U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-QSB  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  o
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from  Commission File No. 000-50814  UNIVERSAL FOG, INC. (Exact name of small business issuer as specified in its charter)  Delaware
        86-0827216(State or other jurisdiction of incorporation or organization)
        (I.R.S. Employer Identification No.)  1808 South 1st Avenue Phoenix, AZ 85003 (Address of Principal Executive Offices)  602/254-9114 (Issuers telephone number)    Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNoo  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yeso
        Nox  Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by a court. YesxNoo  State the number of shares outstanding of each of the issuers classes of common equity, as of May 10, 2006: 38,652,300 shares of common stock.      UNIVERSAL FOG, INC.



FINANCIAL STATEMENTS



INDEX



Part I-- FINANCIAL INFORMATION




Item 1. Financial Statements


Item 2. Managements Discussion and Analysis of Financial Condition


Item 3. Control and Procedures

Part II-- OTHER INFORMATION




Item 1. Legal Proceedings


Item 2. Changes in Securities


Item 3. Defaults Upon Senior Securities


Item 4. Submission of Matters to a Vote of Security Holders


Item 5. Other Information


Item 6. Exhibits and Reports on Form 8-K

Signatures and Required Certifications



Item 1. Financial Information



BASIS OF PRESENTATION



The accompanying reviewed financial statements are presented in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB and item 310 under subpart A of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the three months ended March 31, 2006 are not necessarily indicative of results that may be expected for the year ending December 31, 2006. The financial statements are presented on the accrual basis.



















FINANCIAL STATEMENTS



UNIVERSAL FOG, INC.



FINANCIAL STATEMENTS









As of March 31, 2006





UNIVERSAL FOG, INC.

Financial Statements

Table of Contents





FINANCIAL STATEMENTS




Page #


Consolidated Balance Sheet
        F-1


Consolidated Statements of Operations
        F-2


Consolidated Statements of Cash Flows
        F-3


Notes to the Consolidated Financial Statements
        F-4





















Universal Fog, Inc.

And Subsidiary

Consolidated Balance Sheet

(Unaudited)


March 31,2006AssetsCurrent Assets:Cash and cash equivalents
        $
        31,067Accounts Receivable, net of allowancefor doubtful accounts of $32,572
        
        43,970Inventory
        
        116,773Total Current Assets
        
        191,810Property, Plant, and Equipment, net ofaccumulated depreciation of$113,385
        
        444,933Sundown Lighting Distributorship
        
        50,000Patent Rights, net of $2,706 ofaccumulated amortization
        
        47,512Total Assets
        $
        734,255Liabilities and Stockholders EquityCurrent Liabilities:Accounts Payable-trade
        $
        86,025Accrued Expenses
        
        63,392Advances from Stockholders
        
        39,466Note Payable
        
        141,365Total Current Liabilities
        
        330,248Commitments and Contingencies
        
        -Stockholders Equity:Convertible preferred stock, $.0001 par value,10,000,000 shares authorized, 4,000,000and 0 shares issued and outstanding
        
        400Common stock, $.0001 par value,300,000,000 shares authorized,38,652,300 sharesissued and outstanding
        
        3,865Additional Paid-in Capital
        
        905,908Accumulated Deficit
        
        (506,166)Total Stockholders Equity
        
        404,007Total Liabilitiesand Stockholders Equity
        $
        734,255See Notes to Consolidated Financial Statements

F-1





Universal Fog, Inc.



and Subsidiary



Consolidated Statements of Operations

(Unaudited)






3 Mos.
Ended
March 31, 2006
        
        3 Mos. Ended
March 31,
2005Sales, net of returns
        $
        139,289
        $
        102,264Cost of Sales
        
        83,701
        
        30,769Gross Profit
        
        55,588
        
        71,585Operating Expenses:General and administrative expenses
        
        70,926
        
        47,809Advertising and marketing
        
        4,223
        
        860Compensation Costs
        
        58,509
        
        36,097Total Operating Expenses
        
        133,658
        
        84,766Net Lloss from Operations
        
        (78,070)
        
