SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

                                FORM 10-KSB

     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

              For the Fiscal Year ended:  June 30, 2002

                                    OR

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

            For the transition period from ________ to ________

                         Commission File No. 0-26375

                            NETSALON CORPORATION
            ------------------------------------------------------
               (Name of Small Business Issuer in its Charter)

            Delaware                                     84-1472120
-------------------------------                   ------------------------
(State or Other Jurisdiction of                   (I.R.S. Employer Identi-
Incorporation or Organization)                        fication Number)

                2235 West 1st Street, Fort Myers, Florida  33901
         ------------------------------------------------------------
         (Address of Principal Executive Offices, Including Zip Code)

Issuer's telephone number, including area code:  (941) 791-3300

Securities registered pursuant to Section 12(b) of the Act:  None.

Securities registered pursuant to Section 12(g) of the Act:  Common Stock.

Check whether the Issuer(1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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  [X] No [ ]

As of November 1, 2002, 19,630,900 Shares of the Registrant's Common Stock
were outstanding.  The aggregate market value of voting stock of the
Registrant held by non-affiliates was approximately $100,000.

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.  $1,001,274.

Documents incorporated by reference:  None.

Page 1



                                   PART I

ITEM 1.  DESCRIPTION BUSINESS.

GENERAL

OVERVIEW

     NetSalon Corporation (the "Company" or "NetSalon") is an application
service provider and has been actively involved in high-tech product
development  and consultation since its formation in late 1998.  NetSalon has
developed various Internet-related products, which it originally intended to
sell through a multi-level marketing distribution system.  As of August 17,
2000, the Company publicly announced its abandonment of the multi-level
marketing distribution model, and announced its intention to provide products,
custom programming and consultation through distributors who maintain Internet
sites where products can be sold and through multi-level marketing companies
on a private-label basis.

     During the fiscal year ended June 30, 2002, the Company was involved in
developing marketing plans and seeking distributors and other resellers for
the products, and the Company entered into several contracts with distributors
and multi-level marketing companies.  These contracts generate fees to
NetSalon for implementation of the web sites and technology required for
distribution of the products, as well as revenues from product sales made by
the distributors and multi-level marketing companies themselves.

     NetSalon is engaged in two business segments: (1) providing customized
software, technology and consulting services to affinity, multi-level and
network marketing organizations, and (2) providing customized web-site design,
web hosting and related internet services. It is important to note that
NetSalon's ability to provide service is entirely dependent on the Industry
expertise, technical skills and intellectual property of it's directors,
officers, staff and independent contractors.

     In connection with the Company's web-site/internet  and design services,
the Company sells a variety of services including turnkey eCommerce
applications and portal applications.  Examples of the eCommerce applications
are the NetSalon Enterprise, AeonCard, ezSiteBuilders, B2C Site Builders,
Shopping Cart / Inventory Management and Instant Portal.  Examples of the
portal applications include web-based email, yellow pages, white pages, stock
quotes, news, web-search, calendars, address books, horoscopes and more. These
applications are customized to varying degrees to meet customers
specifications and must be maintained by NetSalon personnel on a daily basis
to operate efficiently.

     The Company's service and applications include the following:

     1.  THE NETSALON ENTERPRISE is a suite of ASP applications, which
         can be fully branded and customized to any company.  The customer
         picks and chooses which applications their company can best benefit
         from including the Portal / Site Replicator, AeonCard,
         ezSiteBuilders, B2C Site Builders, Portal Applications, etc.  The
         Customized applications reside on the server platform in the
         NetSalon facility.  The Enterprise is  branded with a business's
         name, logo, and site design and color scheme utilizing any domain
         name of choice.  NetSalon stores all data on its Microsoft SQL
         servers and secured by 128bit SSL security certificates.  NetSalon
         personnel provide all technical support, 2nd level customer service,
         upgrades and maintenance.


Page 2


     2.  THE PORTAL / SITE REPLICATOR is an enterprise wide, replicating web
         site. The portal is designed to provide community, content, and
         commerce, branded with a company's information, name, logo, site
         design and color scheme and their company's affiliate information.
         Affiliate portals are websites custom made by NetSalon that can be
         used by direct selling representatives to display and sell products.
         The portal website is built and replicated through interactive
         procedures.  The affiliate relationship was initially made popular
         by Amazon.com and has since been adopted by literally thousands of
         online retailers and wholesalers.  The potential client in need of
         NetSalon Enterprise affiliate portal/site replicator applications
         would include; network marketing companies, non-profit / charitable
         organizations, Fortune 100, 500, and 1000 companies who have large
         sales forces, churches, schools, and unions, and insurance companies.

     3.  AEONCARDS are CD-based business cards comprised of a "flash" movie
         whereby advertisements and information can be viewed.  The AeonCard
         is designed and built over the Internet using interactive processes.
         The AeonCard is an online interactive generator that provides a way
         to create an interactive CD-ROM online. The AeonCard generator
         allows for the uploading of text and graphics, and then configures
         that content into a pre-selected template. Once the entering of data
         and graphics is complete or satisfactory, a preview option is
         provided to view the production. Once the preview tab has been
         clicked, the generator outputs a totally cool, interactive,
         executable flash movie. Once the build process is complete, the
         master can then be purchased online. Cut and shaped CD-ROMS are then
         replicated and mailed to the purchaser within 3 business days. All
         of these processes are accomplished online without contact with a
         physical person.  The AeonCard Master License allows for the customer
         to download their presentations to their personal computer or email
         their presentations world-wide. The potential client in need of the
         AeonCard is any person or company with information, or products and
         service to market.

     4.  EZSITEBUILDERS is an online wizard that provides users the ability
         to go online and develop a personal or family  web site. NetSalon
         has over 85 family templates to choose from. This product was
         designed for the most illiterate of users and is very easy to use.
         Once the web site is created, it is deployed instantly. Users may
         at any time change or update information or templates without
         incurring any fees.  The potential client in need of an ezSite would
         be anyone wanting to have a presence on the world-wide-web. There
         were over 3 million web sites sold through cooperative marketing
         companies in 2000.

