10QSB 1 netsalon.txt NETSALON CORP. 3-31-02 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ending March 31, 2002 Commission File Number 000-26375 NetSalon Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 84-1472120 ------------------------ --------------------------- (State of incorporation) (I.R.S. Employer ID Number) 2235 1st Street, Suite 216, Fort Meyers, Florida 33901 --------------------------------------------------------- (Address of principal executive offices) (zip code) (941) 791-3300 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of Securities Exchange Act of 1934 during the preceding 12 months (or for such a shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of May 17, 2002, 19,630,900 common shares, $.001 par value per share, were outstanding. NETSALON CORPORATION INDEX Page Part I FINANCIAL INFORMATION Item 1. Consolidated Balance Sheet as of March 31, 2002 (Unaudited) and June 30, 2001 3 Consolidated Statements of Operations for the three months ended March 31, 2002 and March 31, 2001 (unaudited) 4 Consolidated Statements of Operations for the nine months ended March 31, 2002 and March 31, 2001 (unaudited) 5 Consolidated Statement of Cash Flows for the nine months ended March 31, 2002 and March 31, 2001 (Unaudited) 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Default on Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16 2 NETSALON CORPORATION Consolidated Balance Sheet March 31, 2002 June 30, (Unaudited) 2001 ASSETS Current assets: Cash $ 2,649 $ - Accounts receivable - 664 Prepaid expenses 1,900 4,818 Software licenses - 91,200 ----------- ----------- 4,549 96,682 Capitalized software costs, net of accumulated amortization of $11,021 20,870 15,617 Property and equipment, net of accumulated depreciation of $20,177 35,583 54,989 ---------- ----------- Total Assets $ 61,002 $ 167,288 ========== =========== LIABILITIES AND SHAREHOLDERS' (DEFICIT) Current liabilities: Accounts payable and accrued expenses $ 460,524 $ 219,215 Deferred revenue 205,454 268,591 Notes payable 512,510 523,803 Loans payable to shareholders 501,519 390,019 ----------- ---------- 1,680,007 1,401,628 ----------- ---------- Non current liabilities: Deferred revenue 7,690 45,037 ----------- ---------- Total Liabilities 1,687,697 1,446,665 ----------- ---------- Commitments and contingencies (Note 9) - - Stockholders' (Deficit) Preferred stock - 20,000,000 shares authorized; $.001 Par; no shares issued - - Common stock - 100,000,000 shares authorized; $.001 Par; 19,630,900 shares issued 19,630 19,630 Additional paid-in capital 933,921 933,921 Accumulated deficit (2,580,246) (2,232,928) ----------- ---------- Total Stockholders' (Deficit) (1,626,695) (1,279,377) ----------- ---------- Total Liabilities and Stockholders' (Deficit) $ 61,002 $ 167,288 =========== ========== The accompanying notes are an integral part of these consolidated financial statements. 3 NETSALON CORPORATION Consolidated Statements of Operations (Unaudited) For the For the Three Months Three Months Ended Ended March 31, 2002 March 31, 2001 ----------------- ----------------- Revenue: Enterprise Implementation 76,776 423,651 Enterprise Implementation (Deferred) 85,595 - Consulting & Custom programming 15,000 - Co-Location Services 1,000 - Software 28,758 - Enterprise Maintenance 38,212 - Other Revenue - Miscellaneous 268 - ----------- ----------- 245,609 423,651 Cost of revenue 11,237 72,479 ----------- ----------- Gross margin 234,372 351,172 Operating expenses: Research and development 4,700 16,436 General and administrative expenses 167,446 191,281 Selling and marketing 19,252 11,316 ----------- ----------- 191,398 219,033 ----------- ----------- Operating income 42,974 132,139 ----------- ----------- Other income and (expenses): Interest expense (16,783) (15,668) Meadow Run Farms settlement - 93,492 ----------- ----------- (16,783) 77,824 ----------- ----------- Net income $ 26,191 $ 209,963 =========== =========== Basic and diluted earnings per share: Basic loss per common share $ 0.001 $ 0.011 =========== =========== Weighted average common shares outstanding 19,630,900 19,630,900 =========== =========== Diluted earnings per common share $ 0.001 $ 0.011 =========== =========== Weighted average diluted common shares outstanding 19,630,900 19,630,900 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 4 NETSALON CORPORATION Consolidated Statements of Operations (Unaudited) For the For the Nine Months Nine Months Ended Ended March 31, 2002 March 31, 2001 ----------------- ----------------- Revenue: Enterprise Implementation 129,474 633,651 Enterprise Implementation (Deferred) 162,092 - Custom programming 103,900 - Licenses 56,886 - Co-Location Services 2,500 - Commissions 1,750 - Software 28,929 - Enterprise Maintenance 41,502 - Licenses - From Deferred Revenue 101,051 - Other Revenue Miscellaneous 268 - ----------- ----------- 628,352 633,651 Cost of revenue 144,616 176,059 ----------- ----------- Gross margin 483,736 457,592 Operating expenses: Research and development 49,318 78,088 General and administrative expenses 584,315 602,034 