----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

**(Mark      One)**

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

**SECURITIES      EXCHANGE ACT OF 1934**

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

**OR**

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

**SECURITIES      EXCHANGE ACT OF 1934**

**For      the transition period from ____________ to      ____________                **

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

**Universal      Capital Management, Inc.**

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

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

----

----

----

| **PART                I**                                                                              |   | **FINANCIAL                INFORMATION** |   |   |   |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|--------|--------|
| **Item                1.**                                                                             |   | **Financial                Statements**  |   |   |   |
|                                                                                                   |
|  UNIVERSAL                CAPITAL MANAGEMENT, INC.(A                BUSINESS DEVELOPMENT COMPANY) |
|  STATEMENT                OF ASSETS AND LIABILITIES                                               |

|                                                                                                    |   | October                31, 2006 |      | April                30, 2006 |   |
|---------------------------------------------------------------------------------------------------------|--------|---------------------------------|-----------|-------------------------------|--------|
|                                                                                                    |   | (Unaudited)                     |      | (Audited)                     |   |
| ASSETS                                                                                                  |   |                            |      |                          |   |
| Investment                in Securities, at fair value (cost: $5,904,928 and                $2,539,600) |   | $                               | 6,906,680 |                          | $      | 3,331,620 |   |
| Cash                and Cash Equivalents                                                                |   |                            | 38,960    |                          |   | 84,272 |   |
| Note                Receivable                                                                          |   |                            | 95,000    |                          |   | 60,000 |   |
| Due                from Portfolio Companies                                                             |   |                            | 54,720    |                          |   | 26,873 |   |
| Miscellaneous                Receivables                                                                |   |                            | 5,773     |                          |   | - |   |
| Due                from Affiliates                                                                      |   |                            | 35,148    |                          |   | 24,646 |   |
| Prepaid                Expenses                                                                         |   |                            | 7,666     |                          |   | 7,648 |   |
| Property                and Equipment, net                                                              |   |                            | 9,229     |                          |   | 10,178 |   |
| Rent                Deposit                                                                             |   |                            | 1,100     |                          |   | 1,100 |   |
| TOTAL                ASSETS                                                                             |   | $                               | 7,154,276 |                          | $      | 3,546,337 |   |
|                                                                                                    |   |                            |      |                          |   |   |   |
| LIABILITIES                                                                                             |   |                            |      |                          |   |   |   |
| Accounts                Payable and Accrued Expenses                                                    |   |                            | 545,643   |                          |   | 195,114 |   |
| Note                Payable                                                                             |   |                            | 325,000   |                          |   | 100,000 |   |
| Deferred                Revenue                                                                         |   |                            | 1,776,479 |                          |   | 939,433 |   |
| Deferred                Income Taxes                                                                    |   |                            | 454,500   |                          |   | 68,000 |   |
| TOTAL                LIABILITIES                                                                        |   | $                               | 3,101,622 |                          | $      | 1,302,547 |   |
|                                                                                                    |   |                            |      |                          |   |   |   |
| NET                ASSETS                                                                               |   | $                               | 4,052,654 |                          | $      | 2,243,790 |   |
|                                                                                                    |   |                            |      |                          |   |   |   |
| ANALYSIS                OF NET ASSETS:                                                                  |   |                            |      |                          |   |   |   |
| Net                Capital Paid in on Shares of Capital Stock                                           |   |                            | 3,363,602 |                          |   | 2,140,640 |   |
| Distributable                Earnings                                                                   |   |                            | 689,052   |                          |   | 103,150 |   |
| Net                Assets                                                                               |   | $                               | 4,052,654 |                          | $      | 2,243,790 |   |
|                                                                                                    |   |                            |      |                          |   |   |   |
| Equivalent                per share value based on 5,438,274 shares                                     |   |                            |      |                          |   |   |   |
| of                capital stock outstanding as of October 31, 2006                                      |   |                            |      |                          |   |   |   |
| and                4,917,634 shares of capital stock outstanding                                        |   |                            |      |                          |   |   |   |
| as                of April 30, 2006                                                                     |   | $                               | 0.75      |                          | $      | 0.46 |   |