     5.  B2C SITEBUILDERS is an online wizard that provides users the ability
         to go online and develop a professional business Web site. NetSalon
         has over 85 professional templates to choose from. This product was
         designed for the most illiterate of users and is very easy to use.
         Once the web site is created, it is deployed instantly. Users may at
         any time change or update information or templates without incurring
         any fees.  The potential client in need of an B2C would be anyone
         wanting to have a presence on the world wide web. There were over 3
         million web sites sold through cooperative marketing companies in
         2000.

Page 3


     6.  SHOPPING CART / INVENTORY MODULE is a system that covers all the
         needs for e-commerce Web sites.  The NetSalon Shopping Cart System
         is the next generation shopping cart /e-commerce management system
         and dynamic site creation. It interfaces with the entire NetSalon
         enterprise and automates customer's site creation and product
         management.  The shopping cart / inventory module is ideal for
         network marketing companies as it allows the company to set
         distributor pricing costs yet allows the distributor or affiliate
         to set their retail pricing.  The NetSalon Shopping Cart System
         allows companies to concentrate on managing their products and not
         worrying about learning programming, HTML or database. And with its
         interface, there is no need to install complicated, limited
         functionality programs and buy/install a secure Digital Certificate.
         All credit cards, real-time processing, and e-mail notifications are
         handled by the shopping cart server, insuring customers do not miss
         a single order, while keeping their orders and customers' credit
         card numbers fully secured.  The NetSalon Inventory Control Module
         is an Inventory or stock management system which allows customers to
         maintain a proper variety of required items, decrease inventory
         turnover, reduce and optimize inventory and safety stock levels,
         obtain lower raw material prices through creative supplier
         networking, eliminate obsolete items, increase cash flow and working
         capital, reduce storage cost, reduce insurance cost, reduce taxes,
         reduce downtime and include Admin Module Components.

     In a typical contract with a new multi-level marketing company, NetSalon
will charge a fee to implement and develop the Company's business.  This fee
is paid as a percentage of revenues that the MLM company receives from new
distributors/representatives and as a percentage of revenues from the sale of
NetSalon's instant portal and other products through the distributors.
NetSalon may also charge a monthly or annual maintenance fee, which is paid
from revenues collected by the MLM company.

LETTER OF INTENT FOR REVERSE ACQUISITION

     The Company has entered into a letter of intent with the shareholder of
an Australian company which is in the business of developing communications
equipment for the wireless communication industry in both the commercial and
military fields pursuant to which the Company would acquire a majority
interest in this company in exchange for issuing 90 million shares of the
Company's common stock.  One requirement of this letter of intent is that
certain of the Company's insiders must cancel 9,630,900 of their shares in
order that there will only be 10 million shares of the Company's common stock
outstanding just prior to the closing.  This transaction is currently in
negotiations and both sides are working on their due diligence.  There is no
assurance that this transaction will be closed.

EMPLOYEES

     The Company has reduced staff and management to increase efficiency and
lower costs. We currently have three employees including officers and
directors and utilize a variety of independent contracters.  We intend to hire
additional employees as the development of our business requires. It is
important to note that NetSalon's ability to provide service is entirely
dependent on the Industry expertise, technical skills and intellectual
property of it's directors, officers, staff and independent contractors.


Page 4


ITEM 2.  DESCRIPTION OF PROPERTY.

     The Company leases approximately 1,275 square feet of office space at
2235 West 1st Street in Fort Myers, Florida, pursuant to a one year lease
which commenced July 1, 2002.  The landlord provides a 3.0 meg broadband
internet circuit as part of the lease.  The monthly rent is approximately
$4,028.

ITEM 3.  LEGAL PROCEEDINGS.

     The Company is not a party to any material legal proceeding, except as
follows:

     During October 2001, Steve Little, a former employee of the Company,
filed a complaint against the Company's subsidiary, in the District Court of
Tarrant County, Texas.  The complaint was part of a counter-claim against Mark
Manuel who originally sued Mr. Little in August 2001.  The suit alleges that
Manuel promised Little a job with NetSalon where he would receive a salary of
$20,000 a month and 3,000,000 shares of common stock.  Little is seeking
$70,000 in unpaid salary, loss of the value of the promised shares of stock
and unspecified exemplary damages.

     This matter was settled during the year ended June 30, 2002, and as part
of the settlement the Company paid $7,000 to Mr. Little.

     During January 2002, James S. Williams filed a complaint against the
Company and Mark S. Manuel, a director of the Company, in the District Court
of Harris County, Texas.  The Complaint alleges that the Company breached its
agreement dated September 15, 2000 to make monthly payments of $25,000 to
Williams under a promissory note in the amount of $536,700.  The Complaint
seeks actual damages of $559,028, prejudgment interest and attorney's fees.

     During November 2002, the Company entered into a Settlement Agreement
with Mr. Williams which provides as follows:  The Company agreed to the entry
of a judgment against it in the amount of $534,445 together with interest
thereon from April 13, 2001 at the rate of 9% per annum. Williams agreed that
he would not execute upon the judgment until November 20, 2003 except pursuant
to the terms of the Agreement.  Mark Manuel is to deliver 3,000,000 shares of
NetSalon common stock owned by Mr. Manuel, and such shares are to be held in
escrow by Mr. Williams' attorney.  In the event that the Company completes it
proposed transaction with Global Investments Fund Pty Ltd., an Australian
corporation, certain shareholders of the Company will be required to cancel
9,630,900 shares leaving 10,000,000 shares outstanding before the closing.  Of
these ten million shares, Mr. Williams will keep one million of the escrow
shares in full satisfaction of the judgment debt and the other two million
shares his attorney is holding in escrow will be cancelled.  If this
transaction does not close, but another similar one does close by November 20,
2003, the same provisions will apply. If the Company does not complete the
transaction with the Australian company, or another such transaction, Williams
may at any time accept the 3 million shares in escrow in full satisfaction of
the judgment debt.  Williams is not allowed to execute on the judgment until
after November 20, 2003, unless the Company is in default under the Agreement.
After November 20, 2003, if the Company has not completed a reverse
acquisition or paid the debt, Williams may execute upon the Judgment and take
the 3 million shares in escrow.


Page 5


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year ended June 30, 2002.


