THE CENTRAL REGIONS OF ACTIVE GALAXIES ARE KNOWN TO CONTAIN CLUMPY GAS INCLUDING SUPERSONIC CLOUDS. FAST MOVING CLOUDS ARE ALSO OBSERVED IN GALACTIC WINDS. CLOUDS ARE IN FACT CENTRAL COMPONENTS OF UNIFICATION MODELS FOR ACTIVE GALACTIC NUCLEI (AGN) AND FORM THE BASIS OF MANY PHOTOIONIZATION AND DYNAMICAL MODELLING EFFORTS. HOWEVER DESPITE MANY YEARS OF INTENSIVE STUDIES THE ORIGIN AND DYNAMICS OF CLOUDS REMAIN UNCERTAIN MOSTLY BECAUSE MULTI-DIMENSIONAL GEOMETRICAL EFFECTS AND THE RADIATION-HYDRODYNAMICS AND -MAGNETODYNAMICS ARE POORLY UNDERSTOOD. WE PROPOSE TO CONTINUE OUR QUEST TO DEVELOP A COMPREHENSIVE AND QUANTITATIVE THEORY FOR CLOUD FORMATION DESTRUCTION AND ACCELERATION BASED ON HIGH RESOLUTION LOCAL SIMULATIONS. OUR EARLIER SIMULATIONS SHOWED FROM FIRST PRINCIPLES THAT THERMAL INSTABILITY AND RADIATION PRESSURE CAN FACILITATE THE FORMATION REGENERATION AND ACCELERATION OF CLOUDS. HOWEVER THESE SIMULATIONS DID NOT CAPTURE SOME IMPORTANT PHYSICAL AND GEOMETRICAL ASPECTS OF CLOUDS AS THEY WERE ONE- AND TWO-DIMENSIONAL AND NEGLECTED MAGNETIC FIELDS. HERE WE PROPOSE TO MAKE THREE NATURAL YET TRANSFORMATIVE EXTENSIONS OF OUR EARLIER WORK: 1) ADD MAGNETIC FIELDS AND ANISOTROPIC CONDUCTION; 2) CARRY OUT THE SIMULATIONS IN THREE-DIMENSIONS; AND 3) COMPUTE MANY OBSERVATIONAL DIAGNOSTICS SUCH AS PROFILES OF THE OPTICAL UV AND X-RAY LINES EMISSION LINE RATIOS AND BROAD-BAND CONTINUUM SPECTRA. THE RESULTS OF THIS PROJECT WILL REVEAL THE BASIC PHYSICAL PROPERTIES OF FLOWS IN AGN WITH UNPRECEDENTED ACCURACY AND DETAIL. THE OBSERVATIONAL DIAGNOSTICS WILL BE COMPARED WITH OBSERVATIONS BY BOTH CURRENT NASA MISSIONS SUCH AS HST CHANDRA SPITZER SWIFT AND NUSTAR AS WELL AS FUTURE MISSIONS SUCH AS JWST.