----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

**(Mark      One)**

**xQUARTERLY      REPORT      PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**For      the quarterly period ended July 31, 2006**

**OR**

**oTRANSITION      REPORT      PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**For      the transition period from _______________ to      ________________**

**Commission      File Number **
**000-51132**

**Universal      Capital Management, Inc.**

**(Exact      name of registrant as specified in its charter)**

| **Delaware**                                            | **20-1568059**                     |
|---------------------------------------------------------|------------------------------------|
| (State                or other jurisdiction of          | (I.R.S.                Employer    |
| Incorporation                or Organization)           | Identification                No.) |
|                                                    |                               |
| **2601                Annand Drive**                    |                               |
| **Suite                16**                             |                               |
| **Wilmington,                DE**                       | **19808**                          |
| (Address                of principal executive offices) | (Zip                Code)          |

----

**Table      of Contents**

**Page**

| PART                I   | FINANCIAL                INFORMATION                                                                                      | 1      |
|-------------------------|---------------------------------------------------------------------------------------------------------------------------|--------|
| Item                1.  | Financial                Statements                                                                                       | 1      |
| Item                2.  | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations | 12     |
| Item                3.  | Quantitative                and Qualitative Disclosures About Market Risk                                                 | 17     |
| Item                4.  | Controls                and Procedures                                                                                    | 17     |
|                    |                                                                                                                      |   |
| PART                II. | OTHER                INFORMATION                                                                                          | 17     |
| Item                2.  | Unregistered                Sales of Equity Securities and Use of Proceeds.                                               | 17     |
| Item                6.  | Exhibits.                                                                                                                 | 18     |

----

**PART      I**
**FINANCIAL      INFORMATION**

**Item      1. **
**Financial      Statements**

|                                                                                                    |   | July                31, 2006 |      | April                30, 2006 |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|-------------------------------|--------|
|                                                                                                    |   | (Unaudited)                  |      | (Audited)                     |   |
| ASSETS                                                                                                  |   |                         |      |                          |   |
| Investment                in Securities, at fair value (cost: $3,884,928 and                $2,539,600) |   | $                            | 4,232,726 |                          | $      | 3,331,620 |   |
| Cash                and Cash Equivalents                                                                |   |                         | 169,854   |                          |   | 84,272 |   |
| Miscellaneous                Receivables                                                                |   |                         | 203,450   |                          |   | 86,873 |   |
| Due                from Affiliates                                                                      |   |                         | 40,093    |                          |   | 24,646 |   |
| Prepaid                Expenses                                                                         |   |                         | 7,535     |                          |   | 7,648 |   |
| Property                and Equipment, net                                                              |   |                         | 9,703     |                          |   | 10,178 |   |
| Rent                Deposit                                                                             |   |                         | 1,100     |                          |   | 1,100 |   |
| Deferred                Income Taxes                                                                    |   |                         | 88,800    |                          |   | - |   |
| TOTAL                ASSETS                                                                             |   | $                            | 4,753,261 |                          | $      | 3,546,337 |   |
|                                                                                                    |   |                         |      |                          |   |   |   |
| LIABILITIES                                                                                             |   |                         |      |                          |   |   |   |
| Accounts                Payable and Accrued Expenses                                                    |   |                         | 323,076   |                          |   | 195,114 |   |
| Notes                Payable                                                                            |   |                         | 350,000   |                          |   | 100,000 |   |
| Deferred                Revenue                                                                         |   |                         | 1,653,533 |                          |   | 939,433 |   |
| Deferred                Income Taxes                                                                    |   |                         | -         |                          |   | 68,000 |   |
| TOTAL                LIABILITIES                                                                        |   | $                            | 2,326,609 |                          | $      | 1,302,547 |   |
|                                                                                                    |   |                         |      |                          |   |   |   |
| NET                ASSETS                                                                               |   | $                            | 2,426,652 |                          | $      | 2,243,790 |   |
|                                                                                                    |   |                         |      |                          |   |   |   |
| ANALYSIS                OF NET ASSETS:                                                                  |   |                         |      |                          |   |   |   |
| Net                Capital Paid in on Shares of Capital Stock                                           |   |                         | 2,561,269 |                          |   | 2,140,640 |   |
| Distributable                Earnings/(deficit)                                                         |   |                         | (134,617  | )                             |   | 103,150 |   |
| NET                ASSETS                                                                               |   | $                            | 2,426,652 |                          | $      | 2,243,790 |   |
|                                                                                                    |   |                         |      |                          |   |   |   |
| Equivalent                per share value based on 5,438,274 shares                                     |   |                         |      |                          |   |   |   |
| of                capital stock outstanding as of July 31, 2006                                         |   |                         |      |                          |   |   |   |
| and                4,917,634 shares of capital stock outstanding                                        |   |                         |      |                          |   |   |   |
| as                of April 30, 2006                                                                     |   | $                            | 0.45      |                          | $      | 0.46 |   |

