UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[ x ]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                          OF THE SECURITIES ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

                                       OR

[   ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                          OF THE SECURITIES ACT OF 1934
            FOR THE TRANSITION PERIOD FROM ___________TO ____________

                        COMMISSION FILE NUMBER: 33-120671


                              SONOMA COLLEGE, INC.
             (Exact name of registrant as specified in its charter)

                CALIFORNIA                                      68-0290784
      (State or other jurisdiction of                         (I.R.S. Employer
       incorporation or organization)                        Identification No.)

                             1304 SOUTH POINT BLVD.
                                    SUITE 280
                               PETALUMA, CA 94954

          (Address, including zip code, of principal executive offices)

                                 (707) 283-0800

              (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 the Securities Exchange Act of
1934 during the preceding 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.

(1)Yes   __     No   X
                     -

(2)Yes   __     No   X
                     -

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's class of common
equity, as of the latest practicable date: At ______________, the issuer had
outstanding 68,142,062 shares of Common Stock, par value $.0001 per share.

Transitional Small Business Disclosure Format (Check one):  Yes[  ]  No[X]



<PAGE>



                              SONOMA COLLEGE, INC.

                                   FORM 10-QSB

                                      INDEX

                         PART I - FINANCIAL INFORMATION

                                                                            PAGE
   Item 1.

                Condensed Consolidated Balance Sheet -
                September 30, 2006 (Unaudited)                               1-2

                Condensed Consolidated Statements of Operations
                for the three months ended September 30, 2006
                 and 2005 (Unaudited)                                          3

                Condensed Consolidated Statement of Stockholder
                Deficiency for the three months ended September 30, 2006
                (Unaudited)                                                    4

                Condensed Consolidated Statements of Cash Flows for the
                three months ended September 30, 2006 and 2005 (Unaudited)     5

                Notes to Unaudited Condensed Consolidated
                Financial Statements                                           6


   Item 2.      Management's Discussion and Analysis or Plan of and
                Results of Operations

   Item 3.      Controls and Procedures


                           PART II - OTHER INFORMATION

   Item 1.      Legal Proceedings
   Item 2.      Unregistered Sales of Equity Securities and
                Use of Proceeds
   Item 3.      Defaults upon Senior Securities
   Item 4.      Submission of Matters to a Vote of Security Holders
   Item 5.      Other Information
   Item 6.      Exhibits

   Signatures

Exhibits 31.1 and 31.2
Exhibits 32.1 and 32.2


<PAGE>


                                             SONOMA COLLEGE, INC. AND SUBSIDIARY
                                            CONDENSED CONSOLIDATED BALANCE SHEET
                                                              September 30, 2006
--------------------------------------------------------------------------------
                                                                     (Unaudited)


                                     ASSETS



CURRENT ASSETS
--------------
  Cash and cash equivalents                                           $    4,856
  Accounts receivable, net of allowance for
    doubtful accounts of $202,291                                        807,650
  Prepaid expenses and other current assets                               66,251
                                                                      ----------

Total Current Assets                                                     878,757

PROPERTY AND EQUIPMENT, NET                                              166,760

INTANGIBLE ASSETS, NET                                                   281,204

DEFERRED FINANCING COSTS, NET                                            222,086

SECURITY DEPOSITS                                                         69,683
                                                                      ----------


      TOTAL ASSETS                                                    $1,618,490
                                                                      ==========




                       SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       1
<PAGE>


                                             SONOMA COLLEGE, INC. AND SUBSIDIARY
                                            CONDENSED CONSOLIDATED BALANCE SHEET
                                                              September 30, 2006
--------------------------------------------------------------------------------
                                                                     (Unaudited)


                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY


CURRENT LIABILITIES
   Line of credit                                                   $   475,000
   Accounts payable and accrued expenses                              1,407,212
   Unearned tuition                                                     347,025
   Advanced tuition                                                     124,918
   Capital lease obligations, current portion                            31,430
                                                                    -----------

        Total Current Liabilities                                     2,385,585

SUBORDINATED NOTES PAYABLE TO OFFICERS/STOCKHOLDERS                   2,171,160
SENIOR CONVERTIBLE DEBENTURES                                           250,000
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION                          74,764
COMMON STOCK AND STOCK OPTIONS SUBJECT TO RESCISSION                     87,699
                                                                    -----------

        TOTAL LIABILITIES                                             4,969,208
                                                                    -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
  Common stock, $0.0001 par value; 250,000,000 shares
     authorized; 64,619,842 shares issued and outstanding,
     net of 375,000 shares included in common
     stock and stock options subject to rescission                        6,462
  Additional paid-in capital                                          1,474,366
  Accumulated deficit                                                (4,831,546)
                                                                    -----------

        TOTAL STOCKHOLDERS' DEFICIENCY                               (3,350,718)
                                                                    -----------

        TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY              $ 1,618,490
                                                                    ===========





                       SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.





                                       2
<PAGE>

                                             SONOMA COLLEGE, INC. AND SUBSIDIARY
                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
                                                                     (Unaudited)


                                                   For the Three Months Ended
                                                         September 30,
                                               ---------------------------------
                                                      2006             2005
                                               ---------------------------------

REVENUES
--------
  Tuition and fee income                          $    505,231     $    589,940
                                                  ------------     ------------

OPERATING EXPENSES
------------------
  Instructional costs                                  305,525          379,712
  Sales and marketing                                   81,643           73,657
  General and administration                           667,752          484,985
  Depreciation and amortization                         31,734           23,252
                                                  ------------     ------------

      TOTAL OPERATING EXPENSES                       1,086,654          961,606
                                                  ------------     ------------

      LOSS FROM OPERATIONS                            (581,423)        (371,666)
                                                  ------------     ------------
OTHER EXPENSES
--------------
  Interest                                            (294,002)         (15,583)
  Deferred financing costs - amortization              (22,164)            --
                                                  ------------     ------------
      TOTAL OTHER EXPENSES                            (316,166)         (15,583)
                                                  ------------     ------------

      NET LOSS                                    $   (897,590)    $   (387,249)
                                                  ============     ============

NET LOSS PER COMMON SHARE -  BASIC
  AND DILUTED                                     $      (0.01)    $      (0.01)
                                                  ============     ============

WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING - BASIC AND DILUTED            64,619,842       63,832,478
                                                  ============     ============





                       SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.







                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                                                          SONOMA COLLEGE, INC. AND SUBSIDIARY
                                                                CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                                                                                For the Three Months Ended September 30, 2006
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                  (Unaudited)


                                       Common Stock
                         ------------------------------------------     Additional Paid-in    Accumulated
                                   Shares             Amount                 CapitaL            Deficit              Total
                         ----------------------------------------------------------------------------------------------------

<S>             <C>              <C>                  <C>                  <C>               <C>                 <C>
Balance at July 1, 2006          64,619,842           $ 6,462              $ 1,224,366       $ (3,933,956)       $(2,703,128)


  Debt discounts on
    senior convertible
    debentures                           --                --                  250,000                 --            250,000

Net loss                                 --                --                       --           (897,590)          (897,590)

                         ----------------------------------------------------------------------------------------------------

    Balance at
    September 30, 2006           64,619,842           $ 6,462              $ 1,474,366       $ (4,831,546)       $(3,350,718)

                         ====================================================================================================


                                                                     SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>




                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                             SONOMA COLLEGE, INC. AND SUBSIDIARY
                                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------
                                                                                     (Unaudited)

                                                                      For the Three Months Ended
                                                                            September 30,
                                                                     ---------------------------
                                                                         2006           2005
                                                                     ---------------------------
<S>                                                                    <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
  Net loss                                                            $(897,590)      $(387,249)
    Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation and amortization                                      31,734          23,252
      Amortization of deferred financing costs                           22,164              --
      Provision for bad debts                                            72,388              --
      Amortization of deferred consulting fees                               --           4,433
      Amortization of discounts on senior convertible debentures        250,000              --
    Changes in operating assets and liabilities:
      Accounts receivable                                              (298,553)        (36,587)
      Prepaid expenses and other current assets                         (38,250)        (19,107)
      Security deposit                                                       --          (5,780)
      Accounts payable and accrued expenses                             209,106          85,637
      Due to related party                                                   --          16,665
      Unearned tuition                                                   18,031         168,979
      Advanced tuition                                                   67,371          76,617
      Common stock and stock options subject to rescission                   --          50,763
                                                                      ---------       ---------
          NET CASH USED IN OPERATING ACTIVITIES                        (563,599)        (22,377)
                                                                      ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
      Purchases of intangibles, curricula                                (7,500)        (16,550)
      Purchases of property and equipment                               (30,000)        (16,652)
                                                                      ---------       ---------
          NET CASH (USED IN) INVESTING ACTIVITIES                       (37,500)        (33,202)
                                                                      ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
      Proceeds of notes payable                                              --         300,000
      Proceeds from senior convertible notes                            250,000              --
      Payment of deferred financing costs                               (46,250)             --
      Repayment of note payable                                              --        (150,500)
      Proceeds from notes payable to officers/stockholders              344,595              --
      Repayment of notes payable to officers/stockholders                    --        (115,000)
      Advances from related party                                            --          39,291
      Principal payments on capital lease obligations                    (8,584)         (7,907)
                                                                      ---------       ---------
          NET CASH PROVIDED BY FINANCING ACTIVITIES                     539,761          65,884
                                                                      ---------       ---------

          NET (DECREASE) INCREASE IN CASH AND
              CASH EQUIVALENTS                                          (61,338)         10,305

CASH AND CASH EQUIVALENTS  - Beginning                                   66,194           3,965
-------------------------                                             ---------       ---------

CASH AND CASH EQUIVALENTS  - Ending                                   $   4,856       $  14,270
-------------------------                                             =========       =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the period for:
    Interest                                                          $   6,961       $  15,583
  Non-cash investing and financing activities:
    Purchase of equipment through capital lease obligations           $      --       $  76,161
    Debt discounts on senior convertible debentures                   $ 250,000

                                      SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>




                                       5
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated balance sheet as of
September 30, 2006, the condensed consolidated statements of operations for the
three month periods ended September 30, 2006 and 2005, stockholders' deficiency
for the three month period ended September 30, 2006 and cash flows for the three
month periods ended September 30, 2006 and 2005 are unaudited. The unaudited
condensed consolidated financial statements have been prepared on the same basis
as the annual consolidated financial statements and, in the opinion of
management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the condensed consolidated financial
position of Sonoma College, Inc. and Subsidiary ("Sonoma" or the "Company") as
of September 30, 2006, and condensed consolidated results of operations for the
three month periods ended September 30, 2006 and 2005 and cash flows for the
three month periods ended September 30, 2006 and 2005. The results of operations
for the three month periods ended September 30, 2006 are not necessarily
indicative of the results to be expected for the full year ending June 30, 2007,
or for any other interim period. The accompanying condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements of Sonoma for the year ended June 30, 2006 included in its
Form 10K-SB filed on November 15, 2006 pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 filed with the Securities and Exchange
Commission.