----

|                                                                                                                                         |   |     |                                                          | %                of |   | Number                of |   |                      |        |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------------------------------------------------------------|---------------------|--------|--------------------------|--------|---------------------------|-------------|
| Common                Stocks & Other Investments United States - 100%                                                                    |   | Business |                                                          | Portfolio           |   | Shares                   |   | Fair                Value |        |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |
| BF                Acquisition Group V, Inc.*                                                                                                 |   |     | Inactive                company                               |                |   | 0.02                     | %      |                      | **100,000   |   | $ | 1,625 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| AccelaPure                Corporation*                                                                                                       |   |     | Bio-Pharma                and purification services           |                |   | 14.48                    | %      |                      | **1,000,000 |   |   | 1,000,000 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                          |   |                      |        |   |   |  |   |
| Creative                Energy Solutions, Inc.*                                                                                              |   |     | Develops                alternative energy technologies       |                |   | 14.48                    | %      |                      | **2,000,000 |   |   | 1,000,000 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| Extreme                Visual Technologies, Inc.*                                                                                            |   |     | Develops                unique graphics imaging technologies  |                |   | 28.96                    | %      |                      | **2,000,000 |   |   | 2,000,000 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| BroadRelay                Holdings, Inc.*                                                                                                    |   |     | High                speed internet media                      |                |   | 21.15                    | %      |                      | **1,304,401 |   |   | 1,460,929 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| Warrants                to purchase 200,000 shares of BroadRelay Holdings, Inc.* at an exercise                price of $0.65 per share***** |   |     | High                speed internet media                      |                |   | 2.56                     | %      |                      |        |   |   | 177,000 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| Warrants                to purchase 175,000 shares of BroadRelay Holdings, Inc.* at an exercise                price of $0.65 per share      |   |     | High                speed internet media                      |                |   | 3.19                     | %      |                      |        |   |   | 220,000 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| Subtotal                affiliated companies                                                                                                 |   |     |                                                          |                |   | 84.84                    | %      |                      |        |   |   | 5,859,554 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| IPI                Fundraising, Inc.                                                                                                         |   |     | Sales                and distribution of fundraising products |                |   | 0.00                     | %      |                      | 575,000     |   |   | - |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| Gelstat                Corporation                                                                                                           |   |     | Consumer                health care                           |                |   | 0.16                     | %      |                      | 221,429     |   |   | 11,071 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| Neptune                Industries, Inc.                                                                                                      |   |     | Seafood                production                             |                |   | 0.20                     | %      |                      | 47,619      |   |   | 13,810 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| Third                Order Nanotechnologies, Inc. (formerly PSI-TEC Holdings,                Inc.                                            |   |     | Plastics                engineering                           |                |   | 6.06                     | %      |                      | ***787,500  |   |   | 418,600 |   |
| Theatre                Xtreme Entertainment Group, Inc.                                                                                      |   |     | Home                theater sales/installation                |                |   | 8.74                     | %      |                      | ****575,936 |   |   | 603,645 |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
|                                                                                                                                         |   |     |                                                          |                |   |                     |   |                      |        |   |   |   |   |
| Total                (aggregate cost $5,904,928)                                                                                             |   |     |                                                          |                |   | 100.00                   | %      |                      |        |   | $ | 6,906,680 |   |

