**U.S.
      Securities and Exchange Commission**


**Washington,
      D.C. 20549**









**FORM
      10-QSB**







**[X]**
            **Quarterly
                Report Under Section 13 or 15(d) of The Securities Exchange Act of
                1934
                for the Quarterly Period Ended June 30,
                2007**





**[
                 ]**
            **Transition
                Report Under Section 13 or 15(d) of The Securities Exchange Act of
                1934
                for the Transition Period from _______ to
                _______**





**Commission
      File Number: 000-52749**







**SALON
      CITY, INC.**


****(Exact
      name of small business issuer as
      specified in its charter)







**NEVADA**
            **20-2107795**(State
                or other jurisdiction of
            (IRS
                Employer Identification No.)incorporation
                or organization)




**909
      North Palm Avenue**


**Suite
      311**


**West
      Hollywood, California 90069**


(Address
      of principal executive offices)





**310-358-9017**


(Issuer's
      telephone number)












Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act 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
                [  ]





Indicate
      by check mark whether the registrant is a shell company (as defined in rule
      12b-2 of the exchange act). Yes [  ] No [X]





Number
      of
      shares of common stock outstanding as of August 13,
      2007:     977,483,258


Number
      of
      shares of preferred stock outstanding as of August 13,
      2007:              -0-














**CAUTIONARY
      STATEMENT REGARDING FORWARD LOOKING INFORMATION**




The
      discussion contained in this 10-QSB under the Securities Exchange Act of 1934,
      as amended, contains forward-looking statements that involve risks and
      uncertainties. The issuer's actual results could differ significantly from
      those
      discussed herein. These include statements about our expectations, beliefs,
      intentions or strategies for the future, which we indicate by words or phrases
      such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the
      Company believes," "management believes" and similar language, including those
      set forth in the discussions under "Notes to Financial Statements" and
      "Management's Discussion and Analysis or Plan of Operation" as well as those
      discussed elsewhere in this Form 10-QSB. We base our forward-looking statements
      on information currently available to us, and we assume no obligation to update
      them. Statements contained in this Form 10-QSB that are not historical facts
      are
      forward-looking statements that are subject to the "safe harbor" created by
      the
      Private Securities Litigation Reform Act of 1995.




2




**TABLE
                OF
                CONTENTS****PART
                I. FINANCIAL INFORMATION**ITEM
                1.FINANCIAL
                STATEMENTS
            4ITEM
                2.MANAGEMENT'S
                DISCUSSION AND
                ANALYSISOFFINANCIAL
                CONDITION
                ANDRESULTSOF
                OPERATION
            10ITEM
                3.CONTROLS AND
                PROCEDURES
            15**PART
                II. OTHER INFORMATION**ITEM
                1.LEGAL
                PROCEEDINGS
            16ITEM
                2.CHANGES IN
                SECURITIES AND USE OF
                PROCEEDS
            16ITEM
                3.DEFAULTS
                UPON SENIOR
                SECURITIES
            16ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            16ITEM
                5.OTHER
                INFORMATION
            16ITEM
                6.EXHIBITS AND
                REPORTS ON FORM
                8-K
            16SIGNATURES
            17INDEX
                TO
                EXHIBITS
            18





3





**ITEM
      1.** **FINANCIAL STA****TEMENTS**




**SALON
                  CITY, INC.****Balance
                  Sheet*****At
                  June 30, 2007***
 
 Assets:Current
                assetsCash
              
              $
              88,055Accounts
                receivable less allowance for doubtful accounts of $59,342
              
              
              60,283Prepaid
                expenses
              
              
              54,000Total
                current assets
              
              
              202,338Fixed
                assetsEquipment
              
              
              25,272Accumulated
                depreciation
              
              
              (17,536
              )Total
                fixed assets
              
              
              7,736Total
                  assets
              
              $
              210,074Liabilities
                  and Stockholders' EquityCurrent
                liabilitiesAccounts
                payable and accrued expenses
              
              $
              271,431Related
                party loan payable
              
              
              43,291Total
                current liabilities
              
              
              314,722Long-term
                bank loans payable
              
              
              99,924Total
                liabilities
              
              
              414,646Stockholders'
                DeficitCommon
                stock, (1,000,000,000 shares authorized, 975,467,258shares
                issued and outstanding, par value $.001 per share)
              
              
              975,467Preferred
                stock, (50,000,000 shares authorized, noshares
                issued and outstanding, par value $.001 per share)
              
              
              -Additional
                paid-in capital
              
              
              92,488Treasury
                stock
              
              
              (243,128
              )Stock
                subscriptions receivable
              
              
              (107,551
              )Retained
                deficit
              
              
              (921,848
              )Total
                stockholders' deficit
              
              
              (204,572
              )Total
                  liabilities and stockholders' deficit
              
              $
              210,074The
                  accompanying notes are an integral part of these financial
                  statements






4




**SALON
                CITY, INC.****Statements
                of Operations*****For
                the Three and Six Months Ended June 30, 2007 and
                2006***For
                the Three Months
            
