending March 31, 2002
and March 31, 2001 ranged from 3.5-3.8 million per month. During the year ending
March 31, 2003, Salon began to restrict access to its content, thereby
suppressing unique visitors, which for the last six months of 2003 ranged from
2.6-3.0 million per month. The busy news cycle due to the war in Iraq and the
2004 presidential campaign has boosted the number of unique visitors to Salon,
which increased to 2.7-3.2 million during the last six months of the fiscal year
and averaged 3.1 million during the last quarter of the fiscal year ending March
31, 2004.

     Salon believes its viewers are attractive to advertisers and brand
campaigns. According to Spring 2004 results from @Plan, an independent
syndicated research firm, Salon's user base has the following characteristics:
(a) 58% are between the ages of 25 and 49, with an overall mean average of 41;
(b) an average household income of $80,500; (c) 74% have earned a college degree
and 43% have earned a post-graduate degree; (d) 44% have professional or
managerial positions; (e) 98% shop online; and (f) 77% are online every day.


INTERNET ADVERTISING

     Internet companies such as Salon, provide platforms or advertising units
for companies to advertise their goods and services. Advertising units initially
consisted of 468x60 pixel banners, which for Salon resided at the top of any
given Website page and 125x125 pixel buttons. Companies such as Salon typically
sell these advertising units to advertisers based on a guaranteed number of
Website page views by a Website visitor. As this medium has matured, advertisers
have demanded improved advertising units to deliver their messages to potential
customers. Salon and other companies responded by increasing the mix of
advertisement unit sizes to include, among other sizes, 336x280 pixel rectangles
and 728x90 pixel leader boards, with the later supplanting the original 468x60
pixel banner. The 728x90 pixel leader board is the number one advertising unit
approved by the Interactive Advertising Bureau (IAB) and sold by Salon as of
March 31, 2004, followed by 336x280 pixel rectangles. For the industry as a
whole, according to online advertising industry leader DoubleClick, the 728x90
pixel leader board is

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now the number one selling advertising unit, experiencing a 900% growth from
2002 to 2003, while the 468x60 pixel banner experienced a 13% decline during the
same time period.

     During 2002, Salon began to offer advertisers an ability to present "rich
media" dynamic advertisements, defined as non-static images, which was sold at a
premium to other advertising units. In January 2003, Salon began to restrict
access to its content solely to Salon Premium subscribers, with access allowed
to non-subscribers willing to watch a rich media "Access Pass" advertisement. In
May 2003, Salon expanded its Access Pass advertisement to include advertisements
triggered before a non Salon Premium subscriber reached Salon's home page at
www.salon.com. After watching the advertisement, which lasts up to approximately
one minute, the individual is then granted the ability to view all of Salon's
content. This strategy has enabled Salon to bundle in its orders the sale of
traditional banner and leader board advertising units, and Access Pass rich
media advertisements, increasing overall advertising revenues. During the year
ended March 31, 2004, approximately 47% of Salon's overall advertising revenues
resulted from offering Access Pass advertisements.

     According to a survey conducted by PricewaterhouseCoopers and sponsored by
the IAB, revenues from Internet advertising was approximately $7.27 billion
during calendar year 2003 versus $6.01 billion during calendar year 2002, a 21%
increase. However, the study indicated that approximately 95% of advertising was
garnered by the top fifty ad-selling companies. The study therefore implies that
Salon competed for approximately $300-$400 million of advertising dollars with
all the other ad-selling Websites. Salon's ability to capitalize significantly
on this portion of the market was hampered by its financial viability as
perceived by potential advertisers, and its low number of unique Website
visitors, as advertisers on average tend to seek Websites with a minimum ten
million monthly unique Website visitors versus approximately three million for
Salon. As a result of these factors, Salon's advertising revenues for the year
ended March 31, 2004 increased by approximately $0.1 million to $1.8 million as
compared to the year ended March 31, 2003.

     Overall, Internet advertising during calendar year 2003 was estimated to
comprise only 3% of the total dollars spent for advertising, compared to
approximately 2.5% during calendar year 2002. It is estimated by eMarketer that
calendar year 2004 Internet advertising will be approximately $8.4 billion,
which considering that approximately 95% of the advertising market will go
towards the top fifty Websites, will leave approximately $400-$500 million
available for companies such as Salon.

PAY FOR ONLINE CONTENT

     When activity first surged on the Internet, access to content was rarely
restricted and was available free of charge. A few Websites, notably the Wall
Street Journal's online edition, realized that to be profitable, they had to
charge for access to content. This initiative was originally viewed with
skepticism by other Internet media companies, but is now more widely adopted.
The Online Publishers Association (OPA) has reported, based on a study conducted
in partnership with comScore Networks, that U.S. consumers spent $1.56 billion
for online content during calendar year 2003, compared to $1.31 billion in
calendar year 2002. The 18.8% increase year over year was attributable to a
greater number of consumers purchasing content and not additional dollars spent
per consumer. Even though the average price for an annual online subscription of
$48.65 was relatively unchanged from the previous calendar year, Salon increased
its annual subscription fee to Salon Premium with no advertising from $30 to $35
and increased its annual subscription with ads from $18.50 to $22.50 in August
2003. The largest three categories, personals/dating, business/investment and
entertainment/lifestyle, accounted for 64% of all spending for content. The
general news category, which includes Salon, reportedly generated a total of
$87.5 million in subscription revenues during calendar year 2003, or
approximately 5.6% of all online content spending, compared to $70 million
during calendar year 2002. Salon's niche in this category is its independence
and award winning content.

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REVENUE SOURCES

     Salon's primary revenue sources are from advertising, and subscriptions to
Salon Premium and The Well/Table Talk.

     Advertising revenues are derived from the sale of promotional space on
Salon's Website. Traditionally, this was the major source of revenue for Salon.
With the introduction of the Salon Premium subscription service in April 2001,
the dependency on advertising revenues diminished. Advertising as a percentage
of all revenues has decreased from 54% for the year ended March 31, 2002 to 42%
for the year ended March 31, 2003 to 39% for the year ended March 31, 2004.
During the first quarter of the year ending March 31, 2005, Salon has
experienced resurgence in advertising sales, while subscriptions to Salon
Premium have reached a plateau of approximately 72,000 active subscribers. Salon
cannot estimate if this trend will continue for the remainder its year ending
March 31, 2005.

     Most of the advertising campaigns are short duration, generally less than
ninety days. Salon's obligations typically include the guarantee of a minimum
number of impressions, or views of an advertisement by a Website visitor, a set
number of "Access Pass" advertisement downloads by a Website visitor, or a set
number of days that an Access Pass advertisement will be run. To the extent the
minimum guaranteed amounts are not provided, Salon defers recognition of the
corresponding revenue until the remaining guaranteed amounts are achieved, if
mutually agreeable with an advertiser. If these "make good" amounts are not
agreeable to an advertiser, no further revenue is recognized. No customer
accounted for over ten percent of either total revenue or advertising revenue
for the years ended March 31, 2004 or March 31, 2003. One customer, Lexus,
accounted for 13% of advertising revenue and 8% of total revenue for the year
ended March 31, 2002.

     Salon began offering Salon Premium, a pay for online content subscription
service, in April 2001. Subscription durations were originally for one-month,
one-year and two-years, with the two-year subscription plan being suspended in
November 2002. Initially, some content was restricted to Salon Premium
subscribers only. In January 2003, Salon modified its business model by granting
"Access Passes," which allows access to substantially all of Salon's content to
non Salon Premium subscribers willing to view some form of advertisement. The
annual subscription rate for Salon Premium with no ads, the primary plan offered
by Salon and originally priced at $30, was increased in August 2003 to $35, with
no detrimental effects on subscriptions. Benefits of Salon Premium include the
option to view Salon content without advertising banners, pop-ups or other forms
of advertisements; the ability to easily download content in text or PDF format,
a convenience that enables readers to view additional Salon articles when not
connected to the Internet; access to certain Premium-only events; membership to
Table Talk; and free of charge print magazines.

     Salon Premium revenue is recognized ratably over the period that services
are provided. During the year ended March 31, 2004, Salon received $1.9 million
in cash and recognized $1.8 million of revenue for this service from
approximately 76,000 new and renewal subscription sales. For the year ended
March 31, 2003, Salon received $1.6 million in cash and recognized $1.3 million
of revenue for this service from approximately 70,000 new and renewal
subscription sales. For the year ended March 31, 2002, in which Salon Premium
operated for approximately eleven months, Salon received $1.1 million in cash
and recognized $0.6 million of revenue from approximately 35,000 subscription
sales. Salon had approximately 72,000 active subscribers and a renewal rate for
purchased subscriptions of 64 percent as of March 31, 2004.

     Salon offers The Well and Table Talk monthly subscription services, for
access to on-line discussion forums. Revenue is recognized ratably over the
subscription period. The revenues recognized

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and the cash received of $0.6 million has stayed constant for the years ended
March 31, 2004, March 31, 2003 and March 31, 2002.

     Salon generates nominal revenue from the licensing of content that
previously appeared in Salon and for providing links to a third party's Website.
The third party offers a personals/dating services.

SALES AND MARKETING

     Salon has sales offices in New York City and San Francisco with six active
advertising sales employees as of March 31, 2004, down from seven employees as
of March 31, 2003. Salon has an employee engaged in marketing and another in
Salon Premium customer support at its San Francisco office.

     During the year ended March 31, 2004, Salon incurred $1.1 million in
advertising costs to promote and attract viewers to its Website, compared to
$0.8 million for the year ended March 31, 2003 and $0.7 million for the year
ended March 31, 2002. The advertising costs of $1.1 million for the year ended
March 31, 2004 were primarily non-cash advertising credits, which resulted from
an investment in Salon by Rainbow Media Holdings in the form of prepaid
advertising rights that provides advertising in various television networks
without the use of cash. Advertising costs for the years ended March 31, 2003
and March 31, 2002 include the usage of approximately $0.8 million of such
non-cash advertising credits.

     During the year ended March 31, 2003, Rainbow Media Holdings transferred a
portion of its obligation to provide Salon with advertising credits to NBC's
Bravo channel, while still retaining a portion of the overall obligation. The
transfer occurred due to the sale by Cablevision, which owns Rainbow Media
Holdings, of its Bravo channel to NBC.

COMPETITION

     Salon competes for advertising revenues from a multitude of Internet
Websites, with the 50 largest Websites attracting an estimated 95% of all the
advertising dollars. The Websites include major portals such as Yahoo.com, major
search engines such as Google and major online media publications such as
CNN.com.

     Salon believes it has no competitors for its pay for online content, or
Salon Premium subscription plan. Even though some Websites such as
CBCMarketWatch.com and the Wall Street Journal Online edition have online
subscription plans, they do not provide general interest news and information,
as does Salon. Salon's pricing for its annual subscription of $35 without
advertisements is under the 2003 average of approximately $49 as reported by the
OPA, which Salon feels allows it to compete for subscription dollars. Salon
believes that its award winning content and independence attract individuals to
Salon's Website, and to ultimately subscribe to its Salon Premium pay for online
content service.

SALON'S STRATEGY

INCREASING CIRCULATION

     Salon has limited cash resources to market its Website in order to increase
circulation. However, Salon does have unique, compelling and highly acclaimed
editorial content desirable by other media properties. Salon has undertaken
various media partnerships that strive to expand its reach. Salon has entered
into an editorial partnership with Rolling Stone Magazine, whereby Rolling Stone
and Salon collaborate on special reports that are published in Rolling Stone
Magazine. Salon's first special report,

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entitled "Bush's War on Gay Marriage" was published in the March 18, 2004
edition of Rolling Stone, and several additional stories are planned during the
2004 Presidential election campaign. In March 2004, Salon entered into a
six-month editorial exchange relationship with The Guardian of London newspaper
whereby both companies are to exchange up to three stories daily, with prominent
links to each other's respective Website. Also in March 2004, Salon entered an
agreement with Air America, a network of radio stations currently in
approximately 15 major US cities, to broadcast a "Salon story of the Day " as
part of its daily news offering. Even though activity with The Guardian and Air
America was minimal through March 31, 2004, it is hoped that these agreements
with print publications and radio will increase Salon's visibility and
ultimately increase circulation.

     Salon has also initiated a strategy to increase circulation by making
content available to advocacy groups that want to send Salon articles directly
to their members. For example, in March 2004, Moveon.org sent a Salon story,
Karen Kwiatkowski's "The New Pentagon Papers," directly to members on its e-mail
list. This initial e-mailing by Moveon.org, was followed up later again in March
2004 and in April 2004 to links to Salon stories. Salon will continue to make
editorial available to advocacy groups to distribute to their members, and hopes
this will expose it to a pool of new users who will become regular visitors of
the Website.

     In order to increase the number of unique visitors to its Website, and
therefore become more attractive to advertisers, Salon is exploring
collaboration and/or distribution agreements with a major Internet site. Even
though Salon is in discussions to further this goal, prior efforts, such as with
AOL approximately a year ago, have not resulted in noticeable increases in
circulation, if at all.

CONTINUE TO ESTABLISH INNOVATIVE ADVERTISING PROGRAMS

     In January 2003, Salon began to enable those readers who were not Salon
Premium subscribers' to access all new content if they were willing to view some
form of rich media advertising "Access Pass." Performance matrices for the
Access Pass have exceeded IAB banner standard performances, and therefore Salon
has been able to charge a premium for this ad unit. The new format results in a
Website visitor interacting with an advertisement for approximately one minute
and in return is given a pass to access Salon's Website for 8 hours. Salon's
strategy is to continue to promote the benefits of this new ad format, and
experiment with new technology to increase non-banner advertising inventory.

EXPAND SUBSCRIPTION-BASED REVENUES

     In January 2003, Salon began to "gate" all content and require a user
either to view an advertisement, or to become a Salon Premium subscriber. To
further entice Website visitors to join Salon Premium, Salon offers free
promotions, such as magazine subscriptions to "U.S. News and World Report" and
"Wired," which it continuously updates and expands. In addition, Salon
occasionally offers potential new subscribers free DVDs and books. The
respective publishers provide the offering of magazines, books and DVDs free to
Salon in return for promotion of the product by Salon.

     Salon has also offered Premium memberships to advocacy groups to bundle in
with their membership or fundraising drives. NARAL Pro-Choice America has
bundled a Salon Premium subscription to donors who contribute $35 or more to
NARAL. Human Rights Campaign also has bundled in Salon Premium subscriptions for
new members who subscribe at a minimum $35 annual fee. In both programs, Salon
receives $3.50 per person. Even though the revenues generated from such programs
have been minimal as of this filing, Salon hopes that similar programs will
attract additional visitors to its Website and make more individuals aware of
Salon.

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     Salon has begun to implement technology to track user behavior and
customize messaging based on the information gathered. Special messaging, via
pop-ups to frequent users, has been implemented, as well as customized messaging
for lapsed members. Tracking and messaging actions are geared towards increasing
Salon Premium subscriptions, and to improve the 64 percent renewal rate for
purchased subscriptions that Salon has experienced through March 31, 2004.

     In order to increase Salon Premium revenue, Salon has entered into two
agreements in which third parties will aggregate Salon's content with other
content providers to be distributed through telephone companies, ISPs and cable
companies. The combined content is to be sold to individuals for a monthly
charge, and Salon will get a remit for each new subscriber. One of the third
parties initiated a private labeled Web subscription service in May 2004 for a
small independent telephone company that will market the bundled subscription
service to its telephone, cable and ISP customers. It is uncertain when the
other third party will initiate its service. Salon is unable to predict how
successful this strategy will be.

INFRASTRUCTURE AND OPERATIONS

     Salon has created a flexible publishing structure that enables it to
develop its content while responding quickly to news events and taking advantage
of the ease of distribution provided by the Internet. Salon content is developed
on its proprietary software platform and captured in a database for reuse in web
and other formats. The system allows Salon content to be easily redistributed to
other Websites, newspapers, magazines, and electronic devices.

     Salon's Website is supported by a variety of servers using the Solaris and
Linux operating systems. Salon's top technical priority is the fast delivery of
pages to its users. Salon's systems are designed to handle traffic growth by
balancing the amount of traffic among multiple servers. Salon relies on server
redundancy to help achieve its goal of 24 hour, seven-day-a-week Website
availability. Regular automated backups protect the integrity of Salon data.
Salon servers are maintained by a third-party facility that provides bandwidth
on demand to meet the fluctuating needs of Salons network. The third party
offers high-speed connections to the Internet, helping ensure fast serving and
delivery of Salon's Website, and monitors all servers via human or technical
means on a continuous basis. Salon follows password management procedures to
protect access to its servers. Uninterruptible power supplies for protection
against power outages support all of Salon's servers.

     Software to maintain and manage Salon Premium was created in-house. In May
2003, Salon re-developed and re-deployed its subscription sign-up system in
order to improve customer experience and level of customer support, and to
increase the flexibility of service offerings. During the year ended March 31,
2003, account and subscription management systems were re-engineered in order to
apply additional control mechanisms and to improve the level of performance
reporting related to the subscription service offering.

PROPRIETARY RIGHTS

     Salon's success and ability to compete is dependent in part on the goodwill
associated with its trademarks, trade names, service marks and other proprietary
rights and on its ability to use U.S. laws to protect its intellectual property,
including its original content, content provided by third parties, and content
provided by columnists. Salon also claims common law protection on certain names
and marks that it has used in connection with business activities.

     Salon owns the Internet address WWW.SALON.COM. Because WWW.SALON.COM is the
address of the main home page to Salon's Website and incorporates Salon's
company name, it is a vital part of Salon's

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intellectual property assets. Salon does not have a registered trademark on the
address, and therefore it may be difficult for Salon to prevent a third party
from infringing its intellectual property rights in the address.

EMPLOYEES

     As of March 31, 2004, Salon had 6 part-time and 49 full-time employees.
Salon believes its employee relations are good. None of Salon's employees are
represented by a labor union or are subject to a collective bargaining
agreement. Salon's future success is highly dependent on the ability to attract,
hire, retain and motivate qualified personnel.

ITEM 2. PROPERTIES

     As of March 31, 2004, Salon leases the 11th floor at 22 Fourth Street, San
Francisco, California, representing approximately 10,500 square feet of office
space at approximately $21,000 per month, with the lease expiring in February
2005.

     Salon leases approximately 7,000 square feet of space at 126 Fifth Avenue,
New York, New York. The rent for this space is approximately $19,000 per month,
with the lease expiring in December 2004. Salon has subleased these premises
since April 2003, with approximately $13,000 per month being paid directly to
the lessor from the sub-lessee for the duration of the original lease.

     Salon leases nominal office space at 41 East 11th Street, 11th Floor, New
York, NY for approximately $9,000 per month with the lease terminating on May
31, 2004. Subsequent to March 31, 2004, Salon amended the lease for an
additional twelve-month period for approximately $10,000 per month.

     Subsequent to March 31, 2004, Salon entered into a lease agreement for
minimal office space in Washington, DC. for three years commencing on June 1,
2004 for approximately $1,600 per month.

ITEM 3. LEGAL PROCEEDINGS

     Salon is not a party to any pending legal proceedings that it believes will
materially affect its financial condition or results of operations.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 2004.




                                       12
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS

     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

     Information with respect to the quarterly high and low bid prices for
Salon's common stock for its fiscal years 2004 and 2003, based on sales
transactions reported by NASDAQ through November 20, 2002 and in the OTC
(Over-The-Counter) Bulletin Board after November 20, 2002, is provided below:


                                  FISCAL YEAR ENDED          FISCAL YEAR ENDED
                                   MARCH 31, 2004             MARCH 31, 2003
                                ---------------------      ---------------------
FOR THE QUARTERS ENDED             HIGH        LOW            HIGH       LOW
                                ---------- ----------      ---------- ----------
        June 30                    0.08       0.04            0.17       0.02
        September 30               0.10       0.02            0.14       0.04
        December 31                0.07       0.03            0.09       0.01
        March 31                   0.40       0.03            0.08       0.04


     There were 247 holders of record of Salon common stock as of June 21, 2004.
This number was derived from Salon's stockholder records, and does not include
beneficial owners of Salon's voting common stock whose shares are held in the
names of various dealers, clearing agencies, banks, brokers, and other
fiduciaries. The closing price of Salon's common stock on June 21, 2004 was
$0.14 per share

     Salon has never declared or paid any cash dividends on its capital stock
and does not expect to pay any cash dividends in the foreseeable future.













                                       13
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE><CAPTION>
                                                                        Dollar amounts in thousands, except per share
                                                            -------------------------------------------------------------------
Year Ended March 31,                                          2004           2003           2002           2001           2000
----------------------------------------------------        -------        -------        -------        -------        -------
<S>                                                         <C>            <C>            <C>            <C>            <C>
Net revenues                                                $ 4,499        $ 4,003        $ 3,619        $ 7,202        $ 8,002
Net loss (1)                                                $ 6,046        $ 5,597        $ 8,000        $19,155        $21,890
Net loss attributable to common
       stockholders (2)                                     $ 8,661        $ 5,678        $11,286        $19,155        $33,405
Basic and diluted net loss per share attributable to
common stockholders                                         $  0.61        $  0.41        $  0.83        $  1.48        $  3.63
Weighted average common shares
       outstanding used in computing
       per share amounts                                     14,099         13,938         13,547         12,962          9,204
Cash and cash equivalents                                   $   696        $   162        $ 1,542        $ 3,047        $17,982
Prepaid advertising rights                                  $ 4,430        $ 5,480        $ 6,266        $ 7,075        $ 7,884
Total assets (3)                                            $ 6,270        $ 7,590        $11,342        $16,298        $35,284
Capital leases - long-term portion                          $  --          $    18        $    77        $   325        $   324
Total long-term liabilities (4)                             $ 2,621        $   569        $   229        $   601        $   473
</TABLE>



(1) The net loss for the year ended March 31, 2003 includes write-down of
long-lived assets of $345 related to certain leasehold improvements. The net
loss for the year ended March 31, 2002 includes a write-down of long-lived
assets of $782 due to impairments. The net loss for the year ended March 31,
2001 includes a write-down of long-lived assets of $3,517 due to impairments.

(2) The net loss attributable to common stockholders for fiscal year ended March
31, 2004 includes a preferred deemed dividend of $2,615 that included $2,040
resulting from the difference between the offering price of Salon's Series C
preferred stock and warrants sold in February 2004 and the deemed fair value of
Salon's common stock on the date of the transaction and $575 from the change in
value during the year ended March 31, 2004 of warrants issued to preferred
stockholders. The net loss attributable to common stockholders for fiscal year
ended March 31, 2002 includes a preferred deemed dividend of $3,189 which was
the difference between the offering price of Salon's Series A preferred stock
sold in August and September 2001 and the deemed fair value of Salon's common
stock on the date of the transaction. The net loss attributable to common
stockholders for fiscal year ended March 31, 2000 includes a preferred deemed
dividend of $11,515 that was the difference between the offering price of
Salon's then Series C preferred stock sold in April 1999 and the deemed fair
value of Salon's common stock on the date of the transaction.

(3) Amounts for the years ended March 31, 2000 and 2001 reflect adoption of
Emerging Issues Task Force Issue 00-18, "Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees" for
that year.

(4) Salon's charter allows for the issuance of 50,000,000 shares of common
stock. Since the year ended March 31, 2003, Salon has had an insufficient number
of authorized shares to satisfy all obligations

                                       14
<PAGE>

under convertible instruments, warrant agreements and options. Therefore, since
that time, the value of warrants issued is classified as a long-term liability,
with the fair value re-measured at each balance sheet period. The valuation of
warrants will continue until such time as Salon has amended its Certificate of
Incorporation and upon receiving the requisite approval of Salon's Board of
Directors and stockholders to increase the number of authorized common stock.
The March 31, 2004 balance of $2,621 represents such value and $354 was the
value of the warrants as of March 31, 2003.




























                                       15
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS

OVERVIEW

     Salon Media Group, Inc. is an Internet media company that produces a
content Website with eight primary sections, and two online communities - The
Well and Table Talk. Salon was incorporated in July 1995 and launched its
initial Website in November 1995.