----

|                                                                                          |   | Three                months endedOctober                31, 2006 |     | Three                months endedOctober                31, 2005 |   | Six                months endedOctober                31, 2006 |   | Six                months endedOctober                31, 2005 |      |
|-----------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|----------|------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|----------------------------------------------------------------|-----------|
| Income                                                                                        |   |                                                             |     |                                                             |   |                                                           |   |                                                           |      |
| Management                Services                                                            |   | $                                                                | 907,055  |                                                             | $      | 243,000                                                        |   | $                                                              | 1,492,955 |   | $ | 243,000 |   |
| Interest                Income                                                                |   |                                                             | 11,814   |                                                             |   | -                                                              |   |                                                           | 18,335    |   |   | - |   |
|                                                                                          |   |                                                             | 918,869  |                                                             |   | 243,300                                                        |   |                                                           | 1,511,290 |   |   | 243,300 |   |
| Expenses                                                                                      |   |                                                             |     |                                                             |   |                                                           |   |                                                           |      |   |   |   |   |
| Bad                Debt                                                                       |   |                                                             | 543      |                                                             |   | -                                                              |   |                                                           | 543       |   |   | - |   |
| Depreciation                                                                                  |   |                                                             | 474      |                                                             |   | 119                                                            |   |                                                           | 949       |   |   | 950 |   |
| Dues                and Subscriptions                                                         |   |                                                             | -        |                                                             |   | 285                                                            |   |                                                           | -         |   |   | 420 |   |
| Fees                and Commissions                                                           |   |                                                             | 10,356   |                                                             |   | 5,358                                                          |   |                                                           | 13,938    |   |   | 9,561 |   |
| Interest                Expense                                                               |   |                                                             | 7,316    |                                                             |   | 466                                                            |   |                                                           | 9,036     |   |   | 929 |   |
| Insurance                                                                                     |   |                                                             | 18,313   |                                                             |   | 15,943                                                         |   |                                                           | 37,512    |   |   | 32,090 |   |
| Marketing                                                                                     |   |                                                             | 9,165    |                                                             |   | -                                                              |   |                                                           | 12,589    |   |   | 400 |   |
| Office                Expenses and Supplies                                                   |   |                                                             | 908      |                                                             |   | (760                                                           | )      |                                                           | 1,611     |   |   | 1,639 |   |
| Payroll                                                                                       |   |                                                             | 139,887  |                                                             |   | 125,192                                                        |   |                                                           | 258,272   |   |   | 232,500 |   |
| Payroll                Taxes                                                                  |   |                                                             | 6,528    |                                                             |   | 5,339                                                          |   |                                                           | 15,213    |   |   | 12,927 |   |
| Postage,                Delivery and Shipping                                                 |   |                                                             | 1,099    |                                                             |   | 711                                                            |   |                                                           | 1,855     |   |   | 1,706 |   |
| Professional                Fees                                                              |   |                                                             | 177,098  |                                                             |   | 60,409                                                         |   |                                                           | 696,746   |   |   | 155,263 |   |
| Rent                                                                                          |   |                                                             | 4,200    |                                                             |   | 4,300                                                          |   |                                                           | 8,400     |   |   | 8,200 |   |
| Share                Based Compensation Expense                                               |   |                                                             | 2,334    |                                                             |   | -                                                              |   |                                                           | 183,278   |   |   | - |   |
| Taxes                - Franchise                                                              |   |                                                             | 3,401    |                                                             |   | -                                                              |   |                                                           | 4,814     |   |   | - |   |
| Telephone                                                                                     |   |                                                             | 1,358    |                                                             |   | 741                                                            |   |                                                           | 2,164     |   |   | 1,874 |   |
| Travel                and Entertainment                                                       |   |                                                             | 7,963    |                                                             |   | 8,275                                                          |   |                                                           | 30,053    |   |   | 22,055 |   |
| Utilities                                                                                     |   |                                                             | 1,023    |                                                             |   | 593                                                            |   |                                                           | 1,684     |   |   | 1,397 |   |
|                                                                                          |   |                                                             | 391,966  |                                                             |   | 226,971                                                        |   |                                                           | 1,278,657 |   |   | 481,911 |   |
|                                                                                          |   |                                                             |     |                                                             |   |                                                           |   |                                                           |      |   |   |   |   |
| Income                (Loss) from Operations                                                  |   |                                                             | 526,902  |                                                             |   | 16,329                                                         |   |                                                           | 232,633   |   |   | (238,611 | ) |
|                                                                                          |   |                                                             |     |                                                             |   |                                                           |   |                                                           |      |   |   |   |   |
| Net                realized Gain on Dividend of Portfolio Stock                               |   |                                                             | **-**    |                                                             |   | **-**                                                          |   |                                                           | 343,924   |   |   | - |   |
|                                                                                          |   |                                                             |     |                                                             |   |                                                           |   |                                                           |      |   |   |   |   |
| Unrealized                Appreciation (Depreciation) on Investments                          |   |                                                             | 840,066  |                                                             |   | (62,734                                                        | )      |                                                           | 395,844   |   |   | (730,109 | ) |
|                                                                                          |   |                                                             |     |                                                             |   |                                                           |   |                                                           |      |   |   |   |   |
| Income                Tax Benefit (Provision)                                                 |   |                                                             | (543,300 | )                                                                |   | 16,900                                                         |   |                                                           | (386,500  | ) |   | 383,500 |   |
|                                                                                          |   |                                                             |     |                                                             |   |                                                           |   |                                                           |      |   |   |   |   |
| Net                Increase (Decrease) in Net Assets Resulting from                Operations |   | $                                                                | 823,668  |                                                             | $      | (29,505                                                        | )      | $                                                              | 585,901   |   | $ | (585,220 | ) |

