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

                                _______________

                                   FORM 10-Q
                                _______________

(Mark One)
[X]  Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange
     Act of 1934

     For the Quarterly Period Ended March 31, 2006 or

[ ]  Transition Report Pursuant to Section 13 or 15(d) of The Securities
     Exchange Act of 1934

              For the Transition Period from _________ to ___________

                        Commission File Number: 001-31323

                                _______________

                             SLS INTERNATIONAL, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)
                                _______________


                   Delaware                                52-2258371
          ------------------------             ---------------------------------
          (State of Incorporation)             (IRS Employer Identification No.)

        1650 W. Jackson Ozark, Missouri                     65721
  ----------------------------------------               ----------
  (Address of Principal Executive Offices)               (Zip Code)

          Issuer's Telephone Number, Including Area Code: (417) 883-4549

              ----------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

     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.
     Yes  [X] No  [ ]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

   Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
     Yes [ ] No [X]

     APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of the
Exchange Act subsequent to the distribution of securities under a plan confirmed
by a court. N/A
     Yes [ ] No [ ]

On May 12, 2006, 47,661,481 shares of SLS International, Inc. common stock were
outstanding.

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

<PAGE>





                             SLS INTERNATIONAL, INC.

                                      INDEX




                          PART I. FINANCIAL INFORMATION

                                                                        Page No.
                                                                        --------
Item 1.  Financial Statements

         Condensed Consolidated Balance Sheet                               1
         Condensed Consolidated Statements of Operations                    2
         Condensed Consolidated Statement of Cash Flows                     3
         Notes to Condensed Consolidated Financial Statements               4
Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations                          10
Item 3.  Quantitative and Qualitative Disclosures About Market Risk        13

Item 4. Controls and Procedures                                            13


                           PART II. OTHER INFORMATION

Item 6.  Exhibits                                                          14
Signature                                                                  15










                                       ii

<PAGE>


                         PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS.
        ---------------------


                            SLS INTERNATIONAL, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                    March 31,     December 31,
                                                                                      2006            2005
                                                                                  ------------    ------------
                                                                                   (unaudited)     (audited)
<S>                                                                               <C>             <C>
Assets
Current assets:
     Cash                                                                         $      7,456    $    195,573
     Accounts receivable, less allowance for doubtful accounts of
       $45,000 as of March 31, 2006 and December 31, 2005                              499,068         614,048
     Inventory                                                                       4,341,449       4,193,236
     Deposits - inventory                                                            1,467,750         316,629
     Prepaid expenses and other current assets                                         109,645         258,024
                                                                                  ------------    ------------
              Total current assets                                                   6,425,368       5,577,510
                                                                                  ------------    ------------

Fixed assets:
     Building                                                                               --       4,401,739
     Vehicles                                                                          283,233         283,233
     Equipment                                                                         488,269         483,635
     Leasehold improvements                                                              5,140           6,488
                                                                                  ------------    ------------
                                                                                       776,642       5,175,095
Less accumulated depreciation                                                          227,501         249,695
                                                                                  ------------    ------------
              Net fixed assets                                                         549,141       4,925,400
                                                                                  ------------    ------------

         Prepaid Expense                                                               550,012         110,337
                                                                                  ------------    ------------
                                                                                  $  7,524,521    $ 10,613,247
                                                                                  ============    ============
Liabilities and Shareholders' Equity
Current liabilities:
     Current maturities of long-term debt and notes payable                       $      4,433    $      4,376
     Accounts payable                                                                  942,981       1,470,913
     Customer Deposits                                                                 143,203         207,819
     Other liabilities                                                                 249,440         172,919
                                                                                  ------------    ------------
              Total current liabilities                                              1,340,057       1,856,027

Accrued liability - D Warrants                                                              --              --
Notes payable, less current maturities                                                   6,238           7,367
                                                                                  ------------    ------------
              Total liabilities                                                      1,346,295       1,863,394
                                                                                  ------------    ------------

Commitments and contingencies:
Temporary Equity:
     Preferred Stock, Series A, $0.001 par, 2,000,000 shares
       authorized; 44,000 and 66,000 shares issued as of
       March 31, 2006 and December 31, 20                                                   44              66
     Contributed Capital - preferred                                                   243,905         348,625
     Common Stock, $.001 par; 125,000,000 shares authorized;
       2,568,400 shares issued as of March 31, 2006 and December 31, 2005                2,568           2,568
     Contributed Capital - common                                                    1,338,132       1,338,132