----

| Common                Stocks & Other Investments - United States - 100%                                                                                                                   |   | Business                                                                 |   | Portfolio |   | Shares |   | Fair                Value |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|-----------|--------|--------|--------|---------------------------|--------|
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |
| BF                Acquisition Group V, Inc.*                                                                                                                                                  |   | Inactive              company                                            |   |      | 0.03   | %      |   | 100,000                   |   | $ | 1,625 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Accelapure                Corporation*                                                                                                                                                        |   | Pharmaceutical              purification service              company    |   |      | 23.63  | %      |   | 1,000,000                 |   |   | 1,000,000 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| BroadRelay                Holdings, Inc.*                                                                                                                                                     |   | High              speed internet media                                   |   |      | 16.25  | %      |   | 1,264,401                 |   |   | 687,834 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Warrants                to purchase 200,000 shares of BroadRelay                                                                                                                              |   | High              speed internet media                                   |   |      | 1.61   | %      |   |                      |   |   | 68,000 |   |
| Holdings,                Inc.* at an exercise price of $1.00 per share                                                                                                                        |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Warrants                to purchase 150,000 shares of BroadRelay                                                                                                                              |   | High              speed internet media                                   |   |      | 2.67   | %      |   |                      |   |   | 113,000 |   |
| Holdings,                Inc.* at an exercise price of $0.65 per share                                                                                                                        |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Subtotal                affiliated companies*                                                                                                                                                 |   |                                                                     |   |      |   | 44.19  | %      |                      |   |   |   | 1,870,459 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| IPI                Fundraising, Inc.                                                                                                                                                          |   | Sales              and distribution of fundraising              products |   |      | 0.00   | %      |   | 575,000                   |   |   | 0 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Gelstat                Corporation                                                                                                                                                            |   | Consumer              health care                                        |   |      | 0.26   | %      |   | 221,429                   |   |   | 11,071 |   |
| Company                                                                                                                                                                                       |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Neptune                Industries, Inc.                                                                                                                                                       |   | Seafood              production                                          |   |      | 0.39   | %      |   | 47,619                    |   |   | 16,667 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| PSI                - TEC Corporation                                                                                                                                                          |   | Plastics              engineering                                        |   |      | 13.25  | %      |   | 787,500                   |   |   | 560,625 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Extreme                Visual Technologies, Inc..                                                                                                                                             |   | Visual              Communications                                       |   |      | 23.63  | %      |   | 1,000,000                 |   |   | 1,000,000 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Theatre                Xtreme Entertainment Group, Inc.                                                                                                                                       |   | Home              theater sales and Installation                         |   |      | 18.28  | %      |   | 575,936                   |   |   | 773,904 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| Total                (aggregate cost $3,884,928)                                                                                                                                              |   |                                                                     |   |      |   | 100.00 | %      |                      |   |   | $ | 4,232,726 |   |
|                                                                                                                                                                                          |   |                                                                     |   |      |   |   |   |                      |   |   |   |   |   |
| *Each                portfolio company in which the Company owns 5% or more of the outstanding                voting securities is deemed an “affiliated                company.” |