----

| INCREASE                IN NET ASSETS FROM OPERATIONS               |   |   |      |
|---------------------------------------------------------------------|--------|--------|-----------|
| Income                from operations                               |   | $      | 232,633   |   |
| Unrealized                appreciation on investments, net of taxes |   |   | 9,344     |   |
| Net                realized gain on dividend of portfolio stock     |   |   | 343,924   |   |
|                                                                |   |   |      |   |
| NET                INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |   |   | 585,901   |   |
|                                                                |   |   |      |   |
| CAPITAL                SHARE TRANSACTIONS                           |   |   |      |   |
| Issuance                of Common Stock                             |   |   | 1,041,280 |   |
| Share-based                Compensation Expense                     |   |   | 183,278   |   |
| Stock                Options granted for operating Expenses         |   |   | 447,000   |   |
| Dividend                of Portfolio Stock                          |   |   | (448,595  | ) |
|                                                                |   |   |      |   |
| NET                CAPITAL SHARE TRANSACTIONS                       |   |   | 1,222,963 |   |
|                                                                |   |   |      |   |
| TOTAL                INCREASE                                       |   |   | 1,808,864 |   |
|                                                                |   |   |      |   |
| NET                ASSETS, BEGINNING OF YEAR                        |   |   | 2,243,790 |   |
|                                                                |   |   |      |   |
| NET                ASSETS, END OF PERIOD                            |   | $      | 4,052,654 |   |

----

|                                                                                          |   | Six                months endedOctober 31, 2006 |       | Six                months endedOctober 31, 2005 |   |
|-----------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|-------------------------------------------------|--------|
|                                                                                          |   |                                            |       |                                            |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES                                           |   |                                            |       |                                            |   |
| Net                increase (decrease) in net assets resulting from                operations |   | $                                               | 585,901    |                                            | $      | (585,220 | ) |
| 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   | )                                               |   | - |   |
| Stock                received for interest                                                    |   |                                            | (13,888    | )                                               |   | - |   |
| Investment                securities received in exchange for management services             |   |                                            | (1,462,955 | )                                               |   | (243,300 | ) |
| Depreciation                expense                                                           |   |                                            | 949        |                                            |   | 950 |   |
| Share                based compensation expense                                               |   |                                            | 183,278    |                                            |   | - |   |
| Stock                options granted for operating expenses                                   |   |                                            | 447,000    |                                            |   | - |   |
| Net                unrealized (appreciation) depreciation on investments                      |   |                                            | (395,844   | )                                               |   | 730,109 |   |
| Deferred                Income Taxes                                                          |   |                                            | 386,500    |                                            |   | (383,500 | ) |
| Net                changes in miscellaneous receivables                                       |   |                                            | (5,773     | )                                               |   | (19,050 | ) |
| Net                changes in due from portfolio companies                                    |   |                                            | (27,847    | )                                               |   | - |   |
| Net                changes in due from affiliates                                             |   |                                            | (10,500    | )                                               |   | 9,395 |   |
| Prepaid                expenses                                                               |   |                                            | (18        | )                                               |   | 1,596 |   |
| Net                changes in accounts payable and accrued expenses                           |   |                                            | 350,529    |                                            |   | (22,432 | ) |
| Net                cash used in operating activities                                          |   |                                            | (306,592   | )                                               |   | (511,452 | ) |
|                                                                                          |   |                                            |       |                                            |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                           |   |                                            |       |                                            |   |   |   |
| Increase                in notes receivable                                                   |   |                                            | (55,000    | )                                               |   | - |   |
| Net                cash used in investing activities                                          |   |                                            | (55,000    | )                                               |   | - |   |
|                                                                                          |   |                                            |       |                                            |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES                                           |   |                                            |       |                                            |   |   |   |
| Proceeds                from issuance of debt                                                 |   |                                            | 325,000    |                                            |   | - |   |
| Repayment                of debt                                                              |   |                                            | (250,000   | )                                               |   | - |   |
| Proceeds                from issuance of common stock                                         |   |                                            | 241,280    |                                            |   | 453,600 |   |
| Net                cash provided by financing activities                                      |   |                                            | 316,280    |                                            |   | 453,600 |   |
|                                                                                          |   |                                            |       |                                            |   |   |   |
| NET                INCREASE (DECREASE) IN CASH                                                |   |                                            | (45,312    | )                                               |   | (57,852 | ) |
|                                                                                          |   |                                            |       |                                            |   |   |   |
| CASH                AND CASH EQUIVALENTS, BEGINNING OF YEAR                                   |   |                                            | 84,272     |                                            |   | 158,453 |   |
|                                                                                          |   |                                            |       |                                            |   |   |   |
| CASH                AND CASH EQUIVALENTS, END OF PERIOD                                       |   | $                                               | 38,960     |                                            | $      | 100,601 |   |