     A significant portion of Salon's revenues is advertising revenues, derived
from the sale of promotional space on its Website. The sale of promotional space
is generally less than ninety days in duration. Advertising platforms sold
included "rich media" streaming advertisements, as well as traditional banner
and pop-up advertisements.

     Salon began offering Salon Premium, a pay for online content subscription
service, in April 2001. Subscription durations were originally for one-month,
one-year and two-years, with the two-year subscription plan being suspended in
November 2002. Initially, some unabridged content on Salon's Website was
restricted to only Salon Premium subscribers. In January 2003, Salon modified
its restrictions to allow access to substantially all of its content to Salon
Premium subscribers or to non Salon Premium subscribers willing to view some
form of advertisement by granting this pool of individuals an "Access Pass."
Salon Premium revenue is recognized ratably over the period that services are
provided. During the year ended March 31, 2004, Salon received $1.9 million in
cash and recognized $1.8 million of revenue for this service.

     Salon offers The Well and Table Talk, monthly subscription services, for
access to on-line discussion forums. Revenue is recognized ratably over the
subscription period. Salon generates nominal revenue from the licensing of
content that previously appeared in Salon's Website and for hosting links to a
third party's personals/dating Website.

     Production and content expenses consist primarily of salaries and related
expenses for Salon's editorial, artistic, audio and production staffs, online
communities staff, payments to freelance writers and artists, and
telecommunications and computer related expenses for the support and delivery of
Salon's Website and online communities.

     Sales and marketing expenses consist primarily of salaries, commissions and
related personnel costs, travel, and other costs associated with Salon's sales
force, as well as advertising, promotional and distribution costs and the
amortization of prepaid advertising rights.

     Research and development expenses consist primarily of salaries and related
personnel costs associated with the development, testing and enhancement of
Salon's software to manage its Website, and to maintain and enhance the software
utilized in managing Salon Premium, as well as supporting marketing and sales
efforts.

     During the year ended March 31, 2001, Salon capitalized $0.7 million of
costs related to enhancing Salon's Website management software. During the year
ended March 31, 2002 Salon discontinued all direct efforts to market and sell
this software to focus on its core content, production and maintenance business.
Accordingly, Salon determined that this asset was impaired and recorded an
impairment charge of $0.7 million. Prior to June 2000, Salon expensed all costs
related to enhancing its Website, and since then, has not incurred any material
costs for enhancement or to add substantial additional functionality on its
Website.

                                       16
<PAGE>

     General and administrative expenses consist primarily of salaries and
related personnel costs, accounting and legal fees, and other fees associated
with operating a publicly traded company.

     Salon has incurred significant net losses and negative cash flows from
operations since its inception. As of March 31, 2004, Salon had an accumulated
deficit of $90.9 million. These losses have been funded primarily through the
issuance of common stock from Salon's initial public offering in June 1999,
issuance of preferred stock, and from the issuance of convertible notes payable.
Salon believes that it will incur negative cash flows from operations for the
year ending March 31, 2005.

     Salon has not recorded a provision for federal or state income taxes for
any period since inception due to reoccurring operating losses. At March 31,
2004 Salon had net operating loss carryforwards for federal income tax purposes
of $61.3 million and $31.1 million for California, that begin to expire in the
years March 31, 2006 through March 31, 2014. Utilization of Salon's net
operating loss carryforwards may be subject to a substantial annual limitation
due to ownership change limitations provided by the Internal Revenue Code and
similar California state provisions. Such an annual limitation could result in
the expiration of the net operating loss carryforwards before utilization. A
valuation allowance has been established and, accordingly, no benefit has been
recognized for such operating losses and other deferred tax assets. The net
valuation allowance increased $1.5 million during the year ended March 31, 2004
to $24.2 million. Salon believes that, based on a number of factors, the
availability of objective evidence creates sufficient uncertainty regarding the
realization of the deferred tax assets such that a full valuation allowance has
been recorded. These factors include Salon's history of net losses since
inception and expected near-term future losses.

CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires Salon to utilize accounting policies and
make estimates and assumptions that affect our reported amounts. Salon's
significant accounting policies are described in Note 2 to the consolidated
financial statements. Salon believes accounting policies and estimates related
to revenue recognition and prepaid advertising rights are the most critical to
Salon's financial statements. Future results may differ from current estimates,
assumptions or change in conditions.

REVENUE RECOGNITION

     Salon recognizes revenues once persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable and
collectibility is reasonably assured. Revenues are recognized ratably in the
period over which Salon's obligations are fulfilled. Payments received before
Salon's obligations are fulfilled are classified as "Deferred revenue" in
Salon's consolidated balance sheet.

     Advertising revenues, derived from the sale of promotional space on its
Website, comprised 39% of Salon's revenues for the year ended March 31, 2004.
The duration of the advertisements are generally short term, usually less than
ninety days. Revenues derived from such arrangements are recognized during the
period the advertising space is provided. Salon's obligations typically include
the guarantee of a minimum number of impressions, a set number of "Access Pass"
advertisement downloads, or a set number of days that an Access Pass
advertisement will run. To the extent minimum guaranteed amounts are not
provided for, Salon defers recognition of the corresponding revenue until the
remaining guaranteed amounts are achieved, if mutually agreeable with an
advertiser. If these "make good" impressions are not agreeable to an advertiser,
no further revenue is recognized.

                                       17
<PAGE>

     Salon Premium, a pay for online content subscription service, provides
unrestricted access to Salon's content and the ability to easily download
content in text or PDF format, a convenience that enables readers to view
additional Salon articles when not connected to the Internet. Subscription
durations are primarily one-year. Non Salon Premium subscribers generally can
gain access to Salon's content after viewing some form of advertisement

     Salon offers The Well and Table Talk, monthly subscription services, for
access to on-line discussion forums. Revenue is recognized ratably over the
subscription period.

PREPAID ADVERTISING RIGHTS

     In December 1999, Salon sold 1,125,000 shares of common stock to Rainbow
Media Holdings and received $11.8 million of advertising credits that were to be
utilized for up to ten years. The credits were valued at $8.1 million, based on
the price of Salon's stock on the date the transaction was finalized. As of
March 31, 2004, Salon has $5.4 million advertising credits resulting from the
transaction, valued at $4.4 million.

RESULTS OF OPERATIONS

FISCAL YEARS ENDED MARCH 31, 2004 AND 2003

NET REVENUES

     Salon's net revenue increased 12% to $4.5 million in the year ended March
31, 2004 from $4.0 million in the fiscal year ended March 31, 2003.

     Advertising revenues increased 3% to $1.8 million for the year ended March
31, 2004 from $1.7 million for the year ended March 31, 2003. The modest
increase in advertising revenues generally reflects an acceptance by advertisers
of Salon's Access Pass advertisement format with rich media that results in a
more favorable advertising experience than traditional banner advertising.
Viewing Access Pass advertisements allow non Salon Premium subscribers access to
Salon's content. Overall, Salon was not able to capitalize on the 21% increase
in Internet advertising experienced in calendar year 2003 due to the relatively
small number of Website visitors that it generates and concerns of Salon's
financial viability.

     As advertising campaigns are normally short in duration and finalized
shortly before implementation, Salon cannot predict full year amounts. However,
Salon estimates that for its quarter ending June 30, 2004 advertising revenues
will be approximately $0.9-$1.0 million.

     Salon Premium and Well/Table Talk subscription revenues increased 28% to
$2.4 million for the year ended March 31, 2004 from $1.9 million for the year
ended March 31, 2003. The increase is attributable to revenues earned from
subscriptions to Salon Premium, which generated $1.8 million in revenue during
the year versus $1.3 million the prior year. Salon Premium revenues increased
from a growth in overall subscriptions, as new and renewed one-year paid
subscriptions for the year ended March 31, 2004 were approximately 63,600,
versus approximately 53,300 for the year ended March 31, 2003. However, the
number of active subscribers has stabilized at approximately 72,000 primarily
from a decline in the renewal rate. The approximate current renewal rate for
purchased subscriptions is 64% versus 71% last year. The decline is attributable
to the January 2003 decision to make all of Salon's content available to non
Salon Premium subscribers as long as a Website visitor were willing to view an
Access Pay advertisement. The easing of access to Salon's content removed a
major inducement for a

                                       18
<PAGE>

Website visitor to spend cash and subscribe to Salon Premium. However, Salon has
made up for this loss of cash by increasingly being able to sell more Access
Pass advertisement opportunities to advertisers. Salon does not anticipate the
number of subscriptions increasing at the same rate during its year ending March
31, 2005 as it during the year ended March 31, 2004 and estimates that it will
recognize Salon Premium revenues of approximately $2.0 for the year ending March
31, 2005.

     All other sources of revenue accounted for $0.3 million for the year ended
March 31, 2004 compared to $0.4 million for the year ended March 31, 2003. The
decrease of $0.1 million was primarily due to a decrease in the licensing of
content, as Salon did not actively pursue this weak market during the second
half of its year ended March 31, 2004.

PRODUCTION AND CONTENT

     Production and content expenses during the year ended March 31, 2004 was
$4.6 million versus $4.4 million for the year ended March 31, 2003, an increase
of $0.2 million or 5%. The increase reflects a credit during the year ended
March 31, 2003 of $0.2 million from the reversal of previously accrued bonuses
that were not going to be paid and a non cash charge this year of $0.2 million
related to the value of warrants issued for editorial collaboration with a print
publisher, offset by a $0.1 million reduction of Internet hosting costs and a
$0.1 million reduction in general operating costs. Salon does not anticipate
production and content cash related expenditures to vary significantly for the
year ending March 31, 2005 from the current year results.

SALES AND MARKETING EXPENSES

     Sales and marketing expenses during the year ended March 31, 2004 were $2.4
million versus $2.3 million for the year ended March 31, 2003, an increase of
$0.1 million or 4%. The minor overall increase reflects utilizing an additional
$0.3 million of advertising credits this year versus last year, offset by
reductions of $0.1 million in payroll related costs from the elimination three
positions during the year, and $0.1 million from reduced general operating
costs. Salon anticipates utilizing $0.5-$0.8 million of advertising credits
during the year ending March 31, 2005, with overall expenses of approximately
$1.6-$1.9 million.

RESEARCH AND DEVELOPMENT EXPENSES

     Research and development expenses for the years ended March 31, 2004 and
March 31, 2003 were $0.6 million. Salon does not anticipate research and
development expenditures to vary significantly for the year ending March 31,
2005 from the current year results.

GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses for the years ended March 31, 2004 and
March 31, 2003 were $1.4 million. While the March 31, 2003 results reflected a
credit from reversing a bonus accrual of $0.2 million and the March 31, 2004
results included a charge of $0.1 million related to the issuance of warrants to
a former employee, the March 31, 2004 results also include a $0.1 million
reduction in legal expenses from a reduction in matters requiring outside
counsel guidance and a $0.1 million reduction in general operating costs. Salon
estimates that general and administrative expenses will be approximately
$0.8-$1.0 million for the year ending March 31, 2005.

                                       19
<PAGE>

AMORTIZATION OF INTANGIBLES

     Amortization of intangible expenses during the years ended March 31, 2004
and March 31, 2003 were $0.4 million. As all intangible assets except for $0.2
million of goodwill have been amortized as of March 31, 2004, Salon does not
anticipate incurring any amortization of intangibles expenses for its year
ending March 31, 2005.

WRITE-DOWN OF LONG-LIVED ASSETS

     In 1999, Salon entered into a ten-year lease for two floors of office space
in San Francisco. In February 2001, Salon began to sublease one of the two
floors with the sublease agreement terminating during the year ended March 31,
2003. Salon determined that the office space previously subleased would not be
utilized or subleased, and as a consequence, wrote-down the value of the assets
associated with the office space by $0.3 million during the year ended March 31,
2003. No comparable charge was incurred during the year ended March 31, 2004.

INTEREST AND OTHER INCOME

     Interest and other income for the year ended March 31, 2004 is primarily
$0.1 million of realized income from monies received by Salon to finance
editorial content that was completed during the period. The nominal interest and
other income for the year ended March 31, 2003 was interest income from
certificates of deposit.

INTEREST AND OTHER EXPENSE

     Interest and other expense for the year ended March 31, 2004 was $1.3
million compared to $0.1 million for the year ended March 31, 2004. As Salon has
insufficient common stock authorized to satisfy all obligations under
convertible instruments, warrant agreements and options, Salon revalues its
warrants at each balance sheet period. The results for the year ended March 31,
2004 include a charge of $0.8 million related to the revaluation of warrants
held by convertible note holders. Salon contemplates securing Board of Directors
and stockholder approval by its third quarter of its year ending March 31, 2005
increasing the authorized number of common shares, which would cure such a
deficiency. If such approvals were to be received and the price of Salon's
common stock were to not fluctuate significantly from $0.14 per share, Salon
does not contemplate incurring such a charge to its results of operations for it
year ending March 31, 2005. The year ended March 31, 2004 results also include a
charge of $0.1 million of interest on convertible notes and $0.3 million related
to amortizing the initial value of warrants issued to the holders of the
convertible notes. Salon converted all outstanding convertible notes to
preferred stock on December 30, 2003 and as such does not contemplate incurring
similar charges on its results of operations for the year ending March 31, 2005.

     The results for the year ending March 31, 2004 also includes $0.1 million
of various other interest expense charges related to capital lease agreements
and a bank borrowing agreement. The $0.1 million charge for the year ending
March 31, 2003 includes nominal charges under capital leases, convertible note
interest and the value of warrants issued to convertible note holders.

PREFERRED DEEMED DIVIDEND

     The non-cash preferred deemed dividend of $2.6 million for the year ended
March 31, 2004 includes $2.0 million resulting from the difference between the
offering price of Salon's Series C preferred stock and warrants sold in February
2004 and the deemed fair value of Salon's common stock

                                       20
<PAGE>

on the date of the transaction and $0.6 million from the change in value during
the year ended March 31, 2004 of warrants issued to preferred stockholders.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

     As a result of the above factors, Salon recorded a net loss attributable to
common stockholders of $8.7 million or $0.61 per share for the fiscal year ended
March 31, 2004 compared to a net loss of $5.7 million or $0.41 per share for the
fiscal year ended March 31, 2002.


FISCAL YEARS ENDED MARCH 31, 2003 AND 2002

NET REVENUES

     Salon's net revenue increased 11% to $4.0 million in the year ended March
31, 2003 from $3.6 million in the fiscal year ended March 31, 2002.

     Advertising revenues decreased 13% to $1.7 million for the year ended March
31, 2003 from $1.9 million for the year ended March 31, 2002. The decrease in
advertising revenues reflected an apprehension by advertisers to place orders
with Salon given Salon's going concern uncertainty and corresponding uncertainty
of Salon's ability to fulfill an order. In addition, the decrease reflects the
majority of advertising dollars being allocated by advertisers to the largest
Websites and not to Websites of Salon's size.

     Subscription revenues increased 60% to $1.9 million for the year ended
March 31, 2003 from $1.2 million for the year ended March 31, 2002. The increase
is attributable largely to Salon Premium, a pay for online content subscription
service launched in late April 2001, which generated $1.3 million in revenue
during the year versus $0.6 million last year, its inaugural year in which it
operated for eleven months.

     All other sources of revenue accounted for $0.4 million for the year ended
March 31, 2003 compared to $0.3 million for the year ended March 31, 2002. The
increase of $0.1 million was primarily due to an increase in revenue from a
third party for which Salon provides links to its dating/personals Website.

PRODUCTION AND CONTENT

     Production and content expenses during the year ended March 31, 2003 was
$4.4 million versus $5.0 million for the year ended March 31, 2002, a decline of
$0.6 million or 12%. The decrease primarily reflects reducing approximately
eighteen positions during the year ended March 31, 2002, to a staffing level
that stayed relatively constant throughout the year ended March 31, 2003, and
the reversal of previously accrued bonuses that resulted in salary related costs
decreasing by $0.4 million. In addition, during the year ended March 31, 2003,
Internet hosting costs were reduced by $0.1 million as Salon found a new
provider for this service, depreciation expense declined by $0.1 million as
assets became more fully depreciated and general operating costs were reduced by
$0.1 million. These reductions were offset by a $0.1 million increase in
freelance expenditures.

SALES AND MARKETING EXPENSES

     Sales and marketing expenses during the year ended March 31, 2003 were $2.3
million versus $2.7 million for the year ended March 31, 2002, a decline of $0.4
million or 16%. The decrease primarily

                                       21
<PAGE>

reflects reducing approximately six positions during the year ended March 31,
2002, and then reducing an additional three positions during the year ended
March 31, 2003, resulting in salary related costs decreasing by $0.2 million. A
general reduction in expenditures in order to preserve Salon's limited cash
resources resulted in general expenditures decreasing by $0.2 million.

     Sales and marketing expenses include a charge for the use of advertising
credits. For the years ending March 31, 2003 and March 31, 2002 Salon used $0.8
million of such credits.

RESEARCH AND DEVELOPMENT EXPENSES

     Research and development expenses during the year ended March 31, 2003 were
$0.6 million versus $0.7 million for the year ended March 31, 2002, a decline of
$0.1 million or 11%. The decrease primarily reflects reducing approximately
three positions during the year ended March 31, 2002, to a staffing level that
stayed relatively constant throughout the year ended March 31, 2003, resulting
in salary related costs decreasing by $0.1 million.

GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses during the year ended March 31, 2003
were $1.4 million versus $1.9 million for the year ended March 31, 2002, a
decline of $0.5 million or 30%. The decrease is attributable to reversing $0.2
million in previously accrued bonuses. In addition, March 31, 2002 results
include $0.3 million of bad debt expense, with this year's results only
reflecting marginal bad debt expense.

AMORTIZATION OF INTANGIBLES

     Amortization of intangible expenses during the year ended March 31, 2003
was $0.4 million versus $0.5 million for the year ended March 31, 2002, a
decline of $0.1 million or 13%. The decrease is attributable to the suspension
in amortizing goodwill in accordance with the April 1, 2002 adoption of
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standard No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142).

WRITE-DOWN OF LONG-LIVED ASSETS

     In 1999, Salon entered into a ten-year lease for two floors of office space
in San Francisco. In February 2001, Salon began to sublease one of the two
floors with the sublease agreement terminating during the year ended March 31,
2003. Salon determined that the office space previously subleased would not be
utilized or subleased, and as a consequence, wrote-down the value of the assets
associated with the office space by $0.3 million as of March 31, 2003.

     The results for Salon's year ending March 31, 2002 includes a write-down of
long-lived assets of $0.7 million associated with the discontinuance in
marketing proprietary software to manage Websites and $0.1 million of goodwill
associated with issuing 317,000 shares of common stock stipulated in the May
2000 acquisition agreement of MP3Lit.com by Salon.

INTEREST AND OTHER EXPENSE

     Interest and other expense for both years ended March 31, 2003 and 2002 was
$0.1 million of interest related expenses. The interest expense for the year
ended March 31, 2002 was primarily related

                                       22
<PAGE>

to lease obligations of Salon, while the interest expense for the year ended
March 31, 2003 primarily relates to the bridge notes issued during the year.

PREFERRED DEEMED DIVIDEND

     The preferred deemed dividend of $3.2 million for the year ended March 31,
2002 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 was convertible on the dates of the transactions, as
well as the effect of an immediate redemption right of the preferred stock
issued, after allocating the proceeds between preferred stock and warrants.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

     As a result of the above factors, Salon recorded a net loss attributable to
common stockholders of $5.7 million or $0.41 per share for the fiscal year ended
March 31, 2003 compared to a net loss of $11.3 million or $0.83 per share for
the fiscal year ended March 31, 2002.


LIQUIDITY AND CAPITAL RESOURCES

     As of March 31, 2004, Salon had approximately $0.7 million in available
cash remaining from the issuance Series C preferred stock in December 2003 and
February 2004. Salon received a total of $0.9 million from the issuance of
Series C preferred stock.

     Net cash used in operations was $2.8 million for the year ended March 31,
2004, compared to $2.9 million for the year ended March 31, 2003. The principal
use of cash during the year ended March 31, 2004 was to fund the $6.0 million
net loss for the period, offset partly by non-cash charges of $3.4 million and
use of assets and liabilities of $0.1 million. The principal use of cash during
the year ended March 31, 2003 was to fund the $5.6 million net loss for the
period, offset partly by non-cash charges of $2.2 million and changes in assets
and liabilities of $0.5 million. The principal use of cash during the year ended
March 31, 2002 was to fund the $8.0 million net loss for the period and a $0.8
million decrease in liabilities, partly offset by non-cash charges of $3.3
million and an increase in deferred revenues of $0.3 million.

     Net cash used in investing activities was immaterial for the years ended
March 31, 2004, March 31, 2003 and March 31, 2002. Salon anticipates purchases
of $0.1 million of property and equipment during the year ending March 31, 2005.

     For the year ended March 31, 2004, net cash from financing activities was
$3.3 million, which was comprised of $2.5 million from the issuance of notes
payable, $0.9 million from the issuance of Series C preferred stock and $0.2
million from bank borrowings, offset by $0.2 million of re-payments to the bank
and $0.1 million of payments under capital leases. For the year ended March 31,
2003, net cash from financing activities was $1.5 million, which was comprised
of $1.7 million from the issuance of notes payable, offset by $0.2 million from
nominal payments for capital lease obligations. For the year ended March 31,
2002, net cash from financing activities consisted of $3.7 million from the
issuance of Series A and B preferred stock, offset by $0.2 million from nominal
payments for capital lease obligations.

     In October 2002, Salon entered into an Accounts Receivable Purchase
Agreement with a bank. As Salon determined that the agreement was no longer
required to meet short-term cash needs, the

                                       23
<PAGE>

agreement was allowed to expire in January 2004. Salon has no immediate plans to
reactivate a similar agreement. As of March 31, 2004 Salon has immaterial
amounts owed under capital leases and does not anticipate entering into similar
debt instruments during its year ending March 31, 2005.

     Salon, as permitted under Delaware law and in accordance with its Bylaws,
indemnifies its officers, key employees and directors for certain events or
occurrences, subject to certain limits, while the officer is or was serving at
Salon's request in such capacity. The term of the indemnification period is for
the officer's, key employee's or director's lifetime. The maximum amount of
potential future indemnification is unlimited; however, Salon does have a
Director and Officer Insurance Policy that limits Salon's exposure and enables
Salon to recover a portion of any future amounts paid. As a result of the
insurance policy coverage, Salon believes the fair value of these
indemnification agreements is minimal.

     The following summarizes Salon's contractual obligations as of March 31,
2004, as amended and in effect subsequent to March 31, 2004, and the effect
these contractual obligations are expected to have on Salon's liquidity and cash
flows in future periods (in thousands):

                                   Payments Due By Period
                   ---------------------------------------------------------
                      Total     1 Year or Less    1-3 Years    After 3 Years
                   ----------   --------------   -----------   -------------
Operating leases   $      475   $          434   $        41   $          --
Capital leases             18               18            --              --
                   ----------   --------------   -----------   -------------
       Total       $      493   $          452   $        41   $          --
                   ==========   ==============   ===========   =============

     PricewaterhouseCoopers LLP, Salon's independent accountants through
November 13, 2003 have included a paragraph in their report indicating that
substantial doubt exists as to Salon's ability to continue as a going concern
because of Salon's recurring operating losses, negative cash flow and an
accumulated deficit for the for the years ended March 31, 2002 and March 31,
2003. Salon's current independent accountants, Burr, Pilger & Mayer LLP make the
same assertions in their report for Salon's year ended March 31, 2004.

     As of March 31, 2004, Salon's available cash resources were sufficient to
meet working capital needs for approximately two months. Subsequent to March 31,
2004, Salon received consent from its Board of Directors and stockholders to
issue 2,085 shares of Series D preferred stock at $800 per share. In June 2004,
Salon received $0.5 million from the issuance of 417 shares of Series D
preferred stock. Salon believes that it will be able to sell an additional 834
shares for $1.0 million during the remainder of its year ending March 31, 2005.
However, Salon estimates that with the cash on hand as of March 31, 2004, the
cash anticipated to be provided from operations, and $0.5 million from the June
2004 issuance of Series D stock, that it will only have to issue an additional
417 shares of Series D preferred stock to fund operations during the remainder
of the year ending March 31, 2005.