Shareholders' equity:
     Preferred stock, Series B, $.001 par, 1,000,000 shares
       authorized; 89,700 shares issued as of
       March 31, 2006 and December 31, 2005                                                 90              90
     Preferred stock, Series C, $.001 par, 25,000 shares
       authorized; 14,450 shares issued as of
       March 31, 2006 and December 31, 2005                                                 14              14
          Contributed capital - preferred                                           16,787,062      16,787,062
     Common stock, $.001 par; 125,000,000 shares authorized;
       44,289,910 shares and 43,719,910 shares issued as of
       March 31, 2006 and December 31, 2005                                             44,290          43,719
     Common stock not issued but owed to buyers; 3,071 shares
       at March 31, 2006 and December 31, 2005                                               3               3
     Contributed capital - common                                                   29,140,460      28,339,951
     Unamortized cost of stock issued for services                                  (1,141,964)     (1,310,862)
     Retained deficit                                                              (40,236,378)    (36,799,515)
                                                                                  ------------    ------------
              Total shareholders' equity                                             6,178,226       8,749,853
                                                                                  ------------    ------------
                                                                                  $  7,524,521    $ 10,613,247
                                                                                  ============    ============
</TABLE>
            The accompanying notes are an integral part of these
                  condensed consolidated financial statements

                                       1

<PAGE>


                            SLS INTERNATIONAL, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                                                       For the Three Months
                                                         Ended March 31,
                                                ------------------------------
                                                    2006              2005
                                                ------------      ------------
Revenue                                         $    970,497      $    824,720
Cost of sales                                        765,990           486,162
                                                ------------      ------------
Gross profit                                         204,507           338,558
General and administrative expenses                3,319,077         3,032,430
                                                ------------      ------------
Loss  from  operations                            (3,114,570)       (2,693,872)

Other income (expense):
      Interest expense                                  (708)             (438)
      Gain on valuation of D warrants                     --           899,928
      Gain (loss) on asset disposal                 (325,464)
      Interest and miscellaneous, net                  3,879            48,176
                                                ------------      ------------
                                                    (322,293)          947,667
                                                ------------      ------------
Loss before income tax                            (3,436,863)       (1,746,205)
Income tax provision                                      --                --
                                                ------------      ------------
Net loss                                          (3,436,863)       (1,746,205)
                                                ------------      ------------
Deemed dividend associated with
   beneficial conversion of preferred stock               --        (3,246,112)
Dividend - preferred series C                             --            (7,678)
                                                ------------      ------------
Net loss availiable to common shareholders      $ (3,436,863)     $ (4,999,995)
                                                ============      ============

Basic and diluted loss per share                $      (0.07)     $      (0.12)
                                                ============      ============
Weighted average shares outstanding               46,971,381        42,697,378
                                                ============      ============

              The accompanying notes are an integral part of these
                   condensed consolidated financial statements


                                       2


<PAGE>


                            SLS INTERNATIONAL, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   For the Three Months
                                                                                      Ended March 31,
                                                                               ----------------------------
                                                                                   2006            2005
                                                                               ------------    ------------
<S>                                                                            <C>             <C>
Operating activities:
     Net loss                                                                  $ (3,436,863)   $ (1,746,205)
     Adjustments to reconcile net income to cash flows
       from operating activities:
          Depreciation and amortization                                              62,380          36,341
          Amortization of cost of stock issued for services                         168,898         253,903
          Expense of options granted for compensation                               549,636              --
          Expense of stock & options granted for services                            41,701         871,175
          (Gain) loss on disposal of fixed assets                                   325,464              --
          (Gain) on valuation of D warrants                                              --        (899,928)
     Change in assets and liabilities:
          Accounts receivable, less allowance for doubtful accounts                 114,980         (91,393)
          Inventory                                                                (148,213)       (154,915)
          Deposits - inventory                                                   (1,151,121)        (76,461)
          Deposits - merger                                                              --         100,000
          Prepaid expenses and other current assets                                (291,297)         91,376
          Accounts payable                                                         (527,930)       (154,204)
          Other liabilities                                                          76,521
                                                                                                   (594,278)
          Other current liabilities                                                 (64,616)             --
                                                                               ------------    ------------
          Cash used in operating activities                                      (4,280,460)     (2,364,589)
                                                                               ------------    ------------
Investing activities:
     Investment in certificates of deposit                                               --      (4,000,000)
     Proceeds from disposal of fixed assets                                       3,999,550              --
     Additions of fixed assets                                                      (11,134)     (4,023,843)
                                                                               ------------    ------------
          Cash provided by (used in) investing activities                         3,988,416      (8,023,843)
                                                                               ------------    ------------
Financing activities:
     Sale of stock, net of expenses                                                 105,000       4,490,988
     Repayments of notes payable                                                     (1,073)         (1,219)
                                                                               ------------    ------------
          Cash provided by financing activities                                     103,927       4,489,769
                                                                               ------------    ------------
Increase (decrease) in cash                                                        (188,117)     (5,898,663)
Cash, beginning of period                                                           195,573      10,712,858
                                                                               ------------    ------------
Cash, end of period                                                            $      7,456    $  4,814,195
                                                                               ============    ============
Supplemental cash flow information:
     Interest paid                                                             $        708    $        438
     Income taxes paid (refunded)                                                        --              --
     Dividend -preferred series C paid in common stock                                   --           7,678

Noncash investing activities:
     Stock issued and options granted for services                             $     41,701    $    871,175
     Options granted for compensation                                          $    549,636    $         --
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.