**NON-CASHINVESTING      AND FINANCING ACTIVITIES:**

**July      2006, common stock was issued upon exercise of stock options granted for      services rendered. **

**The      stock was issued in exchange for a note receivable in the face amount of      $800,000. In October 2006, the note receivable was exchanged for 1,000,000      shares of Extreme Visual Technologies, Inc. stock valued at $1.00 per share.      **

**In      October 2006, a $20,000 note receivable to BroadRelay Holdings, Inc. was      converted into 40,000 shares of BroadRelay Holdings, Inc. **

----

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

**Basis        of Presentation**

**Nature        of Business**

**Security        Valuations**

**Use        of Estimates**

**Cash        and Equivalents**

----

**Note        1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED**

**Property        and Equipment**

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

**Income        Taxes**

**Stock-Based        Compensation**

*.*

**Reclassifications**

----

**NOTE        2 - INVESTMENTS**

|                                                                                                     |   | Number                  of      |      |   |   |                           |   |                           |      |
|----------------------------------------------------------------------------------------------------------|--------|---------------------------------|-----------|--------|--------|--------------------------------|--------|--------------------------------|-----------|
|                                                                                                     |   | Shares                  held at |      |   |   | Value                  at      |   | Unrealized                     |      |
|                                                                                                     |   | Oct.                  31, 2006  |      | Cost   |   | Oct.                  31, 2006 |   | Gain                  / (Loss) |      |
|                                                                                                     |   |                            |      |   |   |                           |   |                           |      |
| Affiliated                  Securities*                                                                  |   |                            |      |   |   |                           |   |                           |      |   |   |   |   |
|  BF                  Acquisition Group V, Inc.                                                      |   |                            | 100,000   |   | $      | 1,625                          |   | $                              | 1,625     |   | $ | - |   |
|  AccelaPure                  Corporation                                                            |   |                            | 1,000,000 |   |   | 1,000,000                      |   |                           | 1,000,000 |   |   | - |   |
|  Creative                  Energy Solutions, Inc.                                                   |   |                            | 2,000,000 |   |   | 1,000,000                      |   |                           | 1,000,000 |   |   | - |   |
|  Extreme                  Visual Technologies, Inc.                                                 |   |                            | 2,000,000 |   |   | 1,813,888                      |   |                           | 2,000,000 |   |   | 186,112 |   |
|  BroadRelay                  Holdings, Inc.                                                         |   |                            | 1,304,401 |   |   | 511,100                        |   |                           | 1,460,929 |   |   | 949,829 |   |
| Warrants                  to Purchase 200,000 shares of BroadRelay Holdings,                  Inc.  |   |                            |      |   |   |                           |   |                           |      |   |   |   |   |
| Warrants                  expiring December 15, 2006                                                     |   |                            | 200,000   |   |   | -                              |   |                           | 177,000   |   |   | 177,000 |   |
| Warrants                  expiring July 15, 2011                                                         |   |                            | 150,000   |   |   | -                              |   |                           | 220,000   |   |   | 220,000 |   |
|                                                                                                     |   |                            |      |   |   |                           |   |                           |      |   |   |   |   |
| Total                  Affiliated Securities                                                             |   |                            |      |   |   | 4,326,613                      |   |                           | 5,859,554 |   |   | 1,532,941 |   |
|                                                                                                     |   |                            |      |   |   |                           |   |                           |      |   |   |   |   |
| Non-affiliated                  Securities                                                               |   |                            |      |   |   |                           |   |                           |      |   |   |   |   |
|  IPI                  Fundraising, Inc                                                              |   |                            | 575,000   |   |   | 6,625                          |   |                           | -         |   |   | (6,625 | ) |
|  Gelstat                  Corporation                                                               |   |                            | 221,429   |   |   | 350,000                        |   |                           | 11,071    |   |   | (336,929 | ) |
|  Neptune                  Industries, Inc.                                                          |   |                            | 47,619    |   |   | 20,000                         |   |                           | 13,810    |   |   | (6,190 | ) |
|  Third                  Order Nanotechnologies, Inc.**                                              |   |                            | 787,500   |   |   | 619,000                        |   |                           | 418,600   |   |   | (200,400 | ) |
|  Theater                  Xtreme Entertainment Group, Inc.                                          |   |                            | 575,936   |   |   | 396,578                        |   |                           | 603,645   |   |   | 207,067 |   |
|                                                                                                     |   |                            |      |   |   |                           |   |                           |      |   |   |   |   |
| Total                  Non-Affiliated Securities                                                         |   |                            |      |   |   | 1,392,203                      |   |                           | 1,047,126 |   |   | (345,077 | ) |
|                                                                                                     |   |                            |      |   |   |                           |   |                           |      |   |   |   |   |
| Total                  Securities                                                                        |   |                            |      |   | $      | 5,718,816                      |   | $                              | 6,906,680 |   | $ | 1,187,864 |   |