        (13,181)Interest Expense
        
        2,812
        
        2,809Net Loss before Income Taxes
        
        (80,882)
        
        (16,080)Provision for Income Taxes
        
        0
        
        0Net Loss
        $
        (80,882)
        $
        (16,080)Loss Per Common Share:Basic
        $
        0.00
        $
        0.00Diluted
        $
        0.00
        $
        0.00



See Notes to Consolidated Financial Statements









F-2











UNIVERSAL FOG, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005






2006
        
        2005Cash flows from operating activities:Net cash provided by (used in) operating activities
        
        (16,086)
        
        18,031Cash flows from investing activities:Net cash (used in) investing activities
        
        -
        
        (2,500)Cash flows from financing activities:Net cash provided by (used in)financing activities
        
        2,294
        
        (3,788)Net increase (decrease) in cash
        
        (13,792)
        
        11,743Cash at beginning of period
        
        44,859
        
        4,363Cash at end of period
        $
        31,067
        $
        16,106



See Notes to Consolidated Financial Statements











F-3











UNIVERSAL FOG, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2006 and 2005




Supplemental Cash Flows Disclosures2006
        
        2005Interest paid
        $
        2,812
        $
        2,899Income taxes paid
        $
        --
        $
        --Non-Cash Investing and Financing Activities2006
        
        2005Contribution of property and equipment,net of related note payable, asadditional paid in capital
        $
        --
        $
        250,562



See Notes to Consolidated Financial Statements.











F-4











UNIVERSAL FOG, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






1.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and operations



Universal Fog, Inc. was incorporated in the state of Arizona on July 11,1996 and was the successor of the business known as Arizona Mist, Inc. which began in 1989. On May 9, 2005, Universal Fog, Inc. entered into a Stock Purchase Agreement and Share Exchange (effecting a reverse merger)with Edmonds 6, Inc. (Edmonds 6) and its name was changed to Universal Fog, Inc. (hereinafter referred to as either UFI or the Company).Edmonds 6 was incorporated on August 19, 2004 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. Pursuant to this agreement, Universal Fog, Inc. (which has been in continuous operation since 1996) became a wholly owned subsidiary of Edmonds 6.



The Company began manufacturing systems for outdoor cooling in Arizona and quickly expanded to distribute throughout the United States. As the Company grew, so did the need for more efficient, more effective, and higher quality commercial grade products.



All Universal Fog, Inc. high pressure fog systems are custom designed and manufactured for each specific application. We incorporate three different types of tubing in our systems enabling us to comply with nearly any design requirement. Our low profile 3/8 flexible nylon tubing utilizes our patented SLIP-LOK brass fittings allowing extreme versatility and easy installation. The use of 3/8 high-pressure nitrogenized copper is aesthetically very pleasing and enables us to conceal our mist lines behind walls, such as stucco, and meet certain building code requirements. In addition, we also produce systems using 3/8 stainless steel tubing, though copper systems are recommended, providing one of the most extensive product selections in the industry.



The concept is inherent in nature, such as water vapor, clouds, and fog, which manifest due to the earths environment. Universal Fog, Inc. high pressure fog systems can create the same environment where and when you want it. Using normal tap water and pressurizing it to 800 PSI with our high-pressure pump modules, we force water through a series of patented brass and stainless steel nozzles creating a micro-fine mist or fog. With droplets ranging in size from 4  40 microns, the fog flash evaporates, removing unwanted heat in the process. Temperature drops up to 40°F are typical in situations where high heat and low humidity exist.



The concept of fog and its benefits have been in use for over 50 years. While most commonly known for cooling, fog can be used for a variety of applications.



CRITICAL ACCOUNTING POLICIES



We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results. Our preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.



Our accounting policies that are the most important to the portrayal of our financial condition and results, and which require the highest degree of management judgment relate to revenue recognition, the provision for uncollectible accounts receivable, property and equipment, advertising and issuance of shares for service.







In December 2001, the SEC issued a cautionary advice to elicit more precise disclosure about accounting policies management believes are most critical in portraying our financial results and in requiring managements most difficult subjective or complex judgments. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates.



