**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 September 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 November 9,
      2007: 984,083,258




Number
      of
      shares of preferred stock outstanding as of November 9,
      2007: -0-









*Table
          of Contents*




**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
                  ANALYSISOF
                  FINANCIAL CONDITION AND RESULTSOF
                  OPERATION
              9ITEM
                  3.CONTROLS
                  AND
                  PROCEDURES
              13**PART
                  II. OTHER INFORMATION**ITEM
                  1.LEGAL
                  PROCEEDINGS
              13ITEM
                  2.CHANGES
                  IN SECURITIES AND USE OF
                  PROCEEDS
              13ITEM
                  3.DEFAULTS
                  UPON SENIOR
                  SECURITIES
              13ITEM
                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              13ITEM
                  5.OTHER
                  INFORMATION
              13ITEM
                  6.EXHIBITS
                  AND REPORTS ON FORM
                  8-K
              13SIGNATURES
              14INDEX
                  TO
                  EXHIBITS
              15
  3
 *Table
            of Contents*
  **ITEM
        1.** **FINANCIAL STA****TEMENTS**
  **SALON
                      CITY, INC.****Balance
                      Sheet*****At
                      September 30, 2007***Assets:Current
                      assetsCash
                  
                  $
                  106,309Accounts
                      receivable less allowance for doubtful accounts of $45,505
                  
                  
                  127,680Prepaid
                      expenses
                  
                  
                  54,000Total
                      current assets
                  
                  
                  287,989Fixed
                      assetsEquipment
                  
                  
                  15,126Accumulated
                      depreciation
                  
                  
                  (15,126
                  )Total
                      fixed assets
                  
                  
                  -Total
                      assets
                  
                  $
                  287,989Liabilities
                      and Stockholders' DeficitCurrent
                      liabilitiesAccounts
                      payable and accrued expenses
                  
                  $
                  379,225Related
                      party loan payable
                  
                  
                  147,212Total
                      current liabilities
                  
                  
                  526,437Long-term
                      bank loans payable
                  
                  
                  99,625Total
                      liabilities
                  
                  
                  626,062Stockholders'
                      DeficitCommon
                      stock, (1,000,000,000 shares authorized, 984,083,258shares
                      issued and outstanding, par value $.001 per share)
                  
                  
                  984,083Preferred
                      stock, (50,000,000 shares authorized, noshares
                      issued and outstanding, par value $.001 per share)
                  
                  
                  -Additional
                      paid-in capital
                  
                  
                  2,254,933Treasury
                      stock
                  
                  
                  (243,128
                  )Retained
                      deficit
                  
                  
                  (3,333,961
                  )Total
                      stockholders' deficit
                  
                  
                  (338,073
                  )Total
                      liabilities and stockholders' deficit
                  
                  $
                  287,989
  The
            accompanying notes are an integral part of these financial
            statements
  4
 *Table
                of Contents*
  **SALON
                    CITY, INC.****Statements
                    of Operations*****For
                    the Three and Nine Months Ended September 30, 2007 and
                    2006***For
                    the Three Months
                
                
                For
                    the Nine MonthsEnded
                    September 30,
                
                
                Ended
                    September 30,2007
                
                
                2006
                
                
                2007
                
                
                2006Advertising
                    income
                
                $
                182,302
                
                
                $
                182,279
                
                
                $
                411,126
                
                
                $
                372,380Distributors,
                    conference and other income
                
                
                -
                
                
                
                -
                
                
                
                140
                
                
                
                -Total
                    revenue
                
                
                182,302
                
                
                
                182,279
                
                
                
                411,266
                
                
                
                372,380Cost
                    of goods sold
                
                
                (171,968
                )
                
                
                (106,225
                )
                
                
                (463,537
                )
                
                
                (216,862
                )Gross
                    profit (loss)
                
                
                10,334
                
                
                
                76,054
                
                
                
                (52,271
                )
                
                
                155,518Selling,
                    general and administrative expenses
                
                
                312,171
                
                
                
                146,128
                
                
                