----

**NOTE        3 - INCOME TAXES**

| Deferred:                             |   |   |    |   |
|---------------------------------------|--------|--------|---------|--------|
| Federal                               |   | $      | 301,800 |   |
| State                                 |   |   | 84,700  |   |
|                                  |   |   |    |   |
|  Total                  Deferred |   | $      | 386,500 |   |

| Income                  tax at statutory rate             |   | $      | 330,600 |   |
|-----------------------------------------------------------|--------|--------|---------|--------|
| State                  income taxes, net of federal taxes |   |   | 55,900  |   |
|                                                      |   |   |    |   |
|                                                      |   | $      | 386,500 |   |

| Unrealized                  gains   |   | $      | 472,100 |   |
|-------------------------------------|--------|--------|---------|--------|
| Net                  operating loss |   |   | (17,600 | )      |
|                                |   |   |    |   |
|  Total                         |   | $      | 454,500 |   |

----

**NOTE        4 - DUE FROM AFFILIATES**

|                                                  |   |    |   |
|-------------------------------------------------------|--------|--------------|--------|
| Due                  from BF Acquisition Group V, Inc |   | $            | 35,148 |   |
|                                                  |   |         |   |   |
|  Total                                           |   | $            | 35,148 |   |

**NOTE        5 - SUBSCRIPTION AGREEMENT**

**NOTE        6 - NOTES PAYABLE**

**NOTE        7 - EMPLOYEE STOCK OPTIONS**

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**NOTE        8 - CAPITAL SHARE TRANSACTIONS**

** **

**NOTE        9 - FINANCIAL HIGHLIGHTS**

| Per                  Share Operating Performance                       |   |   |   |   |
|------------------------------------------------------------------------|--------|--------|--------|--------|
| Net                    asset value, beginning of period                |   | $      | 0.46   |   |
|                                                                   |   |   |   |   |
| Income                    from operations, net of tax benefit          |   |   | 0.03   |   |
| Unrealized                    appreciation on investment, net of taxes |   |   | 0.04   |   |
| Realized                    gain on dividend of portfolio stock        |   |   | 0.03   |   |
|                                                                   |   |   | 0.10   |   |
| Add                    capital share transactions                      |   |   | 0.19   |   |
| Net                    asset value, end of period                      |   | $      | 0.75   |   |
| Total                    Return                                        |   |   | 7.3    | %      |
| Average                    Net Assets as a percentage of :             |   |   |   |   |
| Expenses                    (annualized)                               |   |   | 80.2   | %      |
|                                                                   |   |   |   |   |
| Management                    income (annualized)                      |   |   | 93.7   | %      |

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**Item        2. **

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

**Business        Overview**

----

**Financial        Condition**

| ·   | The                increase in unrealized appreciation on investments of approximately                $396,000 mainly due to an increase in value of shares of BroadRelay                Holdings, Inc. and Theater Xtreme Entertainment Group, Inc. and an                increase in the value of 200,000 BroadRelay Holdings, Inc. warrants                that                expire in December 2006, offset in part by a decrease in the value                of the                shares of Gelstat Corporation, Neptune Industries, Inc. and Third                Order                Nanotechnologies, Inc. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                increase of 340,000 shares in the Company’s investment in BroadRelay                Holdings, Inc. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company’s investment in 1,000,000 shares of Extreme Visual Technologies,                Inc., a private company. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Company’s investment in 2,000,000 shares of Creative Energy Solutions,                Inc., a private company. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                acquisition of 150,000 BroadRelay Holdings, Inc. warrants that expire                in                July 2011. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                increase in notes receivable of $35,000. |
|--------------------|-------------------------------------------------------------|
| ·   | The                increase in amounts due from portfolio companies of approximately                $28,000. |
|--------------------|--------------------------------------------------------------------------------------------------------------|

