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

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-K/A

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

                    For the fiscal year ended March 31, 2005
                                       or

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                   For the transition period from        to

                         Commission file number 0-26395

                             SALON MEDIA GROUP, INC.
             (Exact name of Registrant as specified in its charter)

                  Delaware                               94-3228750
      (State or other jurisdiction of                   (IRS Employer
       incorporation or organization)              Identification Number)

                           101 Spear Street, Suite 203
                             San Francisco, CA 94105
                    (Address of principal executive offices)

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

                                 (415) 645-9200
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.001 Par Value
                                (Title of Class)

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

Indicate by check mark 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 was approximately $908,000 based on the closing sale price of the
registrant's common stock on September 30, 2004, which was the last business day
of the registrant's most recently completed second fiscal quarter. 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, 2005 was 15,346,609 shares.

================================================================================
<PAGE>


                                   FORM 10-K/A

     The undersigned registrant hereby amends the following items of its Annual
Report on Form 10-K for the fiscal year ended March 31, 2005 to include Item 8
of Part II, Note 2. Summary of Significant Accounting Policies, Recent
accounting pronouncements and Stock-based compensation, as well as the Part III
information set forth herein.


<PAGE>

ITEM 8. Consolidated Financial Statements and Supplementary Data
                                                                            Page

Reports of Independent Registered Public Accounting Firms  ....................4

Consolidated Balance Sheets as of March 31, 2005 and 2004......................6

Consolidated Statements of Operations for the years ended
     March 31, 2005 2004, and 2003   ..........................................7

Consolidated Statements of Stockholders' Equity for the years
     ended March 31, 2005 2004, and 2003   ....................................8

Consolidated Statements of Cash Flows for the years ended
     March 31, 2005 2004, and 2003   ..........................................9

Notes to Consolidated Financial Statements....................................10

Selected Quarterly Financial Data  (unaudited)................................34



                                       3
<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, 2005 and 2004, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
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 audits.

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 audits provide 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, 2005 and 2004, and the results of its operations and its
cash flows for the years 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 $91.3
million at March 31, 2005. 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 16, 2005


                                       4
<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 results of
operations and cash flows of Salon Media Group, Inc. and its subsidiaries for
the year 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


                                       5
<PAGE>

                             SALON MEDIA GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
               (in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                                               March 31,
                                                                                       --------------------------
                                                                                          2005            2004
                                                                                       -----------    -----------
<S>                                                                                    <C>            <C>
Assets
    Current assets:
       Cash and cash equivalents                                                       $       686    $       696
       Accounts receivable, net                                                                623            306
       Prepaid expenses and other current assets                                               232            432
                                                                                       -----------    -----------
        Total current assets                                                                 1,541          1,434

    Property and equipment, net                                                                191             89
    Prepaid advertising rights                                                               3,970          4,430
    Goodwill, net                                                                              200            200
    Other assets                                                                               167            117
                                                                                       -----------    -----------
        Total assets                                                                   $     6,069    $     6,270
                                                                                       ===========    ===========
Liabilities and stockholders' equity
    Current liabilities:
       Accounts payable and accrued liabilities                                        $       788    $     1,125
       Deferred revenue                                                                      1,047          1,107
       Capital lease obligations, current                                                        -             18
                                                                                       -----------    -----------
        Total current liabilities                                                            1,835          2,250

    Warrants payable                                                                             -          2,621
    Other long-term liabilities                                                                 82              -
                                                                                       -----------    -----------

       Total liabilities                                                                     1,917          4,871
                                                                                       -----------    -----------
Commitments and Contingencies (Note 8)

Stockholders' equity:
    Preferred stock, $0.001 par value, 5,000,000 shares authorized, 8,386 shares
       issued and outstanding at March 31, 2005 and 7,552 shares issued and
       outstanding at March 31, 2004 (aggregate liquidation preference of
       $20,686 at March 31, 2005 and $18,926 at March 31, 2004)                                  -              -

    Common stock, $0.001 par value, 600,000,000 shares authorized, 14,970,622
       shares issued and outstanding at March 31, 2005 and 14,155,276 shares
       issued and outstanding at March 31, 2004                                                 15             14
    Additional paid-in capital                                                              95,430         92,320
    Accumulated deficit                                                                    (91,293)       (90,935)
                                                                                       -----------    -----------
        Total stockholders' equity                                                           4,152          1,399
                                                                                       -----------    -----------
        Total liabilities and stockholders' equity                                     $     6,069    $     6,270
                                                                                       ===========    ===========
</TABLE>

           See accompanying notes to Consolidated Financial Statements


                                       6
<PAGE>

                             SALON MEDIA GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                     Year Ended March 31,
                                                           -----------------------------------------
                                                               2005           2004           2003
                                                           -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>
Net revenues                                               $     6,628    $     4,499    $     4,003
                                                           -----------    -----------    -----------

Operating expenses:
   Production and content                                        4,446          4,647          4,425
   Sales and marketing                                           1,891          2,393          2,305
   Research and development                                        617            614            626
   General and administrative                                      766          1,386          1,354
   Amortization of intangibles                                       -            353            412
   Write-down of long-lived assets                                   -              -            345
                                                           -----------    -----------    -----------
       Total operating expenses                                  7,720          9,393          9,467

Loss from operations                                            (1,092)        (4,894)        (5,464)


Interest and other income                                          159            119             13

Interest and other income (expense)                                415         (1,271)          (146)
                                                           -----------    -----------    -----------
       Net loss                                                   (518)        (6,046)        (5,597)

Preferred deemed dividend                                          160         (2,615)           (81)
                                                           -----------    -----------    -----------
Net loss attributable to common stockholders               $      (358)   $    (8,661)   $    (5,678)
                                                           ===========    ===========    ===========

Basic and diluted net loss per share attributable to
   common stockholders                                     $     (0.02)   $     (0.61)   $     (0.41)

Weighted average shares used in computing basic
   and diluted net loss per share attributable
   to common stockholders                                       14,390         14,099         13,938
</TABLE>


           See accompanying notes to Consolidated Financial Statements


                                       7
<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, 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 14                    -          -          -          -       (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 11 and 14             -          -          -          -       (294)          -            -        (294)
Net loss                                       -          -          -          -          -           -       (6,046)     (6,046)
                                        --------------------------------------------------------------------------------------------
Balance, March 31, 2004                    7,552   $      -     14,155   $     14   $ 92,320    $      -    $ (90,935)   $  1,399

Shares issued under employee stock
   plans                                       -          -        399          -         55           -            -          55
Value of shares issued to settle
   amounts owed a trade payable                -          -        417          1         41           -            -          42
Value of warrants issued in
   conjunction with severance
   agreement                                   -          -          -          -        100           -            -         100
Series D convertible preferred stock
   and common stock warrants issued
   for cash                                  834          -          -          -      1,207           -         (310)        897
Preferred deemed dividend from
   revaluation of warrants issued to
   preferred stock holders                     -          -          -          -          -           -          470         470
Extinguishment of warrant liability
   - see Note 14                               -          -          -          -      1,707           -            -       1,707
Net loss                                       -          -          -          -          -           -         (518)       (518)
                                        --------------------------------------------------------------------------------------------
Balance, March 31, 2005                    8,386          -     14,971   $     15   $ 95,430           -    $ (91,293)   $  4,152
</TABLE>


           See accompanying notes to Consolidated Financial Statements


                                       8
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                          Year Ended March 31,
                                                                                 --------------------------------------
                                                                                    2005           2004          2003
                                                                                 ----------    ----------    ----------
<S>                                                                              <C>           <C>           <C>
Cash flows from operating activities:
 Net loss                                                                        $     (518)   $   (6,046)   $   (5,597)
 Adjustments to reconcile net loss to net cash used in operating activities:
    Write-down of long lived assets                                                       -             -           345
    Loss from retirement of assets                                                        -            43             2
    Stock-based compensation                                                              -             -            57
    Warrant re-valuation                                                               (541)        1,037            33
    Depreciation and amortization                                                       495         1,285           962
    Allowance for (recovery of) doubtful accounts                                         2           (10)           46
    Operating lease incentives                                                           65             -             -
    Gain on issuance of common stock for trade payable                                  (25)            -             -
    Prepaid advertising rights usage                                                    460         1,050           786
    Changes in assets and liabilities:
      Accounts receivable                                                              (319)          (69)           53
      Prepaid expenses, other current assets and other assets                          (130)          (59)          326
      Accounts payable, accrued liabilities and other long-term liabilities            (254)         (180)         (226)
      Deferred revenue                                                                  (60)          189           355
                                                                                 ----------    ----------    ----------
         Net cash used in operating activities                                         (825)       (2,760)       (2,858)
                                                                                 ----------    ----------    ----------
Cash flows from investing activities:
 Purchase of property and equipment                                                    (217)          (35)           (4)
 Proceeds from asset sales                                                                -            15             -
                                                                                 ----------    ----------    ----------
         Net cash used in investing activities                                         (217)          (20)           (4)
                                                                                 ----------    ----------    ----------
Cash flows from financing activities:
 Proceeds from issuance of preferred stock, net                                         995           892             -
 Proceeds from issuance of common stock, net                                             55             -             -
 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                                                (18)          (91)         (212)
                                                                                 ----------    ----------    ----------
         Net cash provided by financing activities                                    1,032         3,314         1,482
                                                                                 ----------    ----------    ----------
Net increase (decrease) in cash and cash equivalents                                    (10)          534        (1,380)

Cash and cash equivalents at beginning of period                                        696           162         1,542
                                                                                 ----------    ----------    ----------

Cash and cash equivalents at end of period                                       $      686    $      696    $      162
                                                                                 ==========    ==========    ==========

Amount paid for interest                                                         $        -    $        6    $       35
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
 Issuance of warrants in connection with agreements                                     100           100             3
 Preferred deemed dividends                                                            (160)        2,615            81
 Conversion of notes payable and accrued interest to preferred stock                      -         4,394             -
 Issuance of common stock for trade payable                                              42             -             -
</TABLE>

           See accompanying notes to Consolidated Financial Statements


                                       9
<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, 2005 of $91,293. These
factors raise substantial doubt about Salon's ability to continue as a going
concern.