Selling and marketing 143,321 64,565 ----------- ----------- 776,954 744,687 ----------- ----------- Operating loss (293,218) (287,095) ----------- ----------- Other income and (expenses): Interest income - 3,704 Disposition of fixed assets (2,933) (12,635) Interest expense (51,167) (52,059) ----------- ----------- (54,100) (60,990) ----------- ----------- Net loss $ (347,318) $ (348,085) =========== =========== Basic and diluted loss per share: Basic loss per common share $ (0.018) $ (0.018) =========== =========== Weighted average common shares outstanding 19,630,900 19,630,900 =========== =========== Diluted earnings per common share $ (0.018) $ (0.018) =========== =========== Weighted average diluted common shares outstanding 19,630,900 19,630,900 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 5 NETSALON CORPORATION Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended March 31, 2002 and 2001 2002 2001 ----------- ----------- Net loss $ (347,318) $ (348,085) Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation of property and equipment 12,398 6,950 Loss on asset disposition 2,933 12,635 Amortization of capitalized software costs 9,543 - Changes in operating assets and liabilities: Decrease in accounts receivable 664 (38,555) (Increase) in non-trade receivables - (5,000) Decrease in prepaid expenses 2,918 2,800 Decrease in software licenses 91,200 (91,200) Increase in accounts payable and accrued expenses 166,309 235,605 (Decrease) in deferred revenue (100,484) - Increase in accrued compensation to officers (shareholders) 240,000 - Other (1,953) - ----------- ----------- Net cash provided by (used in) operating activities 76,210 (224,850) ----------- ----------- Cash flows from investing activities: Capitalized software costs (14,796) - Cash receipts from sale of assets - 100,000 Disposition of furniture 12,172 - Purchase of equipment (6,144) (34,748) ----------- ----------- Net cash provided by (used in) investing activities (8,768) 65,252 ----------- ----------- Cash flows from financing activities: Proceeds from sale of common stock - 447,350 Advances by prior majority owner of Makepeace pursuant to Share Exchange Agreement - 25,778 Repayment on bank note payable - (100,000) Repayments of shareholder loan (11,293) (91,467) Prior-investor payable repayment (53,500) (89,190) ----------- ----------- Net cash provided by (used in) financing activities (64,793) 192,471 ----------- ----------- Increase in cash 2,649 32,873 Cash, beginning of period - 19,473 Increase in beginning cash balance due To Share Exchange Agreement - 22,996 ----------- ----------- Adjusted cash, beginning of period - 42,469 ----------- ----------- Cash, end of period $ 2,649 $ 75,342 =========== =========== Additional cash flow disclosures Interest paid $ 20,000 $ - Noncash Transactions Purchase of office furniture and fixtures through direct loan installment $ 11,293 $ - The accompanying notes are an integral part of these consolidated financial statements. 6 NETSALON CORPORATION Notes to Consolidated Financial Statements (Unaudited) March 31, 2002 NOTE 1 - ORGANIZATION OPERATIONS AND BUSINESS DESCRIPTION NetSalon Corporation ("NetSalon" or the "Company") is an application service provider and has been actively involved in high-tech product development since its formation in late 1998. The Company's products consist of the NetSalon enterprise including the affiliate portal (portal site replicator), ezsitebuilders, AeonCards, and University courses. The Company's products are described as follows: NetSalon Enterprise is a suite of pre-built applications, which can be fully branded to any company. Customers of NetSalon select applications that benefit them best including affiliate portals (Portal / Site Replicator); AeonCards; ezSiteBuilders for individuals and B2C SiteBuilders for businesses; and NetSalon Universities (Distance Learning). The Enterprise is privately branded for each customer with their business's name, logo, site design, and color scheme utilizing any domain name of choice. NetSalon stores all data on customer servers. NetSalon Corporation provides all technical support, second level customer service, upgrades and maintenance. Affiliate portals (Portal / Site Replicator) is an enterprise wide, replicating web site. The portal is designed to provide community, content, and commerce, branded with a customer's information, name, logo, site design and color scheme and their company's affiliate information. EzSiteBuilders and B2C Builders are online wizards that provide users the ability to go online and develop personal and business web sites, respectively. AeonCards are CD-based business cards comprised of a "flash" movie whereby advertisements and information can be viewed. The AeonCard is designed and built over the Internet using interactive processes. Universities (Distance Learning) are on-line interactive courses that provide educational material on over 400 courses ranging from basic computer technology to highly technical areas of programming. The customers of the Company are primarily direct-selling