Table of Contents





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

---

# FORM
10-QSB

---

|                                               | 
|---------------------------------------------- | 
|xQUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
|THE SECURITIES EXCHANGE
  ACT OF 1934         

For
the quarterly period ended September 30, 2006

|                                                | 
|----------------------------------------------- | 
|oTRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
|THE SECURITIES EXCHANGE
  ACT OF 1934          

For the transition
period from _________ to _________

Commission
File Number :0-7475

|                   
|-------------------
|                   
|                   
|NATURE VISION, INC.

(Exact name of
small business issuer as specified in its charter)


|                                  |  |                    
|--------------------------------- |  | -------------------
|Minnesota                         |  | 41-0831186         
|(State or other
  jurisdiction of |  | (I.R.S. Employer   
|incorporation or
  organization)  |  | Identification No.)

213 NW 4th StreetBrainerd,
MN  56401
(Address of principal executive offices)

(218) 825-0733
(Issuers telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such requirements for the past 90 days. Yes x   No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
 Yes o   Nox

The number of shares of issuers common stock, par value $0.16 per share, outstanding as of November 14,
2006, was 2,217,887. The registrant has no other classes of securities outstanding.

Transitional Small Business Disclosure Format (Check
one): Yes o   No x







|                    |  | 
|------------------- |  | 
|NATURE VISION, INC.
|INDEX              
|                    |  | 

|        |            |                                                                                                     |  |            
|------- | ---------- | --------------------------------------------------------------------------------------------------- |  | -----------
|PART I  |            |                                                                                                     |  | Page Number
|        |            |                                                                                                     |  |            
|        |            |                                                                                                     |  |            
|        | Item 1:    | Financial Information                                                                               |  | 1          
|        |            |                                                                                                     |  |            
|        |            | Consolidated Balance Sheet -
  September 30, 2006 and December 31, 2005                             |  | 1          
|        |            |                                                                                                     |  |            
|        |            | Consolidated
  Statements of Operations - Three and Nine Months Ended September 30, 2006 and
  2005 |  | 2          
|        |            |                                                                                                     |  |            
|        |            | Consolidated Statements of Cash
  Flows - Nine Months Ended September 30, 2006 and 2005             |  | 3          
|        |            |                                                                                                     |  |            
|        |            | Notes to Consolidated Financial
  Statements                                                        |  | 4          
|        |            |                                                                                                     |  |            
|        | Item 2:    | Managements Discussion and Analysis
  of Financial Condition and Results of Operations             |  | 18         
|        |            |                                                                                                     |  |            
|        | Item 3:    | Controls and Procedures                                                                             |  | 27         
|        |            |                                                                                                     |  |            
|PART II |            |                                                                                                     |  |            
|        |            |                                                                                                     |  |            
|        | Item 6:    | Exhibits                                                                                            |  | 28         
|        |            |                                                                                                     |  |            
|        | Signatures |                                                                                                     |  | 29         

i

---



Table of Contents

Part I

Item 1: Financial Information

Nature Vision, Inc. and SubsidiariesConsolidated Balance Sheets (Unaudited)
September 30, 2006 and December 31, 2005

|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | -------------------------------- | - | ---------- | 
|ASSETS                                                                                                                                                                                 |  | Unaudited
  September 30, 2006 |            | Reclassified
  December 31, 2005 |  
|                                                                                                                                                                                       |  |                                |            |                                  |  
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|CURRENT ASSETS                                                                                                                                                                         |  |                                |            |                                  |   |            | 
|Cash and Cash Equivalents                                                                                                                                                              |  | $                              |           |                                  | $ |           | 
|Accounts Receivable, net                                                                                                                                                               |  |                                | 2,438,843  |                                  |   | 3,672,353  | 
|Inventories, net                                                                                                                                                                       |  |                                | 7,627,878  |                                  |   | 6,240,912  | 
|Prepaid Expenses                                                                                                                                                                       |  |                                | 396,585    |                                  |   | 373,459    | 
|Deferred Income Taxes                                                                                                                                                                  |  |                                | 1,040,000  |                                  |   | 350,000    | 
|Current assets of discontinued operations                                                                                                                                              |  |                                | 1,942,327  |                                  |   | 2,117,090  | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|Total Current Assets                                                                                                                                                                   |  |                                | 13,445,633 |                                  |   | 12,753,814 | 
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|PROPERTY AND EQUIPMENT, NET                                                                                                                                                            |  |                                | 2,001,674  |                                  |   | 1,314,913  | 
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|NON-CURRENT ASSETS                                                                                                                                                                     |  |                                |            |                                  |   |            | 
|Building and Land Held for Sale, Net                                                                                                                                                   |  |                                | 565,462    |                                  |   | 1,200,001  | 
|Other assets of discontinued operations                                                                                                                                                |  |                                | 14,098     |                                  |   | 14,098     | 
|Cash Value Life Insurance                                                                                                                                                              |  |                                | 147,764    |                                  |   | 135,698    | 
|Deferred Income Taxes                                                                                                                                                                  |  |                                | 435,746    |                                  |   | 435,746    | 
|Intangibles - net                                                                                                                                                                      |  |                                | 117,841    |                                  |   | 95,483     | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|Total Non-Current Assets                                                                                                                                                               |  |                                | 1,280,911  |                                  |   | 1,881,026  | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|TOTAL ASSETS                                                                                                                                                                           |  | $                              | 16,728,218 |                                  | $ | 15,949,753 | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                   |  |                                |            |                                  |   |            | 
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|CURRENT LIABILITIES                                                                                                                                                                    |  |                                |            |                                  |   |            | 
|Checks issued in excess of cash in bank                                                                                                                                                |  | $                              | 361,278    |                                  | $ | 377,552    | 
|Current Portion Contract Payable Vaddio                                                                                                                                                |  |                                | 445,501    |                                  |   | 462,420    | 
|Current Portion of Long-Term Debt                                                                                                                                                      |  |                                | 0          |                                  |   | 55,649     | 
|Current Portion of Deferred Retirement
  Benefits                                                                                                                                      |  |                                | 71,400     |                                  |   | 71,400     | 
|Line of Credit, Bank                                                                                                                                                                   |  |                                | 5,125,000  |                                  |   | 2,230,000  | 
|Account Payable                                                                                                                                                                        |  |                                | 1,117,076  |                                  |   | 1,481,334  | 
|Accrued Payroll and Payroll Taxes                                                                                                                                                      |  |                                | 289,888    |                                  |   | 483,352    | 
|Accrued Expenses                                                                                                                                                                       |  |                                | 703,036    |                                  |   | 690,324    | 
|Income Taxes Payable                                                                                                                                                                   |  |                                | 0          |                                  |   | 2,000      | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|Total Current Liabilities                                                                                                                                                              |  |                                | 8,113,179  |                                  |   | 5,854,031  | 
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|LONG-TERM LIABILITIES                                                                                                                                                                  |  |                                |            |                                  |   |            | 
|Long-term Debt, Net of Current Portion                                                                                                                                                 |  |                                | 0          |                                  |   | 387,016    | 
|Deferred Retirement Benefits                                                                                                                                                           |  |                                | 575,507    |                                  |   | 651,725    | 
|Contract Payable Vaddio, Net of Current
  Portion                                                                                                                                      |  |                                | 0          |                                  |   | 250,431    | 
|Deferred Income Taxes                                                                                                                                                                  |  |                                | 514,200    |                                  |   | 514,200    | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|Total Non-Current Liabilities                                                                                                                                                          |  |                                | 1,089,707  |                                  |   | 1,803,372  | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|Total Liabilities                                                                                                                                                                      |  |                                | 9,202,886  |                                  |   | 7,657,403  | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|STOCKHOLDERS EQUITY                                                                                                                                                                   |  |                                |            |                                  |   |            | 
|Common Stock, $.16 Par Value per Share
  25,000,000 Shares Authorized Common Shares Issued and Outstanding at
  September 30, 2006 were 2,217,887 and December 31, 2005 were 2,178,887 |  |                                | 354,862    |                                  |   | 348,620    | 
|Additional Paid-In Capital                                                                                                                                                             |  |                                | 6,698,487  |                                  |   | 6,436,409  | 
|Retained Earnings                                                                                                                                                                      |  |                                | 471,983    |                                  |   | 1,507,321  | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|Total Stockholders Equity                                                                                                                                                             |  |                                | 7,525,332  |                                  |   | 8,292,350  | 
|                                                                                                                                                                                       |  |                                |            |                                  |  
|                                                                                                                                                                                       |  |                                |            |                                  |   |            | 
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                             |  | $                              | 16,728,218 |                                  | $ | 15,949,753 | 
|                                                                                                                                                                                       |  |                                |            |                                  |  

See accompanying notes to consolidated
financial statements.

1

---



Table of Contents

Nature
Vision, Inc. and SubsidiariesConsolidated
Statements of Operations (Unaudited)Three and Nine Months Ended September 30,
2006 and 2005

|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|------------------------------------------------------------- |  | --------------------------------- | --------- | -------------------------------- | - | --------- | - | ---- | ---------- | - | - | ---------- | -
|                                                              |  | Three
  Months Ended September 30 |           | Nine
  Months Ended September 30 |  
|                                                              |  | 2006                              |           | 2005                             |   | 2006      |   | 2005 |           
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|SALES, NET                                                    |  | $                                 | 4,143,757 |                                  | $ | 3,879,034 |   | $    | 10,371,848 |   | $ | 10,846,394 |  
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|COST OF GOODS SOLD                                            |  |                                   | 2,753,662 |                                  |   | 2,552,516 |   |      | 7,025,421  |   |   | 7,747,232  |  
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|GROSS PROFIT                                                  |  |                                   | 1,390,095 |                                  |   | 1,326,518 |   |      | 3,346,427  |   |   | 3,099,162  |  
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES                |  |                                   | 1,743,970 |                                  |   | 1,072,379 |   |      | 5,058,215  |   |   | 3,196,404  |  
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|INCOME(LOSS) FROM OPERATIONS                                  |  |                                   | (353,875  | )                                |   | 254,139   |   |      | (1,711,788 | ) |   | (97,242    | )
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|OTHER INCOME(EXPENSE)                                         |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Interest Expense                                              |  |                                   | (98,985   | )                                |   | (45,187   | ) |      | (273,917   | ) |   | (72,687    | )
|Interest Income                                               |  |                                   | 0         |                                  |   | 2         |   |      | 0          |   |   | 519        |  
|Gain on Sale of Property and Equipment                        |  |                                   | (5,275    | )                                |   | 0         |   |      | 8,608      |   |   | 0          |  
|Other Income                                                  |  |                                   | (5        | )                                |   | 5,154     |   |      | 43,523     |   |   | 13,632     |  
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|Net Other Expenses                                            |  |                                   | (104,265  | )                                |   | (40,031   | ) |      | (221,786   | ) |   | (58,536    | )
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|INCOME(LOSS) BEFORE TAXES                                     |  |                                   | (458,140  | )                                |   | 214,108   |   |      | (1,933,574 | ) |   | (155,778   | )
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|PROVISION FOR INCOME TAX EXPENSE(REFUND)                      |  |                                   | (184,000  | )                                |   | 104,000   |   |      | (767,000   | ) |   | (30,000    | )
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|INCOME (LOSS) FROM CONTINUING
OPERATIONS                      |  |                                   | (274,140  | )                                |   | 110,108   |   |      | (1,166,574 | ) |   | (125,778   | )
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|GAIN (LOSS) FROM DISCONTINUED
OPERATIONS                      |  |                                   | (13,282   | )                                |   | 193,522   |   |      | 131,236    |   |   | 392,078    |  
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|NET INCOME(LOSS)                                              |  | $                                 | (287,422  | )                                | $ | 303,630   |   | $    | (1,035,338 | ) | $ | 266,300    |  
|                                                              |  |                                   |           |                                  |   |           |   |      |           
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Income(Loss) per Common Share                                 |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Basic                                                         |  | $                                 | (0.13     | )                                | $ | 0.14      |   | $    | (0.47      | ) | $ | 0.12       |  
|Diluted                                                       |  | $                                 | (0.13     | )                                | $ | 0.13      |   | $    | (0.47      | ) | $ | 0.12       |  
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Income (Loss) from Continuing Operations
  per Common Share   |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Basic                                                         |  | $                                 | (0.12     | )                                | $ | 0.05      |   | $    | (0.53      | ) | $ | (0.06      | )
|Diluted                                                       |  | $                                 | (0.12     | )                                | $ | 0.05      |   | $    | (0.53      | ) | $ | (0.06      | )
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Income (Loss) from Discontinued Operations
  per Common Share |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Basic                                                         |  | $                                 | (0.01     | )                                | $ | 0.09      |   | $    | 0.06       |   | $ | 0.18       |  
|Diluted                                                       |  | $                                 | (0.01     | )                                | $ | 0.08      |   | $    | 0.06       |   | $ | 0.18       |  
|                                                              |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Weighted Average Common Shares                                |  |                                   |           |                                  |   |           |   |      |            |   |   |            |  
|Basic                                                         |  |                                   | 2,217,887 |                                  |   | 2,178,877 |   |      | 2,212,764  |   |   | 2,178,877  |  
|Diluted                                                       |  |                                   | 2,217,887 |                                  |   | 2,255,648 |   |      | 2,212,764  |   |   | 2,229,423  |  

