SOURCE: Salon Media Group, Inc.

February 13, 2006 06:00 ET

Salon Reports Third Quarter Fiscal Year 2006 Results

Records Quarterly Net Loss Attributable to Common Stockholders of $0.9 Million Compared to $0.4 Million Profit in Prior Year Period; Records Non-GAAP Pro Forma Profit Attributable to Common Stockholders of $0.3 Million for the Quarter and $0.2 Million Year-to-Date

SAN FRANCISCO, CA -- (MARKET WIRE) -- February 13, 2006 -- Salon Media Group, Inc. (OTC BB: SALN), an Internet media company, announced today a net loss attributable to common stockholders of $0.9 million for its third quarter ended December 31, 2005, compared to a net profit attributable to common stockholders of $0.4 million for its third quarter the year before. The quarter ended December 31, 2005 results were significantly impacted by a non-cash preferred deemed dividend charge of $1.0 million from the issuance of preferred stock during the quarter.

Total revenues for the quarter ended December 31, 2005 were $2.1 million, a decrease of 4% from $2.2 million a year ago, with advertising revenues increasing 4% to $1.38 million from $1.33 million a year ago. However, due to a decrease in subscriptions, Salon Premium revenues declined to $0.5 million compared to $0.6 million a year ago.

On a non-GAAP pro forma basis, which excludes non-cash and non-recurring items, Salon recorded a $0.3 million profit attributable to common stockholders for the current quarter compared to a profit of $0.4 million in the prior year quarter. On a year-to-date non-GAAP pro forma basis, Salon recorded a $226,000 profit attributable to common stockholders compared to a profit of $172,000 in the prior year nine-month period. This is the first time in Salon's history that it has been able to put together two back-to-back non-GAAP pro forma profits for a nine month period.

"We are pleased to report our current quarter pro forma profit and our second consecutive pro forma profit for a nine month period," stated Elizabeth Hambrecht, Salon's CEO and President. "While our results showed some year-on-year improvements," she continued, "we were disappointed that our quarter advertising sales were essentially flat from a year ago, and we're continuing efforts to develop a highly engaging advertising product and broaden our readership, in order to stay on top of key trends in the advertising market."

A reconciliation of net profit (loss) attributable to common stockholders calculated in accordance with generally accepted accounting principles in the United States of America (GAAP) and pro forma net income (loss) attributable to common stockholders is provided immediately following the consolidated statements of operations. These pro forma measures are not in accordance with, or an alternative for, GAAP and may be different from pro forma measures used by other companies. Salon believes that the presentation of pro forma results provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. Readers of Salon's consolidated financial statements are advised to review and carefully consider the financial information prepared in accordance with GAAP contained in this press release and Salon's periodic filings with the Securities and Exchange Commission.

Future Periods Guidance:

Salon does not believe that the quarter or nine months ended December 31, 2005 GAAP and non-GAAP financial results should be considered predictive of future quarter or year results.

Salon forecasts that it will most likely report a net loss for its quarter ending March 31, 2006 and cannot accurately predict its results for future quarters. Due to seasonality, Salon estimates that total revenues for its quarter ending March 31, 2006 will be $1.1 - $1.4 million, with advertising sales comprising $0.5 - $0.8 million of the total. Currently, Salon has $0.4 million of firm commitments to serve advertisements during the quarter ending March 31, 2006. Salon cannot accurately predict total revenues after March 31, 2006 owing to the relatively short time frame in which advertising orders are secured and when they run on our Website and the lack of significant long-term advertising orders. Salon anticipates Salon Premium revenues of approximately $0.4 - $0.5 million for its quarter ending March 31, 2006.

About Salon Media Group, Inc.:

Founded in 1995, Salon is an Internet publishing company. Salon's award-winning journalism combines original investigative stories and provocative personal essays along with quick-take commentary and staff-written Weblogs about politics, technology, culture and entertainment. Committed to interactivity, the Website also hosts two online communities, Table Talk and The Well. During the current fiscal year, Salon has added new features such as the daily music download column Audiofile, Videodog video clips, the Daou Report, an opinionated guide to the blogosphere, and the ability to automatically submit Letters to the Editor.

