SALON MEDIA GROUP, INC. (OTCMKTS:SLNM) Files An 8-K Entry into a Material Definitive Agreement

SALON MEDIA GROUP, INC. (OTCMKTS:SLNM) Files An 8-K Entry into a Material Definitive Agreement

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Item 1.01Entry Into a Material Definitive Agreement

Purchase Agreement

Private Placement

On January 24, 2017, Salon Media Group, Inc. (the Company)
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 a private
placement (the Private Placement) shares of the Companys Series A
Mandatorily Convertible Voting Preferred Stock (the Series A
Preferred Stock). The Company has authorized the issuance and
sale in the Private Placement up to 2,417,471 shares of the
Series A Preferred Stock, at the purchase price of $1.24 per
share.

The Company expects that the completion of the purchase and sale
of the shares of the Series A Preferred Stock will occur in two
stages, each a Closing. The initial Closing (the Initial Closing)
was completed on January 26, 2017. In the Initial Closing, the
Company sold to the Purchasers an aggregate of 805,824 shares of
Series A Preferred Stock for a total purchase price of $1
million. The purchase price was paid either in cash or by
delivery for cancellation of certain demand promissory notes made
by the Company to certain of the Purchasers who had advanced
funds to the Company in anticipation of the Initial Closing. The
final Closing (the Final Closing) shall occur no later than
February 24, 2017, or as soon thereafter as may be practicable.
The Final Closing will include only investors who have previously
indicated interest in participating in the Private Placement.

The Purchasers in the Initial Closing included the Companys Chief
Executive Officer, Jordan Hoffner, and certain of his family
members, the Companys Chief Financial Officer, Elizabeth
Hambrecht, and the Companys director, William Hambrecht.

Terms of Series A Preferred Stock

The Series A Preferred Stock is a newly designated series of the
Companys authorized preferred stock, par value of $0.001 per
share. At a special meeting concluded on January 24, 2017, the
Companys Board of Directors (the Board) approved the designation
of the Series A Preferred Stock, authorizing for issuance a total
of 2,865,623 shares of Series A Preferred Stock. The total
authorized amount was determined in order to provide for the
aggregate of 2,417,471 shares of Series A Preferred Stock that
may be sold in the Private Placement and the aggregate of 448,153
shares of the Series A Preferred Stock the Company agreed to
issue to the Stock Exchange Agreement or the Bridge Financing
Agreement (as such terms as defined herein).

The rights, preferences, powers and restrictions of the shares of
Series A Preferred Stock are set forth in the Certificate of
Designation (the Certificate of Designation) of the Series A
Mandatorily Convertible Voting Preferred Stock, which has been
filed with the Secretary of State of the State of Delaware.

Except as may be otherwise provided in the Certificate of
Designation, the shares of Series A Preferred Stock will not be
entitled to receive any dividends, and shall carry a number of
votes equal to the number of shares of Common Stock, par value
$0.001 per share (the Common Stock) issuable upon conversion of
the Series A Preferred Stock.

Subject to customary adjustments for stock splits, stock
dividends, and similar events, each share of Series A Preferred
Stock shall be convertible into 100 shares of Common Stock. The
shares of Series A Preferred Stock will automatically convert
into shares of Common Stock upon the effectiveness of an
amendment to the Companys current Restated Certificate of
Incorporation (the Certificate Amendment) authorizing sufficient
shares of Common Stock for issuance on the conversion of the
Series A Preferred Stock.

