Table of Contents





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

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# FORM
10-QSB

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xQUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

oTRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition
period from ___________ to ___________

Commission
File Number :0-7475

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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 Street
Brainerd, MN  56401(Address of principal executive offices, including zip code)

(218) 825-0733(Issuers telephone number, including area code)

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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 filing 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    No x

The number of shares of registrants common stock, par
value $0.16 per share, outstanding as of August 11, 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





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NATURE VISION, INC.INDEX

|        |            |                                                                                             |            
|------- | ---------- | ------------------------------------------------------------------------------------------- | -----------
|PART I  |            |                                                                                             | Page
Number
|        |            |                                                                                             |            
|        | Item
  1:  | Financial
  Information                                                                     |            
|        |            |                                                                                             |            
|        |            | Consolidated
  Balance Sheet - June 30, 2006 and December 31, 2005                          | 1          
|        |            |                                                                                             |            
|        |            | Consolidated
  Statements of Operations - Six and Three Months Ended June 30, 2006 and 2005 | 2          
|        |            |                                                                                             |            
|        |            | Consolidated
  Statements of Cash Flows - Six Months Ended June 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     | 15         
|        |            |                                                                                             |            
|        | Item
  3:  | Controls
  and Procedures                                                                   | 21         
|        |            |                                                                                             |            
|PART II |            |                                                                                             |            
|        |            |                                                                                             |            
|        | Item
  4:  | Submission
  of Matters to a Vote of Security Holders                                       | 22         
|        |            |                                                                                             |            
|        | Item  6:   | Exhibits                                                                                    | 22         
|        |            |                                                                                             |            
|        | Signatures |                                                                                             | 23         

i

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Table of Contents

Part I

Item 1: Financial Information

Nature Vision, Inc. and SubsidiariesConsolidated Balance Sheets
June 30, 2006 and December 31, 2005

|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ---------- | ------------------- | - | ---------- | 
|ASSETS                                                                                                                                                                            |  |                 |            |                     |   |            | 
|                                                                                                                                                                                  |  | Unaudited       |            | Audited             |  
|                                                                                                                                                                                  |  | June 30,
  2006 |            | December
  31, 2005 |  
|                                                                                                                                                                                  |  |                 |            |                     |  
|CURRENT ASSETS                                                                                                                                                                    |  |                 |            |                     |   |            | 
|Cash and Cash Equivalents                                                                                                                                                         |  | $               |           |                     | $ |           | 
|Accounts Receivable, net                                                                                                                                                          |  |                 | 1,899,466  |                     |   | 3,672,353  | 
|Inventories, net                                                                                                                                                                  |  |                 | 9,495,336  |                     |   | 8,321,002  | 
|Prepaid Expenses                                                                                                                                                                  |  |                 | 345,004    |                     |   | 410,459    | 
|Deferred Income Taxes                                                                                                                                                             |  |                 | 848,000    |                     |   | 350,000    | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|Total Current Assets                                                                                                                                                              |  |                 | 12,587,806 |                     |   | 12,753,814 | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|PROPERTY AND EQUIPMENT,
  NET                                                                                                                                                     |  |                 | 2,275,433  |                     |   | 1,887,926  | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|NON-CURRENT ASSETS                                                                                                                                                                |  |                 |            |                     |   |            | 
|Building and Land Held for Sale, Net                                                                                                                                              |  |                 | 641,086    |                     |   | 641,086    | 
|Cash Value Life Insurance                                                                                                                                                         |  |                 | 147,146    |                     |   | 135,698    | 
|Deferred Income Taxes                                                                                                                                                             |  |                 | 435,746    |                     |   | 435,746    | 
|Intangibles - net                                                                                                                                                                 |  |                 | 129,862    |                     |   | 95,483     | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|Total Non-Current Assets                                                                                                                                                          |  |                 | 1,353,840  |                     |   | 1,308,013  | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|TOTAL ASSETS                                                                                                                                                                      |  | $               | 16,217,079 |                     | $ | 15,949,753 | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|LIABILITIES AND
  STOCKHOLDERS EQUITY                                                                                                                                            |  |                 |            |                     |   |            | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|CURRENT LIABILITIES                                                                                                                                                               |  |                 |            |                     |   |            | 
|Checks issued in excess of cash in bank                                                                                                                                           |  | $               | 136,641    |                     | $ | 377,552    | 
|Current Portion Contract Payable Vaddio                                                                                                                                           |  |                 | 250,432    |                     |   | 462,420    | 
|Current Portion of Long-Term Debt                                                                                                                                                 |  |                 | 396,180    |                     |   | 55,649     | 
|Current Portion of Deferred Retirement
Benefits                                                                                                                                   |  |                 | 70,033     |                     |   | 71,400     | 
|Line of Credit, Bank                                                                                                                                                              |  |                 | 4,415,000  |                     |   | 2,230,000  | 
|Account Payable                                                                                                                                                                   |  |                 | 1,114,472  |                     |   | 1,481,334  | 
|Accrued Payroll and Payroll Taxes                                                                                                                                                 |  |                 | 355,069    |                     |   | 483,352    | 
|Accrued Expenses                                                                                                                                                                  |  |                 | 559,540    |                     |   | 690,324    | 
|Income Taxes Payable                                                                                                                                                              |  |                 | 0          |                     |   | 2,000      | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|Total Current Liabilities                                                                                                                                                         |  |                 | 7,297,367  |                     |   | 5,854,031  | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|LONG-TERM LIABILITIES                                                                                                                                                             |  |                 |            |                     |   |            | 
|Long-term Debt, Net of Current Portion                                                                                                                                            |  |                 | 0          |                     |   | 387,016    | 
|Deferred Retirement Benefits                                                                                                                                                      |  |                 | 592,758    |                     |   | 651,725    | 
|Contract Payable Vaddio, Net of Current
Portion                                                                                                                                   |  |                 | 0          |                     |   | 250,431    | 
|Deferred Income Taxes                                                                                                                                                             |  |                 | 514,200    |                     |   | 514,200    | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|Total Non-Current Liabilities                                                                                                                                                     |  |                 | 1,106,958  |                     |   | 1,803,372  | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|Total Liabilities                                                                                                                                                                 |  |                 | 8,404,325  |                     |   | 7,657,403  | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|STOCKHOLDERS EQUITY                                                                                                                                                              |  |                 |            |                     |   |            | 
|Common Stock, $.16 Par Value per Share 25,000,000
Shares Authorized
  Common Shares Issued and Outstanding at June 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                                                                                                                                                                 |  |                 | 759,405    |                     |   | 1,507,321  | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|Total Stockholders Equity                                                                                                                                                        |  |                 | 7,812,754  |                     |   | 8,292,350  | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 
|                                                                                                                                                                                 
|TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY                                                                                                                                        |  | $               | 16,217,079 |                     | $ | 15,949,753 | 
|                                                                                                                                                                                  |  |                 |            |                     |   |            | 

See accompanying notes to consolidated financial
statements.

