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ALON MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and par value amounts) June 30, 2012 (Unaudited) Assets Current assets: Cash and cash equivalents Accounts receivable, net Assets held for sale Prepaid expenses and other current assets Total current assets Property and equipment, net Goodwill Other assets Total assets Liabilities and Stockholders' Deficit Current liabilities: Short-term borrowings Related party advances Convertible notes payable Accounts payable and accrued liabilities Deferred revenues Total current liabilities Deferred rent Total liabilities Stockholders deficit: Preferred stock, $0.001 par value, 5,000,000 shares authorized, 9,404 shares issued and outstanding at June 30, 2012 and March 31, 2012 (liquidation value of $26,346 at June 30, 2012) Common stock, $0.001 par value, 30,000,000 shares authorized, 3,282,576 shares issued and outstanding at June 30, 2012 and March 31, 2012 Additional paid-in capital Accumulated deficit Total stockholders' deficit Total liabilities and stockholders' deficit $ $ 1,000 $ 9,870 3,106 1,581 144 15,701 91 15,792 1,000 8,105 3,106 1,847 165 14,223 123 14,346 $ $ 197 $ 780 200 173 1,350 86 161 1,597 $ 130 783 194 1,107 92 200 158 1,557 March 31, 2012 (1)

3 99,863 (114,061) (14,195) 1,597 $

3 99,737 (112,529) (12,789) 1,557

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

Three Months Ended June 30, 2012 2011 Net revenues Operating expenses: Production and content Sales and marketing Information technology support General and administrative Separation expenses Total operating expenses Loss from operations Interest expense Loss from continuing operations Income (loss) from discontinued operations Net loss Basic and diluted net loss per share Loss from continuing operations Loss from discontinuing operations $ 836 $ 929

934 433 278 437 218 2,300 (1,464) (59) (1,523) (9) (1,532) $

648 324 215 368 1,555 (626) (65) (691) 13 (678)

$ $

(0.46) $ (0.01) (0.47) $

(0.21) (0.00) (0.21)

Net loss
Weighted-average shares of common stock used in computing basic and diluted net loss per share

3,283

3,283

SALON MEDIA GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Three Months Ended June 30, 2012 2011 Cash flows from operating activities: Net loss Less income (loss) from discontinued operations Loss from continuing operations Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization Stock-based compensation Changes in assets and liabilities: Accounts receivable Prepaid expenses and other assets Accounts payable, accrued liabilities and deferred rent Deferred revenues Net cash used in operating activities Cash flows from investing activities: Purchase of property and equipment Net cash used in investing activities Cash flows from financing activities: Proceeds from related party advances Capital lease payments Net cash provided by financing activities $ (1,523) $ (9) (1,532) (691) 13 (678)

16 126 3 18 (297) (21) (1,687)

39 59 (199) (12) 53 (19) (757)

(10) (10)

(3) (3)

1,765 1,765

600 (1) 599

Net cash provided by operating activities from discontinued operations


Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental schedule of non-cash financing activity: Conversion of accrued interest into convertible notes payable

(1) 67 130 197 $

(161) 386 225

- $

130

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