**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-K**








**(MARK
      ONE)**





x **ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**





**FOR
      THE FISCAL YEAR ENDED - AUGUST 31, 2008**





**OR**





o **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**





**FOR
      THE TRANSITION PERIOD FROM ______ TO ______**





**COMMISSION
      FILE NUMBER 000-27629**




**SHEERVISION
      INC.**


(Name
      of small business issuer in its charter)





Delaware
              (State
                or other jurisdiction of incorporation or organization)
            23-2426437
              (I.R.S.
                Employer Identification No.)4030
                Palos Verdes Drive North
              Suite
                104
              Rolling
                Hills Estates, California
              (Address
                of principal executive offices)
            90274
              (Zip
                Code)




Issuer’s
                telephone number:
            (310)
                265-8918Securities
                registered pursuant to Section 12(b) of the Act:
            None




Name
                of Exchange on which registered:Securities
                registered pursuant to Section 12(g) of the Act:
            Common
                Stock, par value $0.001 per shareName
                of exchange on which registered:
            None





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No x





Indicate
      by check mark whether the registrant (1) filed all reports required to be filed
      by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
      preceding 12 months (or for such shorter period that issuer was required to
      file
      such reports) and (2) has been subject to such filing requirements for at least
      the past 90 days.  Yes x No o





Indicate
      by check mark if there is no disclosure of delinquent filers in response to
      Item
      405 of Regulation S-B contained in this form and no disclosure will be
      contained, to the best of registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K.x





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
                accelerated filer o
            Accelerated
                filer o
            Non-accelerated
                filero
            Smaller
                reporting company x





Indicate
      by check mark whether the issuer is a shell company (as defined in Rule 12b-2
      of
      the Act). Yes o No x








As
      of February 29, 2008, the aggregate market value of the voting and non-voting
      common equity held by non-affiliates (3,499,387 shares) was approximately
      $699,877 (based upon the closing price of $0.20 per share of common stock on
      February 29, 2008).





As
      of November 17, 2008, the registrant had 12,735,190 outstanding shares of common
      stock, par value $0.001 per share.











**Table
      of Contents**





Form
      10-K Index


Item
                  1. Description of Business
              3Item
                  1A. Risk Factors
              9Item
                  1B. Unresolved Staff CommentsItem
                  2. Description of Property
              13Item
                  3. Legal Proceedings
              13Item
                  4. Submission of Matters to a Vote of Security Holders
              13Item
                  5. Market for Registrant's Common Equity and Related Stockholder
                  Matters
              14Item
                  6. Selected Financial Data
              15Item
                  7. Management’s Discussion and Analysis of Financial Condition and Results
                  of Operation
              15Item
                  7A.Quantitative
                  and Qualitative Disclosures about Market Risk
              22Item
                  8. Financial Statements and Supplementary Data
              22Item
                  9. Changes in and Disagreements with Accountants on Accounting
                  And
                  Financial Disclosure
              22Item
                  9A. Controls and Procedures
              22Item
                  9B. Other Information
              23Item
                  10. Directors, Executive Officers and Corporate Governance
              24Item
                  11. Executive Compensation
              27Item
                  12.Security Ownership of Certain Beneficial Owners and Management
                  and
                  Related Stockholder Matters
              30Item
                  13. Certain Relationships and Related Transactions
              31Item
                  14. Principal Accountant Fees and Services
              31Item
                  15. Exhibits, Financial Statement Schedules
              32


2





**PART
      I**




SPECIAL
      NOTE REGARDING FORWARD LOOKING
      STATEMENTS




***This
      Annual Report on Form 10-K (including the section regarding Management's
      Discussion and Analysis of Financial Condition and Results of Operations)
      contains forward-looking statements regarding our business, financial condition,
      results of operations and prospects. Words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or
      variations of such words are intended to identify forward-looking statements,
      but are not deemed to represent an all-inclusive means of identifying
      forward-looking statements as denoted in this Annual Report on Form 10-K.
      Additionally, statements concerning future matters are forward-looking
      statements.***





Although
      forward-looking statements in this Annual Report on Form 10-K reflect the good
      faith judgment of our management, such statements can only be based on facts
      and
      factors currently known by us. Consequently, forward-looking statements are
      inherently subject to risks and uncertainties and actual results and outcomes
      may differ materially from the results and outcomes discussed in or anticipated
      by the forward-looking statements. Factors that could cause or contribute to
      such differences in results and outcomes include, without limitation, those
      specifically addressed under the heading “ *Risks
      Related to Our Business* ”
below,
      as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers
      are urged not to place undue reliance on these forward-looking statements,
      which
      speak only as of the date of this Annual Report on Form 10-K. We file reports
      with the Securities and Exchange Commission (the “ *SEC* ”
or
      “ *Commission* ”).
      We
      make available on our website under “Investors/Financial Info/SEC Filings,” free
      of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q,
      current reports on Form 8-K and amendments to those reports as soon as
      reasonably practicable after we electronically file such materials with or
      furnish them to the SEC. Our website address is www.sheervision.com. You can
      also read and copy any materials we file with the SEC at the SEC's Public
      Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain
      additional information about the operation of the Public Reference Room by
      calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet
      site (www.sec.gov) that contains reports, proxy and information statements,
      and
      other information regarding issuers that file electronically with the SEC,
      including us.





