Salon Reports Third Quarter Fiscal Year 2005 Results and Management Changes Records Quarterly Net Profit of $0.4 Million, Compared to $1.2 Million Loss in

Prior Year Period as Revenue Increases 69%



Names Elizabeth Hambrecht Chief Executive Officer, Joan Walsh Editor in Chief

and Conrad Lowry Chief Financial Officer



    SAN FRANCISCO, Feb. 10 /PRNewswire-FirstCall/ -- Salon Media Group, Inc.
 (OTC Bulletin Board:   SALN), an Internet media company, announced today a net
 profit attributable to common stockholders of $0.4 million for its third
 quarter ended December 31, 2004, compared to a net loss attributable to common
 stockholders of $1.2 million for its third quarter the year before.
     Total revenues for the quarter ended December 31, 2004 were $2.2 million,
 an increase of 69% from $1.3 million a year ago, with advertising revenues
 increasing to $1.3 million from $0.6 million a year ago.  Salon has not
 recorded quarterly revenues in excess of $2.0 since the quarter that ended
 December 31, 2000, four years earlier.
     On a non-GAAP pro forma basis, Salon recorded a profit attributable to
 common stockholders of $0.4 million compared to a loss of $0.4 million in the
 prior year period.  For the nine-month period ended December 31, 2004, Salon
 recorded a non-GAAP pro forma profit attributable to stockholders of $0.2
 million, compared to a comparable non-GAAP pro forma loss attributable to
 stockholders of $2.1 million for the nine month period ended December 31,
 2003.
     A reconciliation of net profit calculated in accordance with generally
 accepted accounting principles in the United States of America (GAAP) and pro
 forma net income (loss) is provided immediately following the consolidated
 statements of operations below. 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.
 
     Management Changes
     Salon also announced the promotion of Elizabeth Hambrecht to Chief
 Executive Officer and Joan Walsh to Editor in Chief, effective February 10,
 2005. Founder David Talbot, formerly CEO and Editor in Chief, has relinquished
 those positions but will stay on as Chairman of the Board.  Conrad Lowry, who
 has been serving the Company as Controller, will assume the duties of Chief
 Financial Officer and Secretary.
     "I am very excited to announce this profitable quarter," Talbot stated.
 "It's an excellent time for me to move into a new role. Betsy and Joan have
 been part of the leadership team that brought Salon new fiscal and editorial
 life, and I'm proud to be able to leave Salon in their hands."  Talbot will
 also be working on a book about John and Robert Kennedy for Free Press/Simon &
 Schuster.
     Joan Walsh joined Salon as its first full-time news editor in October 1998
 and presided over the development of its award-winning news and politics
 department.  Her work has appeared in many national newspapers and magazines,
 from the Los Angeles Times and Baltimore Sun to Vogue and the Nation.  She
 became Senior Vice President of Editorial Operations in 2004.  Elizabeth
 Hambrecht joined Salon in April 2003 as Chief Financial Officer, and was named
 President in October 2003.  Mr. Lowry has been Controller at Salon since 2000.
     Talbot attributed Salon's improved performance to its continued editorial
 excellence and the strength of its innovative business model, which offers
 readers a choice between subscribing - Salon had 89,100 subscribers in the
 quarter ending Dec. 31, 2004 - or using an advertiser-sponsored "Site Pass,"
 which lets readers access Salon's award-winning editorial content for free
 after viewing a short advertisement. "Our loyal subscribers have sustained us
 through tough times, and our Site Pass model is letting us reach a new
 generation of readers and subscribers," Talbot said.
 
     Highlights of quarter ending December 31, 2004:
 
     -- Total revenues for the current period were $2.2 million compared to
 $1.3 million last year, a 69% increase. Salon has not recorded quarterly
 revenues in excess of $2.0 since its quarter ended December 31, 2000.
     -- Advertising revenues increased to $1.3 million this quarter compared to
 $0.6 million last year, a 124% increase.
     -- Salon Premium subscribers at the end of the quarter were approximately
 89,100 compared to approximately 73,700 a year ago.
 
     Future Periods Guidance:
     Salon does not believe that the quarter ending December 31, 2004 GAAP and
 non-GAAP financial results should be considered predictive of future quarter
 results.
     Salon anticipates a net loss for its quarter ending March 31, 2005 and
 cannot accurately predict when it will reach net profit in future quarters.
 Due to seasonality, Salon estimates that total revenues for its quarter ending
 March 31, 2005 will be $1.3 - $1.4 million, with advertising sales comprising
 $0.6 - $0.7 million of the total.  Salon cannot predict total revenues after
 March 31, 2005 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 Premium subscriptions grew from approximately 80,900 at September
 30, 2004 to approximately 89,100 as of December 31, 2004.  Salon does not
 believe that this is indicative of future subscription growth rates and cannot
 accurately predict the number of active subscribers as of March 31, 2005.
 
     About Salon Media Group, Inc.:
     Founded in 1995, Salon is an Internet media company that produces an award
 winning, original-content Website of news, opinion and culture, and hosts two
 subscription communities, Table Talk and The Well.
 
