U.S.
        Securities and Exchange Commission
 Washington,
        D.C. 20549
 
 
  FORM
        10-Q
  
 [X]
              Quarterly
                  Report Under Section 13 or 15(d) of The Securities Exchange Act
                  of 1934
                  for the Quarterly Period Ended March 31,
                  2008
 
 [
                   ]
              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
                  [ ]
  1
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, a non-accelerated filer, or a smaller reporting company.
        See
        definitions of “large accelerated filer”, “accelerated filer” and “smaller
        reporting company” in Rule 12b-2 of the Exchange Act.
  Large
                  accelerated
                  filer
               ̈Non-accelerated
                  filer
               ̈(Do
                  not check if a smaller
                  reporting company)Accelerated
                  filer
               ̈Smaller
                  reporting
                  company
              þ
 
 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 May 13,
        2008: 992,049,925
 Number
        of
        shares of preferred stock outstanding as of May 13, 2008: -0-
  CAUTIONARY
        STATEMENT REGARDING FORWARD LOOKING INFORMATION
  The
        discussion contained in this 10-Q
        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
                  CONTENTSPART
                  I. FINANCIAL INFORMATIONITEM
                  1.FINANCIAL
                  STATEMENTS
              4ITEM
                  2.MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATION
              9ITEM
                  3. QUANTITATIVE AND QUALITATIVE
                  DISCLOSURES ABOUT MARKET RISK
              11ITEM
                  4.CONTROLS
                  AND PROCEDURES
              11PART
                  II. OTHER INFORMATIONITEM
                  1.LEGAL
                  PROCEEDINGS
              11ITEM
                  1A. RISK
                  FACTORS
              11ITEM
                  2.UNREGISTERED
                  SALES OF EQUITY
                  SECURITIESAND USE
                  OF
                  PROCEEDS
              11ITEM
                  3.DEFAULTS
                  UPON SENIOR SECURITIES
              11ITEM
                  4. SUBMISSION OF MATTERS
                  TO A
                  VOTE OF SECURITY HOLDERS
              11ITEM
                  5.OTHER
                  INFORMATION
              11ITEM
                  6.EXHIBITS
                  AND
                  REPORTS ONFORM
                  8-K
              11SIGNATURES
              12INDEX
                  TOEXHIBITS
              13
  3
 Table
            of Contents
  ITEM
        1. FINANCIAL STATEMENTS
  SALON
                    CITY,
                    INC.Balance
                    SheetAt
                    March 31,
                    2008Assets:Current
                    assetsCash
                
                
                
                
                
                $               78,326Accounts
                    receivable
                
                
                
                34,246Other
                    current
                    assets
                
                
                
                44,000Total
                    current
                    assets
                
                
                
                
                156,572Fixed
                    assetsEquipment
                
                
                
                
                27,631Accumulated
                    depreciation
                
                
                
                (19,924)Total
                    fixed
                    assets
                
                
                
                
                
                7,707Total
                    assets
                
                
                
                
                
                $             164,279Liabilities
                    and Stockholders'
                    EquityCurrent
                    liabilitiesAccounts
                    payable and accrued
                    expenses
                
                $             482,818Current
                    portion of bank loans
                    payable
                
                
                18,721Related
                    party
                    advances
                
                
                
                231,066Total
                    current
                    liabilities
                
                
                
                
                732,605Long-term
                    bank loans
                    payable
                
                
                
                104,365Total
                    liabilities
                
                
                
                
                
                836,970Stockholders'
                    EquityPreferred
                    stock, (50,000,000
                    shares authorized, -0- sharesissued
                    or outstanding, par value $
                    .001 per share)
                
                -Common
                    stock, (1,000,000,000
                    shares authorized, 989,783,258shares
                    issued and outstanding, par
                    value $.001 per share)
                989,784Additional
                    paid-in
                    capital
                
                
                
                2,237,323Treasury
                    stock
                
                
                
                
                (230,972)Retained
                    deficit
                
                
                
                
                (3,668,826)Total
                    stockholders'
                    equity
                
                
                
