slnm20190630

slnm20190630_10q.htm

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 June 30, 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 August 1, 2019 was 315,939,477 shares.

FORM 10-Q

SALON MEDIA GROUP, INC.

INDEX

PART I	FINANCIAL INFORMATION	Page Number

ITEM 1:	Financial Statements

	Condensed Balance Sheets as of June 30, 2019 (unaudited) and March 31, 2019	3

	Condensed Statements of Operations for the three months ended June 30, 2019 and 2018 (unaudited)	4

	Condensed Statements of Stockholders’ Deficit for the three months ended June 30, 2019 and 2018 (unaudited)	5

	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	19

ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk	26

ITEM 4:	Controls and Procedures	26

PART II	OTHER INFORMATION

ITEM 1:	Legal Proceedings	27

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

ITEM 3.	Defaults upon Senior Securities	28

ITEM 4.	Mine Safety and Disclosures	28

ITEM 5.	Other Information	28

ITEM 6:	Exhibits	29

	Signatures	30

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

	June 30,			March 31,
	2019			2019 (1)
	(unaudited)
Assets
Current assets:
Cash	$	60		$	269
Prepaid expenses and other current assets		54			52
Current assets held for sale (Note 4)		457			439
Total current assets		571			760

Non-current assets held for sale (Note 4)		174			210
Total assets	$	745		$	970

Liabilities and Stockholders’ Deficit
Current liabilities:
Short-term borrowings and accrued interest	$	1,532		$	1,512
Convertible promissory notes, net		700			700
Convertible promissory notes – related party, net		764			711
Accrued liabilities		927			904
Current liabilities held for sale (Note 4)		1,373			1,431
Total current liabilities		5,296			5,258

Non-current liabilities held for sale (Note 4)		-			-
Total liabilities		5,296			5,258

Commitments and contingencies (See Note 9)

Stockholders’ deficit:
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, 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		136,288			136,312
Accumulated deficit		(141,155	)		(140,753	)
Total stockholders' deficit		(4,551	)		(4,288	)
Total liabilities and stockholders' deficit	$	745		$	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 June 30,
	2019			2018

Revenues	$	-		$	-

Operating expenses:
General and administrative		456			746
Total general and administrative		456			746

Loss from operations		(456	)		(746	)
Interest expense		(45	)		(38	)
Warrant discount		(53	)		-
Non-cash interest expense – beneficial conversion feature		-			-
Net loss from continuing operations	$	(554	)	$	(784	)
Income (Loss) from discontinued operations (Note 4)		152			(210	)
Net loss	$	(402	)	$	(994	)

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	)

Weighted average shares used in computing basic and diluted net loss per share from continuing operations		154,680,279			151,056,477

Weighted average shares used in computing basic and diluted net loss per share from discontinued operations		154,680,279			151,056,477

See accompanying notes to condensed financial statements.

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

	Preferred						Common				Additional						Total
	Stock						Stock				Paid-In			Accumulated			Stockholders’
	Shares			Amount			Shares		Amount		Capital			(Deficit)			Deficit

Balance, March 31, 2019		1,648,830		$	2			151,056,477	$	151	$	136,312		$	(140,753	)	$	(4,288	)

Shares converted from preferred stock		(1,648,830	)		(2	)		164,883,000		165		(163	)					-
Stock-based compensation		-			-			-		-		139			-			139
Net loss		-			-			-		-		-			(402	)		(402	)
Balance, June 30, 2019		-		$	-			315,939,477	$	316	$	136,288		$	(141,155	)	$	(4,551	)

	Preferred				Common				Additional					Total
	Stock				Stock				Paid-In		Accumulated			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		-		-		-		-		390		-			390
Net loss		-		-		-		-		-		(994	)		(994	)

Balance, June 30, 2018		1,648,830	$	2		151,056,477	$	151	$	135,057	$	(139,080	)	$	(3,870	)

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

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

	Three Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net loss from continuing operations	$	(554	)	$	(784	)

Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		139			390
Amortization of debt discount		53			-
Changes in assets and liabilities:
Prepaid expenses and other current assets		(2	)		(26	)
Accrued liabilities		43			110
Net cash (used in) operating activities – continuing operations		(321	)		(310	)
Net cash provided by (used in) operating activities – discontinued operations		112			131
Net cash (used in) operating activities		(209	)		(179	)