     "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 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
                                               2004     2003    2004     2003
 
     Net revenues                            $2,150   $1,273   $5,139   $3,404
 
     Operating expenses:
        Production and content                1,131    1,069    3,335    3,214
        Sales and marketing                     551      649    1,406    1,679
        Research and development                158      150      449      448
        General and administrative              163      371      524    1,064
        Amortization of intangibles              --       86       --      276
           Total operating expenses           2,003    2,325    5,714    6,681
 
     Profit (loss) from operations              147   (1,052)    (575)  (3,277)
     Other income (expense), net                125     (134)     572     (458)
     Net profit (loss)                          272   (1,186)      (3)  (3,735)
     Preferred deemed dividend                  123       (1)     252       30
     Net profit (loss) attributable to
      common stockholders                      $395  $(1,187)    $249  $(3,705)
 
     Basic diluted net profit (loss) per
      share attributable to common
      stockholders                            $0.03   $(0.08)   $0.02   $(0.26)
 
     Diluted net profit (loss) per share
      attributable to common stockholders     $0.00   $(0.08)   $0.00   $(0.26)
 
     Weighted average shares used in
      computing basic net profit (loss)
      per share attributable to common
      stockholders                           14,507   14,155   14,275   14,081
 
     Weighted average shares used in
      computing dilutive net profit (loss)
      per share attributable to common
      stockholders                          203,387   14,155  202,762   14,081
 
 
 
                            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    $0   $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    27      190      524    47        571
          Total operating
           expenses             2,003  (224)   1,779    5,714  (588)     5,126
 
     Profit (loss) from
      operations                  147   224      371     (575)  588         13
     Other income (expense),
      net                         125  (104)      21      572  (415)       157
     Net profit (loss)            272   120      392       (3)  173        170
     Preferred deemed
      dividend                    123  (123)       0      252  (252)         0
     Net profit (loss)
      attributable to
      common stockholders        $395   $(3)    $392     $249  $(79)      $170
 
     Basic net profit (loss)
      per share attributable
      to common stockholders    $0.03          $0.03    $0.02            $0.01
     Dilutive net profit
      (loss) per share
      attributable
      to common stockholders    $0.00          $0.00    $0.00            $0.00
 
     Weighted average shares
      used in computing
      basic net profit
      (loss) per share
      attributable
      to common stockholders   14,507         14,507   14,275           14,275
     Weighted average shares
      used in computing
      dilutive net profit
      (loss) per share
      attributable to common
      stockholders            203,387        203,387  202,762          202,762
 
     (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, 2003        December 31, 2003
                                As(1)         Pro     As(1)             Pro
                             Reported  Adj.  Forma  Reported   Adj.     Forma
 
     Net revenues              $1,273    $0  $1,273   3,404    $       $3,404
 
     Operating expenses:
       Production and content   1,069  (124)    945   3,214    (262)     2,952
       Sales and marketing        649  (386)    263   1,679    (673)     1,006
       Research and
        development               150   (28)    122     448     (52)       396
       General and
        administrative            371   (61)    310   1,064     (94)       970
       Amortization of
        intangibles                86   (86)     --     276    (276)        --
          Total operating
           expenses             2,325  (685)  1,640   6,681  (1,357)     5,324
 
     Loss from operations      (1,052)  685    (367) (3,277)  1,357     (1,920)
     Other income (expense),
      net                        (134)   77     (57)   (458)    301       (157)
     Net loss                  (1,186)  762    (424) (3,735)  1,658     (2,077)
     Preferred deemed
      dividend                     (1)    1      --      30     (30)        --
     Net loss attributable to
      common stockholders     $(1,187) $763   $(424) (3,705) $1,628    $(2,077)
 
     Basic and diluted net
      loss per share
      attributable
      to common stockholders   $(0.08)       $(0.03)  (0.26)            $(0.15)
 
     Weighted average shares
      used in computing
      basic and diluted net
      loss per share
      attributable to common
      stockholders             14,155        14,155  14,081             14,081
 
     (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     Nine Months
                                                Ended           Ended
                                            December 31,      December 31,
                                            2004      2003   2004      2003
 
     Net profit (loss) attributable to
      common stockholders                   $395   $(1,187)  $249   $(3,705)
 
     Less:
        Charges (benefits) resulting from
         re-valuing warrants
         issued in conjunction with
         operations                         (135)      (57)  (541)       (9)
        Utilization of prepaid advertising
         rights                              159       360    440       600
        Gain on issuance of stock for
         trade payable                       (25)       --    (25)       --
        Loss on retirement of assets          --        43     --        43
        Depreciation and amortization
         charges                             121       416    299     1,024
        Preferred deemed dividend charges
         (benefits) from
         re-valuing warrants issued to
         preferred stockholders             (123)        1   (470)      (30)
        Preferred deemed dividend charge
         from issuance of
         preferred stock                      --        --    218        --
     Pro forma net profit (loss)
      attributable to common stockholders   $392     $(424)  $170   $(2,077)
 
 
 
                              SALON MEDIA GROUP, INC.
                      CONSOLIDATED BALANCE SHEETS (Unaudited)
                (in thousands, except share and per share amounts)
 
                                                   December 31,       March 31,
                                                      2004              2004
     Assets
         Current assets:
             Cash and cash equivalents                 $460              $696
             Accounts receivable, net                 1,128               306
             Prepaid expenses and other
              current assets                            262               432
                 Total current assets                 1,850             1,434
 
         Property and equipment, net                    139                89
         Other intangible assets, net                     0                 0
         Goodwill, net                                  200               200
         Prepaid advertising rights                   3,990             4,430
         Other assets                                    68               117
                 Total assets                        $6,247            $6,270
 
     Liabilities and stockholders' equity
     Liabilities:
         Current liabilities:
             Accounts payable and accrued
              liabilities                              $865            $1,143
             Deferred revenue                         1,119             1,107
                 Total current liabilities            1,984             2,250
 
         Warrants payable                                --             2,621
 
             Total liabilities                        1,984             4,871
 
     Stockholders' equity:
         Common stock                                    14                14
         Preferred stock                                 --                --
         Additional paid in capital                  94,935            92,320
         Accumulated deficit                        (90,686)          (90,935)
             Total stockholders' equity               4,263             1,399
                 Total liabilities and
                  stockholders' equity               $6,247            $6,270
 
 
 

SOURCE Salon Media Group, Inc.

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