See accompanying notes to consolidated
financial statements.

2

---



Table of Contents

Nature
Vision, Inc. and SubsidiariesConsolidated Statements of Cash Flows (Unaudited)Nine Months Ended September 30, 2006 and 2005

|                                                                                |  |      |            |      |   |            |  
|------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                |  | 2006 |            | 2005 |  
|                                                                                |  |      |            |      |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                            |  |      |            |      |   |            |  
|Net Income (Loss)                                                               |  | $    | (1,035,338 | )    | $ | 266,300    |  
|Adjustments to reconcile net loss to net
  cash flows from operating activities |  |      |            |      |   |            |  
|Depreciation and Amortization                                                   |  |      | 384,208    |      |   | 300,891    |  
|Gain on Disposal of Property and Equipment                                      |  |      | (8,608     | )    |   | 0          |  
|Provision for Deferred Income Taxes                                             |  |      | (690,000   | )    |   | 0          |  
|Change in Deferred Retirement Benefits                                          |  |      | (30,529    | )    |   | (86,167    | )
|Change in Bad Debt Reserve                                                      |  |      | 0          |      |   | 0          |  
|Changes in Operating Assets and Liabilities                                     |  |      |            |      |   |            |  
|Accounts Receivable                                                             |  |      | 1,233,510  |      |   | (19,857    | )
|Income Taxes Receivable                                                         |  |      | 0          |      |   | 89,800     |  
|Inventories, net                                                                |  |      | (1,212,203 | )    |   | (2,415,873 | )
|Prepaid Expenses                                                                |  |      | (23,126    | )    |   | 186,428    |  
|Accounts Payable                                                                |  |      | (364,258   | )    |   | 86,318     |  
|Other Non-current Assets                                                        |  |      | (12,066    | )    |   | (7,816     | )
|Income Taxes Payable                                                            |  |      | (2,000     | )    |   | 183,154    |  
|Accrued Payroll and Payroll Taxes                                               |  |      | (193,464   | )    |   | (39,421    | )
|Accrued Expenses                                                                |  |      | 12,712     |      |   | (89,850    | )
|Payments on Deferred Retirement Benefits                                        |  |      | (45,689    | )    |   | 0          |  
|                                                                                |  |      |            |      |  
|Net Cash Flows from Operating Activities                                        |  |      | (1,986,851 | )    |   | (1,546,093 | )
|                                                                                |  |      |            |      |  
|                                                                                |  |      |            |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                            |  |      |            |      |   |            |  
|Purchases of Property and Equipment                                             |  |      | (1,089,524 | )    |   | (479,605   | )
|Proceeds from Sale of Property and
  Equipment                                  |  |      | 695,764    |      |   | 0          |  
|Purchases of Intangibles                                                        |  |      | (56,420    | )    |   | 0          |  
|                                                                                |  |      |            |      |  
|Net Cash Flows from Investing Activities                                        |  |      | (450,180   | )    |   | (479,605   | )
|                                                                                |  |      |            |      |  
|                                                                                |  |      |            |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                            |  |      |            |      |   |            |  
|Decrease in checks issued in excess of Cash
  in Bank                           |  |      | (16,274    | )    |   | (37,511    | )
|Net Advances from Line of Credit, Bank                                          |  |      | 2,895,000  |      |   | 2,270,000  |  
|Principal Payments on Long-term Debt                                            |  |      | (442,665   | )    |   | (29,913    | )
|Payments on Contract Payable                                                    |  |      | (267,350   | )    |   | (187,149   | )
|Cash Received on Exercise of Options                                            |  |      | 268,320    |      |   | 0          |  
|                                                                                |  |      |            |      |  
|Net Cash Flows from Financing Activities                                        |  |      | 2,437,031  |      |   | 2,015,427  |  
|                                                                                |  |      |            |      |  
|                                                                                |  |      |            |      |   |            |  
|Net Change in Cash and Cash Equivalents                                         |  |      | 0          |      |   | (10,271    | )
|                                                                                |  |      |            |      |   |            |  
|CASH AND CASH EQUIVALENTS - January 1, 2006
  and 2005                          |  |      | 0          |      |   | 41,572     |  
|                                                                                |  |      |            |      |  
|                                                                                |  |      |            |      |   |            |  
|CASH AND CASH EQUIVALENTS - September 30,
  2006 and 2005                       |  | $    |           |      | $ | 31,301     |  
|                                                                                |  |      |            |      |  
|                                                                                |  |      |            |      |   |            |  
|Supplemental Cash Flow Disclosures;                                             |  |      |            |      |   |            |  
|Cash paid for Interest                                                          |  | $    | 257,764    |      | $ | 60,593     |  
|Cash paid for Income Taxes                                                      |  | $    | 2,000      |      | $ | 41,000     |  

See accompanying notes to consolidated
financial statements.

3

---



Table of Contents

NATURE VISION,
INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited)
September 30, 2006 and 2005

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE
OF OPERATIONS

Nature Vision, Inc., (f/k/a Photo Control Corporation)
(the Company or we) was incorporated as a Minnesota corporation in 1959. On
August 31, 2004, the Company changed its name to Nature Vision, Inc. in
connection with a merger transaction with Nature Vision Operating Inc. (f/k/a
Nature Vision, Inc.) a Minnesota corporation that was incorporated in 1998. As
a part of the merger, Nature Vision Operating Inc. became a wholly-owned
subsidiary of the Company. The shares of the combined company trade on the
Nasdaq Capital Market under the symbol, NRVN.

The
Companys continuing operations has two distinct divisions, the Nature Vision
Division for outdoor recreation products, located in Brainerd, Minnesota, and
the Vaddio Division for audio visual products, located in Minneapolis, Minnesota.
On October 20, 2006 the Company sold the Norman product line of its Photo
Control division and has renamed the division the Vaddio Division. The
long-term growth plans for the Company will be in the outdoor recreation
markets. This growth will be generated organically and through potential
strategic acquisitions.

INTERIM
FINANCIAL INFORMATION

The accompanying
consolidated balance sheet at September 30, 2006 and the consolidated
statements of operations and cash flows for the nine months and three months
ended September 30, 2006 and 2005 are unaudited. The unaudited interim
consolidated balance sheet and consolidated statements of operations, and cash
flows have been prepared in accordance with accounting principles generally
accepted in the United States of America and, in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Companys financial position, results of
operations and its cash flows for the nine months and three months ended
September 30, 2006 and 2005. The financial data and other information disclosed
in these notes to the consolidated financial statements related to these
periods are unaudited. Operating results for the nine months ended September
30, 2006 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2006. The consolidated financial statements should
be read in conjunction with the audited financial statements for the year ended
December 31, 2005 included in the Annual Report on Form 10-KSB of the Company
filed with the Securities and Exchange Commission.

PRINCIPLES
OF CONSOLIDATION

The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiary. All significant inter-company transactions and balances have been
eliminated in consolidation.

FINANCIAL
INSTRUMENTS

The carrying
amounts for all financial instruments approximate fair value. The carrying
amounts for cash and cash equivalents, accounts receivable, accounts payable
and accrued expenses approximate fair value because of the short maturity of
these instruments. The fair value of long-term debt, line of credit-bank,
contract payable and deferred liabilities  retirement benefits approximates
the carrying amounts based upon the Companys expected borrowing rate for debt
with similar remaining maturities and comparable risk.

CASH
AND CASH EQUIVALENTS

The Company
maintains its cash balances in various area banks. Cash balances are insured up
to $100,000 per bank by the FDIC. The balances, at times, may exceed federally
insured limits. The Company defines cash and cash equivalents as highly liquid, short-term
investments with a maturity at the date of acquisition of three months or less.

4

---



Table of Contents



ACCOUNTS
RECEIVABLE

The Company reviews customers credit history before
extending unsecured credit and establishes an allowance for uncollectible
accounts based upon factors surrounding the credit risk of specific customers
and other information. Accounts receivable are generally due 30 days after
invoice date. Accounts receivable over 30 days are considered past due. The
Company does not accrue interest on past due accounts receivable. If accounts
receivable are in excess of the provided allowance are determined
uncollectible, they are charged to expense in the year that determination is
made. Accounts receivable are written off after all collection efforts have
failed. Accounts receivable have been reduced by an allowance for uncollectible
accounts of approximately $37,000 at September 30, 2006 and December 31, 2005.

INVENTORIES

Inventories consist of raw materials, work in process
and finished goods and are valued at lower of cost using the first-in,
first-out (FIFO) method or market. Market represents estimated realizable value
in the case of finished goods and replacement or reproduction cost in the case
of other inventories. Due to changing technology and market demand, inventory
is subject to obsolescence. An annual review is made of all inventories to
determine if any obsolete, discontinued or slow moving items are in inventory.
Based on this review, inventory is disposed of or an allowance for obsolescence
established to cover any future disposals. Such estimates are difficult to make
under current volatile economic conditions and it is possible significant
changes in required inventory reserves may occur in the future.

IMPAIRMENT
OF LONG-LIVED ASSETS

The Company reviews long-lived assets, including
property and equipment and intangible assets, for impairment whenever events or
changes in business circumstances indicate that the carrying amount of an asset
may not be fully recoverable. An impairment loss would be recognized when the
estimated future cash flows from the use of the asset are less than the
carrying amount of that asset. To date, there have been no such losses.

DEPRECIATION

Property and equipment are recorded at cost. Depreciation
is provided for using the straight-line method over an estimated useful life of
25 to 30 years for buildings and improvements and over useful lives ranging
from three to seven years for all other property and equipment. Improvements
are capitalized while maintenance, repairs and minor renewals are expensed when
incurred.