            
            For
                the Six MonthsEnded
                June 30,
            
            
            Ended
                June 30,2007
            
            
            2006
            
            
            2007
            
            
            2006Advertising
                income
            
            $
            121,709
            
            
            $
            120,666
            
            
            $
            228,824
            
            
            $
            190,101Distributors,
                conference and other income
            
            
            -
            
            
            
            -
            
            
            
            140
            
            
            
            -Total
                revenue
            
            
            121,709
            
            
            
            120,666
            
            
            
            228,964
            
            
            
            190,101Cost
                of goods sold
            
            
            (196,165
            )
            
            
            (66,790
            )
            
            
            (291,569
            )
            
            
            (110,637
            )Gross
                profit (loss)
            
            
            (74,456
            )
            
            
            53,876
            
            
            
            (62,605
            )
            
            
            79,464Selling,
                general and administrative expenses
            
            
            41,747
            
            
            
            43,444
            
            
            
            138,338
            
            
            
            116,718Net
                ordinary income (loss)
            
            
            (116,203
            )
            
            
            10,432
            
            
            
            (200,943
            )
            
            
            (37,254
            )Interest
                expense
            
            
            (14,594
            )
            
            
            (4,803
            )
            
            
            (21,795
            )
            
            
            (11,620
            )Net
                income (loss)
            
            $
            (130,797
            )
            
            $
            5,629
            
            
            $
            (222,738
            )
            
            $
            (48,874
            )Basic
                income (loss) per share
            
            $
            
            *
            
            $
            
            *
            
            $
            
            *
            
            $
            
            *Fully
                diluted income (loss) per share
            
            $
            
            *
            
            $
            
            *
            
            $
            
            *
            
            $
            
            *Weighted
                average shares outstanding
            
            
            983,845,458
            
            
            
            915,015,874
            
            
            
            977,345,458
            
            
            
            923,358,125*
                =
                less than $.01 per share.The
                accompanying notes are an integral part of these financial
                statements




5




**SALON
                  CITY, INC.****Statements
                  of Cash Flows*****For
                  the Six Months ended June 30, 2007 and
                  2006***6
                  Months ended
              
              
              6
                  Months ended6/30/2007
              
              
              6/30/2006CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                loss
              
              $
              (222,738
              )
              
              $
              (48,874
              )Adjustments
                to reconcile net (loss) to net cash(used
                in) operating activities:Depreciation
              
              
              1,536
              
              
              
              1,534Par
                value of shares returned to treasury
              
              
              12,156
              
              
              
              -Common
                stock issued for services rendered
              
              
              45,000
              
              
              
              -(Increase)
                decrease in operating assets:Accounts
                receivable
              
              
              44,784
              
              
              
              21,235Prepaid
                expenses
              
              
              (5,000
              )
              
              
              (50,685
              )Increase
                (decrease) in operating liabilities:Accounts
                payable and accrued expenses
              
              
              24,141
              
              
              
              37,732NET
                CASH (USED IN) OPERATING ACTIVITIES
              
              
              (100,121
              )
              
              
              (39,058
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchases
                of equipment
              
              
              (8,883
              )
              
              
              -NET
                CASH (USED IN) INVESTING ACTIVITIES
              
              
              (8,883
              )
              
              
              -CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from sale of common stock to investors
              
              
              13,000
              
              
              
              221,500Receipt
                of loans from officer
              
              
              43,291
              
              
              
              -Proceeds
                from bank loans
              
              
              58,045
              
              
              
              -Repayments
                of bank loans
              
              
              -
              
              
              
              (1,616
              )NET
                CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              114,336
              
              
              
              219,884NET
                INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              5,332
              
              
              
              180,826CASH
                  AND CASH EQUIVALENTS:Beginning
                of period
              
              
              82,723
              
              
              
              27,507End
                of period
              
              $
              88,055
              
              
              $
              208,333SUPPLEMENTAL
                  CASH FLOW DISCLOSURES AND NON-CASHFINANCING  INFORMATION:Cash
                paid during the period for interest
              
              $
              21,795
              
              
              $
              11,620Cash
                paid during the period for income taxes
              
              $
              -
              
              
              $
              -Receipt
                of 12,156,400 common shares from officer in payment of officer
                loan
              
              $
              243,128
              
              
              $
              -The
                  accompanying notes are an integral part of these financial
                  statements




6




NOTES
        TO CONDENSED FINANCIAL STATEMENTS
 OF
 SALON
        CITY, INC.
 JUNE
        30,
        2007 (UNAUDITED)
 
  NOTE
        A -
        BASIS OF PRESENTATION
 
 The
        accompanying unaudited condensed financial statements have been prepared
        in
        accordance with accounting principles generally accepted in the United States
        of
        America for interim financial information and pursuant to the rules and
        regulations of the Securities and Exchange Commission. Accordingly, they
        do not
        include all of the information and footnotes required by generally accepted
        accounting principles for complete financial statements.
 