     Salon has reduced expenses, and may reduce them further, to match
anticipated revenues to reach cash flow breakeven. There can be no assurance
that a further cost cutting exercise would be successful in completely
eliminating the difference between expenditures and revenues or that such
actions would not have a harmful effect on Salon's business and results of
operations. Until cash flow breakeven is reached on a consistent basis, Salon
may have to rely on additional investment capital or other financing activities.
There can be no assurance that Salon will be able to obtain additional capital
on terms that are favorable, or at all. 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, which are in-active. 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.


                                       10
<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 analyzes 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.


                                       11
<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 Site 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 Site 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.
Subscription revenues from Table Talk were eliminated during the year ended
March 31, 2005 and became a no-cost benefit to Salon Premium subscribers. 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 subscriptions are generally only for one month.

Advertising costs

     Salon expenses advertising costs as they are incurred. Advertising expense
was $471, $1,056, and $772, for the fiscal years ended March 31, 2005, 2004, and
2003.

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, 2005, 2004 and 2003 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.


                                       12
<PAGE>

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

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
reflect management's expectations of future losses. Two customers accounted for
19% and 15% respectively, of total trade accounts receivable at March 31, 2005
and two customers accounted for 20% and 12%, respectively, of total trade
accounts receivable at March 31, 2004.

     No customer accounted for 10% or more of total revenue for the fiscal years
ended March 31, 2005, 2004 and 2003.

Recent accounting pronouncements

     In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 123R (revised 2004),
"Share-Based Payment" (SFAS 123R). In annual periods beginning after June 15,
2005, as amended by the Securities and Exchange Commission (SEC), SFAS 123R
would eliminate the ability to account for equity-based compensation using the
intrinsic value-based method under Accounting Principles Board (APB) 25. SFAS
123R requires companies' to calculate equity-based compensation expense for
stock compensation awards based on the fair value of the equity instrument at
the time of grant. Salon currently uses, and will upon adoption of SFAS 123R,
utilize the Black-Scholes option pricing model to determine the value of its
stock compensation awards, but may later determine that an alternative model may
be more appropriate.

     Under SFAS 123R, public companies are allowed to select from three
alternative transition methods: the Modified Prospective Application, which
allows for the adoption of SFAS 123R without restatement of prior interim
periods in the year of adoption; the Modified Prospective Application with
restatement of prior interim periods in the year of adoption; and the Modified
Retrospective Application which allows companies to restate prior financial
statements. Salon expects to adopt SFAS 123R beginning in the first quarter of
fiscal year 2007, as required, using the Modified Prospective method, and will
not restate prior periods for the adoption of SFAS 123R.

     Currently, Salon discloses pro forma net income (loss) and related pro
forma net income (loss) per share in accordance with SFAS 123 "Accounting for
Stock-Based Compensation" and SFAS 148 "Accounting for Stock-Based
Compensation-Transition and Disclosure-An Amendment of FASB Statement No. 123".
Under SFAS 123R, equity-based compensation expense is required to be recognized
in companies' financial statements. For the years ended March 31, 2005, 2004 and
2003, had SFAS 123R been effective, Salon would have recognized additional
non-cash equity-based compensation expense of $1,390, $219, and $737,
respectively, applying the provisions of SFAS 123R.

     The amounts disclosed within the footnotes are not necessarily indicative
of the amounts that will be expensed upon the adoption of SFAS No. 123R.
Compensation expense calculated under SFAS No. 123R may differ materially from
amounts currently disclosed within the footnotes, based on changes in the fair
value of our common stock, the term in which the options vest, changes in the
number of options granted, the treatment of tax benefits that may result, and
changes in interest rates or other factors.


                                       13
<PAGE>

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

Stock-based compensation

     Salon accounts for stock-based employee compensation arrangements in
accordance with the provisions of APB 25 and 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 SFAS 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,
                                                                  -----------------------------------
                                                                     2005         2004         2003
                                                                  ---------    ---------    ---------
<S>                                                               <C>          <C>          <C>
Net loss attributable to common stockholders:
    As reported                                                   $    (358)   $  (8,661)   $  (5,678)
    Add back: stock-based employee compensation
    expense included in reported net loss                                 -            -           57

    Deduct: total stock-based compensation expense
    determined under the fair value based method, net
    of related tax                                                   (1,390)        (219)        (737)
                                                                  ---------    ---------    ---------
    Pro forma net loss attributable to common stockholders        $  (1,748)   $  (8,880)   $  (6,358)
                                                                  =========    =========    =========

Basic and diluted net loss per share attributable
common stockholders:
    As reported                                                   $   (0.02)   $   (0.61)   $   (0.41)
    Pro forma net loss per share                                  $   (0.12)   $   (0.63)   $   (0.46)
</TABLE>


                                       14
<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. As no options were granted during the year
ended March 31, 2004, Salon determined the estimated fair value of its options
granted for the years ended March 31, 2005, and 2003, using the following
assumptions:

<TABLE>
<CAPTION>
                                                                          Year Ended March 31,
                                                              -----------------------------------------------
                                                                   2005             2004             2003
                                                              -------------    -------------    -------------
<S>                                                                <C>              <C>          <C>
Risk-free interest rates                                           3.40%             N/A         3.25 - 4.38%
Expected lives (in years)                                            4               N/A              4
Expected volatility                                                120%              N/A            120.0%
Dividend yield                                                     0.0%              N/A             0.0%
</TABLE>

     The weighted average grant date fair value per share of options granted
during the years ended March 31, 2005, 2004, and 2003 was $0.11, none, and
$0.08, 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,
                                                              -----------------------------------------------
                                                                   2005             2004             2003
                                                              -------------    -------------    -------------
<S>                                                           <C>              <C>              <C>
Numerator:
     Net loss attributable to common stockholders             $        (358)   $      (8,661)   $      (5,678)
                                                              =============    =============    =============

Denominator:
     Weighted average shares outstanding                         14,390,000       14,155,000       14,155,000
     Weighted average shares held in escrow                                          (56,000)        (217,000)
                                                              -------------    -------------    -------------
     Weighted average shares used in computing basic
        and diluted net loss per share attributable to
        common stockholders                                      14,390,000       14,099,000       13,938,000
                                                              =============    =============    =============
     Basic and diluted net loss per share attributable to
        common stockholders                                   $       (0.02)   $       (0.61)   $       (0.41)
                                                              =============    =============    =============

     Antidilutive securities including options, warrants
        and convertible preferred stock not included
        in loss per share calculation                           232,006,000      199,312,000       33,214,000
                                                              =============    =============    =============
</TABLE>


                                       15
<PAGE>

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

Note 3. Balance Sheet Components

                                                          Year Ended March 31,
                                                         ----------------------
                                                            2005         2004
                                                         ---------    ---------
Accounts receivable, net:
       Accounts receivable                               $     653    $     336
       Less: allowance for doubtful accounts                   (30)         (30)
                                                         ---------    ---------

                                                         $     623    $     306
                                                         =========    =========
Prepaid expenses and other current assets
       Prepaid lease termination fees                    $       -    $     192
       Receivable from employees                                89           92
       Prepaid expenses                                         88           79
       Short term deposits                                      54           49
       Other receivables                                         1           20
                                                         ---------    ---------

                                                         $     232    $     432
                                                         =========    =========
Property and equipment, net
       Computer hardware and software                    $   1,316    $   1,392
       Leasehold improvements                                   67           34
       Furniture and office equipment                          243          258
                                                         ---------    ---------

                                                             1,626        1,684
       Less accumulated depreciation and amortization       (1,435)      (1,595)
                                                         ---------    ---------

                                                         $     191    $      89
                                                         =========    =========

Other assets
       Long-term deposits                                $     167    $      65
       Other                                                     -           52
                                                         ---------    ---------

                                                         $     167    $     117
                                                         =========    =========

Accounts payable and accrued liabilities
       Accounts payable                                  $     216    $     348
       Salaries and wages payable                              270          162
       Accrued services                                         92           68
       Reserve for claims                                      151          181
       Rent expense normalization                                -          302
       Other accrued expenses                                   59           64
                                                         ---------    ---------

                                                         $     788    $   1,125
                                                         =========    =========

     Depreciation expense for the years ended March 31, 2005, 2004 and 2003 was
$115, $347, and $513, respectively.

     Included in computer hardware and software, and furniture and office
equipment as of March 31, 2004, are assets under capital leases amounting to
$165, with accumulated depreciation of $156. As of March 31, 2005, Salon has no
fixed assets under capital lease agreements.


                                       16
<PAGE>

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

     During the year ended March 31, 2004, Salon forfeited $420 of 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, was
expensed over the revised lease term, which expired in February 2005. The
unamortized balance of the forfeited amount was $192 as of March 31, 2004.

Note 4. Employee Stock Purchase Plan

     The Salon.com, Inc, 1999 Employee Stock Purchase Plan (the "ESPP") was
established 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 purchase price of each share of stock to
be acquired is established at the discretion of Salon's Board of Directors, but
in no event shall the price be set 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 ESPP operation was suspended on March 1, 2001. 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 5. 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,
2005.

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


                                       17
<PAGE>

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

March 31, 2003, Salon borrowed and repaid $82 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, 2005, the loan and
associated interest total $89 and is included as a component of "Prepaid
expenses and other current assets" in Salon's Consolidated Balance Sheets. In
addition, $7 of interest has been paid as of March 31, 2005.

     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
in rent income during the year ended March 31, 2003. Elizabeth Hambrecht,
Salon's Chief Executive Officer and President, is the daughter of investor
William Hambrecht, the Chairman and Chief Executive Officer of WR Hambrecht +
Co., LLC.

     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:

<TABLE>
<CAPTION>
                                                Promissory                   Series C
                                                   Note        Warrants       Shares
Name                                              Amount        Issued        Issued
-------------------------------------------    -----------   -----------   -----------
<S>                                            <C>             <C>               <C>
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
                                               -----------   -----------   -----------
Total all                                      $     3,521     8,997,875         4,561
                                               ===========   ===========   ===========
</TABLE>

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.


                                       18
<PAGE>

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

     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.