The accompanying unaudited interim condensed consolidated financial statements
have been prepared assuming that the Company will continue as a going concern.
The Company incurred a net loss of $ 897,590 for the three months ended
September 30, 2006. In addition, as of September 30, 2006 the Company had a
working capital deficiency of $1,506,828 and a stockholders' deficiency of
$(3,350,718). These conditions raise substantial doubt about the Company's
ability to continue as a going concern. These condensed consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


NOTE 2. SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES

The accounting policies followed by Sonoma are set forth in Notes 1 and 2 to
Sonoma's audited consolidated financial statements included in its Form 10K-SB
as of and for the year ended June 30, 2006 filed with the Securities and
Exchange Commission. These accounting policies conform to United States
generally accepted accounting principles, and have been consistently applied in
the preparation of the condensed consolidated financial statements as of
September 30, 2006 and for the three month periods ended September 30, 2006 and
2005.

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements of Sonoma include the accounts
of Sonoma and its wholly-owned subsidiary, MW Asia, Inc., after elimination of
intercompany accounts and transactions.

USE OF ESTIMATES

The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions. Such estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from estimated amounts.

EARNINGS (LOSS) PER SHARE

Basic net earnings (loss) per share ("EPS") are calculated based on the weighted
average number of common shares outstanding for the period. Since any common
stock purchase options, outstanding warrants and any security


                                       6
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 2 - SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

potentially convertible into common stock for the three month periods ended
September 30, 2006 and 2005 would be anti-dilutive, the basic and fully diluted
shares are the same for calculating earnings (loss) per share. Securities that
could potentially dilute basic EPS in the future that were not included in the
computation of diluted EPS because to do so would have been antidilutive for the
periods presented consist of the following:




                                                            September 30,
                                                       2006             2005
                                                    (Unaudited)      (Unaudited)
                                                   -------------    ------------

Warrants to purchase common stock                    6,250,000                --

Options to purchase common stock                       400,000           400,000

Stock options issued under
2004 Stock Option Plan                               2,700,000                --
                                                     ---------         ---------

                                                     9,390,000           400,000
                                                     =========         =========



REVENUE RECOGNITION AND UNEARNED TUITION

Revenue from tuition and fees are recognized pro-rata (on a straight-line basis)
over the relevant period attended by the student of the applicable course or
program. If a student withdraws from a course or program, the paid but unearned
portion of the student's tuition is refunded. Refunds are calculated and paid in
accordance with applicable federal, state and institutional refund policies.
Unearned tuition represents the portion of tuition payments received but not
earned and is reflected as a current liability in the accompanying condensed
consolidated balance sheet as such amount is expected to be earned within the
next year. Advanced tuition represents funds received from students related to
courses or programs that have not yet commenced. If a student does not commence
the related course or program, the full amount is refunded. Revenues are
recognized over the period of service and are generally invoiced on a per
semester basis.

STOCK-BASED COMPENSATION

On April 28, 2004, Sonoma adopted its 2004 Stock Option Plan (the "2004 Plan")
under which it may grant qualified and nonqualified options to purchase up to
10,000,000 shares of common stock to employees and consultants. Qualified
options shall be exercisable for a period of up to ten years from the date of
the grant at no less than the fair value of the common stock on the date of
grant. The term of such options shall be up to five years from the date of grant
for stockholders who own more than ten percent of the voting power of all
classes of stock of Sonoma at the date of grant, and shall be exercisable for no
less that 110% of fair value on the date of grant.


                                       7
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005



NOTE 2 - SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

Prior to July 1, 2006, the Company accounted for the stock option plans under
the recognition and measurement provisions of Accounting Principles Board
Opinion No. 25 ("APB 25"). Accordingly, the Company would recognize employee
stock based compensation expense only if it granted options at a price lower
than the closing price on the date of grant. Any resulting compensation expense
would then have been recognized ratably over the associated service period. No
stock-based employee compensation expense relating to the Company's stock option
plans was reflected in net loss for the three ended September 30, 2005, as all
options granted under its plan had an exercise price equal to or greater than
the market value of the underlying common stock on the date of grant. Prior to
July 1, 2006, the Company provided pro-forma disclosure amounts in accordance
with Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"), as if the fair
value method defined by SFAS 123 had been applied to its stock-based
compensation. No options were granted in the quarter ended September 30, 2006.

Effective July 1, 2006, the Company adopted the fair value recognition
provisions of SFAS 123R, using the modified prospective transition method and
therefore has not restated prior periods' results. Under this transition method,
there is no employee stock-based compensation expense reported for the three
months ended September 30, 2006 included in compensation expense for all
stock-based compensation awards granted because all such awards were fully
vested prior to July 1, 2006. Stock-based compensation expense for all
share-based payment awards that will be granted after June 30, 2006 will be
based on the grant-date fair value estimated in accordance with the provisions
of SFAS 123R. The Company will recognize these compensation costs over the
requisite service period of the award, which is generally the vesting term of
the options associated with the underlying employment agreement, where
applicable.

There was no impact to the condensed consolidated financial statements for the
three months ended September 30, 2006 as a result of adopting SFAS 123R nor on
both basic and diluted net loss per share for the three months ended September
30, 2006. At September 30, 2006, the Company had no unamortized value of
employee stock options under SFAS 123R.

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 and the Emerging Issues Task Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or
Services" ("EITF 96-18") which requires that such equity instruments are
recorded at their fair value on the measurement date, which is typically the
date the services are performed. There was no such stock based compensation for
the three-months ended September 30, 2006, and 2005.

Option valuation models require the input of highly subjective assumptions
including the expected life of the option. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.




                                       8
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 2 - SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Prior to July 1, 2006, the Company accounted for the stock option plans
under the recognition and measurement provisions of Accounting Principles Board
Opinion No. 25 ("APB 25"). Accordingly, the Company would recognize employee
stock based compensation expense only if it granted options at a price lower
than the closing price on the date of grant. Any resulting compensation expense
would then have been recognized ratably over the associated service period. No
stock-based employee compensation expense relating to the Company's stock option
plans was reflected in net loss for the three ended September 30, 2005, as all
options granted under its plan had an exercise price equal to or greater than
the market value of the underlying common stock on the date of grant. Prior to
July 1, 2006, the Company provided pro-forma disclosure amounts in accordance
with Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"), as if the fair
value method defined by SFAS 123 had been applied to its stock-based
compensation. For the three months ended September 30, 2005, under APB 25, no
stock-based employee compensation expense relating to the Company's stock option
plan would have been reflected in net loss, as the Company grants all options
granted under its plan had an exercise price equal to market value of the
underlying common stock on the date of grant. No options were granted in the
quarter ended September 30, 2006.

         Effective July 1, 2006, the Company adopted the fair value recognition
provisions of SFAS 123R, using the modified prospective transition method and
therefore has not restated prior periods' results. Under this transition method,
there is no employee stock-based compensation expense reported for the three
months ended September 30, 2006 included compensation expense for all
stock-based compensation awards granted because all such awards were fully
vested prior to July 1, 2006. Stock-based compensation expense for all
share-based payment awards that will be granted after June 30, 2006 will be
based on the grant-date fair value estimated in accordance with the provisions
of SFAS 123R. The Company will recognize these compensation costs over the
requisite service period of the award, which is generally the vesting term of
the options associated with the underlying employment agreement, where
applicable.

         There was no impact to the condensed consolidated financial
statements for the three months ended September 30, 2006 as a result of adopting
SFAS 123R nor on both basic and diluted net loss per share for the three months
ended September 30, 2006. At September 30, 2006, the Company had no unamortized
value of employee stock options under SFAS 123R.

         The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 and the Emerging Issues Task Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or
Services" ("EITF 96-18") which requires that such equity instruments are
recorded at their fair value on the measurement date, which is typically the
date the services are performed. There was no such stock based compensation for
the three ended September 30, 2006, and 2005.


                                       9
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

NOTE 2 - SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

         Option valuation models require the input of highly subjective
assumptions including the expected life of the option. Because the Company's
employee stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.


         A summary of the status of the options under the Company's stock option
plan and the changes during the three months ended September 30, 2006 is
presented in the table below:

                                                                   Weighted
                                                      Number        Average
                                                    of Options   Exercise Price
                                                  ------------  ----------------

       Balance, July 1, 2006                         2,755,000  $           0.50
       Granted                                               -              0.50
       Forfeit                                         105,000              0.50
                                                   -----------  ----------------
       Balance, September 30, 2006                   2,650,000  $           0.50
                                                   ===========  ================


         All stock options outstanding as of September 30, 2006 are exercisable,
with a remaining average contractual life of 1.73 years and had no intrinsic
value at September 30, 2006.


RECENT ACCOUNTING PROCOUNCEMENTS

In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation 48, "Accounting for Uncertainty in Income Taxes--an
interpretation of FASB Statement No. 109" ("FIN 48"), which prescribes a
recognition threshold and measurement process for recording in the financial
statements uncertain tax positions taken or expected to be taken in a tax
return. Additionally, FIN 48 provides guidance on the recognition,
classification, accounting in interim periods and disclosure requirements for
uncertain tax positions. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company is assessing the impact of this Interpretation on
its condensed consolidated financial statements, but does not expect it to have
a material effect.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". SFAS
No. 157 provides guidance for using fair value to measure assets and
liabilities. In addition, this statement defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value
measurements. Where applicable, this statement simplifies and codifies related
guidance within United States generally accepted accounting principles. This
statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. The Company's adoption of SFAS No. 157 is not expected to have a material
effect on its consolidated financial statements.