                                       3

<PAGE>


                             SLS INTERNATIONAL, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

       The accompanying unaudited condensed consolidated financial statements at
       March 31, 2006 have been prepared in accordance with U.S. generally
       accepted accounting principles for interim financial information and with
       the instructions to Form 10-Q and reflect all adjustments which, in the
       opinion of management, are necessary for a fair presentation of financial
       position as of March 31, 2006 and results of operations and cash flows
       for the three months ended March 31, 2006. All such adjustments are of a
       normal recurring nature. The results of operations for the interim period
       are not necessarily indicative of the results expected for a full year.
       The statements should be read in conjunction with the financial
       statements and footnotes thereto included in our Form 10-K for the year
       ended ended December 31, 2005.

NOTE 2 - GOING CONCERN MATTERS

         The accompanying financial statements have been prepared on a
         going-concern basis, which contemplates the realization of assets and
         the satisfaction of liabilities in the normal course of business. As
         shown in the financial statements during the years ended December 31,
         2005, 2004 and 2003, the company incurred losses of $10,004,388,
         $8,599,899, and $3,979,341 respectively. The financial statements do
         not include any adjustments relating to the recoverability and
         classifications of liabilities that might be necessary should the
         Company be unable to continue as a going concern. It is management's
         plan to finance its operations for the foreseeable future primarily
         with proceeds from capital contributed by shareholders and to explore
         other financing options in the investment community. But contractual
         commitments significantly limit our ability to raise capital. At March
         31, 2006 no formal agreements for additional capital had been entered
         into. There can be no assurance that these sources will provide
         sufficient cash inflows to enable the Company to achieve its
         operational objectives or continue as a going concern.

NOTE 3 - STOCK TRANSACTIONS

         In November 2003, an agreement was signed with William Fischbach for
         consulting services to be performed November 10, 2003 to November 10,
         2006. As compensation for consulting services we issued 400,000 shares
         of common stock on November 11, 2003. Using the market value of the
         date the agreement was signed, the shares were valued at $780,000 and
         recorded as a debit in the equity section of the balance sheet as
         unamortized cost of stock issued for services. The cost is amortized
         over the three-year period of the agreement. Consulting expense
         relating to this agreement was $556,329 for the years ended December
         31, 2005, 2004 and 2003. On March 31, 2006 an additional $65,000 was
         recorded as consulting expense. As of first quarter ended March 31,
         2006 there is $158,671 remaining in unamortized stock issued for
         services for this agreement. The agreement also calls for the issuance
         of options, not to exceed an aggregate of 800,000, to Mr. Fischbach on
         January 1 of each year based on the previous year's performance levels.
         No options were issued on January 1, 2006 or 2005 under this agreement.
         As of March 31, 2006, Mr. Fischbach had earned no options based on his
         performance in the quarter ended March 31, 2006. The agreement also
         calls for additional compensation to Mr. Fischbach in the form of a
         cash fee of 2% of the dollar amount of value provided in a merger,
         acquisition, or other transaction resulting directly from Mr.
         Fischbach's services. As of March 31, 2006, Mr. Fischbach had earned no
         cash fee based on the value provided to us in the quarter ended March
         31, 2006.

                                       4

<PAGE>


         In February of 2004, an agreement was signed with Ryan Schinman for
         consulting services to be performed indefinitely. As compensation for
         consulting services the Company agreed to issue 50,000 options on the
         date of signing and 10,000 options per month thereafter. The options
         have a term of ten years and a strike price equal to the market price
         on their grant date. The strike price for the options granted in 2004
         ranged from $1.45 to $3.10. Using the Black-Scholes pricing model, the
         options were valued at $215,600 and recorded as consulting expense for
         the year ended December 31, 2004. In the year ended December 31, 2005,
         120,000 options were granted to Ryan Schinmann for consulting services.
         The options have a strike price equal to market price on their grant
         date, ranging from $1.99 to $2.51. Using the Black-Scholes pricing
         model, the options were valued at $113,516 and recorded as consulting
         expense. Factors used in the Black-Scholes pricing model included a
         risk-free interest rate of 3.93% to 4.50%; strike prices of $1.99 to
         $2.51; market prices of $1.99 to $2.51; volatility rate of 21.13% to
         25.87%; and a yield rate of 0.00%. For three months ended March 31,
         2006, 30,000 options were granted to Ryan Schinman for consulting
         services. The options have a strike price equal to the market price on
         their grant date, ranging from $1.06 to $1.18. Using the Black-Scholes
         pricing model the options were valued at $15,946 and recorded as
         consulting expense for the first quarter. Factors used in the
         Black-Scholes pricing model included a risk-free interest rate of 4.31%
         to 4.76%; strike prices of $1.06 to $1.18; market prices of $1.06 to
         $1.18; volatility rate of 23.85% to 32.15%; and a yield rate 0.00%.