1

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Table of Contents

Nature Vision, Inc. and SubsidiariesConsolidated Statements of Operations (Unaudited)

|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|-------------------------------------------- |  | -------------------------- | --------- | ------------------------ | - | --------- | - | ---- | ---------- | - | - | ---------- | -
|                                             |  | Three Months Ended June 30 |           | Six Months Ended June 30 |  
|                                             |  | 2006                       |           | 2005                     |   | 2006      |   | 2005 |           
|                                             |  |                            |           |                          |   |           |   |      |           
|                                            
|SALES, NET                                   |  | $                          | 4,644,502 |                          | $ | 5,032,323 |   | $    | 9,311,093  |   | $ | 10,486,688 |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|COST OF GOOD SOLD                            |  |                            | 3,320,061 |                          |   | 3,602,920 |   |      | 6,427,764  |   |   | 7,684,597  |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|GROSS PROFIT                                 |  |                            | 1,324,441 |                          |   | 1,429,403 |   |      | 2,883,329  |   |   | 2,802,091  |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |  |                            | 1,728,480 |                          |   | 1,369,247 |   |      | 3,979,471  |   |   | 2,840,829  |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|(LOSS) INCOME FROM OPERATIONS                |  |                            | (404,039  | )                        |   | 60,156    |   |      | (1,096,142 | ) |   | (38,738    | )
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|OTHER INCOME (EXPENSE)                       |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|Interest Expense                             |  |                            | (124,056  | )                        |   | (19,986   | ) |      | (174,932   | ) |   | (27,500    | )
|Interest Income                              |  |                            | 0         |                          |   | 0         |   |      | 0          |   |   | 517        |  
|Gain on Sale of Property and Equipment       |  |                            | 11,069    |                          |   | 0         |   |      | 13,883     |   |   | 0          |  
|Other Income                                 |  |                            | 6,802     |                          |   | 6,179     |   |      | 11,275     |   |   | 10,391     |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|Net Other Expenses                           |  |                            | (106,185  | )                        |   | (13,807   | ) |      | (149,774   | ) |   | (16,592    | )
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|(LOSS) INCOME BEFORE TAXES                   |  |                            | (510,224  | )                        |   | 46,349    |   |      | (1,245,916 | ) |   | (55,330    | )
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|PROVISION FOR INCOME TAX EXPENSE(REFUND)     |  |                            | (204,000  | )                        |   | 19,000    |   |      | (498,000   | ) |   | (18,000    | )
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|NET (LOSS) INCOME                            |  | $                          | (306,224  | )                        | $ | 27,349    |   | $    | (747,916   | ) | $ | (37,330    | )
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|                                            
|(Loss) income per Common Share               |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|Basic                                        |  | $                          | (0.14     | )                        | $ | 0.01      |   | $    | (0.34      | ) | $ | (0.02      | )
|Diluted                                      |  | $                          | (0.14     | )                        | $ | 0.01      |   | $    | (0.34      | ) | $ | (0.02      | )
|                                             |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|Weighted Average Common Shares               |  |                            |           |                          |   |           |   |      |            |   |   |            |  
|Basic                                        |  |                            | 2,217,887 |                          |   | 2,178,559 |   |      | 2,194,395  |   |   | 2,178,559  |  
|Diluted                                      |  |                            | 2,217,887 |                          |   | 2,254,063 |   |      | 2,194,395  |   |   | 2,178,559  |  

See accompanying notes to consolidated
financial statements.

2

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Table of Contents

Nature Vision, Inc. and SubsidiariesConsolidated Statements of Cash Flows (Unaudited)
For Six Months Ended June 30, 2006 and 2005

|                                                                                |  |      |            |      |   |            |  
|------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                |  | 2006 |            | 2005 |  
|                                                                                |  |      |            |      |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                            |  |      |            |      |   |            |  
|Net Loss                                                                        |  | $    | (747,916   | )    | $ | (37,330    | )
|Adjustments to reconcile net loss to net
  cash flows from operating activities |  |      |            |      |   |            |  
|Depreciation and Amortization                                                   |  |      | 239,731    |      |   | 191,500    |  
|Gain on Disposal of Property and
Equipment                                      |  |      | (13,883    | )    |   | 0          |  
|Provision for Deferred Income Taxes                                             |  |      | (498,000   | )    |   | 0          |  
|Change in Deferred Retirement Benefits                                          |  |      | (29,875    | )    |   | (52,447    | )
|Change in Bad Debt Reserve                                                      |  |      | 6,654      |      |   | 0          |  
|Changes in Operating Assets and
Liabilities                                     |  |      |            |      |   |            |  
|Accounts Receivable                                                             |  |      | 1,766,233  |      |   | 473,116    |  
|Income Taxes Receivable                                                         |  |      | 0          |      |   | (59,000    | )
|Inventories, net                                                                |  |      | (1,174,334 | )    |   | (1,229,502 | )
|Prepaid Expenses                                                                |  |      | 65,455     |      |   | 143,549    |  
|Accounts Payable                                                                |  |      | (366,862   | )    |   | (21,727    | )
|Other Non-current Assets                                                        |  |      | (11,448    | )    |   | (8,907     | )
|Income Taxes Payable                                                            |  |      | (2,000     | )    |   | 0          |  
|Accrued Payroll and Payroll Taxes                                               |  |      | (128,283   | )    |   | 14,759     |  
|Accrued Expenses                                                                |  |      | (130,784   | )    |   | (89,718    | )
|Payments on Deferred Retirement Benefits                                        |  |      | (30,459    | )    |   | 0          |  
|                                                                                |  |      |            |      |   |            |  
|Net Cash Flows from Operating Activities                                        |  |      | (1,055,771 | )    |   | (675,707   | )
|                                                                                |  |      |            |      |   |            |  
|                                                                                |  |      |            |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                            |  |      |            |      |   |            |  
|Purchases of Property and Equipment                                             |  |      | (645,238   | )    |   | (348,112   | )
|Proceeds from Sale of Property and
  Equipment                                  |  |      | 53,924     |      |   | 0          |  
|Purchases of Intangibles                                                        |  |      | (56,420    | )    |   | 0          |  
|                                                                                |  |      |            |      |   |            |  
|Net Cash Flows from Investing Activities                                        |  |      | (647,734   | )    |   | (348,112   | )
|                                                                                |  |      |            |      |   |            |  
|                                                                                |  |      |            |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                            |  |      |            |      |   |            |  
|Increase (decrease) in checks issued in excess of Cash
  in Bank                |  |      | (240,911   | )    |   | 50,361     |  
|Net Advances from Line of Credit,
  Bank                                        |  |      | 2,185,000  |      |   | 1,140,000  |  
|Principal Payments on Long-term Debt                                            |  |      | (46,485    | )    |   | (20,965    | )
|Payments on Contract Payable                                                    |  |      | (462,419   | )    |   | (187,149   | )
|Cash Received on Exercise of Options                                            |  |      | 268,320    |      |   | 0          |  
|                                                                                |  |      |            |      |   |            |  
|Net Cash Flows from Financing Activities                                        |  |      | 1,703,505  |      |   | 982,247    |  
|                                                                                |  |      |            |      |   |            |  
|                                                                                |  |      |            |      |   |            |  
|Net Change in Cash and Cash Equivalents                                         |  |      | 0          |      |   | (41,572    | )
|                                                                                |  |      |            |      |   |            |  
|CASH AND CASH EQUIVALENTS - January 1, 2006
  and 2005                          |  |      | 0          |      |   | 41,572     |  
|                                                                                |  |      |            |      |   |            |  
|                                                                                |  |      |            |      |   |            |  
|CASH AND CASH EQUIVALENTS - June 30, 2006
  and 2005                            |  | $    | 0          |      | $ |           |  
|                                                                                |  |      |            |      |   |            |  
|                                                                                |  |      |            |      |   |            |  
|Supplemental Cash Flow Disclosures;                                             |  |      |            |      |   |            |  
|Cash paid for Interest                                                          |  | $    | 166,767    |      | $ | 30,631     |  
|Cash paid for Income Taxes                                                      |  | $    | 2,000      |      | $ | 41,000     |  