                
                (672,691)Total
                    liabilities and
                    stockholders' equity
                
                
                
                $             164,279The
                    accompanying notes are an
                    integral part of these financial
                    statements
  4
 Table
            of Contents
  SALON
                    CITY, INC.Statements
                    of OperationsFor
                    the Three Months Ended March 31, 2008 and 2007Quarter
                    ended
                
                
                Quarter
                    ended3/31/2008
                
                
                3/31/2007Advertising
                    income
                
                $
                83,664
                
                
                $
                103,115Distributors,
                    conference and other income
                
                
                815
                
                
                
                140Total
                    revenue
                
                
                84,479
                
                
                
                103,255Cost
                    of goods sold
                
                
                (77,643
                )
                
                
                (95,404
                )Gross
                    Profit
                
                
                6,836
                
                
                
                7,851Selling,
                    general and administrative expenses
                
                
                59,350
                
                
                
                96,591Net
                    ordinary (loss)
                
                
                (52,514
                )
                
                
                (88,740
                )Interest
                    expense
                
                
                (9,863
                )
                
                
                (7,201
                )Net
                    (loss)
                
                $
                (62,377
                )
                
                $
                (95,941
                )Basic
                    income (loss) per share
                
                $
                
                *
                
                $
                
                *Fully
                    diluted income (loss) per share
                
                $
                
                *
                
                $
                
                *Weighted
                    average shares outstanding
                
                
                988,153,458
                
                
                
                990,258,974*
                    =
                    less than $.01 per share.The
                    accompanying notes are an
                    integral part of these financial
                    statements
  5
 Table
            of Contents
  SALON
                    CITY,
                    INC.Statements
                    of Cash
                    FlowsFor
                    the Three Months ended March
                    31, 2008 and 2007Quarter
                    ended
                
                
                Quarter
                    ended3/31/2008
                
                
                3/31/2007CASH
                    FLOWS FROM OPERATING
                    ACTIVITIES:Net
                    loss
                
                $
                (62,377
                )
                
                $
                (95,941
                )Adjustments
                    to reconcile net
                    (loss) to net cash(used
                    in) operating
                    activities:Depreciation
                
                
                1,041
                
                
                
                1,250Common
                    stock issued for services
                    rendered
                
                
                11,191
                
                
                
                45,000(Increase)
                    decrease in operating
                    assets:Accounts
                    receivable
                
                
                (25,698
                )
                
                
                (34,163
                )Other
                    current
                    assets
                
                
                (44,000
                )
                
                
                10,000Increase
                    (decrease) in operating
                    liabilities:Accounts
                    payable and accrued
                    expenses
                
                
                72,887
                
                
                
                10,420NET
                    CASH (USED IN) OPERATING
                    ACTIVITIES
                
                
                (46,956
                )
                
                
                (63,434
                )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
                
                
                -
                
                
                
                13,000Incurrences
                    (repayment of) related
                    pary advances
                
                
                (3,837
                )
                
                
                10,909Proceeds
                    from bank
                    loans
                
                
                17,384
                
                
                
                48,456NET
                    CASH PROVIDED BY (USED IN)
                    FINANCING ACTIVITIES
                
                
                13,547
                
                
                
                72,365NET
                    INCREASE IN CASH AND CASH
                    EQUIVALENTS
                
                
                (33,409
                )
                
                
                48CASH
                    AND CASH
                    EQUIVALENTS:Beginning
                    of
                    period
                
                
                111,735
                
                
                
                82,723End
                    of
                    period
                
                $
                78,326
                
                
                $
                82,771SUPPLEMENTAL
                    CASH FLOW DISCLOSURES
                    AND NON-CASHFINANCING  INFORMATION:Cash
                    paid during the quarter for
                    interest
                
                $
                -
                
                
                $
                -Cash
                    paid during the quarter for
                    income taxes
                
                $
                -
                
                
                $
                -The
                    accompanying notes are an
                    integral part of these financial
                    statements
  6
 Table
            of Contents
  NOTES
          TO
          CONDENSED FINANCIAL STATEMENTS
 OF
 SALON
          CITY, INC.
 MARCH
          31, 2008 (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 March 31, 2008 and the
          results of operations for the period ended March 31, 2008.
 