     Salon's common stock holders have experienced considerable dilution from
the issuance of Series A, B and C preferred stock. As of March 31, 2004, the
holders of Salon's preferred stock control approximately 95% of the voting
securities of Salon, with related parties holding approximately 66% of such
securities. Of the related parties, Director John Warnock holds approximately
40% of the total voting securities, with the father of Salon's President, Chief
Financial Officer and Secretary either directly or indirectly, controlling
approximately 20% of the total voting securities. As stated in Note 11 of
Salon's consolidated financial statement, in the event of a liquidation event,
the liquidation preferences of holders of Salon's preferred stock will most
likely preclude any common stockholder from receiving little, if any,
liquidation distributions. The issuance of Series D preferred stock will result
in additional

                                       24
<PAGE>

dilution to Salon's common stock holders. The 417 shares of preferred stock
issued in June 2004 were sold at an effective common stock purchase price of
$0.093 per share and can be converted to approximately 5.4 million shares of
common stock.

     Salon's lease for office space, located at 22 Fourth Street, San Francisco,
CA was originally to expire in 2009. During the year ending March 31, 2004,
Salon amended its lease to terminate in February 2005, for which it forfeited a
$0.4 million deposit and lowered its monthly rent from approximately $70,000 per
month to approximately $21,000 per month. Salon amended it lease again to
relocate from the 16th floor to the 11th floor for which the landlord forgave
approximately $145,000 in arrears rents owed. Between now and February 2005,
Salon will either extend the term of its existing lease agreement or relocate to
similar office space. Salon believes that it will be able to secure a revised or
new lease agreement on similar or improved terms.

     Effective January 13, 2004 Salon and Rolling Stone, a wholly owned entity
of Wenner Media LLC, entered into an editorial collaboration agreement for which
both entities agreed to jointly finance, produce and publish content. On January
15, 2004, the President of Wenner Media LLC joined Salon's Board of Directors.
As of March 31, 2004, the two entities have jointly produced one story published
on March 18, 2004.

     Salon has no off-balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

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

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


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


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

     Salon has $0.7 million in cash as of March 31, 2004. These funds, in
conjunction with collections of accounts receivable, Salon Premium
subscriptions, and $0.5 million from the issuance of

                                       25
<PAGE>

417 shares of Series D preferred stock on June 4, 2004, have been used to fund
operations as of this filing. Salon believes that it can receive $1.0 million
from the issuance of an additional 834 shares of Series D preferred stock. If
Salon does not secure additional funds from the issuance of Series D preferred
stock, other equity securities or instruments that convert into equity
securities, Salon may be unable to continue as a going concern and cease
operations.

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

     The certificate of designation and preferences and rights of the Series D
preferred stock approved by Salon's Board of Directors subsequent to March 31,
2004, stipulates that the Series D conversion price will be equal to 70% of the
average closing sales price of Salon's common stock for the thirty days prior to
the date of issue of the Series D preferred stock. Such a discount will trigger
a non-cash preferred deemed dividend charge. The June 2004 issuance of 417
shares of Series D preferred stock will result in an approximate $0.2 million
preferred deemed dividend charge to Salon's results of operations. Salon cannot
predict to what extent it will incur preferred deemed dividend charges for
subsequent issuances of Series D preferred stock.

SALON HAS RELIED ON RELATED PARTIES FOR SIGNIFICANT INVESTMENT CAPITAL

     Salon has been relying on cash from related parties to fund operations. The
related parties are primarily John Warnock, a Director of Salon, and William
Hambrecht, either directly or indirectly. Mr. Hambrecht is the father of Salon's
President, Chief Financial Officer, and Secretary. Out a total of $4.2 million
of cash received by Salon from the issuance of convertible notes payable, $3.5
million was from related parties. In addition, of the $0.9 million received from
the issuance of Series C preferred stock in December 2003 and February 2004,
$0.5 million was from Salon Director John Warnock and $0.2 million was from the
father of Salon's President, Chief Financial Officer, and Secretary. Of the $0.5
million received in the June 2004 issuance of Series D preferred stock, $249,600
was from Salon Director John Warnock and $225,600 was either directly or
indirectly from the father of Salon's President, Chief Financial Officer, and
Secretary. Curtailment of cash investments by related parties could
detrimentally impact Salon's ability to continue its operations and Salon may be
unable to continue as a going concern.

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

     The holders of Salon's Series A, B and C preferred stock collectively own
approximately 95% of all voting securities as of March 31, 2004. These
stockholders therefore own a controlling interest in Salon. Of this amount,
approximately 66% is by related parties, of which approximately 20% is
controlled directly or indirectly by the father of Salon's President, Chief
Financial Officer, and Secretary and approximately 40% by a Director of Salon.
Therefore, related parties by themselves own a controlling interest in Salon.

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

                                       26
<PAGE>

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

     Salon's Series A, B and C preferred stockholders have liquidation
preferences of Salon's assets over common stockholders of a minimum of
approximately $18.9 million as of March 31, 2004. In the event of a liquidation
event, these holders would have preference over common stockholders of $18.9
million, or more, and therefore could affect the value of an investment in
Salon's common stock. Future issuance of preferred stock will increase this
liquidation preference.

SALON LACKS SIGNIFICANT REVENUES AND HAS A HISTORY OF LOSSES

     Salon has a history of significant losses and expects to incur operating
losses in the near future. For the year ended March 31, 2004, Salon had net
losses attributable to common stockholders of $8.7 million and had an
accumulated deficit of $90.9 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.

     Burr, Pilger & Mayer LLP, Salon's independent registered public accounting
firm for the year ended March 31, 2004 have included a "going-concern" audit
opinion on the consolidated financial statements for that year.
PricewaterhouseCoopers LLP, Salon's independent registered public accounting
firm for the years ended March 31, 2003, and 2002 have included a
"going-concern" audit opinion on the consolidated financial statements for those
years. The audit opinions report substantial doubt about Salon's ability to
continue as a going concern, citing issues such as the history of losses and
absence of current profitability. As a result of the "going-concern" opinions,
Salon's stock price and investment prospects may be adversely affected, thus
limiting financing choices and raising concerns about the realization of value
on assets and operations.

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

     Salon is under severe budgetary constraints to limit expenditures. These
constraints affect editorial staffing levels and the purchase of content from
freelance writers. These constraints affect the amount and quality of content
published on Salon's Website and consequently, the positive experience of
Website visitors. The positive experience leads to reoccurring Website visits,
new subscriptions to Salon Premium, and corresponding high renewal rates of
Salon Premium subscribers. For the year ended March 31, 2004 Salon's estimated
renewal rate for one-year paid subscription to Salon Premium was approximately
64%. Salon cannot predict if this rate will continue in the future or how many
new Salon Premium subscriptions it will acquire.

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

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

                                       27
<PAGE>

     o    successfully sell and market its Access Pass advertisements;

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

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

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

     o    successfully sell and market it network to advertisers;

     o    increase the amount of revenues it receives per advertisement;

     o    increase awareness of the Salon brand;

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

     o    attract and retain key sales personnel.

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

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

     o    advertisers' budgets;

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

     o    internal acceptance reviews by advertisers and their agencies;

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

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

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

                                       28
<PAGE>

WITH A VOLATILE SHARE PRICE, SALON MAY BE THE TARGETS OF SECURITIES LITIGATION,
WHICH IS COSTLY AND TIME-CONSUMING TO DEFEND

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

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

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

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

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

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

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

     o    the mix of advertisements sold by Salon or its competitors;

     o    the economic and business cycle and the recovery speed;

     o    the level of Internet usage;

     o    Salon's ability to attract, integrate and retain qualified personnel;

     o    technical difficulties or system downtime affecting the Internet
          generally or the operation of Salon's Website;

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

     o    the amount and timing of operating costs.

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

                                       29
<PAGE>

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

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

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

     The success of the Salon brand depends largely on its ability to provide
high quality content and services. If Internet users do not perceive Salon's
existing content and services to be of high quality, or if 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 grow the Salon brand, its
business could be severely harmed.

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

     Salon's success significantly depends on key editorial personnel. In
addition, because Salon's users must perceive the content of Salon's Website as
having been created by credible and notable sources, Salon's success also
depends on the name recognition and reputation of its editorial staff. Due to
Salon's 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 retaining and motivating its current personnel, its
business could be harmed.

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

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

                                       30
<PAGE>

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

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

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

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

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

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

     Salon uses third-party software to manage and measure the delivery of
advertising on its Website. 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 Website. 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.

                                       31
<PAGE>

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

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

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

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

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

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

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

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

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

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<PAGE>

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 subscriptions, and this may harm Salon's
business. A number of factors may inhibit the growth of Internet usage,
including the following. If these or any other factors cause use of the Internet
to slow or decline, its results of operations could be harmed.

     o    inadequate network infrastructure;

     o    security concerns;

     o    charging for content;

     o    inconsistent quality of service; and

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


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

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

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

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

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

                                       33
<PAGE>

insurance or is in excess of its insurance coverage could severely harm its
financial condition and business. Implementing measures to reduce its exposure
to these forms if liability may require Salon to spend substantial resources and
limit the attractiveness of Salon's service to users.

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

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

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

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

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

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

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

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

                                       34
<PAGE>

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

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

GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES OF THE INTERNET MAY RESTRICT
SALON'S BUSINESS OR RAISE ITS COSTS

     There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future, however, that address issues including content, copyrights,
distribution, antitrust matters, user privacy, pricing, and the characteristics
and quality of products and services. An increase in regulation or the
application of existing laws to the Internet could significantly increase
Salon's costs of operations and harm Salon's business. For example, the
Communications Decency Act of 1996 sought to prohibit the transmission of
certain types of information and content over the Web. Additionally, several
telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet service providers and online service providers
in a manner similar to long distance telephone carriers and to impose access
fees on these companies. Imposition of access fees could increase the cost of
transmitting data over the Internet. Moreover, it may take years to determine
the extent to which existing laws relating to issues such as 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 Website and services without the user's permission.
In the past, the Federal Trade Commission has investigated companies that have
used personally identifiable information without permission or in violation of a
stated privacy policy. If Salon uses this information without permission or in
violation of its policy, Salon may face potential liability for invasion of
privacy for compiling and providing information to its corporate customers and
electronic commerce merchants. In addition, legislative or regulatory
requirements may heighten these concerns if businesses must notify Internet
users that the data may be used by marketing entities to direct product
promotion and advertising to the user. Other countries and political entities,
such as the European Union, have adopted such legislation or regulatory
requirements. The United States may adopt similar legislation or regulatory
requirements. If consumer privacy concerns are not adequately addressed, our
business, financial condition and results of operations could be materially
harmed.

                                       35
<PAGE>

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

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

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

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

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

     o    after the transaction where the stockholder acquired 15% or more of
          the corporation's assets, the stockholder owned at least 85% of the
          corporation's outstanding voting stock, excluding shares owned by
          directors, officers and employee stock plans in which employee
          participants do not have the right to determine confidentially whether
          shares held under the plan will be tendered in a tender or exchange
          offer; or

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

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

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

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

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

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

                                       36
<PAGE>

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


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Salon does not have an exposure to market risk for changes in interest
rates. Salon has no investments denominated in foreign country currencies and
therefore is not subject to foreign exchange risk.























                                       37
<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                            Page

Reports of Independent Registered Public Accounting Firms..................  39

Consolidated Balance Sheets as of March 31, 2004 and 2003..................  41

Consolidated Statements of Operations for the years ended March 31, 2004
     2003, and 2002........................................................  42

Consolidated Statements of Stockholders' Equity for the years ended
     March 31, 2004, 2003, and 2002........................................  43

Consolidated Statements of Cash Flows for the years ended March 31, 2004
     2003, and 2002........................................................  44

Notes to Consolidated Financial Statements.................................  45


Selected Quarterly Financial Data (unaudited)..............................  67
















                                       38
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
Salon Media Group, Inc.

We have audited the accompanying consolidated financial statements of Salon
Media Group, Inc. as of March 31, 2004, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Salon Media Group,
Inc. as of March 31, 2004, and the results of its operations and its cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses and
negative cash flows from operations and has an accumulated deficit of $90.9
million at March 31, 2004. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.




/s/ Burr, Pilger & Mayer LLP
San Francisco, California
May 4, 2004, except for Note 14,
as to which the date is June 7, 2004





                                       39
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of Salon Media Group, Inc.:

     In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Salon Media Group, Inc. and its subsidiaries at March 31, 2003 and
2002, and the results of their operations and their cash flows for each of the
two years in the period ended March 31, 2003 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has suffered recurring
losses and negative cash flows from operations and has an accumulated deficit at
March 31, 2003 of $82.3 million that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.





/s/ PricewaterhouseCoopers LLP
San Jose, California
June 27, 2003




                                       40
<PAGE>
                             SALON MEDIA GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE><CAPTION>
                                                                 MARCH 31,
                                                           --------------------
                                                             2004        2003
                                                           --------    --------
<S>                                                       <C>         <C>
ASSETS

     Current assets:
          Cash and cash equivalents                        $    696    $    162
          Accounts receivable, net                              306         227
          Prepaid expenses and other current assets             432         169
                                                           --------    --------
          Total current assets                                1,434         558

     Property and equipment, net                                 89         459
     Prepaid advertising rights                               4,430       5,480
     Intangible assets, net                                    --           348
     Goodwill, net                                              200         200
     Other assets                                               117         545
                                                           --------    --------
          Total assets                                     $  6,270    $  7,590
                                                           ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY

     Current liabilities:
          Notes payable - related parties                  $   --      $  1,256
          Notes payable - non related parties                  --           458
          Accounts payable and accrued liabilities            1,125       1,275
          Deferred revenue                                    1,107         918
          Capital lease obligations, current                     18          91
                                                           --------    --------
          Total current liabilities                           2,250       3,998

     Warrants payable                                         2,621         354
     Other long term liabilities                               --           197
     Capital lease obligations, long term                      --            18
                                                           --------    --------
          Total liabilities                                   4,871       4,567
                                                           --------    --------
Commitments and Contingencies (Note 8)

Stockholders' equity:
      Preferred stock, $0.001 par value, 5,000,000
           shares authorized, 7,552 shares issued
           and outstanding at March 31, 2004 and
           934 shares issued and Outstanding at
           March 31, 2003 (aggregate liquidation
           preference of $18,926 at March 31, 2004
           and $7,472 at March 31, 2003)                       --          --

     Common stock, $0.001 par value, 50,000,000
           shares authorized, 14,155,276 shares
           issued and outstanding at March 31, 2004
           and March 31, 2003                                    14          14
     Additional paid-in capital                              92,320      85,283
     Accumulated deficit                                    (90,935)    (82,274)
                                                           --------    --------
          Total stockholders' equity                          1,399       3,023
                                                           --------    --------
          Total liabilities and stockholders' equity       $  6,270    $  7,590
                                                           ========    ========
</TABLE>
           See accompanying notes to Consolidated Financial Statements

                                       41
<PAGE>

                             SALON MEDIA GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                      YEAR ENDED MARCH 31,
                                                 ------------------------------
                                                   2004       2003       2002
                                                 --------   --------   --------

Net revenues                                     $  4,499   $  4,003   $  3,619
                                                 --------   --------   --------

Operating expenses:
     Production and content                         4,647      4,425      5,009
     Sales and marketing                            2,393      2,305      2,737
     Research and development                         614        626        703
     General and administrative                     1,386      1,354      1,925
     Amortization of intangibles                      353        412        476
     Write-down of long-lived assets                 --          345        782
                                                 --------   --------   --------
         Total operating expenses                   9,393      9,467     11,632

Loss from operations                               (4,894)    (5,464)    (8,013)


Interest and other income                             119         13         82
Interest and other expense                         (1,271)      (146)       (69)
                                                 --------   --------   --------
         Net loss                                  (6,046)    (5,597)    (8,000)
Preferred deemed dividend                          (2,615)       (81)    (3,189)

Cumulative cash dividend on preferred stock          --         --          (97)
                                                 --------   --------   --------
Net loss attributable to common stockholders     $ (8,661)  $ (5,678)  $(11,286)
                                                 ========   ========   ========

Basic and diluted net loss per share
     attributable to common stockholders         $  (0.61)  $  (0.41)  $  (0.83)

Weighted average shares used in computing
     basic and diluted net loss per share
     attributable to common stockholders           14,099     13,938     13,547


           See accompanying notes to Consolidated Financial Statements

                                       42
<PAGE>

                             SALON MEDIA GROUP, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  (in thousands, except Preferred Stock Shares)
<TABLE><CAPTION>

                                                  Preferred          Common
                                                    Stock             Stock      Additional                               Total
                                              ---------------------------------   Paid-In     Unearned    Accumulated  Stockholders'
                                               Shares  Amount   Shares   Amount   Capital   Compensation    Deficit       Equity
                                              -------------------------------------------------------------------------------------
<S>                                               <C>     <C>  <C>      <C>      <C>         <C>          <C>          <C>
BALANCE, MARCH 31, 2001                            -       -    14,140   $  14    $ 78,404    $  (231)     $ (65,310)   $  12,877
Series A convertible preferred stock and
   common stock warrants issued for cash         809       -         -       -       3,205          -              -        3,205
Series B convertible preferred stock and
   common stock warrants issued for cash         125       -         -       -         466          -              -          466
Preferred deemed dividend                          -       -         -       -       3,189          -         (3,189)           -
Cash dividend on preferred stock                   -       -         -       -          97          -            (97)           -
Shares issued under employee stock plans           -       -        15       -           4          -              -            4
Warrants issued in association with
   agreements                                      -       -         -       -           3          -              -            3
Value of contingent shares issued in
   conjunction with acquisition                    -       -         -       -         108          -              -          108
Amortization of unearned compensation              -       -         -       -         (60)       174              -          114
Net loss                                           -       -         -       -           -          -         (8,000)      (8,000)
                                              ------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2002                          934       -    14,155      14      85,416       (57)        (76,596)       8,777


Amortization of unearned compensation              -       -         -       -           -        57               -           57
Value of contingent shares issued in
   conjunction with acquisition                    -       -         -       -          42         -               -           42
Preferred deemed dividend                          -       -         -       -           -         -             (81)         (81)
Reclassification of warrants to liabilities -
   see Note 11                                     -       -         -       -        (175)        -               -         (175)
Net loss                                           -       -         -       -           -         -          (5,597)      (5,597)
                                              ------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2003                          934       -    14,155      14      85,283         -         (82,274)       3,023


Value of contingent shares issued in
   conjunction with acquisition                    -       -         -       -           5         -               -            5
Series C convertible preferred stock and
  common stock warrants issued from
  conversion of convertible notes payable      5,493       -         -       -       4,394         -               -        4,394
Series C convertible preferred stock and
  common stock warrants issued for cash        1,125       -         -       -         892         -               -          892
Preferred deemed dividend on issuance of
  Series C Convertible preferred stock             -       -         -       -       2,040         -          (2,040)           -
Preferred deemed dividend from revaluation of
  warrants issued to preferred stock holders       -       -         -       -           -         -            (575)        (575)
Reclassification of warrants to liabilities -
  see Notes 10 and 11                              -       -         -       -        (294)        -               -         (294)
Net loss                                           -       -         -       -           -         -          (6,046)      (6,046)
                                              ------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2004                        7,552   $   -    14,155   $  14    $ 92,320    $    -      $  (90,935)     $ 1,399
                                              ====================================================================================
</TABLE>

           See accompanying notes to Consolidated Financial Statements

                                       43
<PAGE>

                             SALON MEDIA GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE><CAPTION>
                                                                                            YEAR ENDED MARCH 31,
                                                                                    ------------------------------------
                                                                                      2004          2003          2002
                                                                                    --------      --------      --------
<S>                                                                                <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                                           $ (6,046)     $ (5,597)     $ (8,000)
 Adjustments to reconcile net loss to net cash used in operating activities:
     Write-down of long lived assets                                                    --             345           782
     Loss from retirement of assets                                                       43             2            28
     Stock-based compensation and warrant amortization                                 1,394           108           200
     Depreciation and amortization                                                       928           944         1,213
     Allowance for (recovery of) doubtful accounts                                       (10)           46            73
     Write-off of long-term receivable                                                  --            --             236
     Prepaid advertising rights usage                                                  1,050           786           809
     Changes in assets and liabilities:
         Accounts receivable                                                             (69)           53            75
         Prepaid expenses, other current assets and other assets                         (59)          326           111
         Accounts payable and accrued liabilities                                       (180)         (226)         (836)
         Deferred revenue                                                                189           355           340
                                                                                    --------      --------      --------
            Net cash used in operating activities                                     (2,760)       (2,858)       (4,969)
                                                                                    --------      --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment                                                      (35)           (4)           (7)
 Proceeds from asset sales                                                                15          --            --
                                                                                    --------      --------      --------
            Net cash used in investing activities                                        (20)           (4)           (7)
                                                                                    --------      --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuance of preferred stock, net                                          892          --           3,671
 Proceeds from issuance of common stock, net                                            --            --               7
 Proceeds from bank borrowings                                                           182            82          --
 Repayment of short-term borrowings                                                     (182)          (82)         --
 Proceeds from issuance of notes payable, net                                          2,513         1,694          --
 Principal payments under capital leases                                                 (91)         (212)         (207)
                                                                                    --------      --------      --------
            Net cash provided by financing activities                                  3,314         1,482         3,471
                                                                                    --------      --------      --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     534        (1,380)       (1,505)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                         162         1,542         3,047
                                                                                    --------      --------      --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $    696      $    162      $  1,542
                                                                                    ========      ========      ========

AMOUNT PAID FOR INTEREST                                                            $      6      $     35      $     68
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 Adjustment in value of assets purchased under capital lease                        $   --        $     17      $   --
 Warrants issued in connection with issuance of convertible notes payable                263            65          --
 Issuance of stock and warrants in connection with acquisition                             5            42           108
 Issuance of warrants in connection with agreements                                      100             3             3
 Preferred deemed dividend in connection with preferred stock financing                2,615            81         3,189
 Dividend on preferred stock                                                            --            --              97
 Conversion of notes payable and accrued interest to preferred stock                   4,394          --            --

</TABLE>

           See accompanying notes to Consolidated Financial Statements

                                       44
<PAGE>

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

NOTE 1. THE COMPANY

     Salon Media Group, Inc ("Salon") is an Internet media company that produces
a content Website with eight primary subject-specific sections and two online
communities. One of the sections provides audio streaming. Salon was originally
incorporated in July 1995 in the State of California and reincorporated in
Delaware in June 1999. Salon operates in one business segment.


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     These consolidated financial statements contemplate the realization of
assets and the satisfaction of liabilities in the normal course of business.
Salon has incurred losses and negative cash flows from operations since
inception and has an accumulated deficit at March 31, 2004 of $90,935. 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
or other financing alternatives. There can be no assurance that Salon will be
able to obtain 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.

RECLASSIFICATIONS

     Certain reclassifications have been made to prior year's balances in order
to conform to the current year's presentation.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Salon and its
wholly owned subsidiaries. All material intercompany accounts and transactions
have been eliminated in the consolidated financial statements.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

                                       45
<PAGE>

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

ACCOUNTS RECEIVABLE

     Accounts receivable are stated net of doubtful accounts. Salon estimates
the uncollectibility of the accounts receivable balance and maintains allowances
for estimated losses. Salon analyses accounts receivable, historical bad debts,
receivable aging, customer credit-worthiness, and current economic trends when
evaluating the adequacy of the allowance for doubtful accounts.

PROPERTY AND EQUIPMENT

     Property and equipment are recorded at cost. Maintenance, repairs and minor
renewals are expensed as incurred. Depreciation is provided on a straight-line
basis over the useful lives of the asset, principally three years for computer
hardware and software, and five years for furniture and office equipment.
Depreciation of leasehold improvements is provided on a straight-line basis over
the useful life of the asset or the term of the lease, whichever is shorter.
When property and equipment is retired or otherwise disposed of, the cost and
accumulated depreciation are relieved from the accounts and the net gain or loss
is included in the determination of income.