See accompanying notes to consolidated
financial statements.

3

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Table of Contents

NATURE VISION,
INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2006 and 2005

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE
OF OPERATIONS

On August 31, 2004, the Company changed its name from
Photo Control Corporation to Nature Vision, Inc. in connection with a reverse
merger transaction with Nature Vision Operating, Inc. (f/k/a, Nature Vision,
Inc.), a Minnesota corporation that was incorporated in 1998. As part of the
merger transaction, Nature Vision Operating, Inc. became a wholly owned
subsidiary of the Company.

The Company is organized into two divisions  Nature
Vision and Photo Control (Photo). The Nature Vision division designs and
markets video viewing systems for the sport fishing market and other video
based consumer and industrial products. The Photo division designs,
manufactures and markets professional cameras, electronic flash equipment, lens
shades and related photographic accessories and sells products used in the
video conferencing and presentation industry. Nature Vision, Inc. grants
unsecured credit to its customers which are primarily dealers and consumers
located throughout the United States and Canada. Nature Vision, Inc. contracts
with outside organizations for the manufacture and sale of its products. The
geographic market in which Photo competes consists of the entire United States
and, to a lesser extent, some foreign countries and also grants unsecured
credit to its customers.

INTERIM
FINANCIAL INFORMATION

The accompanying consolidated balance sheet at June
30, 2006 and the consolidated statements of operations and cash flows for the six months and three months ended June 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 six months and three months ended June 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 six months ended June 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 including 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

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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 $48,000 at June 30, 2006 and $37,000 at 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 estimate realizable value
in the case of finished goods and replacement or reproduction cost in the case
of other inventories. Because of 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.

BUILDING
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 includes our current assembly and distribution facility and
our corporate headquarters. Accordingly, we have reflected the carrying value
of the building as held for sale as of June 30, 2006 and December 31, 2005. As
a result, we have discontinued recording depreciation on the building effective
July 1, 2005 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 related to the Nature Vision, Inc. segment. On July 14, 2006 the
building has been subsequently sold.

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 six years. Amortization expense was $22,040 and $34,332 for the six months
ended June 30, 2006 and 2005, respectively and $14,063 and $17,166 for the
three months ended June 30, 2006 and 2005, respectively. Accumulated amortization
related to these assets was $85,998 at June 30, 2006 and $63,958 at December
31, 2005. Estimated remaining amortization expense for the years ending
December 31, 2006, 2007, 2008, 2009 and 2010 is $23,211, $40,705, $25,733,
$22,122 and $15,270, respectively.

5

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Table of Contents

Schedule of Intangible Assets

|                               |  |                |         |                            |   |                              |  |   |         | 
|------------------------------ |  | -------------- | ------- | -------------------------- | - | ---------------------------- |  | - | ------- | 
|                               |  | Gross
  Amount |         | Accumulated
  Amortization |   | Net Value
  at June 30, 2006 | 
|                               |  |                |         |                            |   |                              | 
|                               |  |                |         |                            |   |                              | 
|Trademarks                     |  | $              | 9,085   |                            | $ | 6,090                        |  | $ | 2,995   | 
|Patents                        |  | $              | 54,199  |                            | $ | 29,227                       |  | $ | 24,972  | 
|Vector  Non-compete Contract  |  | $              | 56,420  |                            | $ | 3,760                        |  | $ | 52,660  | 
|Vaddio  Employment Contract   |  | $              | 23,328  |                            | $ | 13,520                       |  | $ | 9,808   | 
|Vaddio  Distribution Network  |  | $              | 32,715  |                            | $ | 18,963                       |  | $ | 13,752  | 
|Vaddio  Intellectual Property |  | $              | 40,114  |                            | $ | 14,439                       |  | $ | 25,675  | 
|                               |  |                |         |                            |   |                              |  |   |         | 
|                               |  |                |         |                            |   |                              |  |   |         | 
|Totals                         |  | $              | 215,861 |                            | $ | 85,999                       |  | $ | 129,862 | 
|                               |  |                |         |                            |   |                              |  |   |         | 