 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.
 
 Advertising
          Costs -
          Advertising costs are expensed as incurred. The Company does not incur
          any
          direct-response advertising costs.
 
 Revenue
          Recognition
          -
 
 Advertising
          Revenue - Revenue
          from advertising is recognized when advertising services are earned and
          measurable based upon completed performance. For advertising services,
          performance becomes complete when the actual printing of the magazine is
          finished and the customer is billed with accompanied proof of
          printing.
 
 Distributor
          Revenue - Revenue
          from distributors for retail sales of publications is recognized at the
          point it
          is earned and measurable based upon completed performance. For revenue
          from
          distributors, performance becomes complete at a subsequent date when the
          distributor reports the actual number of publication units sold.
 
 Conference
          Revenue -
          Conference revenue is earned and measurable based upon completed performance,
          unless it is for non-refundable deposits related to ticket sales and
          sponsorships. Performance becomes complete for conferences at the end of
          the
          conference.
 
 All
          revenue transactions are reviewed for credit worthiness prior to commencement
          of
          the revenue process.
 
 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.
 7
 Table
                of Contents
  NOTES
              TO
              CONDENSED FINANCIAL STATEMENTS
 OF
 SALON
              CITY, INC.
 MARCH
              31, 2008 (UNAUDITED)
  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 September, 2006, the FASB issued SFAS No. 157, "Fair
          Value Measurements", which defines fair value, establishes a framework
          for
          measuring fair value in generally accepted accounting principles and expands
          disclosures about fair value measurements. SFAS No. 157 is effective for
          fiscal
          years beginning after November 15, 2007. The adoption of this standard
          on
          January 1, 2008 did not have a material effect on the Company's financial
          statements.
 
 In
          September, 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
          Defined Benefit Pension and Other Postretirement Plans - An Amendment of
          FASB
          Statements No. 87, 88, 106 and 132(R)". SFAS No. 158 requires an employer
          to (i)
          recognize in its statement of financial position an asset for a plan's
          overfunded status or a liability for a plan's underfunded status; (ii)
          measure a
          plan's assets and its benefit obligations that determine its funded status
          as of
          the end of the employer's fiscal year (with limited exceptions); and (iii)
          recognize changes in the funded status of a defined benefit postretirement
          plan
          in the year in which the changes occur. Those changes will be reported
          in
          comprehensive income. The Company previously adopted in 2006 the requirement
          to
          recognize the funded status of a benefit plan and the disclosure requirements.
          The requirement to measure plan assets and benefit obligations to determine
          the
          funded status as of the end of the fiscal year and to recognize changes
          in the
          funded status in the year in which the changes occur is effective for fiscal
          years ending after December 15, 2008. The adoption of the measurement date
          provisions of this standard is not expected to have a material effect on
          the
          Company's financial statements.
 
 In
          February, 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
          Financial Assets and Financial Liabilities". SFAS No. 159 permits entities
          to
          choose to measure many financial assets and financial liabilities at fair
          value.
          Unrealized gains and losses on items for which the fair value option has
          been
          elected are reported in earnings. SFAS No. 159 is effective for fiscal
          years
          beginning after November 15, 2007. The Company is not electing to measure
          its
          financial assets or liabilities at fair value pursuant to this
          statement.
 
 In
          December, 2007, the FASB issued No. 141, (revised 2007) "Business Combinations"
          ("SFAS No. 141R"). SFAS No. 141R replaces SFAS No. 141, which the Company
          previously adopted. SFAS No. 141R revises the standards for accounting
          and
          reporting of business combinations. In summary, SFAS No. 141R requires
          the
          acquirer of a business combination to measure, at fair value, the assets
          acquired, the liabilities assumed, and any noncontrolling interest in the
          acquiree at the acquisition date, with limited exceptions. SFAS No. 141R
          applies
          to all business combinations for which the acquisition date is on or after
          the
          beginning of the first annual reporting period beginning on or after December
          15, 2008. The Company does not believe that the adoption of this statement
          on
          January 1, 2009 will have a material effect on the Company's financial
          statements.
 
