SALON MEDIA GROUP INC - FORM 10-K/A

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EX-31.2 - CERTIFICATION - SALON MEDIA GROUP INC	ex31-2.htm
EX-23.1 - CONSENT - SALON MEDIA GROUP INC	ex23-1.htm
EX-31.1 - CERTIFICATION - SALON MEDIA GROUP INC	ex31-1.htm
EX-32.2 - CERTIFICATION - SALON MEDIA GROUP INC	ex32-2.htm
EX-32.1 - CERTIFICATION - SALON MEDIA GROUP INC	ex32-1.htm

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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K/A

(Amendment No. 2)

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

For the fiscal year ended March 31, 2009

[ ] 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 of Incorporation)	(IRS Employer Identification No.)

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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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

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

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined by Exchange Act Rule 12b-2).Yes [ ] No [X]

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $125,000 based on the closing sale price of the registrant’s common stock on June 10, 2009. 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 10, 2009 was 2,021,276 shares.

Explanatory Note

We are filing this amendment to our Annual Report on Form 10-K for the fiscal year ended March 31, 2009 to make the following changes:

Revised the cover page of this Report to properly refer to this report as covering the fiscal year ended March 31, 2009 rather than 2008.

Revised Item 7 under the caption “Separation Expenses” to include additional information regarding separation expenses incurred in the second half of fiscal year 2009.

Revised the Summary Compensation Table under Item 11 to include 2 years of compensation for the named executive officers and modified footnote 5 to such table.

Revised Item 11 under the caption “Potential Payments Upon Termination or Change in Control” to provide additional clarification.

Revised the Signature Page to identify the officer signing as principal accounting officer.

Revised the certifications filed as Exhibits 31.1 and 31.2

We have not modified or updated the disclosures presented in the original Form 10-K for the fiscal year ended March 31, 2009, except as provided above. Accordingly, this Amendment No. 2 on Form 10-K/A does not reflect events occurring after the filing of our original annual report on Form 10-K for the fiscal year ended March 31, 2009 and does not modify or update those disclosures affected by subsequent events. Information not affected by this amendment is unchanged and reflects the disclosures made at the time of the original filing of the Form 10-K for the fiscal year ended March 31, 2009 filed on June 29, 2009.

FORM 10-K

SALON MEDIA GROUP, INC.

INDEX

PART I		Page Number

ITEM 1.	Business	4

ITEM 1A.	Risk Factors	11

ITEM 1B.	Unresolved Staff Comments	20

ITEM 2.	Properties	21

ITEM 3	Legal Proceedings	21

ITEM 4	Submission of Matters to a Vote of Security Holders	21

PART II

ITEM 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	21

ITEM 6.	Selected Consolidated Financial Data	24

ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	34

ITEM 8.	Financial Statements and Supplementary Data	35

ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	64

ITEM 9A.	Controls and Procedures	64

ITEM 9B.	Other Information	65

PART III

ITEM 10.	Directors and Executive Officers of the Registrant	66

ITEM 11.	Executive Compensation	70

ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	80

ITEM 13.	Certain Relationships and Related Transactions	87

ITEM 14.	Principal Accountant Fees and Services	90

PART IV

ITEM 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	91

SIGNATURES		100

Table of Contents

PART I

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that involve risks and uncertainties, including but not limited to statements regarding our strategy, plans, objectives, expectations, intentions, financial performance, cash-flow breakeven timing, financing, economic conditions, Internet advertising market performance, subscription service plans, non-web opportunities and revenue sources. Although Salon Media Group, Inc. (“Salon” or the “Company”) believes its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Salon’s actual results may differ significantly from those anticipated or implied in these forward-looking statements as a result of the factors set forth above and in Salon’s public filings. Salon assumes no obligation to update any forward-looking statements as circumstances change.

Salon’s actual results may differ significantly from those anticipated or implied in these forward-looking statements as a result of the factors set forth below and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Factors That May Affect Salon’s Future Results and Market Price of Stock." In this report, the words “anticipates,” “believes,” “expects,” “estimates,” “intends,” “future,” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

ITEM 1. Business

Overview

Salon was originally incorporated in July 1995 in the State of California and reincorporated in Delaware in June 1999. On June 22, 1999, Salon had its initial public offering, with its common stock quoted on the NASDAQ National Market under the symbol SALN. Effective May 16, 2001, Salon adopted the name Salon Media Group, Inc. Due to Salon’s inability to meet the continued listing requirements of the NASDAQ Market, on November 21, 2002, Salon’s common stock began trading in the OTC (Over-The-Counter) Bulletin Board marketplace under the symbol SALN.OB. Following a 20:1 reverse split on November 15, 2006, the Company’s stock ticker symbol became SLNM.OB.

Salon is an online news and social networking company and an Internet publishing pioneer. Salon’s award-winning journalism combines original investigative stories and provocative personal essays along with quick-take commentary and staff-written Weblogs about politics, technology, culture and entertainment. Committed to interactivity, the Website also hosts two online communities, Table Talk and The Well, as well as Open Salon, a blogging social network launched in August, 2008. Among its many quality offerings, Salon sponsors a daily blog by the independent blogger Glenn Greenwald, a monthly column by culture writer Camille Paglia, and a daily blog by Editor-in-Chief Joan Walsh. In its editorial product Salon balances two crucial missions: (1) providing original and provocative content on topics that the mainstream media overlook, and (2) filtering through the media chatter and clutter to help readers find the stories that matter.

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The main entry and navigation point to Salon's primary subject-specific sections is Salon's home page at www.salon.com. Built around multiple daily features – War Room, Five Things, Since you Asked, Broadsheet, How the World Works, Beyond the Multiplex, Video Dog and daily blogs by Glenn Greenwald and Joan Walsh, Salon provides a constantly updated array of news, features, interviews, columnists and blogs, including the following:

News & Politics	Salon News & Politics features breaking stories, investigative journalism and commentary, as well as interviews with newsmakers, politicians and pundits. News features Salon’s War Room, a daily politics blog.
Opinion	Opinion features provocative commentary on timely issues, including daily blogs by Glenn Greenwald and Joan Walsh, and weekly columns by Gary Kamiya, Joe Conason and Garrison Keillor, and a monthly column by Camille Paglia.
Technology & Business	Technology & Business provides smart, opinionated coverage of Internet news and digital culture from today's best technology writers, along with in-depth features about the business world and the economy. It features Patrick Smith's regular Ask the Pilot column, Andrew Leonard’s How the World Works blog, and shared content from the GigaOM network.
Arts & Entertainment	Arts & Entertainment stages music and television reviews and interviews. The section includes frequent television and music features, as well as Video Dog, a video blog comprised of user generated video clips, as well as regular podcasts. It is anchored by television critic Heather Havrilesky.
Movie Page	Salon’s Movie Page spotlights film reviews, especially critics’ picks, and provides readers an ability to check movie show times, buy tickets or rent DVDs. Starting in 2008, Salon also offers I Like to Watch, featuring film critics Andrew O’Hehir and Stephanie Zacharek.
Life	Life features articles by thought-provoking writers about family life, motherhood and women's lives and issues, as well as the women’s news digest Broadsheet. Cary Tennis' popular advice column, Since You Asked, appears daily.
Books	Books includes ahead-of-the-curve daily book reviews and interviews with today's most interesting writers. Nationally renowned critics Laura Miller and Andrew O’Hehir anchor this site, which often includes insightful freelance reviews.
Comics	The Comics section features the works of comic luminaries Tom Tomorrow, Ruben Bolling, Carol Lay and Keith Knight.
Environment & Science	News and opinion articles on issues related to science and the environment, with topics ranging from global warming to the relationship between science and religion.

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Salon has two online communities, The Well and Table Talk, which allow users to discuss Salon content and interact with other users. The Well, a subscription member-only discussion community in which members use their real names to post and only members can view the postings, had approximately 2,500 paying subscribers as of May 31, 2009. Table Talk is available to all Internet users.

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

During fiscal year 2009, Salon launched Open Salon.com, a social network for bloggers, with content curated by Salon staff. Open Salon functions like a real-time magazine cover, where the best content is spotlighted. Blogs from Open Salon may be posted on the Salon.com website. Open Salon’s audience has grown consistently since its launch, and is expected to contribute to revenues in fiscal 2010.

Revenue Sources

One customer accounted for over 13% of advertising revenue for the year ended March 31, 2009. No customer accounted for over 10% of either total revenue or advertising revenue for the year ended March 31, 2008, or March 31, 2007, which were as follows (in thousands):

	Year Ended March 31,
	2009					2008					2007
	Amount		%			Amount		%			Amount		%
Advertising	$	5,195		76	%	$	5,434		72	%	$	5,409		70	%
Salon Premium		994		14	%		1,333		18	%		1,546		20	%
All Other		685		10	%		746		10	%		793		10	%
Total	$	6,874		100	%	$	7,513		100	%	$	7,748		100	%

Salon has generated Internet advertising revenues since its inception. To offset the precipitous drop in advertising revenues experienced in 2000 from the downturn in the economy, the company launched Salon Premium, a subscription service, in April 2001. Since that time, the market for Internet advertising has improved; according to the Interactive Advertising Bureau, online advertising revenues have grown from $9.6 billion in 2004 to $23.4 billion in 2008. According to industry analysts, online advertising revenues are experiencing year over year declines during the first half of 2009 due to the deep recession, although to a lesser extent than traditional media, especially print. However, long-term industry trends are expected to remain favorable. Central to Salon’s strategy is to capitalize on the expected continued shift in spending of advertising budgets to the Web in response to increased online usage.

An important factor in increasing advertising revenues in future periods, including Salon’s peak third quarter ending December 31, is growing Salon’s audience. Attracting more unique Website visitors is important to Salon as they generate page views, and each page view becomes a potential platform for serving advertisements. Ultimately, Salon charges advertisers for a set number of ad impressions viewed by a Website visitor. Due to various factors, including concerted efforts to make Salon’s content more accessible to readers by automatically launching its Site Pass advertisement, formatting content to maximize the potential for Salon’s content to show up in search engine results, and marketing campaigns with a select few Websites, the average number of unique monthly Website visitors for the year ended March 31, 2009 increased 10% to approximately 4.8 million from the year ended March 31, 2008. Additionally, monthly unique visitors have grown by 123% over the past four years. Aiding the continued growth in unique visitors to Salon’s Website is the general migration of readers to the Internet from print newspapers. The table in the following page reflects unique monthly visitors to Salon’s Website.

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Salon has evaluated the balance between its subscription and advertising businesses and has shifted emphasis toward advertising. Until recently, a Website visitor was given a choice of: (1) becoming a Salon Premium subscriber to avoid having to view advertisements on future visits to Salon’s Website or (2) viewing an advertisement to gain access to all of Salon’s content. This strategy has been found to impede access to Salon’s Website and its ability to generate advertising impressions. During fiscal 2007, Salon changed its Site Pass model to automatically serve advertisements, enabling a Website visitor to gain more seamless access to Salon’s content. This change has produced an increase in the number of ad impressions that Salon can serve and improved Salon’s potential to generate an even greater amount of advertising revenues, offsetting a drop in Salon Premium subscriptions that traditionally were solicited from the Site Pass and the relatively smaller amount of revenue they generate.

Most advertising campaigns are of short duration, generally less than ninety days. Salon’s obligations may include a guaranteed minimum number of impressions, or views by Website visitors of an advertisement, a set number of “Site Pass” advertisements viewed by Website visitors or a set number of days that a Site Pass advertisement is to run. To the extent the minimum guaranteed amounts are not achieved, Salon defers recognition of the corresponding revenue until the remaining guaranteed amounts are provided, if mutually agreeable with an advertiser. If these “make good” amounts are not agreeable with an advertiser, no further revenue is recognized. Salon has also successfully made greater use of ad networks to better monetize unsold ad inventory.

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Generally, subscriptions to Salon Premium cost between $30 and $45 annually, depending on any associated bundles of promotional items offered. Benefits of Salon Premium include unrestricted access to Salon’s content with no banners, pop-ups or site pass advertisements, free magazine subscriptions, free access to the Table Talk on-line discussion forum, and the ability to download content in text or PDF format.

Salon Premium revenue is recognized ratably over the period that services are provided. For the year ended March 31, 2009, Salon received $0.8 million in cash and recognized $1.0 million of revenue for this service primarily from approximately 17,600 paid new and renewed one year subscriptions and from approximately 7,000 monthly subscriptions. For the year ended March 31, 2008, Salon received $1.2 million in cash and recognized $1.3 million of revenue for this service primarily from approximately 27,900 paid new and renewed one year subscriptions and from approximately 4,400 monthly subscriptions. For the year ended March 31, 2007, Salon received $1.5 million in cash and recognized $1.5 million of revenue for this service primarily from approximately 44,200 paid new and renewed one year subscriptions and from approximately 5,000 monthly subscriptions. Since peaking at 89,100 subscribers in December 2004, paid subscriptions have continued to decline to 33,900 as of March 31, 2008 and approximately 23,500 as of March 31, 2009. The drop is expected to continue during the next year, following longstanding industry trends away from paid Web content.

The other sources of revenue are primarily from The Well, an on-line discussion forum. Revenue is recognized ratably over the subscription period. The revenues recognized were $0.4 million each for the years ended March 31, 2009, March 31, 2008 and March 31, 2007. Salon generates nominal revenue from the licensing of content that previously appeared in Salon and for providing links to a third party’s Website offering personals/dating services.

Sales and Marketing

Salon has sales offices in New York City, Los Angeles and San Francisco with eight advertising sales and operations employees as of March 31, 2009, of which four actively solicit orders. As of March 31, 2009, Salon has one employee associated with Salon Premium membership activities.

Salon incurred advertising expenses of $0.9 million, $1.1 million and $0.4 million for the years ended March 31, 2009, 2008, and 2007, respectively. These advertising expenses primarily represent non-cash expenses from the utilization of advertising credits which Salon acquired in January 2000 from the sale of common stock to Rainbow Media Holdings (“Rainbow”). During the year ended March 31, 2003, Rainbow transferred a portion of its obligation to provide Salon with advertising credits to NBC’s Bravo channel, while still retaining a portion of the overall obligation. The transfer occurred due to the sale by Cablevision, which owns Rainbow Media Holdings, of its Bravo channel to NBC. As of March 31, 2009, Salon has $1.8 million in advertising credits, of which approximately $1.0 million remain with NBC and approximately $0.8 million are with Rainbow, all of which will expire in December 2009. Since their acquisition, Salon has used the advertising credits for cable television and online advertisements. Salon intends to utilize the NBC and Rainbow credits to continue to promote its website as well as its new social network, Open Salon. Salon expects to recover the full value of all the advertising credits through usage or settlement in cash, per the terms of the agreement, but there can be no absolute assurance as to any potential cash settlement.

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Competition

Salon competes for advertising revenues with numerous Websites, with the 50 largest companies attracting an estimated 91% of all the internet advertising dollars according to a recent study by PricewaterhouseCoopers LLC and sponsored by the Interactive Advertising Bureau. These companies have Websites that include major portals such as Yahoo, major search engines such as Google, major social networks such as Facebook and MySpace, and major online media publications such as CNN.com.

Salon also competes with many news–oriented Websites. In addition to traditional news-oriented Websites such as CNN, NBC, ABC and CBS, Salon also competes with sites such as the Huffington Post, Slate, Mother Jones, Daily Beast and Politico for staff, audience and ad sales.

Salon’s Strategy

Continued focus on growing Salon’s audience

Increasing unique visitors to Salon’s Website and the resulting page views that serve as a platform for advertising impressions is key to Salon’s revenue growth. In addition to the revenue generated from advertising, an increase in unique visitors could increase revenue from subscriptions as each new visitor to Salon’s Website is a potential new subscriber to Salon Premium. As a result, audience growth will continue to be a primary business goal for Salon.

Salon plans to continue to focus on developing its audience growth through a combination of editorial enhancements, new products, and more effective use of technology. Salon has continued to add new writers, and enhance or create new content areas and features for its readers. The Company plans to invest in major site improvements in fiscal 2010 to accelerate its continued growth.

Salon launched a new social networking service in August 2008 for its users, “Open Salon”, which allows them to post user profiles; contribute blogs and other content; and collect all their contributions to Salon, including Letters to the Editor, in one place. Management believes Open Salon will attract and retain unique users, increase advertising inventory and lower its incremental editorial costs. Salon’s strategy to continue to grow its audience also encompasses partnership formation to deliver Salon’s content to a broader audience, a search engine optimization plan, and an integrated marketing plan that includes mostly online advertising. In the last several years Salon has not allocated, and does not currently contemplate in its next fiscal year allocating any significant cash resources towards such efforts; however, Salon has formed and continues to form partnerships and alliances to deliver Salon’s award-winning, unique, and compelling content to a broader audience.

Focus on advertising revenue opportunity while Premium subscriber base declines

Salon generates most of its revenue from advertising on its Website, as well as through subscribers who pay to read its content without ads. However, as Salon increased its number of readers to its Website, Salon has determined that if its advertising sales team can sell most of its inventory, it will be more profitable for Salon to drive its readers to its advertising supported Website rather than to a subscription, without-ads Website. Salon recognizes that its subscription model will continue to be preferred by a minority of its readers, and will therefore continue the subscription program, with emphasis on “Premium with ads” as a means of increasing potential ad impressions. Additionally, Salon will continue efforts to increase the average value per subscriber by bundling third-party services with subscriptions, and intends to offer other products and services to current subscribers.

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Salon increased emphasis on advertising revenues during FY08 and has continued to do so in FY09 and beyond. In FY10, Salon plans to continue to provide more creative advertising offerings, improve the technological orientation of the site to attract more non-standard advertising and expand into additional advertising categories. It will also expand the use of ad networks to fully monetize any unsold remnant inventory.

Enhanced Website Design

In fiscal 2010, Salon plans to launch a re-designed architecture and website to improve the presentation of timely and relevant content through a compelling and dynamically-tuned interface. Salon expects this redesign to result in greater user satisfaction, and therefore, higher utilization, higher search rankings that will drive new users to the site and a higher proportion of repeat engagement, as users return throughout the day to obtain timely news and information. It is anticipated that the site will be more dynamic and interactive, and that its new modular architecture will allow editors to manage a real time flow of content presented in a graphically compelling fashion, while also servicing multiple platforms and devices, and dynamic usability experiments. Salon is also exploring additional ways to exploit the changing media landscape.

Expanding Gross Margins

Salon has made substantial strides in the past several months to better realign its production costs with its revenue potential in an effort to reach profitability. Among other measures, we reduced full-time headcount from 67 in November 2008 to 52 at year end and we are continually aiming to match personnel resources to overall business need given the prevailing advertising market. Additionally, we are evaluating opportunities to reduce the expense of our high-quality content by focusing on reducing cost per page, seeking less costly sources of content, including greater content aggregation and the use of highly-rated articles and blogs from Open Salon.

Develop content partnerships

Salon believes it needs fresh content and new ideas to continue to attract readers to its Website. To this end, Salon has made efforts to initiate partnerships to create content particularly in areas where Salon does not have facilities or experience, such as video content, and various content verticals. Additionally, Salon has made efforts to identify bloggers who might have a strong affinity with its readers, and who might be interested in moving their sites to Salon in order to gain a greater reach of readership, and to gain infrastructure support.

New Channels of Content Distribution

To meet the growing demand for mobile content, Salon has revamped its presence on AvantGo, the largest mobile content platform. Salon’s new AvantGo presence will be featured on the top level of the service’s Technology channel, one of its most popular feeds. Even though increased mobile usage is expected to generate minimal additional revenue, this channel is primarily an opportunity for Salon to extend its presence beyond a Web browser.

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Infrastructure and Operations

Salon has created a flexible publishing structure that enables it to develop its content while responding quickly to news events and take advantage of the ease of distribution provided by the Internet. Salon content is deployed on its proprietary software platform and captured in a database for reuse in Web and other formats. The content on Salon’s Website has been structured to facilitate being found by search engines, a key driver in increasing traffic to Salon’s Website. During the last two years, Salon has improved the look and feel of its Website to increase appeal to its audience and contemplates continued changes to its Website. In FY10, Salon plans to make significant investments in this area to help drive traffic to its site.

Salon’s Website is supported by a variety of servers using the Solaris and Linux operating systems. Salon’s top technical priority is the fast delivery of pages to its users. Salon’s systems are designed to handle traffic growth by balancing the amount of traffic among multiple servers. Salon relies on server redundancy to help achieve its goal of 24 hours, seven-days-a-week Website availability. Regular automated backups protect the integrity of Salon’s data. Salon servers are maintained at a third-party facility in Sacramento, in a building capable of withstanding a major earthquake. The third-party facility provides continuous monitoring of the servers.

Software to maintain and manage Salon Premium was created in-house and upgraded in 2003, again during the year ended March 31, 2007, and a major reprogramming is planned for fiscal year 2010.

Proprietary Rights

Salon’s success and ability to compete is dependent in part on the goodwill associated with its trademarks, trade names, service marks and other proprietary rights and on its ability to use U.S. laws to protect its intellectual property, including its original content, content provided by third parties, and content provided by columnists. Salon has a registered trademark on its name and is securing a registered trademark on its logo.

Salon owns the Internet address www.salon.com. Because www.salon.com is the address of the main home page to Salon’s Website and incorporates Salon’s company name, it is a vital part of Salon’s intellectual property assets. Salon does not have a registered trademark on the address, and therefore it may be difficult for Salon to prevent a third party from infringing its intellectual property rights to the address.

Employees

As of March 31, 2009, Salon has 52 full-time and two part-time employees. Salon believes its employee relations are good. No employees of Salon are represented by a labor union or are subject to a collective bargaining agreement. Salon’s future success is highly dependent on the ability to attract, hire, retain and motivate qualified personnel.

ITEM 1A. Risk Factors

Factors That May Affect Salon’s Future Results and Market Price of Stock

Salon’s business faces significant risks. The risks described below may not be the only risks Salon faces. Additional risks that are not yet known or that are currently immaterial may also impair its business operations or have a negative impact on its stock price. If any of the events or circumstances described in the following risks actually occurs, its business, financial condition or results of operations could suffer, and the trading price of its common stock could decline.