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

Nature Vision, Inc. recognizes revenue on the date
products are shipped to the customer. Most sales for Nature Vision, Inc. are
made with the right of return or exchange based on their policy. Sales for the
Photo division are recorded when the product is shipped and returns are
permitted only for defective equipment. Estimated reserves for returns are
established by management based on historical experience and are subject to
ongoing review and adjustment by Nature Vision, Inc. 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 provides a standard one-year warranty program for its
products. Photo warrants its products for one or two years. The allowance
reserve for sales returns and warranty cost was $205,000 and $295,000 at June
30, 2006 and December 31, 2005, respectively. The following table provides the
expense recorded and charges against the reserve for the six months ended June
30, 2006 and 2005.

|                            |  |         |          |      |   |         |  
|--------------------------- |  | ------- | -------- | ---- | - | ------- | -
|                            |  | June 30 |         
|                            |  | 2006    |          | 2005 |  
|                            |  |         |          |      |  
|Accrued balance  beginning |  | $       | 295,000  |      | $ | 200,000 |  
|Provision                   |  |         | 75,121   |      |   | 95,575  |  
|Claims incurred             |  |         | (165,121 | )    |   | (95,575 | )
|                            |  |         |          |      |   |         |  
|                            |  |         |          |      |   |         |  
|Accrued balance  ending    |  | $       | 205,000  |      | $ | 200,000 |  
|                            |  |         |          |      |   |         |  

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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 Photo are expensed as incurred.
Prepaid advertising expenses were $162,151 and $127,881 for June 30, 2006 and
December 31, 2005, respectively. Advertising expensed was $751,022 and $543,268
for the six months ended June 30, 2006 and 2005, respectively and $298,823 and
$210,570 for the three months ended June 30, 2006 and 2005, respectively.

SELF-FUNDED
INSURANCE

The Company maintains a partially self-funded group
health and fully-funded short-term disability employee benefit plan. Specific
and aggregate stop loss coverage on the health plan is 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 such claims.

RESEARCH
AND DEVELOPMENT

The Company expenses all costs related to product
research and development as incurred. Research and development expense was
$130,438 and $82,744 for the six months ended June 30, 2006 and 2005
respectively and $79,131 and $45,804 for the three months ended June 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 six and three months ended June
30, 2006. Therefore, there was no SFAS No. 123(R) compensation expense for the
six and three months ended June 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 June 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 June 30, 2006.

7

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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 EndedJune 30 |         | Six Months
  EndedJune 30 |  
|                                            |  |                             |         |                          
|                                            |  | 2006                        |         | 2005                      |   | 2006   |  | 2005 |        
|                                            |  |                             |         |                           |   |        |  |      |        
|Net (Loss) Income:                          |  |                             |         |                           |   |        |  |      |         |   |    |        |  
|As reported                                 |  | ($                          | 306,224 | )                         | $ | 27,349 |  | ($   | 747,916 | ) | ($ | 37,330 | )
|Pro forma                                   |  | ($                          | 306,224 | )                         | $ | 27,349 |  | ($   | 747,916 | ) | ($ | 37,330 | )
|                                            |  |                             |         |                           |   |        |  |      |         |   |    |        |  
|Basic net (loss) income per common share:   |  |                             |         |                           |   |        |  |      |         |   |    |        |  
|As reported                                 |  | ($                          | .14     | )                         | $ | .01    |  | ($   | .34     | ) | ($ | .02    | )
|Pro forma                                   |  | ($                          | .14     | )                         | $ | .01    |  | ($   | .34     | ) | ($ | .02    | )
|                                            |  |                             |         |                           |   |        |  |      |         |   |    |        |  
|Diluted net (loss) income per common share: |  |                             |         |                           |   |        |  |      |         |   |    |        |  
|As reported                                 |  | ($                          | .14     | )                         | $ | .01    |  | ($   | .34     | ) | ($ | .02    | )
|Pro forma                                   |  | ($                          | .14     | )                         | $ | .01    |  | ($   | .34     | ) | ($ | .02    | )
|                                            |  |                             |         |                           |   |        |  |      |         |   |    |        |  
|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 six months and three months ended June 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 six or
three months ended June 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 no dilutive common stock
equivalents, options and warrants, for the six and three months ended June 30,
2006 and 2005, respectively. Anti-dilutive options were 197,958 and 149,250 at
June 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.

8

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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. 151

In November 2004,
FASB issued SFAS No. 151 Inventory Costs which amends the guidance in ARB No.
43, Chapter 4 Inventory Pricing, to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that under some
circumstances, items such as idle facility expense, excessive spoilage, double
freight, and re-handling costs may be so abnormal as to require treatment as
current period charges. SFAS No. 151 requires that those items be recognized
as current-period charges regardless of whether they meet the criterion of so
abnormal. In addition, SFAS No, 151 requires that allocation of fixed production
overheads to the costs of conversion be based on the normal capacity of the
production facilities. SFAS No. 151 shall be effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Earlier application
is permitted for inventory costs incurred during fiscal years beginning after
the date SFAS No. 151 was issued. SFAS No. 151 shall be applied prospectively.
The adoption of SFAS No. 151 was not material on the Companys consolidated
financial statements.

SFAS
No. 153

In December 2004,
FASB issued SFAS No. 153 Exchanges of Non-monetary Assets which amends APB
Opinion No. 29, Accounting for Non-monetary Transactions. APB No. 29 is based
on the principle that exchanges of non-monetary assets should be measured based
on the fair value of the assets exchanged. The guidance in that Opinion,
however, included certain exceptions to that principle. SFAS No. 153 amends APB
No. 29 to eliminate the exception for non-monetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. A non-monetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. SFAS No. 153
shall be effective for non-monetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. Earlier application is permitted for
non-monetary asset exchanges occurring in fiscal periods beginning after the
date SFAS No. 153 was issued. SFAS No. 153 shall be applied prospectively. The
adoption of SFAS No. 153 was not material on the Companys consolidated
financial statements.

FIN No. 48

In July 2006, FASB published Interpretation (FIN) No.
48, Accounting for Uncertainty in Income Taxes, to address the
noncomparability in reporting tax assets and liabilities resulting from a lack
of specific guidance in FASB SFAS No. 109, Accounting for Income Taxes, on the uncertainty in income
taxes recognized in an enterprises financial statements. Specifically, FIN No.
48 prescribes (a) a consistent recognition threshold and (b) a measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return, and provides related
guidance on derecognition, classification, interest and penalties, accounting
in interim periods, disclosure, and transition. FIN No. 48 will apply to fiscal
years beginning after December 15, 2006, with earlier adoption permitted.