Cash flows from investing activities:
Purchase of equipment and capitalized website development costs		-			-
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 – related party		-			110
Proceeds from unsecured advances		-			50
Net cash provided by financing activities		-			160

Net increase (decrease) in cash		(209	)		(19	)
Cash, beginning of year		269			67
Cash, end of year	$	60		$	48


Amount paid for interest	$	-		$	-
Amount paid for income taxes	$	-		$	-

See accompanying notes to 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

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, 2019, which are included in Salon’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on 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 three months ended June 30, 2019 are not necessarily indicative of the expected results for any other interim period or for the fiscal year ending March 31, 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 has an accumulated deficit as of June 30, 2019 of $141,155. In addition, Salon expects to incur a net loss from operations for its year ending March 31, 2020. During the last two years, Salon has relied on cash from related-party advances and rounds of financing to meet its cash requirements. In March 2019, the Company entered into an asset purchase agreement with Salon.com, LLC pursuant to which it agreed to sell substantially all of its assets for an aggregate purchase price of $5 million. Following consummation of this agreement, it is intended that the Company will cease to be an operating company. As the Company will cease to have any revenue generating activities at that time, it is unlikely that the Company will raise additional funds on commercially reasonable terms, if at all. Further, there is no guarantee that the proceeds from the asset sale will be sufficient to satisfy all of 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 if the Company is unable to continue as a going concern.

Use of 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)

Revenue Recognition

We recognize revenue when we transfer control of promised goods or services to our customer in an amount that reflects the consideration we expect to be entitled to in exchange for those good or services.

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.

Two customers accounted for approximately 64% and 12% of revenues for the three months ended June 30, 2019. Two customers accounted for approximately 14% and 12% of revenues for the three months ended June 30, 2018. Two customers accounted for approximately 66% and 13% of trade accounts receivable as of June 30, 2019. Two customers accounted for approximately 72% and 14% of trade accounts receivable as of March 31, 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 June 2018, the FASB issued Accounting Standard Update No. 2018-07, Compensation—Stock Compensation (“ASU 2018-07”), to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments for employees, with certain exceptions. Under the new guidance, the cost for nonemployee awards may be lower and less volatile than under current GAAP because the measurement generally will occur earlier and will be fixed at the grant date. This update is effective for the fiscal year ended March 31, 2020.

In June 2016, the FASB issued Accounting Standard Update No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”), which requires companies to consider historical experiences, current market conditions and reasonable and supportable forecasts in the measurement of expected credit losses. This update is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, although early adoption is permitted. We are currently evaluating the impact it will have on our financial statements.

Accounting Standards Adopted

On April 1, 2019, we adopted Accounting Standards Update No 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted the new guidance using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. We did not record a ROU asset or liability on the balance sheet as our operating lease was terminated as of June 30, 2019. In addition, we did not enter into any non-cancellable operating lease agreements.

In July 2017, the Financial Accounting Standards Board (“FASB”) issued a two-part Accounting Standards Update (“ASU”) 2017-11, “Earnings Per Share (Topic 260).” Part I addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Part II does not require any transition guidance because those amendments do not have an accounting effect. ASU 2017-11 is effective for public entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, 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)

Note 3. Revenue for Discontinued Operations

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

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

Note 4. Discontinued Operations

On March 6, 2019, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Salon.com, LLC (“Buyer”) under which it agreed to sell substantially all of its 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 its 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. As a result of the Company entering into the Asset Purchase Agreement, the Company’s operations have been characterized as discontinued operations in its financial statements pursuant to ASC 205-20, Presentation of Financial Statements – Discontinued Operations.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

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

	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 MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

The following table summarizes the assets and liabilities of discontinued operations (in thousands):

	June 30,		March 31,
	2019		2019
ASSETS
Current Assets
Accounts receivable, net	$	457	$	439
Total current assets held for sale		457		439

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

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

Note 5. 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 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.