 In
        the
        opinion of management, the unaudited condensed financial statements contain
        all
        adjustments consisting only of normal recurring accruals considered necessary
        to
        present fairly the Company's financial position at June 30, 2007 and the
        results
        of operations for the period ended June 30, 2007.
 
 Management’s
        Use of Estimates - The preparation of financial statements in conformity
        with accounting principles generally accepted in the United States of America
        requires management to make estimates and assumptions that effect the reported
        amounts of assets and liabilities, disclosures of contingent assets and
        liabilities at the date of the financial statements and the reported amounts
        of
        revenues and expenses during the reporting period. Actual results could differ
        from those estimates.
 
 Fair
        Value of Financial Instruments– The carrying amounts of financial
        instruments including accounts receivable, other current assets, equipment
        and
        related depreciation, accounts payable and accrued expenses and bank loans
        payable approximated fair value because of the immediate short-term maturity
        of
        these instruments.
 
 Income
        Taxes– Income taxes are provided for the tax effects of transactions
        reported in the financial statements and consist of deferred taxes related
        primarily to differences between the basis of certain assets and liabilities
        for
        financial and tax reporting and net operating loss-carry forwards. Deferred
        taxes represent the future tax return consequences of those differences,
        which
        will either be taxable or deductible when the assets and liabilities are
        recovered or settled.
 
 The
        income tax benefit consists of taxes currently refundable due to net operating
        loss carry back provisions less the effects of accelerated depreciation for
        the
        federal government. 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 the entire deferred tax asset will not be realized. Deferred tax assets
        and
        liabilities are adjusted for the effect of changes in tax laws and rates
        on the
        date of enactment.
 
 Earnings
        (Loss) Per Share - The Company reports earnings (loss) per share in
        accordance with Statement of Financial Accounting Standard (SFAS) No.128.
        This
        statement requires dual presentation of basic and diluted earnings (loss)
        with a
        reconciliation of the numerator and denominator of the loss per share
        computations. Basic earnings per share amounts are based on the weighted
        average
        shares of common outstanding. If applicable, diluted earnings per share assume
        the conversion, exercise or issuance of all common stock instruments such
        as
        options, warrants and convertible securities, unless the effect is to reduce
        a
        loss or increase earnings per share. Accordingly, this presentation has been
        adopted for the periods presented. There were no adjustments required to
        net
        income for the period presented in the computation of diluted earnings per
        share. There were no common stock equivalents (CSE) necessary for the
        computation of diluted loss per share.
 
 Fixed
        Assets– Fixed assets are recorded at cost and include expenditures that
        substantially increase the productive lives of the existing assets. Maintenance
        and repair costs are expensed as incurred. Depreciation is provided using
        the
        straight-line method. Depreciation of property and equipment is calculated
        over
        the management prescribed recovery periods, which range from 5 years for
        equipment to 7 years for furniture and fixtures.
 
 When
        a
        fixed asset is disposed of, its cost and related accumulated depreciation
        are
        removed from the accounts. The difference between undepreciated cost and
        proceeds from disposition is recorded as a gain or loss.
  7
 NOTES
          TO CONDENSED FINANCIAL STATEMENTS
 OF
 SALON
          CITY, INC.
 JUNE
          30,
          2007 (UNAUDITED)
  Advertising
        Costs - Advertising costs are expensed as incurred. The Company does not
        incur any direct-response advertising costs.
 
 Revenue
        Recognition- Revenue is recognized when advertising services are earned and
        measurable based upon performed.
 
 Comprehensive
        Income (Loss) - The Company adopted Financial Accounting Standards Board
        Statement of Financial Accounting Standards No. 130, *“Reporting
        Comprehensive Income”*, which establishes standards for the reporting and
        display of comprehensive income and its components in the financial statements.
        There were no items of comprehensive income (loss) applicable to the Company
        during the year covered in the financial statements.
 
 Long-Lived
        Assets - In accordance with SFAS No. 144, the Company reviews and evaluates
        its long-lived assets for impairment whenever events or changes in circumstances
        indicate that their net book value may not be recoverable. When such factors
        and
        circumstances exist, including those noted above, the Company compares the
        assets’ carrying amounts against the estimated undiscounted cash flows to be
        generated by those assets over their estimated useful lives. If the carrying
        amounts are greater than the undiscounted cash flows, the fair values of
        those
        assets are estimated by discounting the projected cash flows. Any excess
        of the
        carrying amounts over the fair values are recorded as impairments in that
        fiscal
        period.
 
 Cash
        and Cash Equivalents - For purposes of the Statements of Cash Flows, the
        Company considers liquid investments with an original maturity of three months
        or less to be cash equivalents.
 