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Salon’s projected cash flows may not meet expectations

Salon relies on cash projections to run its business and changes such projections as new information is made available or events occur. The most significant component of Salon’s cash projections is cash to be generated from advertising sales and, to a lesser extent, cash to be generated from Salon Premium. Forecasting advertising revenues and resulting cash receipts for an extended period of time is problematic due to the short duration of most advertising sales. If projected cash inflows and outflows do not meet expectations, Salon’s ability to continue as a going concern may be adversely affected.

If Salon forecasts or experiences periods of limited, or diminishing cash resources, Salon may need to issue additional securities. These newly issued securities could be highly dilutive to existing common shareholders. However, there is no guarantee that Salon will be able to issue additional securities in future periods to meet cash needs and, if it is unable to raise additional cash, Salon’s ability to continue as a going concern may be adversely affected.

Salon has relied on related parties for significant investment capital

Salon has been relying on cash infusions primarily from related parties to fund operations. The related parties are generally John Warnock, Chairman of the Board of Salon, and William Hambrecht. William Hambrecht is the father of Salon’s former President and Chief Executive Officer, Elizabeth Hambrecht, a Director of the Company. During the year ended March 31, 2009, related parties provided approximately $1.8 million in new loans.

Curtailment of cash investments and borrowing guarantees by related parties could detrimentally impact Salon’s cash availability and its ability to fund its operations.

Salon’s principal stockholders can exercise a controlling influence over Salon’s business affairs and may make business decisions with which non-principal stockholders disagree and may affect the value of their investment

Based on information available to Salon, the holders of Salon’s Series A, B, C and D preferred stock collectively own approximately 94% of all voting securities. These stockholders therefore own a controlling interest in Salon. Of this amount, approximately 22% is controlled directly or indirectly by William Hambrecht and approximately 41% by Chairman and Director John Warnock. Therefore, related parties by themselves own a controlling interest in Salon.

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

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Future sales of significant number of shares of Salon’s common stock by principal stockholders could cause its stock price to decline

Salon’s preferred stockholders can convert their 9,467 shares of preferred stock to approximately 10.1 million shares of common stock. As Salon’s common stock is normally thinly traded, if these stockholders were to convert their shares of preferred stock to common stock and sell the resulting shares, the per share price of Salon’s common stock may be adversely affected.

Salon may not be able to receive the full value of its advertising credits

As of March 31, 2009, Salon has $1.8 million of advertising credits which Salon has valued at $1.2 million that expire on December 31, 2009. Of the $1.8 million, approximately $0.8 million are the obligation of Rainbow Media Holdings (“Rainbow”) and approximately $1.0 million are the obligation of NBC. Salon feels that it should be able to fully utilize the credits with both Rainbow and NBC, but may not be able to fully utilize the credits prior to expiration. Salon expects to recover the full value of all the advertising credits through usage or settlement in cash, per the terms of the agreement, but there can be no absolute assurance as to any potential cash settlement.

Salon’s stock has been and will likely continue to be subjected to substantial price and volume fluctuations due to a number of factors, many of which will be beyond its control and may prevent its stockholders from reselling its common stock at a profit

The securities markets have experienced significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, have and may continue to reduce the market price of its common stock, regardless of its operating performance. In addition, Salon’s stock is thinly traded and operating results could be below the expectations of public market analysts and investors, and in response, the market price of its common stock could decrease significantly.

Salon’s preferred stockholders are entitled to potentially significant liquidation preferences of Salon’s assets over common stockholders in the event of such an occurrence

Salon’s Series A, B, C and D preferred stockholders have liquidation preferences over common stockholders of the first approximately $24.3 million in potential sales proceeds as of March 31, 2009, which includes the effect of undeclared dividends of $5 million. If a liquidation event were to occur, and preferred stock dividends were declared, the holders of preferred stock would be entitled to the first $24.3 million of cash distributions, while the holders of common stock would receive none of this amount. If a liquidation event were to occur in excess of $24.3 million and if preferred stock dividends were to be declared, the holders of preferred stock would be entitled to receive a relatively larger distribution than the holders of common stock would be entitled to receive.

Salon has historically lacked significant revenues and has a history of losses

Salon has a history of significant losses and expects to incur a loss from operations, based on generally accepted accounting principals, for its fiscal year ending March 31, 2010 and potentially in future years. Once Salon attains profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis in the future. If revenues grow slower than Salon anticipates or operating expenses exceed expectations, financial results will most likely be severely harmed and the ability of Salon to continue its operations will be seriously jeopardized.

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Burr, Pilger & Mayer LLP, Salon’s independent registered public accounting firm for the years ended March 31, 2007, March 31, 2008, and March 31, 2009, included a “going-concern” audit opinion on the consolidated financial statements for those years. The audit opinions report substantial doubt about Salon’s ability to continue as a going concern, citing issues such as the history of losses and absence of current profitability. As a result of the “going-concern” opinions, Salon’s stock price and investment prospects have been and will continue to be adversely affected, thus limiting financing choices and raising concerns about the realization of value on assets and operations.

Salon Premium memberships have been declining and may continue to decline, adversely affecting revenues and available cash

Salon has been relying on the revenues and cash generated from Salon Premium subscriptions since its implementation in April 2002. Salon Premium subscriptions grew from nothing to a high of approximately 89,100 as of December 31, 2004. However, since that time, subscriptions have been declining to approximately 23,500 as of March 31, 2009. Salon forecasts that these memberships will continue to decline to approximately 15,000 as of March 31, 2010. If the decline were to be in excess of anticipated amounts, Salon’s operations and available cash could be adversely affected.

Salon has depended on advertising sales for much of its revenues, and its inability to maintain or increase advertising revenues could harm its business

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

successfully sell and market its Website auto start Site Pass or other rich media advertisements;

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

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

maintain a significant number of sellable impressions generated from Website visitors available to advertisers;

successfully sell and market its network to advertisers;

increase the dollar amount of the advertising orders it receives;

maintain pricing levels of the advertising it sells;

increase awareness of the Salon brand;

improve the technology for serving advertising on its Website;

handle temporary high volume traffic spikes to its Website;

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

attract and retain key sales personnel.

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Legislative action and potential new accounting pronouncements are likely to cause its general and administrative expenses and other operating expenses to increase

To comply with the Sarbanes-Oxley Act of 2002 and proposed accounting changes by the Securities and Exchange Commission, Salon may be required to hire additional personnel and utilize additional outside legal, accounting and advisory services, all of which will cause its general and administrative costs to increase.

Hackers may attempt to penetrate Salon’s security system; online security breaches could harm its business

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

With a volatile share price, Salon may be the target of securities litigation, which is costly and time-consuming to defend

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

Salon’s quarterly operating results are volatile and may adversely affect its common stock price

Salon’s future revenues and operating results, both Generally Accepted Accounting Principles in the United States (“GAAP”) and non GAAP, are likely to vary significantly from quarter to quarter due to a number of factors, many of which are outside Salon’s control, and any of which could severely harm Salon’s business. These factors include:

Salon’s ability to attract and retain advertisers and subscribers;

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

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

the timing and uncertainty of Salon’s advertising sales cycles;

the mix of advertisements sold by Salon or its competitors;

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the economic and business cycle;

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

technical difficulties or system downtime affecting the Internet generally or the operation of Salon’s Website; and

the amount and timing of operating costs.

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

The controversial content of Salon’s Website may limit its revenues

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

Salon’s promotion of the Salon brand must be successful to attract and retain users as well as advertisers and strategic partners

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

Salon needs to hire, integrate and/or retain qualified personnel because these individuals are important to its growth

Salon’s success significantly depends on key personnel. In addition, because Salon’s users must perceive the content of Salon’s Website as having been created by credible and notable sources, Salon’s success also depends on the name recognition and reputation of its editorial staff. Due to Salon’s history of losses, Salon may experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Salon may be unable to retain its current key employees or attract, integrate or retain other qualified employees in the future. If Salon does not succeed in attracting new personnel or retaining and motivating its current personnel, its business could be harmed.

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Salon may expend significant resources to protect its intellectual property rights or to defend claims of infringement by third parties, and if Salon is not successful it may lose rights to use significant material or be required to pay significant fees

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

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

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

Salon’s technology development efforts may not be successful in improving the functionality of its network, which could result in reduced traffic on its Website, reduced advertising revenues, or a loss of Salon Premium subscribers

Salon is constantly upgrading its technology to manage its Website and its Salon Premium program, and during the last year redesigned its Website homepage. In addition, it is creating technology for new products that Salon hopes to launch during its next fiscal year. If these systems do not work as intended, or if Salon is unable to continue to develop these systems to keep up with the rapid evolution of technology for content delivery and subscription management, its Website or subscription management systems may not operate properly, which could harm Salon’s business. Additionally, software product design, development and enhancement involve creativity, expense and the use of new development tools and learning processes. Delays in software development processes are common, as are project failures, and either factor could harm Salon’s business. Moreover, complex software products such as its online publishing and subscription management systems frequently contain undetected errors or shortcomings, and may fail to perform or scale as expected. Although Salon has tested and will continue to test its systems, errors or deficiencies may be found in these systems that may adversely impact its business.

Salon relies on software, purchased from an independent supplier, to deliver and report some of its advertising, the failure of which could impair its business

Salon uses software, purchased from an independent supplier, to manage and measure the delivery of advertising on its Website. The software is essential to Salon whenever an advertiser does not stipulate ad serving from a third party such as Doubleclick. This type of software may fail to perform as expected. If this software malfunctions, advertisements may not be served correctly on its Website, or if the software does not accurately capture impression information, then Salon’s advertising revenues could be reduced, and its business could be harmed.

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Salon may be held liable for content or third party links on its Website or content distributed to third parties

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

Concerns about transactional security may hinder electronic commerce on Salon’s Website and may expose Salon to potential liability

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

Salon may be required to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by these breaches. Protection may not be available at a reasonable price or at all.

Salon’s internally developed software and software platforms provided by a third party to manage Salon’s subscription business might fail resulting in lost subscription income

Salon’s software to manage its subscription business was developed internally to interface with the software provided by a third party. The third party’s software provides a gateway to authenticate credit card transactions. Even though Salon’s system to manage its Salon Premium program is Payment Card Industry (PCI) compliant, if this system were to fail or not function as intended, credit card transactions might not be processed and Salon’s cash resources and revenues would therefore be harmed.

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Salon’s systems may fail due to natural disasters, telecommunications failures and other events, any of which would limit user traffic

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

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

Privacy concerns could impair Salon’s business

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

Possible state sales and other taxes could adversely affect Salon’s results of operations

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

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Provisions in Delaware law and Salon’s charter, stock option agreements and offer letters to executive officers may prevent or delay a change of control

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

the Board of Directors approved the transaction in which the stockholder acquired 15% or more of the corporation’s assets;

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

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

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

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

Salon’s Board is classified into three classes of Directors as nearly equal in size as possible with staggered three year-terms; and

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

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

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

In addition, employment agreements with certain executive officers provide for the payment of severance and acceleration of the vesting of options and restricted stock in the event of termination of the executive officer following a change of control of Salon. These provisions could have the effect of discouraging potential takeover attempts.

ITEM 1B. Unresolved Staff Comments

None.

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ITEM 2. Properties

Salon leases 8,623 square feet of office space at 101 Spear Street, San Francisco, California, where it is headquartered. The lease for the San Francisco office will terminate in February 2014. Salon also leases 4,200 square feet of office space at 15 West 37th Street, 8th Floor, New York, NY, through August 2011, and smaller offices at 1130 Connecticut Ave. NW, Washington, DC, expiring December 31, 2009, and 300 Manhattan Beach Blvd, Manhattan Beach, CA, terminating August 30, 2009. Salon also rents minimal space to host its servers in Sacramento, California.

Salon believes that its existing properties are in good condition and are suitable for the conduct of its business.

ITEM 3. Legal Proceedings

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

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

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended March 31, 2009.

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

Information with respect to the quarterly high and low sales prices for Salon’s common stock, ticker symbol SLNM.OB, for its fiscal years 2009 and 2008, based on sales transactions reported by the OTC (Over-The-Counter) Bulletin Board is provided below:

	Fiscal Year Ended		Fiscal Year Ended
	March 31, 2009		March 31, 2008
For the quarter ended	High	Low	High	Low
June 30	1.68	1.10	1.70	1.10
September 30	1.98	1.00	1.70	1.20
December 31	1.10	0.16	2.00	1.50
March 31	0.40	0.20	1.90	1.40

There were 169 holders of record of Salon common stock as of June 3, 2009. This number was derived from Salon’s stockholder records, and does not include beneficial owners of Salon’s voting common stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers, and other fiduciaries. The closing price of Salon’s common stock on June 3, 2009 was $0.16 per share.

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

Salon has never repurchased any of its equity securities.

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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, 2009, 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.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans, excluding securities reflected in column (a) (c)
Equity compensation plans approved by security holders	2,390,375	$0.35	293,052

Equity compensation plans not approved by security holders	50,000	$0.35	None

Total	2,440,375	N/A	293,052

Equity Compensation Plans Not Approved by Security Holders

In February 2005, Salon entered into a Non-Plan Stock Agreement with its then Chairman, pursuant to which Salon granted such person non-qualified options to purchase 50,000 shares of common stock at an exercise price of $2.80 per share. Such option grant did not receive stockholder approval. 50% of the shares subject to the option vested on the date of grant and 50% of the shares subject to the option vested in February 2006. On December 4, 2008, these and substantially all other options then outstanding were repriced to $0.35, the fair market value of the Company’s common stock on that date.

In June 2006, Salon entered into a Non-Plan Stock Agreement with its then Senior Vice President – Publisher, pursuant to which Salon granted such person non-qualified options to purchase 50,000 shares of common stock at an exercise price of $3.20 per share. Such option grant did not receive stockholder approval. 25% of the shares subject to the option vested after one year and 1/48th vests per month thereafter. In December 2006, Salon entered into another Non-Plan Stock Agreement with its then Senior Vice President – Publisher, pursuant to which Salon granted such person non-qualified options to purchase 25,000 shares of common stock at an exercise price of $1.05 per share. Such option grant did not receive stockholder approval. 25% of the shares subject to the option vested after one year and 1/48th vests per month thereafter. These options have been forfeited following the departure of the executive.

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Stock Performance Graph

The graph below matches Salon Media Group Inc.'s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index, and a customized peer group of six companies that includes: Answers Corp., CNET Network Inc, PlanetOut Inc, Quepasa Corp., TheStreet.com Inc and Tucows Inc. The graph tracks the performance of a $100 investment in our common stock, in the peer group, and the index (with the reinvestment of all dividends) from March 31, 2004 to March 31, 2009.

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

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ITEM 6. Selected Consolidated Financial Data

	Dollar amounts in thousands, except per share
Year Ended March 31,	2009		2008		2007		2006		2005
Net revenues	$	6,874	$	7,513	$	7,748	$	6,516	$	6,628
Net loss	$	4,699	$	3,409	$	1,566	$	1,122	$	518
Net loss attributable to common
stockholders (1)	$	4,699	$	3,463	$	1,861	$	1,349	$	358
Basic and diluted net loss per share
attributable to common
stockholders (2)	$	2.34	$	1.79	$	1.10	$	1.67	$	0.50
Weighted average common shares
outstanding used in computing
per share amounts (thousands)(2)		2,008		1,940		1,692		809		720
Cash and cash equivalents	$	371	$	818	$	829	$	441	$	686
Prepaid advertising rights	$	1,225	$	2,131	$	3,267	$	3,718	$	3,970
Total assets	$	3,330	$	4,616	$	5,605	$	5,304	$	6,069
Capital leases – long-term portion	$	34	$	56	$	-	$	-	$	-
Total long-term liabilities	$	2,706	$	600	$	85	$	120	$	82

(1) The net loss attributable to common stockholders for the year ended March 31, 2009 does not include a preferred deemed dividend, as there were no issuances of preferred stock. The net loss attributable to common stockholders for the year ended March 31, 2008 includes a preferred deemed dividend charge of $54 from the issuance of Series D preferred stock. The charge represents the difference between the offering price of Salon’s Series D 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 value of the warrants issued in the transaction. The net loss attributable to common stockholders for the year ended March 31, 2007 includes a preferred deemed dividend charge of $295 from the issuance of Series D preferred stock. The charge represents the difference between the offering price of Salon’s Series D 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 value of the warrants issued in the transaction. The net loss attributable to common stockholders for the year ended March 31, 2006 includes a preferred deemed dividend charge of $227 from the issuance of Series D preferred stock. The charge represents the difference between the offering price of Salon’s Series D 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 value of the warrants issued in the transaction. The net loss attributable to common stockholders for the fiscal year ended March 31, 2005 includes a net preferred deemed dividend benefit of $160 derived from a benefit of $470 from a decrease in value of warrants previously issued to preferred stockholders and a charge of $310 from the issuance of Series D-1 and D-2 preferred stock during the year. The charge represents the difference between the offering price of Salon’s Series D 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 value of the warrants issued in the transaction.

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(2) The share and per share results for the years ended prior to March 31, 2007 reflect a reverse stock split effective as of November 15, 2006. In the reverse stock split, each 20 outstanding shares common stock (“old common stock”) was automatically reduced into one share of new common stock.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Salon is an online news and social networking company and an Internet publishing pioneer. Salon’s award-winning journalism combines original investigative stories and provocative personal essays along with quick-take commentary and staff-written Weblogs about politics, technology, culture and entertainment. Committed to interactivity, the Website also hosts two online communities, Table Talk and The Well, and is developing Open Salon, a social network for bloggers. In its editorial product Salon balances two crucial missions: (1) providing original and provocative content on topics that the mainstream media overlook, and (2) filtering through the media chatter and clutter to help readers find the stories that matter.

Sources of Revenue

The most significant portion of Salon’s revenues is derived from advertising from the sale of promotional space on its Website. The sale of promotional space is generally less than ninety days in duration. Advertising units sold include “rich media” streaming advertisements, as well as traditional banner and pop-up advertisements.

Salon also derives a significant portion of its revenues from its Salon Premium subscription program. Prior to March 2007, subscriptions to Salon Premium were generally $35 for one year with no ads, and during March 2007, the rate was increased to $45. Salon Premium revenue is recognized ratably over the period that services are provided. This source of revenue has been decreasing since Salon’s quarter ended December 31, 2004 when paid subscriptions peaked at approximately 89,100 and have since decreased to approximately 23,450 as of March 31, 2009. Salon expects this downward trend to continue, as it is placing greater emphasis on its advertising sales to generate revenue. Revenue from the online discussion forum The Well has been recognized ratably over the subscription period. Salon also generates nominal revenue from the licensing of content that previously appeared in Salon’s Website and for hosting links to a third party’s personals/dating Websites.

Expenses

Production and content expenses consist primarily of salaries and related expenses for Salon’s editorial, artistic, and production staff, online communities’ staff, payments to freelance writers and artists, bandwidth costs associated with serving pages and hosting our online communities on our Website, credit card transaction costs and ad serving costs.

Sales and marketing expenses consist primarily of salaries, commissions and related personnel costs, travel, and other costs associated with Salon’s sales force, business development efforts and its subscription service. It also includes advertising, promotions and the amortization of prepaid advertising rights.

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

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General and administrative expenses consist primarily of salaries and related personnel costs, accounting and legal fees, and other fees associated with operating a publicly traded company. Certain shared overhead expenses are allocated to other departments.

Critical Accounting Policies

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

Share Based Compensation

On April 1, 2006 Salon adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, which requires companies to expense their stock option awards. Salon adopted SFAS 123R using the modified prospective transition method and therefore did not restate results for prior periods. Salon’s expenses include stock-based expenses related to stock option grants to employees, non-employee Directors and consultants.

Liquidity

Salon has incurred significant net losses and negative cash flows from operations since its inception. As of March 31, 2009, Salon had an accumulated deficit of $101.0 million. These losses have been funded primarily through the issuance of common stock from Salon’s initial public offering in June 1999, issuances of preferred stock, bank debt, from the issuance of convertible notes payable and other advances from related parties.

Burr, Pilger & Mayer LLP, Salon’s independent accountants for the years ended March 31, 2009, March 31, 2008 and March 31, 2007 have included a paragraph in their report indicating that substantial doubt exists as to Salon’s ability to continue as a going concern because of Salon’s recurring operating losses, negative cash flow and accumulated deficit.

Income Taxes

Salon has not recorded a provision for federal or state income taxes since inception due to recurring operating losses. At March 31, 2009, Salon had net operating loss carryforwards of $73.4 million for federal income tax purposes that begin to expire in March 2016, and $34.2 million for California income tax purposes. As Salon has been incurring tax losses, $2.3 million of California net operation loss carryforwards expired as of March 31, 2009, and if Salon were to incur a tax loss for the year ending March 31, 2010, an additional $7.1 million operating loss carryforward will expire. Utilization of Salon’s net operating loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code and similar California State provisions. Such an annual limitation could result in the expiration of the net operating loss carryforwards before utilization. A valuation allowance has been established and, accordingly, no benefit has been recognized for such operating losses and other deferred tax assets. The net valuation allowance increased $1.5 million during the year ended March 31, 2009 to $28.0 million. Salon believes that, based on a number of factors, the availability of objective evidence creates sufficient uncertainty regarding the realization of the deferred tax assets such that a full valuation allowance has been recorded. These factors include Salon’s history of net losses since inception and expected near-term future losses.

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Revenue Recognition

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

Advertising revenues, derived from the sale of promotional space on its Website, comprised 76%, 72% and 70% of Salon’s revenues, respectively for the years ended March 31, 2009, 2008 and 2007. The duration of the advertisements are generally short term, usually less than ninety days. Revenues derived from such arrangements are recognized during the period the advertising space is provided. Salon’s obligations typically include a guaranteed minimum number of impressions, a set number of Site Pass advertisements viewed, or a set number of days that a Site Pass advertisement will run. To the extent minimum guaranteed amounts are not achieved, Salon defers recognition of the corresponding revenue until the remaining guaranteed amounts are provided, if mutually agreeable to an advertiser. If these “make good” impressions are not agreeable to an advertiser, no further revenue is recognized.

