SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

________________

FORM 10-Q

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

For the quarterly period ended ~~December~~June 3130, ~~2018~~2019

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

For the transition period from to

Commission file number 0-26395

SALON MEDIA GROUP, INC.

(Exact name of Registrant as specified in its charter)

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

870 Market Street

San Francisco, CA 94102

(Address of principal executive offices)

(415) 870-7566

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 Par Value

(Title of Class)

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

Indicate by check mark whether the registrant has submitted electronically if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ~~[ ]~~ ☐ Accelerated filer ~~[ ]~~☐ Non-accelerated filer ~~[ ]~~☐ Smaller reporting company [X] Emerging growth company ~~[ ]~~☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ~~[ ]~~ ☐

Indicate by check mark whether the Registrant is a shell company as defined by Rule 12b-2 of the act. Yes [ ] No [X]

The number of outstanding shares of the Registrant's Common Stock, par value $0.001 per share, on ~~June~~August 1, 2019 was ~~151~~315,~~056~~939,477 shares.

FORM 10-Q

SALON MEDIA GROUP, INC.

INDEX

PART I	FINANCIAL INFORMATION	Page Number
ITEM 1:	Financial Statements
	Condensed Balance Sheets as of December 31, 2018 (unaudited) and March 31, 2018	3
	Condensed Balance Sheets as of June 30, 2019 (unaudited) and March 31, 2019	3
	Condensed Statements of Operations for the three months and six months ended December 31, 2018 and 2017 (unaudited)	4
	Condensed Statements of Operations for the three months ended June 30, 2019 and 2018 (unaudited)	4
	Condensed Statements of Stockholders’ Deficit for the three and six months ended December 31, 2018 and 2017 (unaudited)	5
	Condensed Statements of Stockholders’ Deficit for the three months ended June 30, 2019 and 2018 (unaudited)	5
	Condensed Statements of Cash Flows for the six months December 31, 2018 and 2017 (unaudited)	6
	Condensed Statements of Cash Flows for the three months June 30, 2019 and 2018 (unaudited)	6
	Notes to Condensed Financial Statements (unaudited)	7
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2119
ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk	2926
ITEM 4:	Controls and Procedures	2926
PART II	OTHER INFORMATION
ITEM 1:	Legal Proceedings	3027
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3128
ITEM 3.	Defaults upon Senior Securities	3128
ITEM 4.	Mine Safety and Disclosures	3128
ITEM 5.	Other Information	3128
ITEM 6:	Exhibits	3329
	Signatures	3430

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SALON MEDIA GROUP, INC.
CONDENSED BALANCE SHEETS
(in thousands, except share and par value amounts)

	December 31,			March 31,
	June 30,			March 31,
	2018			2018 (1)
	2019			2019 (1)
	(unaudited)
Assets
Current assets:
Cash	$	~~196~~60		$	52269
Accounts receivable, net of allowance of $15		678			433
Prepaid expenses and other current assets		54			52
Prepaid expenses and other current assets		63			65
Current assets held for sale (Note 4)		457			439
Total current assets		~~937~~571			~~550~~760
Property, software development and equipment, net		246			359
Non-current assets held for sale (Note 4)		174			210
Other assets, principally deposits		38			38
Total assets	$	745		$	970
Total assets	$	1,221		$	947
Liabilities and Stockholders’ Deficit
Current liabilities:
Short-term borrowings and accrued interest	$	1,~~493~~532		$	1,~~439~~512
Convertible promissory notes, net		700			~~200~~700
Convertible promissory notes – related party, net		~~659~~764			~~535~~711
Accounts payable		1,443			1,198
Accrued liabilities		927			904
Accrued liabilities		811			841
Current liabilities held for sale (Note 4)		1,373			1,431
Deferred Revenue		4			-
Total current liabilities		5,296			5,258
Total current liabilities		5,110			4,213
Non-current liabilities held for sale (Note 4)		-			-
Deferred rent		-			-
Total liabilities		5,296			5,258
Total liabilities		5,110			4,213
Commitments and contingencies (See Note 9)
Commitments and contingencies (See Note 8)
Stockholders’ deficit:
Series A convertible preferred stock, $0.001 par value, 5,000,000 shares authorized, 1,648,830 shares issued and outstanding as of December 31, 2018 and March 31, 2018 (liquidation preference of $4,089 as of December 31, 2018 and March 31, 2018, respectively)		2			2
Series A convertible preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 and 1,648,830 shares issued and outstanding as of June 30, 2019 and March 31, 2019 (liquidation value of $0 and $4,089 as of June 30, 2019 and March 31, 2019)		-			2
Common stock, $0.001 par value, 900,000,000 shares authorized, 151,056,477 shares issued and outstanding as of December 31, 2018 and March 31, 2018		151			151
Common stock, $0.001 par value, 900,000,000 shares authorized, 315,939,477 and 151,056,477 shares issued And outstanding as of June 30, 2019 and March 31, 2019		316			151
Additional paid-in capital		~~135~~136,~~972~~288			~~134~~136,~~667~~312
Accumulated deficit		(~~140~~141,~~014~~155	)		(~~138~~140,~~086~~753	)
Total stockholders' deficit		(34,~~889~~551	)		(34,~~266~~288	)
Total liabilities and stockholders' deficit	$	~~1,221~~745		$	~~947~~970

(1)

Derived from the Company’s audited financial statements.

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

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

	Three Months Ended						Nine Months Ended
	Three Months Ended June 30,
	December 31,						December 31,
	2019			2018
	2018			2017			2018			2017
Revenues	$	-		$	-
Revenues	$	962		$	1,247		$	2,280		$	3,868
Operating expenses:
Operating expenses:
General and administrative		456			746
Production and content		538			808			1,745			2,844
Total general and administrative		456			746
Sales and marketing		15			111			15			416
Loss from operations		(456	)		(746	)
Technology		99			192			399			590
Interest expense		(45	)		(38	)
General and administrative		634			644			1,980			1,589
Warrant discount		(53	)		-
Total operating expenses		1,286			1,755			4,139			5,439
Non-cash interest expense – beneficial conversion feature		-			-
Loss from operations		(324	)		(508	)		(1,859	)		(1,571	)
Net loss from continuing operations	$	(554	)	$	(784	)
Change in fair value of share based liability		-			(79	)		-			(79	)
Income (Loss) from discontinued operations (Note 4)		152			(210	)
Interest expense		(62	)		(15	)		(142	)		(43	)
Net loss	$	(402	)	$	(994	)
Non-cash interest expense – beneficial conversion feature		-			(94	)		-			(369	)
Basic and diluted net loss per share from continuing operations	$	(0.00	)	$	(0.01	)
Gain on settlement of accounts payable		73			-			73			-
Basic and diluted net loss per share from discontinued operations	$	(0.00	)	$	(0.00	)
Net loss	$	(313	)	$	(696	)	$	(1,928	)	$	(2,062	)
Weighted average shares used in computing basic and diluted net loss per share from continuing operations		154,680,279			151,056,477
Basic and diluted net loss per share	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted average shares used in computing basic and diluted net loss per share from discontinued operations		154,680,279			151,056,477
Weighted average shares used in computing basic and diluted net loss per share		151,056			151,056			151,056			150,476

~~The~~See accompanying notes ~~are~~to ancondensed ~~integral part of these~~ financial statements.

SALON MEDIA GROUP, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(in thousands, except per share data)
(unaudited)

	Three Months Ended December 31, 2018
	Preferred						Common				Additional						Total
	Preferred Stock						Common Stock				Additional Paid-In			Accumulated			Total Stockholders’
	Stock						Stock				Paid-In			Accumulated			Stockholders’
	Shares			Amount			Shares		Amount		Capital			(Deficit)			Deficit
Balance, September 30, 2018		1,648,830		$	2			151,056,477	$	151	$	135,453		$	(139,701	)	$	(4,095	)
Balance, March 31, 2019		1,648,830		$	2			151,056,477	$	151	$	136,312		$	(140,753	)	$	(4,288	)
Stock-based compensation		-			-			-		-		400			-			400
Shares converted from preferred stock		(1,648,830	)		(2	)		164,883,000		165		(163	)					-
Issuance of warrants in connection with convertible notes		-			-			-		-		119			-			119
Stock-based compensation		-			-			-		-		139			-			139
Net loss		-			-			-		-		-			(~~313~~402	)		(~~313~~402	)
Balance, December 31, 2018		1,648,830		$	2			151,056,477	$	151	$	135,972		$	(140,014	)	$	(3,889	)
Balance, June 30, 2019		-		$	-			315,939,477	$	316	$	136,288		$	(141,155	)	$	(4,551	)

	Three Months Ended December 31, 2017
	Preferred				Common				Additional					Total
	Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Stock				Stock				Paid-In		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		(Deficit)			Deficit
Balance, September 30, 2017		1,648,830	$	2		151,056,477	$	151	$	133,836	$	(136,347	)	$	(2,358	)
Balance, March 31, 2018		1,648,830	$	2		151,056,477	$	151	$	134,667	$	(138,086	)	$	(3,266	)
Debt discount from convertible notes		-		-		-		-		269		-			269
Stock-based compensation		-		-		-		-		390		-			390
Stock-based compensation		-		-		-		-		446		-			446
Net loss		-		-		-		-		-		(994	)		(994	)
Net loss		-		-		-		-		-		(696	)		(696	)
Balance, June 30, 2018		1,648,830	$	2		151,056,477	$	151	$	135,057	$	(139,080	)	$	(3,870	)
Balance, December 31, 2017		1,648,830	$	2		151,056,477	$	151	$	134,551	$	(137,043	)	$	(2,339	)

	Nine Months Ended December 31, 2018
	Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		(Deficit)			Deficit
Balance, March 31, 2018		1,648,830	$	2		151,056,477	$	151	$	134,667	$	(138,086	)	$	(3,266	)
Stock-based compensation		-		-		-		-		1,186		-			1,186
Issuance of warrants in connection with convertible notes		-		-		-		-		119		-			119
Net loss		-		-		-		-		-		(1,928	)		(1,928	)
Balance, December 31, 2018		1,648,830	$	2		151,056,477	$	151	$	135,972	$	(140,014	)	$	(3,889	)

	Nine Months Ended December 31, 2017
	Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		(Deficit)			Deficit
Balance, March 31, 2017		-	$	-		150,000,000	$	150	$	125,053	$	(134,981	)	$	(9,778	)
Debt discount from convertible notes		-		-		-		-		544		-			544
Shares converted from convertible notes		1,648,830		2		-		-		7,135		-			7,137
Shares from options exercised		-		-		1,056,477		1		10		-			11
Stock-based compensation		-		-		-		-		799		-			799
Reclassification of options to liabilities		-		-		-		-		1,010		-			1,010
Net loss		-		-		-		-		-		(2,062	)		(2,062	)
Balance, December 31, 2017		1,648,830	$	2		151,056,477	$	151	$	134,551	$	(137,043	)	$	(2,339	)

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

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

	Nine Months Ended
	Three Months Ended June 30,
	December 31,
	2019			2018
	2018			2017
Cash flows from operating activities:
Net loss	$	(1,928	)	$	(2,062	)
Net loss from continuing operations	$	(554	)	$	(784	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from retirement of assets, net		-			5
Stock-based compensation		139			390
Bad debt expense and change in allowance for doubtful accounts		1			6
Amortization of debt discount		53			-
Depreciation		113			52
Changes in assets and liabilities:
Gain on settlement of accounts payable		73			-
Prepaid expenses and other current assets		(2	)		(26	)
Stock-based compensation		1,186			799
Accrued liabilities		43			110
Amortization of debt discount		14			94
Net cash (used in) operating activities – continuing operations		(321	)		(310	)
Non-cash interest expense – beneficial conversion feature		-			275
Net cash provided by (used in) operating activities – discontinued operations		112			131
Changes in operating assets and liabilities:
Net cash (used in) operating activities		(209	)		(179	)
Accounts receivable		(246	)		(115	)
Prepaid expenses and other current assets		2			84
Other assets		-			(5	)
Accounts payable		172			(31	)
Accrued liabilities		28			226
Deferred rent		-			(58	)
Deferred revenue		4			-
Net cash used in operating activities		(581	)		(730	)
Cash flows from investing activities:
Purchase of equipment and capitalized website development costs		-			~~(150~~-	)
Net cash used in investing activities		-			(150	)
Net cash (used in) investing activities – continuing operations		-			-
Net cash (used in) investing activities – discontinued operations		-			-
Net cash (used in) investing activities		-			-
Cash flows from financing activities:
Proceeds from convertible promissory notes		500			785
Proceeds from convertible promissory notes – related party		-			110
Proceeds from convertible promissory notes – related party		225			-
Proceeds from unsecured advances		-			50
Proceeds from related party advances		-			40
Net cash provided by financing activities		-			160
Repayments of related party advances		-			(40	)
Net increase (decrease) in cash		(209	)		(19	)
Net proceeds from issuance of common stock		-			11
Cash, beginning of year		269			67
Net cash provided by financing activities		725			796
Cash, end of year	$	60		$	48
Net increase (decrease) in cash		144			(84	)
Cash, beginning of period		52			183
Cash, end of period	$	196		$	99
Amount paid for interest	$	-		$	-
Amount paid for taxes	$	-		$	-
Amount paid for income taxes	$	-		$	-
Supplemental schedule of non-cash financing activity:
Issuance of warrants in connection with convertible notes	$	119		$	-
Conversion of accrued interest to convertible notes	$	4		$	-
Reclassification of stock options liability back to stockholders’ deficit	$	-		$	1,010
Conversion of convertible promissory note to common stock	$	-		$	275

~~The~~See accompanying notes ~~are~~to ~~an integral part of these~~ condensed financial statements.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

Note 1. The Company ~~and Significant Accounting Policies~~

The Company

Salon Media Group, Inc. (“Salon,” the “Company” or “We”) is an Internet media company that produces a content Website with various subject-specific sections. 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 interim financial statements are unaudited and have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly Salon's financial position, results of operations and cash flows for the periods presented. These financial statements and related notes should be read in conjunction with the audited financial statements for the fiscal year ended March 31, ~~2018~~2019, which are included in Salon’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2018~~2019 filed with the Securities and Exchange Commission (“SEC”) on ~~June~~July 10, 2019. Pursuant to the rules of the SEC, these financial statements do not include all disclosures required by generally accepted accounting principles (“GAAP”). The results for the ~~nine~~three months ended ~~December~~June 3130, ~~2018~~2019 are not necessarily indicative of the expected results for any other interim period or for the fiscal year ending March 31, ~~2019~~2020.