companies. NetSalon also provides custom web development, database design, multi-media application development and other consulting services. BASIS OF CONSOLIDATION These consolidated financial statements include the accounts of NetSalon Corporation and NetSalon I, Inc. All significant intercompany transactions have been eliminated. It is suggested that these financial statements be read in conjunction with the NetSalon June 30, 2001 financial statements and the accompanying notes included in the Annual Report Form 10-KSB. 7 OTHER The Company is subject to risks and uncertainties common to technology-based companies, including rapid technological change, growth of the internet and electronic commerce, new product development, actions of competitors, and availability of sufficient capital and a limited operating history. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONDENSED FINANCIAL STATEMENTS The financial statements included herein have been prepared by NetSalon Corporation without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and NetSalon Corporation believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the NetSalon June 30, 2001 financial statements and the accompanying notes included in the Annual Report Form 10-KSB. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respect's dependent upon the facts that will exist, and procedures that will be accomplished by NetSalon Corporation later in the year. The management of NetSalon Corporation believes that the accompanying unaudited condensed financial statements contain all adjustments (including normal recurring adjustments) necessary to present fairly the operations and cash flows for the periods presented. BASIS OF PRESENTATION These financial statements have been prepared using the accrual basis of accounting consistent with generally accepted accounting principles. USE OF ESTIMATES The preparation of these financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from these estimates. CASH AND CASH EQUIVALENTS The Company considers all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents. For this report, cash and cash equivalents is solely comprised of the amount available in checking accounts. 8 ACCOUNTS RECEIVABLE The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. No allowance was necessary as of March 31, 2002. SOFTWARE LICENSES Software licenses represent rights to use self-study content purchased from a third party that is used to support NetSalon University courses. These licenses are recorded at cost and are charged to earnings when sold. CAPITALIZED SOFTWARE COSTS The Company capitalized $14,796 and $0 during the nine months ended March 31, 2002 and 2000, respectively, of programming and related expenses as required by Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed". Capitalized software costs are amortized over a period of 24 months. Amortization expense for the quarter ended March 31, 2002 amounted $3,181. PROPERTY AND EQUIPMENT Property and equipment are stated at cost and depreciated over estimated useful lives of three to seven years using the straight-line method. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of items sold or otherwise disposed of, and the related accumulated depreciation or amortization is removed from the accounts and gains or losses are reflected in current operations. In addition, the Company periodically reviews all long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the estimated future undiscounted cash flows expected to result from the use and eventual disposition of an asset is less than the carrying value, the asset is reduced to its fair value. There was no impairment recognized in the periods presented herein. INCOME TAXES Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. 9 Legacy NetSalon converted from a limited liability company to a subchapter C Corporation in July 2000. Prior to the conversion, all federal income taxes were reported on the individual income tax returns of the members. REVENUE RECOGNITION AND DEFERRED REVENUE Fees for enterprise implementation and software licenses are generally paid in advance. The fees are deferred and recognized on a straight-line basis over the period of the applicable agreement or contract, which are generally 12 to 24 months. Revenues for consulting and custom programming are recorded as earned or using the percent-complete method as appropriate. Deferred income was $313,628 at June 30, 2001, of which $100,484 was recognized during the nine months ended March 31, 2002. At March 31, 2001, deferred revenue consists of $193,185 in deferred enterprise implementation fees and $27,649 in deferred license fees. NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment was composed of the following at March 31, 2002: Computer equipment $48,965 Furniture and fixtures 6,795 ------- Property and equipment, gross 55,760 Less accumulated depreciation 20,177 ------- Property and equipment, net $35,583 ======= Depreciation expense amounted to $12,398 and $4,751 for the nine months ended March 31, 2002 and 2000, respectively. The Company disposed assets with a combined net book value of $2,933 during the nine months ended March 31, 2002. NOTE 4 - NOTES PAYABLE Notes payable consisted of the following at March 31, 2002: Note payable to former investor. Bears interest at a rate of 9% per annum. Pursuant to a renego- tiated agreement effective May 2001, monthly payments of $5,000 were required through October 2001 with monthly payments of $25,000 beginning in November 2001. This note payable has been classified as a current liability due to payment default. Accrued interest amounted to $38,033 at March 31, 2002. 