We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.



Principles of consolidation and basis of presentation



The accompanying consolidated financial statements included the general accounts of the Company, a Delaware corporation formerly Edmonds 6, Inc. (see above), and its wholly owned Arizona subsidiary, also named Universal Fog, Inc. All material intercompany transactions, accounts and balances have been eliminated in the consolidation.



For financial reporting purposes the reverse merger with Edmonds 6 (see above) has been treated as a recapitalization of UFI with Edmonds 6 being the legal survivor and UFI being the accounting survivor and the operating entity. That is, the historical financial statements prior to May 9, 2005 are those of UFI and its operations, even though they are labeled as those of the Company. Retained earnings of UFI related to its operations, is carried forward after the recapitalization. Operations prior to the recapitalization are those of the accounting survivor, UFI and its predecessor operations, which began July 11,1996. Earnings per share for the periods prior to the recapitalization are restated to reflect the equivalent number of shares outstanding for the entire period operations were conducted. Upon completion of the reverse merger, the financial statements become those of the operating company, with
adjustments to reflect the changes in equity structure and receipt of the assets and liabilities of UFI.



Management estimates



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



Goodwill and intangible assets



In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after June 15, 2001. Under the new standards, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their useful lives.



On May 9, 2005, the Company was assigned the rights to two patents developed by Mr. Bontems, the Companys controlling stockholder, in exchange for the issuance of 4,000,000 convertible preferred stock shares (Notes 2 and 5). Because this transaction is one between entities under common control, the patent rights are carried on the Companys general accounts at their historical cost to Mr. Bontems pursuant to SFAS No. 141 and Staff Accounting Bulletin No. 48.



The patents rights are being amortized using the straight-line method over their remaining estimated lives of approximately six and sixteen years. For the three months ended March 31, 2006 amortization expense related to these patent rights totaled $738. For each of the next five years, management estimates amortization of these patent rights to approximate $3,000.



Income/loss per share



Basic income/loss per share amounts are computed by dividing the net income or loss by the weighted average number of common stock shares outstanding. Diluted income/loss per share amounts reflect the maximum dilution that would have resulted from the issuance of common stock through potentially dilutive securities. Other than the convertible preferred stock (Note 2), the Company does not have any convertible securities, outstanding options or



warrants that could potentially dilute the earnings of its common stockholders. Diluted loss per share amounts are computed by dividing the net income/loss (the preferred shares do not contain dividend rights) by the weighted average number of common stock shares outstanding plus the assumed issuance of the convertible preferred stock. For the three months ended March 31, 2006 and 2005, basic income/loss per share amounts are based on 38,652,300 and 34,000,000 weighted-average number of common stock shares outstanding, respectively. For the three months ended March 31, 2006, no effect has been given to the assumed conversion of the convertible preferred stock shares as the effect would be antidilutive.



2. CAPITAL STRUCTURE DISCLOSURES



The Companys capital structure is complex and consists of a series of convertible preferred stock and a general class of common stock. The Company is authorized to issue 310,000,000 shares of stock with a par value per share of $.0001, 10,000,000 of which have been designated as preferred shares and 300,000,000 of which have been designated as common shares.



Convertible preferred stock



On May 9, 2005, the Company issued 4,000,000 preferred stock shares to its majority common stockholder in exchange for the assignment of two patent rights (Notes 1 and 5). These shares are convertible into the Companys common stock at the option of the holder any time after one year from the date of issuance. Each share of convertible preferred stock is convertible into one share of common stock. In the event of liquidation, these shares also allow the holder to exchange the shares for the Companys office and manufacturing facilities (Notes 1 and 5). In addition, the shares will survive and not be affected by any recapitalization, reorganization or reverse stock split.



Common stock



Each common stock share contains one voting right and contains the rights to dividends if and when declared by the Board of Directors..



Stock options, warrants and other rights



As of March 31, 2006, the Company had not adopted any employee stock option plans and no other stock options, warrants or other stock rights have been granted or issued.