Going Concern

These 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 ~~had~~has an accumulated deficit as of ~~December~~June 3130, ~~2018~~2019 of $~~140~~141,~~014~~155. In addition, Salon expects to incur a net loss from operations for ~~the~~its ~~fiscal~~ year ending March 31, ~~2019~~2020. ~~The~~During ~~Company~~the last two years, Salon has ~~operated~~relied inon cash from related-party advances and rounds of financing to meet its cash requirements. In March 2019, the ~~past~~Company ~~principally~~entered into an asset purchase agreement with ~~the~~Salon.com, ~~assistance~~LLC pursuant to which it agreed to sell substantially all of ~~interest-free~~its ~~advances~~assets ~~from~~for ~~related~~an ~~parties~~aggregate purchase price of $5 million. Following consummation of this agreement, ~~and~~it ~~more~~is ~~recently~~intended bythat ~~financing~~the ~~rounds~~Company inwill ~~fiscal~~cease ~~years~~to ~~2017~~be ~~and~~an ~~2018~~operating company. ~~The~~As ~~financial~~the ~~statements~~Company dowill ~~not~~cease ~~include~~to have any ~~adjustments~~revenue ~~relating~~generating toactivities at that time, it is unlikely that the ~~recoverability~~Company ~~and~~will ~~classification~~raise ofadditional ~~asset~~funds ~~amounts~~on orcommercially reasonable terms, if at all. Further, there is no guarantee that the ~~amounts~~proceeds ~~and~~from ~~classification~~the asset sale will be sufficient to satisfy all of ~~liabilities~~the Company’s creditors. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments that might be necessary ~~should~~if wethe beCompany is unable to continue as a going concern.

~~Our~~Use ~~operating forecast for the remainder~~ of the fiscal year ending March 31, 2019 anticipates smaller operating losses than fiscal year 2018. We estimate we will require approximately $0.5 million in additional funding to meet our operating needs for the balance of our fiscal year. Operating costs for the nine months ended December, 2018 decreased by 25% compared to the same period last year, reflecting additional steps we have taken to better match our operating expense with revenues. If planned revenues continue to be less than expected, or if planned expenses are more than expected, the cash shortfall may be higher, which will result in a commensurate increase in required financing.Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

~~Use~~Revenue ~~of Estimates~~Recognition

~~The~~We ~~preparation~~recognize ofrevenue ~~financial~~when ~~statements~~we intransfer ~~conformity~~control ~~with accounting principles generally accepted in the United States~~ of ~~America~~promised ~~requires~~goods ~~management~~or services to ~~make~~our ~~estimates~~customer ~~and~~in ~~assumptions~~an amount that ~~affect~~reflects the ~~reported~~consideration ~~amounts~~we ofexpect ~~assets~~to ~~and~~be ~~liabilities~~entitled ~~and~~to ~~disclosure~~in ofexchange ~~contingent~~for ~~assets~~those ~~and~~good ~~liabilities~~or ~~at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period~~services. ~~Actual results could differ from those estimates.~~

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate the transaction price to each performance obligation based on the estimated standalone selling price of the promised good or service.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on deposit with banks and have original maturities of three months or less.

Concentration of Credit Risk

Financial instruments that potentially subject Salon to concentrations of credit risk consist primarily 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.

~~Four~~Two customers accounted for approximately 1764%, ~~13%, 11%~~ and 1012% of revenues for the three months ended ~~December~~June 3130, ~~2018~~2019. Two customers accounted for approximately 3214% and 1112% of revenues for the three months ended ~~December~~June 3130, ~~2017~~2018. Two customers accounted for approximately 1166% and 10% of revenues for the nine months ended December 31, 2018. One customer accounted for approximately 25% of revenues for the nine months ended December 31, 2017. Five customers accounted for approximately 18%, 18%, 13%, ~~11% and 11%~~ of trade accounts receivable as of ~~December~~June 3130, ~~2018~~2019. ~~Three~~Two customers accounted for approximately 1672%, ~~12%~~ and 1014% of trade accounts receivable as of March 31, ~~2018~~2019.

Stock-Based Compensation

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. Salon recognizes compensation cost related to options granted on a straight-line basis over the applicable vesting period.

Common Stock Purchase Warrants

The Company accounts for common stock purchase warrants in accordance with FASB ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated as the grant date based on each warrant’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model value method for valuing the impact of the expense associated with these warrants.

Reclassifications

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

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

Accounting Standards Not Yet Adopted

In ~~July~~June ~~2017~~2018, the ~~Financial Accounting Standards Board (“~~FASB”) issued ~~a two-part~~ Accounting ~~Standards~~Standard Update No. 2018-07, Compensation—Stock Compensation (“ASU 2018-07”) ~~2017-11~~, to ~~“Earnings~~simplify ~~Per Share (Topic 260).” Part I addresses~~ the ~~complexity of~~ accounting for ~~certain~~share-based ~~financial~~payments ~~instruments~~to ~~with~~nonemployees ~~down~~by ~~round~~aligning ~~features. Down~~it ~~round~~with ~~features~~the ~~are~~accounting ~~features~~for ~~of certain equity~~share-~~linked~~based ~~instruments~~payments ~~(or~~for ~~embedded~~employees, ~~features)~~with ~~that~~certain ~~result~~exceptions. inUnder the ~~strike~~new ~~price~~guidance, ~~being reduced on~~ the ~~basis~~cost offor ~~the~~nonemployee ~~pricing~~awards ofmay ~~future~~be ~~equity~~lower ~~offerings. Part~~and IIless ~~does~~volatile ~~not~~than ~~require~~under ~~any~~current ~~transition~~GAAP ~~guidance~~ because ~~those~~the ~~amendments~~measurement dogenerally ~~not~~will ~~have~~occur anearlier ~~accounting effect. ASU 2017-11 is effective for public entities for fiscal years,~~ and ~~for~~will ~~interim~~be ~~periods~~fixed ~~within~~at ~~those~~the ~~fiscal~~grant ~~years, beginning after December 15, 2018~~date. ~~Early~~ ~~adoption~~This update is ~~permitted. We~~effective dofor ~~not expect~~ the ~~adoption~~fiscal ofyear ~~this~~ended ~~accounting~~March ~~standard to have a material impact on our financial statements~~31, ~~as our agreements with noteholders containing equity linked instruments do not include down round provisions~~2020.

In June 2016, the FASB issued ~~ASU~~Accounting Standard Update No. 2016-13, “ Financial Instruments – Credit Losses (~~Topic 326~~“ASU 2016-13”):, which ~~Measurement~~requires ofcompanies ~~Credit~~to ~~Losses~~consider onhistorical ~~Financial~~experiences, ~~Instruments.”~~current ~~This~~market ~~ASU~~conditions ~~modifies~~and ~~the~~reasonable ~~impairment~~and ~~model~~supportable toforecasts ~~utilize an expected loss methodology~~ in ~~place of~~ the ~~currently~~measurement ~~used~~of ~~incurred~~expected ~~loss~~credit ~~methodology,~~losses. ~~which~~This ~~will~~update ~~result~~is ineffective ~~the~~for ~~more~~fiscal ~~timely~~years ~~recognition~~beginning ofafter ~~losses.~~December 15, ~~ASU~~2019 ~~No.~~and ~~2016-13~~for ~~will~~interim beperiods ~~effective~~within ~~for~~those ~~the~~fiscal ~~Company~~years, asalthough ~~of January~~early 1,adoption ~~2020~~is permitted. ~~The~~We ~~Company~~are is currently ~~reviewing~~evaluating the impact ofit ~~this~~will ~~new~~have ~~guidance~~ on our ~~condensed~~ financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). The main objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ~~Topic~~Accounting ~~842~~Standards was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.Adopted

~~This~~On ~~ASU~~April is1, ~~effective~~2019, ~~for~~we ~~the~~adopted ~~Company~~Accounting onStandards ~~April~~Update 1No 2016-02, ~~2019. We~~Leases ~~expect~~(Topic to842) ~~adopt~~(ASU ~~the~~2016-02), ~~new~~as ~~standard~~amended, onwhich ~~its~~supersedes ~~effective~~the ~~date.~~lease Aaccounting ~~modified~~guidance ~~retrospective~~under ~~transition~~Topic ~~approach is required~~840, ~~applying~~and ~~the~~generally ~~new~~requires ~~standard~~lessees to ~~all~~recognize ~~leases~~operating ~~existing~~and atfinancing ~~the~~lease ~~date~~liabilities and corresponding right-of-use ~~initial~~(ROU) ~~application.~~assets Anon ~~entity~~the ~~may~~balance ~~choose~~sheet and to ~~use~~provide ~~either~~enhanced ~~(1)~~disclosures ~~its~~surrounding ~~effective~~the ~~date~~amount, ortiming ~~(2)~~and ~~the~~uncertainty ~~beginning~~ of ~~the~~cash ~~earliest~~flows ~~comparative~~arising ~~period~~from ~~presented~~leasing inarrangements. ~~the~~We ~~financial~~adopted ~~statements~~the asnew ~~its~~guidance ~~date~~using ofthe ~~initial~~modified ~~application.~~retrospective Wetransition ~~expect~~approach toby ~~adopt~~applying the new standard onto ~~April~~all 1,leases ~~2019~~existing ~~and~~at ~~use~~ the ~~effective~~ date ~~as our date~~ of initial application. ~~Consequently,~~and ~~financial~~not ~~information~~restating ~~will~~comparative periods. We did not berecord ~~updated~~a ~~and~~ROU ~~the~~asset ~~disclosures~~or ~~required~~liability ~~under~~on the ~~new~~balance ~~standard~~sheet ~~will~~as ~~not~~our beoperating ~~provided~~lease ~~for~~was ~~dates~~terminated ~~and~~as ~~periods~~of ~~before~~June ~~April 1~~30, 2019. In addition, we did not enter into any non-cancellable operating lease agreements.

~~The~~In ~~new~~July ~~standard~~2017, ~~provides~~the Financial Accounting Standards Board (“FASB”) issued a ~~number~~two-part Accounting Standards Update (“ASU”) 2017-11, “Earnings Per Share (Topic 260).” Part I addresses the complexity of ~~optional~~accounting ~~practical~~for ~~expedients~~certain infinancial ~~transition~~instruments with down round features. Down Weround ~~expect~~features toare ~~elect~~features of certain equity-linked instruments (or embedded features) that result in the ~~‘package~~strike price being reduced on the basis of ~~practical~~the ~~expedients’,~~pricing ~~which~~of ~~permits~~future usequity offerings. Part II does not torequire ~~reassess~~any ~~under~~transition ~~the~~guidance ~~new~~because ~~standard~~those ~~our~~amendments ~~prior~~do ~~conclusions~~not ~~about~~have ~~lease~~an ~~identification,~~accounting ~~lease~~effect. ASU ~~classification~~2017-11 is effective for public entities for fiscal years, and ~~initial~~for ~~direct~~interim ~~costs~~periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We do not expect tothe ~~elect~~adoption ~~the use-~~of~~-hindsight~~ orthis ~~the~~accounting ~~practical~~standard ~~expedient~~to ~~pertaining~~have toa ~~land~~material ~~easements;~~impact ~~the~~on ~~latter~~our ~~not~~financial ~~being~~position, ~~applicable~~results toof usoperations, cash flows, or presentation thereof.

