THE FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD- LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER "FORWARD-LOOKING STATEMENTS" AND "RISK FACTORS" DETAILED IN PRIOR COMPANY FILINGS AND THOSE INCLUDED ELSEWHERE IN THIS REPORT.

Results of Operations for the Three Months ended October 31, 2019 and 2018

The following table sets forth the summary statements of operations for the three months ended October 31, 2019 and 2018:





                                                              Three Months Ended
                                                    October 31, 2019       October 31, 2018
Sales - Net of Slotting Fees and Discounts         $        9,267,036     $        8,242,847
Gross Profit                                       $        2,900,952     $        2,687,488
Operating Expenses                                 $       (2,397,352 )   $       (2,151,379 )
Other Expenses                                     $          (94,985 )   $         (179,761 )
Net Income                                         $          408,615     $          356,348

For the three months ended October 31, 2019 and 2018, the Company reported a net income of $408,615 and $356,348, respectively. The change in net income between the three months ended October 31, 2019 and 2018 was primarily attributable to an increased gross profit, lower interest and amortization expenses in 2019.

Sales: Sales, net of slotting fees and discounts increased by approximately 12% to $9,267,036 during the three months ended October 31, 2019, from $8,242,847 during the three months ended October 31, 2018. Sales increased from sales with existing customers as well as new customers.

Gross Profit: The gross profit margin was 31% for the three months ended October 31, 2019 compared to 33% for the three months ended October 31, 2018. During the three months ended October 31, 2019, cost of sales included an increase in depreciation expense of approximately $123,400 (thereby reducing gross margin by approximately 1%) related to the significant plant capacity additions during the last 12 months. Gross margin also decreased slightly due to a change in product mix. In future periods the Company expects sales to increase from the current quarter level which should increase gross profit margin as plant efficiencies should take effect.

Operating Expenses: Operating expenses increased by 11% during the three months ended October 31, 2019, as compared to the three months ended October 31, 2018. Operating expenses decreased as a percentage of sales from 26% in 2018 to 25% in 2019. The $245,973 increase in total operating expenses is primarily attributable to the following approximate increases in operating expenses:

? Advertising of $177,953 due to higher promotional expenses for merchandising

activity, Club Store demos, successful Sirius Radio advertising campaign and

one-time coupon activity;

? Postage and freight of $105,536 due to higher volume;

? Professional fees of $29,832 due to sales consulting and investor relations

activity; and

? Trade show and travel expenses of $24,044 related to additional show activity


  in October 2019.




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These expense increases were offset by decreases in the following as well as minimal decreases in other expense categories:

? Insurance expense of $43,878 due to an overall decrease in workers'

compensation premiums;

? Payroll and related expenses of $27,703 decreased due to a reduction in

headcount as a result of the implementation of new equipment; and

? Other general and administrative of $21,410 decreased due to management's

commitment to substantially reduce expenses.

Other Expense: Other expenses decreased by $84,776 to $94,985 for the three months ended October 31, 2019 as compared to $179,761 during the three months ended October 31, 2018. For three months ended October 31, 2019, other expenses consisted of $89,635 in interest expense incurred on the Company's financing arrangements. In addition, the Company recorded $5,350 of amortization expense related to the debt discount. For the three months ended October 31, 2018, other expenses consisted of $159,688 in interest expense incurred on the Company's finance arrangements. In addition, the Company recorded $20,073 of amortization expense related to the debt discount and finance arrangements.

Results of Operations for the Nine Months ended October 31, 2019 and 2018

The following table sets forth the summary statements of operations for the nine months ended October 31, 2019 and 2018:





                                                               Nine Months Ended
                                                    October 31, 2019       October 31, 2018
Sales - Net of Slotting Fees and Discounts         $       24,731,305     $       21,625,671
Gross Profit                                       $        7,963,402     $        7,578,024
Operating Expenses                                 $       (6,529,294 )   $       (6,358,576 )
Other Expenses                                     $         (311,519 )   $         (749,294 )
Net Income                                         $        1,122,589     $          470,154

For the nine months ended October 31, 2019 and 2018, the Company reported a net income of $1,122,589 and $470,154, respectively. The change in net income between the nine months ended October 31, 2019 and 2018 was primarily attributable to an increase in sales of 15% in addition to a decrease in other expenses.

Sales: Sales, net of slotting fees and discounts increased by approximately 14% to $24,731,305 during the nine months ended October 31, 2019, from $21,625,671 during the nine months ended October 31, 2018. In addition, during the nine months ended October 31, 2019, the Company was able to increase its sales through new customers as well as its existing customer base.

Gross Profit: The gross profit margin was 32% for the nine months ended October 31, 2019 compared to 35% for the nine months ended October 31, 2018. During the nine months ended October 31, 2019, cost of sales included an increase in depreciation expense of approximately $280,000 (thereby reducing gross margin by approximately 1%) related to the significant plant capacity additions during the last 12 months. Gross margin also decreased slightly due to a change in product mix. In future periods the Company expects sales to increase from the current quarter level which should increase gross profit margin as plant efficiencies should take effect.

