U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q/A1

[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.

Explanatory Note: We are amending this Form 10-Q to include a comparative audited balance sheet at December 31, 2007 to comply with the 10-Q presentation rules. We inadvertedly omitted this information in the prior submission.

2

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS	4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	11
ITEM 4. CONTROLS AND PROCEDURES	11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	11
ITEM 1A. RISK FACTORS	11
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIESAND USE OF PROCEEDS	11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	11
ITEM 5. OTHER INFORMATION	11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K	11
SIGNATURES	12
INDEX TOEXHIBITS	13

3

ITEM 1. FINANCIAL STATEMENTS

SALON CITY, INC.
Balance Sheet
At March 31, 2008
			Unaudited	Audited
Assets:			31-Mar-08	31-Dec-07
	Current assets
		Cash	$               78,326	$            111,735
		Accounts receivable	34,246	8,549
	Total current assets		112,572	120,284
	Fixed assets
		Equipment	27,631	27,631
		Accumulated depreciation	(19,924)	(18,883)
	Total fixed assets		7,707	8,748
Total assets			$             120,279	$            129,032
Liabilities and Stockholders' Equity
	Current liabilities
		Accounts payable and accrued expenses	$             445,351	$            409,931
		Current portion of bank loans payable	18,721	81,869
		Related party advances	224,533	234,903
	Total current liabilities		688,605	726,703
	Long-term bank loans payable		104,365	23,833
	Total liabilities		792,970	750,536
	Stockholders' Equity
		Preferred stock, (50,000,000 shares authorized, -0- shares
		issued or outstanding, par value $ .001 per share)	-	-
		Common stock, (1,000,000,000 shares authorized, 989,783,258
		shares issued and outstanding, par value $.001 per share)	989,784	984,083
		Additional paid-in capital	2,237,323	2,231,833
		Treasury stock	(230,972)	(230,972)
		Retained deficit	(3,668,826)	(3,606,449)
	Total stockholders' equity		(672,691)	(621,505)
Total liabilities and stockholders' equity			$             120,279	$            129,032

4

SALON CITY, INC.
Statements of Operations
For the Three Months Ended March 31, 2008 and 2007
	Quarter ended			Quarter ended
	3/31/2008			3/31/2007
Advertising income	$	83,664		$	103,115
Distributors, conference and other income		815			140
Total revenue		84,479			103,255
Cost of goods sold		(77,643	)		(95,404	)
Gross Profit		6,836			7,851
Selling, general and administrative expenses		59,350			96,591
Net 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

SALON CITY, INC.
Statements of Cash Flows
For the Three Months ended March 31, 2008 and 2007
	Quarter ended			Quarter ended
	3/31/2008			3/31/2007
CASH 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			1,250
Common 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	)		10,000
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		72,887			10,420
NET 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		-			13,000
Incurrences (repayment of) related pary advances		(3,837	)		10,909
Proceeds from bank loans		17,384			48,456
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		13,547			72,365
NET INCREASE IN CASH AND CASH EQUIVALENTS		(33,409	)		48
CASH AND CASH EQUIVALENTS:
Beginning of period		111,735			82,723
End of period	$	78,326		$	82,771
SUPPLEMENTAL CASH FLOW DISCLOSURES AND NON-CASH
FINANCING  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

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

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 the three monthsending March 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

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 in Los Angeles, California, we publish SalonCitymagazine, 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 wereincorporated in Nevadaon 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 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 distribute SalonCitymagazine 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 SalonCity 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.

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 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 SalonCity’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.

9

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 the threemonths ended March 31, 2008 and 2007, respectively. The net (loss) in these periods was due primarily to operational expenses, which were $59,350and $96,591for the threemonths ended March 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 sold on the site, including a professional-only publication and regularly produced webisodes of SalonCity’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 at ArizonaStateUniversity. Steve Casciola opened two salons in Seattle’s Pike Street Market and U-District. In 1981 through 1995, Steve Casciola later accepted corporate positions andas 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 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

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 the three months ended March 31, 2008and 2007, respectively. This was primarily attributable to net (losses), which were $(62,377) and $(95,941) for the three months ended March 31, 2008and 2007, respectively, offset by the non-cash charges for common shares issued for services rendered during the threemonths ended March 31, 2008and 2007in the amountsof $11,191 and $45,000m respectively,as discussed above.

Net cash flows used in investing activities for the three months ending March 31, 2008and 2007were $-0-and $8,883, respectively. The cash flows used in investing activities for the three months ended March 31, 2007was solely 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 the three months ended March 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 the threemonths ended March 31, 2008 and 2007, respectively.

Overall, we have funded all ofour cash needs from inception through March 31, 2008with proceeds from issuances of common stock and shareholder loans.

On March 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 PROCEDURES

The 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.

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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 Casciola
		Steven Casciola President, CEO, CFO

INDEX TO EXHIBITS

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