"Safe Harbor" Statement under the U.S. Private Securities Litigation Reform Act of 1995: This press release contains certain "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are naturally subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein. The forward-looking statements contained herein include statements about future financial and operating results of Salon. Factors that could cause actual results to differ materially from those described herein include: the economic environment of the media industry; the difficulty in securing on-line advertising; growth in subscription revenue programs; uncertain revenue sources and the general economic environment. More detailed information about these factors is set forth in the reports filed by Salon with the Securities and Exchange Commission. Salon is under no obligation to and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. We do not believe that our reported results should be considered predictive of future period or full year results.

Note: Salon is a trademark and a registered trademark of Salon Media Group, Inc. All other company and product names mentioned are trademarks of their respective owners.


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

                                  Three Months Ended     Nine Months Ended
                                      December 31           December 31
                                    2005       2004       2005       2004
                                  -------    -------    -------    -------

Net revenues                      $ 2,069    $ 2,150    $ 5,353    $ 5,139
                                  -------    -------    -------    -------

Operating expenses:
  Production and content            1,183      1,131      3,276      3,335
  Sales and marketing                 389        551      1,054      1,406
  Research and development            146        158        519        449
  General and administrative          257        163        706        524
                                  -------    -------    -------    -------
    Total operating expenses        1,975      2,003      5,555      5,714
                                  -------    -------    -------    -------

Profit (loss) from operations          94        147       (202)      (575)
Other income (expense), net             1        125         21        572
                                  -------    -------    -------    -------
Net profit (loss)                      95        272       (181)        (3)
Preferred deemed dividend          (1,040)       123     (1,040)       252
Net profit (loss) attributable
 to common stockholders           $  (945)   $   395    $(1,221)   $   249
                                  =======    =======    =======    =======

Basic net profit (loss) per
 share attributable to common
 stockholders                     $ (0.06)   $  0.03    $ (0.08)   $  0.02

Diluted net profit (loss) per
 share attributable to common
 stockholders                     $ (0.06)   $  0.00    $ (0.08)   $  0.00




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

                     Three Months Ended             Nine Months Ended
                      December 31, 2005             December 31, 2005
                ----------------------------  ----------------------------
                As   (1)               Pro    As   (1)               Pro
                Reported    Adj.      Forma   Reported    Adj.      Forma
                --------  --------  --------  --------  --------  --------
Net revenues    $  2,069  $      -  $  2,069  $  5,353  $      -  $  5,353

Operating
 expenses:
  Production and
   content         1,183       (81)    1,102     3,276      (171)    3,105
  Sales and
   marketing         389       (78)      311     1,054      (184)      870
  Research and
   development       146        (7)      139       519       (45)      474
  General and
   administrative    257        (1)      256       706        (7)      699
                --------  --------  --------  --------  --------  --------
    Total
     operating
     expenses      1,975      (167)    1,808     5,555      (407)    5,148
                --------  --------  --------  --------  --------  --------

Profit (loss)
 from
 operations           94       167       261      (202)      407       205
Other income
 (expense), net        1         -         1        21         -        21
                --------  --------  --------  --------  --------  --------
Net profit
 (loss)               95       167       262      (181)      407       226
                --------  --------  --------  --------  --------  --------
Preferred deemed
 dividend         (1,040)    1,040         -    (1,040)    1,040         -
                --------  --------  --------  --------  --------  --------
Net profit
 (loss)
 attributable to
 common
 stockholders   $   (945) $  1,207  $    262  $ (1,221) $  1,447  $    226
                ========  ========  ========  ========  ========  ========


(1) In accordance with accounting principles generally accepted in the
    United States


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

                     Three Months Ended             Nine Months Ended
                      December 31, 2004             December 31, 2004
                ----------------------------  ----------------------------
                As   (1)               Pro    As   (1)               Pro
                Reported    Adj.      Forma   Reported    Adj.      Forma
                --------  --------  --------  --------  --------  --------
Net revenues    $  2,150  $      -  $  2,150  $  5,139  $      -  $  5,139
                --------  --------  --------  --------  --------  --------