         In December 2004, an agreement was signed with W. Curtis Hargis Co.
         (Hargis) for consulting services. As compensation for consulting
         services we agreed to issue 100,000 options upon reaching an agreement
         with a retailer introduced to us by Hargis. This occurred on March 21,
         2005. We also agreed to issue Hargis one option to purchase one share
         of common stock for every $100 in sales from the retailer provided that
         Hargis shall not be entitled to receive in excess of 500,000 options.
         The options have a term of three years and have a strike price equal to
         the average price of the Company's common stock for the five trading
         days immediately prior to the day the options are earned. As of March
         31, 2005, Hargis had earned 101,529 options to purchase common stock.
         Using the Black-Scholes pricing method, the options were valued at
         $62,886 and recorded as consulting expense in the year ended December
         31, 2005. The agreement also calls for additional compensation to
         Hargis in the form of a cash fee of 2% of the net sales realized from
         the retailer. As of December 31, 2005, Hargis had earned $1,735 based
         on the value provided to us in the year ended December 31, 2005. As of
         first quarter ended March 31, 2006, Hargis has earned an additional
         $252 based on the value provided to us.

         A 6% premium accrues to the face value of the Series C preferred stock
         and compounds quarterly. As of March 31, 2006, the face value of the
         14,450 outstanding shares is $15,553,547, of which $1,103,547 is
         premium. The face value of the preferred stock is convertible into
         common stock at $2.50 per share. As a result, on March 31, 2006, the
         14,450 outstanding shares of preferred stock were convertible into
         6,221,419 shares of common stock. Attached to each Series C Preferred
         share are 400 Class D warrants. Each Class D warrant has a term of five
         years and provides the right to purchase one share of our common stock
         at $6.00 per share, subject to certain adjustments. The Company may
         redeem the warrants and may require the holders to convert the
         preferred stock to common stock if certain conditions are met. Using
         the Black Scholes model for pricing, the Class D warrants were valued
         at $1,506,112. In accordance with EITF 00-19, the warrants were
         recorded as a long-term liability and will be revalued at the end of
         each future quarter. As of December 31, 2005, the warrants were valued
         at $0. Consequently the decrease in the original liability of
         $1,506,112 to the December 31, 2005 value of $0 results in recognition
         of a gain of $1,506,112. As of March 31, 2006 the Black-Scholes pricing
         model valued the warrants at $0.

                                       5
<PAGE>


         In the quarter ended March 31, 2006, 22,000 shares of preferred stock,
         series A, were converted to 220,000 shares of common stock. There are
         44,000 shares outstanding as of March 31, 2006.

         In the quarter ended March 31, 2006, no shares of preferred stock,
         series B, were converted to common stock. There are 89,700 shares
         outstanding as of March 31, 2006.

         In the quarter ended March 31, 2006, no shares of preferred stock,
         series C, were converted to common stock. There are 14,450 shares of
         series C preferred stock outstanding as of March 31, 2006.

         During the quarter ended March 31, 2006, 350,000 options were exercised
         into 350,000 shares of common stock for a total of $105,000.

         In January of 2005, an agreement was signed with New AV Ventures, LLC
         (AV) for consulting services to be performed January 31, 2005 to
         January 31, 2010. As compensation for consulting services the Company
         agreed to issue 300,000 shares of common stock. Using the market value
         on the date the agreement was signed, the shares were valued at
         $720,000 and recorded as a debit in the equity section of the balance
         sheet as unamortized cost of stock issued for services. The cost will
         be amortized over the five-year period of the agreement. Consulting
         expense relating expense relating to this agreement was $144,000 for
         the year ended December 31, 2005. On December 31,2005 there was
         $576,000 remaining in unamortized stock issued for services for this
         agreement. For three months ended March 31, 2006 an additional $36,000
         was recorded as consulting expense relating to this agreement for first
         quarter 2006. On March 31, 2006 there was $540,000 remaining in
         unamortized stock issued for services for this agreement. The Company
         also agreed to give AV a percentage of future sales to certain vendors
         and one option to purchase one share of common stock for each $100 of
         sales to vendors generated by AV provided that AV shall not be entitled
         to receive in excess of 700,000 options. The options will have a term
         of five years and have a strike price equal to the average price of the
         Company's common stock for the five trading days immediately prior to
         January 1 of the following year. As of March 31, 2006, New AV Ventures,
         LLC has earned no cash fee or options under this agreement.