 In
          December, 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
          in
          Consolidated Financial Statements", which requires consolidated net income
          to be
          reported at amounts that include the amounts attributable to both the parent
          and
          noncontrolling interest. SFAS No. 160 is effective for fiscal years beginning
          on
          or after December 15, 2008. The adoption of this standard is not expected
          to
          have a material effect on the Company's financial statements.
 
 In
          March,
          2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
          and Hedging Activities". SFAS No. 161 changes the reporting requirements
          for
          derivative instruments and hedging activities under SFAS No. 133, "Accounting
          for Derivatives and Hedging Activities", by requiring enhanced disclosures
          about
          (a) how and why an entity uses derivative instruments, (b) how derivative
          instruments are accounted for under SFAS No. 133 and (c) the effect of
          derivative instruments and hedging activities on an entity's financial
          position,
          financial performance and cash flows. SFAS No. 161 is effective for fiscal
          years
          beginning after November 15, 2008. The Company does not believe that the
          adoption of this statement will have a material effect on the Company's
          financial statements.
  NOTE
          B –
EQUITY
 
 During
          the three months ended March 31, 2008, the Company issued 5,700,000 common
          shares to outside consultants for payment of services during this period.
          The
          transactions were valued at the stock prices on the dates of issuances
          ranging
          from $.001 to $.003 per share. $11,191 was expensed and is included in
          the
          accompanying statements of operations. This amount also reasonably approximates
          the fair market value of services received.
 
 NOTE
          C - GOING
          CONCERN
 
 As
          shown in the accompanying financial
          statements, the Company has
          suffered recurring losses from operation to date. The Company has a net
          loss and
          negative cash flows from operations of$62,377and
          $46,956for
          thethree monthsendingMarch
          31, 2008, respectively. These
          factors
          raisesubstantial doubt
          about its ability to
          continue as a going concern.
 
 Management's
          plans in regard to this
          matter are to raise equity capital and seek strategic relationships and
          alliances in order to increase revenues in an effort to generate positive
          cash
          flow. Additionally, we must continue to rely upon
          equity infusions
          from investors in order to improve liquidity and sustain operations. The
          financial statements do not include any adjustments that might result from
          the
          outcome of this uncertainty.
  8
 Table
            of Contents
  ITEM
        2. MANAGEMENT'S DISCUSSION
        AND ANALYSIS
        OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 
 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
 
 Headquartered
        inLos Angeles,California,wepublishSalonCitymagazine,
        where Life is Beautiful(SM).
        It is distributed nationally by Time/Warner Retail, a Time Warner
        Company, andinternationallyby
        Kable Distribution Services, an AmRep
        company.  As an emerging media company for beauty entertainment and a
        lifestyle brand for future products and services,we want to appeal to a
        global audience of consumers who want to be empowered to lead a healthier,
        more
        positive lifestyle.
 
 We
        wereincorporated inNevadaon
        January 4,
        2005.Werepresent
        the formal
        incorporation of a 10-year-old media, entertainment and distribution sole
        proprietorship. From our inception in 1997, known then as Salon City Press
        Club, we have
        published print and online media, most notably through our trade publicationSalon
        City Starmagazine.In
        March 2007,were-positioned
        the six-year old
        professional trade publication (Salon
        City
        Star) to the new web
        site, and then launched
        the
        first edition of the 100% consumer-focused publication,Salon
        City.Through 2008,
        the company will still be in the introductory stages of establishing the
        magazine’s presence in retail stores.
 