----

|                                                                |   | Three                monthsendedJuly                31, 2006 |     | Three                monthsendedJuly                31, 2005 |   |
|---------------------------------------------------------------------|--------|--------------------------------------------------------------|----------|--------------------------------------------------------------|--------|
| Income                                                              |   |                                                         |     |                                                         |   |
| Management                Services                                  |   | $                                                            | 585,900  |                                                         | $      | - |   |
| Interest                Income                                      |   |                                                         | 6,522    |                                                         |   | - |   |
|                                                                |   |                                                         | 592,422  |                                                         |   |   |   |
|                                                                |   |                                                         |     |                                                         |   |   |   |
| Expenses                                                            |   |                                                         |     |                                                         |   |   |   |
| Bad                Debt                                             |   |                                                         | -        |                                                         |   | - |   |
| Depreciation                                                        |   |                                                         | 475      |                                                         |   | 831 |   |
| Dues                and Subscriptions                               |   |                                                         | -        |                                                         |   | 135 |   |
| Fees                and Commissions                                 |   |                                                         | 3,582    |                                                         |   | 4,203 |   |
| Interest                Expense                                     |   |                                                         | 1,720    |                                                         |   | 463 |   |
| Insurance                                                           |   |                                                         | 19,199   |                                                         |   | 16,147 |   |
| Marketing                                                           |   |                                                         | 3,424    |                                                         |   | 400 |   |
| Office                Expenses and Supplies                         |   |                                                         | 703      |                                                         |   | 2,399 |   |
| Payroll                                                             |   |                                                         | 118,385  |                                                         |   | 107,308 |   |
| Payroll                Taxes                                        |   |                                                         | 8,685    |                                                         |   | 7,587 |   |
| Postage,                Delivery and Shipping                       |   |                                                         | 756      |                                                         |   | 996 |   |
| Professional                Fees                                    |   |                                                         | 519,648  |                                                         |   | 94,854 |   |
| Rent                                                                |   |                                                         | 4,200    |                                                         |   | 3,900 |   |
| Share                Based Compensation Expense                     |   |                                                         | 180,944  |                                                         |   | - |   |
| Taxes                - Franchise                                    |   |                                                         | 1,413    |                                                         |   | - |   |
| Telephone                                                           |   |                                                         | 806      |                                                         |   | 1,133 |   |
| Travel                and Entertainment                             |   |                                                         | 22,090   |                                                         |   | 13,780 |   |
| Utilities                                                           |   |                                                         | 661      |                                                         |   | 805 |   |
|                                                                |   |                                                         | 886,691  |                                                         |   | 254,941 |   |
|                                                                |   |                                                         |     |                                                         |   |   |   |
| Loss                from Operations                                 |   |                                                         | (294,269 | )                                                            |   | (254,941 | ) |
|                                                                |   |                                                         |     |                                                         |   |   |   |
| Net                Realized Gain on Dividend of Portfolio Stock     |   |                                                         | 343,924  |                                                         |   | - |   |
|                                                                |   |                                                         |     |                                                         |   |   |   |
| Unrealized                Depreciation on Investments               |   |                                                         | (444,222 | )                                                            |   | (667,375 | ) |
|                                                                |   |                                                         |     |                                                         |   |   |   |
| Income                Tax Benefit                                   |   |                                                         | 156,800  |                                                         |   | 366,600 |   |
|                                                                |   |                                                         |     |                                                         |   |   |   |
| Net                Decrease in Net Assets Resulting from Operations |   | $                                                            | (237,767 | )                                                            | $      | (555,716 | ) |

----

| INCREASE                IN NET ASSETS FROM OPERATIONS               |   |   |      |
|---------------------------------------------------------------------|--------|--------|-----------|
| Loss                from operations                                 |   | $      | (294,269  | ) |
| Unrealized                depreciation on investments, net of taxes |   |   | (287,422  | ) |
| Net                realized Gain on Dividend of Portfolio Stock     |   |   | 343,924   |   |
|                                                                |   |   |      |   |
| NET                DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |   |   | (237,767  | ) |
|                                                                |   |   |      |   |
| CAPITAL                SHARE TRANSACTIONS                           |   |   |      |   |
| Issuance                of Common Stock                             |   |   | 1,041,280 |   |
| Receivable                from common Stock                         |   |   | (800,000  | ) |
| Share-based                Compensation Expense                     |   |   | 180,944   |   |
| Stock                Options Granted for Operating Expenses         |   |   | 447,000   |   |
| Dividend                of Portfolio Stock                          |   |   | (448,595  | ) |
|                                                                |   |   |      |   |
| NET                CAPITAL SHARE TRANSACTIONS                       |   |   | 420,629   |   |
|                                                                |   |   |      |   |
| TOTAL                INCREASE                                       |   |   | 182,862   |   |
|                                                                |   |   |      |   |
| NET                ASSETS, BEGINNING OF YEAR                        |   |   | 2,243,290 |   |
|                                                                |   |   |      |   |
| NET                ASSETS, END OF PERIOD                            |   | $      | 2,426,652 |   |