PREPAID ADVERTISING RIGHTS

     Prepaid advertising rights are carried at cost less accumulated
amortization, with amortization commensurate to the usage of such rights, and
expire in January 2010.

INTANGIBLE ASSETS

     Goodwill and other purchased intangibles are carried at cost less
accumulated amortization. Through March 31, 2002 amortization of goodwill was
computed on a straight-line basis over five years. As of April 1, 2002, goodwill
is no longer being amortized and is assessed on an annual basis for impairment
by applying a fair value based test.

IMPAIRMENT OF LONG-LIVED ASSETS

     Salon periodically evaluates the potential impairment of its long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. At the occurrence of an event or
change in circumstances, Salon evaluates the potential impairment of an asset
based on the estimated future undiscounted cash flows attributable to such
assets. In the event impairment exists, Salon will measure the amount of such
impairment based on the present value of the estimated future cash flows using a
discount rate commensurate with the risks involved.

REVENUE RECOGNITION

     Salon's revenues are primarily from the sale of advertising space on its
Website and the sale of subscriptions to individuals. Salon recognizes
advertising revenue once persuasive evidence of an arrangement exists, delivery
has occurred, the fee is fixed or determinable and collectibility is reasonably
assured. Revenues are recognized ratably in the period over which Salon's
obligations are fulfilled. Payments received before Salon's obligations are
fulfilled are classified as "Deferred revenue" in Salon's consolidated balance
sheet.

                                       46
<PAGE>

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

     Advertisement sales agreements are generally short-term agreements, usually
less than ninety days. Revenues derived from such arrangements are recognized
during the period the advertising space is provided, as long as no significant
obligations remain at the end of the period. Salon's obligations may include a
fixed number of days that a Salon Access Pass advertisement is run, the
guarantee of a minimum number of times that an advertisement appears in a page
viewed by a visitor to Salon's Website, or a set number of Access Pass
advertisements downloaded by a Website visitor. To the extent the minimum
guaranteed amounts are not delivered, Salon defers recognition of the
corresponding revenue until the remaining guaranteed amounts are achieved, if
mutually agreeable with an advertiser. If these "make good" impressions are not
agreeable to an advertiser, no further revenue is recognized.

     Revenue from Salon's subscription services, which includes Salon Premium,
The Well and Table Talk, is recognized ratably over the subscription period.
Salon has offered Salon Premium subscriptions for periods of one month, one year
and two years. In November 2002, Salon suspended offering two-year
subscriptions. Well and Table Talk subscriptions are generally only for one
month.

 ADVERTISING COSTS

     Salon expenses advertising costs as they are incurred. Advertising expense
was $1,056, $772, and $689, for the fiscal years ended March 31, 2004, 2003, and
2002.

COMPREHENSIVE LOSS

     Comprehensive loss is defined as the change in equity of a business
enterprise during a period from non-owner sources. There were no differences
between the net loss for the years ended March 31, 2004, 2003 and 2002 and
comprehensive loss for those periods.

FINANCIAL INSTRUMENTS

     The carrying amounts of Salon's financial instruments, including cash and
cash equivalents, accounts receivable, and accounts payable approximate fair
value because of their short maturities. Fair value of capital lease
obligations, if any, approximates carrying value since they bear interest at
current market rates.

 INCOME TAXES

     Salon recognizes deferred taxes by the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for differences between the financial statement and
tax basis of assets and liabilities at enacted statutory tax rates in effect for
the years in which the differences are expected to reverse. The effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.

CONCENTRATIONS OF CREDIT RISK

            Financial instruments that potentially subject Salon to
concentrations of credit risk consist principally of trade accounts receivable.
Salon performs ongoing credit evaluations of its customers, but does not require
collateral. Salon provides an allowance for credit losses that it periodically
adjusts to

                                       47
<PAGE>

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

reflect management's expectations of future losses. Two customers accounted for
20% and 12% respectively, of total trade accounts receivable at March 31, 2004
and two customers accounted for 24% and 19%, respectively, of total trade
accounts receivable at March 31, 2003.

     No customer accounted for 10% or more of total revenue for the fiscal years
ended March 31, 2004, 2003 and 2002.

STOCK-BASED COMPENSATION

     Salon accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock issued to Employees" (APB 25), and Financial Accounting
Standards Board (FASB) Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation - an Interpretation of APB No. 25"
(FIN 44), and complies with the disclosure provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation"
(SFAS No. 123), as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-amendment to FASB Statement No. 123,
Accounting for Stock-Based Compensation." Under APB 25, compensation expense is
based on the difference, if any, on the date of the grant, between the fair
value of Salon's stock and the exercise price. Salon accounts for stock issued
to non-employees in accordance with the provisions of SFAS No. 123 and Emerging
Issues Task Force (EITF) Issue No. 96-18, "Accounting for Equity Instruments
that are Issued to Other than Employees for Acquiring, or in Conjunction with
Selling Goods or Services."

     If Salon's compensation expense under its stock option plan had been
determined pursuant to SFAS 123, Salon's net loss and net loss per share would
have been as follows:
<TABLE><CAPTION>

                                                                                        YEAR ENDED MARCH 31,
                                                                            --------------------------------------------
                                                                                2004            2003            2002
                                                                            ------------    ------------    ------------
<S>                                                                        <C>             <C>             <C>
Net loss attributable to common stockholders:
     As reported                                                            $    (8,661)    $    (5,678)    $   (11,286)
     Add back: stock-based employee compensation
     expense included in reported net loss                                           -             57             114

     Deduct: total stock-based compensation expense
     determined under the fair value based method, net
     of related tax                                                                (219)           (737)         (1,258)
                                                                            ------------    ------------    ------------
     Pro forma net loss attributable to common stockholders                 $    (8,880)    $    (6,358)    $   (12,430)
                                                                            ============    ============    ============

Basic and diluted net loss per share attributable common stockholders:
     As reported                                                            $     (0.61)    $     (0.41)    $     (0.83)
     Pro forma net loss per share                                           $     (0.63)    $     (0.46)    $     (0.92)
</TABLE>

                                       48
<PAGE>

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

     The fair value of the options was estimated at the date of grant using the
Black-Scholes option-pricing model. Salon determined the estimated fair value of
its options granted for the years ended March 31, 2003 and 2002, using the
following assumptions:

                                             YEAR ENDED MARCH 31,
                                     -----------------------------------
                                       2004       2003          2002
                                     -------  ------------  ------------
Risk-free interest rates               N/A    3.25 - 4.38%  3.55 - 4.67%
Expected lives (in years)              N/A          4             4
Expected volitility                    N/A       120.0%        120.0%
Dividend yield                         N/A        0.0%          0.0%

     The weighted average grant date fair value per share of options granted
during the years ended March 31, 2004, 2003, and 2002 was none, $0.08, and
$0.14, respectively.

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>
                                                                        YEAR ENDED MARCH 31,
                                                          ------------------------------------------------
                                                               2004             2003             2002
                                                          --------------   --------------   --------------
<S>                                                      <C>              <C>              <C>
Numerator:
   Net loss attributable to common stockholders           $      (8,661)   $      (5,678)   $     (11,286)
                                                          ==============   ==============   ==============

Denominator:
   Weighted average shares outstanding                       14,155,000       14,155,000       14,153,000
   Weighted average shares held in escrow                       (56,000)        (217,000)        (606,000)
                                                          --------------   --------------   --------------
   Weighted average shares used in computing basic
       and diluted net loss per share attributable to
       common stockholders                                   14,099,000       13,938,000       13,547,000
                                                          ==============   ==============   ==============
   Basic and diluted net loss per share attributable to
       common stockholders                                $       (0.61)   $       (0.41)   $       (0.83)
                                                          ==============   ==============   ==============

   Antidilutive securities including options, warrants
       and convertible preferred stock not included
       in loss per share calculation                        199,312,000       33,214,000       31,873,000
                                                          --------------   --------------   --------------
</TABLE>
                                       49
<PAGE>

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

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

NOTE 3. EMPLOYEE STOCK PURCHASE PLAN

     Salon has an Employee Stock Purchase Plan (the "ESPP") to provide
substantially all employees whose customary employment is more than 20 hours per
week for more than five months in any calendar year eligibility to purchase
shares of its common stock through payroll deductions, up to 10% of eligible
compensation. The ESPP operation was suspended on March 1, 2001. In the event of
resumption, participant account balances are used to purchase shares of Salon
common stock at the lesser of 85 percent of the fair market value of shares on
either the first day or the last day of the designated payroll deduction period
(the Offering Period), as chosen by the Board of Directors at its discretion,
whichever is lower. The aggregate number of shares purchased by an employee may
not exceed 2,000 shares in any one Offering Period, generally six months
(subject to limitations imposed by the Internal Revenue Code). A total of
500,000 shares are available for purchase under the ESPP.

NOTE 4.  401(K) SAVINGS PLAN

     Salon's 401(k) Savings Plan (the "401(k) Plan") is a defined contribution
retirement plan intended to qualify under Sections 401(a) and 401(k) of the
Internal Revenue Code. All full-time employees of Salon are eligible to
participate in the 401(k) Plan pursuant to its terms. Participants may
contribute from 1% to 20% of compensation, subject to statutory limitations.
Employer matching contributions are discretionary based on a certain percentage
of a participant's contributions as determined by management of Salon. Salon has
not made any discretionary contributions to the 401(k) Plan through March 31,
2004.

                                       50
<PAGE>

                             SALON MEDIA GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE><CAPTION>

NOTE 5. BALANCE SHEET COMPONENTS
                                                                  Year Ended March 31,
                                                               --------------------------
                                                                  2004            2003
                                                               ----------      ----------
<S>                                                           <C>             <C>
Accounts receivable, net:
         Accounts receivable                                   $      336      $      267
         Less: allowance for doubtful accounts                        (30)            (40)
                                                               ----------      ----------
                                                               $      306      $      227
                                                               ==========      ==========
Prepaid expenses and other current assets
          Prepaid lease termination fees                       $      192      $     --
          Receivable from employees                                    92              85
          Prepaid expenses                                             79              83
          Short term deposits                                          49            --
          Other receivables                                            20               1
                                                               ----------      ----------
                                                               $      432      $      169
                                                               ==========      ==========
Property and equipment, net
         Computer hardware and software                        $    1,392      $    1,717
         Leasehold improvements                                        34             976
         Furniture and office equipment                               258             457
                                                               ----------      ----------
                                                                    1,684           3,150
         Less accumulated depreciation and amortization            (1,595)         (2,691)
                                                               ----------      ----------
                                                               $       89      $      459
                                                               ==========      ==========

Other assets
         Restricted cash                                       $     --        $      420
         Other                                                        117             125
                                                               ----------      ----------
                                                               $      117      $      545
                                                               ==========      ==========

Accounts payable and accrued liabilities
         Accounts payable                                      $      348      $      709
         Salaries and wages payable                                   162             186
         Accrued services                                              68             105
         Reserve for claims                                           181             203
         Rent expense normanization                                   302            --
         Other accrued expenses                                        64              72
                                                               ----------      ----------
                                                               $    1,125      $    1,275
                                                               ==========      ==========
</TABLE>

     Depreciation expense for the years ended March 31, 2004, 2003 and 2002 was
$347, $513, and $737, respectively.

     Included in computer hardware and software, and furniture and office
equipment are assets under capital leases amounting to $165 and $800 as of March
31, 2004 and March 31, 2003 respectively. The related accumulated depreciation
for these assets was $156 and $632 as of March 31, 2004 and 2003, respectively.

                                       51
<PAGE>

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

     Restricted cash at March 31, 2003 represents time deposits held at
financial institutions as collateral for Salon's letters of credit pursuant to
various lease agreements. During the year ended March 31, 2004, Salon forfeited
the $420 restricted cash to a landlord in order to reduce the remaining term of
a lease from 6.75 years to two years, reduced its office space by approximately
half and reduced monthly lease payments by seventy-two percent. The resulting
decrease in rent payments exceeded the balance of the forfeited deposit, which
accordingly, is being expensed over the revised lease term.

NOTE 6. BANK LINE OF CREDIT

     In October 2002, Salon entered into an Accounts Receivable Purchase
Agreement with a bank. Under the terms of the agreement, the bank could 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 could not exceed $1,000, however the amount was
capped at $300 until such time as Salon had $2,500 of unrestricted cash. Amounts
advanced under this agreement accrued interest at prime plus 1% per annum on the
average daily balance outstanding and were 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 was
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 an
immaterial amount 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. During the year ended March 31, 2003, Salon
borrowed and repaid $89 leaving no amounts owed at the end of the year. During
the year ended March 31, 2004, Salon borrowed and repaid $182. The agreement
expired in January 2004 with no amounts owed and was not renewed.

NOTE 7.  RELATED PARTY TRANSACTIONS

     On October 10, 2000, Salon loaned its Chairman $75 with an agreed 6.3%
annual interest rate with no due date. As of March 31, 2004, the loan and
associated interest total $90 and is included as a component of "Prepaid
expenses and other current assets" in Salon's Consolidated Balance Sheets. In
addition, $1 of interest has been paid as of March 31, 2004.

     In October 2001, Salon entered into a month-to-month sublease agreement
with WR Hambrecht + Co., LLC for office space in New York, NY and received $57
and $68 in rent income during the years ended March 31, 2003 and March 31, 2002,
respectively. Elizabeth Hambrecht, Salon's President, Chief Financial Officer
and Secretary, is the daughter of investor William Hambrecht, the Chairman and
Chief Executive Officer of WR Hambrecht + Co., LLC.

     Salon issued 809 shares of Series A preferred stock in August 2001 and
September 2001. Holders of Series A preferred stock include current Salon
directors John Warnock with 125 shares and Robert McKay, in association with the
McKay Investment Group, with 62 shares. Michael Fuchs, who ceased being a
director in September 2003, holds 62 shares Series A preferred stock. William
Hambrecht holds directly 75 shares of Series A preferred Stock and WR Hambrecht
+ Co., LLC holds 50 shares. Ms. Hambrecht has an ownership interest in WR
Hambrecht + Co., LLC.

     Salon issued 125 shares of Series B preferred stock in March 2002 to Adobe
Systems, Inc. Salon Director John Warnock is Co-Chairman of the Board of Adobe
Systems, Inc.

                                       52
<PAGE>

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

            From July 24, 2002 through December 31, 2003 Salon issued $4,227 of
promissory and convertible promissory notes to various investors and issued
warrants to purchase 10,146,036 shares of common stock. The promissory notes
were converted to 5,493 shares of Series C preferred stock in December 2003.
Related parties pertaining to the issuance of notes were comprised of the
following:

                                             PROMISSORY                SERIES C
                                                NOTE       WARRANTS     SHARES
NAME                                           AMOUNT       ISSUED      ISSUED
----------------------------------------     ---------   ----------   ----------
The Hambrecht 1980 Revocable Trust           $      50      150,000           64
WR Hambrecht + Co., LLC                             50      150,000           64
The Sarah & William Hambrecht Foundation            80       40,107          108
HAMCO Capital Corporation                          100      300,000          127
Ironstone Group, Inc                               650    1,950,000          843
                                             ---------   ----------   ----------
Total William Hambrecht related entities           930    2,590,107        1,206
                                             ---------   ----------   ----------

John Warnock                                     2,199    5,649,345        2,849
Wenner Media LLC                                   200      600,000          250
Robert McKay                                       117       58,423          158
Brian Dougherty                                     50       25,000           67
Elizabeth Hambrecht                                 25       75,000           31
GCWF Investment Partners II                         10        5,000           13
                                             ---------   ----------   ----------
Total all                                    $   3,531    9,002,875        4,574
                                             =========   ==========   ==========


Elizabeth Hambrecht has an ownership interest in WR Hambrecht + Co., LLC and in
HAMCO Capital Corporation. William Hambrecht has an ownership interest in HAMCO
Capital Corporation and Ironstone Group, Inc. Jann Wenner, a Director of Salon,
has a controlling interest and is the Chairman and President of Wenner Media
LLC. Robert McKay is a Director of Salon. Brian Dougherty served as a Director
of Salon until April 2003. GCWF Investment Partners II is an investment entity
of Salon's outside legal counsel.

     In addition to converting promissory notes to shares of Series C preferred
stock in December 2003, Salon received $500 from Director John Warnock for which
Salon issued 625 shares of Series C preferred stock and granted warrants to
purchase 1,500,000 shares of common stock. In February 2004, Salon issued 125
shares of Series C preferred stock and warrants to purchase 300,000 shares of
common stock to The Hambrecht 1980 Revocable Trust and issued 125 shares of
Series C preferred stock and warrants to purchase 300,000 shares of common stock
to WR Hambrecht + Co, Inc.

     William Hambrecht and entities that he has a controlling interest, own
1,933,138 shares of Salon's common stock. In December 2003, Wenner Media LLC
received warrants to purchase 2,000,000 shares of common stock as part of an
editorial collaboration agreement. Director Jann Wenner is the Chairman and
President of Wenner Media LLC.

                                       53
<PAGE>

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

NOTE 8. COMMITMENTS AND CONTINGENCIES

     Salon has non-cancelable operating lease agreements for its office space in
San Francisco, CA that expires in February 2005, for its current office in New
York, NY that expires in May 2004, for a former office in New York, NY that
expires in December 2004, and for minimal office equipment. Rent expense under
these operating lease agreements was $625, $1,306, and $1,472, for the years
ended March 31, 2004, 2003, and 2002, respectively. Subsequent to March 31,
2004, Salon extended its lease agreement for its office in New York to expire in
May 2005 and entered into a lease agreement for office space in Washington, DC.

     Salon leases minimal furniture and computer equipment under capital leases
with imputed interest rates of 8.5% and 15.9%.

     In June 2003, Salon reduced the lease space, term and amount of its San
Francisco office to expire in February 2005 for which the landlord retained a
$420 deposit. The forfeited deposit of $420 is being expensed over the revised
lease term. The lease agreement was amended again in December 2003 in which the
landlord agreed to forgive $145 of prior rents owed if Salon moved to a
different floor of the building being occupied by March 31, 2004, the terms of
which Salon met. The forgiven rent credit will be reflected in Salon's results
of operations over the remaining lease term.

     In May 2003, Salon subleased its former office in New York. The sublease
agreement, which expires in December 2005, requires $395 of lease payments by
Salon to the landlord and $217 of payments by the sublessor to the landlord. The
sublease agreement resulted in a charge to rent expense of $180 that was
included in Salon's results of operations for the year ended March 31, 2004.

     Total future minimum rental payments under capital leases and
non-cancelable operating leases in effect subsequent to March 31, 2003 are as
follows:

                                                        CAPITAL      OPERATING
YEAR ENDING MARCH 31,                                    LEASES        LEASES
                                                       ----------    ----------
    2005                                               $       19    $      434
    2006                                                       --            19
    2007                                                                     19
    2008                                                       --             3
                                                       ----------    ----------
        Total minimum lease payments                           19    $      475
                                                                     ==========
           Less: interest                                      (1)
                                                       ----------
        Present value of minimum lease payments                18
           Less: current portion                              (18)
                                                       ----------
        Long-term portion of capital lease obligation  $       --
                                                       ==========

     Salon has entered into various agreements in which it subleases office
space. Rental income resulting from these agreements paid directly to Salon was
none, $530, and $910, for the years ended March 31, 2004, 2003, and 2002,
respectively. The income is recorded as an offset against rent expense.

     Salon, as permitted under Delaware law and in accordance with our Bylaws,
indemnifies its officers, key employees and directors for certain events or
occurrences, subject to certain limits, while the officer is or was serving at
Salon's request in such capacity. The term of the indemnification period is for

                                       54
<PAGE>

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

the officer's, key employee's or director's lifetime. The maximum amount of
potential future indemnification is unlimited; however, Salon does have a
Director and Officer Insurance Policy that limits Salon's exposure and enables
Salon to recover a portion of any future amounts paid. As a result of the
insurance policy coverage, Salon believes the fair value of these
indemnification agreements is minimal.

NOTE 9. INCOME TAXES

     Salon has not recorded a provision or benefit for federal or state income
taxes for any period since inception due to incurring operating losses. At March
31, 2004, Salon has net operating loss carry-forwards of $61,322 and $31,098 for
Federal and California purposes, respectively, available to reduce future
taxable income, if any. These carry-forwards expire through 2023 and 2013 for
Federal and California purposes, respectively, if not utilized beforehand. At
March 31, 2004, Salon has research and development credit carry-forwards of $12
and $9 for Federal and California income tax purposes, respectively. The
research and development credit carry-forwards expire beginning in the year
2011.

     The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carry-forwards in certain situations where changes occur in the stock
ownership of a company. In the event Salon had incurred a change in ownership,
utilization of the carry-forwards could be significantly restricted.

     Temporary differences and other sources of deferred tax assets that give
rise to significant portions of deferred tax assets and liabilities are as
follows:

                                                     MARCH 31,
                                           -----------------------------
                                               2004             2003
                                           ------------     ------------
Net operating losses                       $     22,496     $     20,686
Other                                             1,702            2,000
                                           ------------     ------------
Total deferred tax assets                        24,198           22,686
Valuation allowance                             (24,198)         (22,686)
                                           ------------     ------------
Net deferred tax asset                     $        --      $        --
                                           ============     ============

     Due to the uncertainty of realizing the benefits attributable to the
aforementioned deferred tax assets, Salon has provided a valuation allowance
against the net deferred tax assets. The difference between Salon's effective
income tax rate and the federal statutory (34%) rate is as follows:

                                                  YEAR ENDED MARCH 31,
                                        ---------------------------------------
                                           2004           2003          2002
                                        ----------     ----------    ----------
Statutory tax benefit                   $   (2,945)    $   (1,930)   $   (3,860)
State taxes, net of federal benefit           (505)          (331)         (662)
Permanent differences                        1,608            105         1,472
Other                                          330           (805)          343
                                        ----------     ----------    ----------
Total                                       (1,512)        (2,961)       (2,707)
Change in valuation allowance                1,512          2,961         2,707
                                        ----------     ----------    ----------
                                        $      --      $      --     $      --
                                        ==========     ==========    ==========

                                       55
<PAGE>

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

NOTE 10. PROMISSORY AND CONVERTIBLE PROMISSORY NOTES PAYABLE

            The following is a recap of promissory and convertible promissory
notes payable issued by Salon for working capital and general corporate use:
<TABLE><CAPTION>

             Note                                Warrants                            Investors
----------------------------   ----------------------------------------------- -----------------------
                                                      Exercise price per share
                                             Number    ----------------------
          Issue Date             Amount      Issued     Original   Revised(*)   Number        Ref.
----------------------------   ----------  ----------  ----------  ----------  -----------------------
<S>                           <C>    <C>     <C>      <C>         <C>            <C>     <C>
         July 24, 2002         $      714     357,021  $   0.2100  $   0.0898     11      1,2,4,7,8,9
        October 3, 2002               200           -                              1           2
       December 18, 2002              200     300,000      0.0575      0.0451      1           1
       January 26, 2003               100     150,000      0.0575      0.0451      1           2
       February 11, 2003              100     300,000      0.0575      0.0451      1           6
        March 12, 2003                100     300,000      0.0460      0.0417      1           6
        March 18, 2003                100     300,000      0.0460      0.0417      1           2
        March 25, 2003                200     600,000      0.0460      0.0417      2          2,6
                               ----------  ----------
Total as of March 31, 2003          1,714   2,307,021
                               ----------  ----------

        April 10, 2003                200     600,000      0.0460      0.0417      2          2,6
        April 29, 2003                200     600,000      0.0575      0.0451      2          2,6
         May 28, 2003                 300     900,000      0.0575      0.0451      1           2
         June 12, 2003                100     300,000      0.0575      0.0451      1           4
         June 26, 2003                100     300,000      0.0575      0.0451      1           1
         July 10, 2003                248     744,015      0.0460      0.0417      3         1,2,5
         July 30, 2003                100     300,000      0.0345      0.0345      1           2
        August 29, 2003               165     495,000      0.0345      0.0345      3         1,2,3
      September 12, 2003              100     300,000      0.0575      0.0451      1           2
      September 29, 2003              100     300,000      0.0805      0.5181      1           2
        October 6, 2003               100     300,000      0.0805      0.5181      1           6
       October 10, 2003               100     300,000      0.0575      0.0451      1           2
       October 30, 2003               150     450,000      0.0575      0.0451      2          2,6
       November 12, 2003              100     300,000      0.0690      0.0484      1           2
       November 24, 2003              150     450,000      0.0575      0.0451      2          2,5
       December 10, 2003              200     600,000      0.0575      0.0451      1          10
       December 11, 2003              100     300,000      0.0575      0.0451      1           2
                               ----------  ----------
Total all issued               $    4,227   9,846,036
                               ==========  ==========
</TABLE>

* Exercise price revised pursuant to an anti-dilution provision in applicable
  warrant SALON MEDIA GROUP, INC.