 Recent
        Accounting Pronouncements - In February 2006, FASB issued SFAS No. 155,
“Accounting for Certain Hybrid Financial Instruments.” SFAS No. 155 amends SFAS
        No 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAF
        No. 140, “Accounting for Transfers and Servicing of Financial Assets and
        Extinguishments of Liabilities.”  SFAS No. 155, permits fair value
        remeasurement for any hybrid financial instrument that contains an embedded
        derivative that otherwise would require bifurcation, clarifies which
        interest-only strips and principal-only strips are not subject to the
        requirements of SFAS No. 133, establishes a requirement to evaluate interest
        in
        securitized financial assets to identify interests that are freestanding
        derivatives or that are hybrid financial instruments that contain an embedded
        derivative requiring bifurcation, clarifies that concentrations of credit
        risk
        in the form of subordination are not embedded derivatives, and amends SFAS
        No.
        140 to eliminate the prohibition on the qualifying special-purpose entity
        from
        holding a derivative financial instrument that pertains to a beneficial interest
        other than another derivative financial instrument.  This statement is
        effective for all financial instruments acquired or issued after the beginning
        of the Company’s first fiscal year that begins after September 15,
        2006.  The adoption of SFAS No. 155 is not expected to have a material
        impact on the Company’s results of operations or financial
        position.
  In
        June
        2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”) which
        prescribes a recognition threshold and measurement attribute, as well as
        criteria for subsequently recognizing, derecognizing and measuring uncertain
        tax
        positions for financial statement purposes.  FIN 48 also requires
        expanded disclosure with respect to the uncertainty in income tax assets
        and
        liabilities.  FIN 48 is effective for fiscal years beginning after
        December 15, 2006, which will be the Company’s calendar year 2007, and is
        required to be recognized as a change in accounting principle through a
        cumulative-effect adjustment to retained earnings as of the beginning of
        the
        year of adoption. The adoption of FIN 48 is not expected to have a material
        impact on the Company’s results of operations or financial
        position.
 
 In
        June
        2006, the Financial Accounting Standards Board (“FASB”) ratified the provisions
        of Emerging Issues Task Force (“EITF”) Issue No. 06-3, “How Taxes Collected from
        Customers and Remitted to Governmental Authorities Should Be Presented in
        the
        Income Statement (That Is, Gross versus Net Presentation).” EITF Issue No. 06-3
        requires that the presentation of taxes within revenue-producing transactions
        between a seller and a customer, including but not limited to sales, use,
        value
        added, and some excise taxes, should be on either a gross (included in revenue
        and cost) or a net (excluded from revenue) basis. In addition, for any such
        taxes that are reported on a gross basis, a company should disclose the amounts
        of those taxes in interim and annual financial statements for each period
        for
        which an income statement is presented if those amounts are significant.
        The
        disclosure of those taxes can be done on an aggregate basis. EITF Issue No.
        06-3
        is effective for fiscal years beginning after December 15, 2006, which will
        be
        the Company’s calendar year 2007.  The adoption of EITF Issue No. 06-3
        is not expected to have a material impact on the Company’s results of operations
        or financial position.
  8
  NOTES
          TO CONDENSED FINANCIAL STATEMENTS
 OF
 SALON
          CITY, INC.
 JUNE
          30,
          2007 (UNAUDITED)
  In
        September 2006, the Securities and Exchange Commission issued Staff Accounting
        Bulletin No.108 (“SAB No. 108”), “Considering the Effects of Prior Year
        Misstatements when Quantifying Current Year Misstatements.” SAB No. 108 requires
        analysis of misstatements using both an income statement (rollover) approach
        and
        a balance sheet (iron curtain) approach in assessing materiality and provides
        for a one-time cumulative effect transition adjustment. SAB No. 108 is effective
        for the fiscal year beginning November 15, 2006.  The adoption of SAB
        No. 108 is not expected to have a material impact on the Company’s results of
        operations or financial position.
  In
        March
        2006, the FASB issued SFAS No. 156.  This Statement amends FASB
        Statement No. 140, Accounting for Transfers and Servicing of Financial Assets
        and Extinguishments of Liabilities, with respect to the accounting for
        separately recognized servicing assets and servicing liabilities. This Statement
        is effective as of the beginning of its first fiscal year that begins after
        September 15, 2006.
  An
        entity
        should apply the requirements for recognition and initial measurement of
        servicing assets and servicing liabilities prospectively to all transactions
        after the effective date of this Statement.
  In
        September 2006, the FASB issued SFAS No. 157 and No. 158.  Statement
        No. 157 defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles (GAAP), and expands disclosures
        about
        fair value measurements.  This Statement applies under other
        accounting pronouncements that require or permit fair value measurements,
        the
        Board having previously concluded in those accounting pronouncements that
        fair
        value is the relevant measurement attribute. Accordingly, this Statement
        does
        not require any new fair value measurements. However, for some entities,
        the
        application of this Statement will change current practice.
  Statement
        No. 158 is an amendment of FASB Statements No. 87, 88, 106, and
        132(R).  It improves financial reporting by requiring an employer to
        recognize the over funded or under funded status of a defined benefit
        postretirement plan (other than a multiemployer plan) as an asset or liability
        in its statement of financial position and to recognize changes in that funded
        status in the year in which the changes occur through comprehensive income
        of a
        business entity or changes in unrestricted net assets of a not-for-profit
        organization.  This Statement also improves financial reporting by
        requiring an employer to measure the funded status of a plan as of the date
        of
        its year-end statement of financial position, with limited
        exceptions.
  The
        Company does not expect application of SFAS No. 156, 157 and 158 to have
        a
        material affect on its financial statements.
 