Significant Accounting Policies

On April 1, 2019, we adopted Topic 842 using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after April 1, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under Topic 840.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

~~While~~Note we continue to assess all of the effects of adoption, we currently believe the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our real estate operating leases and (2) providing significant new disclosures for our leasing activities3. ~~While~~Revenue ~~we continue to assess our contracts, we do not expect a significant change in our leasing activities between now and adoption. The new standard also provides practical expedients~~ for anDiscontinued entity’s ongoing accounting. We currently expect to elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also currently expect to elect the practical expedient to not separate lease and non-lease components for all of our leases.Operations

~~Accounting~~Revenue ~~Standards~~disaggregated ~~Adopted~~by revenue source for the three months ended June 30, 2019 and 2018, consists of the following (in thousands):

In May 2014 (and subsequently updated with clarifying standard), the FASB issued 2014-09 “Revenue from Contracts with Customers” related to new accounting requirements for the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services. Subsequent to the release of this guidance, the FASB has issued additional updates intended to provide interpretive clarifications and to reduce the cost and complexity of applying the new revenue recognition standard both at transition and on an ongoing basis. The new revenue standard may be applied retrospectively to each period presented or modified retrospectively with the cumulative effect recognized as of the date of adoption. The Company adopted the new revenue recognition standard on April 1, 2018, using the modified retrospective transition method.

	Three Months Ended
	June 30,
	2019		2018
Advertising	$	698	$	464
Subscription Program		12		3
Referral and Other		33		137
Total	$	743	$	604

~~The~~Note ~~cumulative impact of adopting this new standard was immaterial and no adjustments to the opening balance of retained earnings were recorded~~4. ~~The~~ ~~implementation~~Discontinued ~~did not have a material impact on the Company’s condensed financial statements.~~ Operations

~~ASC~~On ~~606~~March ~~outlines~~6, a2019, ~~five-step~~the ~~process~~Company ~~for~~entered ~~recognizing~~into ~~revenue~~an ~~from~~asset ~~contracts~~purchase agreement (the “Asset Purchase Agreement”) with ~~customers:~~Salon.com, iLLC (“Buyer”) ~~identify~~under ~~the~~which ~~contract~~it ~~with~~agreed to sell substantially all of its assets (the ~~customer,~~"Asset iiSale"), ~~identify~~including all pertinent intellectual property rights comprising the ~~performance~~Company’s ~~obligations~~business inof owning, operating and publishing the ~~contract~~website known as Salon.com, (~~iii~~the “Business”), ~~determine~~but ~~the~~excluding ~~transaction~~its ~~price~~cash, ivcash equivalents and marketable securities and certain contracts and right related to those contracts and tax refunds and insurance policies and rights related to excluded assets, to the Buyer for an aggregate Purchase Price of $5 million payable plus the amount of the Earn-Out Payment (as described below) ~~allocate~~and the ~~transaction~~assumption ~~price~~of certain assumed liabilities, all pursuant to the ~~separate~~terms ~~performance~~of ~~obligations~~the Asset Purchase Agreement. The purchase price is payable in cash as follows: (i) $550 in payable in cash at closing; (ii) $100 shall be deposited with the ~~contract~~Escrow Agent, ~~and~~which amount shall be released to us in accordance with the terms of the Asset Purchase Agreement; (viii) ~~recognize~~$500 ~~revenue~~of ~~associated~~which was previously paid to the Company as a deposit concurrent with execution of the ~~performance~~term ~~obligations~~sheet for the Asset Purchase Agreement (the "Deposit") and (iv) $3,850 via issuance of a 10% secured promissory note, which note shall be paid in 2 equal installments on the 12 month and 24 month anniversary of the closing date. This note shall be secured by all of the assets being sold to Buyer under the Asset Purchase Agreement. As a result of the Company entering into the Asset Purchase Agreement, the Company’s operations have been characterized as ~~they~~discontinued ~~are~~operations ~~satisfied~~in its financial statements pursuant to ASC 205-20, Presentation of Financial Statements – Discontinued Operations.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, the Company determines the performance obligations that are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon receipt of the services by the customer.

See “Revenue Recognition” in Note 2 for additional discussion of our revenue recognition accounting policies and expanded disclosures.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

2.The ~~Revenue~~following ~~Recognition~~table summarizes the results of discontinued operations for the three months ended June 30, 2019 and 2018 (in thousands):

Salon’s advertising revenue is principally dependent on the number of visits to our Website and the corresponding advertisement unit rates. Articles, videos and other forms of content generate advertising revenue from a diverse mix of advertising methods including display advertisements, where revenue is dependent upon the number of advertising impressions delivered; pre-roll video advertisements, where revenue is dependent on the number of video views; native advertisements, which are advertisements created to match the form and function of the platform on which they appear and sponsored content, in which advertisers pay for adjacency to specific content. In the past two years, industry trends have shifted toward increased use of agency and software-based approaches to buying online advertising. As a result, we have re-focused our advertising sales to rely on the rapidly growing programmatic advertising business in which we directly sell audience packages based on real-time advertising demand and engage third-party agencies to sell advertisement on our Website through programmatic advertising open marketplaces, and we place less emphasis on a traditional media sales efforts.

	Three months ended June 30,
	2019		2018
Revenues	$	743	$	604

Expenses:
Production and content		552		642
Sales and marketing		8		8
Technology		66		164
Total expenses		626		814

Income (Loss) from discontinued operations		117		(210	)
Gain on settlement of accounts payable		35		-
Net Income (Loss) from discontinued operations	$	152	$	(210	)

Salon’s revenues are primarily from the sale of advertising space on its Website. Salon recognizes revenue once persuasive evidence of an arrangement exists, the fee is fixed or determinable, delivery has occurred, and collectability is reasonably assured. Revenues are recognized ratably over the period over in which Salon’s obligations to deliver advertisement impressions are fulfilled. Payments received before Salon’s obligations are fulfilled are classified as “deferred revenue” in Salon’s balance sheets.

Advertisement sales agreements are generally short-term agreements, usually less than ninety days, and frequently have cancellation clauses. 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 the guarantee of a minimum number of times that an advertisement appears in a page viewed by a visitor to Salon’s Website. 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.

The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company acts as a principal or an agent in the transaction. In certain cases, the Company is considered the agent, and the Company records revenue equal to the net amount retained when the fee is earned. In these cases, costs incurred with third-party suppliers are excluded from the Company’s revenue. The Company assesses whether it or the third-party supplier is the primary obligor and evaluates the terms of its customer arrangements as part of this assessment. In addition, the Company considers other key indicators such as latitude in establishing price, inventory risk, nature of services performed, discretion in supplier selection and credit risk.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

~~Our~~The ~~total~~following ~~revenue~~table ~~and~~summarizes the ~~sources~~assets ~~thereof for the three~~ and ~~nine~~liabilities ~~months~~of ~~ended~~discontinued ~~December~~operations ~~31, 2018 and 2017 were as follows~~ (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,		March 31,
	December 31,				December 31,
	2019		2019
	2019		2018		2019		2018
ASSETS
Advertising	$	817	$	939	$	1,846	$	3,140
Current Assets
Subscription Program		13		-		21		-
Accounts receivable, net	$	457	$	439
Referral and Other		132		308		413		728
Total current assets held for sale		457		439
Total	$	962	$	1,247	$	2,280	$	3,868
Non-current Assets
Property, software development and equipment, net		174		210
Total non-current assets held for sale		174		210
Total Assets Held for Sale	$	631	$	649
LIABILITES
Current Liabilities
Accounts payable	$	1,301	$	1,344
Accrued liabilities		72		87
Total current liabilities held for sale		1,373		1,431
Non-current Liabilities
Other liabilities		-		-
Total non-current assets held for sale		-		-
Total Liabilities Held for Sale	$	1,373	$	1,431

3. Borrowing Agreements

Short-term Borrowings

In May 2007, Salon entered into a borrowing agreement with Deutsche Bank Securities, Inc. that allows Salon to borrow up to $1,000, plus accrued interest, at a rate of prime less 0.25%. In September 2016, this credit agreement was transferred to Raymond James and Associates, Inc. (“Raymond James”) after Deutsche Bank Securities, Inc. sold its accounts. The agreement is guaranteed in its entirety by Salon’s former Chairman, John Warnock. The line of credit has been fully drawn as of December 31, 2018. Raymond James may demand repayment of amounts borrowed at any time. Additionally, Mr. Warnock may also choose to terminate his guarantee, which would trigger a demand for repayment. As of December 31, 2018 and March 31, 2018, accrued interest on short-term borrowings totaled approximately $493 and $439, respectively.

As of December 31, 2018, and March 31, 2018, the weighted average interest rate on the Company’s short-term borrowings was approximately 3.6% and 3.5%, respectively.

Convertible Promissory Notes

Interest bearing convertible promissory notes

During the nine months ended December 31, 2018, the Company received $110 from related parties in the form of Bridge Notes as part of the Securities Purchase Agreement. The notes have a one-year maturity and bear a 10% interest rate. The notes will convert at a discount into shares of Common Stock upon a qualified financing by the Company of at least $1 million. In the event of no conversion, the notes are payable in cash or convert into a number of shares of Common Stock of the Company, rounded down to the nearest whole share based on the Company’s as diluted price per share on the maturity date. The conversion price will equal to 70% of the price per share paid in the qualified financing if such financing occurs within four months from the date of the Securities Purchase Agreement, or 70% less 2% per each month after the fourth month anniversary; provided however that the conversion price will never be less than the greater of (A) sixty percent (60%) of the purchase price paid in the qualified financing and (B) the price per share paid by investors in the most recently consummated offering of the Company’s Common Stock, or $0.0124 per share, the conversion price in the Series A Mandatorily Convertible Preferred Private Placement, if the financing occurs more than four months after the date of the Securities Purchase Agreement.

Interest bearing senior secured notes

During the nine months ended December 31, 2018, the Company received $114.5 in advances from related parties. These advances accrued interest at a rate of 10% per annum and payable within one year from the date of advance. On December 7, 2018, these advances and all accrued interest were exchanged for secured notes in the amount of approximately $118.9. These notes bear a 10% interest rate and are payable on June 30, 2019. In addition, on December 7, 2018, the Company issued warrants to the secured note holders to purchase 11,312,600 shares of our common stock at an exercise price of $0.01 per share. The warrants expire five years from the issuance date and can be exercised with cash or cancellation of the secured notes referenced above.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

~~During~~Note ~~the nine months ended December 31, 2018, the Company received $500 from PubLife, LLC upon execution of a term sheet for the sale of the Salon~~5.~~com~~ ~~business,~~Borrowing which is the basis for the Asset Purchase Agreement discussed below. Upon closing of the Asset Purchase Agreement, this $500 is to be credited against the purchase price. If the Company fails to close the Asset Purchase Agreement or breaches the term sheet with PubLife related to the Asset Purchase Agreement, this $500 will convert into a 10% secured promissory note payable within 90-days of issuance, secured by all of the Company’s assets and senior to all indebtedness of the Company.Agreements

4.Short-term ~~Significant Agreements~~Borrowings

~~Technology~~In ~~Support~~May ~~Agreement~~2007, Salon entered into a borrowing agreement with Deutsche Bank Securities, Inc. that allows Salon to borrow up to $1,000, plus accrued interest, at a rate of prime less 0.25%. In September 2016, this credit agreement was transferred to Raymond James and Associates, Inc. (“Raymond James”) after Deutsche Bank Securities, Inc. sold its accounts. The agreement is guaranteed in its entirety by Salon’s former Chairman, John Warnock. The line of credit of $1,000 has been fully drawn as of June 30, 2019. Raymond James may demand repayment of amounts borrowed at any time. Additionally, Mr. Warnock may also choose to terminate his guarantee, which would trigger a demand for repayment. As of June 30, 2019 and March 31, 2019, accrued interest on short-term borrowings totaled approximately $532 and $512, respectively.

OnAs ~~October~~of 25June 30, ~~2018~~2019, ~~the~~and ~~Company~~March ~~entered~~31, ~~into~~2019, ~~a Technology Support Agreement (~~the ~~"Technology~~weighted ~~Agreement")~~average ~~with~~interest ~~PubLife~~rate ~~LLC~~on ~~under which PubLife agreed to provide certain technology support to~~ the Company,’s ~~including all web development activities for a six month~~ short-term inborrowings ~~consideration~~was ofapproximately ~~$1 per month~~3.7% ~~The~~and ~~payment~~3.6%, ~~terms under this agreement were amended under the terms of the Asset Purchase Agreement (as set forth below)~~respectively.