Certificate Amendment Expanding Authorized Share
Capital

The Board has approved the Certificate Amendment and on January
25, 2017, the Company obtained a shareholder consent approving
the Certificate Amendment. Such consent was executed to an
Irrevocable Proxy from each of William Hambrecht and John
Warnock, stockholders who collectively own approximately 80% of
the outstanding shares of the Common Stock. The Certificate
Amendment will increase the Companys authorized shares of
Common Stock to 900,000,000. Accordingly, there exists a vote
sufficient to adopt such Certificate Amendment, and the Company
will prepare a preliminary information statement describing the
Certificate Amendment that was authorized by stockholder
consent. The Company will file with the Securities and Exchange
Commission (the Commission) the preliminary information
statement at least 10 days prior to mailing the definitive
information statement to the stockholders, and the Company will
file the definitive information statement as soon thereafter as
may be practicable. The Company shall file the Certificate
Amendment with the Secretary of State of the State of Delaware
no later than the 21st calendar day following
delivery of the definitive information statement to the
Companys stockholders. The Certificate Amendment will become
effective 20 days from the date of mailing the definitive
information statement to the stockholders.

Additional Purchase Agreement Terms

In addition to certain customary representations and
warranties, indemnification rights and closing conditions, the
Purchase Agreement contains (i) certain demand and piggyback
registration rights, (ii) a right of Spear Point Capital Fund
LP, a Purchaser, to propose for election three (3) directors to
the Board at the Initial Closing, an additional director after
the Final Closing, and a further director mutually acceptable
to Spear Point and the Company, and (iii) the condition that
all related party advances, advances constituting the Bridge
Financing (as described below) and all shares of Series C
Preferred Stock have been converted into shares of Common Stock
or Series A Preferred Stock, where, upon the Initial Closing,
the only outstanding capital stock of the Company will be
Common Stock and Series A Preferred Stock. Such conditions were
met prior to the Initial Closing.

The issuance of the shares of Series A Preferred Stock to the
Purchase Agreement is being made in reliance upon an exemption
from the registration requirements of the Securities Act of
1933, as amended (the Securities Act), to Section 4(a)(2)
thereof.

Exhibits

The Purchase Agreement is filed as Exhibit 10.1 to this Current
Report on Form 8-K and incorporated herein by reference. The
above description of the material terms of the Purchase
Agreement does not purport to be complete and is qualified in
its entirety by reference to Exhibit 10.1.

The Certificate of Designation is filed as Exhibit 3.1 to this
Current Report on Form 8-K and incorporated herein by
reference. The above description of the material terms of the
Certificate of Designation does not purport to be complete and
is qualified in its entirety by reference to Exhibit 3.1.

Stock Exchange Agreement

As a condition to the Initial Closing of the Private Placement,
the Company entered into a stock exchange agreement (the Stock
Exchange Agreement) with holders of shares of Series C
Preferred Stock and related parties who have made advances to
the Company, memorializing such parties agreement to convert
their Series C Preferred Stock or advances due from the Company
into shares of Common Stock (such transactions, the Exchange).

As reported in the Companys Current Report on Form 8-K filed
November 15, 2016, all of its then outstanding shares of Series
C Preferred Stock (an aggregate of 1,075 shares) were exchanged
for an aggregate of 17,200,000 shares of Common Stock. All of
the shares of Series C Preferred Stock had been held by
non-affiliates of the Company.

In addition, as reported in the Companys Current Report on Form
8-K filed November 15, 2016, outstanding related party advances
at November 14, 2016, were approximately $8,341,000. The
related parties who had made these advances, Mr. John Warnock,
then Chairman of the Board, and Mr. William Hambrecht, a
director of the Company, agreed to exchange the Companys
obligations to them for shares of Common Stock. to the terms
agreed, Mr. Warnock and Mr. Hambrecht were to receive a number
of shares of Common Stock equal to the amounts of their
respective advances, divided by $0.10. Accordingly, Mr.
Warnock, who had advanced $5,428,000 to the Company, received
54,280,000 shares of Common Stock. Under these terms, Mr.
Hambrecht, who had advanced $2,913,000, was to receive
29,130,000 shares of Common Stock. The Company reported that
these issuances were made on November 14, 2016, along with the
issuances to the holders of the Series C Preferred Stock. Mr.
Warnock and Mr. Hambrecht entered into the Stock Exchange
Agreement on these terms.