Salon Premium, a pay-for-online content service, provides unrestricted access to Salon’s content with no banners, pop-ups or site pass advertisements, and includes free magazine subscriptions, free access to Table Talk, an online forum, and the ability to easily download content in text or PDF format, a convenience that enables readers to view Salon’s content when not connected to the Internet. The subscription duration for Salon Premium is generally one year. Non-Salon Premium subscribers can gain access to Salon’s content after viewing some form of advertisement.

Salon offers The Well as a monthly subscription service for access to online discussion forums. Revenue is recognized ratably over the subscription period.

Prepaid Advertising Rights

In January 2000, Salon sold 1,125,000 shares of common stock to Rainbow Media Holdings (“Rainbow”) and received $11.8 million of advertising credits that were to be utilized by December 2009. As the per share price of Salon’s common stock declined from the time the agreement was made and the date the agreement was finalized and signed, the advertising credits were valued for financial reporting purposes at $8.1 million. As of March 31, 2009, Salon has $1.8 million advertising credits resulting from the transaction, valued at $1.2 million for financial reporting purposes. Of the $1.8 million of advertising credits, approximately $0.8 million remain with Rainbow and approximately $1.0 million are with NBC. Salon believes that it should be able to utilize all the credits with Rainbow and NBC before they expire on December 31, 2009. Salon is currently exploring ways of fully utilizing the credits, including supporting the launch of Open Salon, before they expire. Salon expects to recover the full value of all the advertising credits through usage or settlement in cash, per the terms of the agreement, but there can be no absolute assurance as to any potential cash settlement or full utilization thereof.

Reclassifications

Certain reclassifications, not affecting previously reported net income or loss, have been made to the previously issued consolidated financial statements to conform to the current period presentation.

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Goodwill

Salon has $0.2 million of goodwill remaining from a purchase in March 1999. This asset is tested for impairment at least annually and has been found not to be impaired.

Results of Operations

Fiscal Years Ended March 31, 2009 and 2008

Net Revenues

Salon’s net revenue decreased 9% to $6.9 million in the year ended March 31, 2009 from $7.5 million in the year ended March 31, 2008.

Advertising revenues decreased 4% to $5.2 million for the year ended March 31, 2009 from $5.4 million for the year ended March 31, 2008, as overall sales declined in the third and fourth quarters, due to the economic recession.

Salon Premium subscription revenues decreased by 25% to $1.0 million for the year ended March 31, 2009 from $1.3 million for the year ended March 31, 2008. The drop in Salon Premium revenues recognized for the year ended March 31, 2009 compared to the year ended March 31, 2008 is attributable to a substantial reduction in the number of new subscribers. Salon acquired approximately 17,600 paid one-year subscriptions for the year ended March 31, 2009 compared to approximately 27,900 for the year ended March 31, 2008. As a result, the number of paid subscribers decreased from approximately 33,900 at March 31, 2008 to approximately 23,450 at March 31, 2009. As of June 1, 2009, Salon had approximately 22,000 paid subscribers. Another contributing factor to the decline in Premium subscriptions is Salon’s continued emphasis on increasing advertising income over promoting Premium subscriptions.

An important factor in increasing advertising revenues in future periods, including Salon’s peak third quarter ending December 31, is attracting more unique visitors to Salon’s Website. Attracting more unique Website visitors is important to Salon as they generate page views, and each page view becomes a potential platform for serving advertisements. Ultimately, Salon charges advertisers based on a set number of impressions viewed by Website visitors. Due to various factors, including concerted efforts to make Salon’s content more accessible to readers by auto launching the site pass, a better optimized Website to facilitate appearance in search engine results, and marketing campaigns with select Websites, the average number of unique monthly Website visitors for the year ended March 31, 2009 increased 10% to 4.8 million from the year ended March 31, 2008, and attained a record high for fiscal year 2009 of 6.3 million in October 2008. Aiding the continued growth in unique visitors to Salon’s Website is the migration of readers to the Internet from print newspapers.

Salon has evaluated the balance between its subscription and advertising businesses and has shifted emphasis toward advertising. Until recently, a Website visitor was given a choice of: (1) becoming a Salon Premium subscriber to avoid having to view advertisements on Salon’s Website or (2) viewing an advertisement to gain access to all of Salon’s content. This strategy was found to impede access to Salon’s Website and its ability to generate advertising impressions. During the quarter ended December 31, 2006, Salon changed its Site Pass model to automatically serve advertisements, enabling a Website visitor to gain a more seamless access to Salon’s content. This change has produced an increase in the number of ad impressions that Salon can serve and improved Salon’s potential to generate an even greater amount of advertising revenues, offsetting a drop in Salon Premium subscriptions that traditionally were solicited from the Site Pass and the relatively small revenue they generate.

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All other sources of revenue were $0.7 million for the year ended March 31, 2009 and $0.8 million for the year ended March 31, 2008. Approximately half of this revenue was derived from the Well, an online discussion forum.

Production and Content Expenses

Production and content expenses during the year ended March 31, 2009 was $5.3 million versus $5.5 million for the year ended March 31, 2008, a decrease of $0.2 million. The 4% decrease primarily reflects a decrease in staff and benefit costs.

Sales and Marketing Expenses

Sales and marketing expenses during the year ended March 31, 2009 were $2.9 million versus $2.8 million for the year ended March 31, 2008, an increase of $0.1 million. The minimal increase results from lower usage of advertising credits being offset by higher ad sales salaries, commissions and travel expenses.

Information Technology Support Expenses

Information technology support expenses during the year ended March 31, 2009 remained flat from one year ago at $0.8 million. The 13% decrease in salary costs was primarily due to the reduction in headcount and the capitalization of development costs for the Open Salon project.

General and Administrative Expenses

General and administrative expenses during the year ended March 31, 2009 remained flat from one year ago at $1.8 million. The minimal increase was primarily attributed to stock-based compensation expenses from restricted stock vesting, as well as an increase in allowance for doubtful accounts.

Separation Expenses

Separation expenses were $0.6 million for the year ended March 31, 2009 and consisted of one-time charges of $0.6 million related to the resignation of Salon’s former CEO, including $0.3 million in non-cash stock-based compensation from the accelerated vesting of options.

In addition, the Company incurred approximately $35,000 of severance expenses associated with the layoffs of nine employees during the second half of fiscal 2009.

Interest and Other Expenses

Interest and other expenses for the year ended March 31, 2009 consisted primarily of accrued interest costs of $194,000 for Salon’s outstanding debts and financial obligations, including a borrowing agreement, several convertible promissory notes, and computer equipment capital leases.

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Fiscal Years Ended March 31, 2008 and 2007

Net Revenues

Salon’s net revenue decreased 3% to $7.5 million in the year ended March 31, 2008 from $7.7 million in the year ended March 31, 2007.

Advertising revenues remained flat from one year ago at $5.4 million for the year ended March 31, 2008, as sales trailed off in the fourth quarter, despite record audiences, due to sales force turnover.

Salon Premium subscription revenues decreased by 14% to $1.3 million for the year ended March 31, 2008 from $1.5 million for the year ended March 31, 2007. The drop in Salon Premium revenues recognized for the year ended March 31, 2008 compared to the year ended March 31, 2007 is attributable to a substantial reduction in the number of new subscribers. Salon acquired approximately 27,900 paid one-year subscriptions for the year ended March 31, 2008 compared to approximately 44,200 for the year ended March 31, 2007. As a result, the number of paid subscribers decreased from approximately 47,200 at March 31, 2007 to approximately 33,900 at March 31, 2008. As of June 1, 2008, Salon had approximately 32,000 paid subscribers.

An important factor in increasing advertising revenues in future periods, including Salon’s peak third quarter ending December 31, is attracting more unique visitors to Salon’s Website. Attracting more unique Website visitors is important to Salon as they generate page views, and each page view becomes a potential platform for serving advertisements. Ultimately, Salon charges advertisers based on a set number of impressions viewed by a Website visitor. Due to various factors, including concerted efforts to make Salon’s content more accessible to readers by auto launching the site pass, a better optimized Website to facilitate appearance in search engine results, and marketing campaigns with select Websites, the average number of unique monthly Website visitors for the year ended March 31, 2008 increased 33% to 4.4 million from the year ended March 31, 2007, and attained a record high of 6.5 million in March 2008. Aiding the continued growth in unique visitors to Salon’s Website is the migration of readers to the Internet from print newspapers.

Salon has evaluated the balance between its subscription and advertising businesses and has shifted emphasis toward advertising. Until recently, a Website visitor was given a choice of: (1) becoming a Salon Premium subscriber to avoid having to view advertisements on Salon’s Website or (2) viewing an advertisement to gain access to all of Salon’s content. This strategy was found to impede access to Salon’s Website and its ability to generate advertising impressions. During the quarter ended December 31, 2006, Salon changed its Site Pass model to automatically serve advertisements, enabling a Website visitor to gain a more seamless access to Salon’s content. This change has produced an increase in the number of ad impressions that Salon can serve and improved Salon’s potential to generate an even greater amount of advertising revenues, offsetting a drop in Salon Premium subscriptions that traditionally were solicited from the Site Pass and the relatively small revenue they generate.

All other sources of revenue were $0.8 million each for the years ended March 31, 2008 and March 31, 2007. Approximately half of this revenue was derived from the Well, an online discussion forum.

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Production and Content Expenses

Production and content expenses during the year ended March 31, 2008 were $5.5 million versus $5.2 million for the year ended March 31, 2007, an increase of $0.3 million. The 6% increase primarily reflects an increase in staff and benefit costs.

Sales and Marketing Expenses

Sales and marketing expenses during the year ended March 31, 2008 were $2.8 million versus $2.0 million for the year ended March 31, 2007, an increase of $0.8 million. The 40% increase primarily reflects utilizing an additional $0.7 million advertising credits this year compared to last year.

Information Technology Support Expenses

Information technology support expenses during the year ended March 31, 2008 remained flat from one year ago at $0.8 million. The 29% increase in salary costs was offset by capitalized development costs for the Open Salon project.

General and Administrative Expenses

General and administrative expenses during the year ended March 31, 2008 were $1.8 million versus $1.3 million for the year ended March 31, 2007, an increase of $0.5 million. The 38% increase is primarily attributable to increased staff salaries, stock-based compensation expenses, professional fees, severance costs and directors fees.

Preferred Deemed Dividend

Salon sold 292 shares of Series D-5 preferred stock on November 19, 2007. All the shares sold are convertible to common stock at an effective price less than the fair market value of Salon’s common stock on the commitment date of the respective transaction. Salon valued the beneficial conversion feature of these shares of preferred stock at $0.05 million. As the shares of preferred stock sold were immediately convertible, Salon recorded a total of $0.05 million non-cash preferred deemed dividend for the year ended March 31, 2008, representing the value of the beneficial conversion feature of the shares issued.

During the year ended March 31, 2007, Salon sold 208 shares of Series D-3 preferred stock and 42 shares of Series D-4 preferred stock on July 27, 2006, 333 shares of Series D-4 preferred on September 21, 2006, and 42 shares of Series D-4 preferred stock and 125 shares of Series D-5 preferred stock on December 18, 2006 that were convertible to common stock at an effective price less than the fair market value of Salon’s common stock on the commitment date. Salon valued the beneficial conversion feature of the preferred stock sold at $0.3 million. As the shares of preferred stock were immediately convertible, for its year ended March 31, 2007, Salon recorded a $0.3 million non-cash preferred deemed dividend, representing the value of the beneficial conversion feature of the shares issued.

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Liquidity and Capital Resources

Net cash used in operations was $2.4 million for the year ended March 31, 2009, $1.5 million for the year ended March 31, 2008, and $1.2 million for the year ended March 31, 2007. The principal use of cash during the years ended March 31, 2009 and March 31, 2008 was to meet its operating deficit. The principal use of cash during the year ended March 31, 2007 was to fund the $1.6 million net loss and reflects accounts receivable increasing by $0.5 million, less $0.8 million of non-cash charges.

Net cash used in investing activities for the years ended March 31, 2009 and March 31, 2008 was $0.3 million to fund the acquisition of computer equipment and internal software development. Net cash used in investing activities was immaterial for the year ended March 31, 2007.

For the year ended March 31, 2009, net cash provided from financing activities was $2.2 million, which included $2.0 million in long-term borrowing and $0.2 million in short-term borrowing. For the year ended March 31, 2008, net cash provided from financing activities was $1.9 million, which included $1.0 million in short-term borrowings, $0.5 million in long-term borrowing and $0.4 million from the issuance of 292 shares of preferred stock. For the year ended March 31, 2007, net cash provided from financing activities was $1.7 million, which included $0.8 million from the exercise of warrants and $0.9 million from the issuance of 750 shares of preferred stock.

Salon, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers 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, 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.

As of March 31, 2009, Salon has four outstanding capital leases on computer equipment and does not anticipate entering into similar debt instruments during its year ending March 31, 2010. The following summarizes Salon’s contractual obligations as of March 31, 2009, and the effect these contractual obligations are expected to have on Salon’s liquidity and cash flows in future periods (in thousands):

	Payments Due By Period
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
Operating leases	$	2,000	$	254	$	977	$	769	$	-
Capital leases		67		33		34		-		-
Capital lease interest		12		9		3		-		-
Short-term borrowing		1,250		1,250		-		-		-
Short-term borrowing interest		78		78		-		-		-
Convertible notes		2,500		-		2,500		-		-
Convertible notes interest		767		326		441		-		-
Total	$	6,674	$	1,950	$	3,955	$	769	$	-

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Capital requirements

Salon has a history of significant losses and expects to incur a net loss from operations for its year ending March 31, 2010. Because of past losses, an anticipated loss next year and a history of negative cash flows from operations, Salon’s independent registered public accounting firm for the years ended March 31, 2009, March 31, 2008 and March 31, 2007 have included a paragraph in its reports indicating substantial doubt as to Salon’s ability to continue as a going concern. During the last three years, Salon has relied on cash from bank debt, the issuance of convertible notes and preferred stock, related party advances, and from the exercise of warrants to meet its cash requirements.

Based on current cash projections for next year, which contemplate a smaller operating loss, positive cash flow generation in the second half of the year, and takes into account $0.6 million in related party advances received subsequent to year end, Salon estimates it will require at least an additional $1.8 million in additional funding to meet operating needs. If planned revenues are less than expected, the cash shortfall may be higher. Salon is in discussions with potential investors, including related parties, to obtain additional funding, and has engaged an investment banker to facilitate these efforts. There can be no assurance that the Company will be able to raise additional funds on commercially reasonable terms, if at all.

Off-Balance Sheet Arrangements

Salon has no off-balance sheet arrangements.

Recent Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141 (revised 2007), “Business Combinations,” (“SFAS 141R”) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” an amendment of ARB No. 51 (“SFAS 160”.) SFAS 141R establishes principles and requirements during business combinations for how the acquirer:

Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree,

Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and

Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

SFAS 160 sets parameters as to how to report noncontrolling interest in consolidated financial statements. SFAS 141R and SFAS 160 are effective for fiscal years beginning after December 15, 2008. Salon believes that the adoption of SFAS 141R and SFAS 160 will not impact Salon’s results of operations, financial position, or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157, “Fair Value Measurements,” (SFAS 157). SFAS 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Salon adopted SFAS 157 as of April 1, 2007. It did not have a material impact on its results of operations, financial position or cash flows.

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In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” (SFAS 161). SFAS 161 amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and requires entities to provide enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair values and amounts of gains and losses on derivative contracts, and disclosures about credit-risk-related contingent features in derivative agreements. This statement applies to all entities and all derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 and does not expect this statement to have a material impact on its financial position and results of operations.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” (SFAS 162). SFAS 162 establishes the GAAP hierarchy and identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We have not yet determined the impact, if any, that implementation of SFAS 162 will have on our results of operations and financial condition.

In May 2008, the FASB also issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60,” (SFAS 163). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. SFAS 163 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of SFAS 163 will have a material impact on its financial condition or results of operation.

In June 2008, the Financial Accounting Standards Board Emerging Issues Task Force (EITF) reached a consensus on EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock.” This EITF will be effective for fiscal years beginning after December 15, 2008. We are currently evaluating the disclosure requirements under EITF 07-5.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

Salon maintains all of its cash in immediately available cash deposits at its bank. These funds are not subject to market risk and no interest is paid on such funds. In May 2007, Salon entered into a credit agreement with Deutsche Bank Securities, Inc. that allows Salon to borrow up to $1.0 million at a rate of prime less 0.25% which will subject Salon to interest rate risk. This line of credit is fully drawn. Rates declined throughout most of fiscal 2009. Salon feels that the impact of the risk of future rate increases will not have a material impact. As Salon conducts all of its business in the United States, Salon is not subject to foreign exchange risk.

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ITEM 8. Consolidated Financial Statements and Supplementary Data

	Page
Consolidated Balance Sheets as of March 31, 2009 and 2008	36

Consolidated Statements of Operations for the years ended March 31, 2009, 2008, and 2007	37

Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended March 31, 2009, 2008, and 2007	38

Consolidated Statements of Cash Flows for the years ended March 31, 2009, 2008, and 2007	39

Notes to Consolidated Financial Statements	40

Selected Quarterly Financial Data (unaudited)	64

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Report Of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Salon Media Group, Inc.

We have audited the accompanying consolidated balance sheets of Salon Media Group, Inc. and its subsidiaries (the “Company”) as of March 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ (deficit) equity, and cash flows for each of the three years in the period ended March 31, 2009. 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 financial statements are free of material misstatement. The Company is not required to have, nor have we been engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Salon Media Group, Inc. and its subsidiaries as of March 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the of the three years in the period ended March 31, 2009, 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 $101.0 million at March 31, 2009. 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 June 25, 2009

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

	March 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	371		$	818
Accounts receivable, net		886			864
Prepaid advertising rights		1,225			-
Prepaid expenses and other current assets		53			185
Total current assets		2,535			1,867

Property and equipment, net		445			412
Prepaid advertising rights		-			2,131
Other assets		150			6
Goodwill		200			200
Total assets	$	3,330		$	4,616
Liabilities and stockholders’ (Deficit) Equity
Current liabilities:
Short-term borrowings	$	1,250		$	1,000
Accounts payable and accrued liabilities		1,324			1,294
Deferred revenue		470			705
Total current liabilities		3,044			2,999

Long-term liabilities:
Convertible notes payable		2,500			500
Other long-term liabilities		172			44
Capital lease, less current portion		34			56
Total liabilities		5,750			3,599
Commitments and contingencies (Note 9)

Stockholders’ (deficit) equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, 9,467 shares
issued and outstanding at March 31, 2009 and 9,475 shares issued and
outstanding at March 31, 2008 (liquidation value of
$24,246 at March 31, 2009 and $23,498 at March 31, 2008)		-			-
Common stock, $0.001 par value, 30,000,000 shares authorized, 2,021,276
shares issued and outstanding at March 31, 2009 and 1,940,172 shares
issued and outstanding at March 31, 2008		2			2
Additional paid-in capital		98,564			97,302
Accumulated deficit		(100,986	)		(96,287	)
Total stockholders’ (deficit) equity		(2,420	)		1,017
Total liabilities and stockholders’ (deficit) equity	$	3,330		$	4,616

See accompanying notes to consolidated financial statements.

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

	Year Ended March 31,
	2009			2008			2007

Net revenues	$	6,874		$	7,513		$	7,748

Operating expenses:
Production and content		5,314			5,544			5,223
Sales and marketing		2,925			2,756			1,978
Information technology support		763			829			828
General and administrative		1,746			1,756			1,286
Separation expenses		631			-			-
Total operating expenses		11,379			10,885			9,315

Loss from operations		(4,505	)		(3,372	)		(1,567	)

Interest and other income (expense)		(194	)		(37	)		1
Net loss		(4,699	)		(3,409	)		(1,566	)
Preferred deemed dividend		-			(54	)		(295	)
Net loss attributable to common stockholders	$	(4,699	)	$	(3,463	)	$	(1,861	)

Basic and diluted net loss per share attributable to
common stockholders	$	(2.34	)	$	(1.79	)	$	(1.10	)

Weighted average shares used in computing basic
and diluted net loss per share attributable
to common stockholders		2,008			1,940			1,692

See accompanying notes to consolidated financial statements.

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SALON MEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(in thousands, except Preferred Stock Shares)

										Additional								Total
	Preferred Stock					Common Stock				Paid-In		Unearned			Accumulated			Stockholders’
	Shares			Amount		Shares		Amount		Capital		Compensation			Deficit			Equity
Balance, March 31, 2006		8,558		$	-		957	$	1	$	94,619	$	(40	)	$	(90,963	)	$	3,617

Shares issued under employee stock plans		-			-		2		-		6		-			-			6
Shares issued under warrant agreements		-			-		730		1		778		-			-			779
Preferred stock converted to common stock		(125	)		-		251		-		-		-			-			-
Share-based compensation		-			-		-		-		190		40			-			230
Series D convertible preferred stock and
common stock warrants issued for cash		750			-		-		-		900		-			-			900
Preferred deemed dividend on issuance of
Series D Convertible preferred stock		-			-		-		-		295		-			(295	)		-
Net loss		-			-		-		-		-		-			(1,566	)		(1,566	)
Balance, March 31, 2007		9,183			-		1,940		2		96,788		-			(92,824	)		3,966

Shares issued under employee stock plans		-			-		-		-		1		-			-			1
Series D convertible preferred stock and
common stock warrants issued for cash		292			-		-		-		350		-			-			350
Preferred deemed dividend on issuance of
Series D Convertible preferred stock		-			-		-		-		54		-			(54	)		-
Share-based compensation		-			-		-		-		109		-			-			109
Net loss		-			-		-		-		-		-			(3,409	)		(3,409	)
Balance, March 31, 2008		9,475			-		1,940		2		97,302		-			(96,287	)		1,017

Shares issued under employee stock plans		-			-		63		-		1		-			-			1
Preferred stock converted to common stock		(8	)		-		18		-		-		-			-			-
Share-based compensation		-			-		-		-		1,261		-			-			1,261
Net loss		-			-		-		-		-		-			(4,699	)		(4,699	)
Balance, March 31, 2009		9,467		$	-		2,021	$	2	$	98,564	$	-		$	(100,986	)	$	(2,420	)

See accompanying notes to consolidated financial statements.