~~General~~Convertible ~~Advertising~~Promissory ~~Services Agreement~~Notes

OnInterest ~~October~~bearing ~~25,~~convertible ~~2018,~~promissory the Company entered into a General Advertising Services Agreement (the "Advertising Agreement") with Proper Media LLC ("Agent") under which the Company retained Agent to provide advertisement sales and trafficking services for our websites, including salon.com and related sites. The term of this agreement is for one -year, which term shall be extended for successive one-year periods under terminated by either party within 30 days’ notice prior to the end of any term. The Company agreed to pay agent its revenue share of all revenue invoiced by Agent in connection with Agent's performance of the services under this agreement. In addition, if the Company refers a 3rd party publishing partner and Agent executes an advertising services agreement with such 3rd party, Agent agrees to pay us 25% of the monthly revenue earned by Agent due to such 3rd party agreement for the first six-months of any such agreement. The payment terms under this agreement were amended under the terms of the Asset Purchase Agreement (as set forth below).notes

~~WGAE~~As of June 30, 2019, the Company had received $200 from related parties in the form of Bridge Notes as part of the Securities Purchase Agreement. The notes have a one-year maturity and bear a 10% interest rate. The notes will convert at a discount into shares of Common Stock upon a qualified financing by the Company of at least $1 million. In the event of no conversion, the notes are payable in cash or convert into a number of shares of Common Stock of the Company, rounded down to the nearest whole share based on the Company’s as diluted price per share on the maturity date. The conversion price will equal to 70% of the price per share paid in the qualified financing if such financing occurs within four months from the date of the Securities Purchase Agreement, or 70% less 2% per each month after the fourth month anniversary; provided however that the conversion price will never be less than the greater of (A) sixty percent (60%) of the purchase price paid in the qualified financing and (B) the price per share paid by investors in the most recently consummated offering of the Company’s Common Stock, or $0.0124 per share, the conversion price in the Series A Mandatorily Convertible Preferred Private Placement, if the financing occurs more than four months after the date of the Securities Purchase Agreement.

InInterest ~~October~~bearing ~~2018,~~senior ~~the~~secured Company entered into an agreement with the WGAE for a three-year period. As a result of the ongoing negotiations and accompanying legal fees as well as the higher cost structure per the negotiated agreement, the effect was detrimental to the company’s financial standing as we had to endure layoffs of management in order to accommodate the editorial staff. In addition, the agreement with the union had a seemingly negative impact on our ability to obtain additional financing. notes

As of June 30, 2019, the Company had received $764 in advances from related parties. These advances accrued interest at a rate of 10% per annum and payable within one year from the date of advance.

As of June 30, 2019, the Company had received $500 from PubLife, LLC upon execution of a term sheet for the sale of the Salon.com business, which is the basis for the Asset Purchase Agreement discussed below. Upon closing of the Asset Purchase Agreement, this $500 is to be credited against the purchase price. If the Company fails to close the Asset Purchase Agreement or breaches the term sheet with PubLife related to the Asset Purchase Agreement, this $500 will convert into a 10% secured promissory note payable within 90-days of issuance, secured by all of the Company’s assets and senior to all indebtedness of the Company.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

5Note 6. Common Stock

On ~~December~~June 3128, ~~2018~~2019, ~~900~~164,~~000~~883,000 common shares, ~~par value $0,001,~~ were ~~authorized,~~issued ofin ~~which~~exchange ~~151~~for 1,~~056~~648,~~477~~830 shares ~~were~~of ~~issued~~Series ~~and~~A ~~outstanding~~Preferred Stock.

6.On ~~Employee~~June ~~Stock~~30, ~~Option~~2019, ~~Plans~~900,000,000 common shares, par value $0,001, were authorized, of which 315,939,477 shares were issued and outstanding.

Salon has two stock option plans approved by stockholders: the Salon Media Group, Inc. 2004 Stock Plan (the “2004 Stock Plan”) and the Salon Media Group, Inc. 2014 Stock Incentive Plan (the “2014 Stock Incentive Plan”), as described in Note 7,. “Employee Stock Option Plans,” of the notes to financial statements in Salon’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018. The 2004 Stock Plan expired in November 2014, after which no further options were permitted to be granted.

Salon has ~~granted~~two ~~options~~stock ~~pursuant~~option to plans ~~not~~ approved ~~(“Non-Plan”)~~ by stockholders.: Wethe ~~did~~Salon ~~not~~Media ~~grant~~Group, ~~any~~Inc. ~~Non-Plan~~2004 ~~options~~Stock ~~during~~Plan (the ~~nine~~“2004 ~~months~~Stock ~~ended~~Plan”) ~~December~~and 31the Salon Media Group, ~~2018~~Inc. ~~During~~2014 Stock Incentive Plan (the ~~nine~~“2014 ~~months~~Stock ~~ended~~Incentive ~~December~~Plan”), 31as described in Note 11, ~~2017~~“Employee weStock ~~granted~~Option toPlans,” ~~our~~of ~~CEO~~the ~~and~~notes to ~~each~~financial ~~member~~statements ofin ~~our~~Salon’s ~~board~~Annual ofReport ~~directors~~on ~~(the~~Form ~~“Board”)~~10-K anfor ~~option~~the tofiscal ~~purchase~~year ~~31,260,505~~ended ~~and~~March 531,~~384,615~~ ~~shares~~2019. ofThe ~~Common~~2004 Stock Plan expired in November 2014, ~~respectively~~after which no further options were permitted to be granted.

WeSalon ~~did~~has ~~not~~granted ~~grant any~~ options ~~during~~pursuant ~~the~~to ~~nine~~plans ~~months~~not ~~ended~~approved ~~December~~(“Non-Plan”) ~~31,~~by ~~2018~~stockholders. ~~During~~We ~~the~~did ~~nine~~not ~~months~~grant ~~ended~~any ~~December~~Non-Plan ~~31, 2017, we granted~~ options toduring ~~all employees of~~ the ~~Company~~three tomonths ~~acquire~~ended aJune ~~total of 7~~30,~~711,418~~ ~~shares~~2019 ~~under~~or ~~the 2014 Stock Incentive Plan~~2018.

~~The~~As ~~fair~~of ~~value~~June of30, ~~each~~2019, ~~option~~the ~~grant~~aggregate ~~was~~stock ~~estimated~~compensation onremaining ~~the~~to ~~date~~be ofamortized ~~grant~~to ~~using~~expense ~~the~~was ~~Black~~$333. Salon expects this stock-~~Scholes~~based ~~option~~compensation ~~pricing~~balance ~~model~~to ~~with~~be amortized as follows: $142 during the ~~following~~remainder ~~assumptions~~of fiscal year 2020; $168 during fiscal year 2021; and ~~fair~~$23 ~~value~~during ~~per~~fiscal ~~share:~~year 2022. The expected amortization reflects only outstanding stock option awards as of June 30, 2019.

	Nine months ended December 31,
	2018				2017
Risk-free interest rates		1.75	–	2.55%	1.75	–	2.05%
Expected lives (in years)		5.7	–	6.3	5.7	–	6.3
Expected volatility		437	–	453%		453%
Dividend yield			0%			0%

The following table summarizes activities under Salon’s plans for the three months ended June 30, 2019:

We applied the expected term of 6.3 years during the nine months ended December 31, 2017, to more appropriately estimate expectations of exercise behavior of the options. The expected stock price volatility is based on historical volatility of Salon’s stock over a period equal to the expected term of the options. The risk-free interest rate is based on the implied yield available on U.S. Treasury securities with a term equivalent to the service period of the stock options. We have not paid dividends in the past.

				Weighted-
	Outstanding			Average		Aggregate
	Stock			Exercise		Intrinsic
	Options			Price		Value
Balance as of April 1, 2019		50,936,000		$	0.06	$	0
Granted		-			-
Exercised		-			-
Expired and forfeited		(22,639,000	)	$	0.06
Outstanding at June 30, 2019		28,297,000		$	0.06	$	-
Exercisable as of June 30, 2019		25,970,000		$	0.06	$	-
Vested and expected to vest as of June 30, 2019		52,630,000		$	0.06	$	-

AsWe ofdid ~~December~~not ~~31,~~grant ~~2018,~~any ~~the~~options ~~aggregate~~during ~~stock~~the ~~compensation~~three ~~remaining~~months toended beJune ~~amortized~~30, to2019 ~~expense~~or ~~was $3,209~~2018. ~~Salon~~The ~~expects this stock~~weighted-~~based~~average ~~compensation~~fair ~~balance~~value toof beoptions ~~amortized~~vested asduring ~~follows:~~each ~~$235~~of ~~during~~ the ~~remainder~~three-month ofperiods ~~fiscal~~ended ~~year~~June ~~2019; $1~~30,~~411~~ ~~during~~2019 ~~fiscal~~and ~~year~~2018 ~~2020;~~was $~~1,127~~0.15 ~~during~~per ~~fiscal~~share ~~year 2021;~~ and $~~436~~0.20 ~~during~~per ~~fiscal~~share, ~~year 2022~~respectively. ~~The~~There ~~expected~~were ~~amortization~~no ~~reflects~~options ~~only~~exercised ~~outstanding~~during ~~stock~~the ~~option~~three ~~awards~~months asended ofJune ~~December 31~~30, ~~2018~~2019.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

~~The~~Our ~~following~~Board ~~table~~also ~~summarizes~~approved ~~activities~~a ~~under~~resolution ~~Salon’s~~on ~~plans~~June ~~for~~12, 2014 to amend the ~~nine~~2014 ~~months~~Stock ~~ended~~Incentive ~~December~~Plan 31to comply with certain California Code of Regulations and Internal Revenue Service regulations. As of June 30, ~~2018:~~2019, options totaling 10,481,985 were awarded under the 2014 Stock Incentive Plan.

				Weighted-
	Outstanding			Average		Aggregate
	Stock			Exercise		Intrinsic
	Options			Price		Value
Balance as of April 1, 2018		58,077,000		$	0.06	$	284
Granted		-			-
Exercised		-			-
Expired and forfeited		(4,279,000	)	$	0.13
Outstanding at December 31, 2018		53,798,000		$	0.06	$	-
Exercisable as of December 31, 2018		23,543,000		$	0.06	$	-
Vested and expected to vest as of December 31, 2018		70,077,000		$	0.06	$	-

We recognized stock-based compensation expense of $139 and $390 during the three months ended June 30, 2019 and 2018, respectively.

WeNote ~~did not grant any options during the nine months ended December 31, 2018~~8. ~~During~~Net ~~the~~Loss ~~nine~~Per ~~months~~Share ~~ended~~Attributable ~~December 31, 2017, we granted options~~ to ~~acquire a total of 44,356,538 shares of~~ Common Stock. The weighted-average fair value of options vested during each of the nine-month periods ended December 31, 2018 and December 31, 2017 was $0.15 per share and $0.18 per share, respectively. There were no options exercised during the nine months ended December 31, 2018.Shareholders

~~Our~~Basic ~~Board~~net ~~also~~loss ~~approved~~per ashare ~~resolution~~is oncomputed ~~June~~using ~~12,~~the ~~2014~~weighted-average tonumber ~~amend~~of ~~the~~shares ~~2014~~of ~~Stock~~common ~~Incentive~~stock ~~Plan~~outstanding toduring ~~comply~~the ~~with~~period. ~~certain~~Diluted ~~California~~net ~~Code~~loss ofper ~~Regulations~~share ~~and~~is ~~Internal~~computed ~~Revenue~~using ~~Service~~the ~~regulations.~~weighted-average Asnumber of ~~December~~common ~~31,~~and ~~2018,~~common ~~options~~stock ~~totaling~~equivalents ~~10,481,985~~outstanding ~~were~~during ~~awarded under~~ the ~~2014~~period, ~~Stock~~as ~~Incentive Plan.~~follows:

We recognized stock-based compensation expense of $1,186 and $799 during the nine months ended December 31, 2018 and 2017, respectively.

	Three Months Ended June 30,
	2019			2018
Numerator:
Net loss from continuing operations	$	(554	)	$	(784	)
Net income (loss) from discontinued operations	$	152		$	(210	)

Denominator:
Weighted average shares used in computing basic and diluted net loss per share		154,680,000			151,056,000

Basic and diluted net loss per share from continuing operations	$	(0.00	)	$	(0.01	)

Basic and diluted net loss per share from discontinued operations	$	(0.00	)	$	(0.00	)

Antidilutive securities including options, convertible debts and preferred stock not included in net loss per share calculation		94,482,000			277,584,000

Note 9. Commitments and Contingencies

On October 17, 2017, Salon signed a two-year office lease agreement for its San Francisco headquarters at 870 Market Street, San Francisco, California. The two-year lease, for approximately 1,072 square feet, commenced on December 1, 2017 and will terminate on November 30, 2019. On April 9, 2019 the Company terminated the lease effective June 30, 2019.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

7. Net Loss Per Share Attributable to Common Shareholders

Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common and common stock equivalents outstanding during the period, as follows:

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
Numerator:
Net loss	$	(313	)	$	(696	)	$	(1,928	)	$	(2,062	)
Denominator:
Weighted average shares used in computing basic and diluted net loss per share		151,056,000			151,056,000			151,056,000			150,476,000
Basic and diluted net loss per share	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Antidilutive securities including options and preferred stock not included in net loss per share calculation		282,495,000			223,403,000			282,495,000			223,403,000

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

8. Commitments and Contingencies

In August 2016, we informed our landlord at our office space at 132 West 31^st Street, New York, New York, of our intention to move out of the premises, and we engaged a property agent to find a sub-tenant for the space. The lease for the New York space commenced on July 1, 2014 and will expire on September 30, 2019. In January 2017, we were asked to vacate the office space at 132 West 31^st Street due to nonpayment of our monthly rent, and on January 30, 2017, we released the letter of credit of $204 to the landlord in payment of the past due rent. On August 3, 2017, we received a notice of legal action (the “Complaint”) from the landlord. This civil summons and complaint in New York State Court seeks to recover all unpaid rents for the remainder of our five-year lease, equal to approximately $918 at the time of filing the initial lawsuit (and currently approximately $630 as of the date of this report) plus damages and attorneys fees. Counsel for Salon is currently evaluating potential defenses and counterclaims, based on the laws and facts.