However, the total of all of the issuances in the Exchange
when added to the shares of Common Stock outstanding on
November 14, 2016, exceeded the total amount of Common Stock
then authorized (the total amount authorized being
150,000,000 shares of Common Stock).

Accordingly, the Company and Mr. Hambrecht amended the Stock
Exchange Agreement with respect to the shares to be issued to
Mr. Hambrecht upon the conversion of his advances to the
Company. Under this Amendment to Stock Exchange Agreement
(the Exchange Amendment) Mr. Hambrecht agreed that to the
conversion of his advances, he received 2,246,017 shares of
Common Stock and, upon the Initial Closing of the Private
Placement, would receive 268,840 shares of Series A Preferred
Stock. Such shares of Series A Preferred stock issued to Mr.
Hambrecht will be converted into 26,884,000 shares of Common
Stock in accordance with the terms of the Series A Preferred
Stock.

Mr. Warnock and Mr. Hambrecht are affiliates of the Company
and participated in the Exchange.

The following table sets forth (i) the securities held, and
advances made, by each of the holders of shares of Series C
Preferred Stock and the related parties prior to, and
tendered in, the Exchange and (ii) the shares of Common Stock
owned by each holder of shares of Series C Preferred Stock
and related party following the Exchange, as at November 14,
2016:

Stockholder

Common

(outstanding

before Exchange)

Series C Pref.

(as converted to

Common)

Related Party

Advances

(as converted to

Common)

Total Common

Stock Outstanding

at 11/14/16

John Warnock

34,931,240 54,280,000 89,211,240

William Hambrecht

27,492,732 2,246,017 29,738,749

Shea Ventures

3,632,962 13,200,000 16,832,962

Other Series C Preferred Holders

4,000,000 4,000,000

Other Common Stockholders

10,217,049 10,217,049
76,273,983 17,200,000 56,526,017 150,000,000

Note that the above table does not include the Series A
Preferred Stock received by Mr. Hambrecht, which was issued
January 25, 2017.

The Company notes that its Current Report on Form 8-K filed
November 15, 2016 incorrectly reported issuances of Common
Stock to Mr. Hambrecht in the total amount of 29,130,000 as
originally contemplated in the Stock Exchange Agreement. This
Current Report on Form 8-K supersedes the information
described in such earlier report.

The issuance of the shares of Common Stock and the shares of
Series A Preferred Stock in the Exchange is exempt from
registration under the Securities Act to Section4(a)(2)
thereof.

The Stock Exchange Agreement is filed as Exhibit 10.2 to this
Current Report on Form 8-K and incorporated herein by
reference. The Exchange Amendment is filed as Exhibit 10.3 to
this Current Report on Form 8-K and incorporated herein by
reference. The above description of the material terms of the
Stock Exchange Agreement and the Exchange Amendment does not
purport to be complete and is qualified in its entirety by
reference to Exhibits 10.2 and 10.3, respectively.

Bridge Financing Agreement

As reported on the Companys Quarterly Report on Form 10-Q
for the quarter ended June 30, 2016, from July 1, 2016
through August 12, 2016, the Company received $200,000 in a
bridge financing (the Bridge Financing). On its balance
sheet included in its Quarterly Report in Form 10-Q for the
quarter ended September 30, 2016, the Company refers to the
Bridge Financing as convertible promissory notes. The
Companys Chief Financial Officer, Elizabeth Hambrecht,
provided $100,000 of the Bridge Financing.

The Company entered into certain securities purchase
agreements (the Bridge Financing Agreements) with the
parties who provided the financing, memorializing such
parties agreement to convert their obligations due from the
Company into shares of the Companys Common Stock.
Subsequently, the parties who provided the Bridge Financing
agreed to accept shares of Series A Preferred Stock in full
satisfaction of the Companys obligations to such parties
and have entered into an amendment to such effect (the
Bridge Finance Amendment). In accordance with these
agreements, the Company, prior to the Initial Closing and
as a condition thereof, issued an aggregate of 179,313
shares of Series A Preferred Stock to the parties who had
provided the Bridge Financing.