                455,009
                
                
                
                262,846Net
                    ordinary (loss)
                
                
                (301,837
                )
                
                
                (70,074
                )
                
                
                (507,280
                )
                
                
                (107,328
                )Interest
                    expense
                
                
                (8,464
                )
                
                
                (8,856
                )
                
                
                (30,259
                )
                
                
                (20,476
                )Net
                    (loss)
                
                $
                (310,301
                )
                
                $
                (78,930
                )
                
                $
                (537,539
                )
                
                $
                (127,804
                )Basic
                    (loss) per share
                
                $
                *
                
                
                $
                *
                
                
                $
                *
                
                
                $
                *Fully
                    diluted (loss) per share
                
                $
                *
                
                
                $
                *
                
                
                $
                *
                
                
                $
                *Weighted
                    average shares outstanding
                
                
                979,775,258
                
                
                
                954,738,808
                
                
                
                975,575,258
                
                
                
                947,176,308*
                    =
                    less than $.01 per share.
    5
 *Table
            of Contents*
  **SALON
                        CITY, INC.****Statements
                        of Cash Flows*****For
                        the Nine Months ended September 30, 2007 and
                        2006***9
                        Months ended
                    
                    
                    9
                        Months ended9/30/2007
                    
                    
                    9/30/2006CASH
                        FLOWS FROM OPERATING ACTIVITIES:Net
                        loss
                    
                    $
                    (537,539
                    )
                    
                    $
                    (127,804
                    )Adjustments
                        to reconcile net (loss) to net cash(used
                        in) operating activities:Depreciation
                    
                    
                    1,822
                    
                    
                    
                    5,280Par
                        value of shares returned to treasury
                    
                    
                    12,156
                    
                    
                    
                    -Fair
                        value of rent provided by officer
                    
                    
                    6,750
                    
                    
                    
                    -Common
                        stock issued for services rendered
                    
                    
                    221,800
                    
                    
                    
                    -(Increase)
                        decrease in operating assets:Accounts
                        receivable
                    
                    
                    (57,905
                    )
                    
                    
                    (40,006
                    )Other
                        current assets and prepaid expenses
                    
                    
                    -
                    
                    
                    
                    (71,142
                    )Increase
                        (decrease) in operating liabilities:Accounts
                        payable and accrued expenses
                    
                    
                    174,216
                    
                    
                    
                    77,182Deferred
                        revenue
                    
                    
                    (52,785
                    )
                    
                    
                    -NET
                        CASH (USED IN) OPERATING ACTIVITIES
                    
                    
                    (231,485
                    )
                    
                    
                    (156,490
                    )CASH
                        FLOWS FROM INVESTING ACTIVITIES:Purchases
                        of equipment
                    
                    
                    (1,433
                    )
                    
                    
                    -NET
                        CASH (USED IN) INVESTING ACTIVITIES
                    
                    
                    (1,433
                    )
                    
                    
                    -CASH
                        FLOWS FROM FINANCING ACTIVITIES:Proceeds
                        from sale of common stock to investors
                    
                    
                    46,037
                    
                    
                    
                    300,218Receipt
                        of loans from officer
                    
                    
                    147,212
                    
                    
                    
                    -Proceeds
                        from bank loans
                    
                    
                    56,662
                    
                    
                    
                    -Repayments
                        of bank loans
                    
                    
                    -
                    
                    
                    
                    (1,161
                    )NET
                        CASH PROVIDED BY FINANCING ACTIVITIES
                    
                    
                    249,911
                    
                    
                    
                    299,057NET
                        INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                    
                    
                    16,993
                    
                    
                    
                    142,567CASH
                        AND CASH EQUIVALENTS:Beginning
                        of period
                    
                    
                    89,316
                    
                    
                    
                    27,507End
                        of period
                    
                    $
                    106,309
                    
                    
                    $
                    170,074SUPPLEMENTAL
                        CASH FLOW DISCLOSURES AND NON-CASHFINANCING  INFORMATION:Cash
                        paid during the period for interest
                    
                    $
                    30,258
                    
                    
                    $
                    20,476Cash
                        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
 *Table
            of Contents*
  NOTES
          TO CONDENSED FINANCIAL STATEMENTS
 OF
 SALON
          CITY, INC.
 SEPTEMBER
          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 September 30, 2007 and
          the
          results of operations for the period ended September 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
 *Table
              of Contents*
  NOTES
            TO CONDENSED FINANCIAL STATEMENTS
 OF
 SALON
            CITY, INC.
 SEPTEMBER
            30, 2007 (UNAUDITED)
  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.
 