In September 2006, the staff of the SEC issued Staff Accounting Bulletin No. 108
("SAB 108") which provides interpretive guidance on how the effects of the
carryover or reversal of prior year misstatements should be considered in
quantifying a current year misstatement. SAB 108 becomes effective in fiscal
2007. Adoption of SAB 108 is not expected to have a material impact on the
Company's consolidated financial position, results of operations or cash flows.

NOTE 3. LINE OF CREDIT

On July 13, 2005, Sonoma entered into a one-year revolving credit line agreement
with Wisse Enterprises LLC ("Wisse") and executed a promissory note in favor of
Wisse in an amount up to $500,000. The terms of the revolving credit line
agreement and promissory note provide that Sonoma may borrow up to $500,000 from
Wisse. Sonoma


                                       10
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 3 - LINE OF CREDIT, CONTINUED

borrowed $300,000 upon the execution of the agreements at an annual rate of
interest of 3.51% (LIBOR), adjusted monthly. As of September 30, 2006, the
Company had remaining availability of $25,000. Each draw down (borrowing) from
the revolving credit line is due on the earlier of the first anniversary of such
draw down (borrowing) or the expiration of the agreement. Any draws (borrowings)
from the revolving credit line must be made within the first year of the
revolving credit line agreement. The Chairman, Chief Executive Officer and
Executive President of Sonoma personally guaranteed the obligations of Sonoma
pursuant to a guaranty agreement. In addition, pursuant to the revolving credit
line agreement, the Company issued 375,000 shares of its common stock to Wisse
and granted Wisse an option to purchase 250,000 shares of common stock of the
Company at an exercise price of $0.50 per share. The option expires on the third
anniversary of the revolving credit line agreement. The aggregate fair value of
the common stock issued using a value of $.096 per share was $36,000 and the
value of the common stock purchase option of $14,763 determined utilizing the
Black-Scholes option pricing model had been accounted for as a component of
deferred financing costs and amortized to expense in the year ended June 30,
2006. These transactions were exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.


NOTE 4. NOTES PAYABLE

In October 2005, Sonoma entered into a Convertible Promissory Note ("Note")
agreement with TLC, LLC for the amount of $100,000. The note bore interest at
7.5% per annum. Related interest expense for the year ended June 30, 2006
amounted to $5,117. Principal and accrued interest was originally due and
payable in full in October 2006. At Sonoma's option, this Note and accrued
interest thereon was convertible at any time prior to maturity into shares of
Sonoma's common stock at the conversion rate of $.20 per share. During June
2006, Sonoma exercised its option and converted the Note and related accrued
interest of $5,117, resulting in the issuance of 509,375 shares of common stock.
In addition, Sonoma granted TLC, LLC a non-qualified stock option to purchase
50,000 shares of its common stock at an exercise price of $0.50 per share. The
option may be exercised at any time during its term, which expires in October
2008. The aggregate fair value of the common stock purchase option of $2,956
determined utilizing the Black-Scholes option pricing model has been accounted
for as a component of deferred financing costs was amortized ratably to expense
over the 12-month term of the agreement. These transactions were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

In connection with the registration statement the Company initially filed
November 22, 2004 on Form SB-2 with the Securities and Exchange Commission, the
common stock and stock options issued in the Wisse revolving line of credit
transaction (see Note 3) and the TLC, LLC convertible promissory note
transaction may have constituted a general solicitation in the offering of these
securities, which would be a violation of Section 5 of the Securities Act of
1933. Consequently these parties may have a right of rescission for the value of
these shares and options of $53,719. Consequently, the amount has not been
accounted for as a component of stockholders' deficiency, but reflected as a
component of the liability, "Common stock and stock options subject to
rescission", in the accompanying condensed consolidated balance sheet as of
September 30, 2006. In addition, the Company would be obligated for interest
expense in the event of rescission by Wisse and TLC, LLC, the amount of which
was not material at September 30, 2006.

NOTE 5. SENIOR CONVERTIBLE DEBENTURES

Effective on August 9, 2006, in a transaction in which vFinance Investments,
Inc. ("vFinance") acted as exclusive placement agent, the Company closed on a
$500,000 financing with two private investors structured as Senior Convertible
Debentures bearing interest at 9% per annum and due February 8, 2008 plus
five-year warrants to purchase 6.25 million shares of common stock at $0.10 per
share. The Company received gross and net proceeds of $250,000 and $208,750,
respectively, on closing. The Company is entitled to the remaining $250,000 upon
the


                                       11
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 5. SENIOR CONVERTIBLE DEBENTURES, CONTINUED

effective date of a registration statement to be filed with the Securities and
Exchange Commission by the Company with respect to the common stock underlying
the conversion of the Senior Convertible Debentures and the exercise of the
warrants. The Senior Convertible Debentures are convertible at $0.08 per common
share at the option of the holders, into an aggregate of 3,125,000 shares with
respect to the initial closing of $250,000 and an additional 3,125,000 shares
upon the receipt of the remaining proceeds. The Company has a call provision
with respect to the Senior Convertible Debentures if certain conditions for the
market price of the Company's stock are satisfied, as defined in the agreement.
The common stock underlying the Senior Convertible Debentures and warrants
include certain anti-dilution protection provisions and have defined
registration rights. In addition, under certain conditions the Company has the
option to pay interest in cash or in shares of its common stock. The transaction
is a private placement with the securities that may be issued being exempt from
registration under the Securities Act of 1933.

At August 9, 2006, the date of issuance, the fixed conversion price of the
Senior Convertible Debentures of $0.08 represented a discount to the market
value of the Company's common stock, which was at a quoted market price of $0.12
per share. In accordance with EITF 00-27, "Application of Issue 98-5 to Certain
Convertible Instruments" and EITF 98-5, "Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjusted Conversion Ratios",
the Company determined the relative fair value of the warrants and the Senior
Convertible Debentures and allocated the proceeds received on a relative fair
value basis. The fair value of the warrants was calculated using the
Black-Scholes option pricing model with the following assumptions: dividend
yield of 0%, expected volatility of 151%, risk-free interest rate of 4.81% and
an expected term of five years. Based upon this calculation, the effective
conversion price of Senior Convertible Debentures was determined to be
approximately $0.02 per common share, resulting in a beneficial conversion
feature of $66,179. The 6,250,000 warrants issued in the closing of the Senior
Convertible Debentures have a fair value of $183,821 which was determined
utilizing the Black-Scholes option pricing model with the following assumptions
used: expected life 5 years, volatility 151%, 0% dividends and a risk-free
interest rate 4.86%. These amounts were accounted for as debt discounts
associated with the Senior Convertible Debentures and credited to additional
paid-in capital during the three month period ended September 30, 2006. The
entire debt discounts of $250,000 was simultaneously charged to interest expense
since the conversion feature of the Senior Convertible Debentures and the
warrants are all immediately exercisable.

NOTE 6. COMMITMENT AND CONTINGENCIES

LITIGATION

On February 26, 2004, as amended on September 12, 2004, Sonoma entered into an
employment agreement with its President and Chief Academic Officer (the "CAO"),
which had an original expiration date of June 30, 2007, unless renewed by Sonoma
no later than May 31, 2006. The employment agreement, as amended, originally
provided for the following compensation:

(i) For the period beginning on February 26, 2004 and ending on August 31, 2004,
compensation at the rate of $75,000 per annum; for the period beginning on
September 1, 2004 and ending on the termination of the Agreement, $100,000 per
annum.

(ii) Beginning on September 1, 2004, a quarterly cash bonus of up to $25,000 as
determined on a quarter by quarter basis, if the CAO and/or Sonoma achieved
certain quarterly objectives as agreed to in writing by and between the Board of
Directors of the Company and the CAO, and,

(iii) For each of the three fiscal years commencing with the year ended June 30,
2005, an option (under its 2004 Stock Option Plan) to purchase 333,000 shares of
common stock of Sonoma for the achievement of certain objectives as



                                       12
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 6. COMMITMENT AND CONTINGENCIES, LITIGATION, CONTINUED

agreed to in writing by and between the Board of Directors of Sonoma and the
CAO. The exercise price with respect to any option that could have been granted
pursuant to this provision of the employment agreement would be the fair market
value of the common stock underlying such option on the date of grant of the
option.

On April 4, 2005, the Board of Directors of Sonoma College terminated the CAO
for cause and removed the CAO as a member of the Board of Directors. On May 2,
2005, Sonoma filed a lawsuit against the CAO and his spouse, in the Superior
Court of the State of California in and for the County of Sonoma. Management
believes, and has alleged in its complaint against the CAO and his wife, that,
among other things: (i) the COA breached his employment agreement and other
common law duties to Sonoma College by working for a competitor, the University
of Northern California; and, (ii) the CAO breached the Assignment of Right and
Exclusive License and Assumption of Obligations and Sale of Certain Assets
Agreement entered into with Sonoma College by licensing the intellectual
property transferred to the Company pursuant to the agreement to third parties.
Pursuant to the complaint, management requested that the court grant
compensatory damages, punitive damages, attorneys' fees and injunctive relief.
Management intends to aggressively enforce its rights and claims in connection
with the complaint. The CAO has filed an answer to Sonoma's complaint and a
cross-complaint for wrongful termination, breach of contract and conversion.
Sonoma has filed an answer to the cross-complaint.

In April 2006, H. John Stalcup filed a lawsuit against Sonoma College, certain
officers of Sonoma College and its attorney and transfer agent (collectively,
the "Defendants") in the Superior Court of the State of California in and for
the County of Sonoma. Mr. Stalcup has alleged in his complaint, that, among
other things: the Defendants intentionally and negligently interfered with
prospective economic advantage, committed a conversion, fraud and trespass to
chattels by not allowing the restrictive legend to be removed from his stock
certificates which represent shares of common stock of Sonoma College. We have
filed an answer to the cross-complaint and the litigation matters involving Mr.
Stalcup were consolidated.

In addition, Mr. Stalcup filed a complaint with the U.S. Department of Labor
with respect to the issues set forth in his cross-complaint pursuant to the
employee protection provisions of Title VIII of the Sarbanes-Oxley Act of 2002.
Mr. Stalcup's complaint was dismissed by the U.S Department of Labor in August
2005 because Sonoma was determined not to be an employer subject to the
applicable provisions of the Sarbanes-Oxley Act. Mr. Stalcup appealed the U.S.
Department of Labor's determination in September 2005. In February 2006, Mr.
Stalcup's appeal was dismissed by the U.S Department of Labor.