 NOTE
        B –
EQUITY
 
 During
        the six months ended June 30, 2007, the Company issued 3,000,000 common shares
        to an outside consultant for payment of services during this period. The
        transaction was valued at the stock price on the date of issuance of $.015
        per
        share. $45,000 was expensed and is included in the accompanying statements
        of
        operations. This amount also reasonably approximates the fair market value
        of
        services received.
 
 During
        the six months ended June 30, 2007, the Company collected 12,156,400 of the
        Company’s officer and majority shareholder’s common shares in payment of a
        receivable from the officer in the amount of $243,128. These shares were
        recorded as treasury stock in the accompanying balance sheet at June 30,
        2007.




9




**ITEM
      2.** **MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPE****RATION**




As
      used
      herein the terms "we", "us", "our," the “Registrant,” and the "Company" means,
      Salon City, Inc., a Nevada corporation.





GENERAL
      DESCRIPTION OF BUSINESS





**Introduction**





We represent
      the formal incorporation of a 10-year-old media, entertainment and distribution
      business located in Hollywood, California. From our inception, we have provided
      branding, media and product distribution services for the world-wide beauty
      industry (including professional and consumer beauty salons as well as spas),
      most notably through our Salon City Star magazine, and we also have a
      network for distributing beauty products to such salons and spas. We were
      formally incorporated in Nevada on January 4, 2005.





In
      2007,
      after six years of publishing Salon City Star, SCI entered into a worldwide
      newsstand distribution agreement with Time Warner Retail and Kable Distribution
      News to launch the all-new Salon City Magazine in over 5000 major retail
      bookstores and newsstands in the USA and in 30 countries. The magazine is
      currently in its initial roll-out stages and is being augmented by a digital
      edition and online community at www.saloncity.com. Additional media
      products are being planned for 2008 and include a professional only publication
      and regularly produced webisodes of a Salon City TV show.





We
      originally launched operations in
      the fall of 1995 as SC Communications, a sole proprietorship owned by our
      current management. It first provided consulting services to beauty product
      manufacturers. In 1998, we added publicity and public relations services for
      salons and individuals through an additional sole proprietorship named Salon
      City Press Club. In 2000, we began producing the SunFun Beauty Festival (an
      annual summer conference in Las Vegas).





In
      2001 we began publishing Salon
      City Star magazine – a consumer magazine for salons, spas, and their
      clients. From 2001-2006, Salon City Star was sold on newsstands in
      Southern California and New York City, mailed to top salons and nationally
      distributed in salons and spas by our network of 30 distributors, known as
      Salon
      City Network.





Our
      distributors, who in the future
      will be recruited and selected to be exclusively licensed to represent Salon
      City in their markets, also sell top professional beauty products to a market
      of
      roughly 250,000 salons and spas. This market has combined annual revenues
      exceeding $150 billion dollars in services and retail revenues. To increase
      our
      exposure in this market, we use our magazine and media events to position the
      Salon City brand.





By
      building our brand name and inviting distributors and members to join our
      network, we plan to grow Salon City’s brand worldwide and to help
      independent distributors gain exposure, develop their markets and increase
      their
      customer loyalty and promote their people, products and programs; some of which
      will be anticipated Salon City products and services.




10





**Nature
      of the Products or Services Offered**





Salon City's
      concept arises from our core mission to offer the public positively oriented
      news and products related to the conscious consumer’s desire to live a life of
      health and wellness. We intend to more formally organize our consumer movement
      into a membership consisting of salons, spas and clients–what we call the “Salon
      City Society”– as it grows and emerges in the world of beauty, entertainment and
      lifestyle branding. We have built a globally respected brand associated with
      a
      positive, balanced lifestyle vision for both the beauty industry and public.
      Some of our products and programs will include:





SalonCityMagazine





Published
      monthly in 2008-9, our Hollywood-based magazine, Salon City, which is
      sold and distributed in bookstores throughout the world and in selected salons.
      SalonCity features news from celebrities, everyday
      people and America's favorite beauty makers. Beauty entertainment and lifestyle
      news is the focus.  SalonCity,
      currently in its 2007 rollout stages, has a roll-out circulation of
      approximately 75,000-100,000 issues. In 2008-9 national circulation will exceed
      150,000 copies per issue, and is strategically targeted to evolve into a
      high-volume publication with higher frequencies and readership in excess of
      1
      million issues. We currently sell the magazine through national retailers like
      Hudson News, Barnes & Noble, Borders, Target, Kmart, Rite Aids and major
      grocery and drug chains. It is also sold in 30 countries worldwide. A
      professional salon distribution program is being developed to allow licensed
      network distributors and salons to retail Salon City’s
      publications.