                                   PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     PRINCIPAL MARKET OR MARKETS.  The Company's Common Stock has traded in
the over-the-counter market since the first quarter of 2000, and is quoted on
the OTC Bulletin Board under the symbol "NSLN."

     The following table sets forth the closing bid prices of the Common Stock
for the periods indicated, as reported by the OTC Bulletin Board.

     QUARTER ENDED                           HIGH         LOW
     --------------                         -------     -------

     September 30, 2000                       2.50       1.50
     December 31, 2000                         .625       .26
     March 31, 2001                           1.625       .375
     June 30, 2001                             .42        .26

     September 30, 2001                        .51        .06
     December 31, 2001                         .07        .02
     March 30, 2002                            .18        .03
     June 30, 2002                             .08        .04
     September 30, 2002                        .06        .03

     APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK.  The number of holders of
record of the Company's common stock at November 1, 2002, was 2,038.  This
does not include shares held in street name.

     DIVIDENDS.  The Company has paid no cash dividends on its Common Stock
and has no present intention of paying cash dividends in the foreseeable
future.  It is the present policy of the Board of Directors to retain all
earnings to provide for the growth of the Company.  Payment of cash dividends
in the future will depend, among other things, upon the Company's future
earnings, requirements for capital improvements and financial condition.

     PRIVATE SALES OF SECURITIES. During the quarter ended June 30, 2002, the
Company did not sell any securities which were not registered under the
Securities Act of 1933, as amended.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

     The forward-looking statements included in Management's Discussion and
Analysis of Financial Condition and Results of Operations, which reflect
management's best judgment based on factors currently known, involve risks and
uncertainties. Our actual results may differ significantly from the results
discussed in the forward-looking statements. You should not regard their
inclusion as a representation by us that the objectives or plans will be
achieved. Factors that might cause such a difference include, but are not
limited to, competitive, technological, financial and business challenges
making it more difficult than expected to sell products and services.  We may
be unable to hire and retain our key sales, technical and management
personnel; there may be other material adverse changes in our operations or
business, and any or all of these factors may affect our ability to achieve
our projected sales growth.  Forward-looking information provided by the
Company pursuant to the safe harbor established by recent securities
legislation should be evaluated in the context of these factors.


Page 6

RESULTS OF OPERATIONS

     During the year ended June 30, 2002 the Company reported revenue of
$1,001,274 compared to revenue of $439,223 during the year ended June 30,
2001.  During August 2000, the Company made the decision to abandon the use of
a multilevel marketing distribution model, and to sell its products through
distributors, other multilevel marketing companies, and affinity
organizations.

     During the year ended June 30, 2002 the cost of revenue was $342,585 or
34.2% of sales, compared to $114,671 or 26.1% of sales during the year ended
June 30, 2001.

     Operating expenses for the year ended June 30, 2002 were $863,523
compared to $1,205,563 for the year ended June 30, 2001.  Research and
development costs declined significantly from $194,909 in the year ended June
30, 2001 to $14,824 in the year ended June 30,2002, because the Company
completed the development of most of its products during the prior year.

     Interest expense increased from $69,105 in the year ended June 30, 2001
to $108,482 in the year ended June 30, 2002 due to the increased level of debt
outstanding.

     The net loss was $333,001 in the year ended June 30, 2002 compared to
$959,047 in the year ended June 30, 2001.

LIQUIDITY AND CAPITAL RESOURCES

     As of June 30, 2002, the Company had a working capital deficit of
$1,330,821.  The Company's future existence is dependent upon closing those
contracts now in negotiation, or alternatively to seek additional capital.  It
would be difficult for the Company to raise additional capital, particularly
in view of the Company's poor financial condition and the reluctance of the
participants in the equity markets to invest in speculative ventures.

ITEM 7.  FINANCIAL STATEMENTS.

     The financial statements are set forth on pages F-1 through F-14 hereto.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     No response required.



Page 7



                                PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

     The Directors and Officers of the Company are as follows:

      Name          Age            Positions and Offices Held
      ----          ---            --------------------------

Lance A. Perry      40       President, Chief Executive Officer and
                             Director

Robert L. Proctor   36       Chief Operations Officer, Chief Information
                             Officer and Director

     There is no family relationship between any Director or Executive Officer
of NetSalon Corporation.

     Set forth below are the names of all of our Directors and Executive
Officers, all positions and offices held by each such person, the period
during which he has served as such, and the principal occupations and
employment of such persons during at least the last five years:

     LANCE A. PERRY   PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR.  Mr.
Perry has served as President, Chief Executive Officer and a director of the
Company since April 1, 2002.   Mr. Perry was the original founder and CEO of
the Company's subsidiary, Netsalon I, Inc. in 1998, and he formed its core
vision, distribution channel partnerships, launched its product and services
strategy, managed the technical team and negotiated contracts.  Prior to his
departure in March 2000, he was responsible for all technology evaluation and
implementation, system vendor relations, scalability issues and the technology
personnel.  During the period from March 2000 until March 2002, Mr. Perry was
the chief architect of the "Nourish the Children" program, an initiative of
NuSkin enterprises, a publicly-traded company in the MLM industry.  From 1994
until 1998, Mr. Perry founded and served as CEO of The Synet Corporation, a
business and technology consulting firm that specialized in E-commerce,
content aggregation and technical development.  From the mid-1980s until 1994,
he served in executive and sales administration roles with Editors Choice
Software, Emergency Networks and Standard Computer.

     ROBERT L. PROCTOR - CHIEF OPERATIONS OFFICER, CHIEF INFORMATION OFFICER
AND DIRECTOR.  Mr. Proctor has served as Chief Operations Officer, Chief
Information Officer and a Director since January 1, 2001.  He has been
involved in various capacities with NetSalon I, Inc., the Company's
wholly-owned subsidiary, since it was founded in November 1998.  From March
2000 until January 2001, he was the owner and President of BuiltPRO LLC, a
company which provided website architecture, design and development.  From
1996 until 1999, Mr. Proctor founded, owned and operated IDSI Online, which
provided small to medium websites for the MLM, network marketing and direct
sales industries.  In 1999, he merged IDSI with two other partners to form
Syntechs Corporation, where he served as webmaster, director of creative
development and sales manager.  From 1992 until 1995, he was the owner and
sales manager of Trendz/Pizazz Imports and Wholesale, an import/export
clothing and accessories company.  From 1986 to 1993, Mr. Proctor worked as
collections supervisor, credit manager, human resources manager, and assistant
to the comptroller of TBS.