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SALON MEDIA GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended March 31,
	2009			2008			2007
Cash flows from operating activities:
Net loss	$	(4,699	)	$	(3,409	)	$	(1,566	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from retirement of assets, net		4			-			-
Share-based compensation		1,025			313			230
Depreciation and amortization		210			102			89
Prepaid advertising rights usage		906			1,136			451
Changes in assets and liabilities:
Accounts receivable		(22	)		143			(505	)
Prepaid expenses, other current assets and other assets		(12	)		(4	)		101
Accounts payable, accrued liabilities and other long-term liabilities		410			262			(21	)
Deferred revenue		(235	)		(87	)		(28	)
Net cash used in operating activities		(2,413	)		(1,544	)		(1,249	)
Cash flows from investing activities:
Purchase of property and equipment		(247	)		(313	)		(48	)
Net cash used in investing activities		(247	)		(313	)		(48	)
Cash flows from financing activities:
Proceeds from short-term borrowings		250			1,000			-
Proceeds from long-term borrowings		2,000			500			-
Capital lease payments		(38	)		(5	)		-
Proceeds from issuance of preferred stock, net		-			350			900
Proceeds from issuance of common stock, net		1			1			785
Net cash provided by financing activities		2,213			1,846			1,685
Net (decrease) increase in cash and cash equivalents		(447	)		(11	)		388
Cash and cash equivalents at beginning of year		818			829			441
Cash and cash equivalents at end of year	$	371		$	818		$	829

Amount paid for interest	$	12		$	3		$	-
Amount paid for taxes		-			-			-
Supplemental schedule of non-cash investing and financing activities:
Preferred deemed dividend	$	-		$	54		$	295
Property and equipment purchased with capital lease	$	12		$	86		$	-
Stock compensation liability	$	-		$	204		$	-

See accompanying notes to consolidated financial statements.

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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” or the Company) is an Internet media company that produces a content Website with various subject-specific sections, which includes two online communities, and a social network. The Website also allows for audio downloads and video clips. 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, 2009 of $100,986. In addition, Salon expects to incur a net loss from operations for its year ending March 31, 2010. During the last three years, Salon has relied on cash from the issuance of bank debt, convertible notes and preferred stock and from the exercise of warrants to meet its cash requirements. Based on current cash projections for next year, which contemplate a smaller operating loss, positive cash flow generation in the second half of the year, and takes into account $0.6 million in related party advances received subsequent to year end, Salon estimates it will require at least an additional $1.8 million in additional funding to meet operating needs. If planned revenues are less than expected, the cash shortfall may be higher. Salon is in discussions with potential investors, including related parties, to obtain additional funding, and has engaged an investment banker to facilitate these efforts. There can be no assurance that the Company will be able to raise additional funds on commercially reasonable terms, if at all.

Principles of consolidation

The consolidated financial statements include the accounts of Salon and its wholly owned subsidiaries, which are not active. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Segment and enterprise-wide reporting

Salon discloses segment enterprise-wide information in accordance with Statement of Financial Accounting Standard (SFAS) No. 131 “Disclosures about Segments of Enterprises and Related Information.” Based upon definitions contained within SFAS No. 131, management has determined that Salon operates in one segment. In addition, virtually all revenues are in United States, and all of the long-lived assets are located within the United States.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

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.

Accounts receivable, net

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, net

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.

Software Development Costs

Information technology support expenses to develop new product offerings for internal use, such as Open Salon, are capitalized as software development costs. Salon has capitalized $95 of expenditures through March 31, 2009, which is included with property and equipment.

Prepaid advertising rights

Prepaid advertising rights are carried at cost less accumulated amortization, with amortization commensurate to the usage of such rights, and expire on December 31, 2009. In the event that the rights are not fully utilized prior to their expiration, Salon has the right to receive cash for the unused value, but there can be no absolute assurance as to any potential cash settlement or full utilization thereof.

Reclassifications

Certain reclassifications, not affecting previously reported net loss, have been made to the previously issued consolidated financial statements to conform to the current period presentation.

Goodwill

Goodwill is not amortized, but instead is tested for impairment at least annually during the quarter ending March 31, or earlier as warranted by events or changes in circumstances.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

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 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.

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 viewed 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 from Salon Premium and The Well are recognized ratably over the subscription period. Salon Premium subscriptions are generally for one month or one year periods. Well subscriptions are generally only for one month.

Advertising costs

Salon expenses advertising costs as they are incurred. Advertising expense was $905, $1,136, and $448, for the fiscal years ended March 31, 2009, 2008, and 2007.

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, 2009, 2008 and 2007 and comprehensive loss for those periods.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Stock-based compensation

The Company accounts for stock-based compensation in accordance with, the Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standards No. 123 (revised 2004,) “Share Based Payment” (SFAS 123R). Under the fair value provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period. Salon uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards under SFAS 123R. Salon recognizes compensation cost related to options granted subsequent to the adoption of SFAS 123R on a straight-line basis over the applicable vesting period.

Stock based compensation expense recognized under SFAS 123R for the years ended March 31, 2009, 2008 and 2007 was $1,025, $313 and $230, which consisted of stock-based compensation expense related to stock options and restricted stock. See Note 7: “Employee Stock Option Plan” to the financial statements for additional information.

As of March 31, 2009, the aggregate stock compensation remaining to be amortized to expenses was $668. Salon expects this stock compensation balance to be amortized as follows: $334 during fiscal 2010; $205 during fiscal 2011; $103 during fiscal 2012; and $26 during fiscal 2013. The expected amortization reflects only outstanding stock awards as of March 31, 2009.

No amounts were recorded relating to excess tax benefits from the exercise of stock-based compensation awards during the year ended March 31, 2009, and as a result there were no differences in net cash used in operating and financing activities due to the implementation of SFAS 123R.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions and fair value per share:

	Year Ended March 31,
	2009	2008	2007
Risk-free interest rates	1.30 – 3.09%	2.16 – 5.00%	4.47 – 4.97%
Expected lives (in years)	4	4	4
Expected volatility	92 – 163 %	94 – 116 %	107 - 129 %
Dividend yield	0.0%	0.0%	0.0%

The expected term of the options of four years represents the estimated period of time until exercise and is based on historical experience of similar awards, including the contractual terms, vesting schedules and expectations of future employee behavior. Expected stock price volatility is based on historical volatility of Salon’s stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury securities with a term equivalent to the vesting period of the stock options, or four years. Salon has not paid dividends in the past.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

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:

	Year Ended March 31,
	2009			2008			2007
Numerator:
Net loss attributable to common stockholders	$	(4,699	)	$	(3,463	)	$	(1,861	)

Denominator:
Weighted average shares used in
computing basic and diluted net loss per
share attributable to common stockholders		2,008,000			1,940,000			1,692,000

Basic and diluted net loss per share attributable
to common stockholders	$	(2.34	)	$	(1.79	)	$	(1.10	)

Antidilutive securities including options,
warrants and convertible notes and preferred
stock not included in loss per share calculation		15,518,000			12,678,000			11,868,000

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.

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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. Three customers accounted for 10% or more of the trade accounts receivable at March 31, 2009. No customer accounted for 10% or more of the trade accounts receivable at March 31, 2008. No customer accounted for 10% or more of total revenue for the fiscal years ended March 31, 2009, 2008 and 2007, respectively.

Recent accounting pronouncements

Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree,

Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and

Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157, “Fair Value Measurements,” (“SFAS 157”). SFAS 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Salon, adopted SFAS 157 as of April 1, 2007. It did not have a material impact on its results of operations, financial position, or cash flows.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

In March 2008, the FASB issued Statement of Financial Accounting Standard No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” (“SFAS 161”). SFAS 161 amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and requires entities to provide enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair values and amounts of gains and losses on derivative contracts, and disclosures about credit-risk-related contingent features in derivative agreements. This statement applies to all entities and all derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 and does not expect this statement to have a material impact on its financial position and results of operations.

In May 2008, the FASB issued Statement of Financial Accounting Standard No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” (“SFAS 162”). SFAS 162 establishes the GAAP hierarchy and identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We have not yet determined the impact, if any, that implementation of SFAS 162 will have on our results of operations and financial condition.

In May 2008, the FASB also issued Statement of Financial Accounting Standard No. 163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60,” (“SFAS 163”). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. SFAS 163 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of SFAS 163 will have a material impact on its financial condition or results of operation.

Reclassifications

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Note 3. Borrowing Agreements

In May 2007, Salon entered into a borrowing agreement with Deutsche Bank Securities, Inc. that allows Salon to borrow up to $1,000 at a rate of prime less 0.25%. The agreement is guaranteed in its entirety by Salon’s Chairman. The line of credit has been fully drawn as of March 31, 2009 and 2008. Salon and its Chairman have agreed to lift previously agreed restrictions on the timing of borrowing to permit borrowing to continue under the agreement with the guarantee of the Chairman. Deutsche Bank Securities may demand repayment of amounts borrowed at any time. Additionally, the Chairman may also choose to terminate his guarantee, which would trigger a demand for repayment. As of March 31, 2009, accrued interest on bank debt totals $79. As of March 31, 2009 and 2008, the weighted average interest rate on the Company’s short-term borrowings was 5% and 7%, respectively.

Convertible notes payable

On April 4, 2008, Salon issued to each of its Chairman and the father of Salon’s then CEO a convertible promissory note in exchange for loans with a principal amount of $500, an aggregate of $1,000. Each note bears an interest rate of 7.50 percent per annum, payable annually, in cash or in kind, and matures on March 31, 2012. Each note issued on April 4, 2008 may convert at the election of the holder at any time into a number of shares of Salon’s common stock equal to the aggregate amount of the note obligations divided by (1) $1.68 or (2) the subsequent closing price if the holder participated in a subsequent closing.

On May 15, 2008, Salon sold and issued to another investor a convertible promissory note with a principal amount of $500 as part of the above-referenced financing transaction. The note bears an interest rate of 7.50 percent per annum, payable semi-annually, in cash or in kind, and matures on March 31, 2012. The note may convert at the election of the holder at any time into a number of shares of Salon’s common stock equal to the aggregate amount of the note obligations divided by $1.45.

On October 31, 2008, Salon issued to each of its Chairman and the father of Salon’s then CEO a convertible promissory note in exchange for loans with a principal amount of $500, an aggregate of $1,000, as part of the above financing transactions in which Salon generated gross proceeds of approximately $2,500 as of March 31, 2009. Each note bears an interest rate of 7.50 percent per annum, payable annually, in cash or in kind, and matures on October 31, 2012. Each note issued on October 31, 2008 may convert at the election of the holder at any time into a number of shares of Salon’s common stock equal to the aggregate amount of the note obligations divided by $0.6746. As of March 31, 2009, aggregate accrued interest on convertible debt totals $138.

In the event Salon, at any time prior to the payment in full of the notes, or conversion thereof, shall (a) issue and sell shares of its common or preferred stock or an instrument convertible into its common or preferred stock or (b) issue and sell debentures or enter into any new indebtedness, then the holders of the first $1,000 in principal of the notes may choose to exchange the outstanding principal balance and accrued interest due under the notes for new securities issued on the same terms and conditions of the financing. If Salon completes a financing in excess of $500, then this right of exchange will terminate 30 days following notice of such financing being given to the holders.

As of March 31, 2009, total aggregate related party interest expense was $106 and outstanding debt was $2,106.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Advances

In March 2009, the Company’s Chairman advanced $250, payable on demand, to be used for working capital. This debt is exchangeable into securities to be issued in the next financing raised by the Company from non-related parties.

Note 4. Goodwill

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, 2009 and March 31, 2008 was $200 and has been found not to be impaired.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Note 5. Balance Sheet Components

	Year Ended March 31,
	2009			2008
Accounts receivable, net:
Accounts receivable	$	998		$	894
Less: allowance for doubtful accounts		(112	)		(30	)
	$	886		$	864

Prepaid expenses and other current assets
Prepaid expenses	$	41		$	51
Short-term deposits		12			134
	$	53		$	185

Property and equipment, net
Computer hardware and software	$	1,371		$	1,299
Leasehold improvements		82			67
Furniture and office equipment		276			243
		1,729			1,609
Less accumulated depreciation and amortization		(1,284	)		(1,197	)
	$	445		$	412

Other assets
Long-term deposits	$	133		$	6
Intangibles		17			-
	$	150		$	6

Accounts payable and accrued liabilities
Accounts payable	$	286		$	429
Salaries and wages payable		579			287
Accrued services		25			37
Capital lease, current portion		33			25
Other accrued expenses		401			516
	$	1,324		$	1,294

Depreciation expense for the years ended March 31, 2009, 2008 and 2007 was $210, $102, and $89 respectively.

Note 6. 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, 2009.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Note 7. Employee Stock Option Plan

Salon has two stock option plans approved by shareholders. The Salon Internet, Inc. 1995 Stock Option Plan (the 1995 Plan), which was terminated in November 2004, and the Salon Media Group, Inc. 2004 Stock Plan (the 2004 Plan) that was approved by Salon’s stockholders in November 2004. The 2004 Plan allows the issuance of incentive and nonstatutory options to employees and non-employees of Salon. In October 2005, Salon’s stockholders approved an amendment to the 2004 Plan to increase the maximum number of shares of common stock that may be issued under the plan by 800,000 to 2,300,000 shares. In October 2007, Salon’s stockholders approved another amendment to the 2004 Plan to increase the maximum number of shares of common stock that may be issued under the plan by 875,000 to a total of 3,175,000 shares and to allow for grants of restricted stock awards.

Under the 2004 Plan, incentive and nonqualified stock options may be granted to officers, employees, Directors and consultants of Salon. Options generally vest over periods of four years. Options generally became exercisable as to 25% of the option shares one year from the date of grant and then ratably over the following 36 months (1/48 per month). However, in the case of 1,045,500 options granted on February 7, 2005 and 382,050 options granted on May 16, 2005, half vested on the date of grant, and the remaining half vested on February 7, 2006. The exercise price of options is determined by the Board of Directors and is equal to the fair market value of the stock on the grant date. Generally, Salon’s options expire, if not exercised, ten years after the date of grant.

Salon may grant restricted stock awards to officers under the Salon Media Group, Inc. 2004 Stock Plan, as amended and restated through October 4, 2007 (the “2004 Plan), that typically vest over an approximate four year period. Restricted stock awards are considered outstanding at the time of grant, as the stock award holders are entitled to dividends and voting rights

On December 4, 2008, Salon granted non-plan restricted stock awards to certain officers. These grants will become fully vested on January 1, 2010. Non- Plan restricted stock awards are considered outstanding at the time of grant, as the stock award holders are entitled to dividends and voting rights. As of March 31, 2009, the number of shares granted but unvested was 346,000 with a weighted average fair value of $0.35.

As of March 31, 2009, Salon has approximately 782,000 shares authorized to be issued under the 2004 Plan of which 293,000 remain available for future grant.

Salon has granted options pursuant to plans not approved by shareholders. These grants include an option to purchase 25,000 shares of common stock issued in December 2006 and an option to purchase 50,000 shares of common stock issued in June 2006, both granted to Salon’s then Senior Vice President – Publisher, and an option to purchase 50,000 shares of common stock issued in February 2005 to Salon’s former Chairman. At March 31, 2009 Salon had 293,000 shares of common stock authorized and available for grants under the 2004 Plan.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

During the quarter ended December 31, 2008, the Company repriced substantially all its outstanding options to $0.35, with no change in vesting. This resulted in a non-cash incremental cost of approximately $0.4 million. The total compensation cost measured at December 4, 2008 is the sum of (1) the portion of the grant-date value of the original option award for which the requisite service is expected to be rendered or already has been rendered on modification date;

and (2) the incremental cost resulting from the modification. Incremental cost is the excess, if any, of the fair value of the modified option award immediately after the modification, over the fair value of the original option award immediately before the modification. Incremental cost is expensed over the remaining vesting period of each option, unless it is fully vested in which case it is immediately recognized.

The following table summarizes activity under Salon’s plans for the year ended March 31, 2009:

				Weighted
	Outstanding			Average		Aggregate
	Stock			Exercise		Intrinsic
	Options			Price		Value
Outstanding as of April 1, 2008		2,530,000			$4.02		$320,000
Granted		670,000			$0.38
Exercised		(1,000	)		$1.05
Expired or forfeited		(759,000	)		$1.87
Outstanding at March 31, 2009		2,440,000			$0.35		$123,000
Exercisable at March 31, 2009		1,377,000			$0.36		-
Expected to vest		1,370,000			$0.35		$67,000

The following table summarizes information about stock options outstanding at March 31, 2009:

	Options Outstanding						Options Exercisable
			Weighted
			Average		Weighted				Weighted
	Number of		Remaining		Average		Number of		Average
Range of	Shares		Contractual		Exercise		Shares		Exercise
Exercise Prices	Outstanding		Life (Years)		Price		Exercisable		Price
$0.20 - $0.20		31,000		10.0	$	0.20		-	$	-
$0.35 - $0.35		2,407,000		7.4	$	0.35		1,375,000	$	0.35
$5.20 - $5.20		2,000		6.1	$	5.20		2,000	$	5.20
		2,440,000		7.4	$	0.35		1,377,000	$	0.36

The weighted average fair value per share of the stock option awards in the year ended March 31, 2009, 2008 and 2007 was $0.41, $0.94, and $1.34, respectively. The weighted average fair value of options vested during the year ended March 31, 2009 was $0.63 per share.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

The total intrinsic value of options exercised during the year ended March 31, 2009 for which Salon received $1 in cash was $0.

Note 8. Capital Requirements

Note 9. Commitments and Contingencies

Salon has operating lease agreements for its office space in San Francisco, CA that expires in February 2014, and for its office in Manhattan Beach, CA that expires in August 2009. In addition, Salon has a sublease agreement for its office in Washington, D.C. that expires in December 2009. In addition, Salon’s operating lease for its office space in New York was signed for the period June 2008 through September 2011. Rent expense under operating lease agreements was $457, and $470 for the years ended March 31, 2009, 2008, and 2007 respectively.

Salon has four capital leases as of March 31, 2009. Total future minimum payments under operating and capital leases, short-term borrowing and convertible notes in effect at March 31, 2009 are as follows:

	Payments Due By Period
	Total		1 Year or Less		1 - 3 Years		3 - 5 Years		More than 5 Years
Operating leases	$	2,000	$	254	$	977	$	769	$	-
Capital leases		67		33		34		-		-
Capital lease interest		12		9		3		-		-
Short-term borrowing		1,250		1,250		-		-		-
Short-term borrowing interest		78		78		-		-		-
Convertible notes		2,500		-		2,500		-		-
Convertible notes interest		767		326		441		-		-
Total	$	6,674	$	1,950	$	3,955	$	769	$	-

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Salon, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers 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 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.

Salon has entered into employment agreements with certain key executives under which severance payments in the aggregate amount of approximately $330 would become due and payable in the event of their termination for other than cause or as a result of a change in control.

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 incurred operating losses. At March 31, 2009, Salon has net operating loss carry-forwards of $73,414 and $34,254 for Federal and California purposes, respectively, available to reduce future taxable income, if any. During the year ended March 31, 2009, $2,307 of California net operating loss carry-forwards expired and additional $7,136 is due to expire as of March 31, 2010, with the balance expiring over time thereafter if not utilized beforehand. The federal net operating loss carry-forwards begin to expire on March 31, 2016 if not utilized beforehand.

At March 31, 2009, 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 has incurred a change in ownership, utilization of the carry-forwards could be significantly restricted.

From 2009 to 2008, the valuation allowance changed by $1,560, and from 2008 to 2007, the valuation allowance changed by $997.

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,
	2009			2008
Net operating losses	$	27,094		$	25,421
Other		918			1,031
Total deferred tax assets		28,012			26,452
Valuation allowance		(28,012	)		(26,452	)
Net deferred tax asset	$	-		$	-

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

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,
	2009			2008			2007
Statutory tax benefit	$	(1,598	)	$	(1,177	)	$	(633	)
State taxes, net of federal benefit		(274	)		(202	)		(109	)
Permanent differences		230			130			195
Other		81			253			120
Total		(1,561	)		(996	)		(427	)
Change in valuation allowance		1,561			996			427
	$	-		$	-		$	-

Note 11. Preferred Stock

On November 19, 2007 Salon issued 292 shares of Series D-5 preferred stock and warrants to purchase a total of 35,040 shares of common stock for which it received $350 in cash from the father of a Salon director. The warrants were issued at an exercise price of $1.840 per share, subject to adjustment. The financing was effected in accordance with Amendment No. 8 to the Securities Purchase Agreement dated as of November 19, 2007. All shares were sold at a price of $1,200 per share. The 292 shares of Series D-5 preferred stock are convertible into, and have the voting rights of 233,600 shares of common stock, subject to adjustment.

The Certificate of Designation of Preferences and Rights of the Series D preferred stock stipulates 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 Salon provides notice to purchasers regarding the sale of shares of Series D preferred stock. As a result, (1) the issuance of preferred stock on November 19, 2007 was at an effective common stock per share price of $1.500 compared to a closing per share stock price on the date of the transaction of $1.600, (2) the issuance of preferred stock on December 18, 2006 was at an effective common stock per share price of $0.917 compared to a closing per share stock price on the date of the transaction of $1.30, (3) the issuance of preferred stock on September 21, 2006 was at an effective common stock per share price of $1.708 (as adjusted for the reverse stock split) compared to a closing per share stock price on the date of the transaction of $2.00 (as adjusted for the reverse stock split), and (4) the issuance of preferred stock on July 27, 2006 was at an effective common stock per share price of $2.473 (as adjusted for the reverse stock split) compared to a closing per share stock price on the date of the transaction of $2.80 (as adjusted for the reverse stock split). As the shares of preferred stock were in the money on the commitment dates, Salon therefore determined that the value of the beneficial conversion feature of the shares of preferred stock issued was $73 for the shares issued on July 27, 2006, $113 for the shares issued on September 21, 2006, $109 for the shares issued on December 18, 2006 and $54 for the shares issued on November 19, 2007. As the shares of preferred stock were immediately convertible to shares of common stock, Salon recorded a preferred deemed dividend of $54 for the year ended March 31, 2008.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

The warrants issued have a three year life. In the event of a change in control within the exercise period, Salon will give the warrant holders thirty (30) days advance notice of the effective date of such transaction, and to the extent the warrants have not been exercised in full by the effective date of such transaction, the warrants will terminate. The exercise price of the warrants may be adjusted downward in the event of certain subsequent Salon stock issuances.