DISCONTINUED
OPERATIONS

The sale of Nature Visions Norman photography product
line to Promark International, Inc. was completed on October 20, 2006 pursuant
to the terms of an Asset Purchase Agreement. The transaction involved the sale
of inventory, equipment and certain other assets relating to the Norman
photography product line. The Company negotiated the sale of these assets
during the quarter ended September 30, 2006. These assets met the requirements
of Statement of Financial Accounting Standards No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets as being held for sale. Operations
and cash flows will be eliminated as a result of the sale and the Company will
not have any significant involvement in the operations after the sale. In
accordance with appropriate accounting rules, the Company has reclassified the
previously reported financial results to exclude the results of the Norman
photography product line and these results are presented on a historical basis
as a separate line in the consolidated statements of operations and the
consolidated balance sheets entitled Discontinued Operations. All of the
financial information in the consolidated financial statements and notes to the
consolidated financial statements has been revised to reflect only the results
of continuing operations (see Note 13).

5

---



Table of Contents

BUILDINGS
AND LAND HELD FOR SALE

On June 30, 2005, management signed an agreement to
market for sale the building and land located in Brainerd, Minnesota. The
building and land included our former assembly and distribution facility and
our corporate headquarters. Accordingly, we reflected the carrying value of the
building as held for sale as of December 31, 2005. We discontinued recording
depreciation on the building effective July 1, 2005. The building and land held
for sale related to the Nature Vision, Inc. segment. On July 14, 2006 the
building was sold for net proceeds of $641,840, prior to the repayment of the
related mortgage, resulting in a loss of $5,276.

In November 2006, management anticipates it will sign
an agreement and begin marketing for sale the building and land located in
Minneapolis, Minnesota. Accordingly, we have reflected the carrying value of
the building as held for sale as of September 30, 2006 and December 31, 2005.
As a result, we have discontinued recording depreciation on the building
effective September 30, 2006 and management believes that the current market
value of the building and land is in excess of its carrying value. The building
and land held for sale relate to the Vaddio segment.

INTANGIBLE
ASSETS

Intangible assets consisted primarily of patents and
indefinable intangible assets, (distribution network, intellectual property and
employment contract for the Vaddio product line), and are being amortized using
the straight-line method over their estimated useful lives ranging from three
to twelve years. Amortization expense was $34,062 and $51,498 for the nine
months ended September, 2006 and 2005, respectively and $12,022 and $17,166 for
the three months ended September 30, 2006 and 2005, respectively. Accumulated
amortization related to these assets was $98,020 at September 30, 2006 and
$63,958 at December 31, 2005. Estimated remaining amortization expense for the
years ending December 31, 2006, 2007, 2008, 2009, 2010, and 2011 is $11,189,
$40,705, $25,733, $22,122, $15,270, and $2,822 respectively.

6

---



Table of Contents

Schedule of Intangible Assets

|                               |  |                |         |                            |   |                                   |  |   |         | 
|------------------------------ |  | -------------- | ------- | -------------------------- | - | --------------------------------- |  | - | ------- | 
|                               |  | Gross
  Amount |         | Accumulated
  Amortization |   | Net Value
  at September 30, 2006 | 
|                               |  |                |         |                            |   |                                   | 
|                              
|Trademarks                     |  | $              | 9,085   |                            | $ | 6,270                             |  | $ | 2,815   | 
|Patents                        |  |                | 54,199  |                            |   | 31,845                            |  |   | 22,354  | 
|Vector  Non-compete Contract  |  |                | 56,420  |                            |   | 6,580                             |  |   | 49,840  | 
|Vaddio  Employment Contract   |  |                | 23,328  |                            |   | 15,377                            |  |   | 7,951   | 
|Vaddio  Distribution Network  |  |                | 32,715  |                            |   | 21,539                            |  |   | 11,176  | 
|Vaddio  Intellectual Property |  |                | 40,114  |                            |   | 16,409                            |  |   | 23,705  | 
|                               |  |                |         |                            |   |                                   | 
|                               |  |                |         |                            |   |                                   |  |   |         | 
|Totals                         |  | $              | 215,861 |                            | $ | 98,020                            |  | $ | 117,841 | 
|                               |  |                |         |                            |   |                                   | 

|                               |  |                |         |                            |   |                                  |  |   |        | 
|------------------------------ |  | -------------- | ------- | -------------------------- | - | -------------------------------- |  | - | ------ | 
|                               |  | Gross
  Amount |         | Accumulated
  Amortization |   | Net Value
  at December 31, 2005 | 
|                               |  |                |         |                            |   |                                  | 
|                              
|Trademarks                     |  | $              | 9,085   |                            | $ | 5,730                            |  | $ | 3,355  | 
|Patents                        |  |                | 54,199  |                            |   | 24,027                           |  |   | 30,172 | 
|Vector  Non-compete Contract  |  |                |        |                            |   |                                 |  |   |       | 
|Vaddio  Employment Contract   |  |                | 23,328  |                            |   | 9,854                            |  |   | 13,474 | 
|Vaddio  Distribution Network  |  |                | 32,715  |                            |   | 13,820                           |  |   | 18,895 | 
|Vaddio  Intellectual Property |  |                | 40,114  |                            |   | 10,527                           |  |   | 29,587 | 
|                               |  |                |         |                            |   |                                  | 
|                               |  |                |         |                            |   |                                  |  |   |        | 
|Totals                         |  | $              | 159,441 |                            | $ | 63,958                           |  | $ | 95,483 | 
|                               |  |                |         |                            |   |                                  | 

REVENUE
RECOGNITION

The Company recognizes revenue on the date products
are shipped and returns are permitted for defective equipment. Estimated
reserves for returns are established by management based on historical
experience and are subject to ongoing review and adjustment. Sales and cost of
goods sold are reported net of the provision for actual and estimated future
returns in the accompanying consolidated statements of operations. Revenues are
reported net of discounts and allowances. The
Companys revenue is recognized in accordance with generally accepted
accounting principles as outlined in the SECs Staff Accounting Bulletin No.
104 Revenue Recognition, which requires that four basic criteria be met
before revenue can be recognized: (i) persuasive evidence of an arrangement
exists; (ii) the price is fixed or determinable; (iii) reasonably assured it is
collectible; and (iv) product delivery has occurred. The Company recognizes
revenue as products are shipped based on FOB shipping point terms when title
passes to customers.

SHIPPING
AND HANDLING COSTS

Shipping and handling costs charged to customers are
included in sales and shipping and handling costs incurred by the Company have
been included in cost of goods sold.

ALLOWANCE
ACCOUNTS

The Company has established allowance reserves for
sales returns and warranty cost. Reserves are estimated based on historical
experience, current product lines being sold, and managements estimates.
Nature Vision and Vaddio provide a standard one-year warranty program for its
products. The allowance reserve for sales returns and warranty cost was
$205,000 and $295,000 at September 30, 2006 and December 31, 2005,
respectively. The following table provides the expense recorded and charges
against the reserve for the nine months ended September 30, 2006 and 2005.

7

---



Table of Contents

|                            |  |              |          |      |   |          |  
|--------------------------- |  | ------------ | -------- | ---- | - | -------- | -
|                            |  | September 30 |         
|                            |  | 2006         |          | 2005 |  
|                            |  |              |          |      |  
|Accrued balance  beginning |  | $            | 295,000  |      | $ | 200,000  |  
|Provision                   |  |              | 158,648  |      |   | 140,073  |  
|Claims incurred             |  |              | (248,648 | )    |   | (140,073 | )
|                            |  |              |          |      |  
|                            |  |              |          |      |   |          |  
|Accrued balance  ending    |  | $            | 205,000  |      | $ | 200,000  |  
|                            |  |              |          |      |  

PREPAID
EXPENSES

Included in prepaid expenses is purchased advertising
time on television programs, advertising space in outdoor publications and catalogs
for Nature Vision products. These costs are then expensed over the contract, as
the television shows are aired, and when the publications and catalogs are
issued. Advertising costs for Vaddio are expensed as incurred. Prepaid
advertising expenses were $254,660 and $127,881 for September 30, 2006 and
December 31, 2005, respectively. Advertising expensed was $994,976 and $737,891
for the nine months ended September 30, 2006 and 2005, respectively and
$243,954 and $194,623 for the three months ended September 30, 2006 and 2005,
respectively.

INSURANCE

The Company had maintained a partially self-funded
group health employee benefit plan until August 31, 2006. On September 1, 2006
the Company maintains a fully insured group health employee benefit and fully
self-funded short-term disability employee benefit plan. Specific and aggregate
stop loss coverage on the partially self-funded health plan was provided to
limit the ultimate exposure of the Company. A liability is provided for claims
incurred but not reported. Management reviews this accrual on an on-going basis
and believes it is adequate to cover any such remaining claims.

RESEARCH
AND DEVELOPMENT

The Company expenses all costs related to product
research and development as incurred. Research and development expense was
$222,822 and $122,186 for the nine months ended September 30, 2006 and 2005
respectively and $92,384 and $39,442 for the three months ended September 30,
2006 and 2005 respectively.

STOCK-BASED
COMPENSATION

On December 16,
2004, the Financial Accounting Standards Board, or FASB, issued Statement of
Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment, which
is a revision of SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123
(R) requires all share-based payments to employees, including grants of
employee stock options, to be valued at fair value on the date of grant, and to
be expensed over the applicable vesting period. Pro forma disclosure of the income
statement effects of share-based payments is no longer an alternative. SFAS 123
(R) is effective for all share-based awards granted on or after January 1,
2006. In addition, companies must also recognize compensation expense related
to any awards that are not fully vested as of the effective date. The
Companys options as of December 31, 2005 were fully vested and no
stock-based agreements were issued during the nine and three months ended
September 30, 2006. Therefore, there was no SFAS No. 123(R) compensation
expense for the nine and three months ended September 30, 2006.
Future awards will be measured based on the fair value of the awards
previously calculated in developing the pro forma disclosures in accordance
with the provisions of SFAS No. 123. We implemented SFAS No. 123(R) on January
1, 2006 using the modified prospective method.

As more fully
described in our Annual Report on Form 10-KSB for the year ended December 31,
2005, the Company has granted stock options over the years to employees and
directors under various stockholder approved stock option plans. At September
30, 2006, 197,958 stock options are outstanding which were all fully
vested as of December 31, 2005. The Company expects that the impact on earnings
for the remainder of the year ending December 31, 2006 for stock based
compensation will be $0 and
estimates the impact on future earnings to be approximately $0 based on the
options outstanding as of September 30, 2006.