Page 8


SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE

     Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Form 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, no persons who were either a
Director, Officer or beneficial owner of more than 10% of the Company's Common
Stock, failed to file on a timely basis reports required by Section 16(a) of
the Exchange Act during the most recent fiscal year.

ITEM 10.  EXECUTIVE COMPENSATION

     The following table sets forth information regarding executive
compensation for the Company's Chief Executive Officer and Chief Operations
Officer.  No other executive officer received compensation in excess of
$100,000 for the fiscal years ended June 30, 2002 and 2001, and no amounts
were paid to any executive officer during the fiscal year ended June 30, 2000.
<TABLE>
<CAPTION>
                                    SUMMARY COMPENSATION TABLE


                                                           Long-Term Compensation
                                                      -------------------------------
                              Annual Compensation             Awards          Payouts
                           ------------------------   ---------------------   -------
                                                                   Securi-
                                                                    ties
                                                                   Underly-
                                             Other                   ing                 All
                                             Annual   Restricted   Options              Other
Name and Principal                           Compen-    Stock       /SARs      LTIP     Compen-
     Position        Year   Salary   Bonus   sation    Award(s)    (Number)   Payouts   sation
------------------   ----   -------  -----   ------   ----------   --------   -------   -------
<S>                  <C>    <C>      <C>     <C>      <C>          <C>        <C>       <C>

Lance A. Perry,      2002   $ 45,000   0        0         0           0          0         0
 President                    (1)

Mark S. Manuel,      2002   $120,000   0        0         0           0          0         0
 Chief Executive              (2)
 Officer             2001   $180,000   0        0         0           0          0         0
                              (3)

Robert L. Proctor    2002   $150,000  $5,000    0         0           0          0         0
 Chief Operations             (4)
 Officer
___________________

(1) All $45,000 of this salary was deferred.  The Company loaned Mr. Perry $24,213 during the
    year ended June 30, 2002.

(2) All $120,000 was deferred and then waived by Mr. Manuel as of June 30, 2002.

(3) $62,000 of this salary was deferred and then waived by Mr. Manuel as of June 30, 2002.

(4) $75,000 of this salary was deferred.  The Company loaned Mr. Proctor $20,236 during the
    year ended June 30, 2002.
</TABLE>


Page 9



DIRECTOR COMPENSATION

     Each Director is reimbursed for all reasonable and necessary costs and
expenses incurred as a result of being a Director of the Company.

ITEM 11.  SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS

     The following table sets forth, as of September 30, 2001, each person
known by the Company to be the beneficial owner of five percent or more of the
Company's Common Stock, all Directors and Executive Officers individually and
all Directors and Executive Officers of the Company as a group.  Except as
noted, each person has sole voting and investment power with respect to the
shares shown.

       Name and Address         Amount of Beneficial     Percentage
     of Beneficial Owner             Ownership            of Class
     -------------------        --------------------     ----------

Mark S. Manuel                        5,740,963 (1)         29.2%
2000 Main Street, Suite 202
Fort Myers, FL  33901

Lance A. Perry                        2,000,000             10.2%
9850 South Maryland Parkway
No. 5-155
Las Vegas, NV  89123

Robert L. Proctor                     2,001,000             10.2%
2000 Main Street, Suite 202
Fort Myers, FL  33901

All Directors and Officers            4,001,000             20.4%
as a Group (2 persons)
______________________

(1)  Includes 4,815,963 shares held directly by Mr. Manuel, 825,000 shares
     held in the name of Mr. Manuel's wife, and 100,000 shares held in the
     names of Mr. Manuel's two minor children.

ITEM 12.  CERTAIN TRANSACTIONS

     On August 17, 2000, the Company completed the acquisition of
approximately 99% of the outstanding common stock of NetSalon Corporation, a
Delaware corporation ("NetSalon"), in exchange for approximately 16,562,193
shares of the Company's Common Stock (approximately 85% of the shares now
outstanding).

     The stock issuances were made pursuant to a Share Exchange Agreement
("Agreement") between the Company and NetSalon.  The terms of the Agreement
were the result of negotiations between the managements of the Company and
NetSalon.  However, the Board of Directors did not obtain any independent
"fairness" opinion or other evaluation regarding the terms of the Agreement,
due to the cost of obtaining such opinion or evaluation.

     Included in the 16,562,193 shares issued were shares issued to the
following persons who are former Officers and Directors of the Company, in the
amounts shown:


Page 10


                        Mark Manuel    -  9,223,963
                        Donald Dinger  -    925,000

     As of June 30, 2002, the Company owed $192,692 to Donald Dinger, a former
director and shareholder, for loans Mr. Dinger made to the Company in its
early stages of development.

     As of June 30, 2002, Mr. Manuel, a shareholder and former officer and
director, waived $182,828 that was owed to him for accrued and unpaid salary.











































Page 11


                                   PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibits.

EXHIBIT
NUMBER    DESCRIPTION                   LOCATION
-------   -----------                   --------

  3.1     Certificate of                Incorporated by reference to
          Incorporation                 Exhibit 3.1 to the Registrant's
                                        Report on Form 10-KSB for the year
                                        ended June 30, 2001

 10.1     Share Exchange Agreement      Incorporated by reference to
          between Makepeace Capital     Exhibit 10 to the Registrant's
          Corp. and NetSalon            Report on Form 8-K dated August
          Corporation                   17, 2000

 21       Subsidiaries of the           Filed herewith electronically
          Registrant


     (b)  The Company filed no Reports on Form 8-K during the last quarter of
the period covered by this Report.