During the year ended March 31, 2007 and after considering the 20:1 reverse stock split of November 15, 2006, 62 shares of Series A preferred stock were converted to 124,536 shares of common stock and 63 shares of Series A preferred stock were converted to 126,545 shares of common stock. During the year ended March 31, 2006, one share of Series A preferred stock was converted to 2,008 shares of common stock and 36 shares of Series C preferred stock was converted to 36,000 shares of common stock. Salon did not receive any cash proceeds from these transactions.

During the year ended March 31, 2009, eight shares of Series A preferred stock were converted to 17,671 shares of common stock. Salon received no cash proceeds from the transaction.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Following the above transactions and the 20:1 reverse stock split of November 15, 2006, the conversion rate and common equivalent shares of Salon’s preferred stock is as follows as of March 31, 2009:

			Per share				Common
	Shares		Purchase		Conversion		Equivalent
Preferred Stock	Outstanding		Price		Rate		Shares
Series A		675		$4,000		1.811		1,491,009
Series B		125		$4,000		1.495		334,449
Series C		6,582		$800		0.788		6,685,091
Series D-1		417		$1,200		1.707		293,164
Series D-2		417		$1,200		1.976		253,239
Series D-3
Issued on 12/21/05		209		$1,200		1.707		146,934
Issued on 07/27/06		208		$1,200		2.192		113,851
Series D-4
Issued on 07/27/06		42		$1,200		2.192		22,989
Issued on 09/21/06		333		$1,200		1.585		252,067
Issued on 12/18/06		42		$1,200		0.893		56,429
Series D-5
Issued on 12/18/06		125		$1,200		0.893		167,944
Issued on 11/19/07		292		$1,200		1.418		247,169
Total		9,467						10,064,335

The Series A, B, C and D preferred stock conversion rate is subject to a downward adjustment anti-dilution provision under certain circumstances related to subsequent Salon stock issuances.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Warrants outstanding as of March 31, 2009 that have been issued to holders of Series D preferred stock are as follows:

	Exercise		Warrant
	Price		Shares
Series D-3
Issued on 07/27/06		$2.774		15,137
Series D-4
Issued on 07/27/06		$2.774		3,056
Issued on 09/21/06		$2.058		35,093
Issued on 12/18/06		$1.410		8,244
Series D-5
Issued on 12/18/06		$1.410		24,536
Issued on 11/19/07		$1.673		35,040
				121,106

The exercise price of warrants issued in conjunction with the issuance of Series D are subject to a downward adjustment anti-dilution provision under certain circumstances related to subsequent Salon warrant issuances.

The holders of the Series D preferred stock are entitled to dividends of 5.0%, as and if declared by the Board of Directors. In event of a liquidation, 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 distribution of any assets or property of Salon to the holders of common stock, and the holders of Series A and B preferred stock, and in the case of the Series D preferred stock, 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, based on an annual rate of 8%. 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 will 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, based on an annual rate of 8%. 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. As of March 31, 2009, no dividend has been declared to the holders of preferred stock.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

If, after initial preferential liquidation payments to the holders of Series A, B, C and D preferred stock, any assets remain available for distribution, such assets are to be distributed ratably among the holders of common stock and preferred stock, based on 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. Salon has currently outstanding 675 shares of Series A preferred stock, 125 shares of Series B preferred stock, 6,582 shares of Series C preferred stock and 2,085 shares 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. Based on available information, Salon estimates that the holders of Series C preferred stock hold approximately 89% of this group of shareholders.

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. Preferred stockholders as a group own approximately 91% of the outstanding shares of common stock and common stock issuable upon conversion of the shares of preferred stock, all with voting rights.

The aggregate liquidation preferences of all preferred stockholders as of March 31, 2009 were $19,443 excluding the effect of undeclared dividends, and $24,246 including the effect of undeclared dividends. The aggregate liquidation preferences of all preferred stockholders as of March 31, 2008 were $19,497 excluding the effect of undeclared dividends, and $23,498 including the effect of undeclared dividends.

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.

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

Note 12. Warrants

During the years ended March 31, 2008 and March 31, 2009, no warrants were exercised.

During the year ended March 31, 2007, warrants to acquire 603,642 shares of common stock were exercised for which Salon received $779 in cash that was used for working capital and other general corporate purposes, as follows:

					Exercise
Issue Date	Exercise Date	Warrant Holder	Warrant Shares		Price per share		Cash Received
08/09/01	06/22/06	Shea Ventures LLC		50,000	$	2.188	$	109
06/26/03	06/22/06	E&M RP Trust		15,000	$	0.901		14
08/09/01	07/31/06	Stewart Carrell		2,400	$	2.188		5
08/09/01	07/31/06	Arthur Bruno		1,200	$	2.188		3
08/29/03	08/29/06	William E Mayer Holdings, Inc.		6,000	$	0.690		4
02/10/04	02/05/07	Shea Ventures LLC		30,000	$	0.690		21
		Total non-related parties		104,600			$	156

04/10/03	04/05/06	John Warnock		15,000	$	0.834	$	13
04/29/03	04/05/06	John Warnock		15,000	$	0.901		14
08/09/01	05/11/06	Sarah & William Hambrecht Foundation		30,000	$	2.188		66
06/12/03	05/11/06	The Hambrecht 1980 Revocable Trust		7,500	$	0.901		7
06/12/03	05/11/06	WR Hambrecht + Co LLC		7,500	$	0.901		7
07/10/03	05/11/06	HAMCO Capital Corporation		7,500	$	0.834		6
11/24/03	05/11/06	HAMCO Capital Corporation		7,500	$	0.901		7
02/10/04	05/11/06	The Hambrecht 1980 Revocable Trust		15,000	$	0.690		10
06/04/04	05/11/06	HAMCO Capital Corporation		4,064	$	2.748		11
06/04/04	05/11/06	The Hambrecht 1980 Revocable Trust		14,129	$	2.748		39
02/02/05	05/11/06	HAMCO Capital Corporation		1,718	$	3.220		6
02/02/05	05/11/06	The Hambrecht 1980 Revocable Trust		15,381	$	3.220		50
05/28/03	05/12/06	John Warnock		45,000	$	0.901		41
07/10/03	05/12/06	John Warnock		15,000	$	0.833		12
07/30/03	05/12/06	John Warnock		15,000	$	0.690		10
08/29/03	05/12/06	John Warnock		15,000	$	0.690		10
09/12/03	05/12/06	John Warnock		15,000	$	0.901		13
09/29/03	05/12/06	John Warnock		15,000	$	1.036		16
10/10/03	05/12/06	John Warnock		15,000	$	0.901		13
10/30/03	05/12/06	John Warnock		15,000	$	0.901		13
11/12/03	05/12/06	John Warnock		15,000	$	0.969		15
11/24/03	05/12/06	John Warnock		15,000	$	0.901		13
12/11/03	05/12/06	John Warnock		15,000	$	0.901		13
12/30/03	05/12/06	John Warnock		75,000	$	0.690		52
12/31/03	05/12/06	John Warnock		15,000	$	0.690		10
08/09/01	06/29/06	John Warnock		50,000	$	2.188		109
08/09/01	08/08/06	WR Hambrecht + Co LLC		20,000	$	2.188		44
08/29/03	08/29/06	Eu Revocable Trust		3,750	$	0.690		3
		Total related parties		499,042			$	623
		Total exercised		603,642			$	779

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

The related parties include:

1.	John Warnock, the Chairman and Director of Salon.

2.	Salon’s former CEO and President has an ownership interest in WR Hambrecht + Co. LLC. In addition, the Chairman and CEO of WR Hambrecht + Co LLC is the father of Salon’s former CEO and President.

3.	The Hambrecht 1980 Revocable Trust, a trust of the father of Salon’s former CEO and President.

4.	Sarah & William Hambrecht Foundation for which Salon’s former CEO and President serves as a Director and has voting rights.

5.	HAMCO Capital Corporation, in which Salon’s former CEO and President, and her father, each has an ownership interest therein.

6.	The Eu Revocable Trust is for the benefit of Salon’s former CEO and President.

During the year ended March 31, 2007, warrants for 371,800 shares of common stock were converted to 126,462 shares of common stock for which Salon did not receive any consideration under the net exercise provisions of the warrants, as follows:

					Exercise
Issue Date	Exercise Date	Warrant Holder	Warrant Shares		Price per share		Converted Shares
07/10/03	06/05/06	Octavia, LLC		14,700	$	0.834		11,096
08/09/01	07/31/06	Alacrity Tertiare LLC		10,000	$	2.188		3,161
08/09/01	07/31/06	Thomas Dittmer Declaration Trust		24,800	$	2.188		7,840
08/09/01	08/08/06	Constellation Venture Offshore		4,400	$	2.188		1,390
08/09/01	08/08/06	Constellation Venture		20,800	$	2.188		6,575
09/13/01	08/30/06	Octavia, LLC		24,800	$	2.188		6,709
09/13/01	08/31/06	HVS Boxers, LLC		24,800	$	2.188		6,709
09/13/01	09/05/06	Wasserstein Adelson Ventures		25,200	$	2.188		6,817
12/10/03	12/06/06	Wenner Media LLC		130,000	$	0.901		18,424
		Total non-related parties		279,500				68,721

04/10/03	04/04/06	Ironstone Group, Inc		15,000	$	0.834		12,766
04/29/03	04/25/06	Ironstone Group, Inc		15,000	$	0.901		12,183
10/06/03	05/11/06	Ironstone Group, Inc		15,000	$	1.036		10,909
10/30/03	05/11/06	Ironstone Group, Inc		7,500	$	0.901		5,721
08/09/01	08/09/06	McKay Investment Group		24,800	$	2.188		7,840
02/10/04	02/07/07	WR Hambrecht + Co Inc.		15,000	$	0.690		8,322
		Total related parties		92,300				57,741

		Total converted		371,800				126,462

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SALON MEDIA GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

The related parties include:

1.	William Hambrecht, the father of Salon’s former CEO and President, has an ownership interest in Ironstone Group, Inc.

2.	Salon’s former CEO and President has an ownership interest in WR Hambrecht + Co. Inc. In addition, the Chairman and CEO of WR Hambrecht + Co Inc. is the father of Salon’s former CEO and President.

3.	Robert McKay, a former Director of Salon, is the managing partner of the McKay Investment Group.

The related parties in the prior table exclude Wenner Media LLC. Jann Wenner, the Chairman and President of Wenner Media LLC, served as a Director of Salon until February 2006.

Following the above transactions, and after considering warrants issued in conjunction with the issuance of preferred stock (see Footnote No.11) and expired warrants, Salon has warrants to purchase 123,320 shares of common stock outstanding as of March 31, 2009, as follows:

	Warrant		Exercise		Grant	Expiration
Warrant Holder	Shares		Price		Date	Date
The Hambrecht 1980 Revocable Trust		9,097		$3.013	07/27/06	07/27/09
John Warnock		6,040		$3.013	07/27/06	07/27/09
John Warnock		3,056		$3.013	07/27/06	07/27/09
The Hambrecht 1980 Revocable Trust		17,599		$2.215	09/21/06	09/21/09
John Warnock		17,494		$2.215	09/21/06	09/21/09
Silicon Valley Bank		2,214		$0.862	10/17/02	10/17/09
John Warnock		8,244		$1.494	12/18/06	12/18/09
John Warnock		24,536		$1.494	12/18/06	12/18/09
The Hambrecht 1980 Revocable Trust		35,040		$1.786	11/19/07	11/19/10
		123,320

Note 13. Subsequent Events

Following year end, the Company has received $550 in advances from related parties, including $250 from the father of the Company’s then CEO and director, and $300 from the Company’s Chairman. This debt is exchangeable into securities to be issued in the next financing raised by the Company from non-related parties.

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


	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
2009:
Net revenues	$	1,907		$	1,977		$	1,848		$	1,142
Net loss attributable to
common stockholders		(582	)		(1,281	)		(1,133	)		(1,703	)
Basic and diluted net loss per share
attributable to common stockholders		(0.30	)		(0.66	)		(0.57	)		(0.84	)
Basic and diluted shares used in per share calculation		1,941			1,953			2,004			2,020



2008:
Net revenues	$	1,974		$	2,132		$	2,190		$	1,217
Net loss attributable to common stockholders		(996	)		(308	)		(616	)		(1,544	)
Basic and diluted net loss per share
attributable to common stockholders		(0.51	)		(0.16	)		(0.32	)		(0.80	)
Basic and diluted shares used in per share calculation		1,940			1,940			1,940			1,940

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

None.

ITEM 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report (March 31, 2009), as is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow timely decisions regarding required disclosures.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures were effective.

Our management has concluded that the financial statements included in this Form 10-K present fairly, in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the guidelines as set forth in Securities and Exchange Commission Release no. 33-8810, Commission Guidance Regarding Management’s Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934. Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of March 31, 2009.

This annual report does not include an audit or attestation report of our registered public accounting firm regarding our internal control over financial reporting. Our management’s report was not subject to audit or attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

During the most recent fiscal quarter, there have not been any significant changes in our internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B. Other Information

None.

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PART III

ITEM 10. Directors and Executive Officers of the Registrant

Salon’s executive officers and directors as of May 31, 2009 are as follows:

Name	Age	Position
Richard Gingras (3)	57	Chief Executive Officer, Director
Norman Blashka	55	Executive Vice President and Chief Financial Officer
Joan Walsh	50	Editor-in-Chief
Deepak Desai (1,4,6)	50	Director
Robert Ellis (2,4)	73	Director
Elizabeth Hambrecht(3)	46	Director
George Hirsch(1,4)	74	Director
James Rosenfield (3,5)	80	Director
David Talbot(2,)	57	Director
John Warnock(1,5)	68	Chairman of the Board, Director

(1)

Class I director whose term expires at the 2009 Annual Meeting of Stockholders

(2)

Class II director whose term expires at the 2010 Annual Meeting of Stockholders

(3)

Class III director whose term expires at the next Annual Meeting of Stockholders

(4)

Member of Audit Committee

(5)

Member of Compensation Committee

(6)

Audit Committee financial expert

Richard Gingras was appointed Chief Executive Officer and a Director in May 2009. Prior to joining Salon, he worked as an advisor to various technology startups and also served as an advisor on media product strategy to the senior team at Google from November 2007 through December 2008. From June 2002 through July 2007 he was founder, CEO and Chairman of Goodmail Systems and continued as Chairman through October 2008. From September 2000 through June 2002, he was an advisor to various technology startups including Audiomill (merged into Real Networks, April 2002), technology incubator ChanceTechAV, web applications platform provider Laszlo Systems, custom book publisher MyPublisher, and broadband applications platform developer Sugar Media. From January 1996 through January 1999, he was the founding Vice President, Programming of @Home Network and following that company’s acquisition of Excite became Senior Vice President and General Manager of Excite@Home's consumer portal division through September 2000. In late 1995 he assembled the seed financing for Salon.com and served as an informal advisor to the Company. From September 1993 to January 1996 he was Group Product Manager, Online Services at Apple Computer. From the spring of 1992 through July 1993 he was Group Product Manager at the Peter Norton Computing division of Symantec Corporation. From September 1987 through May 1993 he was Chief Executive Officer of MediaWorks, Inc. Mr. Gingras holds a Bachelor of Arts degree in English from Boston College.

Norman Blashka was appointed Executive Vice President and Chief Financial Officer of Salon in January 2008. From May 2006 through December 2007, he served as Chief Financial Officer of Vizible Corp., an internet software and social networking company. From January 2005 to April 2006, he served as Chief Financial Officer of Operative Media, Inc., an online advertising operations and software company. From January 2004 through December 2005, he served as a financial advisor to a number of internet startup companies. From October 2001 to January 2004, he served as Executive Vice President and Chief Financial Officer of 24/7 Real Media, Inc., a global digital marketing and technology company. From September 1999 until its acquisition in October 2001, he served as Senior Vice President, Chief Financial Officer and Secretary of Real Media, Inc. Prior thereto, he served in a variety of senior financial and operating positions with both startups and established media companies. Mr. Blashka is a Certified Public Accountant, earned an MBA in finance and accounting from Columbia University, and holds a BA in economics, summa cum laude, from SUNY New Paltz, where he currently sits on the Board of Trustees and chairs its audit committee.

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Joan Walsh was appointed Editor-in-Chief in February 2005. From November 2004 through February 2005, she held the position of Senior Vice President – Editorial Operations. From November 2003 to November 2004, she served as Vice President Co-Managing Editor. From October 1999 to November 2003, she served as Vice President of News. Ms. Walsh served as Salon’s News Editor from October 1998 to October 1999. Prior to joining Salon, Ms. Walsh was a freelance writer for approximately ten years and was a consultant to national and regional foundations including the Rockefeller Foundation, the Annie E Casey Foundation and the James Irvine Foundation. Ms. Walsh is currently a Board member of PolicyLink, a research and advocacy group. Ms. Walsh holds a Bachelor of Arts in History from the University of Wisconsin.

Deepak Desai has served as a Director of Salon since September 2004. He joined GlobalEnglish Corporation in June 2002 as its Chief Financial Officer and in December 2005 was appointed its President and Chief Executive Officer. 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 an 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. He currently serves on the board of VerticalResponse.com 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.

Elizabeth Hambrecht served as Chief Executive Office from September 2008 until May 2009. She also previously served as Salon’s Chief Executive Officer from February 2005 until September 2007 and was Salon’s President from October 2003 until September 2007. From May 2003 through February 2005 she also served as Salon’s Chief Financial Officer and Secretary. From 1999 to March 2003, she was 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, and Northern California Public Broadcasting, a public broadcast company for Northern California.

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George Hirsch has served as a Director of Salon since April 2003. Mr. Hirsch is the Chairman of the Board of the U.S. subsidiary of La Cucina Italiana magazine. From 1978 to 1987, he was the founding publisher and president of The Runner magazine at which time it was merged into Runner's World. 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. In 1973, he was founding publisher of New Times magazine and served as its President through 1979. In 1967, he was the founding publisher of 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. He is the Chairman of the Board of the New York City Marathon (New York Roadrunners.)

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

David Talbot founded Salon in 1995. He served as Chief Executive Officer from 1995 through April 1999 and again from October 2003 through February 2005. He was the Chairman of the Board from April 1999 through December 2006. He served as Editor-in-Chief from Salon’s incorporation in 1995 through February 2005. From 1990 to 1995, Mr. Talbot was the Sunday magazine editor and arts & features editor for the San Francisco Examiner newspaper. Mr. Talbot is the author of the New York Times best-seller, "Brothers: The Hidden History of the Kennedy Years," recently published by Free Press/Simon & Schuster. Mr. Talbot has written for numerous publications including Time, The New Yorker and Rolling Stone. In July 2007, Mr. Talbot joined Fenton Communications as a Senior Vice President. Mr. Talbot holds a Bachelor of Arts degree in Sociology from the University of California at Santa Cruz.

John Warnock has served as a Director of Salon since August 2001 and was appointed Chairman of the Board in December 2006. 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 served as a Director for Knight Ridder, Inc., a publisher of news and information in digital and hard copy formats, until its sale in June 2006.

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.”

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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 Salon’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 10% stockholders were complied with.

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ITEM 11. Executive Compensation

Executive Compensation

The following table shows, for the fiscal years ended March 31,2008 and 2009, the compensation of Salon’s (i) principal executive officer; (ii) principal financial officer; and (iii) the three most highly compensated executive officers other than our principal executive officer and principal financial officer who were serving as executive officers during the year ended March 31, 2009, collectively the “Named Executive Officers”:

Summary Compensation Table

					Non-Equity
				Option	Incentive Plan
Name and Principal Position	Year	Salary ($)	Bonus ($)	Awards ($) (1)	Compensation ($)	Total ($)
Elizabeth Hambrecht (2)	2009	65,360	-	3,047	33,000	101,407
Former Chief Executive Officer	2008	77,917	-	17,938	-	95,855

Norman Blashka (3)	2009	195,000	-	266,550	-	461,550
Executive Vice President and Chief Financial Officer	2008	50,769	-	15,714	-	66,483

Joan Walsh (4)	2009	219,292	-	272,739	-	492,031
Editor-in-Chief	2008	200,000	-	29,772	-	229,772

Christopher Neimeth (5)	2009	408,571	23,973	471,945	-	904,488
Former Chief Executive Officer	2008	218,419	-	175,868	67,718	462,005

Andreas Droste (6)	2009	166,922	-	32,497	55,000	254,420
Former Senior Vice President Sales and Marketing	2008	-	-	-	-	-

The amounts shown are the compensation costs recognized by Salon in fiscal years 2008 and 2009 for option and restricted stock awards, as determined pursuant to Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payments (“SFAS 123R”), excluding any estimates of future forfeitures. For a discussion of the assumptions used to calculate the value of the option awards, see Note 2 of the Notes to the Consolidated Financial Statements.

Ms. Hambrecht was reappointed Chief Executive Officer in September 2008 and served in this position until replaced by Richard Gingras in May 2009. Her base annual salary during fiscal 2009 was $130,000. Her base salary excludes $33,000 earned for consulting services prior to her appointment as CEO. Ms. Hambrecht continues to serve as a company director and consultant. During fiscal 2008, she served as Chief Executive Officer until September 2007, during which time her annual salary was $170,000.

Mr. Blashka was appointed Executive Vice President and Chief Financial Officer in January 2008 at a base annual salary of $200,000. In January 2009, Mr. Blashka agreed to a temporary 10% salary reduction in return for restricted stock. Included in option awards is an equity grant in lieu of a cash bonus totaling $73,594.

4.	Ms. Walsh continues to serve as Editor-in-Chief. Her base annual salary during fiscal 2009 was $230,000. In January 2009, Ms. Walsh agreed to a temporary 10% salary reduction in return for restricted stock. Included in option awards is an equity grant in lieu of a cash bonus totaling $73,594.