         In February of 2005, an agreement was signed with 3CD Consulting, LLC
         for consulting services to be performed November 18, 2004 to November
         17, 2007. As compensation for consulting services, the company agreed
         to issue 1,000,000 options for shares of common stock. The options have
         a term of three years and a strike price of $2.00. Using the
         Black-Scholes pricing model, the options were valued at $814,781 and
         recorded as a debit in the equity section of the balance sheet as
         unamortized cost of stock issued for services. Factors used in the
         Black-Scholes pricing model included: risk-free interest rate of 3.08%;
         strike price of $2.00; market price of $2.45; volatility rate of
         29.73%; and a yield rate of 0.00%. The expense is amortized over a
         three-year period of the agreement. Consulting expense relating to this
         agreement was $303,588 for years ended December 31, 2005 and 2004. For
         three months ended March 31, 2006 an additional $67,898 was amortized
         as consulting expense. On March 31, 2006, there was $443,295 remaining
         in unamortized cost of stock issued for services for this agreement.


         In June of 2005, an agreement was signed with JMBP, Inc. and Mark
         Burnett for consulting services. As compensation for consulting
         services the Company agreed to issue 1,000,000 options for shares of
         common stock and 1,000,000 warrants for shares of common stock. The
         options have a term of five years and a strike price of $2.05. The
         warrants have a term of five years and a strike price of $6.50. 400,000
         options and 400,000 warrants vested on the date the agreement was
         signed. The remaining options and warrants vest upon various events as
         set forth in the agreement. As of December 31, 2005, 100,000 additional
         warrants and option were vested. Using the Black-Scholes pricing model,
         these options and warrants were valued at $283,740 and recorded as

                                       6
<PAGE>


         consulting expense for the year ended December 31, 2005. Factors used
         in the Black-Scholes pricing model included: risk-free interest rate of
         3.89%; strike price of $1.91 to $2.05 for the options and $6.50 for the
         warrants; market price of $2.05; volatility rate of 21.92% to 22.13%;
         and a yield rate of 0.00%. As of first quarter ended March 31, 2006 no
         additional options or warrants were vested. Expenses to be recorded in
         future quarters are unknown at this time because the value of the
         vesting options and warrants will be partly based on the market price
         on the date the vesting events take place.

         In June of 2005, we entered into employment agreements with Michael
          Maples, Steven Lamar, and John Gott. Each agreement has a term of
          three years. In the agreements we agreed to pay an aggregate of
          $150,000
         in signing bonuses, agreed to issue an aggregate of 1,125,000 shares of
         common stock, and agreed to issue an aggregate of 1,250,000 options.
         The signing bonuses were paid and capitalized as a prepaid expense,
         which will be amortized over the three-year term of each agreement. In
         the year ended December 31, 2005, $26,127 was recorded in compensation
         expense in relation to the prepaid signing bonuses. For first quarter
         ended March 31, 2006 an additional $11,988 was recorded as compensation
         expense in relation to the prepaid signing bonuses. There is $111,885
         remaining in prepaid expense as of March 31, 2006. The 1,125,000 shares
         of common stock were to be issued in January 2006, but the officers
         have elected to forgo their rights to receive the stock. Because the
         officers have given up the rights to the stock and the stock will not
         be issued, no expense has been recorded on this segment of the
         employment agreement in the year ended December 31, 2005 and there will
         be no expense in the future in regards to this stock. The 1,250,000
         options will be earned evenly over the three-year agreement. Each
         option is convertible into one share of common stock at a strike price
         of $2.50 and is exercisable for a period of ten years. Expense
         associated with the options will be recorded over the three-year period
         of the employment agreements at fair market value, using the
         Black-Scholes pricing model. Compensation expense relating to options
         earned for the twelve months ended December 31, 2005 was $104,966. For
         first quarter ended March 31, 2006 an additional $25,755 was recorded
         as compensation expense related to the options earned. Factors used in
         the Black-Scholes pricing model for 2005 included: risk-free interest
         rate of $3.75 - 4.09%; strike price of $2.50; market price of $1.99 -
         $2.15; volatility rate of 22.13% - 25.87%; and a yield rate of 0.00%.
         As of December 31, 2005, 223,174 of the 1,250,000 options have been
         earned and expensed. In first quarter ended March 31, 2006 an
         additional 104,167 have been earned and expensed. Factors used in the
         Black-Scholes pricing model included: risk-free interest rate of
         4.31%-4.71%; strike price of $2.50; market price of $1.06-$1.18;
         volatility rate of 23.85%-32.15% and a yield rate of 0.00%. For the
         period ended March 31, 2006, a total of 327,341 options have been
         earned and expensed for a total of $130,721 recorded as compensation
         expense. Expenses to be recorded in future quarters are unknown at this
         time because the value of the options earned will be partly based on
         the month-end market price.