 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 - On February 15, 2007, the Financial
          Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
          Standards No. 159, *“**The Fair Value Option for Financial Assets
          and Financial Liabilities**—**Including an Amendment of FASB
          Statement No.**115”* (“SFAS 159”). This standard permits an
          entity to measure financial instruments and certain other items at estimated
          fair value. Most of the provisions of SFAS No. 159 are elective; however,
          the amendment to FASB No. 115, *“**Accounting for Certain
          Investments in Debt and Equity Securities,”* applies to all entities that
          own trading and available-for-sale securities. The fair value option created
          by
          SFAS 159 permits an entity to measure eligible items at fair value as of
          specified election dates. The fair value option (a) may generally be
          applied instrument by instrument, (b) is irrevocable unless a new
          election date occurs, and (c) must be applied to the entire instrument and
          not to only a portion of the instrument. SFAS 159 is effective as of the
          beginning of the first fiscal year that begins after November 15, 2007.
          Early adoption is permitted as of the beginning of the previous fiscal
          year
          provided that the entity (i) makes that choice in the first 120 days
          of that year, (ii) has not yet issued financial statements for any interim
          period of such year, and (iii) elects to apply the provisions of FASB 157.
          Management is currently evaluating the impact of SFAS 159, if any, on the
          Company’s financial statements.
 
 NOTE
          B –
EQUITY
 
 During
          the nine months ended September 30, 2007, the Company issued 11,616,000
          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 $.01 to $.05 per share. $221,800 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 nine months ended September 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 September
          30,
          2007.d
  8
 *Table
            of Contents*
  **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**
 
 Headquartered
        in Los Angeles, California, we publish *Salon City* magazine, where Life
        is Beautiful(SM). It is distributed nationally by Time/Warner Retail, a Time
        Warner Company, and internationally by 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
        were
        incorporated in Nevada on January 4, 2005.  We represent 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
        publication *Salon City Star* magazine.  In March 2007, we
        re-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*. Until spring 2008, the
        company will still be in the yearlong rollout stages of establishing the
        magazine’s presence in retail stores.
 
 To
        reach
        consumers, many of whom are the end-users for salons and spas, we entered
        into a
        three year agreement with Time/Warner Retail to have them distribute *Salon
        City* magazine to thousands of bookstores and newsstands in America and
        Canada. We also entered in to a three year agreement with Kable Distribution
        Services to distribute *Salon City* magazine internationally. The
        magazine is currently sold in approximately 4800 bookstores and newsstands
        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.
 
 ***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.
 
 *Salon
        City* is 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 consumers that 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 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.
  9
 *Table
            of Contents*
 
 **RESULTS
        OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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.
 
 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 $(537,539) and $(127,804) for the nine months ended September
        30,
        2007 and 2006, respectively. The net (loss) in these periods was due primarily
        to operational expenses, which were $455,009 and $262,846 for the nine months
        ended September 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 (loss) of $(310,301) and $(78,930) for the three months ended September
        30,
        2007 and 2006, respectively. The net (loss) in these periods was due primarily
        to operational expenses, which were $312,171 and $146,128 for the three months
        ended September 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.
  10
 *Table
            of Contents*
 
 **Revenue**
 
 We
        recorded revenues of $411,266 and $372,380 for the nine months ended September
        30, 2007 and 2006, respectively. We recorded revenues of $182,302 and $182,279
        for the three months ended September 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.
 