SunFunConference
        & SalonCityExpos





We
      produce events like our SunFun event, which brings top beauty makers together
      to
      meet and share their ideas, products and vision. These events take place in
      cities around the country, where professionals and public are invited to attend.
      SunFun offers professionals one-on-one and group education on media artistry
      and
      branding.





World
      Beautymaker Awards





We
      are
      developing an televised awards event, the World Beautymaker Awards, scheduled
      for 2008-9. This Hollywood event is devoted to recognizing people who contribute
      to our basic values of beauty, truth, and goodness. We have invited beauty
      makers and their clients, as well as numerous city mayors, civic organizations
      like the fire and police departments, and local city news media to contribute
      names of those who deserve recognition for such contributions. We have designed
      the award statuette as a beautiful woman holding a threefold flame (signifying
      inner light), standing on a platform with the words beauty, truth and goodness
      circling the perimeter of the base. We generate revenue from this event through
      sponsorships, media syndication rights, and official licensing
      opportunities.





MAG
      All-Stars (Media Artists Group)





We
      publicize individuals who are members of our “media artists group,” MAG, who are
      all talented communicators and committed to bringing beauty, truth and goodness
      to audiences everywhere. Our media exposure helps them get their unique message
      out to the world. They are positive role models.





SalonCityPress Club





We
      offer
      our “Salon City Press Club” to those individuals who are seeking press and media
      exposure on a regular basis. We offer to write and publicize informational
      news
      updates, which are seen in local area media outlets as well as in our magazine
      and events. The Press Club helps brand us and our clients to the
      public.




11





SalonCityDistribution Network





We
      have
      established a network of distributor relationships across North America. They
      will be selected to represent us in their region. These distributors will bring
      our people, events, education and products to their local cities. In turn,
      they
      provide us with news on top products and information. We currently are
      scheduling events with a number of them as we prepare to expand the program
      nationwide as well as internationally. The industry professionals we have
      professional relationships with are among the many top distributors in the
      world
      with whom we are targeting for affiliation with the Salon City
      Network.





All-Industry
      Marketplace





We
      actively promote businesses who are providing the public with good products
      and
      services. We feature them in the “Marketplace” section of our magazine as well
      as our other publications and events. We recommend that our web fans look into
      these companies, which we choose for their alignment with our vision for a
      positive influence on the beauty industry. We will develop marketing and
      distribution partnerships with many new products seeking our branding
      support.





SalonCitySociety





We
      have
      established an affinity group called Salon City Society. Anyone who is a fan
      of
      beauty, truth and goodness can become part of this group. We take a stand for
      these qualities and what we feel is needed to improve society. Membership simply
      means that people support beauty makers with positivism, passion and
      professionalism.





***Competition***





The
      beauty magazine is highly competitive in many areas, including name recognition,
      product availability, customer service, store location and price.





Competitors
      include national and regional companies that publish beauty magazines. We
      compete on the basis of our customer service, including the trustworthy advice
      of our distributors, magazine availability, price, product, and newsstand
      location.





***Employees***





We
      have
      two full-time employees, and over 30 independent consultants working in numerous
      capacities in Salon City’s publishing, online, media and
      events.





We
      have
      never experienced any material labor disruption and believe that relations
      with
      our employees are good.








**RESULTS
      OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
      2007**





The
      following discussion should be read
      in conjunction with the financial statements included in this report and is
      qualified in its entirety by the foregoing.




FORWARD
      LOOKING STATEMENTS




Certain
      statements in this report, including statements of our expectations, intentions,
      plans and beliefs, including those contained in or implied by "Management's
      Discussion and Analysis" and the Notes to Financial Statements, are
      "forward-looking statements", within the meaning of Section 21E of the
      Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
      subject to certain events, risks and uncertainties that may be outside our
      control. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”,
“will”, and similar expressions identify forward-looking statements. Readers are
      cautioned not to place undue reliance on these forward-looking statements,
      which
      speak only as of the date on which they are made. We undertake no obligation
      to
      update or revise any forward-looking statements. These forward-looking
      statements include statements of management's plans and objectives for our
      future operations and statements of future economic performance, information
      regarding our expansion and possible results from expansion, our expected
      growth, our capital budget and future capital requirements, the availability
      of
      funds and our ability to meet future capital needs, the realization of our
      deferred tax assets, and the assumptions described in this report underlying
      such forward-looking statements. Actual results and developments could differ
      materially from those expressed in or implied by such statements due to a number
      of factors, including, without limitation, those described in the context of
      such forward-looking statements.




12





CRITICAL
      ACCOUNTING POLICIES




*Revenue
      recognition*





Revenue
      is recognized when advertising services are earned and measurable based upon
      completed performance. All revenue transactions are reviewed for credit
      worthiness prior to commencement of the revenue process.