The potential amount of this contingent liability is indeterminate, since it is unknown whether the Landlord will lease the premises to a new tenant, in which case the rents from the new tenant are an off-set to this liability. While counsel for Salon is evaluating potential defenses and counterclaims to the Complaint, we are unable to determine the foregoing liability, if any, with any degree of certainty, due to the uncertain nature of litigation matters. The parties are currently engaged in discovery proceedings and no trial date has been set. The landlord has moved for partial summary judgement as to liability, which motion has not yet been opposed, argued or decided by the Court.

On November 18, 2018, Jordana Brondo, a former employee of Salon Media Group, brought a formal claim against the Company for Judicial Arbitration and Mediation Services under JAMS in San Francisco, CA. Under her claim, Ms. Brondo alleges wrongful termination under the basis of gender discrimination pregnancy discrimination, wrongful termination in violation of public policy, and retaliation. Ms. Brondo seeks general damages, special damages, punitive damages, cost of fees and attorney fees in the amount of $1,600. The Company has denied the allegations and is actively defending the matter. In addition, the Company has insurance to cover any unexpected liability. The matter is currently pending.

Our current office space in New York, located at 253 W. 28^th Street, New York, New York is rented on a month-to-month basis and does not carry a lease agreement.

In October 2018, the Company entered into an agreement with the WGAE for a three-year period. As a result of the ongoing negotiations and accompanying legal fees as well as the higher cost structure per the negotiated agreement, the effect was detrimental to the company’s financial standing as we had to endure layoffs of management in order to accommodate the editorial staff. In addition, the agreement with the union had a seemingly negative impact on the Company’s ability to obtain additional financing.

17Note 10. Income Taxes

In December 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted, which among other changes, reduced the federal statutory corporate tax rate from 35% to 21% effective January 1, 2018. As a result of this change, the Company’s statutory tax rate for fiscal year 2020 will be 21%. The Company recognized deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. As of June 30, 2019 and March 31, 2019, the Company has not reflected any amount as deferred tax asset due to the uncertainty of future profits to offset any net operating loss.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

9.The ~~Preferred~~Company’s ~~Stock~~deferred tax assets consisted of the following as of June 30, 2019 and March 31, 2019 (in thousands).

	June 30,			March 31,
	2019			2019
Net operating losses	$	23,571		$	23,280
Valuation allowance		(23,571	)		(23,280	)
Net deferred tax asset	$	-		$	-

Note 11. Preferred Stock

As part of the Company’s committed efforts to raise capital, on January 24, 2017, Salon entered into a Purchase Agreement (the “Purchase Agreement”) with purchasers identified therein (each, a “Purchaser” and together, the “Purchasers”) to issue and sell to the Purchasers in the private placement (the “Private Placement”) an aggregate principal amount of at least $1 million of the Company’s Series A Preferred Stock. The Company has authorized the issuance and sale in the Private Placement of up to 2,417,471 shares of the Series A Preferred Stock, each of which is convertible into 100 shares of Common Stock, at the purchase price of $1.24 per share. The completion of the purchase and sale of the Series A Preferred Stock occurred in three stages, each a “Closing.”

The initial Closing (“Initial Closing”) was completed on January 26, 2017. In the Initial Closing, we sold to the Purchasers an aggregate of 805,824 shares of Series A Preferred Stock for a total purchase price of $1 million. The investors in the Initial Closing included Jordan Hoffner, director and then CEO (until May 3, 2019), and certain of his family members, the Company’s former Chief Financial Officer (“CFO” until September 28, 2018), Elizabeth Hambrecht, and the Company’s Director, William Hambrecht.

The second Closing (“Second Closing”) was completed on March 23, 2017. In the Second Closing, we sold to the Purchasers an aggregate of 173,252 shares of Series A Preferred Stock for a total purchase price of $215. The Second Closing included only investors who had previously indicated interest in participating in the Private Placement. The investors in the Second Closing included Jordan Hoffner, Elizabeth Hambrecht, Ryan Nathanson, the Company’s former Chief Operating Officer, and Jordana Brondo, the Company’s former Chief Revenue Officer.

The final Closing (the “Final Closing”) was completed on July 20, 2017. In the Final Closing, we sold to the Purchasers an aggregate of 221,601 shares of Series A Preferred Stock for a total purchase price of $275. The Final Closing included only investors who had previously indicated interest in participating in the Private Placement. The investors in the Final Closing included Jordan Hoffner, Elizabeth Hambrecht, and William Hambrecht.

InOn ~~event~~June ~~of a liquidation~~28, ~~the~~2019 ~~holders~~all ~~of the Series A Preferred Stock are entitled to receive~~1, ~~prior and in preference to any distribution of any assets or property of Salon to the holders of Common Stock~~648,830 and by reason of their ownership, an amount per share equal to two (2) times the original issue price of $1.24 per share of Series A Preferred Stock. If the assets and funds available for distribution are insufficient to permit the payment to the holders of Series A 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 A Preferred Stock ratably in proportion to the full preferential amounts which they are entitled to receive. Holders of shares of Series A Preferred Stock ~~are~~were ~~not~~converted ~~entitled~~into ~~to receive dividends~~164, ~~pursuant to the Certificate Designation of Preferences~~883,000 ~~Rights~~shares ~~and Limitations~~ of ~~the~~Common ~~Series A Preferred~~ Stock.

1817

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

~~After~~Note payment of the full preferential amounts has been made to the holders of the shares of Series A Preferred Stock pursuant to the Certificate of Designation, if any remaining assets of the Company are available for distribution to stockholders, the holders of shares of Common Stock and Series A Preferred Stock shall be entitled to receive the remaining assets of the Company available for distribution to stockholders ratably in proportion to the shares of Common Stock then held by them and the shares of Common Stock to which they have the right to acquire upon conversion of the shares of Series A Preferred Stock held by them12. ~~Following~~Subsequent ~~the Final Closing of the Private Placement on July 20, 2017, the Series A Preferred Stock accounts for approximately 52% of outstanding shares on an as converted basis to Common Stock.~~Events

~~The~~Settlement ~~holders~~Agreements ~~of the shares of Series A Preferred Stock are entitled to vote together~~ with ~~the~~Jordan ~~holders~~Hoffner ~~of the shares of Common Stock as though part of that class,~~ and ~~they~~Elizabeth ~~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 Series A Preferred Stock could be converted.~~Hambrecht

~~Neither~~On July 1, 2019, we entered into a Settlement Agreement and Release with each of Jordan Hoffner, our former CEO and Elizabeth Hambrecht, our former CFO. Under the ~~shares~~terms of ~~Series~~each Aagreement, ~~Preferred~~we ~~Stock~~agreed ~~nor~~to pay Mr. Hoffner and Ms. Hambrecht, as applicable, the ~~underlying~~total ~~shares~~sum of ~~Common~~Thirty ~~Stock~~Thousand ~~have~~dollars ~~been~~($30,000.00) ~~registered~~(the ~~for~~“Settlement ~~sale~~Payment”) ~~under~~on the ~~Securities~~earlier ~~Act~~of (i) 2 business days after the Closing of ~~1933,~~that ascertain ~~amended~~Asset Purchase Agreement and (ii) December 31, 2019 (the “Payment Date”). Each of Mr. Hoffner and ~~may~~Ms. ~~not~~Hambrecht beClaimant ~~offered~~acknowledges orthat, ~~sold~~upon inreceipt of the ~~United~~Settlement ~~States~~Payment, ~~absent~~they ~~registration~~will ~~under~~have ~~such~~been ~~act~~paid all wages, severance, all unreimbursed business expenses, and all accrued but unused vacation pay due and owing to them further waived any additional claims for unpaid salary or anwage ~~applicable~~amounts, ~~exemption~~unreimbursed ~~from~~business ~~registration~~expenses, ~~requirements~~and accrued but unused vacation pay. Each of Mr. Hoffner and Ms. Hambrecht executed a general release of all claims under their respective agreements.

~~The exchange rate and common equivalent shares of our Series A Preferred Stock as of December 31, 2018 are as follows:~~18

Preferred Stock	Shares Outstanding		Per Share Exchange Rate		Common Equivalent Shares
Series A		1,648,830		100		164,883,000
Total		1,648,830				164,883,000

The Company intends to fully convert the Series A Preferred Stock into 164,883,000 shares of Common Stock prior to June 30, 2019.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

10. Subsequent Events

Asset Purchase Agreement

On March 6, 2019, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Salon.com, LLC (“Buyer”) under which the Company agreed to sell substantially all of our assets (the "Asset Sale"), including all pertinent intellectual property rights comprising the Company’s business of owning, operating and publishing the website known as Salon.com, (the “Business”), but excluding our cash, cash equivalents and marketable securities and certain contracts and right related to those contracts and tax refunds and insurance policies and rights related to excluded assets, to the Buyer for an aggregate Purchase Price of $5 million payable plus the amount of the Earn-Out Payment (as described below) and the assumption of certain assumed liabilities, all pursuant to the terms of the Asset Purchase Agreement. The purchase price is payable in cash as follows: (i) $550 in payable in cash at closing; (ii) $100 shall be deposited with the Escrow Agent, which amount shall be released to the Company in accordance with the terms of the Asset Purchase Agreement; (iii) $500 of which was previously paid to the Company as a deposit concurrent with execution of the term sheet for the Asset Purchase Agreement (the "Deposit") and (iv) $3,850 via issuance of a 10% secured promissory note, which note shall be paid in 2 equal installments on the 12 month and 24 month anniversary of the closing date. This note shall be secured by all of the assets being sold to Buyer under the Asset Purchase Agreement.

First Amendment to Asset Purchase Agreement

On April 15, 2019, the Company entered into a First Amendment to Asset Purchase Agreement ("First Amendment") with Buyer. The primary purpose of the First Amendment was to amend the payment terms under the Technology Agreement and the Advertising Agreement as set forth below:

(a) for the month of March 2019: (i) ad fees under the Advertising Agreement shall be payable at 6.5%, and (ii) tech management fees payable pursuant to the Technology Agreement shall be $5 plus costs per the Technology Agreement;

(b) for the month of April 2019: (i) ad fees under the Advertising Agreement shall be payable at 6.5%, and (ii) tech management fees payable pursuant to the Technology Agreement shall be $10 plus costs per the Technology Agreement; and

(c) for the month of May 2019 and for each month thereafter: (i) ad fees under the Advertising Agreement shall be payable at 6.5%, (ii) tech management fees payable pursuant to the Technology Agreement shall be $10 plus costs per the Technology Agreement and (iii) an amount equal to 10% APR applied to the Deposit.

The Company also amended Section 10.9 of the Asset Purchase Agreement to include the term sheet related to the acquisition for the documents related to the entire agreement of the parties.

Departure of Directors or Principal Officers

Effective May 3, 2019, Jordan Hoffner resigned as the Company's Chief Executive Officer.

Effective as of September 28, 2018, Elizabeth Hambrecht resigned as the Company's Chief Financial Officer.

Appointment of Officers

Effective May 3, 2019, in connection with Mr. Hoffner's resignation as Chief Executive Officer, the board appointed Richard MacWilliams as the Company's acting Chief Executive Officer and the board also appointed Trevor Colhoun as the Company's acting Chief Financial Officer to fill the vacancy from Ms. Elizabeth Hambrecht's prior resignation. Messrs. MacWilliams and Colhoun both currently serve as Directors of the Company. Mr. MacWilliams will receive $7.5 per month for his role as acting CEO and Mr. Colhoun will receive $2.5 per month for his role as acting CFO.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, social media and other non-web opportunities and revenue sources. Although Salon believes its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Salon’s actual results may differ significantly from those anticipated or implied in these forward-looking statements as a result of the factors set forth above and in Salon’s public filings. Salon assumes no obligation to update any forward-looking statements except as required by law.