As of June 30, 2019, and March 31, 2019, the weighted average interest rate on the Company’s short-term borrowings was approximately 3.7% and 3.6%, respectively.

Convertible Promissory Notes

Interest bearing convertible promissory notes

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.

Interest bearing senior secured 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)

Note 6. Common Stock

On June 28, 2019, 164,883,000 common shares were issued in exchange for 1,648,830 shares of Series A Preferred Stock.

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

Note 7. Employee Stock Option Plans

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 11, “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, 2019. The 2004 Stock Plan expired in November 2014, after which no further options were permitted to be granted.

Salon has granted options pursuant to plans not approved (“Non-Plan”) by stockholders. We did not grant any Non-Plan options during the three months ended June 30, 2019 or 2018.

As of June 30, 2019, the aggregate stock compensation remaining to be amortized to expense was $333. Salon expects this stock-based compensation balance to be amortized as follows: $142 during the remainder of fiscal year 2020; $168 during fiscal year 2021; and $23 during fiscal year 2022. The expected amortization reflects only outstanding stock option awards as of June 30, 2019.

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

				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	$	-

We did not grant any options during the three months ended June 30, 2019 or 2018. The weighted-average fair value of options vested during each of the three-month periods ended June 30, 2019 and 2018 was $0.15 per share and $0.20 per share, respectively. There were no options exercised during the three months ended June 30, 2019.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

Our Board also approved a resolution on June 12, 2014 to amend the 2014 Stock Incentive Plan to comply with certain California Code of Regulations and Internal Revenue Service regulations. As of June 30, 2019, options totaling 10,481,985 were awarded under the 2014 Stock Incentive Plan.

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

Note 8. 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 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)

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.

Note 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)

The Company’s 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.

On June 28, 2019 all 1,648,830 shares of Series A Preferred Stock were converted into 164,883,000 shares of Common Stock.

SALON MEDIA GROUP, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

Note 12. Subsequent Events

Settlement Agreements with Jordan Hoffner and Elizabeth 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.

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, 2019 (the “Fiscal 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, 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, 2019 and 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.

We 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 June 30, 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 from Quarter ended June 30, 2019

●

Net revenues increased 17% to $0.7 million in the quarter ended June 30, 2019 versus $0.6 million in the same period in 2018. The increase 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 79% of our advertising revenues for the June 2019 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.

●

Net loss for the quarter ended June 30, 2019 was $0.4 million, a 60% decrease from $1.0 million for the quarter ended June 30, 2018. This included a net loss from continuing operations for the quarter ended June 30, 2019 of $0.5 million, a 29% decrease from $0.7 million for the quarter ended June 30, 2018. Net income from discontinue operations for the quarter ended June 30, 2019 was $0.2 million compared to a net loss from discontinued operations of $0.2 million for the quarter ended June 30, 2018.

●

Average unique monthly visitors to the Salon.com Website during the quarter ended June 30, 2019 was 6.3 million, a 13% increase compared to the quarter ended March 31, 2019, and a decrease of 19% compared to the quarter ended June 30, 2018, according to data compiled by Google Analytics. Our focus on expanding the tone of our news coverage to attract more millennials and our efforts in the food and culture categories attributed to the quarter over quarter increase, along with the ongoing strategy of growing quality traffic, in order to maximize our ability to monetize our page views with higher CPM video and display advertising. We attribute the year over year decreased traffic to a combination of events, including the changes in the algorithms used by Facebook to promote news content, changed Google search algorithms which led to lower referral traffic from Facebook and Google, respectively, increased competition from other sites for breaking political news and reduced referral traffic from other major websites like Yahoo and Twitter.

●

We have continued to roll out our strategy to produce original video content focused on news, politics, and entertainment under the banner of Salon TV, Salon Talks and Salon Stage. Our goal is to add high quality diversified content to our Website, and to attract premium video advertising that commands higher CPMs as compared to display advertising. Featured guests on Salon Talks this quarter have included Oscar winner Aaron Sorkin, Emmy winners Paula Pell and Sherri Shepherd, Nobel Prize winner Joseph Stiglitz, MSNBC’s Joy Ann Reid, Rep. Ted Lieu, Washington state Gov. and 2020 presidential candidate Jay Inslee, and a series of acclaimed chefs, among others.