 To
        reach consumers, many of whom
        arethe end-users for salons
        and spas, we entered into a three year agreement with Time/Warner Retail
        to have
        them distributeSalonCitymagazine
        tothousands of
        bookstores and newsstands in America andCanada.We
        also entered in to a three year
        agreement with Kable
        Distribution Services to distributeSalonCitymagazine internationally. The magazine
        is currently sold in approximately 4800 bookstores and newsstands throughout
        theUSAandCanada,
        and in additional locations
        internationally in over 30 countries,including, but not
        limited to,Australia,Dubai,Germany,Hong
        Kong,Italy,Mexico,New
        Zealand,Singaporeand theUnited Kingdom.
 
 Competition
 
 The
        beauty and fashion magazine business
        can be highly competitive.We face broad competition for audiences and
        advertising revenue from other media companies that produce magazines,
        newspapers and online content. Overall competitive factors include product
        positioning, editorial quality, circulation, price and customer service.
        Competition for advertising dollars is primarily based on advertising rates,
        the
        nature and scope of readership, and reader response to advertisers’ products and
        services. We compete with our competitors based upon the price of our magazine,
        the quality of the articles and information that we publish, and the design
        features of our magazines.
 
 SalonCityis
        currently sold in the
        women’s
        interest and lifestyle sections of
        retail outlets. Our point of difference is that we have attracted the beauty
        professionals, who are highly sought after by upscale advertisers,
        to our magazine;
        this highly sought after market has traditionally been considered one with
        strong barriers of entry. Moreover, we believe we appeal to a broad demographic
        of mainstream sophisticated consumersthat many advertisers are
        seeking.
 
 Employees
 
 We
        currently have over 40 independent
        contractors working with the company, yet we are able to keep staffing costs
        to
        a minimum with only two full time employees. The 40 or so independent
        consultants work in numerous capacities inSalonCity’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 MONTHS ENDED MARCH 31, 2008 AND 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.
 
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  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 $(62,377)
        and $(95,941)
        for thethreemonths
        endedMarch 31, 2008 and
        2007, respectively. The
        net (loss) in these
        periods was due primarily to operational expenses, which were $59,350and
        $96,591for
        thethreemonths
        endedMarch 31, 2008and
        2007,
        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 $83,664 and $103,115 for the three months ended March
        31,
        2008 and 2007, respectively. The decrease in revenues was attributable to
        market
        conditions, global volatility and our transitioning from limited trade
        advertising revenue to much higher potential consumer advertising revenue.
        This
        influenced the first quarter of 2008 results.
 
 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.
 
 Salon
        City's concept arises from our core mission to offer the public positively
        oriented news and products that relate to a consumer’s desire to live a life of
        health and wellness. We intend to organize a consumer 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
        are in
        the process of building a globally respected brand associated with a positive,
        balanced lifestyle and vision for both the public and the beauty industry.
        While
        our redesigned consumer publication, Salon City magazine, has generated most
        of
        our revenues in 2008, other initiatives, including our new web shows, online
        entertainment and publication, will be unfolding later in 2008 and 2009.
        We
        believe our expanded media and product platform will add to our overall
        revenues.
 
 After
        six
        years as a trade publication, Salon City Star magazine was renamed, redesigned
        and relaunched on February 27, 2007. Our Hollywood-based magazine, Salon
        City,
        is now 100% consumer focused. Salon City is currently sold through thousands
        of
        national retailers like Hudson News, Barnes & Noble, Borders, Target, Kmart,
        Rite Aid and major grocery and drug chains throughout the USA and Canada,
        and in
        additional locations internationally in over 30 countries, including, but
        not
        limited to, Australia, Dubai, Germany, Hong Kong, Italy, Mexico, New Zealand,
        Singapore and the United Kingdom. Salon City features news from celebrities,
        everyday people and world beautymakers in music, art, literature and politics.
        Beauty entertainment and lifestyle news is the focus. Salon City, currently
        in
        its rollout stages, has an introductory circulation of approximately 75,000
        copies per issue and a frequency of eight times per year, resulting in a
        total
        annual circulation of 600,000.  Over the next five years the magazine
        is being strategically positioned to become a high sales volume publication
        with
        circulation in excess of 750,000 copies per issue. With anticipated funding
        in
        place, the company aims in 2009 to double revenues each year for the next
        five
        years.
 