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 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk 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.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Form 10-Q should be considered in conjunction with the audited financial statements, which are included in Salon’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2018~~2019 (the “Fiscal ~~2018~~2019 Annual Report”) filed with the Securities and Exchange Commission. Matters of interest therein include, but are not limited to, our disclosure of critical accounting policies.

Overview

Salon is a technology-based advertising media business that wholly owns and operates an online news website, salon.com (“Salon.com”). Our award-winning website is committed to fearless journalism and combines original investigative stories and provocative personal essays along with quick-take commentary, articles, podcasts and original video about politics, culture, entertainment, sustainability, innovation, technology and business.

We have a history of significant losses and expect to incur a loss from operations for our fiscal year ending March 31, ~~2018~~2019 and potentially for future years. M&K CPA’s, PLLC, Salon’s independent registered public accounting firm for the fiscal years ended March 31, ~~2018~~2019 and ~~2017~~2018, included a “going-concern” audit opinion on the financial statements for those years. The audit opinions report substantial doubt about our 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 factors noted in the going-concern opinions, our 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. In March 2019, we entered into an asset purchase agreement to sell substantially all of our assets. Upon consummation of this transaction, if consummated, we will cease to be an operating company.

21We are in the midst of satisfying the conditions to close on the Asset Purchase Agreement discussed under “Material Agreements entered into during Fiscal Year 2020” below. We expect to complete such transaction in the last week of August 2019. Following the Asset Sale, if consummated, we intend to cease to do business and intend to not engage in any business activities except for dealing with post-closing matters (in the event the Asset Sale is consummated) and for the purpose of liquidating our remaining assets, paying any debts and obligations, distributing the remaining assets to stockholders, and doing other acts required to liquidate and wind up our business and affairs. We will pay or make provision for payment of our known or reasonably ascertainable liabilities that have been incurred or are expected to be incurred prior to liquidation. After that, we will distribute the remaining assets to our stockholders in proportion to their respective stockholder interest in the Company

During the quarter ended December 31, 2018, we continued to execute our business strategy to refine and broaden our editorial products in order to attract both a premier audience and additional advertising, which would increase revenues. We face increased competition, however, from both new and larger websites for traffic and online advertising campaigns, while industry trends continue a shift toward increased use of agency and software-based approaches to buying online advertising. As a result, we have re-focused our advertising sales to rely on the rapidly growing programmatic advertising business. Through our programmatic advertising efforts, we directly sell audience packages based on real-time advertising demand and engage third-party agencies to sell advertisements on our Website through programmatic advertising open marketplaces, thereby placing less emphasis on a traditional media sales effort. The highlights of our December 2018 quarter are listed below:19

~~Highlights~~During ~~from~~the ~~Quarter~~quarter ended ~~December~~June 3130, ~~2018~~2019, we continued to execute our business strategy to refine and broaden our editorial products in order to attract an engaged audience and premium advertising, which would increase revenues. We face increased competition, however, from both new and larger websites for traffic and online advertising campaigns, while industry trends continue a shift toward increased use of agency and software-based approaches to buying online advertising. As a result, we have re-focused our advertising sales to rely on the rapidly growing programmatic advertising business. Through our programmatic advertising efforts, we directly sell audience packages based on real-time advertising demand and engage third-party agencies to sell advertisements on our Website through programmatic advertising open marketplaces, thereby placing less emphasis on a traditional media sales effort. The highlights of our June 2019 quarter are listed below:

●Highlights ~~Net~~from ~~revenues~~Quarter ~~decreased 17% to $1.0 million in the quarter~~ ended ~~December~~June 3130, 2018 versus $1.2 million in the same period in 2017. For the nine-month period ended December 31, 2018, net revenues decreased 41% to $2.3 million, versus $3.9 million in the same period in 2017. The decrease in revenue was a result of a continued significant industry shift in online advertising from advertising sold by a direct sales team to advertising increasingly being sold through software-based “programmatic” technology. Our advertising sold through networks that access these programmatic buys accounted for 59% of our advertising revenues for the December 2018 quarter. We have been making changes to our advertising footprint to capture the greater programmatic opportunity for our display and video advertising inventory and will continue to focus our efforts to allow better management of our advertising inventory and targeting for our advertisers.2019

● Net ~~losses~~revenues ~~from~~increased ~~operations~~17% ~~were~~to $0.37 million ~~during~~in the ~~three~~quarter ~~months~~ ended ~~December~~June 3130, ~~2018,~~2019 ~~and~~versus $10.96 million ~~for~~in the ~~nine~~same ~~months~~period ~~ended~~in ~~December 31,~~ 2018~~, a decrease from $0~~.5 ~~million~~The ~~during~~increase ~~the~~in ~~three~~revenue ~~months~~was ~~ended~~a ~~December~~result ~~31,~~of ~~2017 and~~ a ~~decrease~~continued ~~from~~significant ~~$1.6~~industry ~~million,~~shift ~~during~~in ~~the~~online ~~nine~~advertising ~~months~~from ~~ended~~advertising ~~December~~sold ~~31,~~by ~~2017.~~a ~~The~~direct ~~overall~~sales ~~decrease~~team into ~~losses~~advertising ~~resulted~~increasingly ~~from~~being ~~decreases~~sold inthrough ~~revenues~~software-based ~~offset~~“programmatic” bytechnology. aOur ~~decrease~~advertising insold ~~operating~~through ~~expenses.~~networks ~~Operating~~that ~~expense~~access inthese ~~the~~programmatic ~~December~~buys ~~2018~~accounted ~~quarter~~for ~~was~~79% ~~$1.3~~of ~~million~~our asadvertising ~~compared~~revenues tofor ~~$1.8 million in~~ the ~~December~~June ~~2017~~2019 quarter~~, and $4~~.1 ~~million~~We ~~for~~have ~~the~~been ~~nine~~making ~~months~~changes ~~ended~~to ~~December~~our ~~31,~~advertising ~~2018~~footprint asto ~~compared~~capture tothe ~~$5.4~~greater ~~million~~programmatic opportunity for ~~the~~our ~~corresponding~~display ~~period~~and invideo ~~2017.~~advertising Weinventory and will continue to ~~look~~focus ~~for~~our ~~ways~~efforts to ~~reduce~~allow ~~expenses~~better inmanagement ~~areas~~of ~~that~~our weadvertising ~~expect~~inventory ~~can help reduce losses~~ and ~~accelerate~~targeting afor ~~path~~our ~~to profitability~~advertisers.

● ~~Average~~Net ~~unique~~loss ~~visitors~~for to the ~~Salon.com Website during the~~ quarter ended ~~December~~June 3130, ~~2018~~2019 was 6.$0.4 million, a 4760% decrease ~~compared~~from ~~to the quarter ended December 31, 2017, and an increase of 4~~$1.7%0 ~~compared~~million tofor the quarter ended ~~September~~June 30, 2018~~, according to data compiled by Google Analytics~~. ~~Our~~This ~~continued~~included ~~focus~~a onnet ~~more~~loss ~~breaking~~from ~~news~~continuing ~~and~~operations ~~new~~for ~~categories attributed to~~ the quarter ~~over~~ended ~~quarter~~June ~~increase~~30, ~~along~~2019 ~~with the ongoing strategy~~ of ~~growing~~$0.5 ~~quality traffic~~million, ina ~~order~~29% todecrease ~~maximize~~from ~~our ability to monetize our page views with higher CPM video and display advertising~~$0.7 Wemillion ~~attribute~~for the ~~year~~quarter ~~over~~ended ~~year~~June ~~decreased~~30, ~~traffic~~2018. toNet aincome ~~combination~~from ofdiscontinue ~~events,~~operations ~~including~~for the ~~changes~~quarter inended ~~the~~June ~~algorithms used by Facebook to promote news content~~30, ~~changed~~2019 ~~Google~~was ~~search~~$0.2 ~~algorithms~~million ~~which~~compared ~~led~~ to ~~lower~~a ~~referral~~net ~~traffic~~loss from ~~Facebook~~discontinued ~~and~~operations ~~Google,~~of ~~respectively,~~$0.2 ~~increased~~million ~~competition from other sites~~ for ~~breaking~~the ~~political~~quarter ~~news~~ended ~~and~~June ~~reduced~~30, ~~referral traffic from other major websites like Yahoo and Twitter~~2018.

● WeAverage ~~have~~unique ~~continued~~monthly visitors to ~~roll~~the ~~out~~Salon.com ~~our~~Website ~~strategy~~during tothe ~~produce~~quarter ~~original~~ended ~~video~~June ~~content~~30, ~~focused~~2019 onwas ~~news~~6.3 million, ~~politics~~a 13% increase compared to the quarter ended March 31, 2019, and ~~entertainment~~a ~~under~~decrease of 19% compared to the ~~banner~~quarter ofended ~~Salon~~June TV30, ~~Salon~~2018, ~~Talks~~according ~~and~~to ~~Salon~~data ~~Stage~~compiled by Google Analytics. Our ~~goal~~focus ison toexpanding ~~add~~the ~~high~~tone ~~quality~~of ~~diversified~~our ~~content~~news coverage to attract more millennials and our ~~Website,~~efforts in the food and culture categories attributed to ~~attract~~the ~~premium~~quarter ~~video~~over ~~advertising~~quarter ~~that~~increase, ~~commands~~along ~~higher~~with ~~CPMs~~the asongoing ~~compared~~strategy of growing quality traffic, in order to maximize our ability to monetize our page views with higher CPM video and display advertising. ~~Featured~~We ~~guests~~attribute onthe ~~Salon~~year ~~Talks~~over ~~this~~year ~~quarter~~decreased ~~have~~traffic ~~included~~to ~~Kathy~~a ~~Griffin~~combination of events, ~~Oscar~~including ~~winners~~the ~~Mira~~changes ~~Sorvino~~in the algorithms used by Facebook to promote news content, ~~Melissa~~changed ~~Leo~~Google ~~and~~search ~~Cuba~~algorithms ~~Gooding~~which led to lower referral traffic from Facebook and Google, ~~Jr.~~respectively, ~~Parkland~~increased ~~student~~competition ~~Delaney~~from ~~Tarr,~~other sites for breaking political news and ~~former~~reduced ~~HUD~~referral ~~Secretary~~traffic ~~Julian~~from ~~Castro,~~other ~~among~~major ~~others~~websites like Yahoo and Twitter.

● We ~~continue~~have continued to ~~offer~~roll aout ~~paid~~our ~~subscription~~strategy ~~program~~to ~~that~~produce isoriginal ~~targeted~~video atcontent ~~our~~focused ~~mobile~~on ~~users~~news, ~~who~~politics, ~~prefer~~and ~~not~~entertainment tounder ~~see~~the ~~advertisements~~banner of Salon TV, Salon Talks and Salon Stage. ~~The~~Our ~~offering~~goal is ato ~~Salon~~add ~~ad-free~~high ~~app~~quality ~~for~~diversified ~~mobile~~content ~~and~~to ~~tablet~~our Website, ~~available~~and onto ~~Apple,~~attract ~~Google~~premium ~~Play,~~video ~~Amazon~~advertising ~~Fire~~that ~~and~~commands ~~Roku.~~higher InCPMs ~~October~~as ~~2018,~~compared weto ~~furthered~~display ~~our~~advertising. ~~paid~~Featured ~~content~~guests ~~strategy~~on ~~when~~Salon weTalks ~~launched~~this aquarter ~~browser-based~~have ~~subscription~~included ~~offering~~Oscar ~~for~~winner ~~both~~Aaron ~~mobile~~Sorkin, Emmy winners Paula Pell and ~~desktop~~Sherri asShepherd, ~~well~~Nobel asPrize awinner ~~feature~~Joseph ~~where~~Stiglitz, aMSNBC’s ~~user~~Joy ~~has~~Ann anReid, ~~option~~Rep. toTed ~~pay~~Lieu, ~~per~~Washington ~~piece~~state Gov. and 2020 presidential candidate Jay Inslee, and a series of ~~content~~acclaimed chefs, among others.

● The quarter ended December 31, 2018 featured great journalism — including original reporting and analysis — as Salon covered in-depth the top stories in news, politics and entertainment. Our daily coverage of the 2018 Congressional and gubernatorial races, the Trump Administration, the economy, continued investigation of the alleged Russian interference in the U. S. Presidential race, mass shootings, immigration and the fall television season generated the most interest. We have also continued our broadened, thoughtful and smart coverage on relationships, lifestyle, food and business that have been popular with our users.20

22● The Salon Premium subscription program that removes advertisement for paying users, as well as unlocks exclusive content to them, has seen impressive growth year over year. In the quarter ended June 30, 2019, subscription revenues had increased 114% from the quarter ended June 30, 2018. Subscription revenues had decreased 28% from the quarter ended March 31 2019, however a boom in subscription growth was experience in the month of February 2019 when new premium content was offered for the first time to our audience.