Management does not believe that the lawsuit will have a material adverse effect
on its consolidated financial position or results of operations.

PROGRAM REVIEW AUDITS AND COMPLIANCE

As a condition to participating in the various grant and loan programs, Sonoma
is subject to various program review audits conducted by the financial aid
provider and an independent auditor. The results of these audits sometimes lead
to assessments for non-compliance and Sonoma must make restitution. For the
years through June 30, 2005, no events of noncompliance have taken place. Based
upon Sonoma's experience, no accruals for potential assessments for the years
ended June 30, 2006 and June 30, 2005, were required. Reference is made to the
discussions in last two paragraphs of this caption relating to status of current
compliance issues related to financial ratios and change in control provisions.




                                       13
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 6. COMMITMENT AND CONTINGENCIES, PROGRAM REVIEW AUDITS AND COMPLIANCE,
CONTINUED

Sonoma is subject to extensive regulation by federal and state governmental
agencies and accrediting bodies. In particular, Higher Education Act of 1965
("HEA"), and the regulations promulgated there under by the DOE, subjects Sonoma
to significant regulatory scrutiny on the basis of numerous standards that must
be satisfied in order to participate in the various federal student financial
assistance programs under Title IV of the HEA.

To participate in the Title IV Programs, Sonoma must be authorized to offer its
programs of instruction by the relevant agencies of the state in which it is
located, accredited by an accrediting agency recognized by the DOE and certified
as eligible by the DOE. The DOE will certify an institution to participate in
the Title IV Programs only after the institution has demonstrated compliance
with the HEA and the DOE's extensive regulations regarding institutional
eligibility. An institution must also demonstrate its compliance to the DOE on
an ongoing basis. As of June 30, 2005, management believes that Sonoma was in
substantial compliance, with the foregoing non-financial requirements.

Sonoma must demonstrate compliance with specific DOE standards of financial
responsibility, based upon, among other things, Sonoma's annual consolidated
audited financial statements prepared in accordance with DOE standards. Such
information as of and for the year ended for June 30, 2006 must be provided by
December 31, 2006. The DOE then calculates Sonoma's composite score for
financial responsibility based on its (i) equity ratio, which measures the
institution's capital resources, ability to borrow and financial viability; (ii)
primary reserve ratio, which measures the institution's ability to support
current operations from expendable resources; and (iii) net income ratio, which
measures the institution's ability to operate at a profit. An institution that
does not meet the DOE's minimum composite score may demonstrate its financial
responsibility by posting a letter of credit in favor of the DOE in an amount of
not less than 50% of the Title IV Program funds received by the institution
during its prior fiscal year. Sonoma students received approximately $1,487,000
and $1,620,000 in Title IV funds for the years ended June 30, 2006 and 2005,
respectively. Such conditions include reporting results earlier, compliance with
debt provisions of loan agreements, limitations on withdrawal of owners
including declaring of dividends, and provision of an independent compliance
certificate, among other terms and conditions. Based upon the Company's
financial results for the year June 30, 2006, Sonoma would not satisfy the
composite score established for financial responsibility for the year ended June
30, 2006.

In addition, there is also a letter of credit requirement imposed by the DOE in
the event of a change in control if the Company does not meet the financial
standards. Such a change in control occurred on January 25, 2006, the effective
date of the Company's registration statement. Management has been advised that
the letter of credit requirement for this purpose approximated $407,000 for a
one year period. This requirement can be modified and extended. Sonoma's
continued eligibility to participate in the federal student financial assistance
programs authorized by Title IV Programs is dependent on the approval of the
California Bureau of Private Postsecondary and Vocational Education ("BPPVE"),
Accrediting Bureau of Health Education Schools ("ABHES") and the Department of
Education ("DOE" or "ED"). ABHES and DOE, each of which determined that the
effectiveness of the registration statement represented a change of ownership
and/or control and therefore, pursuant to each agency's requirements.
Consequently the previously issued approvals were suspended as of January 25,
2006. Each of the agencies was required to review and approve the transaction in
order for Sonoma to continue to participate in the Title IV Programs. BPPVE
approved the Initial Offering prior to January 25, 2006, but ABHES and DOE have
not granted this approval as of this filing. ABHES deferred action on Sonoma's
change of ownership application until its next regularly scheduled meeting in
December, 2006. Sonoma has also submitted its response to issues identified
during an evaluation visit. During this process, Sonoma continues to be
accredited by ABHES. DOE similarly has not approved Sonoma's change of ownership
application following the transaction. On April 6, 2006, DOE started holding
federal financial aid funds related to Sonoma students' loans, due mainly to the
Company's failure to post a letter of credit previously requested by DOE for
approximately $407,000. The letter of credit was requested due to Sonoma's
failure to demonstrate financial responsibility following the filing of the SEC
registration statement, as defined by the DOE. Sonoma students can therefore not
receive any Title IV Program funds until DOE approves the change of ownership.
During this period, Sonoma has permitted its Title IV students to start classes
while it is waiting


                                       14
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 6. COMMITMENT AND CONTINGENCIES, PROGRAM REVIEW AUDITS AND COMPLIANCE,
CONTINUED

for approval of funding. Sonoma subsequently submitted a revised change of
ownership application.

Approval is at the discretion of the DOE dependent upon its evaluation of
Sonoma's financial condition for the year ended June 30, 2006. The Company has
obtained the appropriate bank approvals for the letter of credit, which must be
collateralized by the Company. The letter of credit is expected to be issued
upon final acceptance of the form of letter of credit by the DOE. Upon
acceptance by the DOE, Sonoma students will again be eligible to receive Title
IV funding for which they have applied. Sonoma has accepted students enrolling
under these conditions utilizing Title IV funding.

COMMONS STOCK AND STOCK OPTIONS SUBJECT TO RESCISSION

In connection with the registration statement the Company filed on November 22,
2004 on Form SB-2 with the Securities and Exchange Commission, certain options
issued in April 2005 may not have been exempt pursuant to Rule 701 of the
Securities Act of 1933. Of the 2,570,000 of these options issued under the 2004
Plan, 625,000 non-qualified stock options were issued for services to other than
natural persons and were therefore not exempt from registration under Rule 701.
In addition these issuances may have constituted a general solicitation in the
offering of these securities, which would be a violation of Section 5 of the
Securities Act of 1933. The fair value of these options determined using the
Black-Scholes option pricing model of $36,936 originally included in additional
paid-in capital in stockholders' (deficit) has been restated as a
liability,"Common stock and stock options subject to rescission", in the
accompanying condensed consolidated balance sheet as of September 30, 2006. In
addition, the Company would be obligated for interest expense in the event of
rescission by the each of the option holders, the amount of which is immaterial
as of September 30, 2006.

In connection with the registration statement the Company filed on November 22,
2004 on Form SB-2 with the Securities and Exchange Commission, the 375,000
shares of common stock and the option to purchase 250,000 shares of common stock
issued to Wisse in July 2005 and the common stock purchase option issued to TLC,
LLC in October 2005 may have constituted a general solicitation in the offering
of these securities, which would be a violation of Section 5 of the Securities
Act of 1933. Consequently these parties may have a right of rescission for the
value of these shares and options of $150,763 at September 30, 2006. This amount
has been excluded from stockholders' deficit and is included as a component of
the liability, Common stock and stock options subject to rescission, in the
accompanying condensed consolidated balance sheet as of September 30, 2006. In
addition, the Company would be obligated for interest expense in the event of a
rescission, the amount of which is immaterial as of September 30, 2006.

REGISTRATION RIGHTS

EITF ("Emerging Issues Task Force") Issue No. 05-4 "The Effect of a Liquidated
Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No.
00-19, `Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock" ("EITF No. 05-4") addresses
financial instruments, such as stock purchase warrants, which are accounted for
under EITF 00-19 that may be issued at the same time and in contemplation of a
registration rights agreement that includes a liquidated damages clause. The
consensus of EITF No. 05-4 has not been finalized. On August 9, 2006 and October
4, 2006, the Company completed is Senior Convertible Debentures and Secured
Promissory Notes transactions, which included certain registration rights and
demand registration rights with respect to shares of Company common stock issued
and issuable upon exercise of warrants. The Company views these registration
rights agreements as a free standing financial instrument that includes
liquidated damages which could be deemed substantial. Accordingly the Company
views that the interpretive guidance in EITF Issue No. 05-4, view C, provides
the best fit for its circumstances and would require a company, in


                                       15
<PAGE>

                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 6. COMMITMENT AND CONTINGENCIES, REGISTRATION RIGHTS, CONTINUED

certain circumstances to record a derivative liability. As of September 30,
3006, the amount of any such penalty was deemed to be de-minimus and therefore
no liability was recorded in the Condensed Consolidated Financial Statements.
Further, management believes that its future exposure to any material penalty or
liquidated damages is unlikely given its intention to file the registration
statement related to the shares of common stock and the warrants, and to have
the registration statement declared effective and remain effective.

NOTE 7. CONSORTIUM AGREEMENT

On August 3, 2004, the Company and Casa Loma College, Inc. ("Casa"), a
California Corporation, entered into an academic consortium agreement whereby
select Sonoma programs will be operated at Casa's campuses and select Casa
programs will be operated at the Company's campuses in the form of "satellite
programs". Under the agreement, the Company provides its MRI Technology Program
at campuses owned and/or operated by Casa. The agreement stipulates a revenue
sharing arrangement based upon net tuition and fees, as defined. For the three
months ended September 30, 2006 and 2005, with respect to the Casa Loma program,
the Company earned on an accrual basis tuition and fees of $172,000 and
$146,000, respectively. The agreement has an initial two-year term, which will
renew for successive two-year terms unless notice of cancellation is given by
either party to the other within 90 days of the expiration of any term.