3.
        RISKS AND UNCERTAINTIES

The Company operates in a highly specialized industry. The concept is inherent in nature, such as water vapor, clouds and fog, which occur due to the earths environment. Universal Fog, Inc.s high pressure fog systems can create the same environment where and when you want it. Using normal tap water and pressurizing it to 800 PSI with our high-pressure pump modules, we force water through a series of patented brass and stainless steel nozzles creating a micro-fine mist or fog. With droplets ranging in size from 4 - 40 microns, the fog flash evaporates, removing unwanted heat in the process. Temperature drops up to 40° Fahrenheit are typical in situations where high heat and low humidity exist.



The concept of fog and its benefits have been in use for over 50 years. While most commonly known for cooling, fog can be used for a variety of applications.



These products are marketed outside the United States, which subjects the Company to foreign currency fluctuation risks.





4.
        BORROWINGS

The Companys borrowings consist of a mortgage payable.



The mortgage payable was assumed by the Company on January 3, 2005 when the land, office and manufacturing facilities were contributed to the Company as additional paid in capital by the Companys majority stockholder (Notes 1 and5). The mortgage payable bears interest at 8.4%, contains no restrictions or debt covenants and provides for monthly principal and interest payments of $1,443 through May 30, 2006 at which time the remaining principal and all accrued interest shall be due and payable. On March 29, 2006, the Company received approval of a refinancing of this mortgage. The new mortgage will bear interest at 350 basis points over the five year Treasury Rate, will have a term of five years and principal and interest will be payable monthly based on a fifteen year amortization. Financial covenants have not yet been determined.






5.
        RELATED PARTY TRANSACTIONS

On January 3, 2005, the Companys majority stockholder contributed as additional paid in capital the land, office and manufacturing facilities located at 1808 South First Avenue, Phoenix, Arizona to the Company. Because this transaction is one between entities under common control, these facilities were recorded into the Companys books and records at the stockholders historical cost of $401,117. These facilities are security for a note payable (Note 4), which was also transferred to and assumed by the Company.



Additionally, the Companys majority stockholder entered in to an agreement whereby he assigned certain patent rights to the Company in exchange for 4,000,000 shares of the Companys convertible preferred stock (Note 2). These patent rights were also recorded at the stockholders historical cost of $50,218.



At January 1, 2003, the Company owed its majority stockholder $104,247 from advances, net of repayments, made in prior years. During the three months ended March 31, 2006, $8,708 of advances was repaid. During each of the years ended December 31, 2005 and 2004, the Company repaid $36,901 and $7,876, respectively, of these advances. The advances are unsecured, non-interest bearing and due upon demand as funds are available.



Also, at January 1, 2003, the Company owed another stockholder $153,064 from advances, net of repayments, made in prior years. During the three and six months ended June 30, 2005 and each of the years ended December 31, 2004 and 2003, the Company repaid $4,282, $9,921 and $9,437, respectively, of these advances. The advances were unsecured and payable with interest at 5.0% in monthly payments of $1,406 through March 2015. On May 30, 2005, the outstanding advances totaling $129,424  and expense reimbursement totaling $5,576 were repaid through the issuance of 540,000 common stock shares.



6. LEGAL MATTERS



The Company is subject to legal proceedings that arise in the ordinary course of business.



On January 16, 2006, Brian Hahn, COO, presented a proposed employment contract for Board of Directors approval. The Board, by unanimous vote, declined to approve the contract and part of a cost containment process, terminated Mr. Hahns services to the Company. Mr. Hahn filed suit alleging a contractual violation and requesting cash damages of $63,453.36 and common stock in the amount of 3,458,295 shares. The Company intends to vigorously defend the suit. The plaintiffs attorney as agreed to postponement of the Companys answer while good faith settlement discussions are ongoing. Management believes that a settlement will be reached that will not have a material affect on the financial statements. As of December 31, 2005, the Company accrued a loss contingency of $17,510 relating to this matter.









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



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS



The information set forth below should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part I- Item I of this Quarterly Report and the Companys Annual Report on Form 10-KSBfor the year ended December 31, 2005, which contains the audited consolidated financial statements and notes thereto and the Managements Discussion and Analysis of Financial Condition and Results of Operations for the December 31, 2005 Annual Report.