 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 2007, other initiatives,
        including our new web shows, online entertainment and publication, will be
        unfolding 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 2007-2008 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.
 
 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 sold on the site, including
        a
        professional-only publication and regularly produced webisodes of Salon City’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 invite sponsors
        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 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 nine months ended September 30, 2007 and 2006 were $463,537
        and $216,862. Cost of goods sold for the three months ended September 30,
        2007
        and 2006 were $171,968 and $106,225. Gross margin decreased to a net loss
        in the
        three and nine months ended September 30, 2007 from a positive margin in
        the
        three and nine months ended September 30, 2006. The reason for the deterioration
        in gross margin for the three and nine months ended September 30, 2007 is
        due to
        the new magazine being more expensive to produce and revenues taking additional
        quarters to catch up with the new and expanded production.
  11
 *Table
            of Contents*
 
 **Expenses**
 
 Operating
        expenses for the nine months ended September 30, 2007 and 2006 were $455,009
        and
        $262,846, respectively. Operating expenses for the three months ended September
        30, 2007 and 2006 were $312,171 and $146,128, respectively. This was relatively
        constant between periods. Professional fees were the primary reason for the
        increases in the nine 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. We also issued 8,616,000 shares to consultants in the
        third
        quarter of 2007. We recorded compensation expense of $176,800 according to
        the
        closing stock prices on the dates of issuances. This approximated the fair
        value of services received.
 
 Several
        key factors influenced 2007's Q1-Q3 performance:
  1.
              Fountain
                  Capital Fund did not fulfill its promise to place up to $3.5 million
                  worth
                  of ads and sponsorships by the end of 2006, resulting in some projects
                  being delayed, other projects' budgets being diminished and others
                  cancelled.
 
 2.
              The
                  significant increase in startup costs to launch the new consumer
*Salon
                  City* magazine worldwide.
 
 3.
              Marketing
                  and promotional costs to launch the multimedia platform of print,
                  online,
                  webisodes and events.
 
 4.
              The
                  temporary loss of advertising revenue from advertisers who could
                  not place
                  professional-only trade show and product ads in a consumer
                  magazine.
 
 5.
              There
                  was a delay in derived revenue due to the transition of the last
                  issue of
                  the professional publication in December 2006 and consumer publication
                  in
                  March 2007.
 
 **Liquidity
        and Capital Resources**
 
 Net
        cash
        flows (used in) operating activities were $(231,485) and $(156,490) for the
        nine
        months ended September 30, 2007 and 2006, respectively. This was primarily
        attributable to net (losses), which were $(537,539) and $(127,804) for the
        nine
        months ended September 30, 2007 and 2006, respectively, offset by the non-cash
        charges for common shares issued for services rendered during the nine months
        ended September 30, 2007 only in the amount of $221,800 as discussed
        above.
 
 Net
        cash
        flows used in investing activities for the nine months ending September 30,
        2007
        and 2006 were $1,433 and $-0-, respectively. The cash flows used in investing
        activities for the nine months ended September 30, 2007 was primarily used
        for
        the purchase of office related equipment in the amount of $1,433.
 
 Net
        cash
        flows provided by financing activities were $249,911 and $299,057 for the
        nine
        months ended September 30, 2007, and 2006, respectively. This was mainly
        attributable to $46,037 in proceeds from the sale of common stock, to $147,212
        in receipt of loans from an officer, and $56,662 in proceeds from bank loans
        for
        the nine months ended September 30, 2007.
  Overall,
        we have funded all of our cash needs from inception through September 30,
        2007
        with proceeds from issuances of common stock and shareholder loans.
  On
        September 30, 2007, we had cash of $106,309 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.
  12
 *Table
            of Contents*
 
 **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.
 
 **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 10 of this Form 10-QSB,
                  which
                  is incorporated herein by
                  reference.
  Reports on Form 8-K filed
 
 (1)
              None.
  13
 *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:
                  November 14, 2007
              By:
              /s/
                Steven CasciolaSteven
                  Casciola
                President,
                  CEO, CFO






14
 *Table
          of Contents*




**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.






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