NOTE 8. RELATED PARTY TRANSACTIONS

a. On February 26, 2004, as amended on September 12, 2004, Sonoma and Homeland
Safety Training, Inc., a company which is majority owned by the former
President, Academic Dean, and Director of Sonoma, entered into an Assignment of
Rights and Exclusive License and Assumption of Obligations and Sale of Certain
Assets Agreement in connection with the license of certain intellectual property
consisting of course content and related copyrights. Pursuant to the agreement,
as amended, Sonoma granted Homeland Safety Training, Inc. an option to purchase
400,000 shares of common stock of Sonoma at an exercise price of twenty-five
cents ($0.25) per share. The option may be exercised during the period beginning
on June 30, 2006 and ending on June 30, 2011. (Also See Note 5).

b. During the three month period ended September 30, 2005, pursuant to an oral
agreement between Sonoma and Technology Exchange, Inc. ("Technology Exchange"),
a company wholly-owned by the Chief Operating Officer, a stockholder and a
director, Sonoma incurred $30,000 and $6,665 in consulting fees and reimbursed
out-of-pocket expenses, respectively. During the three month period ended
September 30, 2006, Sonoma incurred $30,000 and $4,299 in consulting fees and
reimbursed out-of-pocket expenses, respectively. In addition, during the three
month periods ended September 30, 2006 and 2005, respectively. Technology
Exchange advanced $47,185 and $39,291, respectively, in the payment of direct
expenses of Sonoma. The services provided by Technology Exchange related to
general management, marketing and business development. As of September 30,
2006, $567,064 was due to Technology Exchange in the aggregate, which was
evidenced by subordinated notes payable to officers/stockholder (See Note 6c.).

c. During the three months ended September 30, 2006, Sonoma received an
aggregate of $344,595 in proceeds from officers/stockholders and Technology
Exchange. The cumulative balance as of September 30, 2006 of amounts due to
officers/stockholders and Technology Exchange of $2,171,160 is evidenced by the
Company's unsecured promissory notes due in December 2007, bearing interest at
7% per annum. Related party interest expense for the three month periods ended
September 30, 2006 and 2005 was $33,665 and $7,763, respectively. Related
accrued interest included in accounts payable and accrued expenses in the
accompanying condensed consolidated balance sheet amounted to $98,639 as of
September 30, 2006. The outstanding balances under the notes are classified as
long-term in the


                                       16
<PAGE>
                       SONOMA COLLEGE, INC. AND SUBSIDIARY
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE 8. RELATED PARTY TRANSACTIONS, CONTINUED

accompanying balance sheet since the balances under the notes (which have a
maturity by their terms in December 2007) are subordinated to the Secured Notes
issued August 9, 2006 (see Note 5). since their maturity is December 2007

d. Sonoma has entered into a month-to-month arrangement for the use of office
space, computer and telephone services with Eduprise LLC, a company that is
owned by certain officers/stockholders of the Company that is renewable on a
yearly basis. Sonoma has incurred $8,000 and $6,000 under this arrangement for
the three months periods ended September 30, 2006 and 2005, respectively.

NOTE 9. SUBSEQUENT EVENT

On October 4, 2006, the Company consummated a private placement with two
investors of its 10% Secured Promissory Notes in the gross and net amount of
$550,000 and $487,500, respectively. The investors also received 3,055,554
shares of the Company's common stock with a value of $275,000 at the closing
date and five year warrants to purchase 280,000 shares of common stock expiring
October 4, 2011, exercisable at $0.11 per share. The Secured Promissory Notes
are convertible into common shares at the option of the investors at $0.90 per
share. The Promissory Notes are secured by a mortgage on the residence of an
officer/stockholder and are due April 4, 2007. If not repaid by January 4, 2006,
however, an additional 3,055,554 shares of common stock are issuable to the
investors. An additional 91,666 shares of common stock valued at $8,250 were
issued to a finder. Shares issued in this transaction are subject to certain
piggy-back registration rights.



                                       17
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH OUR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO
APPEARING ELSEWHERE IN THIS REPORT. THIS REPORT CONTAINS STATEMENTS THAT
CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. WE CAUTION YOU THAT FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE STATEMENTS
THAT CONSTITUTE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.


FORWARD-LOOKING STATEMENTS

When used in this Form 10-QSB and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "will likely result,"
"management expects" or "the Company expects," "will continue," "is
anticipated," "estimated" or similar expressions are intended to identify
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Readers are cautioned not to place undue
reliance on any such forward-looking statements, each of which speak only as of
the date made. Such statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical results and
those presently anticipated or projected. The Company has no obligation to
publicly release the result of any revisions, which may be made to any
forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.


GENERAL

We own and operate a private for-profit post-secondary institution that offers
students associate degrees, certificates and continuing education in the allied
healthcare and homeland security fields. We currently operate two campuses. Our
main campus is located in Petaluma, California (about an hour north of San
Francisco) and our second campus is located in the downtown financial district
of San Francisco.

Our stated strategy is to expand through increased student population at our San
Francisco and Petaluma Campuses the establishment of other programs, curricula
and relationships through which we can utilize our online platform; and the
introduction of Consortium Agreement programs with other institutions. We
continue to grow our relationship with Casa Loma to offer our MRI program and
with the New York City Fire Department to offer our Homeland Readiness and
Emergency Management program. In fiscal 2006, we experienced substantial
increases in tuition earned in our physical therapy assistant, MRI and Casa Loma
(MRI) programs, and homeland security programs as a result of incurring
substantial additional costs for program and curricula development, facilities,
faculty, financial aid, registrar and other administrative costs in fiscal 2005.
As can be seen from the table below, our student count has increased
substantially over time, especially when comparing the fiscal year-end totals
(June 30) to the preceding comparable periods. Although there can be no
assurance of this, we expect our student population to continue to increase as a
result of the foregoing programs over the next 12 months. Should we continue to
achieve increased student population, we anticipate that our operating costs as
a proportion of tuition and fee income will decrease in fiscal 2007 as compared
to fiscal 2006, consistent with the preceding year. We can give no assurance,
however, that this trend will continue. In order to continue funding the
foregoing during the year ended June 30, 2006, we expended substantial resources
to complete the process to become a publicly traded company; (our registration
statement on Form SB-2/A was declared effective by the Securities and Exchange
Commission on January 25, 2006); secured a $500,000 revolving credit
arrangement, received $100,000 from the issuance of a convertible note (which
was converted to equity in June 2006) and received $966,000 in funding from our
officers and stockholders. Subsequent to June 30, 2006, we received additional
funding through a private placement in August 2006, in which vFinance acted as
placement agent, in the net amount of $208,750 (a similar amount



                                       18
<PAGE>

to be received upon completing an SEC registration statement) and a bridge
financing arrangement in the net amount of $487,500 in October 2006. There can
be no assurance however, that our plans will ultimately be successful and we may
not achieve adequate revenues or profitability even if we received additional
capital under the vFinance arrangement or from the various sources identified,
which itself is not certain. While we also substantially reduced selling and
marketing expenses we experienced substantial increases in administrative costs
principally related to increased professional costs related to our public
company status, costs of filing of our SB-2, and legal costs associated with
litigation.

We derive our revenues from the following sources: (i) tuition, fees and charges
paid by, or on behalf of, our students and (ii) revenue derived from the
consortium agreements commencing in fiscal 2005. A large number of our students
paid a substantial portion of tuition and other fees with funds received through
student assistance financial aid programs under Title IV of the Higher Education
Act of 1965, as amended ("HEA"). We received approximately 56.1% and 81.1% of
revenue determined on a cash basis from such funds for the years ended June 30,
2006 and 2005, respectively. See below for further discussion regarding the
continued availability of Title IV funds to our students.

Our revenues vary based on student enrollment and population. The number of
students that attend our campuses, the number of new student enrollments during
a fiscal period, student retention rates and general economic conditions
generally impact student population. The introduction of new programs and
emphasis on existing ones are significant factors affecting increased student
population in our programs.

The following table summarizes student enrollment as of each date:

         June 30, 2005                       224
         September 30, 2005                  230
         December 31, 2005                   267
         March 31, 2006                      270
         June 30, 2006                       260
         September 30, 2006                  185

Revenues fluctuate as a result of seasonal variations in our business and due to
capacity and scheduling limitations. These factors impact student population,
which varies as a result of new student enrollments and student attrition.
Historically, we have had lower student enrollments in the 1st quarter of our
fiscal year (July-August-September) compared to the remainder of the fiscal
year. This is due to fewer scheduled enrollments during the months of June, July
and August. In addition, as our programs vary in length generally from 5 to 21
months, this impacts the scheduling of new starts in some programs. Except for
part time faculty costs, expenses remain relatively fixed, however, and do not
vary as significantly as student population and tuition revenues. We expect
quarterly fluctuations in operating results to continue as a result of
enrollment patterns, capacity and scheduling limitations. Such patterns may
change, however, as a result of acquisitions, new school openings, increased
capacity and new program introductions. The operating results for any quarter
are not necessarily indicative of the results for any future period.


We must be authorized by the state in which we operate, accredited by an
accrediting commission recognized by the ED, and certified by ED to participate
in Title IV Programs. Any substantial restrictions on our ability to participate
in Title IV Programs would adversely affect our ability to enroll students. See
discussion below under Liquidity and Capital Resources.

Accounts receivable are due from students and are primarily expected to be paid
through the use of Federal and State sources of funds. Students are responsible
for amounts not available through federal and state sources and unpaid amounts
due when the student withdraws. Under the HEA requirements, students are
obligated to us for education costs that the student can no longer pay with HEA
Title IV funds. We expect that non-Title IV accounts receivable due from
students may increase in the future as student enrollment increases, and that
the related provision for uncollectible accounts may also increase.


                                       19
<PAGE>

CRITICAL ACCOUNTING ESTIMATES

Our financial results can be materially affected by estimates made in certain
specific areas, including the adequacy of our allowance for doubtful accounts,
the anticipated life of our intangible assets, including capitalized curricula,
and realization of these costs through earnings. The adequacy of our allowance
for doubtful accounts is dependent upon our ability to be guaranteed collection
of receivables under the aforementioned Title IV program. Should the Title IV
program available to our students be reduced in the future, we could be exposed
to a greater risk to losses from uncollectible student receivables. Intangible
assets include capitalized curricula costs relate to our various course
offerings, including our new Homeland Security curriculum. We are amortizing
these costs over their estimated useful lives of five years. Under United States
generally accepted accounting principles we are required to periodically
evaluate the recoverability of these and other long-lived assets. If projected
discounted cash flows are not adequate, we may be required to expense some or
all of these costs in the period in which such a determination is made or reduce
the remaining useful life. The occurrence of any of these events could
materially reduce our financial results, net assets and cash flows in the period
in which the event or events occur.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AS COMPARED
TO THE THREE MONTHS ENDED SEPTEMBER 30, 2005:

Total revenues for the three months ended September 30, 2006 as compared to the
comparable period of the preceding year decreased by $85,000 to $505,000, or an
aggregate decrease of 14.4%. We experienced a decrease in student enrollment
from 230 students at September 30, 2005 to 185 at September 30, 2006. This
resulted in decreases in tuition earned in Massage Therapy & MRI offset by
increases in revenue in Physical Therapy Assistant, Homeland Security and the
Casa Loma consortium (MRI) programs. The MRI decreases resulted principally from
the postponement of a semester start in fiscal 2007 to October 2006, whereas the
comparable start in fiscal 2006 occurred in September 2005.