----

|                                                                                                   |   | Three                Months Ended July 31 |     |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|----------|
|                                                                                                   |   | 2006                            |     | 2005  |   |
|                                                                                                   |   |                                      |     |   |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES                                                    |   |                                      |     |   |   |
| Net                decrease in net assets resulting from operations                                    |   | $                                         | (237,767 | ) | $ | (555,716 | ) |
| Adjustments                to reconcile net decrease in net assets from                                |   |                                      |     |   |   |   |   |
| operations                to net cash used in operating activities:                                    |   |                                      |     |   |   |   |   |
| Gain                on dividend of portfolio stock                                                     |   |                                      | (343,924 | ) |   | - |   |
| Investment                securities received in exchange for  management                services |   |                                      | (585,900 | ) |   | - |   |
| Depreciation                expense                                                                    |   |                                      | 475      |   |   | 831 |   |
| Share                based Compensation Expense                                                        |   |                                      | 180,944  |   |   | - |   |
| Stock                options granted for operating expenses                                            |   |                                      | 447,000  |   |   | - |   |
| Net                unrealized depreciation on investments                                              |   |                                      | 444,222  |   |   | 667,375 |   |
| Deferred                Income Taxes                                                                   |   |                                      | (156,800 | ) |   | (366,600 | ) |
| Net                changes in miscellaneous receivables                                                |   |                                      | (6,522   | ) |   | (300 | ) |
| Net                changes in due from affiliates                                                      |   |                                      | (9,059   | ) |   | 300 |   |
| Prepaid                expenses                                                                        |   |                                      | 113      |   |   | 567 |   |
| Net                changes in accounts payable and accrued expenses                                    |   |                                      | 126,520  |   |   | 19,618 |   |
| Net                cash used in operating activities                                                   |   |                                      | (140,698 | ) |   | (233,925 | ) |
|                                                                                                   |   |                                      |     |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                                    |   |                                      |     |   |   |   |   |
| Proceeds                from Notes Receivable                                                          |   |                                      | (115,000 | ) |   | - |   |
| Net                cash used in investing activities                                                   |   |                                      | (115,000 | ) |   | - |   |
|                                                                                                   |   |                                      |     |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES                                                    |   |                                      |     |   |   |   |   |
| Proceeds                from Issuance of Debt                                                          |   |                                      | 200,000  |   |   | - |   |
| Repayment                of Debt                                                                       |   |                                      | (100,000 | ) |   |   |   |
| Proceeds                from issuance of common stock                                                  |   |                                      | 241,280  |   |   | 180,800 |   |
| Net                cash provided by financing activities                                               |   |                                      | 341,280  |   |   | 180,800 |   |
|                                                                                                   |   |                                      |     |   |   |   |   |
| NET                INCREASE (DECREASE) IN CASH                                                         |   |                                      | 85,582   |   |   | (53,125 | ) |
|                                                                                                   |   |                                      |     |   |   |   |   |
| CASH                AND CASH EQUIVALENTS, BEGINNING OF YEAR                                            |   |                                      | 84,272   |   |   | 158,453 |   |
|                                                                                                   |   |                                      |     |   |   |   |   |
| CASH                AND CASH EQUIVALENTS, END OF PERIOD                                                |   |                                      | 169,854  |   | $ | 105,328 |   |
|                                                                                                   |   |                                      |     |   |   |   |   |
| NON-CASH                INVESTING AND FINANCING ACTIVITIES                                             |   |                                      |     |   |   |   |   |

| In                July, 2006 the Company executed a promissory note payable to BroadRelay                Holdings, Inc. in the amount of $150,000 in payment for securities                purchased.                                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                    |
| In                July, 2006 common stock was issued upon exercise of stock options.                The                stock was issued in exchange for a note receivable in the face amount                of                $800,000. |
|                                                                                                                                                                                                                                    |