512,510 ======= 10 NOTE 5 - RELATED PARTY TRANSACTIONS Related party loans and payables were comprised of the following as of March 31, 2002: Note payable to shareholder requiring monthly payments of $5,000 per month including interest at a rate of 12% per annum. Accrued interest amounted to $31,280 at March 31, 2002. This note payable has been classified as current due to payment default. $50,000 and $10,000 were paid toward this note during the nine months ended March 31, 2002 and 2001, respectively. $202,692 Officer (Shareholder) compensation accrued, but not paid at March 31, 2002. No payments were made against this liability for the nine months ended March 31, 2002. 235,827 Due to shareholder and ex-officer for unpaid compensation. No payments were made against this indebtedness during the quarter ended March 31, 2002. 63,000 -------- $501,519 ======== The Company paid or accrued legal fees of $87,873 to a law firm that is also a shareholder of the Company during the nine months ended March 31, 2002. NOTE 6 - STOCK AND WARRANTS As of March 31, 2002, no preferred shares are issued. All shares have similar voting rights. Approximately 756,000 class A warrants are outstanding as of June 30, 2001 that enable the holders to purchase common shares at $5.00 per share. These warrants expire on February 8, 2003. No new warrants were issued and no warrants were exercised during the quarter ended March 31, 2002. The warrants were considered to have no value at March 31, 2002. As part of an employee agreement, an officer of the Company will receive 1,000,000 stock options with an additional 500,000 and 500,000 options being granted on January 1, 2002 and 2003, respectively. NOTE 7 - BASIS OF PRESENTATION - GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. However, the Company has sustained operating losses since its inception and has a net capital deficiency. These facts raise substantial doubt about the Company's ability to continue as a going concern. Management is attempting to raise additional capital. 11 In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. Management is in the process of attempting to reduce operating expenses and broaden its marketing efforts. Management believes that its ability to reduce operating expenses and broaden its marketing efforts provide an opportunity for the Company to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. NOTE 8 - CONCENTRATIONS As of March 31, 2002, for the quarter ending 03/31/02: BY CUSTOMER AMOUNT % OF REVENUE DMB Diversified $ 1,250.00 1% Electrolux 55,300.00 23% Golden Opportunities 50,000.00 20% HitTV 3,795.00 2% Keep And Bear Arms 1,000.00 0% Marketing Club Intl. 89,845.00 37% Marketnetters 995.00 0% MegaRebateCenter 1,708.17 1% MyMGI 971.22 0% Platinum Productions 14,718.00 6% PrePaid Disposable 4,995.00 2% RBC 18,944.50 8% Smart Financial Network 845.00 0% World Trade Cash 975.00 0% Other Revenue 268.00 0% ----------- ---- $245,609.89 100% NOTE 9 - COMMITMENTS AND CONTINGENCIES Certain disagreements exist between the Company and 4N International (4N), an unrelated document production organization, concerning certain marketing and other products created by 4N. 4N claims that the Company owes them approximately $40,000. The Company's management believes that 4N owes them an unspecified amount. Management believes that the Company will be successful in this dispute. The former President of the Company has filed a lawsuit against a terminated employee (Defendant) originally hired to market certain aspects of the Company. The Defendant has filed a counterclaim against the former President and NetSalon. The Defendant, in the counterclaim, seeks to recover actual damages of $70,000 and other unspecified damages for alleged misrepresentation concerning compensation arrangements and opportunities with the Company. The ultimate outcome of this litigation cannot presently be determined. However, in management's opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the consolidated financial statements. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW NetSalon is an application service provider and has been actively involved in high-tech product development since its formation in late 1998. NetSalon has developed various Internet-related products which it originally intended to sell through a multi-level marketing distribution system. As of August 17, 2000, product development essentially was complete, but the Company had not built a successful multi-level marketing distribution system. On that date, the Company publicly announced its abandonment of the multi-level marketing distribution model, and announced its intention to sell products through affiliates who maintain Internet sites where products can be sold, through distributors, and through multi-level marketing companies on a private-label basis. During the fiscal year ended June 30, 2001, the Company was involved in developing marketing plans and seeking distributors and other resellers for the products, and the Company entered into several contracts with distributors and multi-level marketing companies. These contracts generate fees to NetSalon for implementation of the web sites and technology required for distribution of the products, as well as revenues from product sales made by the distributors and multi-level marketing companies themselves. RESULTS OF OPERATIONS During the nine months ended March 31, 2002 the Company reported revenue of $628,352 compared to $633,651 revenue during the nine months ended March 31, 2001. During August 2000, the Company made the decision to abandon the use of a multilevel marketing distribution model, and to sell its products through distributors, other multilevel marketing companies, and affinity organizations. The Company was successful in entering into several contracts with distributors and multilevel marketing companies, and the first sales were generated during the nine months ended March 31, 2001. The Company expects the level of sales to increase during the current year. During the nine months ended March 31, 2002, the cost of revenue was $144,616 or 23% of sales, compared to $176,559 or 28% of sales during the nine months ended March 31, 2001. Operating expenses for the nine months ended March 31, 2002 were $776,954 compared to $744,687 for the nine months ended March 31, 2001. Research and development and general and administrative decreased as the Company attempted to reduce its expenses until revenues increase. Interest expense decreased from $52,059 in the nine months ended March 31, 2001 to $51,167 in the nine months ended March 31, 2002. The net loss was $347,318 in the nine months ended March 31, 2002 compared to a net loss of $348,085 in the nine months ended March 31, 2001. 13 LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2002, the Company had a working capital deficit of $1,675,458. The Company=s future existence is dependent upon closing those contracts now in negotiation, or alternatively to seek additional capital. It would be difficult for the Company to raise additional capital, particularly in view of the Company=s poor financial condition and the reluctance of the participants in the equity markets to invest in speculative ventures. MANAGEMENT FORWARD STATEMENT Management is optimistic in its ability to continue the growth of the company. Demand for the company's products and services are high due directly to the niche market in which they are sold and licensed as well as minimal competition and recent changes in national economic conditions. Economic downturns usually signify an upturn in the multilevel marketing industry as people are looking for new ways to generate extra income. The company meets the needs of economic turndowns head on. In order to compete effectively the company has continued to reduce expenses and increase revenue as follows: * Reduction in staff, office expenses and overhead has recently reduced expenses by approximately $288,000/year * Development of new applications such as master product licenses and enhanced reporting capabilities * Integration of the companies solutions with a broader base of 3rd party applications including software vendors and merchant providers * Continued acquisition of new clients; at the end of the 2001 1st quarter, the company had acquired three clients, at the end of this quarter the client has acquired in excess of 20 clients * Changes in the focus of the company business model from that of a one-to-many client relationships at low entry fees to that of a one-to-several client relationships at a higher entry fees * Recent changes in manage of the company; Lance Perry, one of the original founders of NetSalon has take over the helm as CEO The company has continued to grow and succeed in its methods of how the business is operated. The management model employed and the applications licensed are the most up-to-date in the industry. These impact on the costs and efficiency of the business, essential when you are running small-scale radio operations around the world. The company is also looking at continued revenue growth through 2002. "We have an excellent team of staff and they are all 100% committed to helping the continual growth of NetSalon Corporation into a significant direct sales software vendor. The investors we have can only be of benefit to us going forward." 14 PART II - 0THER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS OF 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. None. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NETSALON CORPORATION By:/s/ Lance Perry Date: May 21, 2002 Lance Perry, President 16