8

---



Table of Contents



Expected volatility is based on implied volatility
from historical volatility of our stock price since January 2, 2004. The Company uses historical Company and industry data
along with implied data to estimate the expected option life and the expected dividend yield. The risk-free rate for periods
within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant. Based upon the lack
of history, the Company will estimate a forfeiture rate upon the granting of options which will be considered to be a reasonable
indicator of future performance in the opinion of management. Therefore, the Company has not assumed any forfeiture rate for
options issued.

|                                           |  |                                 |         |                                |   |         |  |      |           |   |   |         | 
|------------------------------------------ |  | ------------------------------- | ------- | ------------------------------ | - | ------- |  | ---- | --------- | - | - | ------- | 
|                                           |  | Three Months Ended September 30 |         | Nine Months Ended September 30 |  
|                                           |  |                                 |         |                                |  
|                                           |  | 2006                            |         | 2005                           |   | 2006    |  | 2005 |          
|                                           |  |                                 |         |                                |   |         |  |      |          
|Net Income(Loss):                          |  |                                 |         |                                |   |         |  |      |           |   |   |         | 
|As reported                                |  | ($                              | 287,422 | )                              | $ | 303,630 |  | ($   | 1,035,338 | ) | $ | 266,300 | 
|Pro forma                                  |  | ($                              | 287,422 | )                              | $ | 303,630 |  | ($   | 1,035,338 | ) | $ | 266,300 | 
|                                           |  |                                 |         |                                |   |         |  |      |           |   |   |         | 
|Basic net income(loss) per common share:   |  |                                 |         |                                |   |         |  |      |           |   |   |         | 
|As reported                                |  | ($                              | .13     | )                              | $ | .14     |  | ($   | .47       | ) | $ | .12     | 
|Pro forma                                  |  | ($                              | .13     | )                              | $ | .14     |  | ($   | .47       | ) | $ | .12     | 
|                                           |  |                                 |         |                                |   |         |  |      |           |   |   |         | 
|Diluted net income(loss) per common share: |  |                                 |         |                                |   |         |  |      |           |   |   |         | 
|As reported                                |  | ($                              | .13     | )                              | $ | .13     |  | ($   | .47       | ) | $ | .12     | 
|Pro forma                                  |  | ($                              | .13     | )                              | $ | .13     |  | ($   | .47       | ) | $ | .12     | 
|                                           |  |                                 |         |                                |   |         |  |      |           |   |   |         | 
|Stock based compensation:                  |  |                                 |         |                                |   |         |  |      |           |   |   |         | 
|As reported                                |  | $                               | 0       |                                | $ | 0       |  | $    | 0         |   | $ | 0       | 
|Pro forma                                  |  | $                               | 0       |                                | $ | 0       |  | $    | 0         |   | $ | 0       | 

In determining the compensation cost of options
granted during the nine months and three months ended September 30, 2006 and
2005, as specified by SFAS No. 123, the fair value of each option grant has
been estimated on the date of grant using the Black-Scholes option pricing
model. There were no options issued that vested or were granted during the nine
or three months ended September 30, 2006 and 2005.

NET
LOSS PER COMMON SHARE

Net loss per common share was based on the weighted
average number of common shares outstanding during the periods when computing
the basic net loss per share. When dilutive, stock options and warrants are
included as equivalents using the treasury stock market method when computing
the diluted net loss per share. There were dilutive common stock equivalents,
options and warrants, of 50,546 and 76,771 for the nine months and three months
ended September 30, 2005. There were no dilutive common stock equivalents,
options and warrants, for the nine and three months ended September 30, 2006.
Anti-dilutive options were 197,958 and 147,250 at September 30, 2006 and 2005,
respectively.

INCOME
TAXES

The Company accounts for income taxes using the asset
and liability approach, which requires the recognition of deferred tax assets
and liabilities for tax consequences of temporary differences between the
financial statement and income tax reporting bases of assets and liabilities
based on currently enacted rates and laws. These temporary differences
principally include depreciation, net operating losses, deferred retirement
benefits, contract payable, allowance for doubtful accounts, sales returns
allowance, and warranty reserves. Deferred taxes are reduced by a valuation
allowance to the extent that realization of the related deferred tax assets is
not assured.

9

---



Table of Contents

ESTIMATES

The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
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.

RECENT
ACCOUNTING PRONOUNCEMENTS

SFAS
No. 157

The FASB has issued SFAS No. 157 (SFAS No. 157), Fair
Value Measurements, to eliminate the diversity in practice that exists due to
the different definitions of fair value and the limited guidance for applying
those definitions in GAAP that are dispersed among the many accounting pronouncements
that require fair value measurements. SFAS No. 157 retains the exchange price
notion in earlier definitions of fair value, but clarifies that the exchange
price is the price in an orderly transaction between market participants to
sell an asset or liability in the principal or most advantageous market for the
asset or liability. Moreover, the SFAS states that the transaction is
hypothetical at the measurement date, considered from the perspective of the
market participant who holds the asset or liability. Consequently, fair value
is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date (an exit price), as opposed to the price that would be
paid to acquire the asset or received to assume the liability at the
measurement date (an entry price).

SFAS No. 157 also stipulates that, as a market-based
measurement, fair value measurement should be determined based on the
assumptions that market participants would use in pricing the asset or
liability, and establishes a fair value hierarchy that distinguishes between
(a) market participant assumptions developed based on market data obtained from
sources independent of the reporting entity (observable inputs) and (b) the
reporting entitys own assumptions about market participant assumptions
developed based on the best information available in the circumstances
(unobservable inputs). Finally, SFAS No. 157 expands disclosures about the use
of fair value to measure assets and liabilities in interim and annual periods
subsequent to initial recognition. Entities are encouraged to combine the fair
value information disclosed under SFAS No. 157 with the fair value information
disclosed under other accounting pronouncements, including SFAS No. 107,
Disclosures about Fair Value of Financial Instruments, where practicable. The
guidance in this Statement applies for derivatives and other financial
instruments measured at fair value under SFAS No. 133 Accounting for
Derivative Instruments and Hedging Activities at initial recognition and in
all subsequent periods.

SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years, although earlier application is encouraged.
Additionally, prospective application of the provisions of SFAS No. 157 is
required as of the beginning of the fiscal year in which it is initially
applied, except when certain circumstances require retrospective application.

The Company does not feel that the adoption of SFAS
No. 157 would have a material impact on their consolidated financial
statements.

10

---



Table of Contents

SFAS
No. 158

The FASB has issued SFAS No. 158 (SFAS No. 158),
Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans, to require an employer to fully recognize the obligations associated
with single-employer defined benefit pension, retiree healthcare, and other
postretirement plans in their financial statements. Previous standards required
an employer to disclose the complete funded status of its plan only in the
notes to the financial statements. Moreover, because those standards allowed an employer to delay recognition of
certain changes in plan assets and obligations that affected the costs of
providing benefits, employers reported an asset or liability that almost always
differed from the plans funded status. Under SFAS No. 158, a defined benefit
postretirement plan sponsor that is a public or private company or a nongovernmental
not-for-profit organization must (a) recognize in its statement of financial
position an asset for a plans overfunded status or a liability for the plans
underfunded status, (b) measure the plans assets and its obligations that
determine its funded status as of the end of the employers fiscal year (with
limited exceptions), and (c) recognize, as a component of other comprehensive
income, the changes in the funded status of the plan that arise during the year
but are not recognized as components of net periodic benefit cost pursuant to
SFAS No. 87, Employers Accounting for Pensions, or SFAS No. 106, Employers

Accounting for Postretirement Benefits Other Than
Pensions. SFAS No. 158 also requires an employer to disclose in the notes to
financial statements additional information on how delayed recognition of
certain changes in the funded status of a defined benefit postretirement plan
affects net periodic benefit cost for the next fiscal year.

The Company does not feel that the adoption of SFAS
No. 158 would have a material impact on their consolidated financial
statements.

RECLASSIFICATIONS

Certain accounts in the prior periods consolidated
financial statements have been reclassified for comparative purposes to conform
with the presentation in the current year consolidated financial statements.
These reclassifications had no effect on net loss or stockholders equity.

NOTE 2  INVENTORIES

Inventories consisted of the following at:

|                          |  |                    |           |                                  |   |           |  
|------------------------- |  | ------------------ | --------- | -------------------------------- | - | --------- | -
|                          |  | September 30, 2006 |           | December 31, 2005
  Reclassified |  
|                          |  |                    |           |                                  |  
|Raw Materials             |  | $                  | 4,119,252 |                                  | $ | 2,606,517 |  
|Work in Progress          |  |                    | 193,694   |                                  |   | 160,461   |  
|Finished Goods            |  |                    | 3,466,932 |                                  |   | 3,568,934 |  
|                          |  |                    |           |                                  |  
|Total                     |  |                    | 7,779,878 |                                  |   | 6,335,912 |  
|Less: Valuation Allowance |  |                    | (152,000  | )                                |   | (95,000   | )
|                          |  |                    |           |                                  |  
|Inventories, net          |  | $                  | 7,627,878 |                                  | $ | 6,240,912 |  
|                          |  |                    |           |                                  |  

Foreign
Inventory

Included in the consolidated balance sheets are
foreign inventories of $1,193,255 and $1,164,865 at September 30, 2006 and
December 31, 2005, respectively. Foreign inventories consist of raw material
goods held in Asia and used in the production of Nature Vision division
products and finished goods held in Europe for sale of Vaddio division
products.

11

---



Table of Contents

NOTE 3  PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

|                               |  |                      |            |                     |   |           |  
|------------------------------ |  | -------------------- | ---------- | ------------------- | - | --------- | -
|                               |  | September 30,
  2006 |            | December 31,
  2005 |  
|                               |  |                      |            |                     |  
|Land                           |  | $                    |           |                     | $ |          |  
|Buildings and improvements     |  |                      |           |                     |   |          |  
|Tooling                        |  |                      | 985,190    |                     |   | 962,975   |  
|Office furniture and equipment |  |                      | 493,787    |                     |   | 326,019   |  
|Warehouse equipment            |  |                      | 481,981    |                     |   | 173,793   |  
|Vehicles                       |  |                      |           |                     |   | 82,708    |  
|Construction in progress       |  |                      | 1,213,643  |                     |   | 687,665   |  
|                               |  |                      |            |                     |  
|Total                          |  |                      | 3,174,601  |                     |   | 2,233,160 |  
|Less: Accumulated depreciation |  |                      | (1,172,927 | )                   |   | (918,247  | )
|                               |  |                      |            |                     |  
|Net                            |  | $                    | 2,001,674  |                     | $ | 1,314,913 |  
|                               |  |                      |            |                     |  

Depreciation expense of $350,146 and $249,393 was recorded for the nine months ended September 30, 2006 and 2005,
respectively and $132,456 and $92,225 for the three months ended September 30, 2006 and 2005, respectively.

NOTE 4  LINE OF CREDIT, BANK

The Company has a line of credit financing agreement with First National Bank of Deerwood up to a maximum amount
of $5,600,000 which expires April 1, 2007. Interest will be payable monthly at prime plus .75% with a minimum interest rate of 5%.
The line of credit is collateralized by accounts receivable, inventories, property and equipment. The agreement requires the
following affirmative covenants measured based upon December 31 financial results, minimum net worth of $7,000,000, debt to equity
ratio of less than 1.0 to 1.0 and debt service ratio not to exceed 1.2 to 1.0. The Company was in compliance with all covenants at
December 31, 2005. The balance outstanding on the line of credit was $5,125,000 and $2,230,000 at September 30, 2006 and December
31, 2005, respectively. The unused portion of the line of credit at September 30, 2006 was $475,000.