----

**NOTE      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Basis      of Presentation**

**Nature      of Business**

**Security      Valuations**

**Use      of Estimates**

----

**Cash      and Equivalents**

**Property      and Equipment**

| Furniture                  and fixtures        | 5                  to 7 years |
|------------------------------------------------|-------------------------------|
| Computer                  and office equipment | 3                  to 7 years |

**Income      Taxes**

**Concentrations      of Credit Risk**

**Stock-Based      Compensation**

*Share-Based      Payment *
*Accounting      for Stock Issued to Employees*
*Statement      of Cash Flows*

----

**NOTE      2 - INVESTMENTS**

| Portfolio                Companies consist of the following:                                               |   |                                                  |      |   |   |                                                |   |                                  |      |
|------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------|-----------|--------|--------|-----------------------------------------------------|--------|---------------------------------------|-----------|
|                                                                                                       |   |                                                  |      |   |   |                                                |   |                                  |      |
|                                                                                                       |   | Number                of Shares held at July 31, 2006 |      | Cost   |   | Value                atJuly                31, 2006 |   | Unrealized                Gain/(Loss) |      |
|                                                                                                       |   |                                                  |      |   |   |                                                |   |                                  |      |
| Affiliated                Securities*                                                                      |   |                                                  |      |   |   |                                                |   |                                  |      |
| BF                Acquisition Group V, Inc.                                                                |   |                                                  | 100,000   |   | $      | 1,625                                               |   | $                                     | 1,625     |   | $ | 0 |   |
| AccelaPure                Corporation                                                                      |   |                                                  | 1,000,000 |   |   | 1,000,000                                           |   |                                  | 1,000,000 |   |   | 0 |   |
| BroadRelay                Holdings, Inc.common                stock                                        |   |                                                  | 1,264,401 |   |   | 491,100                                             |   |                                  | 687,834   |   |   | 196,734 |   |
| BroadRelay                Holdings, Inc. warrants                expiring December                15, 2006 |   |                                                  | 200,000   |   |   | 3⁄4                                              |   |                                  | 68,000    |   |   | 68,000 |   |
| BroadRelay                Holdings, Inc. warrants                expiring July                15, 2011     |   |                                                  | 150,000   |   |   | 3⁄4                                              |   |                                  | 113,000   |   |   | 113,000 |   |
|                                                                                                       |   |                                                  |      |   |   |                                                |   |                                  |      |   |   |   |   |
| Total                Affiliated Securities                                                                 |   |                                                  |      |   |   | 1,492,725                                           |   |                                  | 1,870,459 |   |   | 377,734 |   |
|                                                                                                       |   |                                                  |      |   |   |                                                |   |                                  |      |   |   |   |   |
| Non-affiliated                Securities                                                                   |   |                                                  |      |   |   |                                                |   |                                  |      |   |   |   |   |
| IPI                Fundraising. Inc.                                                                       |   |                                                  | 575,000   |   |   | 6,625                                               |   |                                  | 0         |   |   | (6,625 | ) |
| Gelstat                Corporation                                                                         |   |                                                  | 221,429   |   |   | 350,000                                             |   |                                  | 11,071    |   |   | (338,929 | ) |
| Neptune                Industries, Inc.                                                                    |   |                                                  | 47,619    |   |   | 20,000                                              |   |                                  | 16,667    |   |   | (3,333 | ) |
| PSI                - TEC Corporation                                                                       |   |                                                  | 787,500   |   |   | 619,000                                             |   |                                  | 560,625   |   |   | (58,375 | ) |
| Theater                Xtreme Entertainment   Group,                Inc.                         |   |                                                  | 575,936   |   |   | 396,578                                             |   |                                  | 773,904   |   |   | 377,326 |   |
| Extreme                Visual Technologies, Inc.                                                           |   |                                                  | 1,000,000 |   |   | 1,000,000                                           |   |                                  | 1,000,000 |   |   | 0 |   |
|                                                                                                       |   |                                                  |      |   |   |                                                |   |                                  |      |   |   |   |   |
| Total                Non-Affiliated Securities                                                             |   |                                                  |      |   |   | 2,392,203                                           |   |                                  | 2,362,267 |   |   | (29,936 | ) |
|                                                                                                       |   |                                                  |      |   |   |                                                |   |                                  |      |   |   |   |   |
|                                                                                                       |   |                                                  |      |   |   |                                                |   |                                  |      |   |   |   |   |
| Total                Securities                                                                            |   |                                                  |      |   | $      | 3,884,928                                           |   | $                                     | 4,232,726 |   | $ | 347,798 |   |
|                                                                                                       |   |                                                  |      |   |   |                                                |   |                                  |      |   |   |   |   |