Mr. Neimeth served as Chief Executive Officer from September 2007 to September 2008 with a base annual salary of $230,000. Mr. Neimeth’s salary amount in 2009 includes payments paid upon his termination totaling $230,000. Option awards amount in 2009 includes $329,654 in stock compensation expense due to accelerated vesting. Prior to September 2007, Mr. Neimeth served as Senior Vice President – Publisher at a base annual salary of $200,000. The 2008 non-equity incentive plan compensation reflects the amount earned upon attaining targeted revenue goals for the fiscal year.

Mr. Droste served as Senior Vice President Sales and Marketing from April 2008 to March 2009 at a base annual salary of $180,000. The salary amount includes payments paid upon his termination totaling $18,000. The nonequity incentive plan compensation amount reflects commissions paid during the fiscal year.

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Grants of Plan-Based Awards in Fiscal 2009

The following table presents information on equity awards granted during the 2009 fiscal year:

GRANTS OF PLAN BASED AWARDS

					All Other
					Option Awards:				Grant Date
					Number of		Exercise or		Fair Value
		Estimated Future Payouts Under			Securities		Base Price		of Stock
	Grant	Equity Incentive Plan Awards			Underlying		of Option		and Option
Name	Date	Threshold	Target	Maximum	Options		Awards (1)		Awards
Elizabeth Hambrecht (2)	12/04/2008					10,833		$0.35		$3,412
	12/04/2008					292,857		$0.35		$102,500

Norman Blashka(3)	12/04/2008					16,667		$0.35		$5,250
	12/04/2008					57,143		$0.35		$20,000

Joan Walsh(4,6)	06/05/2008					125,000		$0.35		$77,500
	12/04/2008					19,167		$0.35		$6,038
	12/04/2008					65,714		$0.35		$23,000

Andreas Droste(5)	12/04/2004					15,000		$0.35		$4,725
	06/05/2008					50,000		$0.35		$31,000

(1)	The exercise price per share of each restricted stock and option was equal to the fair market value of Salon’s common stock on the date of grant. On December 4, 2008, Salon repriced all outstanding options for then current employees at $0.35, with no changes in vesting requirements.

(2)	Non Plan restricted stock awarded to Ms. Hambrecht on December 4, 2008 included 292,857 shares.

(3)	Non Plan restricted stock awarded to Mr. Blashka on December 4, 2008 included 57,143 shares, in lieu of salary.

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(4)	Ms. Walsh’s employment agreement stipulated that she would be eligible to receive 125,000 stock options during her employment with Salon.

(5)	Mr. Droste’s employment agreement stipulated that he would be eligible to receive 50,000 shares of common stock during his employment with Salon.

(6)	Non Plan restricted stock awarded to Ms. Walsh on December 4, 2008 included 65,714 shares, in lieu of salary.

Profit Sharing Retirement Plan and 401(k) Savings Plan

Salon has made no contributions to its profit sharing plan nor matched employee contributions to its 401(k) plan since its inception.

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Outstanding Equity Awards at Fiscal 2008 Year-End

The following table sets forth the outstanding equity awards for each Named Executive Officer as of March 31, 2009.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

	Option Awards
					Equity Incentive
	Number of		Number of		Plan Awards:
	Securities		Securities		Number of
	Underlying		Underlying		Securities
	Unexercised		Unexercised		Underlying	Option		Option
	Options		Options		Unexercised	Exercise		Expiration
Name	Exercisable		Unexercisable		Unearned Options	Price ($)		Date
Elizabeth Hambrecht		125,000					0.35	2/7/2015
		14,064		(1) 10,936			0.35	12/7/2016
		30,631		39,369			0.35	6/28/2017
				10,833			0.35	12/04/2018


Norman Blashka		85,348		(2) 280,433			0.35	1/7/2018
				16,667			0.35	12/04/2018

Joan Walsh				19,167			0.35	12/04/2018
		98,452		76,548			0.35	12/07/2016
				(1,3) 125,000			0.35	06/05/2018
		1,000					0.35	01/25/2010
		450					0.35	08/17/2010
		750					0.35	11/07/2010
		335					0.35	03/22/2011
		1,000					0.35	05/03/2011
		6,250					0.35	10/24/2011
		100,000					0.35	12/07/2015

(1)

Option vests 1/48th per month starting January 7, 2008 provided the grantee continues to be employed by Salon.

(2)

207,277 options vest 1/48th per month as of April 2009, provided the grantee continues to be employed by Salon. 73,156 options vest upon Salon achieving “positive operating cash flow” in any four trailing quarters. If Mr. Blashka is terminated, 100% of his outstanding options shall be fully vested and exercisable as of the date of his employment termination; and in the event of a change in control, all outstanding options become fully vested and exercisable.

(3)

Options vest (1) if Ms. Walsh is terminated for other than cause, 100% of the shares subject to then outstanding options shall be fully vested and exercisable as of the date of her termination, and (2) in the event of a change of control, all outstanding options shall become fully vested and exercisable.

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Option Exercises during Fiscal Year 2009

No current Named Executive Officer exercised any option during fiscal year 2009.

Pension Benefits

None of Salon’s executive officers are covered by a pension plan or other similar benefit plan that provides for payments or other benefits at, following, or in conjunction with retirement.

Nonqualified Deferred Compensation

Salon does not have any nonqualified deferred compensation plan.

Potential Payments Upon Termination or Change in Control

Salon has entered into employment agreements with Mr. Gingras, Mr. Blashka and Ms. Walsh.

In the event of a change in control, Mr. Gingras is entitled to the following:

(1) Fifty percent (50%) of Executive’s then unvested equity awards shall become vested.

(2) If Executive’s employment is terminated without cause, or Executive resigns for Good Reason, as defined in the underlying agreement, including a material reduction in authority or compensation or a relocation of more than fifty miles, within three (3) months before or twelve (12) months after the closing of a Change in Control, then Executive’s remaining unvested equity awards shall become vested.

(3) The Company (or its successor in interest) will pay Executive an amount in cash equal to the excess, if any, of (A) 5% of the aggregate consideration (including all cash and non-cash consideration) paid or exchanged by one or more acquirers in connection with such Change in Control over (B) Executive’s Option Gains (as defined below). For purposes of this Agreement, “Executive’s Option Gains” means the sum of (x) for stock options held by Executive on the date of the closing of the transactions constituting a Change in Control (the “Change in Control Date”), the excess, if any, of the aggregate fair market value of the Company common stock underlying such stock options measured as of the Change in Control Date over the aggregate exercise price of such stock options plus (y) for stock options exercised by Executive prior to the Change in Control Date, the excess, if any, of the aggregate fair market value of the Company common stock underlying such stock options as of the date of each such exercise over the aggregate exercise price of such stock options. The cash payment described in this Section 4(f)(iii) will be paid as soon as administratively practicable after the Change in Control Date, but in no event later than the 15th day of the third month following the end of the year in which the Change in Control occurs.

In the event Mr. Blashka is terminated for a reason other than cause, he will be entitled to a severance payment of six month’s salary and benefits. If Mr. Blashka (1) is terminated after June 30, 2008, 50% of his outstanding options shall be fully vested and exercisable; (2) is terminated after December 31, 2008, 100% of his outstanding options shall be fully vested and exercisable; and (3) in the event of a change in control, all outstanding options and restricted stock become fully vested and exercisable.

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In the event Ms. Walsh is terminated for a reason other than cause, she will be entitled to a severance payment of one year’s salary and benefits. If Ms. Walsh (1) is terminated for other than cause, 100% of her outstanding options shall be fully vested and exercisable; and (2) in the event of a change in control, all outstanding options become fully vested and exercisable.

Mr. Gingras, Mr. Blashka and Ms. Walsh’s contracts contain annual target bonus provisions of 50% of salary, 50-100% of salary and $150,000, respectively. In the event that Mr. Blashka or Ms. Walsh is terminated for a reason other than cause, he or she will be entitled to receive an amount equal to the bonus earned through the date of termination.

Compensation of Directors

The following table details the total compensation by Salon’s non-employee directors for its 2009 fiscal year:

	Fees Earned
	or Paid in		Option
Name	Cash		Awards (1)		Total
Deepak Desai		-		$4,994		$4,994
Robert Ellis		-		$4,994		$4,994
Elizabeth Hambrecht (2)		-		$59,191		$59,191
George Hirsch		-		$4,994		$4,994
Robert McKay		-		$4,994		$4,994
James Rosenfield		-		$4,994		$4,994
David Talbot		-		$4,994		$4,994
John Warnock		-		$4,994		$4,994

(1)

On December 4, 2008, each director except for Ms. Hambrecht received an option to purchase 10,000 shares of common stock. The grant date fair value of each stock option award was $3,150. The exercise price per share for the grants to all of the directors was $0.35. The amounts shown are the compensation costs recognized by Salon in fiscal year 2009 for option awards, as determined pursuant to SFAS 123R, excluding any estimates of future forfeitures. For a discussion of the assumptions used to calculate the value of the option awards, see Note 2 of Notes to the Consolidated Financial Statements.

(2)

On December 4, 2008, Ms. Hambrecht received an option to purchase 10,833 shares of common stock. The grant date fair value was $3,412. The exercise price per share was $0.35. The amount shown is the compensation costs recognized by Salon in fiscal year 2009, as determined pursuant to SFAS 123R, excluding any estimates of future forfeitures. For a discussion of the assumptions used to calculate the value of the option awards, see Note 2 of Notes to the Consolidated Financial Statements.

Compensation Committee Interlocks and Insider Participation

None of Salon’s executive officers has 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.

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Compensation Discussion and Analysis

The Compensation Committee has responsibility for setting the overall compensation strategy for Salon and aligning it to Salon’s business goals. This includes determining the compensation of the Chief Executive Officer and other Named Executive Officers and ensuring that Salon’s compensation program is fair, reasonable and competitive. The Compensation Committee makes recommendations to the Board on equity compensation with the Board having ultimate authority in making equity grants.

Objectives and Challenges of Salon’s Compensation Program

Salon’s executive compensation program is designed to attract, retain and motivate outstanding executive officers capable of leading Salon to fulfill its business objectives, and to establish an appropriate link between executive compensation and achievement of Salon’s strategic and financial performance goals that include attaining profitability, generating sufficient cash to fund operations, and ultimately, enhancing shareholder value.

Due to insufficient cash, Salon has only been able to offer its Chief Executive Officer and President, its Editor-in-Chief and its Executive Vice President and Chief Financial Officer a competitive base annual salary and has not previously been able to implement a non-equity incentive compensation plan, or award annual cash bonuses to these executives. As a consequence, Salon has had to rely on stock option and restricted stock awards in lieu of cash compensation for these officers. Cash constraints have hampered Salon in attracting new executives. Salon has therefore had to rely on offering substantial equity awards to entice prospective new executives to join Salon. Besides cash constraints, Salon faces challenges in hiring and retaining executives due to a relatively small pool of available executive talent in its industry, and because it competes with more established media companies and better funded upstarts. Salon has experienced difficulties in finding suitable executives to lead its sales and technology efforts, positions in high demand. As Salon’s brand recognition has increased, so has the demand for its trained talent.

Role of Compensation Committee and Outside Consultants

The Compensation Committee of the Board of Directors oversees and administers Salon’s executive compensation program in accordance with the Compensation Committee Charter. The Compensation Committee meets on an as-needed basis to: (1) adjust and review executive salaries; (2) award executive bonuses; (3) approve offers to prospective new executive officers; (4) recommend equity grants for executive officers to the Board of Directors; and (5) set non-equity incentive compensation for other key management employees, in conjunction and based upon the recommendation of the executive team. Due to budgetary constraints, Salon has not utilized the services of outside compensation consultants. Once Salon’s operations generate sufficient cash to meet operating needs, the Compensation Committee may retain the services of outside consultants to review executive salaries for appropriateness and to formulate incentive plans for the Named Executive Officers.

Elements of Compensation

Salon provides its executive officers with a compensation package consisting of base salary, commissions for its sales executives, and benefit plan participation generally available to other employees. Beginning in fiscal 2009, bonus plans were offered to named executives. In setting total compensation, the Compensation Committee considers individual and company performance, as well as current and projected cash balances. In determining the compensation for an executive who has been with Salon for a substantial amount of time, the Compensation Committee will consider what it might cost to hire that executive’s replacement, the effect on attaining revenue and profitability goals, and the effect on the well being of Salon’s Website.

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Base Salary. Salaries for Salon’s executive officers are initially set based on negotiation with the individual executive officers at the time of recruitment and with reference to salaries for comparable positions in the industry for individuals of similar education and background. Salon also considers the individual’s experience, reputation in his or her industry and expected contributions to Salon. Base salary is continuously evaluated to ensure it is competitive and may be adjusted from time to time if Salon believes that it is no longer competitive, to match changes to an individual’s job performance or duties, or to retain an executive. Cost of living salary adjustments are also granted to executive officers on an ad hoc basis. In each case, Salon takes into account the results achieved by the executive, his or her future potential, scope of responsibilities and experience, competitive salary practices, the potential impediment in reaching profitability if the executive were to leave Salon, and cash projections. Salon has not utilized benchmarks or compensation studies in determining salary levels, but may do so in the future.

Bonuses and Non-Equity Incentive Plan Compensation. Each executive is eligible for a cash bonus. Due to limited cash, no bonuses have ever been granted in the past to Salon’s Chief Executive Officer and President, Chief Financial Officer and Secretary and Editor-in-Chief. In fiscal 2009, a partial cash bonus of $23,978 was paid to Mr. Neimeth, the Company’s CEO until September 2008, due to the Company achieving certain operating targets through the date of his departure.

In order to align corporate goals and provide incentives for a its new Chief Executive Officer, its Chief Financial Officer, and its Editor-in-Chief, the Compensation Committee will be formulating a bonus plan for fiscal 2010, in accordance with their employment contracts. Fiscal year 2010 target bonuses for these executives are $115,000, $150,000, and $150,000, respectively. Mr. Blashka and Ms. Walsh’s incentive compensation plans for fiscal year 2009 were based on attaining prescribed common operating, financial and other profitability goals, and were each targeted at $150,000. The bonuses, if earned, were payable in cash or stock at the Company’s option. If paid in stock, amounts were to be increased by 25%. The targeted amounts are contractually set. The goals were set based on what the Committee perceived to be synchronized with the overall goal of increasing Salon’s enterprise value. Based on 2009 operating results, Mr. Blashka and Ms. Walsh have each earned additional equity compensation of $73,594, in lieu of cash.

All bonus plans and non-equity incentive plans are approved by Salon’s Compensation Committee upon consultation with the Chief Executive Officer and Chief Financial Officer.

Stock Options. Salon grants stock options to newly hired executives at the next regularly scheduled meeting of the Board of Directors, and subsequently to align their interests with those of its stockholders and as an incentive to remain with Salon. Salon believes that options to purchase its common stock, priced at the market price on the date of grant, are the best tool to motivate executives to build stockholder value. In addition, the granting of stock options has been an appealing form of compensation to Salon as their granting requires no cash outlay. However, these grants affect Salon’s results of operations as they require Salon to record non-cash stock-based compensation. As options are not transferable, they have no value unless the price of the stock increases after a grant of options is made. Because these options typically vest over a four-year period, they are an incentive for executives to build Salon’s value over time and encourage executives to remain in the long-term employment with Salon.

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The goals of Salon’s option grant guidelines are to ensure that future grants are competitive from a grant value perspective and that option usage is consistent with option pool forecasts.

During fiscal year 2007, the Board of Directors of Salon adopted a policy that options are to be granted only at regularly scheduled meetings of the Board. The proximity of any awards to an earnings announcement or other market events is coincidental. The exercise price of the options is the closing price of Salon’s common stock on the date of the grant and the grant date is the date that the Board approves the grant. All new hires are awarded options and Salon’s Compensation Committee makes recommendations to the Board of options grants to be made to executive officers.

The number of stock options Salon granted to executives has varied widely. On May 4, 2009, Mr. Gingras was granted 1,416,211 options upon joining the Company, with the right to receive up to an aggregate amount equal to 10% of the fully-diluted shares of the Company under certain circumstances. On December 4, 2009, Salon granted 16,667 options to its Chief Financial Officer, Mr. Blashka, 15,000 options to its then Vice President of Sales and Marketing, Andreas Droste, and 19,167 to Salon’s Editor-in-Chief, Joan Walsh. During Fiscal 2008, in order to attract a new chief financial officer, Salon granted 365,781 options to Mr. Blashka. On June 5, 2008, the Company granted to Mr. Droste 50,000 options. In May, 2008, Ms.Walsh was also granted 125,000 options in connection with her new employment agreement.

As of March 31, 2009, Salon’s stock option plan allows for the granting of approximately 293,000 shares of common stock. In June 2009, subject to shareholder approval, the Board of Directors increased the available pool by 4.500,000 to fulfill its obligations to Mr. Gingras and potential future hires.

Restricted Stock. In October 2007, Salon’s shareholders approved an amendment to the 2004 Stock Plan to allow for the grant of restricted stock awards. After the creation of such an equity plan, the Compensation Committee will recommend to the Board of Directors that similar awards be made to the other Named Executive Officers. It is contemplated that such awards will vest over a period of four years and be subject to accelerated vesting in the event that the Named Executive Officer is terminated for reasons other than cause, or if a change in control event were to occur. Salon feels that the issuance of restricted stock will be a valuable incentive tool for its executives as this type of equity award will have immediate value upon vesting with no cash outlay by the Company.

During fiscal 2009, Mr. Blashka, Ms. Walsh and Mr. Droste received 57,143, 65,714, and 51,429 shares of restricted stock, respectively, in return for agreeing to temporary salary reductions. Ms. Hambrecht was granted 200,000 shares when she was reappointed as Chief Executive Officer.

Perquisites. Salon does not offer any perquisites to its executive officers.

Retirement and Other Benefits. Salon has a 401(k) savings plan for its employees that allows for matching contributions and profit sharing. Due to limited cash, Salon has never made matching or profit sharing contributions and has no intent to do so in the 2009 fiscal year. Salon does not have a deferred compensation plan for any employee.

Named Executive Officer Cash Compensation

Elizabeth Hambrecht served as CEO from September 2008 until replaced by Mr, Gingras, during which time she received a base annual salary of $130,000. She also received $33,000 earned for consulting services prior to her appointment as CEO. Ms. Hambrecht’s resignation did not affect her service as a director of the Company’s board of directors. She was not eligible for a bonus.

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Christopher Neimeth served as CEO until his departure in September 2008. He was paid an annual salary of $230,000, received additional cash compensation of $23,973, and severance, when fully paid, totaling $230,000.

Norman Blashka, Executive Vice President and CFO, joined Salon in January 2008. His starting contractual base annual salary is $200,000. Due solely to limited cash, Mr. Blashka agreed to a temporary ten percent salary reduction in January 2009. He did not receive any other form of cash compensation during fiscal year 2009.

Joan Walsh, Editor-in-Chief, has a contractual salary of $230,000. She received cash compensation of $219,000 during fiscal year 2009 after she agreed to a temporary ten percent salary reduction in January 2009. Due solely to the Company’s limited cash, Ms. Walsh did not receive any other form of cash compensation during fiscal year 2009.

Andreas Droste joined Salon on April 14, 2008 as Senior Vice President of Sales and Marketing at a base annual salary of $180,000. Mr. Droste left the Company’s employ in March 2009. In connection with the termination of his employment, Mr. Droste received severance in the amount of $18,000. Prior to his departure, he earned $55,000 in commissions.

Richard Gingras, who became CEO effective May 1, 2009, earns a base salary of $230,000.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code limits deductions for executive compensation in excess of $1 million except for certain compensation which qualifies for a performance-based exception. Certain types of compensation in excess of $1 million are deductible by a company if performance criteria are specified in detail and are contingent on stockholder approval of the compensation arrangement. As Salon has been unable to award bonuses and other forms of non-equity incentive compensation to any of its Named Executive Officers due limited cash, the $1 million limitation has not been a factor for Salon. In the future, Salon and the Compensation Committee will endeavor to structure executive compensation plans to achieve maximum deductibility under Section 162(m) with minimal sacrifices of flexibility and impact on corporate objectives.

Accounting for Stock-Based Compensation

Salon has expensed stock option grants and restricted stock under SFAS 123R which requires companies to include the fair value of equity compensation as a compensation expense in their income statements.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of Salon has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

THE COMPENSATION COMMITTEE

James Rosenfield

John Warnock

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

Equity Compensation Plan Information

Information regarding Equity Compensation Plans may be found in Part II, Item 5, commencing on page 23 of this Annual Report on Form 10-K.