In 2004, we began to implement our growth strategy of developing direct sources
of revenues and direct programs which we believe will maximize our potential and
value in the long run. We entered into our first Consortium Agreement in August
2004, with Casa Loma College whereby select programs of each institution will be
operated on the other's campuses in the form of "satellite" programs. The
mutually agreed upon initial focus of providing our MRI Technology Program at
campuses owned and/or operated by Casa Loma College has been a successful
initiaitive for us, as more fully described herein. Net tuition represents gross
tuition and fees reduced by defined direct faculty, supervision and certain
other associated costs we incur, and the revenue shared with Casa Loma. The
initial contract term is for two years, automatically renewable for successive
two-year terms unless cancelled by either party. Initial student enrollment
under this program commenced on September 27, 2004. For the three months ended
September 30, 2006 and 2005 with respect to the Casa Loma program, we reported
earned tuition and fees of $172,000 and $146,000, respectively.

We have greatly expanded awareness efforts in our marketplace by enhancing our
website and through advertising. In order to support the anticipated growth in
student population, we have enhanced the capacity of our institution which
reflects itself in increased instructional costs, sales and marketing, and
general and administrative expenses. These trends are more fully discussed
below. We have entered into other consortium programs, certain of were
discontinued because of lack of performance. Others are in process of being
implemented.


TUITION AND FEE INCOME:

Revenue from our MRI program, excluding Casa Loma, decreased $87,000 or 39.4% to
$134,000 in the three months ended September 30, 2006 as compared to $221,000 in
the comparable period of the preceding year. While we continue to attempt to
expand this program, which we began in 2002, to meet the demand in the
marketplace, revenues decreased as a result of rescheduling a new class start
from September 2006 to October 2006. The Casa Loma consortium program described
above accounted for an increase of $40,000 or 30.8% to $170,000 in tuition
revenue (excluding fees) earned on an accrual basis for the three months ended
September 30, 2006 as compared to $130,000 in the comparable period of the
preceding year. The additional direct costs of this program include the cost of
additional on-line and residential faculty, an instructional online residential
program director, and other direct fees and costs associated with specific
courses of the curriculum. Certain costs vary with numbers of students, others
are fixed costs or are a combination of both.


                                       20
<PAGE>

Homeland Security experienced an increase of $29,000 or 322.2% to $38,000 of
earned tuition in the three months ended September 30, 2006 as compared to
$9,000 in the comparable period of the preceding year. Physical Therapy
Assistant tuition increased by $12,000 or 10.7% to $124,000 for the three months
ended September 30, 2006 as compared to $112,000 in the comparable period of the
preceding year, as we continued to expand the program in our new Petaluma
location. Tuition earned on all Massage Therapy ("MT") programs decreased by
$60,000 to $0 for the three months ended September 30, 2006 as compared to
$60,000 in the comparable period of the preceding year. We temporarily suspended
direct MT student starts in the quarter ended September 30, 2005 while we
negotiated and concluded a dissolution of a consortium agreement with the
National Holistic Institute. We had originally placed reliance on the National
Holistic Institute to provide the MT program. We are moving aggressively to
revitalize this important program - we have recruited a new MT director and
expect to restart direct instruction in the next quarter.

Tuition earned decreased overall in the MT and MRI (excluding Casa Loma)
programs. It increased in more modest amounts in the MRI (Casa Loma), Homeland
Security and PTA programs. While tuition earned decreased this period, we expect
it to improve next period by improving enrollment through our hiring new
professional personnel and faculty, and through greater efforts in our marketing
and advertising programs. Tuition and fee income also includes student
application and service fees and other miscellaneous items. The aggregate
revenues of these sources decreased by $20,000 or 33.9% to $39,000 for the three
months ended September 30, 2006 as compared to $59,000 in the comparable period
of the preceding year. and represented 7.7% and 10.0% of our total revenues,
respectively. Student application and service fees decreased because of lower
student count.


OPERATING EXPENSES:

INSTRUCTIONAL COSTS

Instructional costs include direct and indirect salaries and payroll taxes,
operating expenses of programs including curricula and Internet costs, and other
educational related expenses. Instructional costs decreased by $74,000 or 19.5%
to $306,000 for the three months ended September 30, 2006 as compared to
$380,000 in the comparable period of the preceding year. We were successful in
reducing instructional costs as a percentage of revenue from tuition and fees to
60.1% for the three months ended September 30, 2006 as compared to 64.4% in the
comparable period of the preceding year,. This still resulted in a decrease of
$11,000 in operating profit (revenues reduced by instructional costs) in the
three months ended September 30, 2006 as compared to the comparable period of
the preceding year. Direct instructional salaries decreased by $12,000 or 6.7%
to $167,000 for the three months ended September 30, 2006 as compared to
$179,000 in the comparable period of the preceding year. Program director and
related salaries decreased by $41,000 or 39.1% to $64,000 for the three months
ended September 30, 2006 as compared to $105,000 in the comparable period of the
preceding year. We incurred $34,000 in consortium costs in the three months
ended September 30, 2006. The major component was $27,000 in commission expense
as compared to $5,000 in the comparable period of the preceding year, an
increase of $22,000 or 440.0%, in connection with our related consortium program
revenue. We experienced a decrease of $11,000 or 21.6% in non-personnel related
instructional costs to $40,000 for the three months ended September 30, 2006 as
compared to $51,000 in the comparable period of the preceding year. These costs
are generally associated with the growth and support of our programs in which we
made major investments in prior periods. We are currently reducing and
controlling costs to the extent possible in reaction to our current cash
position.

SALES AND MARKETING:

Sales and marketing includes the costs of advertising, promotion, recruitment
and associated costs and expenses. Sales and marketing increased $8,000 or 10.8%
to $82,000 for the three months ended September 30, 2006 as compared to $74,000
in the comparable period of the preceding year. Recruitment salaries decreased
by $23,000 or 74.2% to $8,000 for the three months ended September 30, 2006 as
compared to $31,000 in the comparable period of the preceding year. Our plans
call for increasing our efforts in this area as our new Chief Academic Officer
builds and strengthens staff.

Advertising, marketing and lead generation costs increased $32,000 or 76.2% to
$74,000 for the three months ended September 30, 2006 as compared to $42,000 in
the comparable period of the preceding year. We increased lead generation and
advertising expenses to increase student enrollment even though we have a
difficult cash flow position.


                                       21
<PAGE>

GENERAL AND ADMINISTRATION:

General and administration costs increased $183,000 or 37.7% to $668,000 for the
three months ended September 30, 2006 as compared to $485,000 in the comparable
period of the preceding year. Occupancy costs decreased by $8,000 or 7.0% to
$106,000 for the three months ended September 30, 2006 as compared to $114,000
in the comparable period of the preceding year. The decrease was primarily
connected to security costs incurred in the period of the preceding year.
Telecommunications and travel expense decreased approximately $3,000 and $9,000
respectively. Legal and accounting increased $42,000 or 30.1% to $180,000 for
the three months ended September 30, 2006 as compared to $138,000 in the
comparable period of the preceding year. In the fiscal 2007 quarter, we
continued to incur substantial legal costs related to the Stalcup litigation,
which substantially accounted for the increase. We continue to incur substantial
professional and other costs, including investor relations costs in fiscal 2006,
these amounts have been reduced as compared to fiscal 2005. However, we do
anticipate that legal, accounting, consulting and in house costs associated with
being a public company, and the future costs of compliance with the
Sarbanes-Oxley Act of 2002 will continue to be significant. We also continue to
experience increases in office, financial aid and other expenses as we have
increased staff, space and operations.


DEPRECIATION AND AMORTIZATION:

Depreciation and amortization expense increased $14,000 or 25.9% to $54,000 for
the three months ended September 30, 2006 as compared to $40,000 in the
comparable period of the preceding year. Substantially all of the increase
relates to additional depreciation associated with acquisition of furniture and
computer equipment related expanded facilities, and of amortization related to
additional capitalized curricula costs put into service.

INTEREST EXPENSE:

Interest expense increased $278,000 or 1735.5% to $294,000 for the three months
ended September 30, 2006 as compared to $16,000 in the comparable period of the
preceding year. The increase resulted from additional interest related to
capital lease financing, officer/stockholder loans, the revolving line of credit
and the vFinance note payable. Interest on officer/stockholder loans amounted to
$33,000 the three months ended September 30, 2006 as compared to $8,000 in the
comparable period of the preceding year. These amounts have been accrued but not
paid to date. As described more fully in Note 5 to the condensed consolidated
financial statements included elsewhere herein, we incurred a non-cash interest
charge of $250,000 in the quarter ended September 30, 2006. This represents
accounting for the discounts related to the Senior Subordinated Notes resulting
from a beneficial conversion feature and fair valuation of warrants issued of
$250,000 as an immediate interest charge.

NET LOSS:

The increase in the net loss of $511,000 or 231.8 to $898,000 for the three
months ended September 30, 2006 as compared to $387,000 in the comparable period
of the preceding year resulted from decreases in revenue and increases in
general and administrative, depreciation and amortization and interest expense
aggregating $577,000 offset by decreases in instructional costs and sales and
marketing aggregating $66,000. As detailed above, increases in operating
expenses were required to support our significant tuition revenue growth in our
regular and new programs and planned future growth. We anticipate tuition
revenue and consortium revenue growth to continue. We have experienced increased
tuition revenue in fiscal 2006 as compared to the fiscal 2005. As noted above,
we experienced a decrease in operating revenue (tuition and other revenue
reduced by instructional costs) by $19,000 for the three months ended September
30, 2006 as compared to the comparable period of the preceding year We also
recorded a $250,000 non-cash interest discount charge related to our Senior
Convertible Debenture transaction. Increased levels and high levels of general
and administrative costs, including major costs associated with our public
status, litigation, strengthening management supervision and oversight and
interest expense associated with additional financing, continued to impair
profitability and cash flow.