     In December 2003, Wenner Media LLC received a warrant to purchase 2,000,000
shares of common stock as part of an editorial collaboration agreement. Salon
director Jann Wenner is the Chairman and President of Wenner Media LLC. During
the year ended March 31, 2005, Salon received $17 from Wenner Media for
editorial collaboration.

     On June 4, 2004, September 30, 2004 and February 2, 2005, Salon issued a
total of 834 shares of Series D preferred stock and warrants to purchase
1,489,457 shares of common stock. The related parties in these transactions
were:

<TABLE>
<CAPTION>
                                                  Series D
                                                   Shares       Warrants      Purchase
Name                                               Issued        Issued        Price
--------------------------------------------    -----------   -----------   -----------
<S>                                             <C>               <C>               <C>
The Hambrecht 1980 Revocable Trust              $       334       590,216           401
HAMCO Capital Corporation                                63       115,653            76
                                                -----------   -----------   -----------
Total William Hambrecht related entities                397       705,869           477
                                                -----------   -----------   -----------

John Warnock                                            416       742,943           499
                                                -----------   -----------   -----------
Total all                                       $       813     1,448,812           976
                                                ===========   ===========   ===========
</TABLE>

Note 8. Commitments and Contingencies

     Salon had a non-cancelable operating lease agreement for its prior office
space in San Francisco, CA that expired in February 2005, a new non-cancelable
operating lease agreement for its current office space in San Francisco, CA that
expires in February 2009, for its current office in New York, NY that expires in
May 2005, for a former office in New York, NY that expired in December 2004, for
its current office in Washington, D.C. that expires in May 2007, and for minimal
office equipment. Rent expense under these operating lease agreements was $634,
$625, and $1,306, for the years ended March 31, 2005, 2004, and 2003,
respectively. Subsequent to March 31, 2005, Salon extended its lease agreement
for its office in New York to expire in May 2006.

     In May 2003, Salon subleased its former office in New York. The sublease
agreement, which expired in December 2004, 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.


                                       19
<PAGE>

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

     Salon has no capital leases as of March 31, 2005. Total future minimum
rental payments under capital leases and non-cancelable operating leases in
effect at March 31, 2003 are as follows:

                                                        Operating
            Year Ending March 31,                         Leases
            ---------------------                      -----------
                     2006                              $      188
                     2007                                     253
                     2008                                     245
                     2009                                     229
                                                       -----------
                         Total lease payments                 915
                                                       ===========

     Salon has entered into various agreements in which it subleases office
space. Rental income resulting from these agreements paid directly to Salon was
$0, $0 and $530 for the year ended March 31, 2005, 2004 and 2003, respectively.
The income was 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
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. 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, 2005 and March 31, 2004 was $200 and has
been found not to be impaired.

     The following table sets forth information concerning Salon's intangible
assets as of March 31, 2005 and 2004:

<TABLE>
<CAPTION>
                                                              Gross                       Net
                                                            Carrying   Accumulated      Carrying
                                                             Amount    Amortization      Amount
                                                          -----------   -----------   -----------
<S>                                                       <C>           <C>           <C>
Trade name                                                $     1,200   $     1,200   $         -
Proprietary technology                                            355           355             -
Audio technology                                                  158           158             -
                                                          -----------   -----------   -----------
Total intangible assets subject to amortization           $     1,713   $     1,713   $         -
                                                          ===========   ===========   ===========
Goodwill                                                  $     3,555   $     3,355   $       200
                                                          -----------   -----------   -----------
Total intangible assets not subject to amortization       $     3,555   $     3,355   $       200
                                                          ===========   ===========   ===========
</TABLE>


                                       20
<PAGE>

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

Note 10. 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, 2005, Salon has net operating loss carry-forwards of $62,834 and $31,937 for
Federal and California purposes, respectively, available to reduce future
taxable income, if any. The carry forwards begin to expire in March 31, 2006 for
California purposes and in March 31, 2016 for federal purposes if not utilized
beforehand. At March 31, 2005, 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,
                                                     --------------------------
                                                         2005           2004
                                                     -----------    -----------
Net operating losses                                 $    23,274    $    22,496
Other                                                      1,483          1,702
                                                     -----------    -----------
Total deferred tax assets                                 24,757         24,198
Valuation allowance                                      (24,757)       (24,198)
                                                     -----------    -----------
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,
                                      -----------------------------------------
                                          2005           2004           2003
                                      -----------    -----------    -----------
Statutory tax benefit                 $      (122)   $    (2,945)   $    (1,930)
State taxes, net of federal benefit           (21)          (505)          (331)
Permanent differences                        (244)         1,608            105
Other                                        (172)           330           (805)
                                      -----------    -----------    -----------
Total                                        (559)        (1,512)        (2,961)
Change in valuation allowance                 559          1,512          2,961
                                      -----------    -----------    -----------
                                      $         -    $         -    $         -
                                      ===========    ===========    ===========


                                       21
<PAGE>

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

Note 11. Promissory and Convertible Promissory Notes Payable

     From July 2002 through December 2003, Salon issued a total of $4,227 of
promissory and convertible promissory notes payable, which in December 2003 were
converted to shares of Series C preferred stock. The following is a recap of the
notes issued and corresponding warrants that were simultaneously issued:

<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>
          7/24/2002         $      714        357,021     $   0.2100     $   0.0898      11     1,2,4,7,8,9
          10/3/2002                200              -                                     1          2
          12/18/2002               200        300,000         0.0575         0.0451       1          1
          1/26/2003                100        150,000         0.0575         0.0451       1          2
          2/11/2003                100        300,000         0.0575         0.0451       1          6
          3/12/2003                100        300,000         0.0460         0.0417       1          6
          3/18/2003                100        300,000         0.0460         0.0417       1          2
          3/25/2003                200        600,000         0.0460         0.0417       2         2,6
                            ----------    -----------
Total as of 3/31/ 2003           1,714      2,307,021
                            ----------    -----------

          4/10/2003                200        600,000         0.0460         0.0417       2         2,6
          4/29/2003                200        600,000         0.0575         0.0451       2         2,6
          5/28/2003                300        900,000         0.0575         0.0451       1          2
          6/12/2003                100        300,000         0.0575         0.0451       1          4
          6/26/2003                100        300,000         0.0575         0.0451       1          1
          7/10/2003                248        744,015         0.0460         0.0417       3        1,2,5
          7/30/2003                100        300,000         0.0345         0.0345       1          2
          8/29/2003                165        495,000         0.0345         0.0345       3        1,2,3
          9/12/2003                100        300,000         0.0575         0.0451       1          2
          9/29/2003                100        300,000         0.0805         0.5181       1          2
          10/6/2003                100        300,000         0.0805         0.5181       1          6
          10/10/2003               100        300,000         0.0575         0.0451       1          2
          10/30/2003               150        450,000         0.0575         0.0451       2         2,6
          11/12/2003               100        300,000         0.0690         0.0484       1          2
          11/24/2003               150        450,000         0.0575         0.0451       2         2,5
          12/10/2003               200        600,000         0.0575         0.0451       1          10
          12/11/2003               100        300,000         0.0575         0.0451       1          2
                            ----------    -----------
       Total all issued     $    4,227      9,846,036
                            ==========    ===========
</TABLE>


                                       22
<PAGE>

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

*Exercise prices revised as of March 31, 2005 pursuant to an anti-dilution
provision in applicable warrant 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 had at the time an
insufficient number of authorized shares of common stock to satisfy all security
instruments, the value of these warrants was reclassified to a component of
warrants payable in Salon's consolidated balance sheet as of March 31, 2004.

Note 12. Subsequent Events

     On May 16, 2005 Salon's Board of Directors issued options to purchase
7,641,000 shares of common stock under the Salon Media Group, Inc. 2004 Stock
Plan. The exercise price of the options was $0.26 per share, with 50% vesting on
the date of grant and the other 50% vesting on February 7, 2006.


                                       23
<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 $1,763 using the Black-Scholes option-pricing
model, applying an estimated life of 4 years, a weighted average risk-free
interest rate of 3.80%, an expected dividend yield of zero percent, a volatility
of 120%, a deemed fair value of common stock of $0.26.

Note 13. Employee Stock Option Plan

     Salon has two stock option plans approved by shareholders, the Salon
Internet, Inc. 1995 Stock Option Plan and the Salon Media Group, Inc. 2004 Stock
Plan (the Plans). Under the Plans, incentive and nonqualified stock options may
be granted to officers, employees, directors and consultants of Salon. Options
generally vest over periods of one to four years and have terms of ten years.
However, of the 20,910,250 options granted on February 7, 2005, half vested on
the date of grant, and the remaining half are to vest after one year of service.
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.

     On February 7, 2005, Salon granted its Chairman 1,000,000 options from a
plan not approved by shareholders.

     At March 31, 2005, 2004, and 2003, Salon had 13,089,000, 3,336,000, and
1,151,000 shares, respectively, authorized and available for grants under the
Plans. Even though the Salon Internet, Inc. 1995 Stock Option Plan as of March
31, 2005 has 3,999,000 shares authorized and available for grants, the plan does
not qualify for grants in various states in which Salon would like to make
grants, and as such, Salon does not intend to make further grants under the
plan, which is to expire on December 12, 2005. Of the 30,000,000 shares
authorized to be issued under the Salon Media Group, Inc. 2004 Stock Plan,
9,089,750 are available to be granted subsequent to March 31, 2005.

     The following table summarizes activity under Salon's Plans from March 31,
2002 through March 31, 2005:

                                                            Weighted
                                                            Average
                                             Number of      Exercise
                                              shares         Price
                                          --------------   ---------
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
Options granted                             21,910,000     $    0.14
Options terminated                            (663,000)    $    1.27
Options exercised                             (399,000)    $    0.14
                                          --------------
Balance March 31, 2005                      24,799,000     $    1.50
                                          ==============


                                       24
<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, 2005:

<TABLE>
<CAPTION>
                                         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
  ---------------         --------------     ------------      ----------        --------------    -------------
<S>                         <C>                  <C>           <C>                 <C>               <C>
   $0.06 - $ 0.06                8,000           7.5           $   0.06                 5,000        $   0.06
   $0.11 - $ 0.14           23,250,000           9.6               0.14            11,059,000            0.14
   $0.20 - $ 0.20              190,000           2.1               0.20               190,000            0.20
   $0.32 - $ 0.37              532,000           5.8               0.36               532,000            0.36
   $0.52 - $ 0.52               28,000           3.5               0.52                28,000            0.52
   $1.38 - $ 2.00              305,000           5.4               1.86               305,000            1.86
   $2.92 - $ 3.63               77,000           4.2               3.01                77,000            3.01
   $5.06 - $ 5.25               30,000           4.6               5.22                30,000            5.22
   $8.50 - $10.06              379,000           4.4               9.60               379,000            9.60
                          --------------                                         --------------
                            24,799,000           9.3           $   0.33            12,605,000        $   0.51
                          ==============                                         ==============
</TABLE>

     At March 31, 2004 and 2003 options to purchase 3,061,000 and 3,589,000
shares of common stock, respectively, were exercisable.