Page 12

                               NETSALON CORPORATION

                                Table of Contents

                                                                  Page

Independent Auditors' Reports                                   F-2 & F-3

Consolidated Financial Statements:

  Consolidated Balance Sheet                                       F-4

  Consolidated Statements of Operations                            F-5

  Consolidated Statement of Shareholders' Deficit                  F-6

  Consolidated Statements of Cash Flows                            F-7

Notes to Consolidated Financial Statements                         F-8



































                                      F-1






INDEPENDENT AUDITORS' REPORT

To the Board of Directors and
Shareholders of NetSalon Corporation

We have audited the accompanying consolidated balance sheet of NetSalon
Corporation (a Delaware Corporation) as of June 30, 2002 and the related
consolidated statements of operations, shareholders' deficit and cash flows
for the year then ended.  The financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principals used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of NetSalon Corporation as of June 30, 2002, and the consolidated results of
operations, changes in shareholders' deficit and cash flows for the year then
ended, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the financial
statements, the Company has suffered recurring losses, has a working capital
deficiency and a stockholders' deficit.  As described more fully in Notes 5
and 8 to the financial statements, the Company is in payment default under
certain notes payable and in arrears on accounts with certain vendors, which
among other things, may cause the balance to be due upon demand. The Company
is not aware of any alternate sources of capital to meet such demands, if
made. Those 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 result from the outcome of this uncertainty.


/s/ Schumacher & Associates, Inc.

November 12, 2002
Denver, Colorado












                                      F-2



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and
Shareholders of NetSalon Corporation

We have audited the related consolidated statements of operations,
shareholders' deficit and cash flows of NetSalon Corporation (a Delaware
Corporation) for the year ended June 30, 2001.  The financial statements are
the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principals used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, and the consolidated results of
operations, changes in shareholders' deficit and cash flows for the year ended
June 30, 2001, in conformity with accounting principles generally accepted in
the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the financial
statements, the Company has suffered recurring losses, has a working capital
deficiency and a stockholders' deficit.  As described more fully in Notes 5
and 8 to the financial statements, the Company is in payment default under
certain notes payable and in arrears on accounts with certain vendors, which
among other things, may cause the balance to be due upon demand. The Company
is not aware of any alternate sources of capital to meet such demands, if
made. Those 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 result from the outcome of this uncertainty.


/s/ Travis Wolff

November 8, 2001
Dallas, Texas















                                        F-3



                               NETSALON CORPORATION
                            Consolidated Balance Sheet
                                  June 30, 2002

ASSETS

Current assets:
     Cash                                                 $   12,660
     Accounts receivable                                       1,555
                                                          ----------
                                                              14,215

Capitalized software costs, net of accumulated
amortization of $10,026                                        7,069

Property and equipment, net of accumulated
depreciation of $25,462                                       14,202
                                                          ----------
                                                          $   35,486
                                                          ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
     Accounts payable and accrued expenses                $  458,908
     Deferred revenue                                         10,440
     Notes payable                                           534,445
     Loans payable to shareholders                           341,243
                                                          ----------
                                                           1,345,036
                                                          ----------

Commitments and contingencies (Notes 4,5,7,8,9 and 10)             -

Shareholders' deficit:
     Preferred stock - 20,000,000 shares authorized;
      $.001 Par; no shares issued                                  -
     Common stock - 100,000,000 shares authorized;
      $.001 Par; 19,630,900 shares issued                     19,630
     Additional paid-in capital                            1,236,749
     Accumulated deficit                                  (2,565,929)
                                                          ----------
                                                          (1,309,550)
                                                          ----------
                                                          $   35,486
                                                          ==========

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










                                     F-4


                            NETSALON CORPORATION
                    Consolidated Statements of Operations

                                                 For the Year Ended
                                             June 30,          June 30,
                                               2002              2001
                                          -------------      -------------

Revenue                                      1,001,274          439,223
Cost of revenue                                342,585          114,671
                                           -----------       ----------
Gross margin                                   658,689          324,552

Operating expenses:
     Research and development                   14,824          194,909
     General and administrative expenses       705,244          687,257
     Selling and marketing                     143,455          323,397
                                           -----------       ---------
                                               863,523        1,205,563
                                           -----------       ----------
Operating loss                                (204,834)        (881,011)

Other income and (expenses):
     Disposition of property and equipment     (19,722)         (12,635)
     Interest income                                37            3,704
     Interest expense                         (108,482)         (69,105)
                                           -----------       ----------
                                              (128,167)         (78,036)
                                           -----------       ----------
Net loss                                   $  (333,001)      $ (959,047)
                                           ===========       ==========

Basic and diluted loss per share:
     Basic loss per common share           $     (0.02)      $     (.05)
                                           ===========       ==========
     Weighted average common shares
     outstanding                            19,630,000       17,558,405
                                           ===========       ==========
     Diluted earnings per common share     $     (0.02)      $     (.05)
                                           ===========       ==========
     Weighted average diluted common
     shares outstanding                     19,630,000       17,558,405
                                           ===========       ==========












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

                                    F-5


                           NETSALON CORPORATION
             CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
                FOR THE YEARS ENDED JUNE 30, 2002 AND 2001

<TABLE>
<CAPTION>


                                     Common Stock          Additional    Common
                               -------------------------    Paid-in       Stock      Accumulated
                                  Shares        Amount      Capital     Subscribed     Deficit         Total
                               -------------   ---------   ----------   ----------   ------------   -----------
<S>                            <C>             <C>         <C>          <C>          <C>            <C>

Members' equity at June 30,
2000                                       -         -              -    473,551      (1,273,881)     (800,330)

Reverse acquisition merger with
Makepeace Capital Corp.:

  Application of stock deposits
  for stock issued                         -        -         473,551   (473,551)              -             -

  Assumption of outstanding
  Makepeace Capital Corp.          3,857,500    3,857         525,273     28,500        (474,180)       83,450

  Liquidation of Makepeace
  Capital Corp. net assets that
  reverted back to majority
  shareholder in return for
  cancellation of common stock    (2,912,896)  (2,913)        (80,537)         -               -       (83,450)

  Issuance of Makepeace common
  stock to acquire NetSalon       31,186,053   31,186         (31,186)         -               -             -

  Recapitalization of Makepeace
  shareholders' deficit and
  deposits on common stock                 -        -        (445,680)   (28,500)        474,180             -

  Stock issued for consulting
  services and finders fees        5,100,396    5,100          (5,100)         -               -             -