*Fixed
      Assets*





Fixed
      assets are recorded at cost and include expenditures that substantially increase
      the productive lives of the existing assets. Maintenance and repair costs are
      expensed as incurred. Depreciation is provided using the straight-line method.
      Depreciation of equipment is calculated over the management prescribed recovery
      periods, which range from 5 years for equipment to 7 years for furniture and
      fixtures.





Expenditures
      for maintenance and repairs are expensed as incurred.





**Net
      Income / Loss**





We
      had a
      net (loss) of $(222,768) and $(48,874) for the six months ended June 30, 2007
      and 2006, respectively. The net (loss) in these periods was due primarily to
      operational expenses, which were $138,338 and $116,718 for the six months ended
      June 30, 2007 and 2006, respectively. It is also a function of revenues, cost
      of
      sales and other expenses as described in the upcoming paragraphs
      below.





We
      had a
      net income (loss) of $(130,797) and $5,629 for the three months ended June
      30,
      2007 and 2006, respectively. The net income (loss) in these periods was due
      primarily to operational expenses, which were $41,747 and $43,444 for the three
      months ended June 30, 2007 and 2006, respectively. It is also a function of
      revenues, cost of sales and other expenses as described in the upcoming
      paragraphs below.





**Revenue**





We
      recorded revenues of $228,824 and $190,101 for the six months ended June 30,
      2007 and 2006, respectively. We recorded revenues of $121,709 and $120,666
      for
      the three months ended June 30, 2007 and 2006, respectively. The increase in
      revenues was attributable to the planned delay in launching the new consumer
      publication in the first quarter of 2007 (Salon City Magazine), which replaced
      last year’s professional magazine (Salon City Star). The ‘professional to
      consumer’ transition lost some of its ‘professional only’ advertisements at this
      time.





To
      inform
      the reader and provide more decision usefulness herein, the following paragraphs
      were written describing more of what we do, the services we provide and the
      magazine we distribute.





Our
      distributors also sell top
      professional beauty products to thousands of salons and spas. We are positioning
      ourselves to brand our magazine to their customers by helping them gain
      exposure, customer loyalty and promoting their people, products and
      programs.




Our
      five to ten year goal is to become
      the most successful media company to deliver beauty entertainment and products
      to the professional salon marketplace. Our goal is to have 25,000 salons aligned
      with Salon City’s ‘New Salon Society’ membership, and we will
      showcase many of them through our ‘licensed’ Salon City Network
      distributors. Each local network will feature the top 40 salons, and in over
      100
      metro markets we will have 4,000 identified in collective marketing and
      advertising as Salon City StarStudio salons.




13





By
      distributing hundreds of magazines
      through these 4,000 salons and others, our goal will be to expand circulation
      and frequency and reach to 2,000,000 issues, and generate 25 million dollars
      plus in advertising, membership, magazine, branding and licensing revenues.
      We
      will accomplish this through our distributor network that retains their rights
      for a desired salon city market.





In
      two to five years, we will continue
      to recruit, train, develop and certify a media artist group (MAG All-Stars)
      of
      sales team and educators to represent and manage the network. In the short
      term
      of one to two years, we are focusing on strengthening our financial foundation,
      restructuring our high interest start up debt, out sourcing a support management
      team and completing our next level of business plan. Overall, we are
      solidifying, polishing and positioning ourselves for larger levels of investment
      and acceleration.





Steve
      and
      Annie Casciola, our majority shareholders, officers and directors, have each
      been in the professional beauty industry over twenty five years. Steve Casciola
      was college trained in electrical engineering/business at
      Arizona State University. Steve Casciola opened two salons in
      Seattle’s Pike Street Market and U-District. In 1981 through 1995, Steve
      Casciola later accepted corporate positions and as Vice President of Marketing
      and Sales for top hair care companies.





Annie
      Casciola was trained as a hairstylist at Vidal Sassoon in London. She was Vidal
      Sassoon’s first lady barber for men in New York City, and later pursued her
      career on the West Coast.





**Cost
      of Goods Sold**





Cost
      of
      goods sold for the six months ended June 30, 2007 and 2006 were $291,569 and
      $110,637. Cost of goods sold for the three months ended June 30, 2007 and 2006
      were $196,165 and $66,790. Gross margin decreased to a net loss in the
      three and six months ended June 30, 2007 from a positive margin in the three
      and
      six months ended June 30, 2006. The reason for the deterioration in gross margin
      for the three and six months ended June 30, 2007 is due to the new book being
      more expensive to produce and revenues taking additional quarters to catch
      up
      with the new and expanded production.





**Expenses**





Operating
      expenses for the six months ended June 30, 2007 and 2006 were $138,338 and
      $116,718, respectively. Operating expenses for the three months ended June
      30,
      2007 and 2006 were $41,747 and $43,444, respectively. This was relatively
      constant between periods. Professional fees were the primary reason for the
      increases in the six month periods in that we issued $45,000 worth of our common
      shares for services rendered by a consultant during the three months ended
      March
      31, 2007. The consultant provided advice to undertake for and consult with
      us
      concerning management, marketing, consulting, strategic planning, corporate
      organization and structure, financial matters in connection with the operation
      of our business, expansion of services, acquisitions and business opportunities,
      and review and advise us regarding its overall progress, needs and
      condition.