Note 14. 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.


                                       25
<PAGE>

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

     A summary of shares of preferred stock that Salon has issued, corresponding
warrants issued, and common stock equivalents, is as follows:

<TABLE>
<CAPTION>
                                                                    Warrants Issued     Conversion         Common
             Transaction   Shares      Price per      Gross                   Exercise    Rate to        Equivalent
 Series          Date      Issued        Share     Proceeds(4)     Number     Price (1)  Common (2)        Shares
 ------      -----------  --------     ---------   -----------  ----------  -----------  ----------     -------------
<S>           <C>            <C>         <C>         <C>        <C>           <C>         <C>             <C>
   A            8/9/2001       621       $4,000       $2,484     4,968,000    $0.10942    0.09957          24,947,520
   A           9/13/2001       188       $4,000         $752     1,504,000    $0.10942    0.09957           7,552,550
                          --------                 -----------  ----------                              -------------
                               809                    $3,236     6,472,000                                 32,500,070

   B            3/7/2002       125       $4,000         $500     1,414,827    $0.08980    0.08003           6,247,750

  C(3)        12/30/2003     6,118         $800       $4,894     1,500,000    $0.03450    0.04000         122,360,000
   C           2/10/2004       500         $800         $400     1,200,000    $0.03450    0.04000          10,000,000
                          --------                 -----------  ----------                              -------------
                             6,618                    $5,294     2,700,000                                132,360,000

   D            6/4/2004       417       $1,200         $500       807,095    $0.13742    0.09300           5,380,642
   D           9/30/2004       208       $1,200         $249       340,363    $0.12650    0.11000           2,269,090
   D            2/2/2005       209       $1,200         $251       341,999    $0.16100    0.11000           2,279,999
                          --------                 -----------  ----------                              -------------
                               834                    $1,000     1,489,457                                  9,929,731

                          --------                 -----------  ----------                              -------------
                             8,386                   $10,030    12,076,284                                181,037,551
                          ========                 ===========  ==========                              =============
</TABLE>

     (1)  Exercise Prices of underlying security has been adjusted as of March
          31, 2005 pursuant to an antidilution provision of the underlying
          security issued in conjunction with issuance of Series A and B
          preferred stock.
     (2)  Rates of conversion to common stock of the Series A and B preferred
          stock has been adjusted as of March 31, 2005 pursuant to an
          antidilution provision of the underlying security.
     (3)  The gross proceeds of the Series C preferred stock issued on December
          30, 2003 consisted of $4,227 from conversion of previously issued
          convertible notes, $167 of accrued interest on such notes and $500 in
          cash.
     (4)  The net cash proceeds from issuance were: for Series A - $3,205,
          Series B - $466, Series C - $892, Series D - $995.

     As of March 31, 2005, the Purchase Agreement and the Certificate of
Designation of Preferences and Rights of the Series D preferred stock allows the
sale and issuance of an additional 1,251 shares of Series D preferred stock and
stipulate that the conversion price to common stock be equal to 70% of the
average closing price of Salon's common stock for the thirty days prior to the
date the Series D preferred is called.

     The holders of the Series A, B, and C preferred stock are entitled
dividends of 8.0%, as and if declared by the Board of Directors and the holders
of the Series D preferred stock are entitled dividends of 5.0%, as and if
declared by the Board of Directors. As of March 31, 2005, no cash dividend has
been declared or paid.

     In event of a liquidation event, the holders of Series D preferred stock
and the holders of the Series C preferred stock rank in parity, and are entitled
to receive, prior and in preference to any


                                       26
<PAGE>

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

distribution of any assets or property of Salon to the holders of common stock,
Series A and B preferred stock. The holders of Series D preferred stock are
entitled to an amount per share equal to $1,200 plus an amount equal to all
declared but unpaid dividends, and in the case of the Series C Preferred Stock,
$1,600 per share, plus an amount equal to all declared but unpaid dividends. If
the assets and funds available for distribution are insufficient to permit the
payment to the holders of Series C and D Preferred Stock of their full
preferential amounts, then the entire assets and funds of Salon legally
available for distribution to stockholders is to be distributed among the
holders of Series C and D Preferred Stock ratably in proportion to the full
preferential amounts which they are entitled to receive. After an initial
distribution to the holders of Series C and D preferred stock, the holders of
the Series A and B preferred stock, who rank in parity, are entitled to receive,
prior and in preference to any distribution of any assets or property of Salon
to the holders of common stock, an amount per share equal to $8,000 plus an
amount equal to all declared but unpaid dividends. If, after the initial
distribution to holders of Series C and D Preferred Stock, the remaining assets
and funds available for distribution are insufficient to permit the payment to
the holders of Series A and B preferred stock of the full preferential amounts,
then the entire remaining assets and funds of Salon legally available for
distribution to stockholders will be distributed among the holders of Series A
and B preferred stock ratably in proportion to the full preferential amounts
which they are entitled to receive.

     If, after initial preferential liquidation payments to the holders of
Series A, B, C and D preferred stock holders, any assets remain available for
distribution, such assets are to be distributed ratably among the holders of
common stock and preferred stock, based on to the shares of common stock then
held by them and issuable upon conversion of the shares of preferred stock then
held by them until aggregate distributions per share reach $12,000 for the
holders of Series A and B preferred stock, $2,400 for the holders of Series C
preferred stock and $3,600 for the holders of Series D preferred stock.

     If, after payment has been made to the holders of common stock and holders
of preferred stock mentioned above, any assets remain available for
distribution, such assets are to be distributed ratably among the holders of
common stock and the holders of Series C preferred stock, based on the number of
shares of common stock then held by them and issuable upon conversion of the
Series C preferred stock then held by them. The holders of Series C Preferred
Stock hold approximately 90% of this group of securities.

     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. The preferred stockholders as a group control approximately 95% of
all voting securities of Salon.

     The aggregate liquidation preferences of all preferred stockholders as of
March 31, 2005, was $19,062 excluding the effect of undeclared dividends and
$20,686 including the effect of undeclared dividends. The aggregate liquidation
preferences of all preferred stockholders as of March 31, 2004, was $18,061
excluding the effect of undeclared dividends and $18,926 including the effect of
undeclared dividends.

     On November 22, 2005, Salon amended its Certificate of Incorporation to
increase the number of authorized shares of common stock from 50,000,000 shares
to 600,000,000 thereby allowing the holders of all series of preferred
stockholders, at their option, to convert their shares to common stock at any
time.


                                       27
<PAGE>

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

Prior to that date, only the holders of Series A and B could convert their
shares of preferred stock to common stock. As of March 31, 2005, no shares of
preferred stock have been converted to common stock.

     The Series A, B, C and D preferred stock conversion price is subject to a
downward adjustment anti-dilution provision under certain circumstances related
to subsequent Salon stock issuances. The effect of this provision through March
31, 2005, has been to reduce the Series A conversion rate from an original 0.25
to 0.09957, and the series B conversion rate from an original 0.1767 to 0.08003.

     The warrants issued in conjunction with the issuance of Series A, B, C and
D are also subject to a downward adjustment anti-dilution provision under
certain circumstances related to subsequent Salon warrant issuances. The effect
of this provision through March 31, 2005, has been to reduce the per share
exercise price of warrants issued to Series A preferred stockholders from an
original $0.2875 to $0.10942, the series B conversion price from an original
$0.21 to $0.08980 and the Series D shares issued on June 4, 2004 from an
original $0.13800 to $0.13742.

     Due to the difference between the offering price of Salon's preferred stock
and the fair value of Salon's common stock into which the preferred stock was
convertible on the date of the transaction and the fair value of warrants
issued, Salon recorded a $310 preferred deemed dividend charge during its year
ended March 31, 2005 from the issuance of Series D preferred stock and a $2,040
preferred deemed dividend charge during its year ended March 31, 2004 from the
issuance of Series C preferred stock.

     Neither the Series A, B, C or D 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.

Expired stock warrants

     In July 1998, Salon issued a warrant to purchase 79,000 shares of Pre-IPO
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 April 1999, Salon issued warrants to purchase 148,000 shares of Pre-IPO
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.


                                       28
<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 Pre-IPO 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.

     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 had a five-year life and
expired in June 2004 without being exercised.

     In conjunction with the May 2000 acquisition of MP3Lit.com, Salon issued
warrants to purchase 100,000 shares of common stock at an exercise price of
$10.50 per share with a five-year life. The warrants were valued at $185 using
the Black-Scholes option-pricing model, applying an expected life of five years,
a weighted average risk-free rate of 6.73%, an expected dividend yield of 0%, a
volatility of 90% and a deemed fair value of common stock of $1.85. Subsequent
to March 31, 2005, the warrants expired without being exercised.

Outstanding stock warrants

     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 pre-IPO Series C convertible preferred stock offering. 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, 2005,
warrants to purchase 172,529 shares of common stock were exercisable.

     In August 2001 and September 2001, Salon issued warrants to purchase
6,472,000 shares of common stock in conjunction with the issuance of Series A
preferred stock. Salon valued the warrants issued using the Black-Scholes
option-pricing model, applying a contractual life of 5 years, a weighted average
risk-free interest rate of 4.5%, an expected dividend yield of zero percent, a
volatility of 100%, an exercise price of $0.2875 and a deemed fair value of
common stock of $0.44 for the warrants issued in August 2001, and $0.34 for the
warrants issued in September 2001. The fair market value of the warrants was
incorporated as a preferred deemed dividend in the consolidated statements of
operations for the year


                                       29
<PAGE>

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

ended March 31, 2002. The warrants may be exercised at any time within five
years after issuance with 4,968,000 expiring in August 2006 and 1,504 expiring
in September 2006. Due to an anti-dilution provision of the warrant, the
exercise price of the warrant has been reduced to $0.10942 as of March 31, 2005.
No warrant was exercised as of March 31, 2005. A warrant to purchase 200,000
shares of common stock was exercised subsequent to March 31, 2005 on a
conversion method in which Salon did not receive any cash in the transaction.