NOTE
2  INVENTORIES

Inventories consisted of the following at:

|                            |  |                 |           |                     |   |           |  
|--------------------------- |  | --------------- | --------- | ------------------- | - | --------- | -
|                            |  | June 30,
  2006 |           | December 31,
  2005 |  
|                            |  |                 |           |                     |  
|Raw Materials               |  | $               | 4,712,311 |                     | $ | 3,672,745 |  
|Work in Progress            |  |                 | 332,812   |                     |   | 318,145   |  
|Finished Goods              |  |                 | 4,840,213 |                     |   | 4,550,112 |  
|                            |  |                 |           |                     |   |           |  
|Total                       |  |                 | 9,885,336 |                     |   | 8,541,002 |  
|Less: Valuation
  Allowance |  |                 | (390,000  | )                   |   | (220,000  | )
|                            |  |                 |           |                     |   |           |  
|Inventories, net            |  | $               | 9,495,336 |                     | $ | 8,321,002 |  
|                            |  |                 |           |                     |   |           |  

9

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Foreign
Inventory

Included in the consolidated balance sheets are
international inventories of $456,006 and $1,164,865 at June 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 Photo Control division
products.

NOTE
3  PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

|                                 |  |                 |            |                     |   |           |  
|-------------------------------- |  | --------------- | ---------- | ------------------- | - | --------- | -
|                                 |  | June 30,
  2006 |            | December 31,
  2005 |  
|                                 |  |                 |            |                     |  
|Land                             |  | $               | 169,460    |                     | $ | 169,460   |  
|Buildings and
  improvements     |  |                 | 430,646    |                     |   | 415,621   |  
|Tooling                          |  |                 | 989,298    |                     |   | 977,073   |  
|Office furniture
  and equipment |  |                 | 515,879    |                     |   | 326,019   |  
|Warehouse
  equipment            |  |                 | 489,180    |                     |   | 173,793   |  
|Vehicles                         |  |                 |           |                     |   | 82,708    |  
|Construction in
  progress       |  |                 | 799,510    |                     |   | 687,665   |  
|                                 |  |                 |            |                     |   |           |  
|Total                            |  |                 | 3,393,973  |                     |   | 2,832,339 |  
|Less: Accumulated
  depreciation |  |                 | (1,118,540 | )                   |   | (944,413  | )
|                                 |  |                 |            |                     |   |           |  
|Net                              |  | $               | 2,275,433  |                     | $ | 1,887,926 |  
|                                 |  |                 |            |                     |   |           |  

Depreciation
expense of $217,690 and $157,168 was recorded for the six months ended June 30,
2006 and 2005, respectively and $107,356 and $73,800 for the three months ended
June 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 $5,000,000 which
expires October 1, 2006. 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 of 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 $4,415,000 and $2,230,000 at June 30, 2006 and December
31, 2005, respectively. The unused portion of the line of credit at June 30, 2006
was $585,000.

10

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Table of Contents

NOTE
5  LONG-TERM DEBT

Long-term debt consisted of the following at:

|                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 |          |                     |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------- | ------------------- | - | ------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                            |  | June 30,
  2006 |          | December 31,
  2005 |  
|                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 |          |                     |  
|Note Payable -
  First National Bank of Deerwood - monthly installments of $4,126 including
  interest at a variable rate of .75% over the index rate (9.0%, and 8.0% at
  June 30, 2006 and December 31, 2005, respectively), with a final payment due
  June 10, 2009, secured by a mortgage on the Companys land and building
  located in Brainerd, MN. The balance was paid in full on July 14, 2006. |  | $               | 396,180  |                     | $ | 404,068 |  
|                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 |          |                     |   |         |  
|Note Payable -
  GMAC  paid in full in January 2006                                                                                                                                                                                                                                                                                                                                                        |  |                 |         |                     |   | 38,597  |  
|                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 |          |                     |   |         |  
|                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 |          |                     |   |         |  
|Totals                                                                                                                                                                                                                                                                                                                                                                                                      |  |                 | 396,180  |                     |   | 442,665 |  
|Less: Current
  portion                                                                                                                                                                                                                                                                                                                                                                                     |  |                 | (396,180 | )                   |   | (55,649 | )
|                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 |          |                     |   |         |  
|                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 |          |                     |   |         |  
|Net Long-term
  Debt                                                                                                                                                                                                                                                                                                                                                                                        |  | $               |         |                     | $ | 387,016 |  
|                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 |          |                     |   |         |  

NOTE 6  INCOME
TAXES

The provision for income taxes consists of the
following components for the six months ended June 30;

|                                 |  |      |          |      |   |         |  
|-------------------------------- |  | ---- | -------- | ---- | - | ------- | -
|                                 |  | 2006 |          | 2005 |  
|                                 |  |      |          |      |  
|                                 |  |      |          |      |   |         |  
|Current                          |  | $    |         |      | $ | (18,000 | )
|Deferred                         |  |      | (498,000 | )    |   |        |  
|                                 |  |      |          |      |   |         |  
|                                 |  |      |          |      |   |         |  
|Total Provision for Income Taxes |  | $    | (498,000 | )    | $ | (18,000 | )
|                                 |  |      |          |      |   |         |  

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 six months ended June 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  | )    |  | 4.9   |   
|Research and
  development credit                            |  |      | (0.6  | )    |  | (0.6  | ) 
|                                                             |  |      |       |      |  |       |   
|Effective Tax Rate                                           |  |      | (40.0 | )%   |  | (32.5 | )%
|                                                             |  |      |       |      |  |       |   

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 June 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  | )    |  | 4.8  |  
|Research and
  development credit                            |  |      | (0.6  | )    |  | (0.6 | )
|                                                             |  |      |       |      |  |      |  
|Effective Tax Rate                                           |  |      | (40.0 | )%   |  | 41.0 | %
|                                                             |  |      |       |      |  |      |  

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

|                                       |  |         |          |          |   |          | 
|-------------------------------------- |  | ------- | -------- | -------- | - | -------- | 
|                                       |  | 6/30/06 |          | 12/31/05 |  
|                                       |  |         |          |          |  
|Current Amounts                        |  |         |          |          |   |          | 
|                                       |  |         |          |          |   |          | 
|Deferred tax
  assets                  |  | $       | 848,000  |          | $ | 350,000  | 
|                                       |  |         |          |          |   |          | 
|                                       |  |         |          |          |   |          | 
|Net Current Deferred Tax Assets        |  | $       | 848,000  |          | $ | 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                 |  | $       | 769,546  |          | $ | 271,546  | 
|                                       |  |         |          |          |   |          | 