NOTE 5  LONG-TERM DEBT

Long-term debt consisted of the following at:

|                                                                           |  |                      |   |                     |   |         |  
|-------------------------------------------------------------------------- |  | -------------------- | - | ------------------- | - | ------- | -
|                                                                           |  | September 30,
  2006 |   | December 31,
  2005 |  
|                                                                           |  |                      |   |                     |  
|                                                                          
|Note Payable - First National Bank of Deerwood - paid in full in July 2006 |  | $                    |  |                     | $ | 404,068 |  
|                                                                          
|Note Payable - GMAC - paid in full in January 2006                         |  |                      |  |                     |   | 38,597  |  
|                                                                           |  |                      |   |                     |  
|                                                                          
|Totals                                                                     |  |                      |  |                     |   | 442,665 |  
|Less: Current portion                                                      |  |                      |  |                     |   | (55,649 | )
|                                                                           |  |                      |   |                     |  
|                                                                          
|Net Long-term Debt                                                         |  | $                    |  |                     | $ | 387,016 |  
|                                                                           |  |                      |   |                     |  

NOTE 6  INCOME TAXES

The provision for income taxes consists of the
following components for the nine months ended September 30;

|                                  |  |      |          |      |   |         |  
|--------------------------------- |  | ---- | -------- | ---- | - | ------- | -
|                                  |  | 2006 |          | 2005 |  
|                                  |  |      |          |      |  
|                                 
|Current                           |  | $    |         |      | $ |        |  
|Discontinued operations           |  |      | 77,000   |      |   | 230,000 |  
|Deferred                          |  |      | (767,000 | )    |   | (30,000 | )
|                                  |  |      |          |      |  
|                                 
|Total Benefit
  from Income Taxes |  | $    | (690,000 | )    | $ | 200,000 |  
|                                  |  |      |          |      |  

12

---



Table of Contents

The provision for taxes differs from the expected
provision that would result from the application of federal tax rates to
pre-tax (loss)income. A comparison of the provision for income tax expense at
the federal statutory rate of 34% for the nine months ended September 30 to the
Companys effective rate is as follows;

|                                                             |  |      |       |      |  |      |  
|------------------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | -
|                                                             |  | 2006 |       | 2005 | 
|                                                             |  |      |       |      | 
|                                                            
|Federal statutory rate                                       |  |      | (34.0 | )%   |  | 34.0 | %
|State tax, net of federal benefit                            |  |      | (2.8  | )    |  | 2.8  |  
|Permanent differences and other including surtax
  exemption |  |      | (2.6  | )    |  | 6.7  |  
|Research and development credit                              |  |      | (0.6  | )    |  | (0.6 | )
|                                                             |  |      |       |      | 
|                                                            
|Effective Tax
  Rate                                         |  |      | (40.0 | )%   |  | 42.3 | %
|                                                             |  |      |       |      | 

The provision for taxes differs from the expected
provision that would result from the application of federal tax rates to
pre-tax (loss)income. A comparison of the provision for income tax expense at
the federal statutory rate of 34% for the three months ended September 30 to
the Companys effective rate is as follows;

|                                                             |  |      |       |      |  |      |  
|------------------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | -
|                                                             |  | 2006 |       | 2005 | 
|                                                             |  |      |       |      | 
|                                                            
|Federal statutory rate                                       |  |      | (34.0 | )%   |  | 34.0 | %
|State tax, net of federal benefit                            |  |      | (2.8  | )    |  | 2.8  |  
|Permanent differences and other including surtax
  exemption |  |      | (2.6  | )    |  | 5.6  |  
|Research and development credit                              |  |      | (0.6  | )    |  | (0.6 | )
|                                                             |  |      |       |      | 
|                                                            
|Effective Tax
  Rate                                         |  |      | (40.0 | )%   |  | 41.8 | %
|                                                             |  |      |       |      | 

The net deferred tax assets and liabilities included
in the financial statements include the following amounts;

|                                         |  |         |           |          |   |          |  
|---------------------------------------- |  | ------- | --------- | -------- | - | -------- | -
|                                         |  | 9/30/06 |           | 12/31/05 |  
|                                         |  |         |           |          |  
|                                        
|Current Amounts                          |  |         |           |          |   |          |  
|                                         |  |         |           |          |   |          |  
|Deferred tax assets                      |  | $       | 1,040,000 |          | $ | 350,000  |  
|                                         |  |         |           |          |  
|                                        
|                                         |  |         |           |          |   |          |  
|Net Current
  Deferred Tax Assets        |  | $       | 1,040,000 |          | $ | 350,000  |  
|                                         |  |         |           |          |  
|Non-current Amounts                      |  |         |           |          |   |          |  
|                                         |  |         |           |          |   |          |  
|Deferred Tax Assets                      |  | $       | 435,746   |          | $ | 435,746  |  
|Deferred Tax Liabilities, net            |  |         | (514,200  | )        |   | (514,200 | )
|                                         |  |         |           |          |  
|                                        
|                                         |  |         |           |          |   |          |  
|Net Non-current
  Deferred Tax Liability |  | $       | 78,454    |          | $ | 78,454   |  
|                                         |  |         |           |          |  
|                                         |  |         |           |          |   |          |  
|Net Deferred Tax
  Asset                 |  | $       | 961,546   |          | $ | 271,546  |  
|                                         |  |         |           |          |  

13

---



Table of Contents

NOTE 7  SEGMENT REPORTING

The Companys
continuing operations are comprised of two divisions, the Nature Vision outdoor
recreation products and Vaddio audio, video peripheral performance equipment
used for video conferencing and presentations. The following summarizes the
Companys segments:

|                               |  |                    |            |          |   |            | 
|------------------------------ |  | ------------------ | ---------- | -------- | - | ---------- | 
|Assets                         |  | 9-30-06            |            | 12-31-05 |  
|                               |  |                    |            |          |  
|Nature Vision                  |  | $                  | 10,055,142 |          | $ | 9,180,801  | 
|Vaddio                         |  |                    | 4,716,651  |          |   | 4,637,764  | 
|Discontinued Operations        |  |                    | 1,956,425  |          |   | 2,131,188  | 
|                               |  |                    |            |          |  
|                              
|Total                          |  | $                  | 16,728,218 |          | $ | 15,949,753 | 
|                               |  |                    |            |          |  
|                              
|Property & Equipment Additions |  | 9-30-06            |            | 12-31-05 |  
|                               |  |                    |            |          |  
|Nature Vision                  |  | $                  | 993,819    |          | $ | 657,065    | 
|Vaddio                         |  |                    | 66,273     |          |   |           | 
|Discontinued Operations        |  |                    | 29,432     |          |   | 108,101    | 
|                               |  |                    |            |          |  
|                              
|Total                          |  | $                  | 1,089,524  |          | $ | 765,166    | 
|                               |  |                    |            |          |  
|                              
|                               |  | Nine Months Ended  |           
|                               |  |                    |           
|Sales                          |  | 9-30-06            |            | 9-30-05  |  
|                               |  |                    |            |          |  
|Nature Vision                  |  | $                  | 3,916,835  |          | $ | 6,305,475  | 
|Vaddio                         |  |                    | 6,455,013  |          |   | 4,540,919  | 
|                               |  |                    |            |          |  
|                              
|Total                          |  | $                  | 10,371,848 |          | $ | 10,846,394 | 
|                               |  |                    |            |          |  
|                              
|Gross Profit                   |  | 9-30-06            |            | 9-30-05  |  
|                               |  |                    |            |          |  
|Nature Vision                  |  | $                  | 920,507    |          | $ | 1,744,413  | 
|Vaddio                         |  |                    | 2,425,920  |          |   | 1,354,749  | 
|                               |  |                    |            |          |  
|                              
|Total                          |  | $                  | 3,346,427  |          | $ | 3,099,162  | 
|                               |  |                    |            |          |  
|                              
|Depreciation and Amortization  |  | 9-30-06            |            | 9-30-05  |  
|                               |  |                    |            |          |  
|Nature Vision                  |  | $                  | 279,011    |          | $ | 189,150    | 
|Vaddio                         |  |                    | 51,065     |          |   | 18,054     | 
|                               |  |                    |            |          |  
|                              
|Total                          |  | $                  | 330,076    |          | $ | 207,204    | 
|                               |  |                    |            |          |  
|                              
|                               |  | Three Months Ended |           
|                               |  |                    |           
|Sales                          |  | 9-30-06            |            | 9-30-05  |  
|                               |  |                    |            |          |  
|Nature Vision                  |  | $                  | 1,565,152  |          | $ | 1,770,260  | 
|Vaddio                         |  |                    | 2,578,605  |          |   | 2,108,774  | 
|                               |  |                    |            |          |  
|                              
|Total                          |  | $                  | 4,143,757  |          | $ | 3,879,034  | 
|                               |  |                    |            |          |  
|                              
|Gross Profit                   |  | 9-30-06            |            | 9-30-05  |  
|                               |  |                    |            |          |  
|Nature Vision                  |  | $                  | 412,099    |          | $ | 566,837    | 
|Vaddio                         |  |                    | 977,996    |          |   | 759,681    | 
|                               |  |                    |            |          |  
|                              
|Total                          |  | $                  | 1,390,095  |          | $ | 1,326,518  | 
|                               |  |                    |            |          |  
|                              
|Depreciation and Amortization  |  | 9-30-06            |            | 9-30-05  |  
|                               |  |                    |            |          |  
|Nature Vision                  |  | $                  | 93,631     |          | $ | 59,250     | 
|Vaddio                         |  |                    | 28,719     |          |   | 6,018      | 
|                               |  |                    |            |          |  
|                              
|Total                          |  | $                  | 122,350    |          | $ | 65,268     | 
|                               |  |                    |            |          |  

14

---



Table of Contents

NOTE
8  CONTRACT PAYABLE - VADDIO

Photo Control Corporation entered into employment
agreements with 3 employees in connection with the acquisition of the Vaddio
assets. The agreements, which expire on December 31, 2006, provides for an
annual base salary and bonus payments under each employment agreement, equal to
3.4% of annual sales of Vaddio products (net of allowances for returns and
billing errors) in excess of $2,000,000 in 2006. If the Company terminates the
employment agreement with the employee without cause prior to December 31,
2006, or if the employee terminates his employment prior to December 31, 2006
under certain conditions (including a sale of all or substantially all of the
assets comprising the Vaddio division or the discontinuation of the Vaddio
division), then the employee is entitled to the bonus payment as defined in the
agreement at the time of the termination of his employment. The Company has
extended the contracts for two of the three effected employees through December
31, 2007. The employee has agreed not to compete with the Company in any
business that the Company is conducting on the date of termination, nor will he
solicit employees, customers and suppliers of the Company or accept employment
or provide services to the Companys customers during the period ending
December 31, 2009. Since the bonus payment is not contingent on the continued
employment of the employee and the amount due can be estimated and is likely to
be paid, the amount of $900,000 (the estimated bonus payment due) was accrued
at the date of the reverse merger. The amount accrued was the fair value of the
liability at the date of the reverse merger. The contract payments of $462,420,
have been paid in March 2006. Future bonuses are estimated to be $445,501 for
2006.

NOTE
9  STOCK OPTIONS

The Company had 39,000 options exercised in January
and February 2006. Total proceeds from the exercise were $268,320.

NOTE
10  DEFERRED RETIREMENT BENEFITS

The Company has retirement benefit agreements with
past employees, which are funded by life insurance. Under the agreements,
covered individuals become vested immediately upon death or if employed at age
65. Benefit costs are recognized over the period of service and recorded as
accrued retirement benefits. The total accrued balance due was $646,907 and
$723,125 at September 30, 2006 and December 31, 2005, respectively.

NOTE
11  COMMITMENTS AND CONTINGENCIES

Employment
Agreement

The Company has entered into an employment with the
President and Chief Executive Officer. Upon termination of employment the
agreement provides for a non-compete period of 5 years. In exchange for the
non-compete, the Company is obligated to pay the employee at his base rate for
a period of up to 2 years.

License
Agreement

In January 2002, Waterstrike Incorporated,
(Waterstrike) granted the Company an exclusive license for the use of certain
underwater camera technologies. Under the agreement, the Company is required to
pay Waterstrike a royalty of $23 for each licensed product sold beginning on
January 1, 2002. The agreement requires the Company to pay annual royalties
based on a minimum level of unit sales. If the minimum level of unit sales in
not met, the Company must pay additional royalties up to the minimum required,
or forfeit the exclusivity of the agreement. For the years ended December 31,
2005 and 2004, the Company did not meet the minimum unit sales level required
under the agreement and may lose the exclusivity of the license agreement. The
license will terminate upon the later of the date of expiration of the last to
expire patent included in the licensed technology, or the date that the Company
permanently ceases the sale of the devises using the technology. Royalty
expense pursuant to this exclusive license agreement was $8,576 and $5,051 for
the nine and three months ended September 30, 2006 and $82,853 and $33,353 for
the nine and three months ended September 30, 2005, respectively.