                                       56
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN
                   THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Investor References for table in prior page:

1.   Non-related party investor.
2.   Investment by John Warnock, Director of Salon.
3.   Investment by Salon's President, Chief Financial Officer, and Secretary.
4.   Investment by the father of Salon's President, Chief Financial Officer, and
     Secretary.
5.   Investment by entity that Salon's President, Chief Financial Officer, and
     Secretary and father have an ownership interest in.
6.   Investment by entity that the father of Salon's President, Chief Financial
     Officer, and Secretary has an ownership interest in.
7.   Investment by Robert McKay, Director of Salon
8.   Investment by Brian Dougherty, former Director of Salon
9.   Investment by outside legal counsel of Salon
10.  Investment by Wenner Media LLC, which included an additional issuance of
     2,000,000 warrants for editorial collaboration between Wenner Media LLC and
     Salon. On January 15, 2004, the President of Wenner Media LLC joined
     Salon's Board of Directors.


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

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

     On December 30, 2003 Salon converted $4,227 of notes, which represented all
amounts then owed under various note agreements, $167 of accrued interest on
such notes, and $500 in cash from a Director of Salon, to 6,118 shares of
Salon's Series C preferred stock, based on a purchase price of $800 per share.
The gross proceeds of $500, less $8 of legal were used for working capital and
other general corporate purposes. In addition, warrants to purchase 1,500,000
shares of Salon's common stocks, at an exercise price of $0.0345 per share, were
issued to the Director and valued at $31. As Salon has an insufficient number of
authorized common shares to satisfy all obligations under convertible
instruments, warrant agreements and options, the value of these warrants was
reclassified to a component of warrants payable in Salon's consolidated balance
sheet as of March 31, 2004.

     The warrants issued in conjunction with the convertible promissory notes
payable contained anti-dilution protection. The issuance of Series C preferred
stock triggered the anti-dilution protection of warrants issued with an exercise
price in excess of $0.0345 per share and is reflected in the prior table.

                                       57
<PAGE>

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

NOTE 11. STOCKHOLDERS' EQUITY

PREFERRED STOCK

     Salon has 5,000,000 shares of preferred stock authorized, whose
preferences, rights and privileges are to be decided by the Board of Directors,
authorized in April 1999.

     On August 9, 2001 and September 13, 2001, Salon issued 809 shares of Series
A convertible ("Series A") preferred stock at $4,000 per share, and issued
warrants to purchase 6,472,000 shares of common stock at an exercise price of
$0.2875 per share, for net proceeds of $3,205. On March 7, 2002 Salon issued 125
shares of Series B convertible ("Series B") preferred stock at $4,000 per share,
and issued a warrant to purchase 1,414,827 shares of common stock at an exercise
price of $0.21 per share, for net proceeds of $466.

     As mentioned in Note 10, on December 30, 2003 Salon issued 6,118 shares of
Series C convertible ("Series C") preferred stock. On February 10, 2004, Salon
issued an additional 500 shares of Series C preferred stock and received $400 in
cash from two investors, one of which is the father of Salon's President, Chief
Financial Officer and Secretary. In addition, warrants to purchase 1,200,000
shares of common stock at an exercise price $0.0345 per share were issued and
valued at $263. As Salon has an insufficient number of authorized common shares
to satisfy all obligations under convertible instruments, warrant agreements and
options, the value of these warrants was reclassified to a component of warrants
payable in Salon's consolidated balance sheet as of March 31, 2004.

     The holders of Series A, B, and C preferred stock are entitled to certain
rights and preferences that include cumulative and accrued dividends of 8.0%
annually when, as and if declared by the Board of Directors. The holders of
preferred stock are entitled, in the event of a liquidation, either voluntary,
involuntary, liquidation, merger, sale of all or substantially all the assets of
Salon, dissolution or winding up the affairs of Salon, prior and in preference
to distributions of assets of Salon made to holders of common stock. The holders
of Series C preferred stock are entitled to receive prior and in preference to
distributions of assets of Salon made to holders of common stock, Series A and
Series B preferred stock, an amount equal to $1,600 per share of Series C
preferred stock. After this initial distribution, the holders of Series A and
Series B preferred stock are entitled to a distributions to be made prior to and
in preference to holders of common stock in an amount equal to $8,000 per share
of Series A and B preferred stock if available. If any assets remain after
initial distributions to the Series A, B and C preferred stock holders, the
holders of Series A, B and C preferred stock are entitled to participate with
the holders of common stock in a distribution of the remaining assets of Salon
available to stockholders ratably in proportion to the shares of common stock
held by them and the shares of common stock which they have the right to acquire
upon conversion of the shares of preferred stock, with the holders of Series A
and B preferred stock being entitled to receive a maximum $4,000 per share in
this distribution. The holders of preferred stock own approximately 95% of the
common stock or shares of common stock that they have the right to acquire upon
conversion their shares of preferred stock.

     The holders of preferred stock, are entitled to vote together with the
holders of Salon's common stock as though part of that class, and are entitled
to vote on all matters and to that number of votes equal to the largest number
of whole shares of common stock into which the shares of preferred stock could
be converted.

                                       58
<PAGE>

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

     Each share of Series A and B preferred stock is convertible at the option
of the holder into shares of common stock at any time. The Series C preferred
stock can be converted to common stock after Salon has amended its Certificate
of Incorporation, and upon securing the requisite approval of Salon's Board of
Directors and stockholders, to increase the authorized number of shares of
common stock. The Series A, B and C preferred stock conversion price is subject
to a downward adjustment anti-dilution provision under certain circumstances
related to subsequent Salon stock issuances.

     The Series A preferred stock was originally convertible into common stock
of Salon at the conversion rate determined by dividing the Series A preferred
stock per share price of $4,000 by the Series A Conversion Price of $0.25, or at
the rate of one share of Series C preferred stock to 16,000 shares of common
stock. The Series B preferred stock was originally convertible into common stock
of Salon at the conversion rate determined by dividing the Series B preferred
stock per share price of $4,000 by the Series A Conversion Price of $0.1767, or
at the rate of one share of Series C preferred stock to 22,637 shares of common
stock. The Series C preferred stock is convertible into common stock of Salon at
the conversion rate determined by dividing the Series C Preferred Stock per
share price of $800 by the Series C Conversion Price of $0.04, or at the rate of
one share of Series C preferred stock to 20,000 shares of common stock. The
March 2002 issuance of Series B preferred stock triggered the anti-dilution
provision of the Series A preferred holders, resulting in the conversion price
of the Series A preferred stock to common stock declining from $0.25 per share
to $0.24338 per share, while increasing the convertible shares of Series A
preferred stock from 12,944,000 shares of common stock to 13,296,306 shares of
common stock. The issuance of Series C preferred stock during the year ended
March 31, 2004 again triggered the anti-dilution provisions of the Series A and
B preferred stock holders. As of March 31, 2004, the Series A Conversion Price
has been adjusted to $0.09959, or at the rate of one share of Series A preferred
stock to approximately 40,165 shares of common stock and the Series B Conversion
Price has been adjusted to $0.08003, or at the rate of one share of Series B
preferred stock to approximately 49,982 shares of common stock. The 809 shares
of Series A preferred stock can be converted to approximately 32,493,000 common
stock shares, the 125 shares of Series B preferred stock can be converted to
approximately 6,248,000 common stock shares and the 6,618 shares of Series C
preferred stock can be converted to approximately 132,360,000 common stock
shares. No conversion of preferred stock to common stock occurred as of March
31, 2004.

     The warrants issued in conjunction with the issuance of Series A and B are
also subject to anti-dilution protection. The March 2002 issuance of warrants to
acquire 1,414,827 shares of common stock at $0.21 per share to the holder of
Series B preferred stock triggered such a provision. Therefore, the exercise
price of warrants to acquire 6,472,000 shares of common stock held by the Series
A preferred stock holders declined from $0.2875 per share to $0.27688 per share
as of March 31, 2003. The issuance of Series C preferred stock reduced the
exercise price of the warrants issued to the Series A preferred holders to
$0.11334 per share and reduced the exercise price of the warrants issued to the
Series B preferred holder to $0.0898 per share.

     A covenant of issuing Series B preferred stock was that Salon hold a
stockholders meeting to approve the terms of the Series B preferred stock and
the warrant no later than October 31, 2002. No such meeting has been held as of
March 31, 2004. Salon anticipates soliciting the approval of its stockholders
regarding the conversion of the Series B preferred stock and the issuance and
sale of the warrant by December 31, 2004.

                                       59
<PAGE>

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

     The difference between the offering price of the Series A preferred stock
and the fair value of the common stock into which the preferred stock is
convertible on the dates of the transactions, resulted in a beneficial
conversion feature in the amount of $2,257. The allocation of proceeds between
preferred stock and warrants and the immediate redemption feature of the
preferred stock resulted in an immediate accretion of the preferred stock in the
amount of $932. The warrants were valued using the Black-Scholes option-pricing
model, assuming no dividend yield, an expected volatility of 100%, contractual
life of five years and a risk-free interest rate of 4.5%. The aggregate value of
the beneficial conversion feature and immediate accretion, of $3,189, is
reflected as a preferred dividend in the consolidated statements of operations
for the year ended March 31, 2002. In addition, an 8% cash dividend of $97 was
accrued to the holders of the preferred stock. As of March 31, 2004, no cash
dividend has been paid.

     Neither the Series A, B or C Preferred Stock, the associated warrants, nor
the underlying shares of common stock have been registered for sale under the
Securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration under such act or an applicable exemption from
registration requirements.

CONVERTIBLE PREFERRED STOCK WARRANTS

     In July 1998, Salon issued a warrant to purchase 79,000 shares of Old
Series B preferred stock at an exercise price of $3.16 per share in connection
with an online distribution agreement. Salon valued the warrant at $217 using
the Black-Scholes option pricing model and amortized this amount to sales and
marketing expense through its fiscal year ended March 31, 2000 in its
Consolidated Statement of Operations. Upon completion of the initial public
offering, the warrant was converted to the right to purchase an equivalent
number of Salon's common stock at the same exercise price per share. The warrant
expired in July 2003 without being exercised.

     In September 1998, Salon issued warrants to purchase up to 220,000 shares
of common stock at an exercise price of $0.52 per share in connection with the
sale of Old Series C convertible preferred stock. Salon valued the warrants at
$615 using the Black-Scholes option-pricing model and applied the amount to
additional paid-in capital. The allocation of proceeds between convertible
preferred stock and warrants resulted in a beneficial conversion feature in the
amount of $271 that was reflected as a preferred deemed dividend in the
Consolidated Statement of Operations for the fiscal year ended March 31, 1999.
Upon completion of the initial public offering, the warrant was converted to the
right to purchase an equivalent number of Salon's common stock at the same
exercise price per share. The warrants may be exercised at any time within 10
years after issuance and expire in September 2008. As of March 31, 2004,
warrants to purchase 173,000 shares of common stock were exercisable.

     In April 1999, Salon issued warrants to purchase 148,000 shares of Old
Series C preferred stock at an exercise price of $3.88 per share. Salon valued
the warrants using the Black-Scholes option pricing model, applying an expected
life of 5 years, a weighted average risk-free interest rate of 5.14%, an
expected dividend yield of zero percent, a volatility of 107% and a deemed fair
value of common stock of $10.80. The fair market value of the warrants of $1.4
million was netted against the proceeds from Salon's initial public offering.
Upon completion of the initial public offering, the warrants were converted into
the right to purchase an equivalent number of shares of Salon's common stock at
the same exercise price per share. The warrants expired in April 2004 without
being exercised.

                                       60
<PAGE>

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

     In April 1999, Salon issued warrants to purchase 26,000 shares of Old
Series C preferred stock at an exercise price of $3.88 per share. Salon valued
the warrant using the Black-Scholes option pricing model, applying a contractual
life of 5 years, a weighted average risk-free interest rate of 5.14%, an
expected dividends yield of zero percent, a volatility of 107% and a deemed fair
value of common stock of $10.80. The fair market value of the warrants of $244
was amortized through Salon's fiscal year ending March 31, 2002 as a component
of sales and marketing expense in the Consolidated Statement of Operations. Upon
completion of Salon's initial public offering, the warrants were converted into
the right to purchase an equivalent number of shares of Salon's common stock at
the same exercise price per share. The warrants expired in April 2004 without
being exercised.

COMMON STOCK WARRANTS NOT ASSOCIATED WITH ISSUANCE OF SERIES A OR B PREFERRED
STOCK

     In June 1999, Salon issued warrants to purchase 6,000 shares of common
stock at an exercise price of $10.06 per share in return for marketing
consulting work. Salon valued the warrants using the Black-Scholes
option-pricing model, applying a contractual life of 5 years, a weighted average
risk-free interest rate of 5.5%, an expected dividend yield of zero percent, a
volatility of 107% and a deemed fair value of common stock of $10.06. The fair
market value of the warrants of $47 was amortized through Salon's fiscal year
ending March 31, 2002 as a component of sales and marketing expense in the
Consolidated Statement of Operations. The warrants may be exercised at any time
within five years after issuance and expire in June 2004. The warrants have not
been exercised as of March 31, 2004.

     In January 2002, Salon issued warrants to purchase 30,000 shares of common
stock at an exercise price of $0.15 per share in return for marketing consulting
work. Salon valued the warrants using the Black-Scholes option-pricing model,
applying a contractual life of 5 years, a weighted average risk-free interest
rate of 4.15%, an expected dividend yield of zero percent, a volatility of 100%
and a deemed fair value of common stock of $0.12. The fair market value of the
warrants of $3 was amortized through Salon's fiscal year ending March 31, 2002
as a component of sales and marketing expense in the Consolidated Statement of
Operations. The warrants may be exercised at any time within five years after
issuance and expire in June 2007. The warrants have not been exercised as of
March 31, 2004.

     In October 2002, Salon issued warrants to purchase 37,500 shares of common
stock at an exercise price of $0.05 per share to secure an account receivable
purchase agreement with a bank. Salon valued the warrants using the
Black-Scholes option-pricing model, applying a contractual life of 7 years, a
weighted average risk-free interest rate of 3.0%, an expected dividend yield of
zero percent, a volatility of 120% and a deemed fair value of common stock of
$0.07. The fair market value of the warrants of $2 was amortized through Salon's
fiscal year ending March 31, 2003 as a component of interest and other expense
in the Consolidated Statement of Operations. The issuance of Series C preferred
stock triggered an anti-dilution provision of the warrant agreement, increasing
the number of warrants to 44,285 and lowering the exercise price to $0.0431. The
warrants may be exercised at any time within seven years after issuance and
expire in October 2009. The warrants have not been exercised as of March 31,
2004.

     In October 2003, Salon issued warrants to purchase 1,000,000 shares of
common stock at an exercise price of $0.05 per share to its former President and
Chief Executive Officer. Salon valued the warrants using the Black-Scholes
option-pricing model, applying a contractual life of 2 years, a weighted average
risk-free interest rate of 1.625%, an expected dividend yield of zero percent, a
volatility of 120% and a deemed fair value of common stock of $0.05. The fair
market value of the warrants of $31 was amortized through Salon's fiscal year
ending March 31, 2004 as a component of general and

                                       61
<PAGE>

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

administrative expense in the Consolidated Statement of Operations. The warrants
may be exercised at any time within two years after issuance and expire in
October 2005. The warrants have not been exercised as of March 31, 2004.

            In December 2003, Salon issued warrants to purchase 2,000,000 shares
of common stock at an initial exercise price of $0.0575 per share as part of an
editorial collaboration agreement with a publisher. Salon valued the warrants
using the Black-Scholes option-pricing model, applying a contractual life of 3
years, a weighted average risk-free interest rate of 2.375%, an expected
dividend yield of zero percent, a volatility of 120% and a deemed fair value of
common stock of $0.05. The fair market value of the warrants of $69 will be
amortized over a twelve-month period as a component of production and content in
the Consolidated Statement of Operations, of which $17 was amortized for the
fiscal year ending March 31, 2004. The warrants may be exercised at any time
within three years after issuance and expires in December 2006. The warrants
have not been exercised as of March 31, 2004.

CONVERTIBLE SECURITIES ISSUED IN EXCESS OF AUTHORIZED SHARES OF COMMON STOCK

     Salon's charter allows for the issuance of 50,000,000 shares of common
stock, which is insufficient to satisfy all obligations under convertible
instruments, warrant agreements and options. The inadequacy was originally
triggered with the issuance of convertible notes that did not stipulate a
maximum number of shares upon conversion and continues to be triggered by the
fact that 6,618 shares of Series C preferred stock could be converted to
132,360,000 shares of common stock. Therefore, due to the inadequacy of
authorized shares of common stock, the value of warrants issued is classified as
a long-term liability, with the fair value re-measured at each balance sheet
period or upon an anti-dilution triggering event of the underlying security
agreement. The initial triggering event occurred with the issuance of
convertible notes on July 24, 2002 resulting in all the then outstanding
warrants being classified as long-term liabilities at a fair value of $175 on
that day. All outstanding warrants were re-measured as of March 31, 2003
resulting in a charge of $114, of which $81 related to warrants issued in
conjunction with the issuances of preferred stock, and was recorded as a
preferred deemed dividend in Salon's results of operations for the year then
ended. The outstanding warrants as of March 31, 2004 were again re-measured as
of that day, which resulted in a cumulative charge of $1,610, of which $575
related to warrants issued in conjunction with the issuances of preferred stock,
and was recorded as a preferred deemed dividend in Salon's results of operations
for the year then ended.

COMMON STOCK ISSUED FOR PREPAID ADVERTISING RIGHTS

     In December 1999, Salon issued 1,125,000 shares of common stock,
representing approximately 10% of Salon's then outstanding common stock to a
broadcasting company in exchange for $11,800 in advertising and promotional time
to be delivered over ten years. Based on the then closing price of Salon's
common stock, Salon recorded the value of the services to be rendered at $8,100
that it is amortizing as used. To date, the broadcasting company has delivered
$5,374 of advertising and promotion time.






                                       62
<PAGE>

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

NOTE 12. GOODWILL AND INTANGIBLE ASSETS

     In accordance with FASB No. 142, "Goodwill and Other Intangible Assets"
(SFAS No. 142), goodwill amortization was discontinued as of March 31, 2002. The
carrying value of goodwill at March 31, 2004 and March 31, 2003 was $200 and has
been found not to be impaired.

     The following table reflects consolidated results as if Salon had followed
the non-amortization provision of SFAS No. 142 for all periods presented as of
March 31 of each year:

                                                    2004       2003       2002
                                                 ---------  ---------  ---------
Reported net loss attributable to common
  stockholders                                   $   8,661      5,678  $  11,286
Goodwill amortization                                             --         133
                                                 ---------  ---------  ---------
Adjusted net loss attributable to common
  stockholders                                   $   8,661  $   5,678  $  11,153
                                                 =========  =========  =========

Basic and diluted net loss per share
  attributable to common stockholders            $    0.61  $    0.41  $    0.83
Goodwill amortization                                  --         --        0.01
                                                 ---------  ---------  ---------
Adjusted basic and diluted net loss per share
  attributable to common stockholders            $    0.61  $    0.41  $    0.82
                                                 =========  =========  =========

     The following table sets forth information concerning Salon's intangible
assets as of March 31, 2004:

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

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

                                       63
<PAGE>

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

     The following table sets forth information concerning Salon's intangible
assets as of March 31, 2003:

                                           Gross                        Net
                                          Carrying     Accumulated    Carrying
                                           Amount     Amortization     Amount
                                        ------------  ------------  ------------
Trade name                              $      1,200  $        960  $        240
Proprietary technology                           355           284            71
Audio technology                                 158           121            37
                                        ------------  ------------  ------------
Total intangible assets subject to
  amortization                          $      1,713  $      1,365  $        348
                                        ============  ============  ============

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

     No amortization of intangibles expense will be incurred in future period.

NOTE 13. EMPLOYEE STOCK OPTION PLAN

     Under the Salon Internet, Inc. 1995 Stock Option Plan ("Salon Plan")
incentive and nonqualified stock options may be granted to officers, employees,
directors and consultants of Salon. Options vest over periods of one to four
years and have terms of ten years. The exercise price of options is determined
by the Board of Directors and is generally at least equal to the fair market
value of the stock on the grant date. Salon does not have any option plans not
approved by shareholders. At March 31, 2004, 2003, and 2002, Salon had
3,336,000, 1,151,000, and 559,000, shares, respectively, authorized and
available for grants under this plan.

     The following table summarizes activity under Salon's Plan from March 31,
2001 through March 31, 2004:

                                                          Weighted
                                                          Average
                                       Number of          Exercise
                                        shares             Price
                                      -----------       -----------
Balance March 31, 2001                  3,509,000       $      3.43
Options granted                         4,206,000       $      0.17
Options terminated                       (972,000)      $      1.99
Options exercised                         (15,000)      $      0.32
                                      -----------
Balance March 31, 2002                  6,728,000       $      1.61
Options granted                            69,000       $      0.10
Options terminated                       (661,000)      $      1.36
Options exercised                             --        $       --
                                      -----------
Balance March 31, 2003                  6,136,000       $      1.62
Options granted                               --        $       --
Options terminated                     (2,185,000)      $      1.83
Options exercised                             --        $       --
                                      -----------
Balance March 31, 2004                  3,951,000       $      1.50
                                      ===========

                                       64
<PAGE>

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

The following table summarizes information about stock options outstanding at
March 31, 2004:

                           Options Outstanding           Options Exercisable
                  ------------------------------------  ----------------------
                                 Weighted
                                 Average      Weighted                Weighted
                   Number of    Remaining     Average    Number of    Average
   Range of         Shares     Contractual    Exercise     Shares     Exercise
Exercise Prices   Outstanding  Life (Years)    Price    Exercisable    Price
---------------   -----------  ------------  ---------  -----------  ---------
$0.06 - $ 0.06         8,000       8.5       $    0.06       3,000   $   0.06
$0.11 - $ 0.14     2,035,000       7.5            0.14   1,237,000       0.14
$0.20 - $ 0.20       225,000       3.1            0.20     225,000       0.20
$0.32 - $ 0.37       687,000       6.6            0.36     644,000       0.36
$0.52 - $ 0.52        31,000       4.5            0.52      31,000       0.52
$1.38 - $ 2.00       376,000       6.3            1.86     333,000       1.86
$2.92 - $ 3.63       120,000       5.0            2.98     119,000       2.97
$5.06 - $ 5.25        43,000       5.2            5.22      43,000       5.22
$8.50 - $10.06       426,000       5.3            9.51     426,000       9.51
                  -----------                           -----------
                   3,951,000       6.6       $    1.50   3,061,000   $   1.87
                  ===========                           ===========

     At March 31, 2003 and 2002 options to purchase 3,589,000 and 1,900,000
shares of common stock, respectively, were exercisable.