Operating
 expenses:
  Production and
   content         1,131       (65)    1,066     3,335      (134)    3,201
  Sales and
   marketing         551      (174)      377     1,406      (471)      935
  Research and
   development       158       (12)      146       449       (30)      419
  General and
   administrative    163        24       187       524        45       569
                --------  --------  --------  --------  --------  --------
    Total
     operating
     expenses      2,003      (227)    1,776     5,714      (590)    5,124
                --------  --------  --------  --------  --------  --------

Profit (loss)
 from operations     147       227       374      (575)      590        15
Other income
 (expense), net      125      (104)       21       572      (415)      157
                --------  --------  --------  --------  --------  --------
Net profit
 (loss)              272       123       395        (3)      175       172
Preferred deemed
 dividend            123      (123)        -       252      (252)        -
                --------  --------  --------  --------  --------  --------
Net profit
 (loss)
 attributable to
 common
 stockholders   $    395  $      -  $    395  $    249  $    (77) $    172
                ========  ========  ========  ========  ========  ========

(1) In accordance with accounting principles generally accepted in the
    United States


                         SALON MEDIA GROUP, INC.
             PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                             (in thousands)
                              (Unaudited)

                                   Three Months Ended    Nine Months Ended
                                      December 31,          December 31,
                                   ------------------    -----------------
                                      2005      2004       2005      2004
                                      ----      ----       ----      ----

Net profit (loss) attributable to
 common stockholders                $  (945)  $   395    $(1,221)  $   249

Less:
  Benefits resulting from
   re-valuing warrants issued in
   conjunction with operations            -      (135)         -      (541)
  Utilization of prepaid advertising
   rights                                75       159        173       440
  Gain on issuance of stock for trade
   payable                                -       (25)         -       (25)
  Depreciation and amortization
   charges                               22       121        102       299
  Stock compensation charges             70         -        132         -
  Allowance for doubtful accounts
   charges                                -         3          -         2
  Preferred deemed dividend  benefits
   from re-valuing warrants issued
   to preferred stockholders              -      (123)         -      (470)
  Preferred deemed dividend charges
   from issuance of preferred stock   1,040         -      1,040       218
                                    -------   -------    -------   -------
Pro forma net profit attributable
 to common stockholders             $   262   $   395    $   226   $   172
                                    =======   =======    =======   =======


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

                                                  December 31,   March 31,
                                                     2005          2005
                                                  (Unaudited)
                                                   ---------     ---------
Assets
   Current assets:
      Cash and cash equivalents                    $     500     $     686
      Accounts receivable, net                         1,219           623
      Prepaid expenses, and other current assets         115           232
                                                   ---------     ---------
         Total current assets                          1,834         1,541
   Property and equipment, net                           187           191
   Prepaid advertising rights                          3,797         3,970
   Goodwill                                              200           200
   Other assets                                          169           167
                                                   ---------     ---------
         Total assets                              $   6,187     $   6,069
                                                   =========     =========
Liabilities and stockholders' equity
   Current liabilities:
      Accounts payable and accrued liabilities           712           788
      Deferred revenue                                   906         1,047
                                                   ---------     ---------
         Total current liabilities                     1,618         1,835
   Other long-term liabilities                           127            82
                                                   ---------     ---------
         Total liabilities                             1,745         1,917
                                                   ---------     ---------

Stockholders' equity:
   Common stock                                           15            15
   Preferred stock                                         -             -
   Additional paid-in-capital                         96,992        95,430
   Unearned compensation                                 (51)            -
   Accumulated deficit                               (92,514)      (91,293)
                                                   ---------     ---------
      Total stockholders' equity                       4,442         4,152
                                                   ---------     ---------
         Total liabilities and stockholders'
          equity                                   $   6,187     $   6,069
                                                   =========     =========

Contact Information

  • Investor Contact:
    Conrad Lowry
    Chief Financial Officer
    (415) 645-9317
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