----

| ·   | The                increase in accounts payable and accrued expenses of approximately                $350,000 which is due mainly to an increase in accrued payroll and                payroll                taxes of approximately $224,000. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                increase in notes payable of $225,000. |
|--------------------|-----------------------------------------------------------|
| ·   | The                increase in deferred revenue of approximately $837,000 which is due                mainly                to an increase in deferred revenue of $1,000,000 for Extreme Visual                Technologies, Inc. which the Company will earn over a twelve month                period                beginning July 12, 2006 and an increase in deferred revenue of $1,000,000                for Creative Energy Solutions, Inc. which the Company will earn over                a six                month period beginning August 1, 2006 offset by a decrease in deferred                revenue of approximately $1,163,000 ( $500,000 for Creative Energy                Solutions, Inc., $307,000 for Extreme Visual Technologies, Inc.,                $250,000                for Accelapure Corporation and $106,000 for Third Order Nanotechnologies,                Inc. ) which was earned during the                period. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                increase in deferred taxes of $387, 000. |
|--------------------|-------------------------------------------------------------|
| ·   | The                sale of 120,640 of the Company’s common shares for proceeds of                $241,280. |
|--------------------|------------------------------------------------------------------------------------------------------------------|
| ·   | In                May, 2006 the Company granted to a stockholder of the Company options                to                purchase 400,000 shares of the Company’s common stock at an exercise price                of $2.00 per share. On June 15, 2006 this stockholder exercised the                option                in full and paid for the shares with a promissory note in the face                amount                of $800,000. The promissory note bore interest at 4.8% per annum,                called                for monthly payments of principal and interest over 12 months, and                was                secured by a pledge of the purchased shares. If any installment of                principal or interest was not paid within fifteen (15) days of the                date                when due, the Company may have declared all remaining installments                of                principal immediately due and payable and proceeded to collect the                same at                once. Under accounting rules applicable to the Company the face amount                of                this receivable was not included in the July 31, 2006 balance sheet                because the note had not been paid. On October 25, 2006, the Company                entered into an agreement with the above shareholder to accept 1,000,000                shares of Extreme Visual Technologies, Inc. common stock in exchange                for                $800,000 principal and $13,888 interest on the promissory note. The                remaining value of $186,112 has been accounted for as unrealized                appreciation on investments. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | 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 October 31, 2006 compared to the three months ended October 31,      2005.**

**Six      months ended October 31, 2006 compared to the six months ended October 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        4.**
**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 Grant.*                                                                                                                                                                                               |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                            |
| 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 Davis M. Bovi payable to the order                of the                Company. ***                                                                                                 |
|   |                                                                                                                                                                                                                                            |
| 10.4   | Security                Agreement dated June 15, 2006 between the Company and David M. Bovi.                ***                                                                                                                                 |
|   |                                                                                                                                                                                                                                            |
| 10.5   | Distribution                of portfolio company shares on August 11, 2006. ****                                                                                                                                                                |
|   |                                                                                                                                                                                                                                            |
| 10.6   | Stock                Transfer Agreement dated October 25, 2006 by and 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 Executive                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 dated May 15,                2006. |
|---|---------------------------------------------------------------------------------------------------------------|

| ** | Incorporated                by reference to the Current Report on Form 8-K dated May 16,                2006. |
|----|---------------------------------------------------------------------------------------------------------------|

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

| **** | Incorporated                by reference to the Current Report on Form 8-K dated August 11,                2006. |
|------|------------------------------------------------------------------------------------------------------------------|

| ***** | Incorporated                by reference to the Current Report on Form 8-K dated October 25,                2006. |
|-------|-------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                                      |                                              |                                         |
|-------------------------------------------|---------------------------------------------------|----------------------------------------------|
|                                      | Universal                Capital Management, Inc. |
|                                 |                                         |                                    |
| Date: December              13, 2006 | By:                                     | /s/ Michael              D. Queen  |
|                                      | Michael              D. Queen, President          |

|                                      |                                      |                                          |
|-------------------------------------------|-------------------------------------------|-----------------------------------------------|
| Date: December              13, 2006 | By:                             | /s/ Joseph              T. Drennan  |
|                                      | Joseph              T. Drennan, Treasurer |

----