     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, 2005.

     In March 2002, Salon issued warrants to purchase 1,414,827 shares of common
stock in conjunction with the issuance of Series B preferred stock. The warrants
may be exercised at any time within five years and have not been exercised as of
March 31, 2005. Due to an anti-dilution provision of the warrant, the exercise
price of each warrant share has been reduced from $0.21 to $0.0898 as of March
31, 2005.

     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 immaterial fair market value of the warrants 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, 2005.

     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 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, 2005.

     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


                                       30
<PAGE>

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

volatility of 120% and a deemed fair value of common stock of $0.05. The fair
market value of the warrants of $69 was amortized as a component of production
and content in the consolidated statement of operations, of which $17 was
amortized for the fiscal year ended March 31, 2004 and $52 was amortized for the
fiscal year ended March 31, 2005. 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, 2005.

     In December 2003, Salon issued warrants to purchase 1,500,000 shares of
common stock at an initial exercise price of $0.0345 per share in conjunction
with the issuance of 625 shares of Series C preferred stock. In addition, in
February 2004, Salon issued warrants to purchase 1,200,000 shares of common
stock at an initial exercise price of $0.0345 per share in conjunction with the
additional issuance of 500 shares of Series C preferred stock. As the issuance
of the 625 shares of preferred stock resulted in a $2,040 preferred deemed
dividend in Salon's consolidated statement of operations for the year ended
March 31, 2004, 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 $0.24. As Salon at
the time had an insufficient number of authorized shares of common stock to
satisfy all security instrument obligations, the resulting warrant value of $263
was reclassified to a component of warrants payable in Salon's consolidated
balance sheet as of March 31, 2004. The warrants may be exercised at any time
within three years after issuance and expires in December 2006 and February
2007. The warrants have not been exercised as of March 31, 2005.

     In June 2004, Salon issued warrants to purchase 807,095 shares of common
stock in conjunction with the issuance of 417 shares Series D preferred stock.
As the transaction resulted in a $195 preferred deemed dividend in Salon's
consolidated statement of operations for the year ended March 31, 2005, 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
3.19%, an expected dividend yield of zero percent, a volatility of 120%, a
deemed fair value of common stock of $0.12 and an exercise price of $0.138 per
share. In September 2004, Salon issued warrants to purchase 340,363 shares of
common stock in conjunction with the issuance of an additional 208 shares of
Series D preferred stock. As the transaction resulted in a $23 preferred deemed
dividend in Salon's consolidated statement of operations for the year ended
March 31, 2005, 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 2.792%, an expected dividend yield of zero percent, a
volatility of 120%, a deemed fair value of common stock of $0.11 and an exercise
price of $0.1265 per share. In February 2005, Salon issued warrants to purchase
341,999 shares of common stock in conjunction with the issuance of an additional
209 shares of Series D preferred stock. As the transaction resulted in a $92
preferred deemed dividend in Salon's consolidated statement of operations for
the year ended March 31, 2005, 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 3.327%, an expected dividend yield of zero percent, a
volatility of 120%, a deemed fair value of common stock of $0.14 and an exercise
price of $0.161 per share. None of the warrants have been exercised as of March
31, 2005.

     In March 2005, Salon issued warrants to purchase 600,000 shares of common
stock at an exercise price of $0.27 per share to its former Senior Vice
President-Business Operations. Salon valued the warrants using the Black-Scholes
option-pricing model, applying a contractual life of 2 years, a weighted


                                       31
<PAGE>

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

average risk-free interest rate of 3.75%, an expected dividend yield of zero
percent, a volatility of 120% and a deemed fair value of common stock of $0.27.
The fair market value of the warrants of $100 was amortized through Salon's
fiscal year ending March 31, 2005 as a component of Sales and marketing expense
in the Consolidated Statement of Operations. The warrants may be exercised at
any time within two years after issuance and expire in March 2007. The warrants
have not been exercised as of March 31, 2005.

     From July 2002 through December 2003, Salon issued warrants to purchase
10,146,036 shares of common stock in conjunction with the issuance of
convertible notes payable and a promissory note, as follows, with the exercise
prices in effect as of March 31, 2005:

              Issue          Expiration         Warrant          Exercise
              Date              Date             Shares            Price
          ------------     --------------    -----------       ------------
            Jul 2002          Jul 2005           357,021          $0.0898
            Dec 2002          Dec 2005           300,000          $0.0451
            Jan 2003          Jan 2006           150,000          $0.0451
            Feb 2003          Feb 2006           300,000          $0.0451
            Mar 2003          Mar 2006         1,200,000          $0.0417
            Apr 2003          Apr 2006           600,000          $0.0417
            Apr 2003          Apr 2006           600,000          $0.0451
            May 2003          May 2006           900,000          $0.0451
            Jun 2003          Jun 2006           600,000          $0.0451
            Jul 2003          Jul 2006           744,015          $0.0417
            Jul 2003          Jul 2006           300,000          $0.0345
            Aug 2003          Aug 2006           495,000          $0.0345
            Sep 2003          Sep 2006           300,000          $0.0451
            Sep 2003          Sep 2006           300,000          $0.0518
            Oct 2003          Oct 2006           750,000          $0.0451
            Oct 2003          Oct 2006           300,000          $0.0518
            Nov 2003          Nov 2006           450,000          $0.0451
            Nov 2003          Nov 2006           300,000          $0.0484
            Dec 2003          Dec 2006           300,000          $0.0345
            Dec 2003          Dec 2006           900,000          $0.0451
                                             -----------
                                              10,146,036
                                             ===========

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
ranging from 1.625% to 2.75%, an expected dividend yield of zero percent, a
volatility of 120% and a deemed fair value of common stock ranging from $0.03 to
$0.07. The fair market value of the warrants of $324 was amortized during
Salon's fiscal years ending March 31, 2003 and March 31, 2004 as a component of
Interest and other expense in the Consolidated Statement of Operations. No
warrants were exercised as of March 31, 2005. Subsequent to March 31,


                                       32
<PAGE>

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

2005, warrants for 239,587 shares of common stock were exercised, of which
113,637 were conversions from warrant shares to common stock shares.

Convertible securities issued in excess of authorized shares of common stock

     On July 24, 2002, Salon issued convertible promissory notes that did not
stipulate a maximum number of shares of common stock that they could be
converted into. As the 50,000,000 shares of common stock then authorized were
deemed to be insufficient to satisfy all obligations under convertible
instruments, warrant agreements and options, Salon recorded the fair value of
the then outstanding warrants of $175 as a long-term liability. The inadequacy
of the number of authorized shares of common stock was exasperated by the
issuance of 6,618 shares of Series C preferred stock, which could be converted
to 132,360,000 shares of common stock for a lack in a sufficient number of
authorized shares of common stock. Since that day, at each measurement period
(the last day of each fiscal quarter), through November 22, 2004, Salon has
re-measured the value of its outstanding warrants.

     For the year ended March 31, 2003, the re-measurement of warrants resulted
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. For the year
ended March 31, 2004, the re-measurement of warrants resulted in a 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. From June 30, 2004
through November 22, 2004, the re-measurement of warrants resulted in a benefit
of $1,011, of which $470 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.

     On November 22, 2004, Salon amended its Certificate of Incorporation,
increasing the number of authorized shares of common stock from 50,000,000 to
600,000,000. As of that date, Salon has had a sufficient number of authorized
shares of common stock to satisfy all obligations under convertible instruments,
warrant agreements and options, and relieved its then cumulative $1,707 warrant
long-term liability to a component of additional paid-in-capital.

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 $11,812 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
$6,026 of advertising and promotion time.


                                       33
<PAGE>

Selected Quarterly Financial Data (unaudited)
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                                   First         Second          Third         Fourth
                                                  Quarter        Quarter        Quarter        Quarter
                                                -----------    -----------    -----------    -----------
<S>                                             <C>            <C>            <C>            <C>
2005:
Net revenue                                     $     1,733    $     1,256    $     2,150    $     1,489

Gross margin                                            533            252          1,019            378
Net income (loss) attributable to                    (1,164)         1,018            395           (607)
     common stockholders
Basic net income (loss) per share
     attributable to common stockholders              (0.08)          0.07           0.03          (0.04)
Diluted net income (loss) per share
     attributable to common stockholders              (0.08)          0.00           0.00          (0.04)
Shares used in per share calculation
     Basic                                           14,155         14,161         14,507         14,743
     Diluted                                         14,155        205,148        203,387         14,743

2004:
Net revenue                                     $     1,045    $     1,086    $     1,273    $     1,095
Gross margin                                           (144)           130            204           (338)
Net income (loss) attributable to
     common stockholders                             (1,320)        (1,198)        (1,187)        (4,956)
Basic net income (loss) per share
     attributable to common stockholders              (0.09)         (0.09)         (0.08)         (0.35)
Diluted net income (loss) per share
     attributable to common stockholders              (0.09)         (0.09)         (0.08)         (0.35)
Shares used in per share calculation
     Basic                                           13,997         14,090         14,155         14,155
     Diluted                                         13,997         14,090         14,155         14,155
</TABLE>


                                       34
<PAGE>

PART III


ITEM 10. Directors and Executive Officers of The Registrant

     Information concerning Salon's Director, their ages as of March 31, 2005,
and their term is set forth below:

<TABLE>
<CAPTION>
                                                                                                 Director
Name                                 Position With the Company                         Age         Since
----                                 -------------------------                         ---         -----
<S>                                  <C>                                                <C>        <C>
Class I directors whose term expires at the 2005 Annual Meeting of Stockholders:
George Hirsch (1)                    Director                                           70         2003
John Warnock  (2)                    Director                                           64         2001
Deepak Desai (1)                     Director                                           46         2004

Class II directors whose term expires at the 2006 Annual Meeting of Stockholders:
Robert Ellis (1)                     Director                                           69         2001
David Talbot                         Director, Chairman                                 53         1995

Class III directors whose term expires at the 2007 Annual Meeting of Stockholders:
Elizabeth Hambrecht                  Director, President, Chief Executive Officer       42         2003
Robert McKay                         Director                                           41         2001
James Rosenfield (2)                 Director                                           76         1998
Jann Wenner                          Director                                           59         2004
</TABLE>

     (1)  Member of Audit Committee
     (2)  Member of Compensation Committee

     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. From 1987 until his retirement in 2004, he 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.