  Sale of common stock net
  of finders fees of $200,000      2,030,000    2,030         477,970          -               -       480,000

  1 for 2 reverse stock split    (19,630,153) (19,630)         19,630          -               -             -

Net loss                                   -        -               -          -         (959,047)    (959,047)
                               -------------   -------     ----------   --------     ------------   -----------
Shareholders' deficit at
 June 30, 2001                    19,630,900    19,630        933,921          -       (2,232,928)   (1,279,377)

Additional paid in capital                 -         -        302,828          -                -       302,828

Net loss                                   -         -              -          -         (333,001)     (333,001)
                               -------------   -------     ----------   --------     ------------   -----------
Shareholders' deficit at
 June 30, 2002                    19,630,000   $19,630     $1,236,749   $      -     $ (2,565,929)  $(1,309,550)
                               =============   =======     ==========   ========     ============   ===========

</TABLE>







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

                                     F-6



                             NETSALON CORPORATION
                      Consolidated Statements of Cash Flows

                                                  For the Year Ended
                                                June 30,       June 30,
                                                  2002           2001
                                               ----------     ---------
Net loss                                      $ (333,001)     $(959,047)

Adjustments to reconcile net loss to
cash used in operating activities:
 Depreciation of property and equipment           17,683          8,582
 Loss on asset disposition                        16,789         12,635
 Amortization of capitalized software costs        8,548          1,479
 Compensation contributed by related party       240,000              -
Change in assets and liabilities:
 (Increase) in accounts receivable                  (891)          (664)
 (Increase) decrease in prepaid rent               4,818         (4,818)
 (Increase) decrease in software licenses         91,200        (91,200)
 Increase in accounts payable and
  accrued expenses                               261,628        199,724
 Increase in accrued shareholder fee payable           -         63,000
 Increase in officer (shareholder)
  compensation payable                            75,552         62,827
 (Decrease) in officer (shareholder)
  expense payable                                      -        (40,931)
 Deferred revenue                               (303,188)       313,628
                                              ----------      ---------
     Net cash provided by (used in)
     operating activities                         79,138       (434,785)

Cash flows from investing activities:
 Proceeds from sale of certificate of deposit          -        100,000
 Capitalized software costs                            -        (17,096)
 Cash received from disposition of
  property and equipment                               -          4,700
 Purchase of property and equipment               (4,978)       (51,621)
                                              ----------      ---------
     Net cash provided by (used in)
     investing activities                         (4,978)        35,983

Cash flows from financing activities:
 Proceeds from private placement (net
  of $200,000 in finder's fees)                        -        482,096
Repayment of settlement note payable                   -        (90,000)
Repayments of working capital advances
 by shareholder                                  (86,500)       (13,500)
Shareholder loan advances                         25,000              -
Repayments of shareholder loan payable                 -        (50,000)
Advances from bank note payable                        -        100,000
Principal repayment of bank note payable               -       (100,000)
                                              ----------      ---------
     Net cash provided by (used in)
     financing activities                        (61,500)       328,596
                                              ----------      ---------
Increase (decrease) in cash                       12,660        (70,206)
Cash, beginning of period                              -         70,206
                                              ----------      ---------
Cash, end of period                           $   12,660      $       -
                                              ==========      =========
Additional cash flow disclosures
 Interest paid                                $        -      $  30,096
Noncash Transactions
 Purchase of office furniture and fixtures
 through direct loan installment              $        -      $  11,293

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

                                     F-7



                             NETSALON CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 2002

Note 1 - Organization

This summary of significant accounting policies of NetSalon Corporation
(Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to accounting principles generally accepted
in the United States of America and have been consistently applied in the
preparation of the financial statements.

Operations and business description

NetSalon Corporation ("NetSalon" or the "Company") is primarily an enterprise
application development company providing internet-based applications for
affinity and direct sales companies.  NetSalon also provides custom web
development, database design, multi-media application development and other
consulting services.

Basis of Consolidation

The consolidated financial statements include the accounts of NetSalon
Corporation and NetSalon I, Inc.  All significant intercompany transactions
have been eliminated.

Business Combination

NetSalon Corporation (NetSalon Corp.), previously named Makepeace Capital
Corp. (Makepeace), acquired 99% of NetSalon I, Inc., previously named NetSalon
Corporation (Legacy NetSalon), pursuant to an August 17, 2000 share exchange
agreement (Agreement) herein referred to as a business combination.  After the
business combination, Makepeace took on the name of NetSalon Corporation and
the acquired Legacy NetSalon changed its name to NetSalon I, Inc. In
accordance with the business combination agreement, Makepeace transferred its
existing assets and liabilities to its former majority shareholder.  Makepeace
had no assets or liabilities as of the business combination date.  As
required, the business combination was accounted for as a reverse acquisition
whereby Legacy NetSalon was defined as the accounting acquirer while Makepeace
was the legal acquirer.

Because of the reverse acquisition and in accordance with SEC regulations,
comparative information does not reflect Makepeace Capital Corp. operations,
but reflects Legacy NetSalon operations.  Legacy NetSalon originally
maintained a calendar year accounting period while Makepeace maintained a
fiscal year accounting period ending on June 30 of each year.  The new entity,
NetSalon Corp., is keeping the same accounting period as Makepeace.














                                    F-8


                            NETSALON CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 2002

Note 1 - Organization (Continued)

Business Combination - continued

Legacy NetSalon began operations in November 1998 developing internet-based
technologies and had reached a point of technical feasibility with its
products by December 31, 2000.  During 2000, Legacy NetSalon emerged from its
developmental stage, entered into a business combination with Makepeace, and
established itself in the marketplace obtaining customers and establishing its
business model.

Other

NetSalon had been reported as a developmental stage company at December 31,
1999.  The Company has subsequently emerged from its developmental stage.

The Company is subject to risks and uncertainties common to technology-based
companies, including rapid technological change, growth of the internet and
electronic commerce, new product development, actions of competitors, reliance
on the knowledge and skills of its employees to be able to service existing
customers, and availability of sufficient capital and a limited operating
history.  Contingencies exist with respect to these matters, the ultimate
resolution of which cannot presently be determined.