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 1, 2009 (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) each executive officer named in the Summary Compensation Table, 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)	3,945,348	91.3%
Shea Ventures LLC (5)	1,685,957	53.8%
Adobe Systems Incorporated (6)	443,847	18.8%
Octavia LLC (7)	374,222	15.7%
Robert McKay(ex-Director) (8)	341,510	14.5%
Constellation Venture Capital (9)	302,095	13.2%
Jann Wenner (ex-Director) (10)	272,340	12.0%
HVS Boxers, LLC (11)	143,743	6.7%
Nancy & Timothy Armstrong (12)	137,837	6.4%

Executive Officers and Directors
John Warnock (13)	6,056,158	91.7%
Elizabeth Hambrecht (14)	429,806	17.6%
David Talbot (15)	288,738	12.5%
Joan Walsh (16)	256,672	11.3%
James Rosenfield (17)	38,597	1.9%
George Hirsch (18)	35,492	1.7%
Robert Ellis (19)	29,760	1.5%
Deepak Desai (21)	27,260	1.3%
Norman Blashka (22)	109,734	5.1%
Richard Gingras	-	-
All executive officers and directors as a group (10 persons)	7,272,217	93.0%

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

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(3)

Calculated on the basis of 2,021,276 shares of Common Stock outstanding as of June 1, 2009, shares of Common Stock underlying options exercisable within sixty (60) days of June 1, 2009, 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, shares of Common Stock issuable upon the conversion of promissory notes, 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. The Hambrecht Entities own 35,822 shares of Common Elizabeth Hambrecht, a director of Salon and Salon’s former President and Chief Executive Officer, has a pecuniary ownership interest in the Hambrecht Entities. Mr. Hambrecht individually owns 405,385 shares of Common Stock, 936,550 shares of Common Stock that Mr. Hambrecht has the right to acquire upon conversion of 50 shares of series A Preferred Stock and 378 shares of Series C Preferred Stock and 584 shares of Series D Preferred Stock and 61,736 shares of Common Stock issuable upon exercise of immediately exercisable warrants. He also holds a promissory note convertible into 1,061,119 shares of Common Stock. Includes ownership by The Sarah and William Hambrecht Foundation of 32,005 shares of Common Stock and 275,459 shares of common stock that the Foundation has the right to acquire upon conversion of 75 shares of Series A Preferred Stock and 108 shares of Series C Preferred Stock. William Hambrecht and Elizabeth Hambrecht are Directors and have voting rights in the Sarah & William Hambrecht Foundation. Includes ownership by HAMCO Capital Corporation, consisting of 20,782 shares of Common Stock and 171,291 shares of Common Stock that HAMCO has the right to acquire upon conversion of 127 shares of Series C Preferred Stock and 63 shares of Series D preferred stock. Mr. Hambrecht and Elizabeth Hambrecht, both have an ownership interest in HAMCO Capital. Includes ownership by Ironstone Group, Inc., consisting of 79,970 shares of Common Stock and 856,204 shares of Common Stock that Ironstone has the right to acquire upon conversion of 843 shares of Series C Preferred Stock. Mr. Hambrecht has an ownership interest in Ironstone Group, Inc. Mr. Hambrecht and Ms. Hambrecht disclaim beneficial ownership of the shares of Salon’s Common Stock held directly by the Hambrecht Entities, HAMCO Capital and Ironstone, other than their proportionate ownership interest.

(5)

Consists of 122,965 shares of Common Stock held by the stockholder and 984,197 shares of Common Stock that the stockholder has the right to acquire upon conversion of 125 shares of Series A Preferred Stock and 697 shares of Series C preferred Stock. Includes 78,101 shares of Common Stock of a trust, as well as 130,005 shares of Common Stock that the trust has the right to acquire upon conversion of 128 shares of Series C Preferred Stock. Includes 370,689 shares of Common Stock issuable upon conversion of a promissory note held by the trust. Edward Shea is the Manager of the stockholder and a Trustee of the trust, and is also a Director of Ironstone Group, Inc. mentioned under item (4).

(6)

Consists of 109,379 shares of Common Stock held by the stockholder. Includes 334,468 shares of Common Stock that the stockholder has the right to acquire upon conversion of 125 shares of Series B Preferred Stock. Salon’s Chairman John Warnock is the co-Chairman of the stockholder and disclaims beneficial ownership of the shares held by the stockholder.

(7)	Consists of 17,805 shares of Common Stock held by the stockholder. Includes 356,417 shares of Common Stock that the stockholder has the right to acquire upon conversion of 62 shares of Series A Preferred Stock and 216 shares of Series C Preferred Stock.

(8)

Consists of 4,200 shares of Common Stock held by the Robert McKay Family Partnership, 7,840 shares of Common Stock held by the McKay Investment Group and 2,921 shares of Common Stock in the Elaine McKay Family Partnership. Includes 297,508 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 that the Elaine McKay Family Partnership has the right to acquire upon conversion of 158 shares of Series C Preferred Stock. Mr. McKay, a former Director of Salon, is the Managing Partner of all the entities. Includes 29,041 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

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(9)

Consists of 33,084 shares of Common Stock held by Constellation Venture Capital, LP and 7,096 shares of Common Stock held by Constellation Venture Offshore, LP. Includes 114,932 shares of Common Stock that Constellation Venture Capital has the right to acquire upon conversion of 52 shares of Series A Preferred Stock and 24,312 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.

(10)

Consists of 18,424 shares of Common Stock held by the stockholder. Includes 253,916 shares of Common Stock that Wenner Media LLC has the right to acquire upon conversion of 250 shares of Series C Preferred Stock. Mr. Wenner, the Chairman and President of Wenner Media LLC served as a Director of Salon until February 2006.

(11)	Consists of 6,709 shares of Common Stock. Includes 137,034 shares of Common Stock that the stockholder has the right to acquire upon conversion of 62 shares of Series A Preferred Stock.

(12)	Includes 146,983 shares of Common Stock that the stockholder has the right to acquire upon conversion of 209 shares of Series D Preferred Stock.

(13)

Consists of 410,426 shares of Common Stock held by the Chairman of the Board of Salon. Includes 4,495,983 shares of Common Stock that the stockholder has the right to acquire upon conversion of 125 shares of Series A Preferred Stock, 3,474 shares of Series C Preferred Stock, and 874 shares of Series D preferred stock and 59,370 shares of Common Stock issuable upon exercise of immediately exercisable warrants. Includes 1,061,119 shares of Common Stock issuable upon conversion of a promissory note. Includes 29,260 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

(14)

Consists of 3,750 shares of Common stock held by the Director. Includes 248,446 shares of Common Stock that the Officer has the right to acquire upon conversion of 31 shares of Series C Preferred Stock and 334 shares of Series D Preferred Stock. Includes 177,610 shares subject to options that may be exercised within sixty (60) days of June 1, 2009. Excludes her proportional beneficial ownership of amounts owned by the Hambrecht Entities and HAMCO Capital described in footnote (4).

(15)

Consists of 384 shares of Common Stock, of which 128 shares are held by Camille Peri, Mr. Talbot's spouse, and 256 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 288,354 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

(16)	Includes 256,672 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

(17)	Includes 38,597 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

(18)	Consists of 732 shares of Common Stock held by the Director and 34,760 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

(19)	Consists of 500 shares of Common Stock held by the Director and 29,2960 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

(21)	Includes 27,260 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

(22)	Includes 109,734 shares subject to options that may be exercised within sixty (60) days of June 1, 2009.

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Series A Preferred Stock

The following table sets forth information regarding the beneficial ownership of Salon’s Series A Preferred Stock as of June 1, 2009 (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	18.5%
John Warnock (3,6)	125	18.5%
Shea Ventures LLC (3)	125	18.5%
Constellation Venture Capital (4)	63	9.3%
McKay Investment Group (5,6)	62	9.2%
Octavia LLC (5)	62	9.2%
HVS Boxers LLC (5)	62	9.2%
All executive officers and directors as a group (2 persons)	125	18.5%

(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 165,768 shares of Common Stock, subject to adjustment. Also includes 50 shares held by WR Hambrecht + Co. LLC that are convertible into 110,512 shares of Common Stock, subject to adjustment. Mr. Hambrecht is the father of Elizabeth Hambrecht, a director of Salon and Salon’s former President and Chief Executive Officer. Ms. Hambrecht has an 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 276,280 shares of Common Stock, subject to adjustment.

(4)	Includes 52 shares held by Constellation Venture Capital, LP that are convertible to 114,932 shares of Common Stock and 11 shares held by Constellation Venture Capital (Offshore), LP that are convertible to 24,312 shares of Common Stock, all subject to adjustment.

(5)	Shares held by the named stockholder are convertible into 160,474 shares of Common Stock, subject to adjustment.

(6)	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.

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Series B Preferred Stock

The following table sets forth information regarding the beneficial ownership of Salon’s Series B Preferred Stock as of June 1, 2009 (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)

(2)	Shares held by the named stockholder are convertible into 334,468 shares of Common Stock, subject to adjustment.

(3)

No director or Named Executive Officer beneficially owns shares of Series B Preferred Stock. However John Warnock, Salon’s Chairman of the Board, 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 June 1, 2009 (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.

	Amount and
	Nature of
	Beneficial	Percent
Name and Address of Beneficial Owner (1)	Ownership	of Class
John Warnock (2,7)	3,474	52.8%
William R. Hambrecht (3)	1,456	22.1%
Shea Ventures LLC (4)	825	12.5%
Elaine McKay Family Partnership (5,7)	158	2.4%
Elizabeth Hambrecht (6,7)	31	*%
All executive officers and directors as a group (3 persons)	3,663	55.7%

*Less than 1%.

(1)

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(2)	Shares held by the named stockholder are convertible into 3,505,000 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, a director of Salon and Salon’s former President and Chief Executive Officer, has an ownership interest in the Hambrecht Entities. Includes 108 shares held by the Sarah & William Hambrecht Foundation that are convertible to 109,691 shares of Common Stock, subject to adjustment. Mr. Hambrecht and Ms. Hambrecht are Directors and have voting rights in the Sarah & William Hambrecht Foundation. Includes 127 shares held by HAMCO Capital that are convertible to 128,989 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 856,204 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 837,922 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 707,917 shares of Common Stock, subject to adjustment. Includes 128 shares owned by the E&M RP Trust that are convertible into 130,005 shares of Common Stock, subject to adjustment.

(5)	Shares held by the named stockholder are convertible into 160,474 shares of Common Stock, subject to adjustment. Mr. McKay, Director, has an ownership interest in the Elaine McKay Family Partnership. Mr. McKay is the Managing Partner of the partnership.

(6)	Shares held by the officer are convertible into 31,485 shares of Common Stock. Stockholder is the President and Chief Executive Officer of the registrant.

(7)	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.

Series D Preferred Stock

The following table sets forth information regarding the beneficial ownership of Salon’s Series D-1, D-2, D-3, D-4 and D-5 Preferred Stock (the “Series D Preferred Stock”) as of June 1, 2009 (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 (2,6)	874	41.9%
William R. Hambrecht (3)	647	31.0%
Elizabeth Hambrecht (4,6)	334	16.0%
Nancy & Timothy Armstrong (5)	209	10.0%
All executive officers and directors as a group (2 persons) (6)	1,218	58.0%

(1)

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(2)	Shares held by the named stockholder, who is the Chairman of the Board of Salon, are convertible into 655,417 shares of Common Stock, subject to adjustment.

(3)

Mr. Hambrecht is the father Elizabeth Hambrecht, a director of Salon and Salon’s former President and Chief Executive Officer. Includes 584 shares held by a trust of the stockholder that are convertible to 442,118 shares of common stock, subject to adjustment. Includes 63 shares held by HAMCO Capital Corporation that are convertible to 42,302 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.

(4)	Shares held by the Officer are convertible into 216,961 shares of Common Stock, subject to adjustment.

(5)	Shares held by the named stockholder are convertible into 146,983 shares of Common Stock, subject to adjustment.

(6)	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 D Preferred Stock.

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ITEM 13. Certain Relationships and Related Transactions

In May 2007, Salon entered into a line of credit with Deutsche Bank Securities, Inc. for borrowings of up to $1 million plus accrued interest. This agreement is guaranteed in its entirety by John Warnock, Salon’s Chairman. As of March 31, 2008 and March 31, 2009, the line was fully drawn. Accrued interest thereon is $79.

In November, 2007, Salon issued 292 shares of Series D-5 preferred stock, convertible into 233,600 shares of Common Stock, subject to adjustment, and a warrant to purchase 35,040 shares of Common Stock at an exercise price of $1.84 per share, subject to adjustment, for net proceeds of $350. The purchaser was William Hambrecht, father of Elizabeth Hambrecht, a director of Salon and Salon’s former President and Chief Executive Officer.

In March 2008, the Company’s Chairman advanced $500, pending completion of a contemplated financing that was under negotiation as of year end. In April, 2008, the Company sold $1 million of convertible promissory notes. The notes have a four year maturity, bear interest at a fixed rate of 7.5% per annum, payable annually in cash or in kind, and are convertible into Common Stock at the rate of $1.68 per share. Mr. Warnock and Mr. Hambrecht each purchased notes in the amount of $500.

In October, 2008, the Company sold $1 million of convertible promissory notes. The notes have a four year maturity, bear interest at a fixed rate of 7.5% per annum, payable semi-annually in cash or in kind, and are convertible into Common Stock at the rate of $.67 per share. Mr. Warnock and Mr. Hambrecht each purchased notes in the amount of $500.

In March 2009, Mr. Warnock advanced $250 to fund working capital.

Subsequent to year end, Mr. Warnock and Mr. Hambrecht have advanced $300 and $250, respectively, to meet Salon’s working capital requirements. This debt is exchangeable into securities to be issued in the next financing raised by the Company from non-related parties.

In May 2009, the Company entered into an advisory agreement with its director and former chief executive office, Elizabeth Hambrecht, under which she will be compensated at the annual rate of $150,000, payable half in cash and half in Salon stock. The agreement may be terminated at any time by either the Company or the advisor.

During the year ended March 31, 2008 and March 31, 2009, no warrants were exercised by related parties

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During the year ended March 31, 2007, the following warrants were exercised by related parties:

				Exercise
Issue Date	Exercise Date	Warrant Holder	Warrant Shares	Price per share		Cash Received
04/10/03	04/05/06	John Warnock (1)	15,000	$0.834	$	12,506
04/29/03	04/05/06	John Warnock (1)	15,000	$0.901		13,518
08/09/01	05/11/06	Sarah & William Hambrecht Foundation (2)	30,000	$2.188		65,652
06/12/03	05/11/06	The Hambrecht 1980 Revocable Trust (3)	7,500	$0.901		6,759
06/12/03	05/11/06	WR Hambrecht + Co LLC (4)	7,500	$0.901		6,759
07/10/03	05/11/06	HAMCO Capital Corporation (5)	7,500	$0.834		6,253
11/24/03	05/11/06	HAMCO Capital Corporation (5)	7,500	$0.901		6,759
02/10/04	05/11/06	The Hambrecht 1980 Revocable Trust (3)	15,000	$0.690		10,350
06/04/04	05/11/06	HAMCO Capital Corporation (5)	4,064	$2.748		11,171
06/04/04	05/11/06	The Hambrecht 1980 Revocable Trust (3)	14,129	$2.748		38,833
02/02/05	05/11/06	HAMCO Capital Corporation (5)	1,718	$3.220		5,532
02/02/05	05/11/06	The Hambrecht 1980 Revocable Trust (3)	15,381	$3.220		49,529
05/28/03	05/12/06	John Warnock (1)	45,000	$0.901		40,553
07/10/03	05/12/06	John Warnock (1)	15,000	$0.833		12,506
07/30/03	05/12/06	John Warnock (1)	15,000	$0.690		10,350
08/29/03	05/12/06	John Warnock (1)	15,000	$0.690		10,350
09/12/03	05/12/06	John Warnock (1)	15,000	$0.901		13,518
09/29/03	05/12/06	John Warnock (1)	15,000	$1.036		15,542
10/10/03	05/12/06	John Warnock (1)	15,000	$0.901		13,518
10/30/03	05/12/06	John Warnock (1)	15,000	$0.901		13,518
11/12/03	05/12/06	John Warnock (1)	15,000	$0.969		14,530
11/24/03	05/12/06	John Warnock (1)	15,000	$0.901		13,518
12/11/03	05/12/06	John Warnock (1)	15,000	$0.901		13,518
12/30/03	05/12/06	John Warnock (1)	75,000	$0.690		51,750
12/31/03	05/12/06	John Warnock (1)	15,000	$0.690		10,350
08/09/01	06/29/06	John Warnock (1)	50,000	$2.188		109,419
08/09/01	08/08/06	WR Hambrecht + Co LLC (4)	20,000	$2.188		43,768
08/29/03	08/29/06	Eu Revocable Trust (6)	3,750	$0.690		2,587
		Total exercised	499,042		$	622,916

(1)	John Warnock is the Chairman of the Board of Directors of Salon.

(2)	Elizabeth Hambrecht, a director of Salon, and her father, William Hambrecht, have voting rights in the Sarah and William Hambrecht Foundation.

(3)	The Hambrecht 1980 Revocable Trust is a trust of William Hambrecht, the father of Salon’s CEO and President.

(4)	William Hambrecht is the Chairman and Chief Executive Officer of WR Hambrecht + Co. LLC. Elizabeth Hambrecht has a pecuniary interest in WR Hambrecht + Co. LLC.

(5)	William Hambrecht and Elizabeth Hambrecht have an ownership interest in HAMCO Capital Corporation.

(6)	The Eu Revocable Trust is for the benefit of Elizabeth Hambrecht.

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During the year ended March 31, 2007, warrants for 92,300 shares of common stock were converted by related parties to 57,741 shares of common stock for which Salon did not receive any consideration under the net exercise provisions of the warrants, as follows:

				Exercise
Issue Date	Exercise Date	Warrant Holder	Warrant Shares	Price per share	Converted Shares
04/10/03	04/04/06	Ironstone Group, Inc (1)	15,000	$0.834	12,766
04/29/03	04/25/06	Ironstone Group, Inc (1)	15,000	$0.901	12,183
10/06/03	05/11/06	Ironstone Group, Inc (1)	15,000	$1.036	10,909
10/30/03	05/11/06	Ironstone Group, Inc (1)	7,500	$0.901	5,721
08/09/01	08/09/06	McKay Investment Group (2)	24,800	$2.188	7,840
02/10/04	02/07/07	WR Hambrecht + Co Inc. (3)	15,000	$0.690	8,322
		Total converted	92,300		57,741

(1)	William Hambrecht has an ownership interest in Ironstone Group, Inc.

(2)	Salon former Director Robert McKay is the managing partner of the McKay Investment Group.

(3)	William Hambrecht is the Chairman and Chief Executive Officer of WR Hambrecht + Co. Inc. Elizabeth Hambrecht has a pecuniary interest in WR Hambrecht + Co. Inc.

During the year ended March 31, 2007, the following related parties purchased shares of Salon’s Series D preferred stock:

		Series D	Cash	Shares	Warrants
Purchaser	Date	Subclass	Received	Issued	Issued
The Hambrecht 1980 Revocable Trust (2)	07/27/06	D-3	$150,000	125	9,097
John Warnock (1)	07/27/06	D-3	99,600	83	6,040
John Warnock (1)	07/27/06	D-4	50,400	42	3,056
The Hambrecht 1980 Revocable Trust (2)	09/21/06	D-4	200,400	167	17,599
John Warnock (1)	09/21/06	D-4	199,200	166	17,494
John Warnock (1)	12/15/06	D-4	50,400	42	8,244
John Warnock (1)	12/15/06	D-5	150,000	125	24,536
			$900,000	750	86,066

(1)	John Warnock is the Chairman of the Board of Directors of Salon.

(2)	The Hambrecht 1980 Revocable Trust is a trust of William Hambrecht, the father of Salon’s CEO and President and a Director.

In November 2006, William Hambrecht, the father of Salon’s CEO and President sold to her in a private transaction 146 shares of Series D-1 preferred stock and 188 shares of Series D-2 preferred stock.

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Policies with Respect to Review, Approval or Ratification of Transactions with Related Persons

Salon has relied on cash infusion from related persons to meet cash operating needs from the year ended March 31, 2003 through the year ended March 31, 2009. During this period of inadequate cash, the Board of Directors approved related person transactions after full disclosure of the interests of related parties. Subsequent to March 31, 2007, Salon’s Audit Committee separately, or in conjunction with the full Board, excluding those related parties involved in such transactions reviewed, approved and/or ratified all related party transactions, as the Audit Committee is empowered to do under Salon's Audit Committee Charter.

Salon has disclosed in filings with the Securities and Exchange Commission (SEC) all related party transactions. The SEC defines a related party transaction to include any transaction, arrangement or relationship in which Salon is a participant and in which any of the following persons has or will have a direct or indirect material interest:

An executive officer, director or director nominee of Salon;

Any person who is known to be the beneficial owner of more than 5% of Salon’s common stock;

Any person who is an immediate family member of an executive officer, director or director nominee of Salon or beneficial owner of more than 5% of Salon’s common stock;

Any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person, together with any other of the foregoing, has a 5% or greater beneficial interest.

ITEM 14. Principal Accountant Fees and Services

Burr, Pilger & Mayer LLP is Salon’s independent registered accountant. The aggregate audit fees billed by Burr, Pilger & Mayer LLP for year ended March 31, 2008 were $110,172 and for March 31, 2009 are estimated to be approximately $99,627. In addition, the aggregate corporate tax filing fees for the year ended March 31, 2009 are estimated to be approximately $8,500. Fiscal year 2009 was the first year Burr, Pilger & Mayer LLP was engaged to perform corporate tax filing services. Except for corporate tax filing services, Burr, Pilger & Mayer LLP did not perform any services for which Salon incurred fees for non-audit related fees, or other fees, nor did any other such firm.

During the year ended March 31, 2009, all audit and tax 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.

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PART IV

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

1.	Financial Statements

The information concerning Salon’s financial statements and the Report of Burr, Pilger & Mayer LLP, Salon’s Independent Auditors required by this item are incorporated by reference herein to the section of this Report in Item 8, entitled “Financial Statements and Supplementary Data.”

2.	Financial Statement Schedules

None.

Exhibits

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

Exhibit
Number		Description of Document
2.1(7)		Agreement and Plan of Reorganization dated as of May 5, 2000, among Salon.com, a Delaware corporation, Target Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Salon, MP3Lit.com, a Nevada corporation and Gary Hustwit, Valerie Hustwit and William Hustwit.
3.2(3)		Restated Certificate of Incorporation of Salon as of June 17, 1999 with Certificate of Amendment of Article Fourth as of June 24, 1999.
3.3.1 (40)		Certificate of Amendment to Restated Certificate of Incorporation, dated as of November 19, 2004.
3.4(3)		Form of Bylaws of Salon adopted June 24, 1999.
3.4(10)		Certificate of Designation of Preferences and Rights of the Series A Preferred Stock dated as of August 8, 2001.
3.4.1(12)		Certificate of Designation of Preferences and Rights of the Series B Preferred Stock, dated as of February 8, 2002.
3.4.2(36)		Certificate of Designation of Preferences and Rights of the Series C Preferred Stock, dated as of December 23, 2003.
3.4.3(38)		Certificate of Designation of Preferences and Rights of the Series D-1 Preferred Stock, Series D-2 Preferred Stock, Series D-3 Preferred Stock, Series D-4 Preferred Stock and Series D-5 Preferred Stock dated as of June 1, 2004.
3.4.4(54)		Amendment to the Certificate of Designation of Preferences and Rights of the Series D-1 Preferred Stock, Series D-2 Preferred Stock, Series D-3 Preferred Stock, Series D-4 Preferred Stock and Series D-5 Preferred Stock dated as of November 19, 2007
4.1(1)		Third Amended and Restated Rights Agreement dated April 14, 1999.
4.1(8)		Fourth Amended and Restated Rights Agreement dated January 12, 2000.
4.2(1)		Second Amended and Restated Voting Agreement dated April 14, 1999.
4.2(5)		Bylaws of the Company are incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-1.