11

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Table of Contents

NOTE
7  SEGMENT REPORTING

The Company has
three product lines, the Nature Vision, Inc. products, Vaddio video equipment
used for video conferencing and presentations, and photographic cameras and
lighting equipment. The following summarizes the Companys segments:

|                                 |  |                    |            |          |   |            | 
|-------------------------------- |  | ------------------ | ---------- | -------- | - | ---------- | 
|Assets                           |  | 6-30-06            |            | 12-31-05 |  
|                                 |  |                    |            |          |  
|Nature Vision,
  Inc.            |  | $                  | 9,001,086  |          | $ | 9,180,801  | 
|Vaddio                           |  |                    | 4,018,589  |          |   | 2,419,618  | 
|Photographic                     |  |                    | 3,197,404  |          |   | 4,349,334  | 
|                                 |  |                    |            |          |   |            | 
|Total                            |  | $                  | 16,217,079 |          | $ | 15,949,753 | 
|                                 |  |                    |            |          |   |            | 
|                                 |  |                    |            |          |   |            | 
|Property &
  Equipment Additions |  | 6-30-06            |            | 12-31-05 |  
|                                 |  |                    |            |          |  
|Nature Vision,
  Inc.            |  | $                  | 549,533    |          | $ | 657,065    | 
|Vaddio                           |  |                    | 66,273     |          |   |           | 
|Photographic                     |  |                    | 29,432     |          |   | 108,101    | 
|                                 |  |                    |            |          |   |            | 
|Total                            |  | $                  | 645,238    |          | $ | 765,166    | 
|                                 |  |                    |            |          |   |            | 
|                                 |  |                    |            |          |   |            | 
|                                 |  | Six Months Ended   |           
|                                 |  |                    |           
|Sales                            |  | 6-30-06            |            | 6-30-05  |  
|                                 |  |                    |            |          |  
|Nature Vision,
  Inc.            |  | $                  | 2,351,683  |          | $ | 4,535,215  | 
|Vaddio                           |  |                    | 3,876,408  |          |   | 2,432,145  | 
|Photographic                     |  |                    | 3,083,002  |          |   | 3,519,328  | 
|                                 |  |                    |            |          |   |            | 
|Total                            |  | $                  | 9,311,093  |          | $ | 10,486,688 | 
|                                 |  |                    |            |          |   |            | 
|                                 |  |                    |            |          |   |            | 
|Gross Profit                     |  | 6-30-06            |            | 6-30-05  |  
|                                 |  |                    |            |          |  
|Nature Vision,
  Inc.            |  | $                  | 508,408    |          | $ | 1,177,576  | 
|Vaddio                           |  |                    | 1,447,924  |          |   | 595,068    | 
|Photographic                     |  |                    | 926,997    |          |   | 1,029,447  | 
|                                 |  |                    |            |          |   |            | 
|Total                            |  | $                  | 2,883,329  |          | $ | 2,802,091  | 
|                                 |  |                    |            |          |   |            | 
|                                 |  |                    |            |          |   |            | 
|Depreciation and
  Amortization  |  | 6-30-06            |            | 6-30-05  |  
|                                 |  |                    |            |          |  
|Nature Vision,
  Inc.            |  | $                  | 185,380    |          | $ | 129,898    | 
|Vaddio                           |  |                    | 32,005     |          |   | 12,828     | 
|Photographic                     |  |                    | 22,346     |          |   | 48,774     | 
|                                 |  |                    |            |          |   |            | 
|Total                            |  | $                  | 239,731    |          | $ | 191,500    | 
|                                 |  |                    |            |          |   |            | 
|                                 |  |                    |            |          |   |            | 
|                                 |  | Three Months Ended |           
|                                 |  |                    |           
|Sales                            |  | 6-30-06            |            | 6-30-05  |  
|                                 |  |                    |            |          |  
|Nature Vision,
  Inc.            |  | $                  | 680,729    |          | $ | 1,631,190  | 
|Vaddio                           |  |                    | 2,076,116  |          |   | 1,344,662  | 
|Photographic                     |  |                    | 1,887,657  |          |   | 2,056,471  | 
|                                 |  |                    |            |          |   |            | 
|Total                            |  | $                  | 4,644,502  |          | $ | 5,032,323  | 
|                                 |  |                    |            |          |   |            | 
|                                 |  |                    |            |          |   |            | 
|Gross Profit                     |  | 6-30-06            |            | 6-30-05  |  
|                                 |  |                    |            |          |  
|Nature Vision,
  Inc.            |  | $                  | 44,301     |          | $ | 411,955    | 
|Vaddio                           |  |                    | 747,424    |          |   | 354,099    | 
|Photographic                     |  |                    | 532,716    |          |   | 663,349    | 
|                                 |  |                    |            |          |   |            | 
|Total                            |  | $                  | 1,324,441  |          | $ | 1,429,403  | 
|                                 |  |                    |            |          |   |            | 
|                                 |  |                    |            |          |   |            | 
|Depreciation and
  Amortization  |  | 6-30-06            |            | 6-30-05  |  
|                                 |  |                    |            |          |  
|Nature Vision,
  Inc.            |  | $                  | 94,570     |          | $ | 64,948     | 
|Vaddio                           |  |                    | 14,724     |          |   | 5,885      | 
|Photographic                     |  |                    | 12,126     |          |   | 20,133     | 
|                                 |  |                    |            |          |   |            | 
|Total                            |  | $                  | 121,420    |          | $ | 90,966     | 
|                                 |  |                    |            |          |   |            | 

12

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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 employee has agreed,
during his employment and for a period of three years thereafter, 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 this three-year time period. 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 $250,432 for 2006.

NOTE
9  STOCK OPTIONS

The Company had 39,000 options exercised in January
and February 2006. Total proceeds from the exercise was $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 $662,791 and
$723,125 at June 30, 2006 and December 31, 2005, respectively.

NOTE
11  COMMITMENTS AND CONTINGENCIES

Employment
AgreementThe 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
AgreementIn 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 $0 and $0 for the six
and three months ended June 30, 2006 and 2005, respectively.

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NOTE
12  CONCENTRATIONS

Major
CustomersDuring the six months ended June 30, 2006, there were
two customers that each accounted for greater than 10% of total net sales. For
the six months ended June 30, 2006, sales to those customers amounted to
approximately 10% and 11% of net sales respectively and for the six months
ended June 30, 2005 amounted to approximately 11% and 7% of total net sales. At
June 30, 2006, approximately 2% and 6% of total accounts receivable were due
from those customers respectively and at December 31, 2005, approximately 6%
and 1% of total accounts receivable were due from those customers respectively.