LIQUIDITY AND CAPITAL RESOURCES

Our condensed consolidated financial statements appearing elsewhere herein have
been prepared assuming that the Company will continue as a going concern. As
shown in the condensed consolidated financial statements, the Company



                                       22
<PAGE>

incurred a net loss of $898,000 for three months ended September 30, 2006. In
addition, as of September 30, 2006, the Company had a working capital deficiency
of $1,507,000, and a stockholders' deficiency of $3,351,000. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Our plans in regard to these matters are described below. The condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

As of September 30, 2006, we had cash and cash equivalents of $4,900. This
decrease of $61,000 as compared to June 30, 2006 resulted from $564,000 used in
operations, $37,000 used in investing activities offset by $540,000 provided by
financing activities.

We used and are using proceeds from financing activities to fund working
capital, marketing and recruitment activities, the continued strengthening of
the management team, administrative staff and faculty. We also incurred
substantial legal, accounting, investor relations and consulting costs in as a
result of our public company status and litigation matters, which are included
in results of operations as described above.

We have generated additional cash to fund operations in the period from July 1,
2005 through June 30, 2006 from officer/stockholders in the net amount of
$966,693 evidenced by 7% notes due December 2007, a revolving credit line
agreement with Wisse Enterprises LLC in the amount of $500,000 (of which
$475,000 was used) and received $100,000 in proceeds of a convertible promissory
note with TLC, LLC. Our Chairman, Chief Executive Officer and Executive
President of Sonoma College, personally guaranteed the obligations of Sonoma
College with respect to the arrangement with Wisse Enterprises. In addition,
pursuant to the revolving credit line agreement, Sonoma College issued 375,000
shares of our common stock to Wisse Enterprises and granted Wisse Enterprises an
option to purchase 250,000 shares of common stock of our common stock at an
exercise price of $0.50 per share. The option expires on the third anniversary
of the revolving credit line agreement. The maturity of the revolving line of
credit was extended to September 2007 and we converted the $100,000 convertible
debenture and accrued interest into 509,375 shares of our common stock,
including interest, effective during June 2006. These transactions were exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933. See
below, however, for a discussion of the rescission liability. In addition we
received additional funding through a private placement in August 2006, in which
vFinance acted as placement agent, in the net amount of $208,750 (a similar
amount to be received upon completing an the SEC registration process related to
the shares of our common stock issuable upon conversion and exercise of the
warrants), a bridge financing arrangement in the net amount of $487,500 in
October 2006 and additional proceeds of notes payable to officers/stockholders.

Effective on August 9, 2006, in a transaction in which vFinance Investments,
Inc. ("vFinance") acted as exclusive placement agent, the Company closed on a
$500,000 financing with two private investors structured as Senior Convertible
Debentures bearing interest at 9% per annum and due February 8, 2008 plus
five-year warrants to purchase 6.25 million shares of common stock at $0.10 per
share. The Company received gross and net proceeds of $250,000 and $208,750,
respectively, on closing. The Company is entitled to the remaining $250,000 upon
the effective date of a registration statement to be filed with the Securities
and Exchange Commission by the Company with respect to the common stock
underlying the conversion of the Senior Convertible Debentures and the exercise
of the warrants. The Senior Convertible Debentures are convertible at $0.08 per
common share at the option of the holders, into an aggregate of 3,125,000 shares
with respect to the initial closing of $250,000 and an additional 3,250,000
shares upon the receipt of the remaining proceeds. The Company has a call
provision with respect to the Senior Convertible Debentures if certain
conditions for the market price of the Company's stock are satisfied, as defined
in the agreement. The common stock underlying the senior convertible debentures
and warrants include certain anti-dilution protection provisions and have
defined registration rights. In addition, under certain conditions the Company
has the option to pay interest in cash or in shares of its common stock. The
transaction is a private placement with the securities that may be issued being
exempt from registration under the Securities Act of 1933.

At August 9, 2006, the date of issuance, the fixed conversion price of the
Senior Convertible Debentures of $0.08 represented a discount to the market
value of the Company's common stock, which was at a quoted market price of $.012
per share. In accordance with EITF 00-27, "Application of Issue 98-5 to Certain
Convertible Instruments" and EITF 98-5, "Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjusted Conversion Ratios",
the Company determined the relative fair value of the warrants and the Senior
Convertible Debentures and allocated the proceeds received on a relative fair
value basis. The fair value of the warrants was calculated using the
Black-Scholes option pricing model with the following assumptions: dividend
yield of 0%, expected volatility of 151%, risk-free interest rate of 4.81% and
an expected term of five years. Based upon this calculation, the effective
conversion



                                       23
<PAGE>

price of Senior Convertible Debentures was determined to be approximately $0.02
per common share, resulting in a beneficial conversion feature of $66,179. The
6,250,000 warrants issued in the closing of the Senior Convertible Debentures,
each of which entitles the holder thereof to purchase shares of our common stock
at an exercise price of $0.08, have a fair value of $183,821. These amounts were
accounted for as a debt discounts associated with the Senior Convertible
Debentures and credited to additional paid-in capital in the three month period
ended September 30, 2006. The debt discounts of $250,000 were simultaneously
charged to interest expense since the conversion feature of the Senior
Convertible Debentures and the warrants are all immediately exercisable.

On October 4, 2006, the Company consummated a private placement with two
investors of its 10% Secured Promissory Notes ("Promissory Notes") in the gross
and net amount of $550,000 and $487,500, respectively. The investors also
received 3,055,554 shares of the Company's common stock with a value of $275,000
at the closing date and five year warrants to purchase 280,000 shares of common
stock expiring September 28, 2011, exercisable at $0.11 per share. The
Promissory Notes are convertible into common shares at the option of the
investors at $0.90 per share. These Promissory Notes are secured by a mortgage
on the residence of an officer/stockholder. These notes are due March 28, 2007,
however if not repaid by December 28, 2006 an additional 3,055,554 shares of
common stock are issuable to the investors. Shares issued in this transaction
are subject to certain piggy-back registration rights. Of the net proceeds,
$407,000 is intended to be used as collateral for the letter of credit required
by the DOE related to the change in control discussed elsewhere herein.

As more fully described in Note 6 to our condensed consolidated financial
statements, we must also demonstrate compliance with specific DOE standards of
financial responsibility, based upon, among other things, annual audited
financial statements in order to maintain eligibility under the various Title IV
loan programs. This material must be provided to the DOE by December 31, 2006
for our fiscal year ended June 30, 2006. The DOE then calculates our composite
score for financial responsibility based on its (i) equity ratio, which measures
the institution's capital resources, ability to borrow and financial viability;
(ii) primary reserve ratio, which measures the institution's ability to support
current operations from expendable resources; and (iii) net income ratio, which
measures the institution's ability to operate at a profit. An institution that
does not meet the DOE's minimum composite score may demonstrate its financial
responsibility by posting a letter of credit in favor of the DOE in an amount of
not less than 50% of the Title IV Program funds for the benefit of our students
during our prior fiscal year. Such conditions include reporting results earlier,
compliance with debt provisions of loan agreements, limitations on withdrawal of
owners including declaring of dividends, and provision of a compliance
certificate from its independent auditors, among other terms and conditions.
Based upon our financial results for fiscal 2006, we believe that the DOE may
determine that we do not satisfy the composite score established for financial
responsibility for fiscal 2006. On April 6, 2006, DOE started holding federal
financial aid funds related to Sonoma students' loans, due mainly to the
Company's failure to post a letter of credit previously requested by DOE for
approximately $407,000. In the interim, the Company has permitted its Title IV
eligible students to start classes and is waiting for approval of funding.

In addition, there is also a letter of credit requirement imposed by the DOE in
the event of a change in control if the Company does not meet financial
requirements. Such a change in control occurred in January 2006, on the
effective date of the Company's registration statement. Management has been
advised that the letter of credit requirement for this purpose approximated
$407,000 for a one year period. This requirement can be modified and extended at
the discretion of the DOE dependent upon its evaluation of Sonoma's financial
condition for the year ended June 30, 2006. The Company has obtained the
appropriate bank approvals for the letter of credit, which will be
collateralized with assets provided by its Chairman and CEO. The letter of
credit is expected to be provided upon final acceptance of the form of letter of
credit by the DOE and satisfaction of any other conditions imposed by DOE. Upon
acceptance by the DOE, Sonoma students will again be eligible to receive Title
IV funding for which they have applied.

Additional funds may be required to support future operations, which may be
derived from sources identified above and other sources, including additional
equity financing and loan arrangements. While management believes that we will
obtain adequate working capital resources to continue operations through
September 30, 2007, we may require additional funds to support operations and
there is no assurance that adequate sources of capital will be available. In
addition there is no assurance that the DOE will approve the continuation of
Title IV DOE funding for our students, which would greatly impair our ability to
continue to attract students.

We have taken steps to improve our collection of accounts receivable and
minimize bad debt write-offs. These steps include hiring experienced personnel,
instituting and enforcing collection procedures with students and instituting



                                       24
<PAGE>

periodic payment plans and/or installment notes for the unfunded portion of
student tuition and fees.

In connection with the November 22, 2004 registration statement the Company
filed on Form SB-2 with the Securities and Exchange Commission:

1. Certain options issued in April 2005 may not have been exempt pursuant to
Rule 701 of the Securities Act of 1933. Of the 2,570,000 of these options issued
under the 2004 Stock Option Plan as of that date, 625,000 non-qualified stock
options were issued for services to other than natural persons and were
therefore not exempt from registration under Rule 701. In addition, these
issuances may have constituted a general solicitation in the offering of these
securities, which would be a violation of Section 5 of the Securities Act of
1933. The fair value of these options determined using the Black-Scholes
option-pricing model of $36,936 has been reflected as a component of the
liability entitled Common stock and stock options subject to rescission, in the
consolidated balance sheet at June 30, 2006. In addition, the Company would be
obligated for interest expense in the event of rescission by each of the option
holders, the amount of which was immaterial for fiscal 2006.