Some of the statements under Description of Business, Risk Factors, Managements Discussion and Analysis or Plan of Operation, and elsewhere in this Report and in the Companys periodic filings with the Securities and Exchange Commission constitute forward-looking statements. These statements involve known and unknown risks, significant uncertainties and other factors what may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward- looking statements. Such factors include, among other things, those listed under Risk Factors and elsewhere in this Report.



In some cases, you can identify forward-looking statements by terminology such as may, will, should, could, intends, expects, plans, anticipates, believes, estimates, predicts, potential or continue or the negative of such terms or other comparable terminology.



The forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties. Such forward-looking statements are based on assumptions that the Company will obtain or have access to adequate financing for each successive phase of its growth, that there will be no material adverse competitive or technological change in condition of the Companys business, that the Companys President and other significant employees will remain employed as such by the Company, and that there will be no material adverse change in the Companys operations, business or governmental regulation affecting the Company. The foregoing assumptions are based on judgments with respect to, among other things, further economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are
beyond the Companys control.



Although management believes that the expectations reflected in the forward-looking statements are reasonable, management cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither management nor any other persons assumes responsibility for the accuracy and completeness of such statements.



Plan of Operation



Universal Fog, Inc. was incorporated in the State of Arizona on July 11, 1996and was the successor of the business known as Arizona Mist, Inc. which began in 1989. On May 9, 2005, Universal Fog, Inc. entered into a Stock Purchase Agreement and Share Exchange (effecting a reverse merger) with Edmonds 6, Inc.(Edmonds 6) and its name was changed to Universal Fog, Inc. (hereinafter referred to as either UFI or the Company). Edmonds 6 was incorporated on August19, 2004 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. Pursuant to this agreement, Universal Fog, Inc. (which has been in continuous operation since 1996) became a wholly owned subsidiary of Edmonds 6.



The Company began manufacturing systems for outdoor cooling in Arizona and quickly expanded to distribute throughout the United States. As the Company grew, so did the need for more efficient, more effective, and higher quality commercial grade products.



All Universal Fog high pressure fog systems are custom designed and manufactured for each specific application. We incorporate three different types of tubing in our systems enabling us to comply with nearly any design requirement. Our low profile 3/8 flexible nylon tubing utilizes our patented SLIP-LOK brass fittings allowing



extreme versatility and easy installation. The use of 3/8high-pressure nitrogenized copper is aesthetically very pleasing and enables us to conceal our mist lines behind walls, such as stucco, and meet certain building code requirements. In addition, we also produce systems using 3/8stainless steel tubing, though copper systems are recommended, providing one of the most extensive product selections in the industry.



The concept is inherent in nature, such as water vapor, clouds, and fog, which manifest due to the earths environment. Universal Fog high pressure fog systems can create the same environment where and when you want it. Using normal tap water and pressurizing it to 800 PSI with our high-pressure pump modules, we force water through a series of patented brass and stainless steel nozzles creating a micro-fine mist or fog. With droplets ranging in size from 4  40 microns, the fog flash evaporates, removing unwanted heat in the process. Temperature drops up to 40°F are typical in situations where high heat and low humidity exist.



The concept of fog and its benefits have been in use for over 50 years. While most commonly known for cooling, fog can be used for a variety of applications.



The Company is currently investigating new sources of supply and is concentrating on controlling costs to enhance its profitability. The Company is fully staffed with highly qualified individuals to fulfill the current and increased demand for product. As a result of this staffing, the Company has increased its sales and production capabilities and believes the Company is well positioned to experience new growth. The Company believes there will not be any significant increase in selling, general and administrative expenses as it implements its business plan.



Results of Operations



Comparison of the Three-Month Periods Ended March 31, 2006 and 2005



Revenues. The Companys revenues are derived from the assembly of components used in misting systems and installations of these systems in commercial and residential applications and through the sales to distributors in various states and foreign countries.