15

---



Table of Contents

Lease Commitment

The Company entered into a lease agreement for its
assembly and distribution facility and corporate headquarters in Brainerd,
Minnesota. The lease commenced on September 1, 2006 and expires August 31,
2016. The monthly base rent increases from $11,718 to $17,800 over the term of
the lease. The Company will record monthly rent expense equal to the total of
the payments due over the lease term, divided by the number of months of the
lease term. The difference between rent expense recorded and the amount paid
will be credited or charged to deferred rent. The Company is also required to
pay its portion of operating expenses.

Future minimum lease payments are as follows for the
years ending September 30:

|           |  |   |           | 
|---------- |  | - | --------- | 
|2007       |  | $ | 141,213   | 
|2008       |  |   | 148,333   | 
|2009       |  |   | 155,453   | 
|2010       |  |   | 162,573   | 
|2011       |  |   | 169,842   | 
|Thereafter |  |   | 964,167   | 
|           |  |   |          
|Total      |  | $ | 1,714,581 | 
|           |  |   |          

NOTE
12  CONCENTRATIONS

Major
Customers

During the quarter and nine months ended September 30,
2006 and 2005, there were no customers that accounted for greater than 10% of
total net sales. At September 30, 2006 and December 31, 2005, there were no
customers that comprised over 10% of total accounts receivable.

Foreign
Sales

Included in the
consolidated statements of operations are foreign sales of $2,347,226 and
$1,280,239 for the nine months ended September 30, 2006 and 2005 respectively
and $1,098,380 and $369,506 for the three months ended September 30, 2006 and
2005 respectively.

Major
Suppliers

Purchases for the nine months ended September 30, 2006
include purchases from two different major suppliers, an offshore manufacturer
of outdoor recreation products and a major camera manufacturer, that
individually accounted for 27% and 36%, respectively, of the materials and
supplies used by the Company. Purchases for the nine months ended September 30,
2005 include purchases from the two same major suppliers that individually
accounted for 25% and 33%, respectively, of the materials and supplies used by
the Company. Management believes minimal risk is present under this offshore
manufacturing arrangement due to other suppliers being readily available.
Management believes minimal risk is present under this camera purchasing
arrangement due to other suppliers being readily available.

NOTE
13  Discontinued Operation

The sale of Nature Visions Norman photography product
line to Promark International, Inc. was completed on October 20, 2006 pursuant
to the terms of an Asset Purchase Agreement. The transaction involved the sale
of inventory, equipment and certain other assets relating to Nature Visions
Norman photography product line for a total purchase price of approximately
$2,400,000, of which $300,000 is payable pursuant to the terms of a three year
note.

16

---



Table of Contents

Sale of inventories and property and equipment based
on carrying amount of inventories of $2,038,014 and property and equipment net
book value of $14,098, and prepaid expenses of $37,000. Sales proceeds received
were cash of $1,998,252, 3 year note receivable of $300,000 and a 90 day
inventory holdback of $125,000. Also recorded was the estimated transaction costs payable
(legal and broker fee) totaling $130,000. Estimated gain on the sale of the
unit was calculated as follows:

|                                             |  |   |            |  
|-------------------------------------------- |  | - | ---------- | -
|Cash received                                |  | $ | 1,998,252  |  
|Note receivable                              |  | $ | 300,000    |  
|Due from buyer                               |  | $ | 125,000    |  
|                                             |  |   |           
|                                            
|                                             |  |   |            |  
|Subtotal                                     |  | $ | 2,423,252  |  
|Less: Transaction costs                      |  | $ | (130,000   | )
|                                             |  |   |           
|                                             |  |   |            |  
|Net proceeds on
  sale                       |  | $ | 2,293,252  |  
|                                            
|Less: Inventories carrying amount            |  | $ | (2,038,014 | )
|Less: Prepaid expenses                       |  | $ | (37,000    | )
|Less: Property and equipment carrying amount |  | $ | (14,098    | )
|                                             |  |   |           
|                                             |  |   |            |  
|Gain on
  disposition of assets              |  | $ | 204,140    |  
|                                             |  |   |           

The following are condensed statements of operations
of the discontinued operations for the three and nine months ended September
30:

|                                                             |  |                                     |           |                                    |   |           |  |      |           |   |   |           | 
|------------------------------------------------------------ |  | ----------------------------------- | --------- | ---------------------------------- | - | --------- |  | ---- | --------- | - | - | --------- | 
|                                                             |  | Three
  Months Ended
  September 30 |           | Nine
  Months Ended
  September 30 |  
|                                                             |  |                                     |           |                                    |  
|                                                             |  | 2006                                |           | 2005                               |   | 2006      |  | 2005 |          
|                                                             |  |                                     |           |                                    |   |           |  |      |          
|                                                            
|Sales, Net                                                   |  | $                                   | 1,674,376 |                                    | $ | 1,714,294 |  | $    | 4,757,378 |   | $ | 5,233,622 | 
|                                                            
|Cost of good
  sold                                          |  |                                     | 1,159,281 |                                    |   | 1,246,186 |  |      | 3,315,286 |   |   | 3,736,067 | 
|Selling,
  general, and administrative                       |  |                                     | 536,357   |                                    |   | 160,986   |  |      | 1,201,583 |   |   | 877,790   | 
|                                                             |  |                                     |           |                                    |   |           |  |      |          
|Income (loss
  from operations)                              |  |                                     | (21,262   | )                                  |   | 307,122   |  |      | 240,509   |   |   | 619,765   | 
|                                                             |  |                                     |           |                                    |   |           |  |      |           |   |   |           | 
|Other income
  (expense)                                     |  |                                     | (20       | )                                  |   | 400       |  |      | (32,273   | ) |   | 2,313     | 
|                                                             |  |                                     |           |                                    |   |           |  |      |           |   |   |           | 
|Provision for
  (benefit from) income taxes                  |  |                                     | (8,000    | )                                  |   | 114,000   |  |      | 77,000    |   |   | 230,000   | 
|                                                             |  |                                     |           |                                    |   |           |  |      |          
|                                                             |  |                                     |           |                                    |   |           |  |      |           |   |   |           | 
|Gain(Loss) from
  discontinued operations                    |  | ($                                  | 13,282    | )                                  |   | 193,522   |  | $    | 131,236   |   | $ | 392,078   | 
|                                                             |  |                                     |           |                                    |   |           |  |      |          
|                                                             |  |                                     |           |                                    |   |           |  |      |           |   |   |           | 
|Gain (Loss) from
  discontinued operations per common share: |  |                                     |           |                                    |   |           |  |      |           |   |   |           | 
|Basic                                                        |  | ($                                  | .01       | )                                  | $ | .09       |  | $    | .06       |   | $ | .18       | 
|                                                             |  |                                     |           |                                    |   |           |  |      |           |   |   |           | 
|Diluted                                                      |  | ($                                  | .01       | )                                  | $ | .08       |  | $    | .06       |   | $ | .18       | 

17

---



Table of Contents

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

The following discussion and analysis of financial
condition, results of operations, liquidity and capital resources should be
read in conjunction with our unaudited consolidated financial statements and
notes thereto appearing elsewhere in this report. This discussion contains
forward-looking statements that involve risks and uncertainties, including
information with respect to our plans, intentions and strategies for our
businesses. Our actual results may differ materially from those estimated or
projected in any of these forward-looking statements.

Company
History and Overview

Nature
Vision, Inc., (f/k/a Photo Control Corporation) (the Company or we) was
incorporated as a Minnesota corporation in 1959.  On August 31, 2004, the Company changed its name to Nature
Vision, Inc. in connection with a merger transaction with Nature Vision
Operating Inc. (f/k/a Nature Vision, Inc.) a Minnesota corporation that was
incorporated in 1998.  As a part of the
merger, Nature Vision Operating Inc. became a wholly-owned subsidiary of the
Company.  The shares of the combined
company trade on the Nasdaq Capital Market under the symbol, NRVN.

The
Companys continuing operations has two distinct divisions, the Nature Vision
Division for outdoor recreation products, located in Brainerd, Minnesota, and
the Vaddio Division for audio visual products, located in Minneapolis,
Minnesota.  On October 20, 2006 the
Company sold the Norman product line of its Photo Control division and has
renamed the division the Vaddio Division.
The long-term growth plans for the Company will be in the outdoor
recreation markets.  This growth will be
generated organically and through potential strategic acquisitions.

Revenue

Revenue
consists of sales of our products net of returns and allowances.  Direct revenue includes sales from orders to
distributors, dealers and direct consumers and includes customer service and
shipping charges.  New product
innovation through the use of technology will continue to be the basis of our
organic growth.  We will look for
potential strategic acquisitions to provide penetration into new product
categories and channels.

Cost of
Goods Sold

Cost
of goods sold for our products consists of the cost of direct materials, labor
to produce the products, freight in, depreciation, amortization, warehousing,
associated management, occupancy costs, customer service and warranty, shipping
and receiving costs, quality assurance and other indirect miscellaneous
manufacturing costs.  Cost of goods sold
can fluctuate based on the product mix sold for a given period as well as
seasonality.  The increased cost of oil
continues to drive up the cost of components and the freight to receive and
ship products.  We continue to evaluate
make versus outsource opportunities to reduce these costs.  We look to increase our distribution
abilities and capacities.

18

---



Table of Contents

Gross Profit

We define
gross profit as the difference between revenue and cost of goods sold.  We believe our gross profit is our best
metric to manage the business on a divisional and product line basis.

Selling, General
and Administrative Expenses

Selling,
general and administrative expenses include directly identifiable operating
costs and other expenses. The majority of these costs are fairly consistent
from month to month.  Selling costs for
both of our divisions consist of payroll, commissions, product management,
marketing, advertising and servicing accounts costs.  General and administrative costs for both divisions include
payroll, product design, product development, engineering, order processing
costs, management information systems, accounting and administrative. Shared
general and administrative expenses include costs associated with general
corporate management and shared departmental services such as legal, external
accounting, management information systems, finance, insurance and human
resources.  Other costs consist
primarily of interest on the existing line of credit.  The interest rate on the credit facility floats with prime, at
prime plus .75%.  As rates have
increased over several quarters, these costs have continued to rise.

Income from
Continuing Operations

Income from
Continuing Operations is defined as revenue less cost of goods sold and selling,
general and administrative expenses.

Gain (Loss) from
Discontinued Operations

In the third
quarter of fiscal 2006, Nature Vision, Inc. negotiated the sale of the Norman
photography product line (part of the Photo Control Division in previous
filings). We sold the Norman photography product line on October 20, 2006.   In accordance with Statement of Financial
Accounting Standards No. 144 , Accounting for the Impairment or Disposal
of Long-Lived Assets, this operating segment was classified as discontinued
operations and the financial results are reported separately as discontinued
operations for all periods presented.

Trends and
Opportunities

Retail
Expansion by Larger Customers.Our large customers, such as
Cabelas, Bass Pro Shops and Dicks Sporting Goods continue to expand the
quantity and regional coverage of stores.
While these customers continue to grow, our smaller customers continue
to reduce in quantity and quality.
These new large retail store expansion plans will provide significant
opportunities for continued growth at the expense of the smaller owner operator
establishments. We anticipate the number of customers within the Outdoor
recreation products market to continue to reduce as the average size of our
customer continues to increase.  This
consolidation puts significant pressure on the business with its increased
reliance on fewer customers.  Failure to
continue business with an existing customer or even maintain an existing sales level with a customer could
have a material adverse impact on earnings.