         In March 2006, the Company awarded 1,063,500 stock options to its
         employees. The options have a strike price of $1.04 per share. As of
         the grant date, 936,000 options were fully vested. The remaining
         127,500 vested one-third on the grant date, one-third on the first
         anniversary of the grant date and one third on the second anniversary
         of the grant date. For the period ended March 31, 2006 a total of
         978,500 options have been earned and expensed for a total of $549,636
         recorded as compensation expense. Expenses to be recorded in future
         quarters are unknown at this time because the value of the earned
         options will be partly based on the month-end market price. Factors
         used in the Black-Scholes pricing model included: risk-free rate of
         4.86%; strike price of $1.04; market price of $1.04; volatility rate of
         105.18% and a yield of 0.00%.

                                       7
<PAGE>


NOTE 4 - UNAMORTIZED COST OF STOCK ISSUED FOR SERVICES


         We have issued or agreed to issue shares of common stock and options as
         part of various consulting agreements. The costs of these issuances are
         recorded as a debit in the equity section of the balance sheet as
         unamortized cost of stock issued for services. The balance is amortized
         into consulting expense over the lives of the various consulting
         agreements. For the quarter ended March 31, 2006, $168,898 was
         amortized into consulting expense. Unamortized cost of stock issued for
         services was $1,141,966 as of March 31, 2006.

NOTE 5 - CONSULTING, PROMOTIONAL AND INVESTOR RELATIONS SERVICES

         Consulting, including legal and accounting, and investor relation
         services expense was $703,459 for the quarter ended March 31, 2006,
         compared to $856,147 for the quarter ended March 31, 2005. Included in
         the total amounts for 2006 are expenses of $168,898 relating to stock
         issued for consulting agreements (see Note 4)and $15,946 for expenses
         relating to options issued for services (See Note 3).

NOTE 6 - BUILDING

         In February 2006, the building that serves as our principal location
         was sold to a third party for gross proceeds of $4,000,000 and leased
         back to the company under a ten-year operating lease. The term of the
         lease runs from February 2006 through February 2016. Future minimum
         lease payments under this new lease are as follows:


         2006                                 $  412,500
         2007                                 $  450,000
         2008                                 $  450,000
         2009                                 $  450,000
         2010 and thereafter                  $3,150,000
                                              ----------
                                              $4,912,500
                                              ==========

         The sale of the building and various improvements resulted in a net
loss of $325,464.


NOTE 7 - NOTES PAYABLE

         At March 31, 2006, there is a note payable for equipment in the amount
         of $11,743 and $10,670 as of December 31, 2005 and March 31, 2006
         respectively. This note bears interest at 5.16% annually and matures in
         July of 2008. Interest expense for the year ended December 31, 2005 and
         the quarter ended March 31, 2006 was $5,354 and $708 respectively.


NOTE 8 - SUBSEQUENT EVENTS

From April 1 to May 12, 2006, 22,000 shares of preferred stock, series A, were
converted into 220,000 shares of common stock.

From April 1 to May 12, 2006, no shares of preferred stock, series B, were
converted.

                                       8
<PAGE>

From April 1 to May 12, 2006, 1,001 shares of preferred stock, series C, were
converted into 433,171 shares of common stock.

In May 2006, a consultant exercised 150,000 options for $45,000 and was issued
150,000 shares of common stock.

On May 12, 2006, we entered into a Purchase and Sale Agreement with Prestige
Capital Corporation. Under the agreement, we can assign domestic accounts
receivable from time to time to Prestige, a finance company based in New Jersey.
Prestige may pay us a down payment of up to 75% of the face value of each
account assigned under the agreement, subject to a maximum outstanding balance
of $5 million. Upon payment of the account, Prestige is required to pay the
remaining balance, less a discount fee from 3% - 6%, depending on the number of
days that the account is outstanding. If the account remains outstanding beyond
75 days, then the discount fee increases over 6%, by 1% for each additional
15-day period prior to payment. To secure the amounts due under the agreement,
we granted Prestige a security interest in all of our accounts and inventory.



















                                       9
<PAGE>


 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         -----------------------------------------------------------------------
         OF OPERATIONS
         -------------

OVERVIEW

We manufacture premium-quality loudspeakers and sell them through our dealer
networks. The speakers use our proprietary ribbon-driver technology and are
generally recognized in the industry as high-quality systems. We sell a
Professional Line of loudspeakers; a Commercial Line of loudspeakers; Home
Theatre systems; a line for recording and broadcast studios; a line for
contractor installations and touring companies; a line of in-wall, in-ceiling
and outdoor loudspeakers; and a line for the cinema and movie theater market.