     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. 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.


                                       35
<PAGE>

     Deepak Desai has served as a Director of Salon since September 2004. He is
currently the Chief Financial Officer of GlobalEnglish Corporation and has held
that position since June 2002. From December 2001 to May 2002 Mr. Desai was the
interim Chief Financial Officer for Pointcross, Inc. and from July 2001 to
October 2001 he was the interim Co-Chief Executive Officer of Yesasia.com Ltd.
From August 1999 to June 2001 Mr. Desai was the Chief Financial Officer of
Asiacontent.com Ltd. From July 1987 to July 1999, Mr. Desai held various
positions with Time Warner, Inc., including General Manager and Chief Financial
Officer with Time Life Asia, Associate Business Manager, Financial Manager and
Assistant Business Manager with Time Inc. and Senior Auditor with Time Warner
Inc. Mr. Desai is a Certified Public Accountant, received a Bachelor of Commerce
in Accounting from the University of Bombay, India and a M.B.A. with a Finance
emphasis from the Wharton School of Business of the University of Pennsylvania.

     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 served as president of eNature.com, a nature content site on the web.
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 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.

     David Talbot co-founded Salon in 1995. He served as Chief Executive Officer
from 1995 through April 1999 and again from October 2003 through February 2005.
He became Chairman of the Board in April 1999. He served as Editor-in-Chief from
Salon's incorporation in 1995 through February 2005. From 1990 to 1995, Mr.
Talbot was the Arts & Features editor for the San Francisco Examiner newspaper.
Mr. Talbot has co-authored three 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 Chief Executive Officer since
February 2005 and Salon's President since October 2003. Previously, she served
as Salon's Chief Financial Officer and Secretary from May 2003 until February
2005. From 1999 to March 2003, she was the co-founder and Director of
Asiacontent.com, an online media company focused on Asian markets. From 1997 to
2000 she was co-founder, Chief Financial Officer and Director of Boom.com, a
Hong Kong-based online stock trading company. 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. She sits on the Board of
Trustees of the San Francisco Friends School, the Asian Art Museum of San
Francisco, and of KQED, a public broadcast company for Northern California.

     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.


                                       36
<PAGE>

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.

     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.

     Please also see information under "Executive Officers of the Registrant"
which is set forth at the end of Part I of Form 10-K.

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."


                                       37
<PAGE>

ITEM 11. Executive Compensation

     Executive Compensation

     The following table sets forth information concerning the compensation
during the fiscal years ended March 31, 2005, March 31, 2004 and March 31, 2003
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
                                                   Annual Compensation                 Awards
                                             --------------------------------       ------------
                                                                                     Securities
                                                                                     Underlying       All Other
       Name and Principal Position            Year     Salary       Bonus(1)           Options      Compensation
----------------------------------------     ------   --------     ----------       ------------    ------------
<S>                                           <C>     <C>          <C>                <C>            <C>
David Talbot(2).........................      2005    $177,860     $        -         5,000,000      $       -
   Chairman                                   2004    $191,250     $        -                 -      $       -
                                              2003    $191,250     $        -                 -      $       -

Elizabeth Hambrecht(2)..................      2005    $132,891     $        -         2,500,000      $       -
   President and Chief Executive Officer      2004    $130,000     $        -                 -      $       -
                                              2003    $      -     $        -                 -      $       -

Joan Walsh(2,3).........................      2005    $132,891     $        -         2,000,000      $       -
   Editor-In-Chief                            2004    $115,000     $        -                 -      $       -
                                              2003    $115,000     $        -                 -      $       -

Conrad Lowry(2).........................      2005    $109,652     $        -         1,500,000      $       -
   Chief Financial Officer and Secretary      2004    $106,250     $        -                 -      $       -
                                              2003    $106,250     $        -                 -      $       -

Melissa Barron..........................      2005    $130,000     $   50,440         1,000,000      $       -
   Senior Vice President - Sales              2004    $130,000     $   33,527                 -      $       -
                                              2003    $130,000     $    7,185                 -      $       -

Patrick Hurley(4).......................      2005    $176,643     $        -                 -      $       -
   (Former)Senior Vice President -            2004    $148,750     $        -                 -      $       -
   Business Operations                        2003    $148,750     $    1,711                 -      $       -
</TABLE>

     (1)  Bonuses are principally based on performance and are shown in the year
          earned.
     (2)  On February 10, 2005 David Talbot resigned his position as Chief
          Executive Officer and Editor-in-Chief, Elizabeth Hambrecht was
          appointed Chief Executive Officer, retained her position as President
          and resigned her position as Chief Financial Officer and Secretary,
          Joan Walsh, who had been serving as Senior Vice President, Editorial
          Operations since November 2004, was appointed Editor-in-Chief and
          Conrad Lowry, who had been serving as Controller since joining Salon
          in September 2000, was appointed Chief Financial Officer and
          Secretary.
     (3)  Joan Walsh was appointed in November 2004 to serve as Senior Vice
          President, Editorial Operations upon the resignation of Scott
          Rosenberg.
     (4)  Salary amounts include $37,187 of severance and $10,349 for unused
          vacation leave. Employment curtailed February 2005.


                                       38
<PAGE>

Stock Options Granted in Fiscal 2005

     The following table provides information on option grants in the fiscal
year ended March 31, 2005 to the Named Executive Officers.

<TABLE>
<CAPTION>
                                   Individual Grants
--------------------------------------------------------------------------------------------
                              Number of     Percentage of
                             securities     total options
                             underlying       granted to                                         Grant date
                               options       employees in    Exercise price     Expiration         present
         Name               granted(1,2)     fiscal year        per share          date             value
-------------------------    -----------    --------------   --------------     -----------      ----------
<S>                           <C>                 <C>             <C>            <C>              <C>
David Talbot(1) .........     5,000,000           23%             $0.14          02/07/2015       $549,634

Elizabeth Hambrecht......     2,500,000           11%             $0.14          02/07/2015       $274,817

Joan Walsh...............     2,000,000            9%             $0.14          02/07/2015       $219,854

Conrad Lowry.............     1,500,000            7%             $0.14          02/07/2015       $164,890

Melissa Barron...........     1,000,000            5%             $0.14          02/07/2015       $109,927

Patrick Hurley...........             -            0%             $   -               -           $      -
</TABLE>

(1)  Includes option to purchase 4,000,000 shares of common stock under the
     Salon Media Group, Inc. 2004 Stock Plan and options to purchase 1,000,000
     shares of common stock from a plan not approved by shareholders.
(2)  Of the options granted, 50% vested on the date of grant and 50% vest on
     February 7, 2005.

     The estimated grant date present value has been calculated using the
Black-Scholes option-pricing model with the following material assumptions: (i)
a risk-free rate of 3.4% (at February 7, 2005), (ii) expected volatility of
120%, (iii) expected life of 4 years, and (iv) no dividend.


Option Exercises and Fiscal 2005 Year-End Values

     The following table sets forth information concerning unexercised options
to purchase our Common Stock held as of March 31, 2005 by the persons named in
the Summary Compensation Table.

<TABLE>
<CAPTION>
                                                         Number of Securities         Value of Unexercised
                                                    Underlying Unexercised Options    In-the-Money Options
                                                         at Fiscal Year End(3)        at Fiscal Year End(1)
                                                                                   --------------------------
                              Shares
                             acquired      Value
        Name               on exercise    Realized     Exercisable  Unexercisable  Exercisable  Unexercisable
-----------------------    -----------    --------     -----------  -------------  -----------  -------------
<S>                           <C>         <C>           <C>           <C>          <C>            <C>
David Talbot ..........             -             -     3,388,551     2,558,333    $   378,167    $   332,583
Elizabeth Hambrecht ...             -             -     1,250,000     1,250,000    $   162,500    $   162,500
Joan Walsh ............             -             -     1,187,484     1,018,229    $   143,880    $   132,370
Conrad Lowry ..........             -             -       836,846       758,645    $    99,328    $    97,922
Melissa Barron(2) .....       160,000     $  28,800       464,207       510,937    $    52,528    $    66,422
Patrick Hurley(4) .....                                   235,063             -    $    15,844              -
</TABLE>

(1)  Based on a closing price of Salon's common stock on March 31, 2005 of $0.27
     per share as reported on the Over-The-Counter (OTC) Bulletin Board and is
     net of the exercise price of such options


                                       39
<PAGE>

(2)  None of the shares acquired were sold as of March 31, 2005.
(3)  Other than options granted in February 2005, 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.
(4)  Subsequent to March 31, 2005, the options to purchase expired without being
     exercised.

Compensation of Directors

     The independent directors of Salon received no cash compensation for
serving as a director during the year ended March 31, 2005. In February 2005,
Deepak Desai, Robert Ellis, Robert McKay and John Warnock, serving as directors,
each received options to purchase 500,000 shares of common stock at an exercise
price of $0.14 per share. Of the options granted, 50% vested on the date of
grant and 50% subject to vest in one year, as long as the director continues to
provide services as a director,

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, 2005 for the persons named in the Summary
Compensation Table, with the exception of an employment curtailment agreement
with Patrick Hurley. Mr. Hurley stopped serving as an employee of Salon in
February 2005.

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.