     Salon has elected to follow the accounting provisions of APB 25 for
stock-based compensation. Accordingly, compensation expense is recognized only
when options are granted with a discounted exercise price from fair market value
at the time of the grant. Any compensation expense is recognized ratably over
the associated service period, which is generally the option vesting term.
Accordingly, Salon recognized the following compensation expense associated with
discounted options issued prior to Salon's initial public offering:

                                             YEAR ENDED MARCH 31,
                                   ---------------------------------------
                                      2004          2003           2002
                                   ----------    ----------     ----------
Production and content             $      --     $       35     $       72
Sales and marketing                       --             21             55
Research and development                  --            --             (22)
General and administrative                --              1              9
                                   ----------    ----------     ----------
                                   $      --     $       57     $      114
                                   ==========    ==========     ==========

                                       65
<PAGE>

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

NOTE 14. SUBSEQUENT EVENTS

            On June 4, 2004, Salon received $500 from the issuance of 417 shares
of Series D-1 preferred stock and warrants to purchase approximately 807,000
shares of common stock. The investors included Salon Director John Warnock,
William Hambrecht, the father of Elizabeth Hambrecht, Salon's President, Chief
Financial Officer and Secretary, and an entity that Mr. Hambrecht and Ms.
Hambrecht have an ownership interest therein. The 417 shares of Series D-1
preferred stock can be converted to approximately 5,381,000 shares of common
stock after Salon has amended its Certificate of Incorporation and upon securing
approval by the Board of Directors and stockholders to increase the authorized
number of shares of Salon's common stock.





















                                       66
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

                                             Net Loss       Loss per share
                                          Attributable to   Attributable to
                  Net         Gross           Common           Common
Quarter         Revenues      Margin       Stockholders     Stockholders
----------      --------     ---------     ------------     ------------
2004
    1st         $  1,045     $    (144)    $     (1,320)    $     (0.09)
    2nd            1,086           130           (1,198)          (0.09)
    3rd            1,273           204           (1,187)          (0.08)
    4th            1,095          (338)          (4,956)          (0.35)
                --------     ---------     ------------
    Total       $  4,499     $    (148)    $     (8,661)    $     (0.61)
                ========     =========     ============

2003
    1st         $    972     $    (201)     $    (1,663)    $     (0.12)
    2nd            1,023          (198)          (1,481)          (0.11)
    3rd            1,140            36           (1,256)          (0.09)
    4th              868           (59)          (1,278)          (0.09)
                --------     ---------     ------------
    Total       $  4,003     $    (422)     $    (5,678)    $     (0.41)
                ========     =========     ============

The sum of the quarterly net loss per share amounts may not equal the full-year
amounts since the computation of the weighted average number of
common-equivalent shares outstanding for each quarter and the full year are made
independently.













                                       67
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

(a)  Previous independent accountants

     (i)  On October 30, 2003, PricewaterhouseCoopers LLP declined to stand for
          reappointment as Salon's independent accountant after the filing of
          the Form 10-Q for Salon for the quarter ended September 30, 2003,
          which Form 10-Q was filed by Salon on November 13, 2003. Therefore,
          PricewaterhouseCoopers LLP ceased serving as Salon's independent
          accountant as of November 13, 2003.

     (ii) The reports of PricewaterhouseCoopers LLP on the financial statements
          as of and for the two fiscal years ended March 31, 2003 and 2002
          contained an explanatory paragraph that expressed substantial doubt
          regarding the Registrant's ability to continue as a going concern.
          Such reports did not contain any other adverse opinion or disclaimer
          of opinion and were not qualified or modified as to audit scope or
          accounting principle.

     (iii) In connection with its audits as of and for the two fiscal years
          ended March 31, 2003 and 2002 and through November 13, 2003, there
          were no disagreements with PricewaterhouseCoopers LLP on any matter of
          accounting principles or practices, financial statement disclosure, or
          auditing scope or procedure, which disagreements, if not resolved to
          the satisfaction of PricewaterhouseCoopers LLP, would have caused them
          to make reference thereto in their report on the financial statements
          for such years.

     (iv) During the two fiscal years ended March 31, 2003 and 2002 and through
          November 13, 2003, there were no reportable events (as defined in
          Regulation S-K Item 304(a)(1)(v)).

     (v)  Salon requested that PricewaterhouseCoopers LLP furnish it with a
          letter addressed to the Securities and Exchange Commission stating
          whether or not it agrees with the above statements. A copy of such
          letter, dated November 26, 2003 was filed as Exhibit 16.2 to a Form
          8-K/A filed on November 26, 2003.

(b)  New independent accountants

     (i)  Salon engaged Burr, Pilger & Mayer LLP as its new independent
          accountant on October 31, 2003. During the two most recent fiscal
          years ended March 31, 2003 and through the six month interim period
          ended September 30, 2003, and through October 30, 2003, Salon did not
          consult with Burr, Pilger & Mayer LLP regarding either (i) the
          application of accounting principles to a specified transaction,
          either completed or proposed; or the type of audit opinion that might
          be rendered on Salon's financial statements, and neither a written
          report was provided to Salon or oral advice was provided that Salon
          concluded was an important factor considered by Salon in reaching a
          decision as to the accounting, auditing or financial reporting issue;
          or (ii) any matter that was either the subject of a disagreement, as
          that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the
          related instructions to Item 304 of Regulation S-K, or a reportable
          event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

     As of the end of the year ended March 31, 2004, Salon carried out an
evaluation, under the supervision and with the participation of members of
Salon's management, including Salon's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of Salon's
disclosure controls and procedures. Based upon that evaluation, Salon's Chief
Executive Officer and Chief Financial Officer have concluded that Salon's
disclosure controls and procedures are effective.

                                       68
<PAGE>

     During the most resent quarter, there were no significant changes in
Salon's internal controls or in other factors that could significantly affect
those controls subsequent to the date of their most recent evaluation. There
were no significant deficiencies or material weaknesses, and therefore, there
were no corrective actions taken.


PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS

     Salon's executive officers and directors as of March 31, 2004 are as
follows:

Name                       Age   Position
------------------------   ---   ---------------------------------------------
David Talbot                52   Chairman of the Board, Editor-in-Chief, Chief
                                 Executive Officer
Michael O'Donnell(1)        40   Chief Executive Officer, President, Director
                                 (former)
Elizabeth Hambrecht         41   President, Chief Financial Officer, and
                                 Secretary
Melissa Barron              46   Senior Vice President, Sales
Sidney Blumenthal           55   Senior Vice President, Editorial Development
Patrick Hurley              42   Senior Vice President, Business Operations
Scott Rosenberg             44   Senior Vice President, Editorial Operations
Robert Ellis(5)             68   Director
Michael Fuchs(2)            58   Director (former)
George Hirsch(3,5)          69   Director
Robert McKay                40   Director
James H. Rosenfield(5,6)    75   Director
John Warnock                63   Director
Jann Wenner(4)              58   Director

     (1) Resigned in October 2003
     (2) Resigned in September 2003
     (3) Director effective April 3, 2003
     (4) Director effective January 15, 2004
     (5) Member of Audit Committee
     (6) Member of Compensation Committee


     DAVID TALBOT co-founded Salon in 1995. He has served as Editor-in-Chief
since Salon's incorporation. He served as Chief Executive Officer from 1995
through April 1999 and again starting in October 2003. He became Chairman of the
Board in April 1999. From 1990 to 1995, Mr. Talbot was the Arts & Features
editor for the San Francisco Examiner newspaper. Mr. Talbot has co-authored
three

                                       69
<PAGE>

books and written for numerous publications including The New Yorker, Rolling
Stone and Playboy. Mr. Talbot holds a Bachelor of Arts degree in sociology from
the University of California at Santa Cruz.

     ELIZABETH HAMBRECHT has served as Salon's President since October 2003 and
as Chief Financial Officer, and Secretary since May 2003. From 1999 to March
2003, she was the co-founder and Director of Asiacontent.com. From 1997 to 2000
she was the co-founder, Chief Financial Officer and Director of Boom.com. From
1992 to 1995 she was Executive Director at Goldman Sachs (Hong Kong) Ltd. From
1987 to 1992 she was Assistant Director at Barings Securities (Hong Kong) Ltd.
Ms Hambrecht holds a Bachelor of Arts degree in history from Vassar College

     MELISSA BARRON has served as Salon's Senior Vice President, Sales since
October 2003. From 2001 to 2003, she served as Vice President, Western Region
Sales. Upon joining Salon in April 1999 to 2001 she served as a Senior Sales
Manager. From 1996 to 1997 she held various advertising positions with Conde
Nast Publications, Inc. and The New Yorker. From 1987 to 1996, she was initially
an Advertising Account Manager and then Western Sales Manager for Fairchild
Publications. From 1984 to 1987 she was a buyer for Nordstrom, a retail
merchant. Ms. Barron holds a Bachelor of Science degree in environmental
planning and management from University of California, Davis.

     SIDNEY BLUMENTHAL has served as Salon's Senior Vice President, Editorial
Development since February 2004. He is also currently a columnist for The
Guardian of London. Mr. Blumenthal is former assistant and senior adviser to
President Bill Clinton. He has been a staff writer for The New Yorker, The
Washington Post and The New Republic, and contributing editor for Vanity Fair.
He is the author of numerous books, including "The Clinton Wars" (2003),
"Pledging Allegiance: The Last Campaign of the Cold War" (1990), "Our Long
National Daydream: A Pageant of the Reagan Era" (1988), co-editor of "The Reagan
Legacy" (1988), "The Rise of the Counter-Establishment" (1986), and "The
Permanent Campaign" (1980). His play, "This Town," was originally produced by LA
TheatreWorks in 1995 and then around the country. He was associate producer of
the major motion picture "Max," released in 2003. Mr. Blumenthal graduated from
Brandeis University in 1969 with a Bachelor of Arts degree in American Studies.

     PATRICK HURLEY has served as Salon's Senior Vice President, Business
Operations since October 2000. From March 1999 to October 2000 he served as Vice
President of Marketing. From 1998 to 1999, he served as Salon's Marketing
Director. From 1996 to 1998, he was Management Supervisor at Hal Riney &
Partners, an advertising agency. From 1994 to 1996, he served as Account
Supervisor for the J. Walter Thompson advertising agency. Mr. Hurley holds a
Bachelor of Arts degree in journalism from Marquette University.

     SCOTT ROSENBERG has served as Salon's Senior Vice President, Editorial
Operations since October 2000. From January 1999 until then, he served as Vice
President of Website Development. He also serves as Salon's Managing Editor and
has held that position since June 1999. Previous to that, he served as Senior
Editor/Technology, a position he held from the founding of Salon in 1995. Before
joining Salon, he was the San Francisco Examiner's movie and theater critic for
nearly 10 years. Mr. Rosenberg holds a Bachelor of Arts degree from Harvard
University.

     ROBERT ELLIS has served as a Director of Salon since August 2001. He is an
advisor, investor, and director of Internet companies. From 1997 through 1999 he
was the publisher, board member and early investor of XOOM.com (XMCM) that was
merged with the National Broadcasting Company, Inc.'s Internet properties. He
formerly was president of eNature.com, the leading nature content site on the
web. Mr. Ellis is a co-founder and member of the board of One FN, and is on the
board of Winetasting.com. In 1996, he founded and produced Bonjour Paris, a
travel destination site in France featured on America Online. Prior to that, he
founded and owned Compact Publishing, for which he developed the Time

                                       70
<PAGE>

Almanac with Time Magazine. He formerly was a correspondent for Time Magazine.
Mr. Ellis holds an M.A. degree in History from the University of Chicago and a
B. A. in Philosophy from Yale University.

     GEORGE HIRSCH has served as a Director of Salon since April 2003. In 1978
he was the founding publisher of THE RUNNER magazine and served as its President
through 1987, at which time Rodale Inc., the publisher of RUNNER'S WORLD,
acquired it. Since 1987 he has held various positions with Rodale, Inc.,
including Worldwide Publisher of RUNNER'S WORLD, Publishing Director of MEN'S
HEALTH, and Director of International Magazines. Currently he is Worldwide
Publisher Emeritus of RUNNER'S WORLD and MEN'S HEALTH magazines. In 1973 he was
founding publisher of NEW TIMES magazine and served as its President through
1979. In 1967 he was the founding publisher NEW YORK magazine and served as its
President through 1971. From 1962 through 1967 he held various positions with
Time Inc. Mr. Hirsch holds a Masters in Business Administration from the Harvard
University and a B.A. in History from Princeton University.

     ROBERT MCKAY has served as a Director of Salon since August 2001. He has
served as the President of the McKay Family Foundation since its inception in
1992, which supports community-based activist organizations working for
long-term social and economic change. Mr. McKay is also the Managing Partner for
the McKay Investment Group, which provides venture capital for early-stage
technology and consumer product companies. He also serves actively on a number
of corporate and foundation boards. Mr. McKay received his B.A. degree in
Political Science and Sociology from Occidental College, and his M.A. in Social
and Public Policy from the University of California, Berkeley.

     JAMES H. ROSENFIELD has served as a Director of Salon since April 1998. Mr.
Rosenfield has been the President of JHR & Associates, a media-consulting firm,
since 1998. From 1994 to 1998, Mr. Rosenfield was Managing Director at the
investment-banking firm of Veronis Suhler & Associates. From 1987 to 1994, he
was Chairman and Chief Executive Officer of John Blair Communications, Inc., a
television sales and syndication company. From 1965 to 1985, Mr. Rosenfield held
various executive positions at CBS Corporation, a television broadcasting and
media company, including Executive Vice President of the Broadcast Group. Mr.
Rosenfield holds a B.A. degree in English from Dartmouth College.

     JOHN WARNOCK has served as a Director of Salon since August 2001. He was a
founder of Adobe Systems and has been its Chairman of the Board since April
1989. Since September 1997, he has shared the position of Adobe Chairman of the
Board with Charles M. Geschke. Dr. Warnock served as Chief Executive Officer of
Adobe from 1982 through December 2000. In December 2000, Dr. Warnock assumed the
role of Chief Technical Officer in addition to that of Chairman of the Board.
Dr. Warnock received a Ph.D. in Electrical Engineering from the University of
Utah. Mr. Warnock serves as a Director for Knight Ridder, Inc., a publisher of
news and information in digital and hard copy formats.

     JANN WENNER has served as a Director of Salon since January 2004. In 1967,
Mr. Wenner founded Rolling Stone Magazine, which was published by Straight Arrow
Publishers, Inc. (SAP, Inc.), a corporation wholly owned by Mr. Wenner and his
family. Mr. Wenner has served as president and chairman of SAP, Inc., and its
wholly owned limited liability company, Wenner Media LLC, since their inception.
In 1992 Mr. Wenner founded Men's Journal, also published through a wholly owned
limited liability company owned by Wenner Media LLC. In 1985 Mr. Wenner
purchased a minority interest in Us Magazine and in 1989 purchased the remaining
interest. In 2000, Us changed to a weekly frequency and today is published
through a joint venture with the Walt Disney Company. Mr. Wenner also serves as
Vice-Chairman of the Rock and Roll Hall of Fame Foundation, Inc.

                                       71
<PAGE>

AUDIT COMMITTEE FINANCIAL EXPERT

     The Board of Directors has determined that the Audit Committee does not
have at least one Audit Committee Financial Expert. As such, the Audit Committee
is composed of disinterested Directors who are not officers of Salon. Salon will
make every effort in the coming year to identify qualified candidates to serve
on the audit committee as an audit committee financial expert.

NOMINATION OF DIRECTORS

     There has been no material change to the way in which security holders may
nominate directors.

CODE OF CONDUCT

     Salon has adopted a Code of Conduct and Policy Regarding Reporting of
Possible Violations (the "Code of Conduct"). The Code of Conduct can be found at
Salon's website at WWW.SALON.COM under the caption "About Salon."





















                                       72
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

            The following table sets forth information concerning the
compensation during the fiscal years ended March 31, 2004, March 31, 2003 and
March 31, 2002 of the Chief Executive Officers and the four other most highly
compensated current and former executive officers.

<TABLE><CAPTION>
                           SUMMARY COMPENSATION TABLE
                                                                            LONG TERM
                                                                           COMPENSATION
                                                                            ON AWARDS
                                                                            ----------
                                                 ANNUAL COMPENSATION        SECURITIES
                                             ---------------------------    UNDERLYING     ALL OTHER
    NAME AND PRINCIPAL POSITION              YEAR     SALARY    BONUS(1)     OPTIONS     COMPENSATION
-----------------------------------------    ----    --------   --------    ----------   ------------
<S>                                         <C>     <C>        <C>          <C>           <C>
Michael O'Donnell(2).....................    2004    $201,250   $    --          --        $     --
     (Former) Chief Executive                2003    $191,250   $    --          --        $     --
     Officer and President                   2002    $191,250   $    --      440,000       $     --

David Talbot.............................    2004    $191,250   $    --          --        $     --
     Chairman, Chief Executive               2003    $191,250   $    --          --        $     --
     Officer and Editor in Chief             2002    $191,250   $    --      440,000       $     --

Elizabeth Hambrecht......................    2004    $130,000   $    --          --        $     --
     President, Chief Financial              2003    $    --    $    --          --        $     --
     Officer, and Secretary                  2002    $    --    $    --          --        $     --

Robert O'Callahan(3).....................    2004    $ 48,229   $    --          --        $     --
     (Former) Chief Financial Officer,       2003    $148,750   $    --          --        $     --
     Treasurer and Secretary                 2002    $148,750   $    --      240,000       $     --

Patrick Hurley...........................    2004    $148,750   $    --          --        $     --
     Senior Vice President - Business        2003    $148,750   $  1,711         --        $     --
     Operations                              2002    $148,750   $    --      165,000       $     --

Scott Rosenberg..........................    2004    $148,750   $    --          --        $     --
     Senior Vice President - Editorial       2003    $148,750   $  1,711         --        $     --
     Operations                              2002    $148,750   $    --      170,000       $     --

Melissa Barron...........................    2004    $130,000   $ 33,527         --        $     --
     Senior Vice President - Sales           2003    $130,000   $  7,185         --        $     --
                                             2002    $121,250   $ 38,934      97,500       $     --
</TABLE>


     (1)  Bonuses are principally based on performance and are shown in the year
          earned
     (2)  Salary amounts include severance payments of $95,625 and $10,000 for
          unused vacation leave
     (3)  Salary amounts include $9,897 for unused vacation leave


STOCK OPTIONS GRANTED IN FISCAL 2004

     None of the individuals named in the Summary Compensation Table received
any option grants during the fiscal year ended March 31, 2004.

                                       73
<PAGE>

OPTION EXERCISES AND FISCAL 2004 YEAR-END VALUES

     The following table sets forth information concerning unexercised options
to purchase Salon's Common Stock held as of March 31, 2004 by the persons named
in the Summary Compensation Table. There were no exercises of options by any of
the officers named in the Summary Compensation Table during the fiscal year
ended March 31, 2004.
<TABLE><CAPTION>

                               NUMBER OF SECURITIES             VALUE OF UNEXERCISED
                           UNDERLYING UNEXERCISED OPTIONS       IN-THE-MONEY OPTIONS
                               AT FISCAL YEAR END(1)           AT FISCAL YEAR END (2)
                           ------------------------------    ---------------------------
       NAME                EXERCISABLE      UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
------------------------   -----------      -------------    -----------   -------------
<S>                         <C>               <C>            <C>            <C>
Michael O'Donnell(3)....     859,912           230,472        $     --       $      --
David Talbot............     774,088           172,796        $     --       $      --
Elizabeth Hambrecht              --                --         $     --       $      --
Robert O'Callahan(4)         180,666           195,522        $     --       $      --
Patrick Hurley..........     197,876            65,312        $     --       $      --
Scott Rosenberg.........     187,827            64,132        $     --       $      --
Melissa Barron..........     100,805            34,339        $     --       $      --

</TABLE>
(1)  Salon's stock options generally vest one-fourth on the first anniversary of
     the date of grant and 1/48 per month thereafter for each full month of the
     optionee's continuous employment by Salon. All options are exercisable only
     to the extent vested.

(2)  The value of the unexercised in-the-money options is based on a fair market
     value of $0.14, the closing price of Salon's Common Stock on March 31, 2004
     as reported on the Over-The-Counter (OTC) Bulletin Board and is net of the
     exercise price of such options. It does not include options that had an
     exercise price greater than $0.14.

(3)  Michael O'Donnell left Salon in October 2003 and did not exercise any
     options.

(4)  Robert O'Callahan left Salon in May 2003 and did not exercise any options



COMPENSATION OF DIRECTORS

     Directors receive no compensation for serving as directors of Salon, except
for Mr. Rosenfield. During the fiscal year ended March 31, 2004, Mr. Rosenfield
was paid a director's fee of $2,500 and reimbursement of expenses of $8,023 for
a total of $10,523.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

     No employment contracts and termination of employment and change-in-control
arrangements exist as of March 31, 2004 for the persons named in the Summary
Compensation Table.

                                       74
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     None of Salon's executive officers have served as a member of the
Compensation Committee or Board of Directors of any other entity that has an
executive officer serving as a member of Salon's Board of Directors.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS


EQUITY COMPENSATION PLAN INFORMATION

     The following table provides information about Salon's common stock that
may be issued upon the exercise of options, warrants and rights under all of
Salon's existing equity compensation plans as of March 31, 2004, including the
Salon.com 1995 Stock Option Plan and the 1999 Employee Stock Purchase Plan.
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------
    PLAN CATEGORY           NUMBER OF SECURITIES TO      WEIGHTED-AVERAGE        NUMBER OF SECURITIES
                            BE ISSUED UPON EXERCISE      EXERCISE PRICE OF      REMAINING AVAILABLE FOR
                            OF OUTSTANDING OPTIONS,    OUTSTANDING OPTIONS,      FUTURE ISSUANCE UNDER
                              WARRANTS AND RIGHTS       WARRANTS AND RIGHTS       EQUITY COMPENSATION
                                                                                   PLANS, EXCLUDING
                                                                                SECURITIES REFLECTED IN
                                                                                      COLUMN (A)

                                      (A)                       (B)                       (C)
-------------------------------------------------------------------------------------------------------
<S>                              <C>                          <C>                   <C>
Equity compensation plans         3,951,261(1)                 $1.50                 3,336,008(1)
approved by security                      0(2)                                         417,525(2)
holders
-------------------------------------------------------------------------------------------------------

Equity compensation plans            None                       None                      None
not approved by security
holders
                            ---------------------------------------------------------------------------
Total                             3,951,261                     N/A                    3,753,533
-------------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Issued under the Salon.com 1995 Stock Option Plan

     (2)  Issued under the Salon.com 1999 Employee Stock Purchase Plan. The Plan
          was suspended March 1, 2001.

                                       75
<PAGE>

COMMON STOCK AND COMMON STOCK EQUIVALENTS

     The following table sets forth information regarding the beneficial
ownership of Common Stock and Common Stock equivalents of Salon as of May 31,
2004 (a) by each stockholder who is known by Salon to be the beneficial owner of
more than 5% of the outstanding Common Stock and Common Stock equivalents or the
combined total voting power of all classes of capital stock of Salon on a fully
diluted, as converted basis, (b) by each director and nominee, (c) by the Chief
Executive Officer and the other four most highly compensated executive officers
serving on March 31, 2004 (the "Named Executive Officers"), and (d) by all
executive officers and directors of Salon as a group.