 The
        magazine’s
        revenues will also be enhanced
        beginning in 2008 with a digital edition, which can be purchased on our internet
        site,www.saloncity.com.
        Additional media products are being
        planned to be soldon the
        site, including a professional-only publication and regularly produced webisodes
        ofSalonCity’s
        new TV program featuring original
        content.
 
 We
        are in the final stages of
        development before going live with the new website, web show and Salon City
        Network (consisting of
        Salon City produced video programs that will appear as part of our online
        entertainment) in the fourth quarter of 2007.  All of our online
        initiatives will be self-funded (magazine advertising revenue). In 2008,
        the
        company will invitesponsors
        and advertisers to participate
        in the branding of their products in exchange for contractual agreements
        that
        may generate revenue.
 
 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 atArizonaStateUniversity.
        Steve Casciola opened two salons inSeattle’s
        Pike Street Market and
        U-District.In
        1981 through 1995, Steve Casciola later
        accepted corporate positionsandas
        Vice President of Marketing and Sales
        for top hair care companies.
 
 Annie
        Casciola was trained as a
        hairstylist at Vidal Sassoon inLondon.
        She was Vidal Sassoon’s
        first lady barber for men inNew York City,
        and later pursued her career
        on the West
        Coast.
 
 Cost
        of Goods Sold
 
 Cost
        of
        goods sold for the three months ended March 31, 2008 and 2007 were $77,643
        and
        $95,404. Gross margin percentages remained relatively the same for the three
        months ended March 31, 2008 compared to 2007. The reason for the decrease
        in
        cost of goods sold for the three months ended March 31, 2008 is due to
        management’s effectiveness at reducing printing and shipping costs and other
        general expenses.
 
 10
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  Expenses
 
 Operating
        expenses for the three months ended March 31, 2008 and 2007 were $59,350
        and
        $96,591, respectively. Professional fees were the primary reason for the
        decrease in the three month period in 2008 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. We recorded compensation expense of $45,000 according
        to
        the closing stock prices on the dates of issuances. This approximated the
        fair
        value of services received. The 2008 services only had a charge of $11,191
        in
        comparison as 5,700,000 shares were issued to consultants for services rendered
        during the quarter but at much lower quoted stock prices.
 
 Management
        took appropriate cost-cutting actions which resulted in the first positive
        gross
        profit margin since launching the new consumer magazine. The company will
        continue to work on minimizing cost of goods sold and other expenses to improve
        efficiencies and gross profits. The steps taken proved successful and involved
        lowered printing, operational costs and marketing costs.  Printing costs
        were reduced 13% compared to the previous quarter. Lowered printing costs
        did
        not interfere with our ability to maintain domestic and international
        distribution, and in fact, have helped to increase it newsstand sales
        efficiencies by 20% and greater. Our elevation to OTCBB status will
        continue to cause a marked increase in professional fees and various expenses
        associated with the type of quarterly and annual reporting expected from
        an
        OTCBB company. Management expects certain OTCBB related costs will remain
        high
        in order to maintain its Bulletin Board trading status and as a fully-reporting,
        public company. We are planning a series of funding and capitalization steps
        to increase revenue, launch new initiatives and reduce costs anticipated
        with being a fully reporting OTCBB public company that is aggressively pursuing
        growth and expansion in the coming months.
  Liquidity
        and Capital
        Resources
 
 Net
        cash flows (used in) operating
        activities were $(46,956)
        and $(63,434)
        for thethree
        months endedMarch 31, 2008and
        2007,
        respectively. This was primarily
        attributable to net (losses), which were $(62,377)
        and $(95,941)
        for thethree
        months endedMarch 31, 2008and
        2007,
        respectively, offset by the non-cash
        charges for common shares issued for services rendered during thethreemonths
        endedMarch 31, 2008and
        2007in the amountsof
        $11,191 and $45,000m
        respectively,as
        discussed above.
 