● InThe ~~October~~quarter ~~2018~~ended June 30, we2019 ~~entered~~featured ~~into~~great anjournalism ~~agreement~~— ~~with~~including ~~the~~original ~~WGAE~~reporting ~~for~~and aanalysis ~~three~~— as Salon covered in-~~year~~depth ~~period~~the top stories in news, politics and entertainment. AsOur adaily ~~result~~coverage of the ~~ongoing~~2020 ~~negotiations~~Democratic ~~and~~presidential ~~accompanying~~primary ~~legal~~campaigns, ~~fees~~the asTrump ~~well~~Administration, asmedia ~~the~~analysis, ~~higher~~Special ~~cost~~Counsel ~~structure~~Robert ~~per~~Mueller’s ~~the~~investigation ~~negotiated~~and ~~agreement~~report, Senate Majority Leader Mitch McConnell, and the ~~effect~~spring ~~was~~TV ~~detrimental~~and toblockbuster early-summer movie season generated the ~~company’s~~most ~~financial~~interest. ~~standing~~Original asinvestigative wereports ~~had~~by toSalon ~~endure~~exposed ~~layoffs~~a culture of ~~management~~sexual harassment and ~~operations~~assault ~~staff~~cover-ups inat ~~order~~the annual Burning Man festival, and put public pressure on a stalled Warner Brothers internal investigation into sexual misconduct by a TV host to ~~accommodate~~finally ~~the~~conclude. ~~editorial~~We ~~staff~~have also continued our broadened, thoughtful and smart coverage on relationships, lifestyle, food and health that have been popular with our users.

● Social media and referral traffic from ~~other~~news ~~websites~~aggregation platforms and apps continue to be major drivers of traffic, atwith ~~approximately~~healthy growth shown in these Channels. Social Media & Referral traffic accounted for 37% of ~~Website~~website visitors asin the quarter ended June 30, 2019, an increase of ~~December~~4% over the quarter ended March 31, ~~2018~~2019, and ~~are~~an aincrease ~~significant~~of ~~focus~~20% ~~across~~beyond the ~~Company.~~Social WeMedia ~~make~~& ~~regular~~Referral ~~updates~~traffic toin the ~~Website~~quarter toended ~~optimize~~June ~~content~~30, 2018. Expanded partnerships with distribution and syndication partners has contributed to bethis positive trend. Content shared onto social media ~~with~~by aour ~~special~~editorial ~~focus~~team onis ~~our~~strategically ~~mobile~~set ~~platforms.~~with ~~Across~~different ~~all~~imagery ~~social~~and ~~platforms,~~headlines wefor ~~average~~each ~~over~~platform 2in ~~million~~an ~~followers~~effort to maximize click through traffic.

● Mobile ~~users~~traffic accounted for 6967% of all ~~users~~pageviews in ~~December~~the ~~2018~~quarter ended June 30 2019, which is ~~slightly~~an upincrease ~~from~~of 667% in mobile traffic from ~~September~~the ~~2018.~~quarter Weended ~~continue~~March to31 ~~have~~2019, and a ~~company-wide~~24% ~~focus~~increase onin ~~our~~mobile ~~users’~~traffic ~~mobile~~from ~~needs,~~the ~~especially~~quarter ~~quick~~ended ~~and~~June ~~easy~~30, ~~access~~2018. We have striven to ~~fast-loading~~increase ~~content~~the ~~optimized~~load ~~for~~time ~~better~~of ~~readability~~our onsite, ~~smaller~~through ~~screens~~intensive efforts to reduce bloating in the website code. We also ~~have~~carefully ~~increased~~adjusted ~~focus~~our on monetization ofstrategy on mobile ~~traffic~~to ~~through~~be ~~implementation~~most ofappropriate ~~native~~for those devices, which lead to a faster site and ~~other~~a better mobile~~-optimized~~ ~~advertising~~experience for our users.

●

We continually work toward leaner, more efficient technological systems through automation, improved architecture and adoption of emerging best practices.

Material Agreements entered into during Fiscal ~~2019~~Year 2020

Advances/Secured Notes from Related Parties

From June 2018 through August 2018, we received $114.5 in advances from related parties. These advances accrued interest at a rate of 10% per annum and payable on the one-year anniversary of such advances. On December 7, 2018, these advances and all accrued interest were exchanged for secured notes in the amount of approximately $118.9. These notes bear a 10% interest rate and are payable on June 30, 2019. In addition, on December 7, 2018, we issued warrants to the secured note holders to purchase 11,312,600 shares of our common stock at an exercise price of $0.01 per share. The warrants expire five years from the issuance date and can be exercised with cash or cancellation of the secured notes referenced above.

Technology Support Agreement

On October 25, 2018 we entered into a Technology Support Agreement (the "Technology Agreement") with PubLife LLC under which PubLife agreed to provide certain technology support to us, including all web development activities for a six month term in consideration of $1 per month. The payment terms under this agreement were amended under the terms of the Asset Purchase Agreement (as set forth below).

General Advertising Services Agreement

On October 25, 2018, we entered into a General Advertising Services Agreement (the "Advertising Agreement") with Proper Media LLC ("Agent") under which we retained Agent to provide advertisement sales and trafficking services for our websites, including salon.com and related sites. The term of this agreement is for one -year, which term shall be extended for successive one-year periods under terminated by either party within 30 days’ notice prior to the end of any term. We agreed to pay agent its revenue share of all revenue invoiced by Agent in connection with Agent's performance of the services under this agreement. In addition, if we refer a 3rd party publishing partner and Agent executes an advertising services agreement with such 3rd party, Agent agrees to pay us 25% of the monthly revenue earned by Agent due to such 3rd party agreement for the first six-months of any such agreement. The payment terms under this agreement were amended under the terms of the Asset Purchase Agreement (as set forth below).

WGAE Agreement

In October 2018, we entered into an agreement with the WGAE for a three-year period. As a result of the ongoing negotiations and accompanying legal fees as well as the higher cost structure per the negotiated agreement, the effect was detrimental to the company’s financial standing as we had to endure layoffs of management in order to accommodate the editorial staff. In addition, the agreement with the union had a seemingly negative impact on our ability to obtain additional financing.

Asset Purchase Agreement

On March 6, 2019, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Salon.com, LLC (“Buyer”) under which we agreed to sell substantially all of our assets (the "Asset Sale"), including all pertinent intellectual property rights comprising the Company’s business of owning, operating and publishing the website known as Salon.com, (the “Business”), but excluding our cash, cash equivalents and marketable securities and certain contracts and right related to those contracts and tax refunds and insurance policies and rights related to excluded assets, to the Buyer for an aggregate Purchase Price of $5 million payable plus the amount of the Earn-Out Payment (as described below) and the assumption of certain assumed liabilities, all pursuant to the terms of the Asset Purchase Agreement. The purchase price is payable in cash as follows: (i) $550 in payable in cash at closing; (ii) $100 shall be deposited with the Escrow Agent, which amount shall be released to us in accordance with the terms of the Asset Purchase Agreement; (iii) $500 of which was previously paid to the Company as a deposit concurrent with execution of the term sheet for the Asset Purchase Agreement (the "Deposit") and (iv) $3,850 via issuance of a 10% secured promissory note, which note shall be paid in 2 equal installments on the 12 month and 24 month anniversary of the closing date. This note shall be secured by all of the assets being sold to Buyer under the Asset Purchase Agreement.

First Amendment to Asset Purchase Agreement

On April 15, 2019, we entered into a First Amendment to Asset Purchase Agreement ("First Amendment") with Buyer. The primary purpose of the First Amendment was to amend the payment terms under the Technology Agreement and the Advertising Agreement as set forth below:

We also amended Section 10.9 of the Asset Purchase Agreement to include the term sheet related to the acquisition for the documents related to the entire agreement of the parties.

24Second Amendment to Asset Purchase Agreement

~~Sources~~On ofJune ~~Revenue~~30, 2019, we entered into a Second Amendment to Asset Purchase Agreement with Buyer under which the parties revised the Asset Purchase Agreement to provide that amounts delivered into escrow upon execution would not be used to compensate any Buyer Indemnified Parties for any losses under the Asset Purchase Agreement.

~~Most~~Settlement ofAgreements ~~Salon’s~~with ~~revenues~~Jordan ~~are~~Hoffner derived from advertising from the sale of promotional space on its Website. The sale of promotional space is generally for less than ninety days in duration. Advertisers pay for advertising on a CPM basis. The primary factors in our ability to increase our advertising revenues in future periods are the addition of higher CPM ad products, such as pre-roll video, and ~~growth~~Elizabeth in our audience. Attracting more unique visitors to our Website is important because these returning users generate additional page views, and each page view becomes a potential platform for advertisements. Advertising comprises banners, video, rich media and other interactive ads. CPMs vary by platform and CPMs for mobile have been less than those for desktop; however, in the recent quarter they have been increasing. Videos and sponsored content on mobile devices continue to grow in popularity and can demand a higher CPM. We believe that continuing to add videos and sponsored content to our mobile platform and improving and optimizing the platform’s design will help increase revenues from our mobile platform.Hambrecht

On July 1, 2019, we entered into a Settlement Agreement and Release with each of Jordan Hoffner, our former CEO and Elizabeth Hambrecht, our former CFO. Under the terms of each agreement, we agreed to pay Mr. Hoffner and Ms. Hambrecht, as applicable, the total sum of Thirty Thousand dollars ($30,000.00) (the “Settlement Payment”) on the earlier of (i) 2 business days after the Closing of that certain Asset Purchase Agreement and (ii) December 31, 2019 (the “Payment Date”). Each of Mr. Hoffner and Ms. Hambrecht Claimant acknowledges that, upon receipt of the Settlement Payment, they will have been paid all wages, severance, all unreimbursed business expenses, and all accrued but unused vacation pay due and owing to them further waived any additional claims for unpaid salary or wage amounts, unreimbursed business expenses, and accrued but unused vacation pay. Each of Mr. Hoffner and Ms. Hambrecht executed a general release of all claims under their respective agreements.

Sources of Revenue from Discontinued Operations

Most of Salon’s revenues were derived from advertising from the sale of promotional space on its Website, which as a result of our executing the Asset Purchase Agreement have been characterized as “Discontinued Operations” in our financial statements. The sale of promotional space is generally for less than ninety days in duration. Advertisers pay for advertising on a CPM basis. The primary factors in our ability to increase our advertising revenues in future periods are the addition of higher CPM ad products, such as pre-roll video, and growth in our audience. Attracting more unique visitors to our Website is important because these returning users generate additional page views, and each page view becomes a potential platform for advertisements. Advertising comprises banners, video, rich media and other interactive ads. CPMs vary by platform and CPMs for mobile have been less than those for desktop; however, in the recent quarter they have been increasing. Videos and sponsored content on mobile devices continue to grow in popularity and can demand a higher CPM. We believe that continuing to add videos and sponsored content to our mobile platform and improving and optimizing the platform’s design will help increase revenues from our mobile platform.

In addition, Salon generates revenue from referring users to third-party websites, and we also generate nominal revenue from the licensing of content that previously appeared in our Website.

Continuing Operating Expenses

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

Sales and marketing expenses consist primarily of salaries and related personnel costs associated with Salon’s sales team and our business development efforts.

Technology expenses consist primarily of salaries and related personnel costs, and contractor fees, associated with the development, testing and enhancement of our software to manage our Website, as well as to support our marketing and sales efforts.

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

Interest expense includes accrued interest on our outstanding debt and non-cash charges from the beneficial conversion feature of convertible debt.

In accordance with Accounting Standards Codification (“ASC”) 718, “Stock Compensation” (ASC 718), our expenses include stock-based compensation expenses related to stock option and restricted stock grants to employees, non-employee directors and consultants. These costs are included in the various departmental expenses.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP 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 financial statements in our Fiscal ~~2018~~2019 Annual Report. We believe accounting policies and estimates related to revenue recognition and accounting for debt and equity are the most critical to our financial statements. Future results may differ from current estimates if different assumptions are used or different conditions were to prevail.

Revenue Recognition

~~Salon~~We ~~recognizes~~recognize ~~revenues~~advertising ~~once~~revenue ~~persuasive~~from ~~evidence~~a ofdiverse anmix ~~arrangement~~of ~~exists,~~advertising ~~the~~methods ~~fee~~including isdisplay ~~fixed or determinable~~advertisements, ~~delivery~~where ~~has~~revenue ~~occurred, and collectability~~ is ~~reasonably~~dependent ~~assured.~~upon ~~Revenues~~the ~~are~~number ~~recognized~~of ~~ratably~~advertising ~~over~~impressions ~~the~~delivered; ~~period~~native inadvertisements, which ~~our obligations to deliver advertisement impressions~~ are ~~fulfilled.~~advertisements ~~The~~created ~~duration~~to ofmatch the ~~advertisements~~form ~~is generally short-term~~ and ~~frequently~~function ~~have~~of ~~cancellation~~the ~~clauses.~~platform ~~Payments~~on ~~received~~which ~~before~~they ~~our~~appear; ~~obligations~~or ~~are~~sponsored ~~fulfilled are classified as “deferred revenues” in Salon’s balance sheet~~content.