From the early 1990's through 1999 we derived substantially all of our revenue
from marketing, renting, selling and installing sound and lighting systems under
the name Sound and Lighting Specialist Inc. In June 1999, due to the favorable
customer acceptance of our custom-designed loudspeaker systems, we ceased these
historical operations and began focusing all efforts towards becoming a
loudspeaker manufacturer and selling to dealers and contractors on a wholesale
basis. As a result, we have been essentially in a development stage, as we are
bringing to market products that we introduced in 2000 and 2001 and designing
and bringing to market additional products.

We began selling loudspeakers in June 2000 when we introduced our Professional
Line. We introduced our other lines of speakers in subsequent years, with the
most recent being the Cinema line, which we started selling in 2004. Our
products are primarily sold through a network of approximately 200 dealers for
our Professional and Commercial lines, 20 dealers for our Home Theater line, and
15 foreign distributors. We recently began selling products directly through a
corporate sales department that targets major "big box" retailers.

The information in this section should be read together with the financial
statements, the accompanying notes to the financial statements and other
sections included in this report.

RESULTS OF OPERATIONS

For the quarter ended March 31, 2006, revenue increased to $970,497 from
$824,740 in the 2005 period, an 18% increase, resulting primarily from our
increased exposure and acceptance of our products in the professional markets.
Our quarterly gross profit percentage decreased to approximately 21% in the 2006
period from margins of approximately 41% in the 2005 period, primarily as a
result of the manufacturing costs at in our new facility which is operating at a
low utilization rate.








                                       10
<PAGE>


General and administrative expenses for the 2006 first quarter increased to
$3,319,077 from $3,032,430 in the 2005 first quarter, a increase of $286,647.
The following table compares categories of our general and administrative
expenses in the first quarter of 2006 to the first quarter of 2005:

                                                    Three Months Ended
                                                -------------------------
                                                 March 31,      March 31,
                                                   2006           2005
                                                ----------     ----------
Non-cash G&A expense items:
---------------------------
Charges for stock and options issued for
  consulting and investor relation services   $  184,844      $  425,199
Charges for options issued to directors
   officers, and employees                       575,391         490,838
Depreciation                                      62,380          36,340
                                              ----------      ----------
Total non-cash G&A expenses                      822,615         952,377

Cash G&A expense items:
-----------------------
Professional, consulting and
    investor relation services                   518,615         430,948
Compensation                                     738,517         191,497
Advertising and promotion                        565,525         813,245
Acquisitions - Expiration of BG deal                  --         100,000
Other cash G&A expenses                          673,805         544,361
                                              ----------      ----------

Total cash G&A expenses                        2,496,462       2,080,053
                                              ----------      ----------

Total G&A expenses                            $3,319,077      $3,032,430
                                              ----------      ----------

Other income (expense) decreased to net other expense of $322,293 in the 2006
first quarter as compared to net other income of $947,667 in the 2005 first
quarter, primarily due to a loss on sale of our headquarters building in Ozark,
Missouri in the amount of $325,464 for the first quarter of 2006 and the
$899,928 gain on the valuation of the D warrants for the first quarter of 2005.

Due to the gross profit decrease, the increase in general and administrative
expense, and the change in other income described above, our net loss increased
to $3,436,862 in the first quarter of 2006 as compared to a net loss of
$1,746,206 in the comparable quarter of 2005.

FINANCIAL CONDITION

On March 31, 2006, our current assets exceeded current liabilities by
$5,085,310, compared to an excess of $3,721,483, on December 31, 2005. Total
assets exceeded total liabilities by $6,178,225, compared to an excess of total
assets over total liabilities of $8,749,853 on December 31, 2005. The increase
in working capital is a direct result of the sale of our building during
February of 2006 which allowed us to invest in the deposits on inventory and
reduce our accounts payable. The decrease of total assets and total liabilities
as of March 31, 2006 compared to December 31, 2005, is also a direct result of
the sale of our building and our net loss.

On March 31, 2006, we had a backlog of orders of approximately $2.05 million
(comprised of $1.6 million from the Q-Line Gold system order from Best Buy and
$450,000 in our professional business), compared to $150,000 as of March 31,
2005. The backlog at March 31, 2006 does not include $1.6 million in additional
consignment orders from Best Buy.

                                       11
<PAGE>


We have experienced operating losses and negative cash flows from operating
activities in all recent years. The losses have been incurred due to the
development time and costs in bringing our products through engineering and to
the marketplace.