 Net
        cash flows used in investing
        activities for thethree
        months endingMarch 31, 2008and
        2007were
        $-0-and
        $8,883,
        respectively. The cash flows used in
        investing activities for thethree
        months endedMarch 31, 2007wassolely
        used for the purchase
        of office
        related equipment in the
        amount of $8,833.
 
 Net
        cash flows provided by financing
        activities were $7,017and
        $72,365for
        thethree
        months endedMarch 31, 2008,
        and 2007,
        respectively. This was mainly
        attributable to $13,000in
        proceeds from the sale of common
        stockin 2007,
        $10,909in
        receipt of loans from an
        officerin 2007,
        and $17,384
        and $48,456in proceeds from bank
        loans for thethreemonths
        endedMarch 31, 2008 and
        2007,
        respectively.
  Overall,
        we have funded all
        ofour cash needs from
        inception throughMarch 31,
        2008with proceeds from
        issuances of commonstock
        and shareholder loans.
  OnMarch
        31, 2008, we had cash of $78,326on
        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.
  ITEM
        3. QUANTITATIVE
        AND QUALITATIVE DISCLOSURES
        ABOUT MARKET RISK
 
 The
        information to be reported under
        this item is not required of smaller reporting companies.
 
 ITEM
        4T. CONTROLS AND PROCEDURES.
  DISCLOSURE
                  CONTROLS
                  AND PROCEDURESThe
                  Company’s management, including its Principal Executive Officer and
                  Principal Financial Officer, has evaluated the design, operation,
                  and
                  effectiveness of the Company’s disclosure controls and procedures pursuant
                  to Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange
                  Act”). There are inherent limitations to the effectiveness of any system
                  of disclosure controls and procedures, including the possibility
                  of human
                  error and the circumvention or overriding of the controls and procedures.
                  Accordingly, even effective disclosure controls and procedures
                  can only
                  provide reasonable assurance of achieving their control objectives.
                  Based
                  upon the evaluation performed by the Company’s management, including its
                  Principal Executive Officer and Principal Financial Officer, it
                  was
                  determined that, as of the end of the period covered by this quarterly
                  report, the Company’s disclosure controls and procedures were effective to
                  provide reasonable assurance that information required to be disclosed
                  in
                  the reports filed or submitted pursuant to the Exchange Act is
                  recorded,
                  processed, summarized, and reported within the time periods specified
                  in
                  the rules and forms of the SEC, and that such information is accumulated
                  and communicated to the Company’s management, including its Principal
                  Executive Officer and Principal Financial Officer, or persons performing
                  similar functions, as appropriate to allow timely decisions regarding
                  disclosures
  Changes
        in Internal Control
        Over Financial Reporting
 
 The
        Company's Principal Executive Officer and Principal Financial Officer have
        determined that, during the period covered by this quarterly report, there
        were
        no changes in the Company's internal control over financial reporting that
        materially affected, or are reasonably likely to materially affect, the
        Company’s internal control over financial reporting. They have also concluded
        that there were no significant changes in the Company’s internal controls after
        the date of the evaluation.
  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
        1A. RISK FACTORS
  Information
        regarding risk factors appears in Part I, “Item 2. Management’s Discussion
        and Analysis of Financial Condition and Results of Operations” under the
        captions “General Description of Business” and “Cautionary Note Regarding
        Forward-Looking Statements” contained in this Quarterly Report on Form 10-Q and
        in “Item 1A. RISK FACTORS” of our 2007 Annual Report on Form 10-KSB. There
        have been no material changes from the risk factors previously disclosed
        in our
        2007 Annual Report on Form 10-KSB.
 
 ITEM
        2. UNREGISTERED SALES OF EQUITY 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 10 of this Form 10-Q, which is incorporated herein
                  by
                  reference.
 
 Reports
        on Form 8-K
        filed
 
 (1)
              None.
 
 11
 Table
            of Contents
  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:
                  May 13, 2008
              By:
              /s/
                Steven CasciolaSteven
                  Casciola
                President,
                  CEO, CFO
  Table
            of Contents
 
 INDEX
        TO EXHIBITS
  Exhibit
                  No.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.