The issuance of the shares of Series A Preferred Stock
under the Bridge Financing Agreement as amended by the
Bridge Finance Amendment is exempt from registration under
the Securities Act to Section 4(a)(2) thereof.

The Bridge Financing Agreements are filed as Exhibits 10.4
and 10.5 to this Current Report on Form 8-K and
incorporated herein by reference. The Bridge Finance
Amendments are filed as Exhibits 10.6 and 10.7 to this
Current Report on Form 8-K and incorporated herein by
reference. The above description of the material terms of
the Bridge Financing Agreements and the Bridge Finance
Amendments does not purport to be complete and is qualified
in its entirety by reference to Exhibits 10.4 and 10.5, and
Exhibits 10.6 and 10.7, respectively.

Item 3.02Unregistered Sales of Equity
Securities

Purchase Agreement — Private Placement

As described above in Item 1.01, in the Initial Closing
under the Purchase Agreement, the Company sold to the
Purchasers an aggregate of 805,824 shares of Series A
Preferred Stock for a total purchase price of $1 million.
Such shares of Series A Preferred Stock shall be
automatically converted into 80,582,400 shares of Common
Stock upon the effectiveness of the Certificate Amendment.

The information regarding the Private Placement set forth
in Item 1.01 of this Current Report is incorporated by
reference into this Item 3.02. The Private Placement of the
shares of Series A Preferred Stock, to the Purchase
Agreement, was undertaken in reliance upon an exemption
from the registration requirements of the Securities Act to
Section 4(a)(2) thereof.

Stock Exchange Agreement

As described above in Item 1.01, to the Stock Exchange
Agreement and the Exchange Amendment, all advances from
related parties equal to $8,341,000 (as of November 14,
2016) and all outstanding Preferred Stock (consisting of
1,075 shares of Series C Preferred Stock as of November 14,
2016) were converted into Common Stock and Series A
Preferred Stock. The advances were converted into
56,526,017 shares of Common Stock and 268,840 shares of
Series A Preferred Stock, and the outstanding 1,075 shares
of Series C Preferred Stock converted into 17,200,000
shares of Common Stock. Following the conversion of the
related party advances and the Series C Preferred Stock,
the total number of outstanding shares of Common Stock
increased from 76,273,983 to 150,000,000 on November 14,
2016 as shown in the table above.

The information regarding the Exchange set forth in Item
1.01 of this Current Report is incorporated by reference
into this Item 3.02. The issuance of the shares of Common
Stock and the shares of Series A Preferred Stock, to the
Stock Exchange Agreement, as amended by the Exchange
Amendment, was undertaken in reliance upon an exemption
from the registration requirements of the Securities Act to
Section 4(a)(2) thereof.

Bridge Financing

As described above in Item 1.01, to the Bridge Financing
Agreement and the Bridge Finance Amendment, all of the
$200,000 in Bridge Financing was converted into 179,313
shares of Series A Preferred Stock.

The information regarding the Bridge Financing set forth
in Item 1.01 of this Current Report is incorporated by
reference into this Item 3.02. The issuance of the shares
of Series A Preferred Stock, to the Bridge Financing
Agreement, as amended by the Bridge Finance Amendment,
was undertaken in reliance upon an exemption from the
registration requirements of the Securities Act to
Section 4(a)(2) thereof.

Item 5.02Departure of Directors
or Principal Officers; Election of Directors; Appointment
of Principal Offi
cers

The Board, having obtained sufficient vote by the
directors and having accepted the resignation of four (4)
previously serving directors, elected three (3) new
directors to the Board: (i) Richard MacWilliams, (ii)
Rodney Bienvenu, and (iii) Trevor Colhoun. Previously
serving directors, Deepak Desai, George Hirsch, James
Rosenfield, and John Warnock resigned from the Board upon
the election of Mr. MacWilliams, Mr. Bienvenu, and Mr.
Colhoun at the Initial Closing. The Board currently
consists of (i) Jordan Hoffner, (ii) William Hambrecht,
(iii) Richard MacWilliams, (iv) Rodney Bienvenu, and (v)
Trevor Colhoun, each of whom will serve on the Board
until the next annual meeting of stockholders or until
his respective successor is elected and qualified.