2. The 375,000 shares of common stock and the option to purchase 250,000 shares
of common stock issued in connection with the July 2005 Wisse financing and the
warrant to purchase 50,000 shares issued in the TLC, LLC transaction in October
2005 discussed above may have constituted a general solicitation in the offering
of these securities, which would be a violation of Section 5 of the Securities
Act of 1933. Consequently, Wisse may have a right of rescission for the value of
these shares and options of $50,763. This amount has been included as a
component of the liability entitled Common stock and stock options subject to
rescission, in the accompanying consolidated balance sheet as of June 30, 2006.
In addition, the Company would be obligated for interest expense in the event of
rescission by Wisse, the amount of which is immaterial for the fiscal 2006.

The Company had no off-balance sheet arrangements as of September 30, 2006.



<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

a) Evaluation of disclosure controls and procedures.

Disclosure controls are procedures that are designed with the objective of
ensuring that information required to be disclosed in our reports filed under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such as
this annual report, is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms. Disclosure controls are
also designed with the objective of ensuring that such information is
accumulated and communicated to our management, including the CEO and CFO, as
appropriate to allow timely decisions regarding required disclosure. Internal
controls are procedures which are designed with the objective of providing
reasonable assurance that (1) our transactions are properly authorized, recorded
and reported; and (2) our assets are safeguarded against unauthorized or
improper use, to permit the preparation of our consolidated financial statements
in conformity with United States generally accepted accounting principles.

We are not an accelerated filer (as defined in the Exchange Act) and are not
required to deliver management's report on internal controls over our financial
reporting until our year ending June 30, 2008. We became a public reporting
company on January 26, 2006. In our efforts to comply with Section 404 of the
Sarbanes-Oxley Act of 2002, during the quarter ended September 30, 2006, we
identified certain matters that would constitute material weakness (as such term
is defined under the Public Company Accounting Oversight Board Auditing Standard
No. 2) in our internal controls over financial reporting. The material weakness
relates to the adequate procedures to insure that all expenses incurred have
been recorded in the appropriate accounting period and the need for additional
qualified financial accounting personnel.

During the quarter ended September 30, 2006 and in the period subsequent
thereto, we have taken specific actions to remediate the reportable conditions
and material weakness, including the devotion of additional resources to the
quarterly and year-end closing processes and the search for additional qualified
financial accounting personnel. We intend to continue to further strengthen our
controls and procedures regarding the closing process.


                                       25
<PAGE>

(b) Changes in internal controls.

There were no significant changes in the Sonoma College's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

In accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.








                                       26
<PAGE>

                                    PART II.

                                OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

On April 4, 2005, the Board of Directors of Sonoma College terminated H. John
Stalcup as Academic President for cause and removed Mr. Stalcup as a member of
the Board of Directors. On May 2, 2005, Sonoma College filed a lawsuit against
H. John Stalcup and Julia A. McCarthy, his spouse, in the Superior Court of the
State of California in and for the County of Sonoma. We believe, and have
alleged in our complaint against H. John Stalcup and Julia A. McCarthy, that,
among other things:

Mr. Stalcup breached his employment agreement and other common law duties to
Sonoma College by working for a competitor, University of Northern California;
and,

Mr. Stalcup breached the Assignment of Right and Exclusive License and
Assumption of Obligations and Sale of Certain Assets Agreement entered into with
Sonoma College by licensing the intellectual property transferred to us pursuant
to the agreement to third parties.

Pursuant to the complaint, we requested that the court grant to us compensatory
damages, punitive damages, attorney's fees and injunctive relief. We intend to
aggressively enforce our rights and claims in connection with the complaint. On
January 13, 2006, H. John Stalcup filed an answer to our complaint and a
cross-complaint for wrongful termination, breach of contract and conversion. We
have filed an answer to the cross-complaint.

In April 2006, H. John Stalcup filed a lawsuit against Sonoma College, certain
officers of Sonoma College and its attorney and transfer agent (collectively,
the "Defendants") in the Superior Court of the State of California in and for
the County of Sonoma. Mr. Stalcup has alleged in his complaint, that, among
other things: the Defendants intentionally and negligently interfered with
prospective economic advantage, committed a conversion, fraud and trespass to
chattels by not allowing the restrictive legend to be removed from his stock
certificates which represent shares of common stock of Sonoma College. We have
filed an answer to the cross-complaint and the litigation matters involving Mr.
Stalcup were consolidated.

In addition, Mr. Stalcup filed a complaint with the U.S. Department of Labor
with respect to the issues set forth in his cross-complaint pursuant to the
employee protection provisions of Title VIII of the Sarbanes-Oxley Act of 2002.
Mr. Stalcup's complaint was dismissed by the U.S Department of Labor in August
2005 because Sonoma was determined not to be an employer subject to the
applicable provisions of the Sarbanes-Oxley Act. Mr. Stalcup appealed the U.S.
Department of Labor's determination in September 2005. In February 2006,
Mr.Stalcup's appeal was dismissed by the U.S Department of Labor.

On October 31, 2006, Sonoma College's counsel in the litigation matters
regarding H. John Stalcup withdrew as counsel to Sonoma College. As of November
1, 2006, the litigations are in the discovery process and Sonoma College is
interviewing attorneys in substitution of its former counsel.


We do not believe that the lawsuit will have a material adverse effect on our
financial position or results of operations, however, there can be no assurance
of the outcome of the lawsuit.

Other than the Stalcup litigation, we are not currently a party to any material
legal action.



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<PAGE>

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

We have offered and sold the following securities in unregistered transactions
pursuant to exemptions under the Securities Act of 1933, as amended in the after
June 30, 2006. No such sales involved the use of an underwriter, no advertising
or public solicitation were involved, the securities bear a restrictive legend
and no commissions were paid in connection with the sale of any securities.

o Effective August 9, 2006, the Company closed on the first tranche of a
financing transaction with a group of private investors ("Investors") in the
amount of $250,000. The financing transaction provides for two tranches, each in
the amount of $250,000, for a total financing of $500,000. The second tranche
will be consummated upon the effective date of a registration statement to be
filed with the Securities and Exchange Commission by the Company with respect to
the shares underlying the conversion of the Debentures and the exercise of the
Warrants. After deducting commissions and other costs of the first tranche of
the offering of $250,000, the Company received proceeds of $208,750. The
financing consists of two components: (a) 9% Secured Convertible Debentures of
the Company ("Debenture" or "Debentures"), in the principal aggregate amount of
$500,000 (two tranches of $250,000 each), due February 8, 2008, such Debentures
convertible into shares of the Company's common stock, $0.0001 par value (the
"Common Stock") at a per share conversion price at the rate equal to the lesser
of: (i) $0.08, subject to adjustment; and (ii) 75% of the average of the 3
lowest closing prices during the 20 trading days immediately prior to the
applicable conversion date; and (b) Warrants registered in the name of each
Investor with an exercise price of $0.10, subject to adjustment. The Company
shall use the net proceeds from the sale of the securities for working capital
purposes.

The Debentures shall accrue interest on the principal amount of the Notes at a
rate per annum of 9% from August 9, 2006 and shall be payable, in arrears,
subject to the terms and conditions of the Notes, together with principal amount
payments, on August 9, 2008. The Debentures are secured by the assets of the
Company and its subsidiaries.

In addition to cash fee and warrants to vFinance Investments, Inc. and its
affiliates, for its services as placement agent, the Company also issued 600,000
shares of common stock, valued at $168,000 in the aggregate, to vFinance
Investments and certain of its agents, as directed by vFinance.

The offer and sale of the securities above were effected in reliance on the
exemptions for sales of securities not involving a public offering, as set forth
in Rule 506 promulgated under the Securities Act of 1933, as amended (the
"Securities Act") and in Section 4(2) and Section 4(6) of the Securities Act
and/or Rule 506 of Regulation D.

The shares of common stock underlying the securities sold in this financing
transaction will be registered for resale on a registration statement to be
filed by the Company in accordance with terms and conditions a registration
rights agreement.

o On October 4, 2006, the Company consummated a private placement with two
investors of its 10% Secured Promissory Notes in the gross and net amount of
$550,000 and $487,500, respectively. The investors also received 3,055,554
shares of the Company's common stock with a value of $275,000 at the closing
date and five year warrants to purchase 280,000 shares of common stock expiring
September 28, 2011, exercisable at $0.11 per share. The Promissory Notes are
convertible into common shares at the option of the investors at $0.90 per
share. The Promissory Notes are secured by a mortgage on the residence of an
officer/stockholder and are due April 4, 2007. If not repaid by January 4, 2007,
however, an additional 3,055,554 shares of common stock are issuable to the
investors. An additional 91,666 shares of common stock valued at $8,250 were
issued to a finder. Shares issued in this transaction are subject to certain
piggy-back registration rights.

The Secured Promissory Notes shall accrue interest on the principal amount of
the Notes at 10% per annum from September 30, 2006 and shall be payable, in
arrears, subject to the terms and conditions of the Notes, together with
principal payments, on the earlier of April 4, 2007 or the date on which the



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<PAGE>

Company consummates an equity financing or funding transaction in excess of
$1,500,000. The Secured Promissory Notes are secured by a mortgage on the
residence of our Chairman and CEO.


 The offer and sale of the securities above were effected in reliance on the
exemptions for sales of securities not involving a public offering, as set forth
in Rule 506 promulgated under the Securities Act of 1933, as amended (the
"Securities Act") and in Section 4(2) and Section 4(6) of the Securities Act
and/or Rule 506 of Regulation D.



ITEM 3.  DEFAULTS BY THE COMPANY UPON ITS 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

a) Exhibits

Exhibit 31.1      Certification of Charles Newman pursuant to Rule 13-14(a) and
                  Item 307 of Regulation SB

Exhibit 32.1      Certification by Charles Newman Pursuant to the 18 U.S.C.
                  Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002



b) Reports on Form 8-K

     None.


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<PAGE>


                                   SIGNATURES

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


                                        SONOMA COLLEGE, INC.
                                        --------------------
                                            (Registrant)


Dated:  November 20, 2006           By  /s/ Charles D. Newman
                                        ------------------------
                                        Charles D. Newman
                                    Chairman of the Board and President
                                    (Chief Executive Officer and
                                    Chief Financial Officer)