We generate advertising revenue from advertisements displayed on our Website. Advertising revenue comprised 7894% and 7977% of our revenues for the ~~nine~~three months ended ~~December~~June 3130, ~~2018~~2109 and ~~December~~June 3130, ~~2017~~2018, respectively. Salon’s advertising revenue is principally dependent on the number of visits to our Website and the corresponding advertisement unit rates. Articles, videos and other forms of content generate advertising revenue from a diverse mix of advertising methods including display advertisements, where revenue is dependent upon the number of advertising impressions delivered; pre-roll video advertisements, where revenue is dependent on the number of video views; native advertisements, which are advertisements created to match the form and function of the platform on which they appear and sponsored content, in which advertisers pay for adjacency to specific content. In the past two years, industry trends have shifted toward increased use of agency and software-based approaches to buying online advertising. As a result, we have re-focused our advertising sales to rely on the rapidly growing programmatic advertising business in which we directly sell audience packages based on real-time advertising demand and engage third-party agencies to sell advertisement on our Website through programmatic advertising open marketplaces, and we place less emphasis on a traditional media sales effort.

~~Accounting for Stock-Based Compensation~~23

Stock-Based Compensation

Salon accounts for stock-based compensation under ASC 718 and recognize the fair value of stock awards on a straight-line basis over the requisite service period of the award, which is the standard vesting term of four years.

We recognized stock-based compensation expense of $~~1,186~~139 and $~~880~~390 during the ~~nine~~three months ended ~~December~~June 3130, ~~2018~~2019 and ~~December 31~~2018, ~~2017,~~ respectively. As of ~~December~~June 3130, ~~2018~~2019, we had an aggregate of $~~3,209~~333 of stock-based compensation remaining to be amortized to expense over the remaining requisite service period of the underlying awards. We currently expect this stock-based compensation balance to be amortized as follows: $~~235~~142 during the remainder of fiscal ~~2019; $1,411 during fiscal~~ 2020; $~~1,127~~168 during fiscal 2021; and $~~436~~23 during fiscal 2022. The expected amortization reflects only outstanding stock option awards as of ~~December~~June 3130, ~~2018~~2019. We expect to continue to issue stock-based awards to our employees in future periods.

The full impact of stock-based compensation in the future is dependent upon, among other things, the timing of when we hire additional employees, the effect of new long-term incentive strategies involving stock awards in order to continue to attract and retain employees, the total number of stock-awards granted, achievement of specific goals for performance-based grants, the fair value of the stock awards at the time of grant and the tax benefit that we may or may not receive from stock-based expenses. Additionally, stock-based compensation requires the use of an option-pricing model to determine the fair value of stock option awards. This determination of fair value is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards.

26Results of Operations for the Three Months Ended June 30, 2019 Compared to the Three Months Ended June 30, 2018

~~Results~~Continued of Operations ~~for the Three and Nine Months Ended December 31, 2018 Compared to the Three and Nine Months Ended December 31, 2017~~

General and administrative

General and administrative expenses decreased 29% to approximately $0.5 million for the three months ended June 30, 2019 from approximately $0.7 million for the three months ended June 30, 2018. The overall decrease was mainly attributed to a decrease in non-cash stock-based compensation.

Interest expense

Interest expense increased 158% to approximately $0.1 million for the three months ended June 30, 2019 from approximately $0.04 million for the three months ended June 30, 2018. The increase was primarily attributed to the increase of non-cash charges from the amortization of the debt discount for stock warrants.

Discontinued Operations

Revenues

Revenues ~~decreased~~increased 17% to approximately $1.0.7 million for the three months ended ~~December~~June 3130, ~~2018~~2019 from approximately $10.26 million for the three months ended ~~December~~June 3130, ~~2017. Revenues decreased 41% to approximately $2.3 million for the nine months ended December 31,~~ 2018 ~~from approximately $3~~.~~9 million for the nine months ended December 31, 2017.~~

Advertising revenues ~~decreased~~increased 1140% to approximately $0.87 million for the three months ended ~~December~~June 3130, ~~2018~~2019 from approximately $0.95 million for the three months ended ~~December~~June 3130, ~~2017~~2018. Direct advertisement sales were approximately 4121% and programmatic advertisement sales were approximately 5979% of total advertising revenue for the three months ended ~~December~~June 3130, ~~2018~~2019.

Advertising revenues decreased 42% to approximately $1.8 million for the nine months ended December 31, 2018 from approximately $3.1 million for the nine months ended December 31, 2017. Direct advertisement sales were approximately 31% and programmatic advertisement sales were approximately 69% of total advertising revenue for the nine months ended December 31, 2018.24

Revenues from all other sources, mostly referral fees, decreased 6750% to approximately $0.105 million for the three months ended ~~December~~June 3130, ~~2018~~2019 from approximately $0.31 million for the three months ended ~~December~~June 3130, ~~2017. Revenues from all other sources, decreased 43% to approximately $0.4 million for the nine months ended December 31,~~ 2018 ~~from approximately $0~~.7 ~~million for the nine months ended December 31, 2017.~~ The overall decreases were attributed to lower revenues from a renewed referral fee customer agreement.

Expenses

Production and content

Production and content expenses decreased 338% to approximately $0.555 million for the three months ended ~~December~~June 3130, ~~2018~~2019 from approximately $0.86 million for the three months ended ~~December~~June ~~31 2017. Production and content expenses decreased 39% to approximately $1.7 million for the nine months ended December 31~~30, 2018 ~~from approximately $2~~.8 ~~million for the nine months ended December 31, 2017.~~ The decrease was mainly attributed to personnel changes and a decrease in internet hosting and ad serving fees.

Sales and marketing

Sales and marketing expenses ~~decreased~~remained ~~86%~~relatively toflat at approximately $0.01008 ~~million~~ for the three months ended ~~December~~June 3130, ~~2018~~2019 ~~from approximately $0.1 million for the three months ended December, 2017. Sales~~ and ~~marketing expenses decreased 96% to approximately $0.01 million for the nine months ended December 31,~~ 2018 ~~from approximately $0~~.~~4 million for the nine months ended December 31, 2017. The decrease was mainly attributed to personnel reductions.~~

Technology

Technology expenses decreased 4865% to approximately $0.107 million for the three months ended ~~December~~June 3130, ~~2018~~2019 from approximately $0.2 million for the three months ended ~~December~~June 3130, ~~2017. Technology expenses decreased 32% to approximately $0.4 million for the nine months ended December 31,~~ 2018 ~~from approximately $0~~.6 ~~million for the nine months ended December 31, 2017.~~ The decrease was mainly attributed to personnel reductions.

General and administrative

General and administrative expenses remained relatively flat at approximately $0.6 million for the three months ended December 31, 2018 and 2017. General and administrative expenses increased 25% to approximately $2.0 million for the nine months ended December 31, 2018 from approximately $1.6 million for nine months ended December 31, 2017. The overall increase was mainly attributed to non-cash stock-based compensation.

Interest expense

Interest expense remained relatively flat at approximately $0.01 million for the three months ended December 31, 2018 and December 31, 2017. Interest expense decreased 66% to approximately $0.1 million for the nine months ended December 31, 2018 from approximately $0.04 million for the nine months ended December 31, 2017. The decrease was primarily attributed to the decrease of non-cash charges from the beneficial conversion feature of convertible promissory notes.

Liquidity and capital resources

Net cash used in operations was approximately $0.62 million for the ~~nine~~three months ended ~~December~~June 3130, ~~2018~~2019. The principal ~~uses~~use of cash during ~~the~~each ~~nine~~of ~~months ended December 31, 2018 were to fund~~ the ~~$1.9~~quarters ~~million~~ended ~~net~~June ~~loss~~30, ~~inclusive~~2019 ~~of $1.2 million stock-based compensation expense~~ and ~~the net activities from various working capital for the period. The accounts receivable, net as of December 31,~~ 2018 ofwas ~~approximately $0.7 million, represent primarily advertising sales during the period, and are expected~~ to bemeet ~~collected within~~ the ~~next~~Company’s ~~four~~operating ~~months~~deficits.

Net cash provided by financing activities was approximately $0.7 million and $0.8 million for the nine months ended December 31, 2018 and December 31, 2017, reflecting proceeds from convertible promissory notes.

We estimate that we will require approximately $0.5 million in additional funding to meet our operating needs for the remaining nine months of fiscal year 2019, ending March 31, 2019. If planned revenues are less than expected, or if planned expenses are more than expected, the cash shortfall may be higher, which will result in a commensurate increase in required financing.

During the nine months ended December 31, 2018, we issued $0.11 million in 10% convertible promissory notes and $0.619 million in 10% senior secured notes payable. If we were not able to obtain additional funding from related parties or others, we would be required to curtail or discontinue operations, or consider other alternatives.

Off-Balance-Sheet Arrangements and Contractual Obligations

WeSalon ~~have~~has an operating lease primarily for office space facilities, this operating lease ~~expires~~was interminated ~~less~~as ~~than~~of 12June ~~months and is not recorded on the balance sheet~~30, ~~we recognize lease expense for this lease on a straight-line basis over the lease term~~2019.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

Item 4. Controls and Procedures

Evaluation of Our Disclosure Controls and Internal Controls

Our management, with the participation of the Company’s executive and principal financial officers, or persons performing similar functions, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q (~~December~~June 3130, ~~2018~~2019), as is defined in Rule 13a-15(e) promulgated under the Exchange Act. 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 Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Company’s management, as the principal executive and financial officers, respectively, to allow timely decisions regarding required disclosures.

Based on that evaluation, our management concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures were not effective due to the following material weaknesses:

Lack of segregation of duties;

Failure to implement accounting controls

Procedures related to identification and approval of related party transactions

To the extent reasonably possible given our limited resources, we intent to take measures to cure the aforementioned weaknesses.

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

To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our financial statements included in this report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in the report fairly present in all material aspects our financial condition, results of operations and cash flows for the years presented.

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.

Changes in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the period covered by this Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

In August 2016, we informed our landlord at our office space at 132 West 31^st Street, New York, New York, of our intention to move out of the premises, and we engaged a property agent to find a sub-tenant for the space. The lease for New York space commenced on July 1, 2014 and will expire on September 30, 2019. In January 2017, we were asked to vacate the office space at 132 West 31^st Street due to nonpayment of our monthly rent, and on January 30, 2017, we released the letter of credit of $204 to the landlord in payment of the past due rent. On August 3, 2017, we received a Complaint from the landlord. This civil summons and complaint in New York State Court seeks to recover all unpaid rents for the remainder of our five-year lease, equal to approximately $918, plus damages and attorney fees (and currently approximately $630 as of the date of this report). Counsel for Salon is currently evaluating potential defenses and counterclaims, based on the laws and facts

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

~~Advances/Secured Notes from Related Parties~~None.

Technology Support Agreement

General Advertising Services Agreement

WGAE Agreement

Asset Purchase Agreement

First Amendment to Asset Purchase Agreement

We also amended Section 10.9 of the Asset Purchase Agreement to include the term sheet related to the acquisition for the documents related to the entire agreement of the parties.

Item 6. Exhibits

(a) Exhibits.

31.1	Certification of Richard MacWilliams, acting Chief Executive Officer of the Registrant pursuant to Section 302, as adopted pursuant to the Sarbanes-Oxley Act of 2002

31.2	Certification of Trevor Colhoun, acting Chief Financial Officer of the Registrant pursuant to Section 302, as adopted pursuant to the Sarbanes-Oxley Act of 2002

32.1	Certification of Richard MacWilliams, acting Chief Executive Officer of the Registrant pursuant to Section 906, as adopted pursuant to the Sarbanes-Oxley Act of 2002

32.2	Certification of Trevor Colhoun, acting Chief Financial Officer of the Registrant pursuant to Section 906, as adopted pursuant to the Sarbanes-Oxley Act of 2002

101.INS**

XBRL Instance

101.SCH**

XBRL Taxonomy Extension Schema

101.CAL**

XBRL Taxonomy Extension Calculation

101.DEF**

XBRL Taxonomy Extension Definition

101.LAB**

XBRL Taxonomy Extension Labels

101.PRE**

XBRL Taxonomy Extension Presentation

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections

Signatures

Pursuant to the requirements of the Securities 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.

Dated: June 12, 2019		/s/ Richard MacWilliams
Dated: August 13, 2019	/s/ Richard MacWilliams
	Richard MacWilliams	~~Richard MacWilliams~~
		Acting Chief Executive Officer (Principal Executive Officer)
	Acting Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
Dated: August 13, 2019	/s/ Trevor Colhoun
	Trevor Colhoun
	Acting Chief Financial Officer (Principal Financial and Accounting Officer)

~~/s/ Trevor Colhoun Trevor Colhoun Chief Financial Officer (Principal Financial and Accounting Officer)~~30

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