----

**NOTE      3 - INCOME TAXES**

|                          |   |   |    |
|-------------------------------|--------|--------|---------|
| Deferred:                     |   |   |    |
| Federal                       |   | $      | 122,400 |   |
| State                         |   |   | 34,400  |   |
|                          |   |   |    |   |
| Total                Deferred |   | $      | 156,800 |   |
|                          |   |   |    |   |

| Income                tax at statutory rate             |   | $      | 134,200 |   |
|---------------------------------------------------------|--------|--------|---------|--------|
| State                income taxes, net of federal taxes |   |   | 22,600  |   |
|                                                    |   |   |    |   |
|                                                    |   | $      | 156,800 |   |
|                                                    |   |   |    |   |

| Unrealized                gains   |   | $      | 227,000  |   |
|-----------------------------------|--------|--------|----------|--------|
| Net                operating loss |   |   | (138,200 | )      |
|                              |   |   |     |   |
| Total                             |   | $      | 88,800   |   |
|                              |   |   |     |   |
|                              |   |   |     |   |

----

**NOTE      4 - DUE FROM AFFILIATES**

| Due                from BF Acquisition Group V, Inc. |   | $      | 35,148 |   |
|------------------------------------------------------|--------|--------|--------|--------|
| Due                from Stockholder                  |   |   | 4,945  |   |
|                                                 |   |   |   |   |
| Total                                                |   | $      | 40,093 |   |
|                                                 |   |   |   |   |

**NOTE      5 - SUBSCRIPTION AGREEMENT**

**NOTE      6 - NOTES PAYABLE**

**NOTE      7 - EMPLOYEE STOCK OPTIONS**

----

**NOTE      8 - CAPITAL SHARE TRANSACTIONS**

**NOTE      9 - FINANCIAL HIGHLIGHTS**

| Per                Share Operating Performance                     |   |   |   |
|--------------------------------------------------------------------|--------|--------|--------|
| Net                asset value, beginning of period                |   | $      | 0.46   |   |
|                                                               |   |   |   |   |
| Loss                from operations, net of tax benefit            |   |   | (0.03  | ) |
| Unrealized                depreciation on investment, net of taxes |   |   | (0.05  | ) |
| Realized                gain on dividend of Portfolio Stock        |   |   | 0.03   |   |
|                                                               |   |   | (0.05  | ) |
|                                                               |   |   |   |   |
| Add                capital share transactions                      |   |   | 0.04   |   |
|                                                               |   |   |   |   |
| Net                asset value, end of period                      |   | $      | 0.45   |   |
|                                                               |   |   |   |   |
|                                                               |   |   |   |   |
| Total                Return                                        |   |   | (12.6  | %) |
|                                                               |   |   |   |   |
| Average                Net Assets as a percentage of:              |   |   |   |   |
| Expenses                (annualized)                               |   |   | 152.0  | % |
| Management                income (annualized)                      |   |   | 100.0  | % |

|   |   |
|--------|--------|

----

**Item        2. **
**Management’s        Discussion and Analysis of Financial Condition and Results of        Operations**

**Introduction**

----

**Financial      Condition**

| ·   | Net                unrealized depreciation on investments of $444,222 mainly due to                a                decrease in the value of the shares of PSI-TEC Holdings, Inc. and                Gelstat                Corporation, offset in part by an increase in the value of shares                of                Theater Xtreme Entertainment Group, Inc., BroadRelay Holdings, Inc.                and an                increase in the value of 200,000 BroadRelay Holdings, Inc. warrants                that                expire in December of 2006. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                increase of 300,000 shares and 150,000 warrants in the Company’s                investment in BroadRelay Holdings,                Inc. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                increase of 300,000 shares in the Company’s investment in Theater Xtreme                Entertainment Group, Inc. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company’s investment in 1,000,000 shares of Extreme Visual Technologies,                Inc. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | The                increase in receivables of approximately $117,000 which is mainly                due to                cash advances, plus accrued interest, to portfolio companies. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                increase in accounts payable and accrued expenses of approximately                $128,000. |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | The                increase in notes payable of                $250,000. |
|--------------------|--------------------------------------------------------------------------|