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
revenues and expenses, and disclosure of contingent assets and liabilities at
the date of the financial statements.  Actual results could differ from these
estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with original
maturities of three months or less to be cash equivalents.  For this report,
cash and cash equivalents is solely comprised of the amount available in
checking accounts.

Accounts Receivable

The Company provides an allowance for doubtful accounts equal to the estimated
uncollectible amounts. The Company's estimate is based on historical
collection experience and a review of the current status of trade accounts
receivable. No allowance was considered necessary as of June 30, 2002.











                                      F-9




                             NETSALON CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 2002

Note 2 - Summary of Significant Accounting Policies (Continued)

Capitalized Software Costs

The Company capitalized $17,096 of programming and related expenses as
required by Statement of Financial Accounting Standards No. 86, "Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed"
during the year ended June 30, 2001.  The capitalized software development is
being amortized over 24 months.  Amortization amounted to $8,548 and $1,479
for the years ended June 30, 2002 and 2001, respectively.

Property and Equipment

Property and equipment are carried at cost and depreciated over estimated
useful lives of three to seven years using the straight-line method.
Maintenance and repairs are charged to expense as incurred; major renewals and
betterments are capitalized and depreciated over the estimated remaining
useful life of the asset.  The cost of items sold or otherwise disposed of,
and the related accumulated depreciation or amortization are removed from the
accounts and gains or losses are reflected in current operations.

The Company periodically reviews all long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.  If the sum of the estimated future undiscounted
cash flows expected to result from the use and eventual disposition of an
asset is less than the carrying value, the asset is reduced to its fair value.
There was no impairment recognized in the periods presented herein.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax loss and credit carry forwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities. The components
of the deferred tax assets and liabilities are individually classified as
current and non-current based on their characteristics. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets will
not be realized.








                                      F-10







                            NETSALON CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 2002


Note 2 - Summary of Significant Accounting Policies (Continued)

Revenue Recognition and Deferred Revenue

Fees for enterprise implementation and software licenses are generally paid in
advance. The fees are deferred and recognized on a straight-line basis over
the period of the applicable agreement or contract, which are generally 12 to
24 months.  Revenues for consulting and custom programming is recorded as
earned or using the percent-complete method as appropriate.

Deferred revenue was approximately $10,440 and $313,628 at June 30, 2002 and
2001, respectively.  During the year ended June 30, 2002, the Company
recognized income previously deferred in the approximate amount of $141,145
related to contracts with customers that are no longer in business and
therefore require no future support from the Company.

Note 3 - Property and Equipment

Property and equipment was composed of the following at June 30, 2002:

     Computer equipment                  $    32,920
     Furniture and fixtures                    6,744
                                         -----------
     Property and equipment, gross            39,664
     Less accumulated depreciation            25,462
                                         -----------
     Property and equipment, net         $    14,202
                                         ===========

Depreciation expense amounted to $17,683 and $8,582 for the years ended June
30, 2002 and 2001, respectively.

Note 4 - Notes Payable

Notes payable consisted of the following at June 30, 2002:

   Note payable to former investor.  Bears interest at
   a rate of 9% per annum.  Pursuant to a renegotiated
   agreement effective May 2001, monthly payments of
   $5,000 were required through October 2001 with
   monthly payments of $25,000 beginning in November
   2001.  This note payable has been classified as a
   current liability due to payment default.  Accrued
   interest amounted to $58,379 at June 30, 2002.            534,445
                                                           ---------
                                                           $ 534,445
                                                           =========





                                  F-11









                            NETSALON CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 2002

Note 5 - Related Party Transactions

   Related party loans and payables were comprised
   of the following as of June 30, 2002:

   Note payable to shareholder requiring monthly payments
   of $5,000 per month including interest at a rate of 12%
   per annum.  Accrued interest amounted to $46,507 at June
   30, 2002.  This note payable has been classified as a
   current liability due to payment default.               $ 177,692

   Officers/Shareholders compensation accrued, but not
   paid at June 30, 2002.                                     75,551

   Due to shareholders for working capital advances.          25,000

   Due to shareholder and ex-officer for unpaid
   compensation.                                              63,000
                                                           ---------
                                                           $ 341,243
                                                           =========

During fiscal year 2001, the Company acquired computer equipment for $8,075
from a company owned by an officer and shareholder. The Company incurred legal
fees of $16,750 and $55,524 to law firms affiliated with shareholders of the
Company during the years ended June 30, 2002 and 2001, respectively.

During the year ended June 30, 2002, a shareholder of the Company transferred
2,000,000 restricted shares each to two officers of the Company.  During
January 2002, at the time the shareholder agreed to transfer the shares, the
publicly traded approximate market value was $.03 per share.  Since the
transfer of the shares was considered to be compensation, compensation was
recorded in the amount of $120,000 and a corresponding amount has been
recorded as additional paid-in capital.

Note 6 - Income Taxes

As of June 30, 2002, there are no current or deferred income taxes payable.
As of June 30, 2002, the Company has total deferred tax assets of
approximately $260,000 due to operating loss carry forwards.  However, because
of the uncertainty of potential realization of these tax assets, the Company
has provided a valuation allowance for the entire $260,000.  Thus, no tax
assets have been recorded in the financial statements as of June 30, 2002.

The Company has available at June 30, 2002, unused operating loss carry
forwards of approximately $1,300,000 which may be applied against future
taxable income, expiring in various years through 2022.  The available net
operating loss carry forwards may be reduced if there is a 50% or more change
in ownership.



                                      F-12



                             NETSALON CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 2002

Note 7 - Stock and Warrants

All common shares outstanding have equal voting rights with no restrictions.
Approximately 756,000 class A warrants are outstanding as of June 30, 2002,
that enable the holders to purchase common shares at $5.00 per share. These
warrants expire on February 8, 2003.  No new warrants were issued and no
warrants were exercised during the years ended June 30, 2002 and 2001.

As part of an employee agreement, two officers of the Company are entitled to
receive 2,000,000 stock options each.  The option plan has been approved by
the directors of the company, but is subject to shareholder approval.  Since
shareholders have not yet approved the plan, no determination was made
regarding valuation of the options.  If the shareholders approve the plan,
each officer will have 1,000,000 options vested immediately.  In addition, if
the shareholders approve the plan, each of the officers will be entitled to
receive 250,000 additional options quarterly commencing July 1, 2002.  The
options would have an exercise price of $.05 per share and would be
exercisable until April 1, 2007.