                                       40
<PAGE>

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, 2005, including the
Salon Internet, Inc. 1995 Stock Option Plan, the Salon Media Group, Inc. 2004
Stock Plan, the Salon Media Group, Inc. Non-Plan Stock Agreement 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          23,799,463 (1)               $0.33                13,506,501 (2)
approved by security
holders
---------------------------------------------------------------------------------------------------------
Equity compensation plans             1,000,000                 $0.14                     None
not approved by security
holders
                            -----------------------------------------------------------------------------
Total                                24,799,463                  N/A                   13,506,501
---------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes 3,270,855 shares issuable under the Salon Internet, Inc. 1995
     Stock Option Plan, which terminates in December 2005 and 20,528,608 shares
     issuable under the Salon Media Group, Inc. 2004 Stock Plan.
(2)  Includes 3,999,226 shares available from the Salon Internet, Inc. 1995
     Stock Option Plan, (which terminates in December 2005), 9,089,750 shares
     available from the Salon Media Group, Inc. 2004 Stock Plan, and 417,525
     shares available from the Salon.com, Inc. 1999 Employee Stock Purchase
     Plan, (which was suspended March 1, 2001).

Equity Compensation Plans Not Approved by Security Holders

     In February 2005, Salon entered into a Non-Plan Stock Agreement with its
Chairman, pursuant to which Salon granted such person non-qualified options to
purchase 1,000,000 shares of common stock at an exercise price of $0.14 per
share. Such option grant did not receive stockholder approval. Fifty percent of
the shares subject to the option vested on the date of grant and 50% of the
shares subject to the option vests in February 2006, as long as the Chairman
continues to provide services as an employee, consultant or director until such
date.


                                       41
<PAGE>

Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth information regarding the beneficial
ownership of Common Stock and Common Stock equivalents of Salon as of June 30,
2005 (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, 2005 (the "Named Executive Officers"), and (d) by all
executive officers and directors of Salon as a group.

                                                    Amount and
                                                    Nature of
                                                    Beneficial        Percent
Name and Address of Beneficial Owner (1)           Ownership (2)    of Class (3)
---------------------------------------------      -------------    ------------
William R. Hambrecht (4)                             45,677,336         77.3%
Shea  Ventures LLC (5)                               23,853,003         61.1%
Adobe Systems Incorporated (6)                        9,991,331         43.2%
Octavia LLC (7)                                       7,600,750         33.1%
Constellation Venture Capital (8)                     3,679,237         20.0%
Wasserstein Adelson Ventures LP (9)                   3,550,372         19.3%
Thomas H. Dittmer Declaration of Trust (10)           2,986,735         16.3%
Michael Fuchs (11)                                    2,986,735         16.3%
Alacrity Management Corporation (12)                  1,937,697         11.2%
The Timken Living Trust (13)                          1,840,358         10.8%
William E. Mayer Holdings (14)                        1,465,703          8.7%
Brian Dougherty (15)                                  1,365,000          8.2%
Rainbow Media Holdings, Inc. (16)                     1,125,000          7.3%

Executive Officers and Directors
John Warnock (17)                                    88,694,412         85.4%
Jann Wenner (18)                                      7,925,000         34.1%
Robert McKay (19)                                     6,577,491         30.1%
David Talbot (20)                                     3,538,217         18.8%
Elizabeth Hambrecht (21)                              1,945,000         11.2%
Joan Walsh (22)                                       1,200,505          7.3%
Conrad Lowry (23)                                       843,616          5.2%
Melissa Barron (24)                                     635,985          4.0%
Patrick Hurley (25)                                     600,000          3.8%
James Rosenfield (26)                                   447,166          2.8%
George Hirsch (27)                                      339,653          2.2%
Robert Ellis (28)                                       298,333          1.9%
Deepak Desai (29)                                       250,000          1.6%
All executive officers and directors as
  a group (13 persons)                              113,295,378         88.4%

(1)  The address for all beneficial owners is c/o Salon Media Group, Inc., 101
     Spear Street, Suite 203, San Francisco, CA 94105.

(2)  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,


                                       42
<PAGE>

     subject to community property laws where applicable and to the information
     contained in the footnotes to this table.

(3)  Calculated on the basis of 15,346,609 shares of Common Stock outstanding as
     of June 30, 2005, shares of Common Stock underlying options exercisable
     within sixty (60) days of June 30, 2005, shares of Common Stock that a
     shareholder has the right to acquire upon conversion of shares of Series A,
     B, C, and D 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 and Chief Executive Officer, has an ownership
     interest in the Hambrecht Entities. Mr. Hambrecht, in conjunction with the
     Hambrecht 1980 Revocable Trust and WR Hambrecht + Co, Inc., jointly own
     1,933,913 shares of Common Stock. Mr. Hambrecht disclaims beneficial
     ownership of the shares of Salon's Common Stock held directly by WR
     Hambrecht + Co, Inc., other than his proportionate ownership interest.
     Includes 18,676,422 shares of Common Stock that Mr. Hambrecht, the
     Hambrecht Entities and the Sarah & William Hambrecht Foundation have the
     right to acquire upon conversion of 125 shares of Series A Preferred Stock,
     upon conversion of 486 shares of Series C Preferred Stock, and upon
     conversion of 334 shares of Series D Preferred Stock. Elizabeth Hambrecht
     is a Director and has voting rights in the Sarah & William Hambrecht
     Foundation. Includes 2,530,323 shares of Common Stock issuable upon
     exercise of immediately exercisable warrants held by Mr. Hambrecht, the
     Hambrecht Entities and the Sarah & William Hambrecht Foundation. Includes
     3,311,025 shares of Common Stock that HAMCO Capital has the right to
     acquire upon conversion of 127 shares of Series C Preferred Stock and upon
     conversion of 63 shares of Series D preferred stock, and 415,653 shares of
     Common Stock issuable upon exercise of immediately exercisable warrants.
     Mr. Hambrecht and Elizabeth Hambrecht, 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. Ms. Hambrecht disclaims
     beneficial ownership of the shares held directly by the Hambrecht Entities
     and HAMCO Capital Corporation, other than her proportionate ownership
     interest.

(5)  Consists of 131,360 shares of Common Stock held by the stockholder.
     Includes 18,961,643 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 1,900,000
     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 the 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. Salon director John Warnock is the co-Chairman of the
     stockholder and disclaims beneficial ownership of the shares held by the
     stockholder.

(7)  Includes 6,810,735 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 790,015
     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, LP and 114,138 shares held by Constellation Venture Offshore, LP.
     Includes 2,089,003 shares of Common Stock that Constellation Venture
     Capital has the right to acquire upon conversion of 52 shares of Series A
     Preferred Stock and 441,904 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


                                       43
<PAGE>

     Offshore, LP. Constellation Venture Capital, LP and Constellation Venture
     Offshore, LP are entities of Bear Stearns.

(9)  Consists of 515,464 shares of Common Stock held by the stockholder.
     Includes 2,530,908 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 2,490,735 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 2,490,735 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. Mr. Fuchs served as a Director of Salon until
     September 2003.

(12) Consists of 116,030 shares of Common Stock held by the stockholder.
     Includes 1,724,328 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.

(13) Includes 1,724,328 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 116,030
     shares of Common Stock.

(14) Consists of 14,091 shares of Common Stock held by the stockholder. Includes
     1,290,967 shares of Common Stock that the stockholder has the right to
     acquire upon conversion of 51 shares of Series C Preferred Stock, upon
     conversion of 21 shares of Series D Preferred Stock and 160,645 shares of
     Common Stock issuable upon exercise of an immediately exercisable warrant.

(15) Consists of 25,000 shares of Common Stock held by the stockholder. Includes
     1,340,000 shares of Common Stock that the stockholder has the right to
     acquire upon conversion of 67 shares of Series C Preferred Stock. Mr.
     Dougherty served as a Director of Salon until April 2003.

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

(17) Consists of 158,533 shares of Common Stock held by the Director. Includes
     79,613,136 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 3,474 shares of Series C Preferred Stock, upon conversion of
     416 shares of Series D preferred stock and 8,792,943 shares of Common Stock
     issuable upon exercise of immediately exercisable warrants. Includes
     288,333 shares subject to options that may be exercised within sixty (60)
     days of June 30, 2005.

(18) 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. Includes 325,000 shares subject to
     options that may be exercised within sixty (60) days of June 30, 2005.

(19) Consists of 84,000 shares of Common Stock held by the Robert McKay Family
     Partnership. Mr. McKay is the managing partner of the Robert McKay Family
     Partnership. Includes 2,490,735 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 288,333 shares subject to options that may
     be exercised within sixty (60) days of June 30, 2005.

(20) Consists of 108,000 shares of Common Stock, of which 2,577 shares are held
     by Camille Peri, Mr. Talbot's spouse and a former employee of Salon, and
     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. Includes 3,430,217 shares subject
     to options that may be exercised within sixty (60) days of June 30, 2005.


                                       44
<PAGE>

(21) 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. Includes 1,250,000 shares subject to options that may be exercised
     within sixty (60) days of June 30, 2005.

(22) Includes 1,200,505 shares subject to options that may be exercised within
     sixty (60) days of June 30, 2005.

(23) Includes 843,616 shares subject to options that may be exercised within
     sixty (60) days of June 30, 2005.

(24) Consists of 163,185 shares of Common Stock. Includes 472,800 shares subject
     to options that may be exercised within sixty (60) days of June 30, 2005.

(25) Includes 600,000 shares of Common Stock issuable upon exercise of an
     immediately exercisable warrant. The individual's employment with Salon
     ceased in February 2005.

(26) Includes 447,166 shares subject to options that may be exercised within
     sixty (60) days of June 30, 2005.

(27) Consists of 14,653 shares of Common Stock held by the Director and 325,000
     shares subject to options that may be exercised within sixty (60) days of
     June 30, 2005.

(28) Consists of 10,000 shares of Common Stock held by the Director and 288,333
     shares subject to options that may be exercised within sixty (60) days of
     June 30, 2005.

(29) Consists of 250,000 shares subject to options that may be exercised within
     sixty (60) days of June 30, 2005.

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, 2005 (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 current executive
officers and directors of Salon as a group.