19

---



Table of Contents

Inventories.
Inventory increased during the third quarter of 2006 within the Nature Vision
division and decreased within the Vaddio division.  Within the Nature Vision division, inventories were substantially
below a required level at the end of 2004 as we were unable to ship product due
to being out of stock.  At the end of
2005, we increased our required levels to insure a high rate of order
fulfillment.  Lower than anticipated
sales in the first nine months of 2006 were a cause for the increase in
inventories early on in 2006.  We
currently have stock in place to fulfill orders and management feels that the
inventory is saleable.  At the Vaddio
division, remaining inventories after the sale of the Norman product line, decreased
in the third quarter of 2006 primarily due to the Companys increased sales in
the division.  As a result of the sale
of the Norman photography product line on October 20, 2006, the Company expects
to reduce overall inventory by approximately $2,000,000.  The inventory relating to this product line
is classified as current assets of discontinued operations on our
consolidated balance sheets.  We further
anticipate the ability to reduce the required levels within both divisions in
future quarters.  Should sales of
existing products not achieve forecasted levels, a change in product components
or customer requirements occur, such reductions may not be obtainable.

Increased
oil prices.Increased oil prices may affect us
negatively.  With increased gasoline
prices, consumers may opt to reduce the amount of discretionary spending on
entertainment items and take fewer vacations.
Increased oil prices continue to impact the costs of material
components, primarily plastic related parts.
We rely on outsourced production and the costs for the associated
shipping of both inbound and outbound product could materially impact the cost
of product and gross profit margins.

Increased
interest costs.Given
the cyclical nature of our business we are reliant on a credit facility.  As growth rates dictate additional
borrowing, interest rates have consistently increased, impacting the costs of
financing.  If we are unable to maintain
favorable financing arrangements it will impact the overall profitability of
the Company.

Acquisition
opportunities. We continue to evaluate opportunities for
strategic acquisitions within the outdoor recreation market.  These acquisitions are expected to be
accretive to earnings.  These potential
acquisitions will require financing which we anticipate we will be able to
obtain.  There is no assurance we will
be able to acquire any strategic company or product line and be able to obtain
the necessary financing or financing acceptable to us.

Investment
in infrastructure.We will continue investing in our
infrastructure to support our new distribution facility and in our management
information systems.  We will also
continue to invest in qualified employees to support our organic growth with
new product innovation. We expect that we will continue to make investments in
our data systems, and we expect to hire additional employees in our
distribution services, and have hired in our engineering and administrative
areas in a manner appropriate to support our anticipated revenue growth.

20

---



Table of Contents

Results
of Operations

The following table provides the percentage change in
our net sales and gross profit from 2005 to 2006 and gross profit as a percent
of net sales, income(loss) from operations, and net income(loss) for 2006 and
2005.

|                                        |  |                              |       |                                  |   |                       |   |      |     |      |   |                       |   |   |        |   |  |         |   
|--------------------------------------- |  | ---------------------------- | ----- | -------------------------------- | - | --------------------- | - | ---- | --- | ---- | - | --------------------- | - | - | ------ | - |  | ------- | --
|                                        |  | Quarter
  ended September 30 |       | Nine
  Months ended September 30 |  
|                                        |  |                              |       |                                  |  
|(in thousands)                          |  | 2006                         |       | 2005                             |   | Increase
  (Decrease) |   | 2006 |     | 2005 |   | Increase
  (Decrease) |  
|                                        |  |                              |       |                                  |   |                       |   |      |     |      |   |                       |  
|                                        |  |                              |       |                                  |   |                       |   |      |     |      |   |                       |   |   |        |   |  |         |   
|Net Sales                               |  | $                            | 4,144 |                                  | $ | 3,879                 |   |      | 6.8 | %    | $ | 10,372                |   | $ | 10,846 |   |  | (4.4    | %)
|                                        |  |                              |       |                                  |   |                       |   |      |     |      |   |                       |   |   |        |   |  |         |   
|Gross Profit                            |  |                              | 1,390 |                                  |   | 1,327                 |   |      | 4.7 | %    |   | 3,346                 |   |   | 3,099  |   |  | 8.0     | % 
|                                        |  |                              |       |                                  |   |                       |   |      |     |      |   |                       |   |   |        |   |  |         |   
|Gross Profit as a percent of net sales  |  |                              | 33.5  | %                                |   | 34.2                  | % |      |     |      |   | 32.3                  | % |   | 28.6   | % |  |         |   
|                                        |  |                              |       |                                  |   |                       |   |      |     |      |   |                       |   |   |        |   |  |         |   
|Income(Loss) from Continuing Operations |  |                              | (354  | )                                |   | 254                   |   |      | n/a |      |   | (1,712                | ) |   | (97    | ) |  | (1664.9 | %)
|                                        |  |                              |       |                                  |   |                       |   |      |     |      |   |                       |   |   |        |   |  |         |   
|Net Income(Loss)                        |  | $                            | (287  | )                                | $ | 304                   |   |      | n/a |      | $ | (1,035                | ) | $ | 266    |   |  | n/a     |   

The net sales decrease for the nine months ended
September 30, 2006 is primarily due to a drop in Nature Vision Division sales
and is discussed in the Division Analysis below.  The Company anticipates the ability to replace those reduced
revenues through organic growth and potential acquisitions with in the outdoor
recreation marketplace.  The Vaddio
Division meanwhile continued to provide double digit growth, year over year and
quarter over quarter.  While net sales
have decreased, gross profit margins continue to show improvement over the
prior year for the nine months ended September 30, 2006 primarily as a result
of new Vaddio products being sold at increased gross profit margins.  Operating costs for sales, marketing,
general and administrative are not linear to sales during the first three
quarters and therefore create losses from operations.  During the nine months ended September 30, 2006 the Company has
incurred a cost for stock based compensation and for the compensation bonus
resulting from the sales of Vaddio product exceeding the estimate accrued at
the time of the reverse merger.  The Company
will continue to absorb additional one time costs for additional stock based
compensation and the Vaddio product sales bonus in the fourth quarter.  These costs will also be absorbed within the
Vaddio division and are not comparable to 2005.

21

---



Table of Contents

Nature Vision Inc. sold the Norman photography product
line on October 20, 2006.  The
transaction involved the sale of inventory, equipment and certain other assets
relating to the Norman photography product line. The Company
negotiated the sale of these assets during the quarter ended September 30,
2006. In accordance with  applicable
accounting rules, the Company has reclassified the previously reported
financial results to exclude  the
results of the Norman photography product line and these  results are
presented  on a historical  basis as a separate line in the
consolidated  statements of
operations.   Refer to Note 13 to the
consolidated financial statements for a discussion of our discontinued
operations.  Funds provided by the sale
will be utilized to reduce the line of credit by approximately $1,900,000.

Selling,
general and administrative expenses

Selling, general and administrative costs have
increased substantially as we have continued to invest in our infrastructure to
support our new distribution facility, management information systems and
anticipated growth.  We have moved the
Nature Vision division and corporate headquarters to a new facility, installed
new information systems and hired additional employees at both divisions in our
engineering and administrative areas in a manner appropriate to support our
anticipated revenue growth.  The Company
has also increased commission structures and marketing efforts primarily with
in the Vaddio division.  Research and
development expenses increased by $100,636 and $52,942 for the nine and three
months ended September 30, 2006 over the prior reporting periods.  These costs in addition to the one time
expenses referred to above are the major contributors to the increases.  Certain costs will be required to be
absorbed over reduced revenues due to the sale of the Norman product line.

Divisional Analysis

Nature
Vision Division

The
following table provides the percentage change in net sales and gross profit
from 2005 to 2006 and gross profit as a percent of net sales for 2006 and 2005
of the Nature Vision Division:

|                                       |  |                              |       |                                  |   |                       |   |      |        |      |   |                       |   |   |       |   |  |        |  
|-------------------------------------- |  | ---------------------------- | ----- | -------------------------------- | - | --------------------- | - | ---- | ------ | ---- | - | --------------------- | - | - | ----- | - |  | ------ | -
|                                       |  | Quarter
  ended September 30 |       | Nine
  Months ended September 30 |  
|                                       |  |                              |       |                                  |  
|(in thousands)                         |  | 2006                         |       | 2005                             |   | Increase
  (Decrease) |   | 2006 |        | 2005 |   | Increase
  (Decrease) |  
|                                       |  |                              |       |                                  |   |                       |   |      |        |      |   |                       |  
|                                       |  |                              |       |                                  |   |                       |   |      |        |      |   |                       |   |   |       |   |  |        |  
|Net Sales                              |  | $                            | 1,565 |                                  | $ | 1,770                 |   |      | (11.6% | )    | $ | 3,917                 |   | $ | 6,305 |   |  | (37.9% | )
|                                       |  |                              |       |                                  |   |                       |   |      |        |      |   |                       |   |   |       |   |  |        |  
|Gross Profit                           |  |                              | 412   |                                  |   | 567                   |   |      | (27.3% | )    |   | 921                   |   |   | 1,744 |   |  | (47.2% | )
|                                       |  |                              |       |                                  |   |                       |   |      |        |      |   |                       |   |   |       |   |  |        |  
|Gross Profit as a percent of net sales |  |                              | 26.3  | %                                |   | 32.0                  | % |      |        |      |   | 23.5                  | % |   | 27.7  | % |  |        |  

22

---



Table of Contents

Decreased sales were due to the carryover of unfilled
demand from 2004 increasing first quarter sales for 2005 to an unusual
level.  The sales carryover from 2004
resulted from the demand for new product that was not available prior to
year-end.  This carryover increased the
first quarter sales for 2005 and was not repeated during the quarter ended
March 31, 2006.  Additionally, sales of
ice fishing products and underwater viewing systems for ice fishing were
impacted by a warmer than normal winter.
Ice formed early in the Northern reaches of the country only to see
40-60 degree daily highs before the end of the 2005-2006 winter season.  Ice never reformed in many of these areas or
was unstable at best, and never formed at all in other areas.  The second and third quarters have been
historically the weakest quarters for the divisions sales.  While gross sales were down, net material
margins have continued to improve as a result of our move to offshore
production in 2004.  Net sales have also
been disproportionately reduced by returns for the nine months ended September
30, 2006.  Gross profits for the quarter
were impacted by returns at a run rate similar to the prior year which was
anticipated.  Management anticipates the
returns to become more in line with historical performance by the end of the
year.  Inventories were ordered in
anticipation of a normal ice season, 2005-2006, and resulted in increased
inventory levels through out the nine months ended September 30, 2006.  Since the beginning of the year, several of
our larger customers have implemented a focus on reducing inventory
levels.  This factor impacts the
division in two areas, reduced sales and increased inventories.  We anticipate this trend will continue
within the industry, forcing suppliers to maintain larger inventories and
satisfy orders within shorter time periods.
Increased inventories are also in anticipation of the divisions
historical peak selling period in the fourth quarter.  An additional impact of increased inventories is the reliance
upon financing to support this, reducing available working capital
resources.  A focus on reducing
inventory levels has been implemented in order to reduce future capital
resource requirements.  Management
anticipates gross product margins to return to prior year levels.  Product mix and seasonality of products can
have a substantial impact on the gross profit margin for any given period.  Consistently increasing interest rates has
continued to increase interest expense.