Note 8 - Going Concern Issues Arising from Recurring Losses, Cash Flow
Problems and Default on Debt

The Company has incurred recurring losses from operations.  As of June 30,
2002, the Company's current liabilities exceeded its current assets by
$1,330,821 and its total liabilities exceeded its total assets by $1,309,550.
Additionally, as of June 30, 2002, the Company was in arrears for principal
and interest payments on certain debt.  Because of the default, the Company
has classified the debt as current liabilities.  Management believes that its
ability to reduce certain operating costs and broadened its marketing efforts
provide an opportunity for the Company to continue as a going concern.  The
accompanying financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.

Note 9 - Concentrations

For the year ending June 30, 2002, one customer accounted for approximately 27
percent of the revenue.  Four other customers accounted for approximately 19,
15, 14 and 7 percent, respectively.  For the year ending June 30, 2001, one
customer accounted for approximately 62 percent of the revenue.  Two other
customers accounted for approximately 14 and 11 percent, respectively.

Note 10 - Litigation and contingencies

Certain disagreements exist between the Company and an entity concerning
certain marketing and other products created by the entity.  The entity claims
that the Company owes them approximately $40,000.  The Company's management
believes that the entity owes them an unspecified amount, less than $40,000.
Management believes that the Company will be successful in this dispute.  A
contingency exists with respect to this matter, the ultimate resolution of
which cannot presently be determined.





                                    F-13



                             NETSALON CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 2002

Note 10 - Litigation and contingencies (Continued)

During January 2002, a note holder filed a complaint against the Company and a
director in the District Court of Harris County, Texas.  The complaint alleges
that the company breached its agreement dated September 15, 2000 to make
monthly payments of $25,000 to the note holder under a promissory note in the
amount of $536,700 including interest.  The complaint seeks damages of
$559,028, prejudgment interest and attorney's fees.

During November 2002, the Company entered into a Settlement Agreement with the
note holder which provides as follows:  The Company agreed to the entry of a
judgment against it in the amount of $534,445 together with interest thereon
from April 13, 2001 at the rate of 9% per annum.  The note holder agreed that
he would not execute upon the judgment until November 20, 2003, except
pursuant to the terms of the Agreement.  The director named in the litigation
is to deliver 3,000,000 shares of the Company's common stock owned by the
director, and such shares are to be held in escrow by the note holder's
attorney.  In the event that the Company completes a business combination
transaction, certain shareholders of the Company will be required to cancel
9,630,900 shares leaving 10,000,000 shares outstanding before the closing.  Of
these ten million shares, the note holder will keep one million of the escrow
shares in full satisfaction of the judgment debt and the other two million
shares his attorney is holding in escrow will be canceled.  If a business
combination does not close, but another similar one does close by November 20,
2003, the same provisions will apply.  If the Company does not complete a
business combination, the note holder may at any time accept the 3 million
shares in escrow in full satisfaction of the judgment debt.  The note holder
is not allowed to execute on the judgment until after November 20, 2003,
unless the Company is in default under the Agreement.  After November 20,
2003, if the Company has not completed a business combination or paid the
debt, the note holder may execute upon the judgment and take the 3 million
shares in escrow.

A former officer/employee has indicated that he is owed approximately $52,000
for unpaid compensation.  In addition, he asserts that the Company is liable
to him for an additional $125,000 related to the purchase, from the Company,
of a certain system that allegedly did not meet represented specifications.
In addition, he asserts that the Company owes him $28,758 for advances made on
behalf of the Company.  Management believes that the system sold to the
individual met required specifications and that there are no amounts due for
past compensation.  Management believes that the total amount owed to this
individual approximates $18,758, which has been shown as a liability in the
accompanying financial statements, as compared to $205,758 claimed by the
individual.  A contingency exists with respect to this matter, the ultimate
resolution of which cannot presently be determined.

The Company is delinquent on payment of payroll taxes and the Internal Revenue
Service has filed liens against the Company.  The unpaid delinquent payroll
taxes are approximately $130,000 at June 30, 2002.  A contingency exists with
respect to this matter, the ultimate resolution of which cannot presently be
determined.

The Company is subject to various threatened creditor litigation and claims
for unpaid balances accrued on the financial statements.  Contingencies exist
with respect to these matters, the ultimate resolution of which cannot
presently be determined.

                                    F-14



                              SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                    NETSALON CORPORATION



Dated:  November 14, 2002           By:/s/ Lance A. Perry
                                       Lance A. Perry, President


     In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

           Signature                 Capacity                   Date
           ---------                 --------                   ----



/s/ Lance A. Perry             President, Chief           November 14, 2002
Lance A. Perry                 Executive Officer
                               and Director


/s/ Robert L. Proctor          Chief Operations Officer   November 14, 2002
Robert L. Proctor              and Director



                                 CERTIFICATIONS

     I, Lance A. Perry, certify that:

     1.     I have reviewed this annual report on Form 10-QSB of NetSalon
Corporation;

     2.     Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

     3.     Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this annual
report;

     4.     I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:

            (a)  designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being
prepared;

            (b)  evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

            (c)  presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

     5.     I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):

            (a)  all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and

            (b)  any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

     6.     The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Dated: November 14, 2002


                                  /a/ Lance A. Perry
                                  Lance A. Perry
                                  President
                                  (Principal Executive Officer)
                                  (Principal Financial Officer)


                 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
                         CHIEF FINANCIAL OFFICER OF
                            NETSALON CORPORATION
                     PURSUANT TO 18 U.S.C. SECTION 1350


     I certify that, to the best of my knowledge, the Annual Report on Form
10-KSB of NetSalon Corporation for the year ended June 30, 2002:

     (1) complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all
material aspects, the financial condition and results of operations of
NetSalon Corporation.


                                        /s/ Lance A. Perry
                                        Lance A. Perry
                                        Chief Executive Officer
                                        and Principal Financial Officer
                                        November 14, 2002