| ·   | The                increase in deferred revenue of approximately $714,000 which is mainly                due                to an increase in deferred revenue of approximately $945,200 for                Extreme                Visual Technologies, Inc. which the Company will earn over the twelve                month period beginning July 12, 2006 offset in part by a decrease                in                deferred revenue of $231,000 ($125,000 for Accelapure Corporation                and                $106,100 for PSI-TEC Holdings, Inc.) which was earned during the                period. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                decrease in deferred taxes of approximately                $157,000. |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | The                sale of 120,640 of the Company’s shares for proceeds of                $241,280. |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| ·   | The                declaration of a dividend paid in the form of 299,064 shares of the                common                stock of Theater Xtreme Entertainment Group, Inc., a portfolio company,                for a total value of $448,595. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Net realized gain of $343,924 on the dividend of shares of common                stock of                Theater Xtreme Entertainment Group, Inc. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Results      of Operations**

----

*Three      months ended July 31, 2006 compared to the three months ended July 31,      2005.*

**Liquidity      and Capital Resources**

*Critical      Accounting Estimates*

----

----

**Item      3.**
**Quantitative      and Qualitative Disclosures about Market Risk**

**Item      4. **
**Controls      and Procedures**

**PART      II. **
**OTHER      INFORMATION**

**Item      **
**2.      **
**Unregistered      Sales of Equity Securities and Use of Proceeds.**

| **DATE                OF SALE**                 | **PURCHASERS**              | **NUMBER                OF SHARES SOLD** | **CONSIDERATION                PAID****PER                SHARE** | **SECURITIES                ACT EXEMPTION CLAIMED** |
|-------------------------------------------------|-----------------------------|------------------------------------------|-------------------------------------------------------------------|-----------------------------------------------------|
| May                1, 2006 through May 31, 2006 | 45                Investors | 120,640                                  | $2.00                                                             | §                3(b)                          |
| June 15,                2006               | 1                Investor   | 400,000                                  | $2.00                                                             | §                4(2)                          |
| **TOTALS**                                      | 46                Investors | 520,640                                  |                                                              |                                                |

**Item      3. **
**Submission      of Matters to a Vote of Security Holders.**

----

**Item      6**
**.**
** **
**Exhibits.**

**The      following exhibits are included herein**
**:      **

|   | 10.1 | Form                of Stock Option Award Agreement.*  |
|--------|------|-------------------------------------------------------------|

|   | 10.2 | Stock                Option Award Agreement between the Company and David M. Bovi dated                May 18,                2006.* * |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.3 | Promissory                Note dated June 15, 2006 made by David M. Bovi payable to the order                of the                Company.* ** |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.4 | Security                Agreement dated June 15, 2006 between the Company and David M.                Bovi.*** |
|--------|------|----------------------------------------------------------------------------------------------------------------|

|   | 31.1 | Certification                pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,                as                amended, executed by the Principal Executive Officer of the                Company. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification                pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as                amended, executed by the Principal Financial Officer of the                Company. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002, executed by the Principal Financial                Officer of the Company. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certification                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002, executed by the Principal Financial                Officer of the Company. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| * | Incorporated                      by reference to the Current Report on Form 8-K filed May 15,                      2006. |
|---|---------------------------------------------------------------------------------------------------------------------------|

| ** | Incorporated                      by reference to the Current Report on Form 8-K filed May 19,                      2006. |
|----|---------------------------------------------------------------------------------------------------------------------------|

| *** | Incorporated                      by reference to the Current Report on Form 8-K filed June 30,                      2006. |
|-----|----------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                                    | Universal                Capital Management, Inc.                                                                                                                                                                |
|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |                                                                                                                                                                                                             |
| Date:                September 15, 2006 | By:                /s/ Michael D.                Queen                                Michael                D. Queen, President |
|                                    |                                                                                                                                                                                                             |
| Date:                September 15, 2006 | By:                /s/ Joseph T.                Drennan                             Joseph                T. Drennan, Treasurer                 |

----