Vaddio
Division

The
following table provides the percentage increase in net sales and gross profit
from 2005 to 2006 and gross profit as a percentage of net sales for 2006 and
2005 of the Vaddio Division:

23

---



Table of Contents

|                                       |  |                              |       |                                  |   |                       |   |      |      |      |   |                       |   |   |       |   |  |      |  
|-------------------------------------- |  | ---------------------------- | ----- | -------------------------------- | - | --------------------- | - | ---- | ---- | ---- | - | --------------------- | - | - | ----- | - |  | ---- | -
|                                       |  | Quarter
  ended September 30 |       | Nine
  Months ended September 30 |  
|                                       |  |                              |       |                                  |  
|(in thousands)                         |  | 2006                         |       | 2005                             |   | Increase
  (Decrease) |   | 2006 |      | 2005 |   | Increase
  (Decrease) |  
|                                       |  |                              |       |                                  |   |                       |   |      |      |      |   |                       |  
|                                       |  |                              |       |                                  |   |                       |   |      |      |      |   |                       |   |   |       |   |  |      |  
|Net Sales                              |  | $                            | 2,579 |                                  | $ | 2,109                 |   |      | 22.3 | %    | $ | 6,455                 |   | $ | 4,541 |   |  | 42.1 | %
|                                       |  |                              |       |                                  |   |                       |   |      |      |      |   |                       |   |   |       |   |  |      |  
|Gross Profit                           |  |                              | 978   |                                  |   | 760                   |   |      | 28.7 | %    |   | 2,426                 |   |   | 1,355 |   |  | 79.0 | %
|                                       |  |                              |       |                                  |   |                       |   |      |      |      |   |                       |   |   |       |   |  |      |  
|Gross Profit as a percent of net sales |  |                              | 37.9  | %                                |   | 36.0                  | % |      |      |      |   | 37.6                  | % |   | 29.8  | % |  |      |  

Sales continue to increase due to new products and
additional distribution channels for the Vaddio products line.  These new products continue to provide
improved gross profit margins as well as provide additional operational
efficiencies within the division.
Reduced pricing from a major supplier also provided a positive impact on
current gross profits.  The Company
anticipates the ability to maintain these pricing levels, but should this
change, it could have a substantial impact on maintaining future margins.  Inventory increased from year end in
anticipation of the divisions historical peak selling periods in the second
and third quarters.  A focus on reducing
inventory levels has been implemented in order to reduce future capital
resource requirements.  Certain indirect
manufacturing, sales, general and administrative costs once shared with the
discontinued operations of the Norman product line will be required to be fully
absorbed by the Vaddio product line in the future.

Liquidity
and Capital Resources

The
Company did not record a cash balance as of September 30, 2006 and December 31,
2005.  Operations for the Company are
financed through an existing line of credit with a local credit facility.  The major factors in uses of cash from
operations netting a decrease of $1,987,000 were the following.  The net loss for the nine months ending
September 30, 2006 of $1,035,000 and corresponding accrual for a deferred tax
credit of $690,000, are the major factors for this decrease as of September 30,
2006.  Other major factors such as a net
increase in inventory levels of $1,212,000 and reduction of payables in the
amount of $364,000 were offset by a reduction of receivables in the amount of
$1,234,000.  The inventory increase in
the Nature Vision division is due to reduced sales levels for the year to date.  Additionally, the Nature Vision division
brought in additional product in 2005 in order to continue to maintain a high
order fill rate.  Historically, the
Nature Vision division sees increased sales in the fourth quarter.  The Vaddio division has seen its inventory
investment reduce from levels ending March 31, 2006.  Both divisions are working to reduce the levels of inventories
and increase inventory turns.  Another
major component of the decrease in the use of cash was a decrease in the level
of receivables of $1,234,000.  This
decrease was due to the increased collections in the first nine months of 2006
and reduced sales during the same time period of 2006.  The final major component is a decrease in
current payables of $364,000.  Reduced
purchases and payments upon fourth quarter receipts are the cause of this change.
Investing activities for capital expenditures were $1,089,000, including
the purchase of the Vector product line.
On February 28,2006, we completed a purchase of the assets
of Vector Teknologies, a small downrigger company located in Illinois for
$250,000 plus inventory of approximately $70,000.  The purchase has been absorbed within the Nature Vision division
of operations.  Management continues to
review opportunities for acquisitions in the outdoor recreation
marketplace.  Management anticipates
that it will continue to invest in capital expenditures for the development of
product lines to be similar to that of 2005.
All of the activity for 2006 for working capital needs was financed
within the current structure of the current credit facility.

24

---



Table of Contents

As
of September 30, 2006 working capital decreased to $5,332,454, from $6,899,783
at December 31, 2005.

Nature
Vision Inc. has a secured line of credit for $5,600,000 at prime plus
..75%.  The prime rate at September 30,
2006 was 8.25%.  As of September 30,
2006, the Company had the ability to borrow against the entire line of
credit.  The line expires on April 1,
2007.  Management anticipates continued
advances against the line of credit to fund anticipated sales growth in future
quarters.  The agreement requires the
following affirmative covenants measured based on December 31 audited results,
minimum net worth of $7,000,000, debt to equity ratio of less than 1.0 to 1.0
and debt service ratio of not to exceed 1.2 to 1.0.  The Company was in compliance with all covenants at December 31,
2005.  Management believes short-term
liquidity needs of the Company will be provided through working capital and the
line of credit, and will be sufficient to finance operations for a period of at
least the next 12 months.

In
the first quarter of 2006, the Company received approximately $268,000 from the
exercise of options for 39,000 shares.
Associated stock based compensation expenses of approximately $100,000
were incurred during the same period.

The
Company sold its Brainerd, MN facility on July 14, 2006 for net proceeds of
$641,840, prior to the repayment of the related mortgage.  Upon the sale, the existing mortgage was
satisfied.  Management negotiated a
lease of a new 35,000 square foot facility.
The lease commenced on September 1, 2006 and expires August 31,
2016.  The monthly base rent increases
from $11,718 to $17,800 over the term of the lease.  At this time, management believes that any debt required to
relocate and improve the new facility will not be substantially different than
the amount on the balance sheet at June 30, 2006.

The
Company anticipates it will sign an agreement in November 2006 to market and
sell its Minneapolis, MN facility and land.
Management anticipates the sale of the property to exceed the carrying
value as presented on the balance sheet.
The Company anticipates utilizing the proceeds to reduce any existing
debt or assist in funding a future acquisition.

Nature
Vision Inc. sold the Norman photography product line on October 20, 2006
pursuant to the terms of an Asset Purchase Agreement. The transaction involved
the sale of inventory, equipment and certain other assets relating to Nature
Visions Norman photography product line for a total purchase price of
approximately $2,400,000, of which $300,000 is payable pursuant to the terms of
a three year note.  The gain on the sale
will be based on carrying amount of inventories of $2,038,014, property and
equipment net book value of $14,098, and prepaid expenses of $37,000.  Sales proceeds received were cash of
$1,998,252, three year note receivable of $300,000 and a 90 day inventory
holdback of $125,000. Estimated transaction costs payable (legal and broker
fee) are projected to be approximately $130,000. The estimated pretax gain on
the sale of the business unit is calculated at approximately $200,000.  The Company utilized the net proceeds to
reduce the line of credit by approximately $1,900,000.

25

---



Table of Contents

It
is managements belief that it will fund any potential acquisitions through
additional financing and the potential issuance of common stock.  Management believes that any additional
long-term debt requirements and additional lines of credit will be readily
available.

It
is managements belief that long-term liquidity needs for the foreseeable
future will be provided by working capital, and the expectation that the
current line of credit will be renewed beyond April 2007 and any additional
long-term debt requirements will be readily available.

The
Company believes that the effect of inflation has not been material during the
quarter and nine months ended September 30, 2006.

Off
Balance Sheet Financing Arrangements

As
of September 30, 2006, there were no off-balance sheet arrangements,
unconsolidated subsidiaries and commitments or guaranties of other parties.

Critical
Accounting Policies

Managements
estimate of the warranty reserve is based on historical company data and
managements best estimate. We evaluated the key factors and assumptions used to
develop the warranty reserve in determining that it is reasonable in relation
to the consolidated financial statements taken as a whole.

The Company recognizes revenue when products are shipped and the
customer takes ownership and assumes risk of loss, collection of the relevant
receivable is probable, persuasive evidence of an arrangement exists and the
sales price is fixed or determinable.  The Companys revenue recognition
policy is in accordance with SEC Staff Accounting Bulletin, No. 104.

Management records a reserve on accounts receivable which is an estimate
of the amount of accounts receivable that are uncollectible. The reserve is
based on a combination of specific customer knowledge, general economic
conditions and historical trends. Management believes the results could be
materially different if economic conditions change for our customers.

26

---



Table of Contents

The carrying value of long-lived assets is periodically assessed to
insure their carrying value does not exceed their estimated net realizable
future value. This assessment includes certain assumptions related to future
needs for the asset to help generate future cash flow. Changes in those
assessments, future economic conditions or technological changes could have a
material adverse impact of the carrying value of these assets.

The inventory reserve is an estimate of the future net realizable value
of our inventory. It is based on historical trends, product life cycles,
forecast of future inventory needs and on-hand inventory levels. Management
believes reserve levels could be materially affected by changes in technology,
our customer base, customer needs, general economic conditions and the success
of certain Company sales programs.

Realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities and projected future taxable
income in making this assessment. Actual future operating results, as well as
changes in future performance, could have a material adverse impact on the
valuation reserves.

Item 3:
Controls and Procedures

(a) As of September 30, 2006 an evaluation was
performed by the registrants President and Chief Financial Officer of the
effectiveness of the design and operation of the registrants disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities and Exchange Act of 1934).
Based upon, and as of the date of that evaluation, the President and
Chief Financial Officer concluded that the registrants disclosure controls and
procedures were effective.

(b) Changes in internal controls.  There were no significant changes in the registrants internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation or during the third quarter ended
September 30, 2006.  There were no
significant deficiencies or material weaknesses, and therefore there were no
corrective actions taken.

27

---



Table of Contents

Part II

Item 1.  Legal
Proceedings.  Not
applicable.

Item 2.  Unregistered
Sales of Equity Securities and Use of Proceeds.  Not applicable.

Item 3.  Defaults Upon
Senior Securities.
Not applicable.

Item 4.  Submission of
Matters to a Vote of Security Holders.  Not applicable.

Item 5.  Other
Information.  Not
applicable.

Item 6.  Exhibits

| |      |                                                                                                                                                                                                                                                                    
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1 | Amendment to Employment Agreements, dated October 9,
  2006, between Nature Vision, Inc. and Robin K. Sheeley (previously filed as
  Exhibit 10.1 to the Registrants Report on Form 8-K dated October 9, 2006).                                                   
| |      |                                                                                                                                                                                                                                                                    
| | 10.2 | Asset Purchase Agreement, dated October 20, 2006, by
  and between Promark International, Inc. d/b/a Photogenic Professional
  Lighting and Nature Vision, Inc. (previously filed as Exhibit 10.1 to the
  Registrants Report on Form 8-K dated October 20, 2006).
| |      |                                                                                                                                                                                                                                                                    
| | 31.1 | Certification of Chief Executive Officer.                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                    
| | 31.2 | Certification of Chief Financial Officer.                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                    
| | 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as
  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                          

28

---



Table of Contents

Signatures

In
accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|                        |                     |                                           
|----------------------- | ------------------- | ------------------------------------------
|                        | NATURE VISION, INC.
|                        |                    
|Date: November 14, 2006 | By:                 | /s/ Jeffrey P. Zernov                     
|                        |                     |                                           
|                        |                     | Its: Chief Executive Officer and President
|                        |                     |                                           
|Date: November 14, 2006 | By:                 | /s/ Michael R. Day                        
|                        |                     |                                           
|                        |                     | Its:  Chief
  Financial Officer           

29

---