●

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.

●

The quarter ended June 30, 2019 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 2020 Democratic presidential primary campaigns, the Trump Administration, media analysis, Special Counsel Robert Mueller’s investigation and report, Senate Majority Leader Mitch McConnell, and the spring TV and blockbuster early-summer movie season generated the most interest. Original investigative reports by Salon exposed a culture of sexual harassment and assault cover-ups at the annual Burning Man festival, and put public pressure on a stalled Warner Brothers internal investigation into sexual misconduct by a TV host to finally conclude. We 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 news aggregation platforms and apps continue to be major drivers of traffic, with healthy growth shown in these Channels. Social Media & Referral traffic accounted for 37% of website visitors in the quarter ended June 30, 2019, an increase of 4% over the quarter ended March 31, 2019, and an increase of 20% beyond the Social Media & Referral traffic in the quarter ended June 30, 2018. Expanded partnerships with distribution and syndication partners has contributed to this positive trend. Content shared to social media by our editorial team is strategically set with different imagery and headlines for each platform in an effort to maximize click through traffic.

●

Mobile traffic accounted for 67% of all pageviews in the quarter ended June 30 2019, which is an increase of 7% in mobile traffic from the quarter ended March 31 2019, and a 24% increase in mobile traffic from the quarter ended June 30, 2018. We have striven to increase the load time of our site, through intensive efforts to reduce bloating in the website code. We also carefully adjusted our monetization strategy on mobile to be most appropriate for those devices, which lead to a faster site and a better mobile 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 Year 2020

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:

(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.

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.

Second Amendment to Asset Purchase Agreement

On June 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.

Settlement Agreements with Jordan Hoffner and Elizabeth Hambrecht

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

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 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

We recognize advertising revenue from a diverse mix of advertising methods including display advertisements, where revenue is dependent upon the number of advertising impressions delivered; native advertisements, which are advertisements created to match the form and function of the platform on which they appear; or sponsored content.

We generate advertising revenue from advertisements displayed on our Website. Advertising revenue comprised 94% and 77% of our revenues for the three months ended June 30, 2109 and June 30, 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.

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 $139 and $390 during the three months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, we had an aggregate of $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: $142 during the remainder of fiscal 2020; $168 during fiscal 2021; and $23 during fiscal 2022. The expected amortization reflects only outstanding stock option awards as of June 30, 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.

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

Continued Operations

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 increased 17% to approximately $0.7 million for the three months ended June 30, 2019 from approximately $0.6 million for the three months ended June 30, 2018.

Advertising revenues increased 40% to approximately $0.7 million for the three months ended June 30, 2019 from approximately $0.5 million for the three months ended June 30, 2018. Direct advertisement sales were approximately 21% and programmatic advertisement sales were approximately 79% of total advertising revenue for the three months ended June 30, 2019.

Revenues from all other sources, mostly referral fees, decreased 50% to approximately $0.05 million for the three months ended June 30, 2019 from approximately $0.1 million for the three months ended June 30, 2018. The overall decreases were attributed to lower revenues from a renewed referral fee customer agreement.

Production and content

Production and content expenses decreased 8% to approximately $0.55 million for the three months ended June 30, 2019 from approximately $0.6 million for the three months ended June 30, 2018. 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 remained relatively flat at approximately $.008 for the three months ended June 30, 2019 and 2018.

Technology

Technology expenses decreased 65% to approximately $0.07 million for the three months ended June 30, 2019 from approximately $0.2 million for the three months ended June 30, 2018. The decrease was mainly attributed to personnel reductions.

Liquidity and capital resources

Net cash used in operations was approximately $0.2 million for the three months ended June 30, 2019. The principal use of cash during each of the quarters ended June 30, 2019 and 2018 was to meet the Company’s operating deficits.

Off-Balance-Sheet Arrangements and Contractual Obligations

Salon has an operating lease primarily for office space facilities, this operating lease was terminated as of June 30, 2019.

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 (June 30, 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.

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

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.

None.

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: August 13, 2019	/s/ Richard MacWilliams
	Richard MacWilliams
	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)