Several
      key factors influenced 2007's Q1 and Q2 performance:




1.
      Fall
      out effect from September to December failure of Fountain Capital Fund to
      perform their agreement.




2.
      Upfront costs to 'green light' the new Salon City Magazine.




3.
      Promotional and marketing costs associated with the launch of the new
      magazine.




4. Temporary
      loss of 'professional advertisers' unable to advertise.




5.
      Four
      month delay between old book and new book





14




**Liquidity
      and Capital Resources**





Net
      cash
      flows (used in) operating activities were $(100,121) and $(39,058) for the
      six
      months ended June 30, 2007 and 2006, respectively. This was primarily
      attributable to net (losses), which were $(222,738) and $(48,874) for the six
      months ended June 30, 2007 and 2006, respectively, offset by the non-cash
      charges for common shares issued for services rendered during the six months
      ended June 30, 2007 only in the amount of $45,000.





Net
      cash
      flows used in investing activities for the six months ending June 30, 2007
      and
      2006 were $8,883 and $-0-, respectively. The cash flows used in investing
      activities for the six months ended June 30, 2007 was primarily used for the
      purchase of office related equipment in the amount of $8,883.





Net
      cash
      flows provided by financing activities were $114,336 and $219,884 for the six
      months ended June 30, 2007, and 2006, respectively. This was mainly attributable
      to $13,000 in proceeds from the sale of common stock, to $43,291 in receipt
      of
      loans from an officer, and $58,045 in proceeds from bank loans for the three
      months ended March 31, 2007.




Overall,
      we have funded all of our cash needs from inception through June 30, 2007 with
      proceeds from issuances of common stock.




On
      June
      30, 2007, we had cash of $88,055 on hand. We do not have or anticipate having
      within the next twelve months any cash flow or liquidity problems and we are
      not
      in default or in breach of any note, loan, lease or other indebtedness or
      financing arrangement requiring us to make payments.





No
      significant amount of our trade payables has been unpaid within the stated
      trade
      term. We are not subject to any unsatisfied judgments, liens or settlement
      obligations.





The
      proceeds from this offering will satisfy our cash requirements for the next
      twelve months. It will not be necessary to raise additional funds.





**ITEM
      3. CONTROLS AND PROCEDURES.**




We
      maintain
      disclosure controls and procedures designed to ensure that information required
      to be disclosed in reports filed under the Securities Exchange Act of 1934
      (“Exchange Act”) is recorded, processed, summarized and reported within the
      specified time periods. Our Chief Executive Officer and its Chief Financial
      Officer (collectively, the “Certifying Officers”) are responsible for
      maintaining our disclosure controls and procedures. Our controls and procedures
      established by us are designed to provide reasonable assurance that information
      required to be disclosed by the issuer in the reports that it files or submits
      under the Exchange Act are recorded, processed, summarized and reported within
      the time periods specified in the Commission’s rules and forms.




As
      of the end
      of the period covered by this report, the Certifying Officers evaluated the
      effectiveness of our disclosure controls and procedures. Based on the
      evaluation, the Certifying Officers concluded that our disclosure controls
      and
      procedures were effective to provide reasonable assurance that information
      required to be disclosed by us in the reports that we file or submit under
      the
      Exchange Act are recorded, processed, summarized and reported, within the time
      periods specified in the applicable rules and forms, and that it is accumulated
      and communicated to our management, including the Certifying Officers, as
      appropriate to allow timely decisions regarding required
      disclosure.




15





**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





We
      are
      not aware of any pending or threatened legal proceedings, in which we are
      involved. In addition, we are not aware of any pending or threatened legal
      proceedings in which entities affiliated with our officers, directors or
      beneficial owners are involved.





**ITEM
      2. CHANGES IN SECURITIES AND USE OF PROCEEDS**




None.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None.





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





None.





**ITEM
      5. OTHER INFORMATION**





None.





**ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K**





(1)
            Exhibits:
                Exhibits required to be attached by Item 601 of Regulation S-B are
                listed
                in the Index to Exhibits beginning on page 8 of this Form 10-QSB,
                which is
                incorporated herein by reference.




Reports on Form 8-K filed





(1)
            None.




16




**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, there
      unto duly authorized.




**SALON
                CITY, INC.**Date:
                August 13, 2007
            By:
            /s/ Steven
                CasciolaSteven
                Casciola
              President,
                CEO, CFO






17




**INDEX
      TO EXHIBITS**




**Exhibit
                No.**
            **Description**31.1
            Certification
                of Chief Executive Officer/Chief Financial
                Officer32.1
            Statement
                required by 18 U.S.C. Section 1350, as adopted
                pursuant to section 906 of the Sarbanes-Oxley Act of
                2002.











18