                                                   Amount and
                                                    Nature of
                                                   Beneficial       Percent
Name and Address of Beneficial Owner (1)            Ownership      of Class
-----------------------------------------------   -------------   -----------
William R. Hambrecht (2)                               125           15.5%
John Warnock (3,7)                                     125           15.5%
Shea Ventures LLC (3)                                  125           15.5%
Wasserstein Adelson Ventures, LP (4)                    63            7.8%
Constellation Venture Capital (5)                       63            7.8%
McKay Investment Group (6,7)                            62            7.7%
Octavia LLC (6)                                         62            7.7%
Thomas H. Dittmer Declaration of Trust (6)              62            7.7%
Michael Fuchs (6,8)                                     62            7.7%
All executive officers and directors as a
  group (2 persons)                                    187           23.1%

(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. The address for each beneficial owner is c/o Salon Media Group,
     Inc., 101 Spear Street, Suite 203, San Francisco, CA 94105.

(2)  Includes 75 shares held by the Sarah & William Hambrecht Foundation that
     are convertible into 3,012,986 shares of Common Stock, subject to
     adjustment. Also includes 50 shares held by WR Hambrecht + Co. LLC that are
     convertible into 2,008,657 shares of Common Stock, subject to adjustment.
     Mr. Hambrecht is the father of Elizabeth Hambrecht, Salon's President and
     Chief Executive Officer. Ms. Hambrecht has an


                                       45
<PAGE>

     ownership interest in WR Hambrecht + Co. LLC and is a Director of and has
     voting rights in the Sarah & William Hambrecht Foundation.

(3)  Shares held by the named stockholder are convertible into 5,021,643 shares
     of Common Stock, subject to adjustment.

(4)  Shares held by the named stockholder are convertible into 2,530,908 shares
     of Common Stock, subject to adjustment.

(5)  Includes 52 shares held by Constellation Venture Capital, LP that are
     convertible to 2,089,003 shares of Common Stock and 11 shares held by
     Constellation Venture Capital (Offshore), LP that are convertible to
     441,904 shares of Common Stock, all subject to adjustment.

(6)  Shares held by the named stockholder are convertible into 2,490,735 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)  Mr. Fuchs served as a Director of Salon 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, 2005 (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
                                                   Beneficial       Percent
Name and Address of Beneficial Owner (1)            Ownership      of Class
----------------------------------------------    -------------   -----------
Adobe Systems Inc. (2)                                 125          100.0%
All executive officers and directors as
  a group (3)                                            0            0.0%

(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. The address for each beneficial owner is c/o Salon Media Group,
     Inc., 101 Spear Street, Suite 203, San Francisco, CA 94105.

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

(3)  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.


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, 2005 (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 current executive
officers and directors of Salon as a group.


                                       46
<PAGE>

                                                  Amount and
                                                   Nature of
                                                  Beneficial       Percent
Name and Address of Beneficial Owner (1)           Ownership      of Class
---------------------------------------------    -------------   -----------
John Warnock (2,8)                                   3,474          52.5%
William R. Hambrecht (3,8)                           1,456          22.0%
Shea Ventures LLC (4)                                  825          12.5%
Wenner Media LLC (5,8)                                 250           3.8%
Elaine McKay Family Partnership (6,8)                  158           2.4%
Elizabeth Hambrecht (7,8)                               31             *%
All executive officers and directors as a
  group (4 persons)                                  3,913          59.1%


*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. The address for each beneficial owner is c/o Salon Media Group,
     Inc., 101 Spear Street, Suite 203, San Francisco, CA 94105.

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

(3)  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 and Chief Executive Officer, has an ownership
     interest in the Hambrecht Entities. Includes 189 shares held by the
     Hambrecht Entities that are convertible to 3,780,000 shares of Common
     Stock, subject to adjustment, 189 shares held by a trust of Mr. Hambrecht
     that are convertible to 3,780,000 shares of Common Stock, subject to
     adjustment, and 108 shares held by the Sarah & William Hambrecht Foundation
     that are convertible to 2,160,000 shares of Common Stock, subject to
     adjustment. Elizabeth Hambrecht is a Director and has voting rights in the
     Sarah & William Hambrecht Foundation. Includes 127 shares held by HAMCO
     Capital that are convertible to 2,540,000 shares of Common Stock, subject
     to adjustment. Mr. Hambrecht and Elizabeth Hambrecht, both have an
     ownership interest in HAMCO Capital. Includes 843 shares held by Ironstone
     Group, Inc. that are convertible to 16,860,000 shares of Common Stock,
     subject to adjustment. Mr. Hambrecht has an ownership interest in 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 the Hambrecht Entities and HAMCO
     Capital Corporation, other than her proportionate ownership interest.
     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). Mr. Shea is a Director of Ironstone Group, Inc.

(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 the E&M RP Trust 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.


                                       47
<PAGE>

(7)  Stockholder is the President and Chief Executive Officer of the registrant.

(8)  Current 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. Excludes 67 shares held by Brian
     Dougherty, who served as a Director of Salon until April 2003.


Series D Preferred Stock

     The following table sets forth information regarding the beneficial
ownership of Salon's Series D-1 and Series D-2 Preferred Stock (the "Series D
Preferred Stock") as of March 31, 2005 (a) by each stockholder who is known by
Salon to be the beneficial owner of more than 5% of the outstanding shares of
Series D Preferred Stock, (b) by each director and nominee, (c) by the Named
Executive Officers, and (d) by all current executive officers and directors of
Salon as a group.

                                                    Amount and
                                                     Nature of
                                                    Beneficial      Percent
Name and Address of Beneficial Owner(1)              Ownership     of Class
-----------------------------------------------    ------------   -----------
John Warnock (2)                                        416          49.9%
William R. Hambrecht (3)                                397          47.6%
All executive officers and directors as a
  group (1 persons) (2,3)                               416          49.9%


(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. The address for each beneficial owner is c/o Salon Media Group,
     Inc., 101 Spear Street, Suite 203, San Francisco, CA 94105.

(2)  Shares held by the named stockholder, who is a Director of Salon, are
     convertible into 4,952,960 shares of Common Stock, subject to adjustment.

(3)  Mr. Hambrecht is the father Elizabeth Hambrecht, Salon's President and
     Chief Executive Officer. Includes 334 shares held by a trust of the
     stockholder that are convertible to 3,934,779 shares of common stock,
     subject to adjustment. Includes 63 shares held by HAMCO Capital Corporation
     that are convertible to 771,025 shares of common stock, subject to
     adjustment. Mr. Hambrecht and Elizabeth Hambrecht, both have an ownership
     interest in HAMCO Capital. Mr. Hambrecht disclaims beneficial ownership of
     the shares held directly by HAMCO Capital Corporation other than his
     proportionate ownership interest. Ms. Hambrecht disclaims beneficial
     ownership of the shares held directly by HAMCO Capital Corporation other
     than her proportionate ownership interest.


                                       48
<PAGE>

ITEM 13. Certain Relationships and Related Transactions

     On October 10, 2000, Salon loaned its Chairman $75,179 with an agreed 6.3%
annual interest rate with no due date. As of March 31, 2005, the loan and
associated interest total $89,005 and $7,365 of interest has been paid as of
March 31, 2005.

     On June 4, 2004, September 30, 2004 and February 2, 2005, Salon issued a
total of 834 shares of Series D preferred stock and warrants to purchase
1,489,457 shares of common stock. The related parties in these transactions
were:

<TABLE>
<CAPTION>
                                                                  Common
                                                  Series D        Stock
                                                   Shares        Warrants        Cash
Name                                               Issued         Issued       Proceeds
-------------------------------------------      -----------   -----------   -----------
<S>                                              <C>               <C>       <C>
The Hambrecht 1980 Revocable Trust               $       334       590,216   $   400,800
HAMCO Capital Corporation                                 63       115,653   $    75,600
                                                 -----------   -----------   -----------
Total William Hambrecht related entities                 397       705,869   $   476,400
                                                 -----------   -----------   -----------

John Warnock                                             416       742,943   $   499,200
                                                 -----------   -----------   -----------
Total all                                        $       813     1,448,812   $   975,600
                                                 ===========   ===========   ===========
</TABLE>

     The Hambrecht 1980 Revocable Trust is a trust of William Hambrecht, the
father of Elizabeth Hambrecht, Salon's President and Chief Executive Officer.
William Hambrecht and Elizabeth Hambrecht, both have an ownership interest in
HAMCO Capital. John Warnock is a Director of Salon.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company'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 the Company with copies of
all Section 16(a) forms filed by such persons.

     Based solely on the Company's review of such forms furnished to us and
written representations from certain reporting persons, we believe that all
filing requirements applicable to our executive officers, directors and more
than ten percent (10%) stockholders were complied with, except for a Form 4 for
director John Warnock for the purchase of Series D-2 preferred stock and
warrants on September 30, 2004 that was filed on October 5, 2004 and a Form 4
for Melissa Barron for the exercise of stock options on February 22, 2005 that
was filed on March 24, 2005.


                                       49
<PAGE>

ITEM 14. Principal Accountant Fees and Services

     Burr, Pilger & Mayer LLP has served as Salon's independent registered
accountant since November 14, 2003. Prior to that date, PricewaterhouseCoopers
LLP served as Salon's independent registered accountant.

     Audit fees incurred by Salon from Burr, Pilger & Mayer LLP for the years
ended March 31, 2004 and March 31, 2005 were $55,665 and $66,995, respectively.
Audit fees incurred by Salon from PricewaterhouseCoopers LLP for the years ended
March 31, 2004 and March 31, 2005 were $28,500 and $1,000. Audit fees were the
only fees incurred from Burr, Pilger & Mayer LLP and PricewaterhouseCoopers LLP.

     During the year ended March 31, 2005, all audit fees were pre-approved by
the Audit Committee. The Audit Committee has adopted a policy that it must
pre-approve all fees for audit services, tax services and other services.




                                       50
<PAGE>

                                   FORM 10-K/A

                                 AMENDMENT NO. 1

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

                                       SALON MEDIA GROUP, INC.


                                       By: /s/ Elizabeth Hambrecht
                                           -----------------------
                                           Elizabeth Hambrecht
                                           Chief Executive Officer and President


     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/ Elizabeth Hambrecht     Chief Executive Officer,            July 27, 2005
---------------------------   President and Director
    Elizabeth Hambrecht       (Principal Executive Officer)


     /s/ Conrad Lowry         Chief Financial Officer and         July 27, 2005
---------------------------   Secretary
       Conrad Lowry           (Principal Financial Officer)



                                       51