Revenues for the three-month period ended March 31, 2006 were $139,289, compared to $102,264 for the three-month period ended March 31, 2005. While the first quarter of the year is historically slow, this increase was due to the acceptance by the market of a new 50 inch fan distributed by the Company and increased sales by Company sales people.



Cost of Sales. The Companys cost of sales consists of materials used in misting systems and labor for the assembly of components and in the local area; labor for installation.



Cost of sales for the three-month period ended March 31, 2006 were $83,701, compared to $30,769 for the three-month period ended March 31, 2006. The increase is the result of increased revenues and the allocation of direct labor which was not allocated in the corresponding quarter of 2005.



Operating Expenses. Operating expenses for the three-month period ended March 31, 2006 were $133,658 compared to $84,766 for the three-month period ended March 31, 2005 due to expenses of audit and filing a registration statement. Selling and marketing expenses increased to $4,223 during these three months in 2006 as compared to $860 for the same three months in 2005 due to additional advertising costs. General and Administrative expenses increased from $47,809 in the three-month period ended March 31, 2005 to $70,926 in the same period in 2006. This increase was also due to additional expenses of becoming a reporting company and the filing of a registration statement. Additional costs were legal and accounting and auditing. Compensation expense increased for the three-month period ended March 31, 2006 to $58,509 from $36,097 in the period ended March 31, 2005 due to increased sales of product and other
personnel costs.



Depreciation and Amortization. Depreciation and amortization are included in General and Administrative expenses. For the three-month period ended March 31, 2006, these costs were $5,598, compared to $4,860 for the three-month period ended March 31, 2005. This increase was due to the acquisition and amortization of our patents.







Liquidity and Capital Resources



We funded our cash requirements for the three-month period ended March 31, 2006 through operations and $40,972 from the sale of treasury stock. The Company does not have any material commitments for capital expenditures as of the date of this report. Management believes sufficient cash flow from operations and the sale of additional common stock will be available during the next twelve months to satisfy its short-term obligations.



Cash decreased by $13,792 during the three-month period ended March 31, 2006. Over the same period in 2005, cash increased by $11,743. During the three-month period ended March 31, 2006, our operating expenses were increased due to expenses of audit and attorney fees and the cost of the registration statement which gave UFI negative cash flow from operations of $16,086 and no cash flow from investing. This was offset by the net cash provided by financing activities of $2,294 giving UFI a net cash decrease of $13,792.



Since January 1, 2006, we have taken steps to lower our monthly operating costs and are currently incurring cash expenses in the amount of approximately $35,000 per month for all operations, of which fixed costs account for approximately $24,000. We anticipate cash expenditures of approximately $420,000 for the year ended December 31, 2006. Management is continuing to seek additional equity capital to fund its various activities and as part of a capital procurement plan, filed a form SB2 registration statement with the SEC on October 5, 2005 to sell 4,000,000 shares of its stock to the public. The filing is not currently effective and will expire on September 30, 2006. Management has also eliminated or reduced unnecessary costs



We believe our current liquidity and capital resources, together with the proceeds received in a public offering, when and if approved, our ongoing operations, and potential credit facilities are sufficient to support our ongoing business operations.



At March 31, 2006, UFI has a mortgage payable, which it assumed on January 3, 2005, on the office/production facility in the amount of $147,570.00. The mortgage bears interest at 8.4% with monthly principal and interest payments of $1,443.00 through May 30, 2006 at which time the remaining principal and all accrued interest shall be due and payable.  The principal and interest payment of $1,443.00 is current and being paid by UFI on a timely basis. On March 29, 2006, the Company received approval of a refinancing of this mortgage. The new mortgage will bear interest at 350 basis points over the five year Treasury Rate, will have a term of five years and principal and interest will be payable monthly based on a fifteen year amortization. Financial covenants have not yet been determined.



UFI has suffered an operating loss for the three-month period ending March 31, 2006 of $78,070. This loss was primarily the result of the expenses of becoming a reporting company, and include the cost of attorneys fees and audit and accounting fees. If UFI does not raise adequate funds from this offering, we will curtail our expansion plans and, if necessary, seek a line of credit secured by the building which will allow UFI to continue as a going concern as our core business should not be affected.