                                             AMOUNT AND NATURE OF     PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1)     BENEFICIAL OWNERSHIP(2)    CLASS(3)
---------------------------------------     -----------------------    --------


William R. Hambrecht(4)......................     40,263,856            76.7%
539 Bryant Street, Suite 100
San Francisco, CA  94107

Shea Ventures LLC(5).........................     23,810,596            62.8%
655 Brea Canyon Road, Suite 200
Walnut, CA 91788

Adobe Systems Incorporated(6)................      9,991,331            45.5%
345 Park Avenue
San Jose, CA  95126

Octavia LLC(7)...............................      7,633,661            35.0%
1735 Union Street
San Francisco, CA 94123

Constellation Venture Capital(8).............      3,678,717            21.4%
Bear Stearns Asset Management
575 Lexington Ave.
New York, NY  10022

Wasserstein Adelson Ventures LP(9)...........      3,549,852            20.7%
1301 Avenue of the Americas, 44th Floor
New York, NY 10019

Thomas H. Dittmer Declaration of Trust(10)...      2,986,223            17.4%
6903 Foxen Canyon Road
Los Olivos, CA 93441

Alacrity Management Corporation(11)..........      1,937,491            12.0%
1563 Solano Ave., #353
Berkeley, CA 94707-2116

The Timken Living Trust(12)..................      1,937,491            12.0%
3828 Happy Valley Rd.
Lafayette, CA 94549

Rainbow Media Holdings, Inc.(13).............      1,125,000             7.9%
1111 Stewart Ave.
Bethpage, NY  11714

                                       76
<PAGE>

NAME AND ADDRESS OF BENEFICIAL OWNER -       AMOUNT AND NATURE OF     PERCENT OF
CONTINUED(1)                                BENEFICIAL OWNERSHIP(2)    CLASS(3)
--------------------------------------      -----------------------    --------

William E Mayer Holdings.(14)................      1,154,091             7.5%
399 Park Ave.  Suite 3204
New York, NY 10022


EXECUTIVE OFFICERS AND DIRECTORS

John Warnock (15)............................     82,736,645            85.4%
Jann Wenner (16).............................      7,600,000            34.9%
Robert McKay (17)............................      6,444,775            31.6%
Michael Fuchs (former Director) (18).........      2,986,223            17.4%
Brian Dougherty (former Director) (19).......      1,365,000             8.8%
David Talbot (20)............................      1,158,658             7.7%
Michael O'Donnell (former Officer) (21)......      1,005,596             6.6%
Elizabeth Hambrecht (22).....................        695,000             4.7%
Scott Rosenberg (23) ........................        246,195             1.7%
Patrick Hurley (24)..........................        215,125             1.5%
Melissa Barron (25)..........................        113,544               *%
James H. Rosenfield (26).....................        106,332               *%
Robert Ellis (27) ...........................         37,500               *%
George Hirsch (28) ..........................         14,653               *%
Directors and executive officers as a
 group (fourteen persons)....................    104,725,246            88.6%

*Less than one percent (1%).

(1)  Unless otherwise noted, the persons named in the table above have sole
     voting and investment power with respect to all shares of Common Stock and
     Common Stock equivalents shown as beneficially owned by them, subject to
     community property laws where applicable and to the information contained
     in the footnotes to this table. Unless otherwise noted, the address for
     each beneficial owner is c/o Salon Media Group, Inc. 22 Fourth St., 11th
     Floor, San Francisco, CA 94103.

(2)  Options granted under Salon's 1995 Stock Option Plan generally vest and
     become exercisable at the rate of one-fourth on the first anniversary of
     the date of grant and 1/48 per month thereafter for each full month of the
     optionee's employment.

(3)  Calculated on the basis of 14,155,276 shares of Common Stock outstanding as
     of May 31, 2004, shares of Common Stock underlying options exercisable
     within sixty (60) days of May 31, 2004, shares of Common Stock that a
     shareholder has the right to acquire upon conversion of shares of Series A,
     B and C Preferred Stock, and currently exercisable warrants to acquire
     shares of Common Stock are deemed outstanding for purposes of calculating
     the beneficial ownership of Common Stock of the holders of such options and
     warrants, as applicable, on a stand-alone basis, without considering the
     ownership interest of other stockholders.

(4)  Mr. Hambrecht has an ownership interest in WR Hambrecht + Co., LLC and WR
     Hambrecht + Co., Inc. (together the "Hambrecht Entities") and is the
     Chairman and Chief Executive Officer of those entities. Elizabeth
     Hambrecht, Salon's President, Chief Financial Officer and Treasurer has an
     ownership interest in WR Hambrecht + Co., LLC. Mr. Hambrecht, and the
     Hambrecht Entities jointly own 1,933,138 shares of Common Stock. Mr.
     Hambrecht disclaims beneficial ownership of the shares of Salon's Common
     Stock held directly by the Hambrecht Entities other than his proportionate
     ownership interest. Ms. Hambrecht disclaims beneficial ownership of the
     shares of Salon's Common Stock held directly by the Hambrecht Entities
     other than her proportionate ownership interest. Includes 14,740,611 shares
     of Common Stock that Mr. Hambrecht and the Hambrecht Entities have the
     right to acquire upon conversion of 125 shares of Series A Preferred Stock
     and upon conversion of 486 shares of Series C Preferred Stock. Includes
     1,940,107 shares of Common Stock issuable upon exercise of immediately
     exercisable warrants held by Mr. Hambrecht, and the Hambrecht

                                       77
<PAGE>

     Entities. Includes 2,540,000 shares of Common Stock that HAMCO Capital has
     the right to acquire upon conversion of 127 shares of Series C Preferred
     Stock and 300,000 shares of Common Stock issuable upon exercise of
     immediately exercisable warrants. Mr. Hambrecht and Elizabeth Hambrecht,
     Salon's President, Chief Financial Officer and Secretary, both have an
     ownership interest in HAMCO Capital. Includes 16,860,000 shares of Common
     Stock that Ironstone Group, Inc. has the right to acquire upon conversion
     of 843 shares of Series C Preferred Stock and 1,950,000 shares of Common
     Stock issuable upon exercise of immediately exercisable warrants. Mr.
     Hambrecht has an ownership interest in Ironstone Group, Inc.

(5)  Includes 18,960,612 shares of Common Stock that the stockholder has the
     right to acquire upon conversion of 125 shares of Series A Preferred Stock,
     upon conversion of 697 shares of Series C Preferred Stock and 1,966,845
     shares of Common Stock issuable upon exercise of immediately exercisable
     warrants. Includes 2,560,000 shares of Common Stock that a trust controlled
     by the stockholder has the right to acquire upon conversion of 128 shares
     of Series C Preferred Stock and 300,000 shares of Common Stock issuable
     upon exercise of immediately exercisable warrants. Edward Shea, the Manager
     of the stockholder, is a Director of Ironstone Group, Inc. mentioned under
     item (4).

(6)  Consists of 2,187,594 shares of Common Stock held by stockholder. Includes
     6,247,750 shares of Common Stock that the stockholder has the right to
     acquire upon conversion of 125 shares of Series B Preferred Stock and
     1,555,987 shares of Common Stock issuable upon exercise of immediately
     exercisable warrants.

(7)  Includes 6,810,223 shares of Common Stock that the stockholder has the
     right to acquire upon conversion of 62 shares of Series A Preferred Stock
     and upon conversion of 216 shares of Series C Preferred Stock and 823,438
     shares of Common Stock issuable upon exercise of immediately exercisable
     warrants.

(8)  Consists of 530,192 shares of Common Stock held by Constellation Venture
     Capital, L.P. and 114,138 shares held by Constellation Venture Offshore,
     LP. Includes 2,088,574 shares of Common Stock that Constellation Venture
     Capital has the right to acquire upon conversion of 52 shares of Series A
     Preferred Stock and 441,813 shares of Common Stock that Constellation
     Venture Capital Offshore, LP has the right to acquire upon conversion of 11
     shares of Series A Preferred Stock. Includes 416,000 shares of Common Stock
     issuable upon exercise of an immediately exercisable warrant held by
     Constellation Venture Capital, L.P. and 88,000 shares of Common Stock
     issuable upon exercise of an immediately exercisable warrant held by
     Constellation Venture Offshore, LP.

(9)  Consists of 515,464 shares of Common Stock held by the stockholder.
     Includes 2,530,388 shares of Common Stock that stockholder has the right to
     acquire upon conversion of 63 shares of Series A Preferred Stock and
     504,000 shares of Common Stock issuable upon exercise of an immediately
     exercisable warrant.

(10) Includes 2,490,223 shares of Common Stock that the stockholder has the
     right to acquire upon conversion of 62 shares of Series A Preferred Stock
     and 496,000 shares of Common Stock issuable upon exercise of an immediately
     exercisable warrant.

(11) Includes 1,724,122 shares of Common Stock that Alacrity Tertiare LLC and
     Alacrity Management Corporation have the right to acquire upon conversion
     of 25 shares of Series A Preferred Stock and upon conversion of 36 shares
     of Series C Preferred Stock and 213,369 shares of Common Stock issuable
     upon exercise of immediately exercisable warrants.

(12) Includes 1,724,122 shares of Common Stock that the stockholder has the
     right to acquire upon conversion of 25 shares of Series A Preferred Stock
     and upon conversion of 36 shares of Series C Preferred Stock and 213,369
     shares of Common Stock issuable upon exercise of immediately exercisable
     warrants.

(13) Rainbow Media Holdings, Inc. is a subsidiary of Cablevision Systems
     Corporation (NYSE:CVC)

(14) Consists of 14,091 shares of Common Stock held by stockholder. Includes
     1,020,000 shares of Common Stock that stockholder has the right to acquire
     upon conversion of 51 shares of Series C Preferred Stock and 120,000 shares
     of Common Stock issuable upon exercise of an immediately exercisable
     warrant.

(15) Consists of 59,188 shares of Common Stock held by the Director. Includes
     74,500,612 shares of Common Stock that stockholder has the right to acquire
     upon conversion of 125 shares of Series A Preferred Stock and 3,474 shares
     of Series C Preferred Stock and 8,149,345 shares of Common Stock issuable
     upon exercise of immediately exercisable warrants. Includes 27,500 shares
     subject to options that may be exercised within sixty (60) days of May 31,
     2004.

                                       78
<PAGE>

(16) Includes 5,000,000 shares of Common Stock that Wenner Media LLC has the
     right to acquire upon conversion of 250 shares of Series C Preferred Stock
     and 2,600,000 shares of Common Stock issuable upon exercise of an
     immediately exercisable warrant. Mr. Wenner, the Chairman and President of
     Wenner Media LLC, disclaims beneficial ownership of the shares of Salon's
     Common Stock equivalents held directly by Wenner Media LLC other than his
     proportionate ownership interest.

(17) Consists of 212,629 shares of Common Stock held by the McKay Investment
     Group, Inc. Mr. McKay is the managing partner of the McKay Investment
     Group. Includes 2,490,223 shares of Common Stock that the McKay Investment
     Group, Inc has the right to acquire upon conversion of 62 shares of Series
     A Preferred Stock, and 496,000 shares of Common Stock issuable upon
     exercise of an immediately exercisable warrant. Includes 3,160,000 shares
     of Common Stock that a trust controlled by the stockholder has the right to
     acquire upon conversion of 158 shares of Series C Preferred Stock and
     58,423 shares of Common Stock issuable upon exercise of immediately
     exercisable warrants. Includes 27,500 shares subject to options that may be
     exercised within sixty (60) days of May 31, 2004.

(18) Includes 2,490,223 shares of Common Stock that the former Director has the
     right to acquire upon conversion of 62 shares of Series A Preferred Stock
     and 496,000 shares of Common Stock issuable upon exercise of an immediately
     exercisable warrant. Mr. Fuchs was a Director until September 2003.

(19) Includes 1,340,000 shares of Common Stock that the former Director has the
     right to acquire upon conversion of 67 shares of Series C Preferred Stock
     and 25,000 shares of Common Stock issuable upon exercise of an immediately
     exercisable warrant. Mr. Dougherty was a Director until April 2003.

(20) Includes 821,658 shares subject to options that may be exercised within
     sixty (60) days of May 31, 2004, includes 2,577 shares held by Camille
     Peri, Mr. Talbot's spouse and a former employee of Salon, and also includes
     5,154 shares held in trust for the benefit of Mr. Talbot's children. Mr.
     Talbot disclaims beneficial ownership of the shares held individually by
     his spouse and in trust for his children.

(21) Consists of 5,596 shares of Common Stock held by the former Chief Executive
     Officer. Includes 1,000,000 shares of Common Stock issuable upon exercise
     of an immediately exercisable warrant. Mr. O'Donnell served as Chief
     Executive Officer until October 2003.

(22) Includes 620,000 shares of Common Stock that the Officer has the right to
     acquire upon conversion of 31 shares of Series C Preferred Stock and 75,000
     shares of Common Stock issuable upon exercise of an immediately exercisable
     warrant.

(23) Includes 204,966 shares subject to options that may be exercised within
     sixty (60) days of May 31, 2004.

(24) Includes 215,125 shares subject to options that may be exercised within
     sixty (60) days of May 31, 2004.

(25) Includes 110,359 shares subject to options that may be exercised within
     sixty (60) days of May 31, 2004.

(26) Includes 106,332 shares subject to options that may be exercised within
     sixty (60) days of May 31, 2004.

(27) Includes 27,500 shares subject to options that may be exercised within
     sixty (60) days of May 31, 2004.

(28) Consists of 14,653 shares of Common Stock held by the Director. Excludes
     60,000 shares of Common Stock held by his sons and stepsons.

                                       79
<PAGE>

SERIES A PREFERRED STOCK
            The following table sets forth information regarding the beneficial
ownership of Salon's Series A Preferred Stock as of March 31, 2004 (a) by each
stockholder who is known by Salon to be the beneficial owner of more than 5% of
the outstanding shares of Series A Preferred Stock, (b) by each director and
nominee, (c) by the Named Executive Officers, and (d) by all executive officers
and directors of Salon as a group.

                                              AMOUNT AND NATURE OF    PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1)       BENEFICIAL OWNERSHIP       CLASS
---------------------------------------       --------------------       -----


William R. Hambrecht(2)(8)....................        125                15.5%
539 Bryant Street, Suite 100
San Francisco, CA  94107

John Warnock(3)(7)............................        125                15.5%
260 Surrey Place
Los Altos, CA  94022

Shea Ventures LLC(3)..........................        125                15.5%
655 Brea Canyon Rd.
Walnut, CA  91788

Wasserstein Adelson Ventures, L.P.(4).........         63                 7.8%
1301 Avenue of the Americas, 44th Floor
New York, NY  10019

Constellation Venture Capital(5)..............         63                 7.8%
Bear Stearns Asset Management
383 Madison Avenue, 28th Floor
New York, NY 10179

McKay Investment Group(6)(7)..................         62                 7.7%
303 Sacramento St., 4th Floor
San Francisco, CA  94111

Octavia LLC(6)................................         62                 7.7%
1735 Union St.
San Francisco, CA  94123

Thomas H. Dittmer Declaration of Trust(6).....         62                 7.7%
6903 Foxen Canyon Road
Los Olivos, CA 93441

Michael Fuchs(6)(9)...........................         62                 7.7%
9 W. 57th St., Suite 4220
New York, NY  10019

Current and former Directors and executive
officers as a group (three persons)...........        249                30.8%

                                       80
<PAGE>

(1)  Unless otherwise noted, the persons named in the table above have sole
     voting and investment power with respect to all shares of Preferred Stock
     shown as beneficially owned by them, subject to community property laws
     where applicable and to the information contained in the footnotes to this
     table. Unless otherwise noted, the address for each beneficial owner is c/o
     Salon Media Group, Inc. 22 Fourth St., 11th Floor, San Francisco, CA 94103.

(2)  Includes 75 shares held by the named stockholder that are convertible into
     3,012,367 shares of Common Stock, subject to adjustment. Also includes 50
     shares held by WR Hambrecht + Co., LLC that are convertible into 2,008,244
     shares of Common Stock, subject to adjustment. Mr. Hambrecht is the father
     of Salon's President, Chief Financial Officer and Secretary.

(3)  Shares held by the named stockholder are convertible into 5,020,612 shares
     of Common Stock, subject to adjustment.

(4)  Shares held by the named stockholder are convertible into 2,530,388 shares
     of Common Stock, subject to adjustment.

(5)  Includes 52 shares held by Constellation Venture Capital, LP that are
     convertible to 2,088,574 shares of Common Stock and 11 shares held by
     Constellation Venture Capital (Offshore), LP that are convertible to
     441,813 shares of Common Stock, all subject to adjustment.

(6)  Shares held by the named stockholder are convertible into 2,490,223 shares
     of Common Stock, subject to adjustment.

(7)  Director or related to director. Except as indicated in the table above, no
     other director or Named Executive Officer beneficially owns shares of
     Series A Preferred Stock.

(8)  Related to the President, Chief Financial Officer, and Secretary.

(9)  Mr. Fuchs was a Director until September 2003.



SERIES B PREFERRED STOCK

     The following table sets forth information regarding the beneficial
ownership of Salon's Series B Preferred Stock as of March 31, 2004 (a) by each
stockholder who is known by Salon to be the beneficial owner of more than 5% of
the outstanding shares of Series B Preferred Stock, (b) by each director and
nominee, (c) by the Named Executive Officers, and (d) by all executive officers
and directors of Salon as a group.

                                              AMOUNT AND NATURE OF    PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER          BENEFICIAL OWNERSHIP      CLASS
------------------------------------          --------------------      -----

Adobe Systems Inc.(1)......................           125               100.0%
345 Park Avenue
San Jose, CA  95126

Directors and executive officers as
 a group (2)...............................             0                 0.0%


(1)  Shares held by the named stockholder are convertible into 6,247,750 shares
     of Common Stock, subject to adjustment.

(2)  No director or Named Executive Officer beneficially owns shares of Series B
     Preferred Stock. However, Salon Director John Warnock is the Co-Chairman of
     the Board of Adobe Systems Inc. and disclaims beneficial ownership of the
     shares of Series B Preferred stock held by Adobe Systems Inc.

                                       81
<PAGE>

SERIES C PREFERRED STOCK

     The following table sets forth information regarding the beneficial
ownership of Salon's Series C Preferred Stock as of March 31, 2004 (a) by each
stockholder who is known by Salon to be the beneficial owner of more than 5% of
the outstanding shares of Series C Preferred Stock, (b) by each director and
nominee, (c) by the Named Executive Officers, and (d) by all executive officers
and directors of Salon as a group.

                                              AMOUNT AND NATURE OF    PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1)       BENEFICIAL OWNERSHIP       CLASS


John Warnock(2)(9).........................           3,474              52.5%
260 Surrey Place
Los Altos, CA  94022

William R. Hambrecht(3)(9).................           1,456              22.0%
539 Bryant Street, Suite 100
San Francisco, CA  94107

Shea Ventures LLC(4).......................             825              12.5%
655 Brea Canyon Rd.
Walnut, CA  91788

Wenner Media LLC(5)(9).....................             250               3.8%
1290 Avenue of the Americas
New York, NY 10104
                                                        158               2.4%
Elaine McKay Family Partnership(6)(9)......
303 Sacramento St., 4th Floor
San Francisco, CA  94111

Brian Dougherty(7)(9)......................              67               1.0%
1259 Redwood Lane
Lafayette, CA 94549

Elizabeth Hambrecht(8)(9)..................              31                 *%
22 Fourth Street, 11th Floor
San Francisco, CA 94103

Current and former Directors and executive
 officers as a group (three persons).......           3,980              60.1%


*Less than one percent (1%).

(1)  Unless otherwise noted, the persons named in the table above have sole
     voting and investment power with respect to all shares of Preferred Stock
     shown as beneficially owned by them, subject to community property laws
     where applicable and to the information contained in the footnotes to this
     table. Unless otherwise noted, the address for each beneficial owner is c/o
     Salon Media Group, Inc. 22 Fourth St., 11th Floor, San Francisco, CA 94103.

(2)  Shares held by the named stockholder are convertible into 69,480,000 shares
     of Common Stock, subject to adjustment

(3)  Includes 297 shares held by the named stockholder that are convertible into
     5,940,000 shares of Common Stock, subject to adjustment. Includes 64 shares
     held by WR Hambrecht + Co., LLC that are convertible into 1,280,000 shares
     of Common Stock, subject to adjustment. Includes 125 shares held by WR

                                       82
<PAGE>

     Hambrecht + Co., Inc. that are convertible into 2,500,000 shares of Common
     Stock, subject to adjustment. Mr. Hambrecht is the Chairman and Chief
     Executive Officer of WR Hambrecht + Co., LLC and WR Hambrecht + Co., Inc.
     Elizabeth Hambrecht, the daughter of Mr. Hambrecht and Salon's President,
     Chief Financial Officer and Treasurer, has an ownership interest in WR
     Hambrecht + Co., LLC. Includes 127 shares held by HAMCO Capital Corporation
     that are convertible into 2,540,000 shares of Common Stock, subject to
     adjustment. Mr. Hambrecht and Elizabeth Hambrecht have an ownership
     interest HAMCO Capital Corporation. Includes 843 shares held by Ironstone
     Group, Inc. that are convertible into 16,860,000 shares of Common Stock,
     subject to adjustment. Mr. Hambrecht has an ownership interest in Ironstone
     Group, Inc. Excludes 825 shares held by or controlled by Edward Shea that
     are convertible into 16,500,000 shares of Common Stock, subject to
     adjustment mentioned under item (4) following. Mr. Shea is a Director of
     Ironstone Group, Inc. Mr. Hambrecht disclaims beneficial ownership of the
     shares held directly by HAMCO Capital Corporation and Ironstone Group,
     Inc., other than his proportionate ownership interest. Ms. Hambrecht
     disclaims beneficial ownership of the shares held directly by WR Hambrecht
     + Co., LLC and HAMCO Capital Corporation, other than her proportionate
     ownership interest.

(4)  Includes 697 shares held by the named stockholder that are convertible into
     13,940,000 shares of Common Stock, subject to adjustment. Includes 128
     shares owned by Edward Shea, the Manager of Shea Ventures LLC, that are
     convertible into 2,560,000 shares of Common Stock, subject to adjustment.

(5)  Shares held by the named stockholder are convertible into 5,000,000 shares
     of Common Stock, subject to adjustment. Jann Wenner, Director, has an
     ownership interest in and is the Chairman and President of Wenner Media
     LLC. Mr. Wenner disclaims beneficial ownership of the shares held directly
     by Wenner Media LLC other than his proportionate ownership interest.

(6)  Shares held by the named stockholder are convertible into 3,160,000 shares
     of Common Stock, subject to adjustment. Mr. McKay, Director, has an
     ownership interest in the Elaine McKay Family Partnership. Mr. McKay
     disclaims beneficial ownership of the shares held directly by the Elaine
     McKay Family Partnership other than his proportionate ownership interest.

(7)  Shares held by the named stockholder are convertible into 1,340,000 shares
     of Common Stock, subject to adjustment Served as Director until April 2003.

(8)  Stockholder is the President, Chief Financial Officer, and Secretary of the
     registrant.

(9)  Current or former director or related to director. Except as indicated in
     the table above, no other director or Named Executive Officer beneficially
     owns shares of Series C Preferred Stock.









                                       83
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On October 10, 2000, Salon loaned David Talbot $75,179 with an agreed 6.3%
annual interest rate with no due date. $1,424.80 in interest has been paid to
date; the current account balance stands at $90,195.23.

     In October 2001, Salon entered into a month-to-month sublease agreement
with WR Hambrecht + Co., LLC for office space in New York, NY and received
$57,000 and $68,000 in rent income during the years ended March 31, 2003 and
March 31, 2002, respectively. Elizabeth Hambrecht, Salon's President, Chief
Financial Officer and Secretary, is the daughter of investor William Hambrecht,
the Chairman and Chief Executive Officer of WR Hambrecht + Co., LLC.

     Salon issued 809 shares of Series A preferred stock in August 2001 and
September 2001. Holders of Series A preferred stock include current Salon
directors John Warnock with 125 shares and Robert McKay, in association with the
McKay Investment Group, with 62 shares. Michael Fuchs, who ceased being a
director in September 2003, holds 62 shares Series A preferred stock. William
Hambrecht holds directly 75 shares of Series A preferred Stock and WR Hambrecht
+ Co., LLC holds 50 shares. Ms. Hambrecht has an ownership interest in WR
Hambrecht + Co., LLC.

     Salon issued 125 shares of Series B preferred stock in March 2002 to Adobe
Systems, Inc. Salon Director John Warnock is Co-Chairman of the Board of Adobe
Systems, Inc.