In order to continue operations, we have been dependent on raising additional
funds. On January 4, 2005, we completed a private placement of 15,000 shares of
our Series C Convertible Preferred Stock for an aggregate purchase price of $15
million (net proceeds of $13,340,408). The investors also received five-year
warrants to purchase an aggregate of 6,000,000 shares of our common stock at an
exercise price of $6.00 per share, subject to certain adjustments. The preferred
stock is initially convertible, at the holder's option, into an aggregate of
6,000,000 shares of our common stock, at a conversion price of $2.50 per share,
subject to certain adjustments, and accrues a 6% premium to the stated value of
the shares of preferred stock, which would be convertible into additional shares
of common stock. We may redeem the warrants (or require the holder to exercise
them) and may require holders to convert the preferred stock to common stock if
certain conditions are met. Through March 31, 2006, holders had converted 550
shares of the Series C Preferred Stock into common stock, leaving 14,450 shares
of Series C Preferred Stock outstanding.

There is intense competition in the speaker business with other companies that
are much larger and national in scope and have greater financial resources than
we have. We will require additional capital to continue our growth in the
wholesale speaker market. We are relying upon our ability to obtain the
necessary financing through the issuance of equity and upon our relationships
with our lenders to sustain our viability.

         In the past, we have been able to privately borrow money from
individuals by the issuance of notes and have sold our stock to raise capital.
However, we cannot be certain that we will continue to be able to successfully
obtain such financing. If we fail to do so, we may be unable to continue as a
viable business.

         Over the last few months of 2005 and the beginning of 2006, we have
been trying to raise capital in either debt or equity financings, but have not
yet been able to obtain capital on terms that are acceptable to us. The terms of
our financing with the purchasers of our Series C Preferred Stock in January
2005 have created a significant impediment to our financing efforts. Among other
issues, the terms of the Series C Preferred Stock prohibit us from raising in
excess of $10 million in debt financing, prohibit us from securing the debt with
any assets other than our inventory and accounts receivable, and require us to
redeem the Series C Preferred Stock at a premium upon the issuance of any
equity. Our inventory and accounts receivable do not provide an asset base that
is sufficient for traditional asset-based lenders to provide $10 million in debt
financing. In addition, potential investors have proposed several transactions
on terms that would require consent of the holders of the Series C Preferred
Stock, but the holders have either refused to provide their consent or have
required additional conditions or consideration in order to provide such
consent, and we have deemed such additional conditions or consideration to be
unacceptable. We may not be able to obtain financing sufficient to fulfill our
business plan or to otherwise maintain our operations, or if obtained, the terms
of such financing may be on terms that are excessively costly, either directly
or as a result of their effect on existing obligations, including the terms of
the Series C Preferred Stock.

                                       12

<PAGE>

FORWARD-LOOKING INFORMATION

This report, as well as our other reports filed with the SEC and our press
releases and other communications, contain forward-looking statements made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995. Forward-looking statements include all statements regarding our
expected financial position, results of operations, cash flows, dividends,
financing plans, strategy, budgets, capital and other expenditures, competitive
positions, growth opportunities, benefits from new technology, plans and
objectives of management, and markets for stock. These forward-looking
statements are based largely on our expectations and, like any other business,
are subject to a number of risks and uncertainties, many of which are beyond our
control. The risks include those stated in the "Risk Factors" section of our

Annual Report on Form 10-KSB and economic, competitive and other factors
affecting our operations, markets, products and services, expansion strategies
and other factors discussed elsewhere in this report, our Annual Report on Form
10-KSB and the other documents we have filed with the Securities and Exchange
Commission. In light of these risks and uncertainties, there can be no assurance
that the forward-looking information contained in this report will in fact prove
accurate, and our actual results may differ materially from the forward-looking
statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
         -----------------------------------------------------------

Our only current borrowing is under a note payable on equipment in the principal
amount of $10,670 at March 31, 2006, which bears interest at 5.16% and matures
in September 2008. The note is at fixed rates and is not subject to fluctuation
based on changes in interest rates.


ITEM 4.  CONTROLS AND PROCEDURES.
         ------------------------

As of March 31, 2006, our Chief Executive Officer and Chief Financial Officer
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of March 31, 2006.

We have made no changes in our internal control over financial reporting during
the quarter ended March 31, 2006 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.




















                                       13
<PAGE>


                           PART II - OTHER INFORMATION

Item 6.   Exhibits.
------    --------
         The following are being filed as exhibits to this Report:

            Exhibit No.          Description of Exhibit
            -----------          ----------------------
                31.1             Rule 13a-14(a) / 15d-14(a) Certifications
                31.2             Rule 13a-14(a) / 15d-14(a) Certifications
                32               Section 1350 Certifications































                                       14
<PAGE>


                                    SIGNATURE


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

                                                SLS INTERNATIONAL, INC.
                                                (Registrant)





Date: March 15, 2006                            By /s/ Michael L. Maples
                                                   -----------------------------
                                                   Michael L. Maples
                                                   Chief Financial Officer
                                                   (Principal Financial Officer)




















                                       15