Related Party Transactions



On January 3, 2005, the Companys majority stockholder contributed as additional paid in capital the land, office and manufacturing facilities located at 1808 South First Avenue, Phoenix, Arizona to the Company. Because this transaction is one between entities under common control, these facilities were recorded into the Companys books and records at the stockholders historical cost of $401,117. These facilities are security for a note payable of $147,570, which was also transferred to and assumed by the Company. The net amount of $253,547 was recorded in the Companys books as additional paid in capital.



Additionally, the Companys majority stockholder entered in to an agreement whereby he assigned certain patent rights to the Company in exchange for 4,000,000 shares of the Companys convertible preferred stock (Note 2). These patent rights were also recorded at the stockholders historical cost of $50,218.





At January 1, 2003, the Company owed its majority stockholder $104,247 from
advances, net of repayments, made in prior years. During the three months ended
March 31, 2006, $8,708 of advances was repaid. During each of the years ended
December 31, 2005 and 2004, the Company repaid $36,901 and $7,876, respectively,
of these advances. The advances are unsecured, non-interest bearing and due upon
demand as funds are available.



Also, at January 1, 2003, the Company owed another stockholder $153,064 from advances, net of repayments, made in prior years. During the six months ended June 30, 2005 and each of the years ended December 31, 2004 and 2003, the Company repaid $4,282, $9,921 and $9,437, respectively, of these advances. The advances were unsecured and payable with interest at 5.0% in monthly payments of $1,406 through March 2015. On May 30, 2005, the outstanding advances totaling $129,424 and $5,576 of expense reimbursement were repaid through the issuance of 540,000 common stock shares.



Item 3. Controls and Procedures




(a)
        Evaluation of disclosure controls and procedures.

Our Chief Executive Officer and Chief Financial Officer (collectively the Certifying Officers) maintain a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management timely. Under the supervision and with the participation of management, the Certifying Officers evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)] under the Exchange Act) within 90 days prior to the filing date of this report. Based upon that evaluation, the Certifying Officers concluded that our disclosure controls and procedures are effective in timely alerting them to material information relative to our company required to be disclosed in our periodic filings with the SEC.




(b)
        Changes in internal controls.

None





PART II - OTHER INFORMATION




Item 1.
        Legal Proceedings.

The Company is subject to legal proceedings that arise in the ordinary course of business.



On January 16, 2005, Brian Hahn, COO, presented a proposed employment contract for Board of Directors approval. The Board, by unanimous vote, declined to approve the contract and part of a cost containment process, terminated Mr. Hahns services to the Company. Mr. Hahn filed suit alleging a contractual violation and requesting cash damages of $63,453.36 and common stock in the amount of 3,458,295 shares. The Company intends to vigorously defend the suit. The plaintiffs attorney as agreed to postponement of the Companys answer while good faith settlement discussions are ongoing. Management believes that a settlement will be reached that will not have a material affect on the financial statements. As of December 31, 2005, the Company has accrued a loss contingency of $17,510 relating to this matter.






Item 2.
        Changes in Securities.

None




Item 3.
        Defaults Upon Senior Securities.

None




Item 4.
        Submission of Matters to a Vote of Security Holders.

No matter was submitted during the quarter ending March 31, 2006, covered by this report to a vote of the Companys shareholders, through the solicitation of proxies or otherwise.






Item 5.
        Other Information.

None




Item 6.
        Exhibits and Reports of Form 8-K.


(a)
        Exhibits

31.1 Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002



32.1 Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002






(b)
        Reports of Form 8-K


August 29, 2005--8-K/A Change of Certifying AccountantsAugust 23, 2005--Audited Financial StatementsAugust 18, 2005--Change in Certifying AccountantsApril 25, 20068-K/A Change of Fiscal Year and      Unaudited March 31, 2005 Financial Statements





SIGNATURES



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




Universal Fog, Inc.Registrant




Date:   May, 12, 2006
        By: /s/ Tom BontemsTom BontemsPresident