Foreign
SalesIncluded in the
consolidated statements of operations are foreign sales of $1,248,846 and
$910,733 for the six months ended June 30, 2006 and 2005 respectively and
$583,569 and $368,071 for the three months ended June 30, 2006 and 2005
respectively.

Major
SuppliersPurchases for the six months ended June 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 26% and 24%, respectively, of the materials and
supplies used by the Company. Purchases for the six months ended June 30, 2005
include purchases from two different major suppliers, an offshore manufacturer
of outdoor recreation products and a major camera manufacturer, that
individually accounted for 20% and 44%, 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.

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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 SmallCap Market under
the symbol, NRVN.

The
Company has two distinct operating divisions, the Nature Vision Division for
outdoor recreation products, located in Brainerd, Minnesota, and the Photo
Control Division for photography and audio visual products, located in
Minneapolis, Minnesota. The long-term growth plans for the Company will be in
the outdoor recreation markets. This growth will be generated organically and
through 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 to 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. 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.


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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 Operations

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


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 significant impact on earnings.


Increased
Inventories. Inventory increased during the second
quarter of 2006 within both divisions since the end of the year. 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 six months of 2006 were the main cause for the
increase in inventories. We currently have stock in place to fulfill orders and
management feels that the inventory is saleable. At the Photo Control division,
inventories increased primarily due to new product introductions and taking
advantage of an ability to level load production capabilities. We 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.

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Table of Contents

Increased
oil prices.Increased oil prices may affect us negatively. If
gasoline prices should continue to increase, 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 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. These acquisitions are expected to be accretive to
earnings. These potential acquisitions will require financing which we
anticipate we will be able to obtain.

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.

Results of Operations

The following table provides
the percentage change in our net sales, gross profit, loss from operations, and
net loss.

|                               |  |                       |       |                          |   |                       |  |      |          |      |   |                       |   |   |        |   |  |         |   
|------------------------------ |  | --------------------- | ----- | ------------------------ | - | --------------------- |  | ---- | -------- | ---- | - | --------------------- | - | - | ------ | - |  | ------- | --
|                               |  | Quarter ended June 30 |       | Six Months ended June 30 |  
|                               |  |                       |       |                          |  
|(in thousands)                 |  | 2006                  |       | 2005                     |   | Increase
  (Decrease) |  | 2006 |          | 2005 |   | Increase
  (Decrease) |  
|                               |  |                       |       |                          |   |                       |  |      |          |      |   |                       |  
|                               |  |                       |       |                          |   |                       |  |      |          |      |   |                       |   |   |        |   |  |         |   
|Net Sales                      |  | $                     | 4,645 |                          | $ | 5,032                 |  |      | (7.7     | %)   | $ | 9,311                 |   | $ | 10,487 |   |  | (11.2   | %)
|                               |  |                       |       |                          |   |                       |  |      |          |      |   |                       |   |   |        |   |  |         |   
|Gross Profit                   |  |                       | 1,324 |                          |   | 1,429                 |  |      | (7.3     | %)   |   | 2,883                 |   |   | 2,802  |   |  | 2.9     | % 
|                               |  |                       |       |                          |   |                       |  |      |          |      |   |                       |   |   |        |   |  |         |   
|Income(Loss) from
  Operations |  |                       | (404  | )                        |   | 60                    |  |      | (773.3   | %)   |   | (1,096                | ) |   | (39    | ) |  | (525.0  | %)
|                               |  |                       |       |                          |   |                       |  |      |          |      |   |                       |   |   |        |   |  |         |   
|Net Income(Loss)               |  | $                     | (306  | )                        | $ | 27                    |  |      | (1,233.3 | %)   | $ | (748                  | ) | $ | (37    | ) |  | (1921.6 | %)

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The sales decrease is primarily due to a drop in
Nature Vision Division sales and is discussed in the Division Analysis
below.  The Photo Control Division
meanwhile continued to provide double digit growth, year over year and quarter
over quarter.  While sales have
decreased, margins continue to improve primarily as a result of new products
being sold at increased gross profit margins.
Operating costs for sales, marketing, general and administrative are not
linear to sales during the six months ended June 30, 2006 and therefore create losses from
operations.  During the first quarter
the Company has incurred a cost for stock based compensation.  We anticipate additional one-time costs in
2006 for additional stock based compensation and for the compensation bonus
resulting from the sales of Vaddio product exceeding the amount accrued at the
time of the reverse merger.  These costs
will also be absorbed within the Photo Control division and are not comparable
to 2005.

Selling, general and administrative expenses

We are continuing to invest in our infrastructure to support our new distribution facility,
management information systems and anticipated growth. We have hired additional employees in our engineering and administrative
areas in a manner appropriate to support our anticipated revenue growth. Research and developement expenses increased by
$47,694 and $33,327 for the six and three months ended June 30, 2006 over the prior reporting periods.
We anticipate our selling, general and administrative expenses for the remaining quarters in the year ending December 31, 2006 will
approximate the amount incurred during the three months ended June 30, 2006.

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 percentage of net sales for 2006 and 2005 of the Nature Vision Division:

|                                      |  |                         |     |                            |   |                       |   |      |         |      |   |                       |   |   |       |   |  |         | 
|------------------------------------- |  | ----------------------- | --- | -------------------------- | - | --------------------- | - | ---- | ------- | ---- | - | --------------------- | - | - | ----- | - |  | ------- | 
|                                      |  | Quarter
  ended June 30 |     | Six Months
  ended June 30 |  
|                                      |  |                         |     |                            |  
|(in thousands)                        |  | 2006                    |     | 2005                       |   | Increase
  (Decrease) |   | 2006 |         | 2005 |   | Increase
  (Decrease) |  
|                                      |  |                         |     |                            |   |                       |   |      |         |      |   |                       |  
|                                      |  |                         |     |                            |   |                       |   |      |         |      |   |                       |   |   |       |   |  |         | 
|Net Sales                             |  | $                       | 681 |                            | $ | 1,631                 |   |      | (58.2%) |      | $ | 2,352                 |   | $ | 4,535 |   |  | (48.1%) | 
|                                      |  |                         |     |                            |   |                       |   |      |         |      |   |                       |   |   |       |   |  |         | 
|Gross Profit                          |  |                         | 44  |                            |   | 412                   |   |      | (89.3%) |      |   | 508                   |   |   | 1,178 |   |  | (56.9%) | 
|                                      |  |                         |     |                            |   |                       |   |      |         |      |   |                       |   |   |       |   |  |         | 
|Gross Profit as a percentage of sales |  |                         | 6.5 | %                          |   | 25.3                  | % |      |         |      |   | 21.6                  | % |   | 26.0  | % |  |         | 

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 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 winter season. Ice never reformed in many of these areas or was unstable at best, and never
formed at all in other areas. Second quarter has been historically the weakest quarter for the divisions sales.
Inventories were ordered in anticipation of a normal ice season and have provided for increased levels as of the end of the first
quarter 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.
Gross profits for the quarter were impacted by returns at a run rate similar to the prior year which was anticipated. While gross
sales were down, net material margins have continued to improve as a result of our move to offshore production in 2004. Management anticipates gross
margins to return to prior year levels in future quarters. Product mix and seasonality of products can have a substantial impact
on the gross profit margin for any given period.