     From July 24, 2002 through December 31, 2003 Salon issued $4.2 million of
promissory and convertible promissory notes to various investors and issued
warrants to purchase 10.1 million shares of common stock. The promissory notes
were converted to 5,493 shares of Series C preferred stock in December 2003.
Related parties pertaining to the issuance of notes were comprised of the
following:

                                              PROMISSORY                SERIES C
                                                 NOTE        WARRANTS    SHARES
NAME                                            AMOUNT        ISSUED     ISSUED
------------------------------------------   -----------   -----------  --------
The Hambrecht 1980 Revocable Trust           $    50,000       150,000        64
WR Hambrecht + Co., LLC                           50,000       150,000        64
The Sarah & William Hambrecht Foundation          80,214        40,107       108
HAMCO Capital Corporation                        100,000       300,000       127
Ironstone Group, Inc                             650,000     1,950,000       843
                                             -----------   -----------  --------
Total William Hambrecht related entities         930,214     2,590,107     1,206
                                             -----------   -----------  --------

John Warnock                                   2,198,690     5,649,345     2,849
Wenner Media LLC                                 200,000       600,000       250
Robert McKay                                     116,845        58,423       158
Brian Dougherty                                   50,000        25,000        67
Elizabeth Hambrecht                               25,000        75,000        31
GCWF Investment Partners II                       10,000         5,000        13
                                             -----------   -----------  --------
Total all                                    $ 3,530,749     9,002,875     4,574
                                             ===========   ===========  ========

                                       84
<PAGE>

Elizabeth Hambrecht has an ownership interest in WR Hambrecht + Co., LC and in
HAMCO Capital Corporation. William Hambrecht has an ownership interest in HAMCO
Capital Corporation and Ironstone Group, Inc. Jann Wenner, a Director of Salon,
has a controlling interest and is the Chairman and President of Wenner Media
LLC. Robert McKay is a Director of Salon. Brian Dougherty served as a Director
of Salon until April 2003. GCWF Investment Partners II is an investment entity
of Salon's outside legal counsel.

     In addition to converting promissory notes to shares of Series C preferred
stock in December 2003, Salon received $0.5 million from Director John Warnock
for which Salon issued Mr. Warnock 625 shares of Series C preferred stock and
granted warrants to purchase 1,500,000 shares of common stock. In February 2004,
Salon issued 125 shares of Series C preferred stock and warrants to purchase
300,000 shares of common stock to The Hambrecht 1980 Revocable Trust and issued
125 shares of Series C preferred stock and warrants to purchase 300,000 shares
of common stock to WR Hambrecht + Co, Inc.

     William Hambrecht and entities that he has a controlling interest, own
1,933,138 shares of Salon's common stock.

     In December 2003, Wenner Media LLC received warrants to purchase 2,000,000
shares of Salon's common stock as part an editorial collaboration agreement.
Jann Wenner, a Director of Salon, has a controlling interest and is the Chairman
and President of Wenner Media LLC.

     Subsequent to March 31, 2004, Salon received $0.5 million from the issuance
of 417 shares of Series D-1 preferred stock and warrants to purchase
approximately 807,000 shares of common stock. The investors included Salon
Director John Warnock, William Hambrecht, the father of Elizabeth Hambrecht,
Salon's President, Chief Financial Officer and Secretary, and an entity that Mr.
Hambrecht and Ms. Hambrecht have an ownership interest therein. Mr. Warnock
acquired 208 shares and a warrant to purchase 402,580 shares of common stock for
which Salon received approximately $250,000 in cash. Mr. Hambrecht acquired 146
shares and a warrant to purchase 282,580 shares of common stock for which Salon
received approximately $175,000 in cash. HAMCO Capital, in which Mr. Hambrecht
and Ms. Hambrecht have an ownership interest, acquired 42 shares and a warrant
to purchase 81,290 shares of common stock for which Salon received approximately
$50,000 in cash.



SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires Salon's
executive officers, directors and persons who beneficially own more than 10% of
Salon's Common Stock to file initial reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission ("SEC"). Such persons
are required by SEC regulations to furnish Salon with copies of all Section
16(a) forms filed by such persons.

     Based solely on Salon's review of such forms furnished to Salon and written
representations from certain reporting persons, Salon believes that all filing
requirements applicable to Salon's executive officers, directors and more than
ten percent (10%) stockholders were complied with, except for Form 4 for
director John Warnock for warrants acquired on April 10, 2003, April 29,2003
that was filed June 2003. In addition, director Robert McKay has not filed a
Form 4 for the conversion of convertible promissory notes to 158 shares of
Series C preferred stock on December 30, 2003.

                                       85
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     For the year ended March 31, 2003, Salon incurred audit fees of $75,750
from PricewaterhouseCoopers LLP. From April 1, 2003 through November 13, 2003,
Salon incurred audit fees of $28,500 from PricewaterhouseCoopers LLP. As of
November 13, 2003,PricewaterhouseCoopers LLP ceased serving as Salon's
independent accountant. Audit fees were the only fees incurred from
PricewaterhouseCoopers LLP.

     Burr, Pilger & Mayer LLP has served as Salon's independent accountant since
November 14, 2003. Audit fees incurred by Salon from Burr, Pilger & Mayer LLP
for the year ended March 31, 2004 were $55,665. Audit fees were the only fees
incurred from Pilger & Mayer LLP.

     During the year ended March 31, 2004, all audit fees were pre-approved by
the Audit Committee.


PART IV


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     a)   The information concerning Salon's financial statements, the Report of
          PricewaterhouseCoopers LLP, Salon's Independent Auditors through
          November 13, 2003, the Report of Burr, Pilger & Mayer LLP, Salon's
          Independent Auditors subsequent to November 13, 2003, required by this
          item are incorporated by reference herein to the section of this
          Report in Item 8, entitled "Financial Statements and Supplementary
          Data."

     b)   Reports on Form 8-K filed during the quarter ended March 31, 2004:

          On January 14, 2004 Salon filed a Current Report on Form 8-K under
          Item 5 announcing the conversion of $4.2 million of notes payable
          and $0.2 million of accrued interest, and the receipt of $500,000 in
          cash to 6,118 share of Series C preferred stock and the issuance of
          warrants to purchase 1.5 million shares of Salon's common stock.

          On February 25, 2004 Salon filed a Current Report on Form 8-K under
          Item 5 announcing the sale of 500 shares of Salon's Series C
          preferred stock and the issuance of warrants to purchase 1.2 million
          shares of Salon's common stock and received $400,000 in cash.

     c)   The following Exhibits are filed as part of, or incorporated by
          reference into, this Report.

EXHIBIT
NUMBER                   DESCRIPTION OF DOCUMENT


2.1(7)      Agreement and Plan of Reorganization dated as of May 5, 2000, among
            Salon.com, a Delaware corporation, Target Acquisition Corporation, a
            Delaware corporation and wholly-owned subsidiary of Salon,
            MP3Lit.com, a Nevada corporation and Gary Hustwit, Valerie Hustwit
            and William Hustwit.

3.2(3)      Restated Certificate of Incorporation of Salon as of June 17, 1999
            with Certificate of Amendment of Article Fourth as of June 24, 1999

                                       86
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3.4(3)      Form of Bylaws of Salon adopted June 24, 1999

3.4(10)     Certificate of Designation of Preferences and Rights of the Series A
            Preferred Stock dated as of August 8, 2001

3.4.1(12)   Certificate of Designation of Preferences and Rights of the Series B
            Preferred Stock, dated as of February 8, 2002

3.4.2(37)   Certificate of Designation of Preferences and Rights of the Series C
            Preferred Stock, dated as of December 23, 2003

4.1(1)      Third Amended and Restated Rights Agreement dated April 14, 1999.

4.1(8)      Fourth Amended and Restated Rights Agreement dated January 12, 2000

4.2(1)      Second Amended and Restated Voting Agreement dated April 14, 1999.

4.2(5)      Bylaws of the Company are incorporated by reference to Exhibit 3.4
            to the Company's Registration Statement on Form S-1

4.2.1(10)   Securities Purchase Agreement dated as of August 9, 2001 between
            Salon Media Group, Inc. and the Purchasers listed on Exhibit A
            attached thereto.

4.2.2(10)   Securities Rights Agreement dated as of August 9, 2001 between Salon
            Media Group, Inc. and the Purchasers listed on Exhibit A attached
            thereto.

4.2.3(10)   Form of Common Stock Purchase Warrant dated August 9, 2001 issued by
            Salon Media Group, Inc.

4.2.4(11)   Securities Purchase Agreement dated as of September 13, 2001 between
            Salon Media Group, Inc. and the Purchasers listed on Exhibit A
            attached thereto.

4.2.5(11)   Securities Rights Agreement dated as of September 13, 2001 between
            Salon Media Group, Inc. and the Purchasers listed on Exhibit A
            attached thereto.

4.2.6(11)   Form of Common Stock Purchase Warrant dated September 13, 2001
            issued by Salon Media Group, Inc.

4.2.7(12)   Securities Purchase Agreement dated as of February 14, 2002 between
            Salon Media Group, Inc. and Adobe Systems Incorporated.

4.2.8(12)   Securities Rights Agreement dated as of February 14, 2002 between
            Salon Media Group, Inc. and Adobe Systems Incorporated.

4.2.9(12)   Form of Common Stock Purchase Warrant dated February 14, 2002 issued
            by Salon Media Group, Inc.

4.2.10(13)  Note and Warrant Purchase Agreement dated as of July 24, 2002

4.2.11(13)  Form of Convertible Promissory Note, dated July 24, 2002 issued by
            Salon Media Group, Inc.

4.2.12(13)  Form of Common Stock Purchase Warrant, dated July 24, 2002 issued by
            Salon Media Group, Inc.

4.2.13(14)  Note dated as of October 3, 2002

4.2.14(15)  Note and Warrant Purchase Agreement dated as of December 18, 2002

                                       87
<PAGE>

4.2.15(15)  Form of Convertible Promissory Note, dated December 18, 2002 issued
            by Salon Media Group, Inc.

4.2.16(15)  Form of Common Stock Purchase Warrant, dated December 18, 2002
            issued by Salon Media Group, Inc.

4.2.17(16)  Note and Warrant Purchase Agreement dated as of January 26, 2003

4.2.18(16)  Form of Convertible Promissory Note, dated January 26, 2003 issued
            by Salon Media Group, Inc.

4.2.19(16)  Form of Common Stock Purchase Warrant, dated January 26, 2003 issued
            by Salon Media Group, Inc.

4.2.20(17)  Note and Warrant Purchase Agreement dated as of February 11, 2003

4.2.21(17)  Form of Convertible Promissory Note, dated February 11, 2003 issued
            by Salon Media Group, Inc.

4.2.22(17)  Form of Common Stock Purchase Warrant, dated February 11, 2003
            issued by Salon Media Group, Inc.

4.2.23(18)  Form of Note and Warrant Purchase Agreement used during March 2003

4.2.24(18)  Form of Convertible Promissory Note used during March 2003 by Salon
            Media Group, Inc.

4.2.25(18)  Form of Common Stock Purchase Warrant used during March 2003 by
            Salon Media Group, Inc.

4.2.26(19)  Note and Warrant Purchase Agreement dated April 10, 2003

4.2.27(19)  Convertible Promissory Note dated April 10, 2003 by Salon Media
            Group, Inc.

4.2.28(19)  Common Stock Purchase Warrant dated April 10, 2003 by Salon Media
            Group, Inc.

4.2.29(20)  Note and Warrant Purchase Agreement dated April 29, 2003

4.2.30(20)  Convertible Promissory Note dated April 29, 2003 by Salon Media
            Group, Inc.

4.2.31(20)  Common Stock Purchase Warrant dated April 29, 2003 by Salon Media
            Group, Inc.

4.2.32(21)  Note and Warrant Purchase Agreement dated May 28, 2003

4.2.33(21)  Convertible Promissory Note dated May 28, 2003 by Salon Media Group,
            Inc.

4.2.34(21)  Common Stock Purchase Warrant dated May 28, 2003 by Salon Media
            Group, Inc.

4.2.35(22)  Note and Warrant Purchase Agreement dated June 12, 2003

4.2.36(22)  Convertible Promissory Note dated June 12, 2003 by Salon Media
            Group, Inc.

4.2.37(22)  Common Stock Purchase Warrant dated June 12, 2003 by Salon Media
            Group, Inc.

4.2.38(23)  Note and Warrant Purchase Agreement dated June 26, 2003

4.2.39(23)  Convertible Promissory Note dated June 26, 2003 by Salon Media
            Group, Inc.

4.2.40(23)  Common Stock Purchase Warrant dated June 26, 2003 by Salon Media
            Group, Inc.

4.2.41(26)  Note and Warrant Purchase Agreement dated July 10, 2003

4.2.42(26)  Convertible Promissory Note dated July 10, 2003 by Salon Media
            Group, Inc.

4.2.43(26)  Common Stock Purchase Warrant dated July 10, 2003 by Salon Media
            Group, Inc.

4.2.44(27)  Note and Warrant Purchase Agreement dated July 30, 2003

4.2.45(27)  Convertible Promissory Note dated July 30, 2003 by Salon Media
            Group, Inc.

4.2.46(27)  Common Stock Purchase Warrant dated July 30, 2003 by Salon Media
            Group, Inc.

4.2.47(28)  Note and Warrant Purchase Agreement dated September 12, 2003

                                       88
<PAGE>

4.2.48(28)  Convertible Promissory Note dated September 12, 2003 by Salon Media
            Group, Inc.

4.2.49(28)  Common Stock Purchase Warrant dated September 12, 2003 by Salon
            Media Group, Inc.

4.2.50(29)  Note and Warrant Purchase Agreement dated September 29, 2003

4.2.51(29)  Convertible Promissory Note dated September 29, 2003 by Salon Media
            Group, Inc.

4.2.52(29)  Common Stock Purchase Warrant dated September 29, 2003 by Salon
            Media Group, Inc.

4.2.53(29)  Note and Warrant Purchase Agreement dated October 6, 2003

4.2.54(29)  Convertible Promissory Note dated October 6, 2003 by Salon Media
            Group, Inc.

4.2.55(29)  Common Stock Purchase Warrant dated October 6, 2003 by Salon Media
            Group, Inc.

4.2.56(30)  Note and Warrant Purchase Agreement dated October 10, 2003

4.2.57(30)  Convertible Promissory Note dated October 10, 2003 by Salon Media
            Group, Inc.

4.2.58(30)  Common Stock Purchase Warrant dated October 10, 2003 by Salon Media
            Group, Inc.

4.2.59(31)  Note and Warrant Purchase Agreement dated October 30, 2003

4.2.60(31)  Convertible Promissory Note dated October 30, 2003 by Salon Media
            Group, Inc. with Ironstone Group, Inc.

4.2.61(31)  Common Stock Purchase Warrant dated October 30, 2003 by Salon Media
            Group, Inc. with Ironstone Group, Inc.

4.2.62(31)  Convertible Promissory Note dated October 30, 2003 by Salon Media
            Group, In. with John Warnock

4.2.63(31)  Common Stock Purchase Warrant dated October 30, 2003 by Salon Media
            Group, Inc. with John Warnock

4.2.64(31)  Note and Warrant Purchase Agreement dated November 12, 2003

4.2.65(31)  Convertible Promissory Note dated November 12, 2003 by Salon Media
            Group, Inc.

4.2.66(31)  Common Stock Purchase Warrant dated November 12, 2003 by Salon Media
            Group, Inc

4.2.67(32)  Note and Warrant Purchase Agreement dated November 24, 2003

4.2.68(32)  Convertible Promissory Note dated November 24, 2003 by Salon Media
            Group, In. and John Warnock

4.2.69(32)  Common Stock Purchase Warrant dated November 24, 2003 by Salon Media
            Group, Inc.for John Warnock

4.2.70(32)  Convertible Promissory Note dated November 24, 2003 by Salon Media
            Group, In. and HAMCO Capital Corporation

4.2.71(32)  Common Stock Purchase Warrant dated November 24, 2003 by Salon Media
            Group, Inc. for HAMCO Capital Corporation

4.2.72(33)  Note and Warrant Purchase Agreement dated December 10, 2003

4.2.73(33)  Convertible Promissory Note dated December 10, 2003 by Salon Media
            Group, In. and Wenner Media LLC

4.2.74(33)  Common Stock Purchase Warrant dated December 10, 2003 by Salon Media
            Group, Inc. for Wenner Media LLC

4.2.75(33)  Note and Warrant Purchase Agreement dated December 11, 2003

4.2.76(33)  Convertible Promissory Note dated December 10, 2003 by Salon Media
            Group, In. and John Warnock

4.2.77(33)  Common Stock Purchase Warrant dated December 10, 2003 by Salon Media
            Group, Inc. for John Warnock

                                       89
<PAGE>

4.2.78(37)  Securities Purchase Agreement dated as of December 30, 2003 between
            Salon Media Group, Inc. and the Purchasers listed on the Schedule of
            Purchasers attached thereto

4.2.79(37)  Form of Common Stock Purchase Warrant dated December 30, 2003 issued
            by Salon Media Group, Inc.

4.2.80(38)  Securities Purchase Agreement dated as of February 10, 2004 between
            Salon Media Group, Inc. and the Purchasers listed on the Schedule of
            Purchasers attached thereto

4.2.81(38)  Form of Common Stock Purchase Warrant February 10, 2004 issued by
            Salon Media Group, Inc.

10.0(4)     Commercial Office Lease between Pacific Resources PCX Development,
            Inc. and Salon dated July 9th, 1999

10.0(6)     Rainbow Media Holdings, Inc. Stock Purchase Agreement dated December
            3, 1999

10.1(1)     1995 Stock Option Plan.

10.1(6)     Bravo Website Agreement dated January 12, 2000

10.2(2)     1999 Employee Stock Purchase Plan.

10.2(6)     Bravo Production Agreement dated January 12, 2000

10.3(1)     Form of Indemnity Agreement.

10.4(1)     Commercial Office Lease between T/W Associates and Salon dated June
            25, 1997.

10.6(1)     Employment Agreement between Michael O'Donnell and Salon dated
            November 7, 1996.

10.6(9)     Employment Agreement between Robert O'Callahan and Salon dated June
            26, 2000

10.9(1)     Warrant to Purchase Stock issued to Imperial Bancorp dated December
            17, 1998.

10.10(1)    Warrant to Purchase Stock issued to Imperial Bank dated April 13,
            1998.

10.11(1)    Warrant to Purchase Stock issued to Imperial Bankcorp dated April
            14, 1997.

10.12(1)    Warrant to Purchase Stock issued to America Online Inc. dated July
            31, 1998.

10.13(1)    Warrant to Purchase Stock issued to Adobe Ventures II L.P. dated
            September 18, 1998.

10.14(1)    Warrant to Purchase Stock issued to ASCII Ventures dated September
            18, 1998.

10.15(1)    Warrant to Purchase Stock issued to H&Q Salon Investors, L.P. dated
            September 18, 1998.

10.16(2)    Warrant to Purchase Stock issued to Daiwa Securities America Inc.
            dated April 14, 1999.

10.17(2)    Warrant to Purchase Stock issued to ACT III Communications dated
            April 14, 1999.

10.18(9)    Amendment No. 2 To Anchor Tenant Agreement between America Online,
            Inc. and Salon.

10.19(1)    Series A Preferred Stock Purchase Agreement dated December 22, 1995.

10.20(1)    First Amendment to the Series A Preferred Stock Purchase Agreement
            dated August 2, 1996.

10.21(1)    Second Amendment to the Series A Preferred Stock Purchase Agreement
            dated February 6, 1997.

10.22(1)    Series B Preferred Stock Purchase Agreement dated November 28, 1997.

                                       90
<PAGE>
10.23(1)    Series C Preferred Stock Purchase Agreement dated September 18,
            1998.

10.24(1)    Series C Preferred Stock Purchase Agreement dated April 14, 1999.

10.25(2)    Warrant to Purchase Stock issued to Chatsworth Securities LLC dated
            April 14, 1999.

10.26(24)   Amended Office Lease between Salon's San Francisco landlord and
            Salon dated June 24, 2003.

10.27(34)   Amended Office Lease between Salon's San Francisco landlord and
            Salon dated December 31, 2003.

16.1(35)    Letter from PricewaterhouseCoopers LLP to the Securities and
            Exchange Commission

16.2(36)    Letter from PricewaterhouseCoopers LLP to the Securities and
            Exchange Commission

21.1(8)     Subsidiaries of Salon

23.2        Consent of PricewaterhouseCoopers LLP, Independent Registered Public
            Accounting Firm

24.1(1)     Power of Attorney (included on page II-5).

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

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

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

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

99.1(25)    Press release dated June 30, 2003 by Salon Media Group, Inc.



FOOTNOTE    FOOTNOTE DESCRIPTION
--------    --------------------
    1       Incorporated by reference to the exhibit filed with Salon's
            Registration Statement report on Form S-1 filed on April 19, 1999.

    2       Incorporated by reference to the exhibit filed with Salon's
            Registration Statement report on Form S-1/A filed on May 27, 1999.

    3       Incorporated by reference to the exhibit filed with Salon's
            Registration Statement report on Form S-1/A filed on June 18, 1999.

    4       Incorporated by reference to the exhibit filed with Salon's
            Quarterly Report on Form 10-Q filed on August 16, 1999

    5       Incorporated by reference to the exhibit filed with Salon's
            Registration Statement report on Form S-8 filed on September 8,
            1999.

    6       Incorporated by reference to the exhibit filed with Salon's
            Quarterly Report on Form 10-Q filed on February 14, 2000

    7       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on May 22, 2000

                                       91
<PAGE>

    8       Incorporated by reference to the exhibits filed with Salon's Annual
            Report on Form 10-K405 filed on June 30, 2000

    9       Incorporated by reference to the exhibit filed with Salon's
            Quarterly Report on Form 10-Q filed on November 13, 2000.

   10       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on August 20, 2001

   11       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on September 25, 2001

   12       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on March 13, 2002

   13       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on July 29, 2002

   14       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on October 15, 2002

   15       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on December 30, 2002

   16       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on February 11, 2003

   17       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on February 24, 2003

   18       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on March 28, 2003

   19       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on April 22, 2003

   20       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on May 12, 2003

   21       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on June 10, 2003

   22       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on June 27, 2003

   23       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on July 11, 2003

   24       Incorporated by reference to the exhibit filed with Salon's
            Quarterly Report on Form 10-Q filed on August 11, 2003

   25       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on July 3, 2003

   26       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on July 25, 2003

   27       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on August 7, 2003

   28       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on September 29, 2003

                                       92
<PAGE>

   29       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on October 14, 2003

   30       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on October 27, 2003

   31       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on November 14, 2003

   32       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on December 9, 2003

   33       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on December 24, 2003

   34       Incorporated by reference to the exhibit filed with Salon's
            Quarterly Report on Form 10-Q filed on February 6, 2004

   35       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on November 17, 2003

   36       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on November 26, 2003

   37       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on January 14, 2004

   38       Incorporated by reference to the exhibits filed with Salon's Current
            Report on Form 8-K filed on February 25, 2004












                                       93
<PAGE>

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                              SALON MEDIA GROUP, INC.

                                              By: /s/ David Talbot
                                                  ----------------------------
                                                  David Talbot
                                                  Chief Executive Officer



                                POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael O'Donnell and Elizabeth
Hambrecht, and each or any one of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming our
signatures as they may be signed by ours said attorney-in-fact and any and all
amendments to this Annual Report on Form 10-K.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

       Signature                           Title                      Date
-------------------------     -------------------------------    ---------------

/s/ David Talbot              Chairman of the Board,              June 28, 2004
-------------------------     Editor-in-Chief
David Talbot                  (Principal Executive Officer)


/s/ Elizabeth Hambrecht       President, Chief Financial          June 28, 2004
-------------------------     Officer, Secretary and Director
Elizabeth Hambrecht           (Principal Financial Officer)


/s/ Robert Ellis              Director                            June 28, 2004
-------------------------
Robert Ellis



                                       94
<PAGE>

/s/ George Hirsch             Director                            June 28, 2004
-------------------------
George Hirsch


/s/ Robert McKay              Director                            June 28, 2004
-------------------------
Robert McKay


/s/ James H. Rosenfield       Director                            June 28, 2004
-------------------------
James H. Rosenfield


/s/ Jann Wenner               Director                            June 28, 2004
-------------------------
Jann Wenner


/s/ John Warnock              Director                            June 28, 2004
-------------------------
John Warnock














                                       95