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4.2.1(10)		Securities Purchase Agreement dated as of August 9, 2001 between Salon Media Group, Inc. and the Purchasers listed on Exhibit A attached thereto.
4.2.2(10)		Securities Rights Agreement dated as of August 9, 2001 between Salon Media Group, Inc. and the Purchasers listed on Exhibit A attached thereto.
4.2.3(10)		Form of Common Stock Purchase Warrant dated August 9, 2001 issued by Salon Media Group, Inc.
4.2.4(11)		Securities Purchase Agreement dated as of September 13, 2001 between Salon Media Group, Inc. and the Purchasers listed on Exhibit A attached thereto.
4.2.5(11)		Securities Rights Agreement dated as of September 13, 2001 between Salon Media Group, Inc. and the Purchasers listed on Exhibit A attached thereto.
4.2.6(11)		Form of Common Stock Purchase Warrant dated September 13, 2001 issued by Salon Media Group, Inc.
4.2.7(12)		Securities Purchase Agreement dated as of February 14, 2002 between Salon Media Group, Inc. and Adobe Systems Incorporated.
4.2.8(12)		Securities Rights Agreement dated as of February 14, 2002 between Salon Media Group, Inc. and Adobe Systems Incorporated.
4.2.9(12)		Form of Common Stock Purchase Warrant dated February 14, 2002 issued by Salon Media Group, Inc.
4.2.10(13)		Note and Warrant Purchase Agreement dated as of July 24, 2002.
4.2.11(13)		Form of Convertible Promissory Note, dated July 24, 2002 issued by Salon Media Group, Inc.
4.2.12(13)		Form of Common Stock Purchase Warrant, dated July 24, 2002 issued by Salon Media Group, Inc.
4.2.13(14)		Note dated as of October 3, 2002.
4.2.14(15)		Note and Warrant Purchase Agreement dated as of December 18, 2002.
4.2.15(15)		Form of Convertible Promissory Note, dated December 18, 2002 issued by Salon Media Group, Inc.
4.2.16(15)		Form of Common Stock Purchase Warrant, dated December 18, 2002 issued by Salon Media Group, Inc.
4.2.17(16)		Note and Warrant Purchase Agreement dated as of January 26, 2003.
4.2.18(16)		Form of Convertible Promissory Note, dated January 26, 2003 issued by Salon Media Group, Inc.
4.2.19(16)		Form of Common Stock Purchase Warrant, dated January 26, 2003 issued by Salon Media Group, Inc.
4.2.20(17)		Note and Warrant Purchase Agreement dated as of February 11, 2003.
4.2.21(17)		Form of Convertible Promissory Note, dated February 11, 2003 issued by Salon Media Group, Inc.
4.2.22(17)		Form of Common Stock Purchase Warrant, dated February 11, 2003 issued by Salon Media Group, Inc.
4.2.23(18)		Form of Note and Warrant Purchase Agreement used during March 2003.
4.2.24(18)		Form of Convertible Promissory Note used during March 2003 by Salon Media Group, Inc.

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4.2.25(18)		Form of Common Stock Purchase Warrant used during March 2003 by Salon Media Group, Inc.
4.2.26(19)		Note and Warrant Purchase Agreement dated April 10, 2003.
4.2.27(19)		Convertible Promissory Note dated April 10, 2003 by Salon Media Group, Inc.
4.2.28(19)		Common Stock Purchase Warrant dated April 10, 2003 by Salon Media Group, Inc.
4.2.29(20)		Note and Warrant Purchase Agreement dated April 29, 2003.
4.2.30(20)		Convertible Promissory Note dated April 29, 2003 by Salon Media Group, Inc.
4.2.31(20)		Common Stock Purchase Warrant dated April 29, 2003 by Salon Media Group, Inc.
4.2.32(21)		Note and Warrant Purchase Agreement dated May 28, 2003.
4.2.33(21)		Convertible Promissory Note dated May 28, 2003 by Salon Media Group, Inc.
4.2.34(21)		Common Stock Purchase Warrant dated May 28, 2003 by Salon Media Group, Inc.
4.2.35(22)		Note and Warrant Purchase Agreement dated June 12, 2003.
4.2.36(22)		Convertible Promissory Note dated June 12, 2003 by Salon Media Group, Inc.
4.2.37(22)		Common Stock Purchase Warrant dated June 12, 2003 by Salon Media Group, Inc.
4.2.38(23)		Note and Warrant Purchase Agreement dated June 26, 2003.
4.2.39(23)		Convertible Promissory Note dated June 26, 2003 by Salon Media Group, Inc.
4.2.40(23)		Common Stock Purchase Warrant dated June 26, 2003 by Salon Media Group, Inc.
4.2.41(25)		Note and Warrant Purchase Agreement dated July 10, 2003.
4.2.42(25)		Convertible Promissory Note dated July 10, 2003 by Salon Media Group, Inc.
4.2.43(25)		Common Stock Purchase Warrant dated July 10, 2003 by Salon Media Group, Inc.
4.2.44(26)		Note and Warrant Purchase Agreement dated July 30, 2003.
4.2.45(26)		Convertible Promissory Note dated July 30, 2003 by Salon Media Group, Inc.
4.2.46(26)		Common Stock Purchase Warrant dated July 30, 2003 by Salon Media Group, Inc.
4.2.47(27)		Note and Warrant Purchase Agreement dated September 12, 2003.
4.2.48(27)		Convertible Promissory Note dated September 12, 2003 by Salon Media Group, Inc.
4.2.49(27)		Common Stock Purchase Warrant dated September 12, 2003 by Salon Media Group, Inc.
4.2.50(28)		Note and Warrant Purchase Agreement dated September 29, 2003.
4.2.51(28)		Convertible Promissory Note dated September 29, 2003 by Salon Media Group, Inc.
4.2.52(28)		Common Stock Purchase Warrant dated September 29, 2003 by Salon Media Group, Inc.
4.2.53(28)		Note and Warrant Purchase Agreement dated October 6, 2003.
4.2.54(28)		Convertible Promissory Note dated October 6, 2003 by Salon Media Group, Inc.
4.2.55(28)		Common Stock Purchase Warrant dated October 6, 2003 by Salon Media Group, Inc.
4.2.56(29)		Note and Warrant Purchase Agreement dated October 10, 2003.
4.2.57(29)		Convertible Promissory Note dated October 10, 2003 by Salon Media Group, Inc.
4.2.58(29)		Common Stock Purchase Warrant dated October 10, 2003 by Salon Media Group, Inc.
4.2.59(30)		Note and Warrant Purchase Agreement dated October 30, 2003.
4.2.60(30)		Convertible Promissory Note dated October 30, 2003 by Salon Media Group, Inc. with Ironstone Group, Inc.

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4.2.61(30)		Common Stock Purchase Warrant dated October 30, 2003 by Salon Media Group, Inc. with Ironstone Group, Inc.
4.2.62(30)		Convertible Promissory Note dated October 30, 2003 by Salon Media Group, Inc. with John Warnock.
4.2.63(30)		Common Stock Purchase Warrant dated October 30, 2003 by Salon Media Group, Inc. with John Warnock.
4.2.64(30)		Note and Warrant Purchase Agreement dated November 12, 2003.
4.2.65(30)		Convertible Promissory Note dated November 12, 2003 by Salon Media Group, Inc.
4.2.66(30)		Common Stock Purchase Warrant dated November 12, 2003 by Salon Media Group, Inc.
4.2.67(31)		Note and Warrant Purchase Agreement dated November 24, 2003.
4.2.68(31)		Convertible Promissory Note dated November 24, 2003 by Salon Media Group, Inc. and John Warnock.
4.2.69(31)		Common Stock Purchase Warrant dated November 24, 2003 by Salon Media Group, Inc. for John Warnock.
4.2.70(31)		Convertible Promissory Note dated November 24, 2003 by Salon Media Group, Inc. and HAMCO Capital Corporation.
4.2.71(31)		Common Stock Purchase Warrant dated November 24, 2003 by Salon Media Group, Inc. for HAMCO Capital Corporation.
4.2.72(32)		Note and Warrant Purchase Agreement dated December 10, 2003.
4.2.73(32)		Convertible Promissory Note dated December 10, 2003 by Salon Media Group, Inc. and Wenner Media LLC.
4.2.74(32)		Common Stock Purchase Warrant dated December 10, 2003 by Salon Media Group, Inc. for Wenner Media LLC.
4.2.75(32)		Note and Warrant Purchase Agreement dated December 11, 2003.
4.2.76(32)		Convertible Promissory Note dated December 10, 2003 by Salon Media Group, Inc. and John Warnock.
4.2.77(32)		Common Stock Purchase Warrant dated December 10, 2003 by Salon Media Group, Inc. for John Warnock.
4.2.78(36)		Securities Purchase Agreement dated as of December 30, 2003 between Salon Media Group, Inc. and the Purchasers listed on the Schedule of Purchasers attached thereto.
4.2.79(36)		Form of Common Stock Purchase Warrant dated December 30, 2003 issued by Salon Media Group, Inc.
4.2.80(37)		Securities Purchase Agreement dated as of February 10, 2004 between Salon Media Group, Inc. and the Purchasers listed on the Schedule of Purchasers attached thereto.
4.2.81(37)		Form of Common Stock Purchase Warrant dated February 10, 2004 issued by Salon Media Group, Inc.
4.2.82(38)		Securities Purchase Agreement dated as of June 4, 2004 between Salon Media Group, Inc. and the Purchasers listed on the Schedule of Purchasers attached thereto.
4.2.83(38)		Form of Common Stock Purchase Warrant dated June 4, 2004 issued by Salon Media Group, Inc.
4.2.84(39)		Amendment No. 1 to Securities Purchase Agreement dated as of September 30, 2004.
4.2.85(39)		Common Stock Purchase Warrant dated September 30, 2004 issued by Salon Media Group, Inc.
4.2.86(43)		Amendment No. 2 to Securities Purchase Agreement dated as of February 2, 2005.

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4.2.87(43)		Form of Common Stock Purchase Warrant dated February 2, 2005 issued by Salon Media Group, Inc.
4.2.88(45)		Amendment No. 3 to Securities Purchase Agreement dated November 9, 2005.
4.2.89(46)		Amendment No. 4 to Securities Purchase Agreement dated December 21, 2005.
4.2.90(46)		Common Stock Purchase Warrant dated December 21, 2005 issued by Salon Media Group, Inc.
4.2.91(48)		Amendment No. 5 to Securities Purchase Agreement dated July 27, 2006.
4.2.92(48)		Common Stock Purchase Warrant dated July 27, 2006 issued by Salon Media Group, Inc. to The Hambrecht 1980 Revocable Trust.
4.2.93(48)		Common Stock Purchase Warrant dated July 27, 2006 issued by Salon Media Group, Inc. to John E. and Marva M. Warnock.
4.2.94(48)		Common Stock Purchase Warrant dated July 27, 2006 issued by Salon Media Group, Inc. to John E. and Marva M. Warnock.
4.2.95(49)		Amendment No. 6 to Securities Purchase Agreement dated September 21, 2006..
4.2.96(49)		Common Stock Purchase Warrant dated September 21, 2006 issued by Salon Media Group, Inc. to The Hambrecht 1980 Revocable Trust.
4.2.97(49)		Common Stock Purchase Warrant dated September 21, 2006 issued by Salon Media Group, Inc. to John E. and Marva M. Warnock.
4.2.98(50)		Amendment No. 7 to Securities Purchase Agreement dated December 18, 2006..
4.2.99(50)		Common Stock Purchase Warrant dated December 18, 2006 issued by Salon Media Group, Inc. to John E. and Marva M. Warnock.
4.2.100(50)		Common Stock Purchase Warrant dated December 18, 2006 issued by Salon Media Group, Inc. to John E. and Marva M. Warnock.
4.2.101(52)		Amendment No.8 to Securities Purchase Agreement dated November 19, 2007
4.2.102(52)		Common Stock Purchase warrant dated November 19, 2007
5.0 (41)		Legal opinion filed by DLA Piper Rudnick Gray Cary US LLP dated January 14, 2005.
10.0(4)		Commercial Office Lease between Pacific Resources PCX Development, Inc. and Salon dated July 9, 1999.
10.0(6)		Rainbow Media Holdings, Inc. Stock Purchase Agreement dated December 3, 1999.
10.1(1)		1995 Stock Option Plan.
10.1(6)		Bravo Website Agreement dated January 12, 2000.
10.2(2)		1999 Employee Stock Purchase Plan.
10.2(6)		Bravo Production Agreement dated January 12, 2000.
10.3(1)		Form of Indemnity Agreement.
10.4(1)		Commercial Office Lease between T/W Associates and Salon dated June 25, 1997.
10.6(1)		Employment Agreement between Michael O’Donnell and Salon dated November 7, 1996.
10.6(9)		Employment Agreement between Robert O’Callahan and Salon dated June 26, 2000.
10.9(1)		Warrant to Purchase Stock issued to Imperial Bancorp dated December 17, 1998.
10.10(1)		Warrant to Purchase Stock issued to Imperial Bank dated April 13, 1998.
10.11(1)		Warrant to Purchase Stock issued to Imperial Bankcorp dated April 14, 1997.
10.12(1)		Warrant to Purchase Stock issued to America Online Inc. dated July 31, 1998.

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10.13(1)		Warrant to Purchase Stock issued to Adobe Ventures II L.P. dated September 18, 1998.
10.14(1)		Warrant to Purchase Stock issued to ASCII Ventures dated September 18, 1998.
10.15(1)		Warrant to Purchase Stock issued to H&Q Salon Investors, L.P. dated September 18, 1998.
10.16(2)		Warrant to Purchase Stock issued to Daiwa Securities America Inc. dated April 14, 1999.
10.17(2)		Warrant to Purchase Stock issued to ACT III Communications dated April 14, 1999.
10.18(9)		Amendment No. 2 To Anchor Tenant Agreement between America Online, Inc. and Salon.
10.19(1)		Series A Preferred Stock Purchase Agreement dated December 22, 1995.
10.20(1)		First Amendment to the Series A Preferred Stock Purchase Agreement dated August 2, 1996.
10.21(1)		Second Amendment to the Series A Preferred Stock Purchase Agreement dated February 6, 1997.
10.22(1)		Series B Preferred Stock Purchase Agreement dated November 28, 1997.
10.23(1)		Series C Preferred Stock Purchase Agreement dated September 18, 1998.
10.24(1)		Series C Preferred Stock Purchase Agreement dated April 14, 1999.
10.25(2)		Warrant to Purchase Stock issued to Chatsworth Securities LLC dated April 14, 1999.
10.26(24)		Amended Office Lease between Salon’s San Francisco landlord and Salon dated June 24, 2003.
10.27(33)		Amended Office Lease between Salon’s San Francisco landlord and Salon dated December 31, 2003.
10.28(42)		Office Lease between BRE/Rincon II Leasehold L.L.C. and Salon Media Group, Inc. dated January 13, 2005.
10.29 (44)		Salon Media Group, Inc. 2004 Stock Plan.
10.30 (44)		Form of the Salon Media Group, Inc. Notice of Grant of Stock Option and Stock Option Agreement.
10.31(44)		Salon Media Group, Inc. Non-Plan Stock Option Agreement with David Talbot dated February 7, 2005
10.32(47)		Employment Agreement with Christopher Neimeth dated June 5, 2006
10.33(47)		Salon Media Group, Inc. Non-Plan Stock Option Agreement with Christopher Neimeth dated June 6, 2006
10.34(51)		Amendment No.1 to Neimeth Employment Agreement dated September 13, 2007
10.35(53)		Employment Agreement with Norman Blashka dated December 31, 2007
10.36(53)		Separation Agreement with Conrad Lowry dated January 9, 2008
10.37(54)		Note Purchase Agreement dated April 4, 2008
10.38(54)		Form of Convertible Promissory Note dated April 4, 2008
10.39(55) 10.40 (56) 10.41 (57)		Employment Agreement with Joan Walsh dated May 13, 2008 Separation Agreement with Christopher Neimeth dated November 12, 2008 Employment Agreement with Richard Gingras dated May 4, 2009

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16.1 (34)		Letter from PricewaterhouseCoopers LLP to the Securities and Exchange Commission.
16.2 (35)		Letter from PricewaterhouseCoopers LLP to the Securities and Exchange Commission.
21.1(8)		Subsidiaries of Salon.
23.2 (41)		Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm dated January 13, 2005.
23.3 (41)		Consent of Burr, Pilger & Mayer LLP, Independent Registered Public Accounting Firm dated January 12, 2005.
23.1		Consent of Burr, Pilger & Mayer LLP, Independent Registered Public Accounting Firm.
24.1(1)		Power of Attorney (included on page II-5).
31.1		Certification of Richard Gingras, Chief Executive Officer of the Registrant pursuant to Section 302, as adopted pursuant to the Sarbanes-Oxley Act of 2002.
31.2		Certification of Norman Blashka, Chief Financial Officer and Secretary of the Registrant pursuant to Section 302, as adopted pursuant to the Sarbanes-Oxley Act of 2002.
32.1		Certification of Richard Gingras, Chief Executive Officer of the Registrant pursuant to Section 906, as adopted pursuant to the Sarbanes-Oxley Act of 2002.
32.2		Certification of Norman Blashka, Chief Financial Officer and Secretary of the Registrant pursuant to Section 906, as adopted pursuant to the Sarbanes-Oxley Act of 2002.

Footnote		Footnote Description
1		Incorporated by reference to the exhibit filed with Salon’s Registration Statement report on Form S-1 filed on April 19, 1999.
2		Incorporated by reference to the exhibit filed with Salon’s Registration Statement report on Form S-1/A filed on May 27, 1999.
3		Incorporated by reference to the exhibit filed with Salon’s Registration Statement report on Form S-1/A filed on June 18, 1999.
4		Incorporated by reference to the exhibit filed with Salon’s Quarterly Report on Form 10-Q filed on August 16, 1999.
5		Incorporated by reference to the exhibit filed with Salon’s Registration Statement report on Form S-8 filed on September 8, 1999.
6		Incorporated by reference to the exhibit filed with Salon’s Quarterly Report on Form 10-Q filed on February 14, 2000.
7		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on May 22, 2000.
8		Incorporated by reference to the exhibits filed with Salon’s Annual Report on Form 10-K405 filed on June 30, 2000.
9		Incorporated by reference to the exhibit filed with Salon’s Quarterly Report on Form 10-Q filed on November 13, 2000.
10		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on August 20, 2001.
11		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on September 25, 2001.

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12		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on March 13, 2002.
13		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on July 29, 2002.
14		Incorporated by reference to the exhibit filed with Salon’s Current Report on Form 8-K filed on October 15, 2002.
15		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on December 30, 2002.
16		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on February 11, 2003.
17		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on February 24, 2003.
18		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on March 28, 2003.
19		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on April 22, 2003.
20		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on May 12, 2003.
21		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on June 10, 2003.
22		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on June 27, 2003.
23		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on July 11, 2003.
24		Incorporated by reference to the exhibit filed with Salon’s Quarterly Report on Form 10-Q filed on August 11, 2003.
25		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on July 25, 2003.
26		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on August 7, 2003.
27		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on September 29, 2003.
28		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on October 14, 2003.
29		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on October 27, 2003.
30		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on November 14, 2003.
31		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on December 9, 2003.
32		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on December 24, 2003.

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33		Incorporated by reference to the exhibit filed with Salon’s Quarterly Report on Form 10-Q filed on February 6, 2004.
34		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on November 17, 2003.
35		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on November 26, 2003.
36		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on January 14, 2004.
37		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on February 25, 2004.
38		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on June 16, 2004.
39		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on October 6, 2004.
40		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on December 13, 2004.
41		Incorporated by reference to the exhibits filed with Salon’s Registration Statement on Form S-8 filed on January 14, 2005.
42		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on January 19, 2005.
43		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on February 4, 2005.
44		Incorporated by reference to the exhibits filed with Salon’s Annual Report on Form 10-K filed on June 29, 2005.
45		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on November 10, 2005.
46		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on December 22, 2005.
47		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on June 9, 2006.
48		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on July 31, 2006.
49		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on September 26, 2006.
50		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on December 20, 2006.
51		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on September 14, 2007
52		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on November 20, 2007
53		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on January 9, 2008
54		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on April 9, 2008
55		Incorporated by reference to the exhibits filed with Salon’s Annual Report on Form 10-K filed on June 27, 2008
56		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on November 20, 2008
57		Incorporated by reference to the exhibits filed with Salon’s Current Report on Form 8-K filed on May 6, 2009

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SIGNATURES

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

SALON MEDIA GROUP, INC.

By: /s/ Richard Gingras

Richard Gingras

Chief Executive Officer

POWER OF ATTORNEY

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

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

Signature	Title	Date

/s/ Richard Gingras	Chief Executive Officer	December 2, 2009
Richard Gingras	(Principal Executive Officer)

/s/ Norman Blashka	Executive Vice President and	December 2, 2009
Norman Blashka	Chief Financial Officer
	(Principal Accounting Officer)

/s/ Deepak Desai	Director	December 2, 2009
Deepak Desai

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/s/ Robert Ellis	Director	December 2, 2009
Robert Ellis

/s/ Elizabeth Hambrecht	Director	December 2, 2009
Elizabeth Hambrecht

/s/ George Hirsch	Director	December 2, 2009
George Hirsch

/s/ James H. Rosenfield	Director	December 2, 2009
James H. Rosenfield

/s/ David Talbot	Director	December 2, 2009
David Talbot

/s/ John Warnock	Chairman of the Board, Director	December 2, 2009
John Warnock

101

Attached files

SALON MEDIA GROUP INC Reports

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