18

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Table of Contents

Photo
Control 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 Photo Control Division:

|                                      |  |                         |       |                            |   |                       |   |      |       |      |   |                       |   |   |       |   |  |       | 
|------------------------------------- |  | ----------------------- | ----- | -------------------------- | - | --------------------- | - | ---- | ----- | ---- | - | --------------------- | - | - | ----- | - |  | ----- | 
|                                      |  | Quarter
  ended June 30 |       | Six Months
  ended June 30 |  
|                                      |  |                         |       |                            |  
|(in thousands)                        |  | 2006                    |       | 2005                       |   | Increase
  (Decrease) |   | 2006 |       | 2005 |   | Increase
  (Decrease) |  
|                                      |  |                         |       |                            |   |                       |   |      |       |      |   |                       |  
|                                      |  |                         |       |                            |   |                       |   |      |       |      |   |                       |   |   |       |   |  |       | 
|Net Sales                             |  | $                       | 3,964 |                            | $ | 3,401                 |   |      | 16.6% |      | $ | 6,959                 |   | $ | 5,951 |   |  | 16.9% | 
|                                      |  |                         |       |                            |   |                       |   |      |       |      |   |                       |   |   |       |   |  |       | 
|Gross Profit                          |  |                         | 1,280 |                            |   | 1,017                 |   |      | 25.9% |      |   | 2,375                 |   |   | 1,625 |   |  | 46.2% | 
|                                      |  |                         |       |                            |   |                       |   |      |       |      |   |                       |   |   |       |   |  |       | 
|Gross Profit as a percentage of sales |  |                         | 32.3  | %                          |   | 29.9                  | % |      |       |      |   | 34.1                  | % |   | 27.3  | % |  |       | 

Sales continue to increase primarily due to new products and additional distribution channels for the
Vaddio product line.
These new products continue to provide
improved gross profit margins as well as provide additional operational
efficiencies within the division.
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.

Liquidity
and Capital Resources

The
Company did not record a cash balance as of June 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
$1,201,000 were the following. The after tax loss for the six months ending June 30, 2006 of $748,000 and corresponding accrual
for a deferred tax credit of $498,000 are the major factors for this decrease as of June 30, 2006. Other major factors such as a
net increase in inventory levels of $1,174,000 and reduction of payables in the amount of $367,000 were offset by a reduction of
receivables in the amount of $1,766,000. 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 third and fourth quarters.
The Photo Control division has seen its inventory investment reduce from levels ending March 31, 2006
to near year end 2005 levels. 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 $1,766,000. This decrease was due to the increased
collections in the first six months of 2006 and reduced sales during the same time period of 2006. The final major component is a
decrease in current payables of $367,000. Reduced purchases and payments upon fourth quarter receipts are the cause of this
change. Investing activities also netted a decrease from capital expenditures of $502,000, 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 of acquisitions. 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.

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As
of June 30, 2006 working capital decreased to $5,436,039, from $6,899,783 at
December 31, 2005.

Nature
Vision Inc. has a secured line of credit for $5,000,000 at prime plus
..75%.  The prime rate at June 30, 2006
was 8.25%.  As of June 30, 2006, the
Company had the ability to borrow against the entire line of credit.  The line expires on October 1, 2006.  Management believes it
can renegotiate a new
line of credit at that time.  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.  The Company has sold its Brainerd facility
on July 14, 2006.  Upon the sale, the
existing mortgage was satisfied.
Management has negotiated a lease of a new 35,000 square foot
facility.  Management expects to pursue
an opportunity to purchase the entire facility, a total of 80,000 square feet,
in the future.  The Company is currently
leasing its formerly owned property back from the new owners until a move to
the new facility is made.  Management
anticipates a move to the new facility on approximately September 1, 2006.  At this time, management believes that any debt
required to relocate and improve the new facility will not be substantially
different than the amount currently on the balance sheet.  Management believes that it will be able to
obtain long-term financing for the new facility improvements.  Management also believes that financing will
be readily available should a purchase be executed.

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.

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 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 six months ended June 30, 2006.

Off
Balance Sheet Financing Arrangements

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

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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.

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 June 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 second quarter ended June 30, 2006.  There were no significant
deficiencies or material weaknesses, and therefore there were no corrective
actions taken.

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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.

(a)  The registrant held its annual meeting of
shareholders on May 19, 2006.

(b)  Not applicable.

(c)  Set forth below are the matters voted upon
at the registrants annual meeting.  All
proposals were approved by the registrants shareholders.

Proposal
No. 1  Election of two Class III directors to hold office for three-year
terms or until their successors are elected or appointed:

Common
shares voting in favor of Curtis A. Sampson:
1,690,042.Common
shares voting to withhold authority:
10,650.

Common
shares voting in favor of Thomas F. Leahy:
1,699,342.Common
shares voting to withhold authority:
1,350.

Item 5.  Other
Information.  Not
applicable.

Item 6.  Exhibits

| |                          |                                          
| | ------------------------ | -----------------------------------------
| | (a) Listing of Exhibits:
| |                          |                                          
| | 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.
| |                          |                                                                                                                          
| | (b) Reports on Form 8-K:

There were no reports on Form 8-K filed this quarter.

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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:  August
  14, 2006 | By:                 | /s/ Jeffrey P. Zernov                        
|                         |                     |                                               | 
|                         |                     | Its:  Chief
  Executive Officer and President
|                         |                     |                                               | 
|Date:  August
  14, 2006 | By:                 | /s/ Michael R. Day                           
|                         |                     |                                               | 
|                         |                     | Its:  Chief
  Financial Officer              

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