None of the resigning directors had any disagreements
with the Company, on any matter relating to the Companys
operations, policies or practices.

Item 5.03Amendments to Articles
of Incorporation or Bylaws
; Change in
Fiscal Year

The Company has filed with the Secretary of State of the
State of Delaware the Certificate of Designation, which
sets forth the rights, preferences, powers and
restrictions of the shares of Series A Preferred Stock
which were issued, or will be issued, to the Purchasers
at each of the Closings, and to the parties under the
Stock Exchange Agreement or the Bridge Financing
Agreement, as described in Items 1.01 and 3.02 of this
Current Report on Form 8-K.

As described in Item 1.01 of this Current Report on Form
8-K, the Certificate of Designation provides that the
shares Series A Preferred Stock will automatically
convert into share of Common Stock upon the effectiveness
of the Certificate Amendment. The information regarding
the Certificate of Designation forth in Item 1.01 of this
Current Report is incorporated by reference into this
Item 5.03. The foregoing description of the Certificate
of Designation in this Item 5.03 is qualified in its
entirety by reference to the full text of the Certificate
of Designation, which is attached as Exhibit 3.1, to this
Current Report on Form 8-K and incorporated in this Item
5.03 by reference.

As described in Item 1.01 above, the Certificate
Amendment, which increases the authorized share
capitalization of the Company, has been approved by the
Board and the requisite stockholder vote. Accordingly,
the Company will provide notice to stockholders regarding
the Certificate Amendment and its effectiveness in
accordance with applicable requirements and will file a
further report when the Certificate Amendment has become
effective. The form of the Certificate Amendment is
attached hereto as Exhibit 3.2 and incorporated in this
Item 5.03 by reference.

Item 9.01.Financial Statements and
Exhibits

Exhibit

Description

3.1

Certificate of Designation of Series A
Mandatorily Convertible Voting Preferred Stock,
dated January 24, 2017

3.2 Certificate of Amendment of Restated Certificate of
Incorporation of Salon Media Group, Inc., dated
January 25, 2017

10.1

Purchase Agreement, dated as of January 24, 2017

10.2

Stock Exchange Agreement, dated as of November
14, 2016

10.3

Amendment to Stock Exchange Agreement, dated
January 19, 2017.

10.4

Bridge Financing Agreement, dated as of August 5,
2016

10.5 Bridge Financing Agreement, dated as of August 5,
2016

10.6

Bridge Finance Amendment, dated January 25, 2017.

10.7 Bridge Finance Amendment, dated January 25, 2017.


About SALON MEDIA GROUP, INC. (OTCMKTS:SLNM)

Salon Media Group, Inc. (Salon) is an Internet media company that produces a content Website with various subject-specific sections. The Company’s Website, www.salon.com, Website covers a range of topics, including news, politics, arts and culture, life, sustainability and innovation, technology and business. The Company has a suite of advertisement products that includes its homepage spotlight, which features custom content in-stream in its editorial news feed, advertiser-sponsored articles and content verticals, custom Website skins that can overlay an advertisement onto the background of its Website, pushdowns that temporarily move the editorial content below an advertisement, while it is being served, video overlays and in-stream video modules, a multi-media content module and a social feed module. Its users engage with the Website through desktop computers, mobile phones and social networking platforms and other referral partners.

SALON MEDIA GROUP, INC. (OTCMKTS:SLNM) Recent Trading Information

SALON MEDIA GROUP, INC. (OTCMKTS:SLNM) closed its last trading session 00.000 at 0.250 with 123,699 shares trading hands.

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