Operating Expenses: Operating expenses increased by 3% during the nine months ended October 31, 2019, as compared to the nine months ended October 31, 2018. Operating expenses decreased as a percentage of sales from 29% in 2018 to 26% in 2019. The $170,718 increase in total operating expenses is primarily attributable to the following approximate increases in operating expenses:

? Postage and freight of $403,398 due to higher charges from freight carriers and

increased sales;

? Commission expense of $58,023 due to increased sales with existing clients as

well as the addition of new clients;

? Professional fees of $43,272 due to investor relations and investment banking

activities; and

? Advertising of $28,565 due to higher promotional expenses for merchandising

activity, Club Store demos, successful Sirius Radio advertising campaign and

one-time coupon activity;






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These expense increases were offset by decreases in the following as well as minimal decreases in other expense categories:

? Stock-based compensation for services rendered by employees and consultants

decreased by $60,182 compared to the prior period; and

? Insurance expense of $22,046 due to an overall decrease in workers'


  compensation premiums.

Other Expense: Other expenses decreased by $437,775 to $311,519 for the nine months ended October 31, 2019 as compared to $749,294 during the nine months ended October 31, 2018. For nine months ended October 31, 2019, other expenses consisted of $293,531 in interest expense incurred on the Company's financing arrangements. In addition, the Company recorded $17,988 of amortization expense related to the debt discount. For the nine months ended October 31, 2018, other expenses consisted of $648,969 in interest expense incurred on the Company's finance arrangements. In addition, during the nine months ended October 31, 2018, the Company recorded $100,325 of amortization expense related to the debt discount and finance arrangements. During the nine months ended October 31, 2018, the Company also incurred non-recurring interest charges of approximately $112,500 in relation to the extension of the Manatuck note and the corresponding accounting for debt modification which resulted in additional interest expense, finance charges and the write-off of debt discount related to prior debt which is included in interest expense.

Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital at October 31, 2019 compared to January 31, 2019:





                       October 31, 2019       January 31, 2019       Increase/(Decrease)
Current Assets        $        6,071,688     $        4,859,549     $           1,212,139
Current Liabilities   $        4,214,386     $        3,615,662     $             598,724
Working Capital       $        1,857,302     $        1,243,887     $             613,415

As of October 31, 2019, we had working capital of $1,857,302 as compared to a working capital of $1,243,887 as of January 31, 2019, an increase of $613,415. The increase in working capital is primarily attributable to an increase in inventories of $254,924, an increase in accounts receivable of $599,207, an increase in other receivables of $163,983 and an increase in prepaid expenses of $192,860. These amounts were offset by an increase in accounts payable and accrued expenses of $422,971 and a $175,753 increase in the current portion of lease obligations.

Net cash provided by operating activities for the nine months ended October 31, 2019 and 2018 was $975,848 and $1,648,425, respectively. The net income for the nine months ended October 31, 2019 and 2018 was $1,122,589 and $470,154, respectively.

Net cash used in all investing activities for the nine months ended October 31, 2019 was $163,186 as compared to $1,026,386 for the nine months ended October 31, 2018, respectively, to acquire new machinery and equipment and leasehold improvements. Our capital expenditures are attributed to a Plant Expansion Project in progress since mid-2017 to expand plant capacity and efficiency to meet growing demand.

Net cash used by all financing activities for the nine months ended October 31, 2019 was $811,497 as compared to $743,272 provided by financing activities for the nine months ended October 31, 2018. During the nine months ended October 31, 2019, the Company made net borrowings on the line of credit of $285,314. These cash in-flows were offset by net payments of term loan of $1,033,336 and $63,475 paid for capital lease payments. During the nine months ended October 31, 2018, the Company received proceeds of $40,000 received from the exercise of options, proceeds of $213,250 from a capital-leaseback transaction and proceeds of $300,000 from term loan. These net proceeds were offset by $7,812 of repayments on a related party notes payable, net repayments on the line of credit of $467,087, $174,155 paid for repayments on a term loan, $16,343 paid for capital lease payments, $31,125 for payment of debt issuance costs, and net payments of $600,000 of the note payable to Manatuck Hill Partners, respectively.





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As reflected in the accompanying condensed consolidated financial statements, the Company has a net income and net cash provided by operations of $1,122,589 and $975,848, respectively, for the nine months ended October 31, 2019.

Although the expected revenue growth and control of expenses leads management to believe that it is probable that the Company's cash resources will be sufficient to meet our cash requirements through the fiscal year ending January 31, 2020, the Company may require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, though there is no guarantee it will be able to do so.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement". This update is to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each entity's financial statements. The amendments in this update apply to all entities that are required, under existing U.S. GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating this guidance and the impact of this update on its consolidated financial statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements.





Critical Accounting Policies

Our condensed consolidated financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 2 of our condensed consolidated financial statements.

Other than the adoption of FASB ASU 2016-02, "Leases" (Topic 842), there have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our January 31, 2019 Annual Report.

Off Balance Sheet Arrangements:

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities" (SPEs).

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