We
      undertake no obligation to revise or update any forward-looking statements
      in
      order to reflect any event or circumstance that may arise after the date of
      this
      Annual Report on Form 10-K. Readers are urged to carefully review and consider
      the various disclosures made throughout the entirety of this Annual Report,
      which attempt to advise interested parties of the risks and factors that may
      affect our business, financial condition, results of operations and
      prospects.





As
      used
      in this Annual Report, the terms “ *we* ”,
      “ *us* ”,
      “ *our* ”,
      and
“ *SheerVision* ”
mean
      SheerVision, Inc., a Delaware corporation and our subsidiary SheerVision, Inc.,
      a California corporation, unless otherwise indicated.





All
      dollar amounts refer to US dollars, unless otherwise indicated.





**ITEM
      1. DESCRIPTION OF BUSINESS**





**General**





We
      design, manufacture, market, and sell proprietary surgical loupes and headlight
      systems to the dental, medical, and veterinary markets throughout the world.
      Through our exclusive arrangements with component manufacturers based in Asia
      and, in combination with our U.S. assembly and testing facilities, we can
      provide top quality loupes and headlight systems through alliances with sales
      partners and directly to end-users with significant advantages over our
      competitors. We are now recognized as one of the leading brand-names within
      our
      core markets, and we believe we offer a solution to the end-user
      better than or equal to our competitors.





Since
      our inception in 1999, we have rapidly established a significant base of
      operations characterized by an entrepreneurial sprit, steady sales growth,
      the
      deployment of a top-notch dedicated sales force, the implementation of a
      strategic branding program, the initiation of an aggressive web presence through
      the introduction of an e-commerce online storefront and a continued focus on
      new
      product development efforts. We believe that we are poised for continued growth
      due to the launch of several new product lines during 2008 and through the
      development of several strategic sales alliances. By offering a choice of
      flip-up or through-the-lens surgical loupes, class-leading headlights, or a
      package of both, we are able to sell to a greater proportion of the market,
      and
      to also offer a better and more complete solution to our customers.





We
      pride ourselves on listening to customer needs within our core markets, and
      then
      being responsive and aggressive in the development of new product designs.
      This
      interactive process has established us as a trailblazer in a previously stagnant
      industry. With our FireFly
      Infinity UltraTM LED and
      Original FireFlyTM LED portable head light systems, SheerVision is now recognized
      as the “first to market” leader in the dental illumination industry. We continue
      to raise the bar, placing our competitors in the undesirable position of
      imitation as opposed to innovation.





**Growth
      Strategy**





Our
      objective is to become the leading provider and global marketer of high quality
      loupes, light systems and related products and services for the dental, medical,
      and veterinary markets. In order to achieve this objective, we have developed
      and continue to pursue the following strategies:




3




***·***
            ***Launch
                an Aggressive Initiative to Develop Strong Domestic Sales
                Alliances***





During
      the last fiscal year we launched two successful domestic alliances, which have
      allowed us to grow our sales by leveraging the dedicated sales forces of two
      major dental firms. Going forward we plan on continuing to build new alliances
      in domestic markets with a major portion of our resources dedicated towards
      this
      goal. The introduction of our line of FireFly head lights has provided us an
      additional advantage to pursue strategic alliances within the United States
      as
      these systems are able to mount on any of our competitors’ loupes currently sold in the US dental and
      surgical markets. This flexible mounting ability opens up a potentially
      lucrative domestic market to potential partners.





***·***
            ***Build
                Upon Sales Momentum in OEM
                Markets***





A
      benefit of our research and development efforts has been the creation of
      innovative products which benefit companies in complementary markets as either
      stand-alone products or as part of larger systems. These products would be
      sold
      under our customers’
      brand names in each of these applications as either unaltered or customized
      designs. With the sophisticated design and engineering teams currently available
      to us, we have the ability to extend our design, engineering, and manufacturing
      capabilities to other companies seeking assistance in their new product
      development efforts. We anticipate a major focus of our efforts will be to
      seek
      and form relationships with new OEM partners in both domestic and international
      markets that can benefit from the technologies we have developed.





***·***
            ***Continue
                to Foster Direct to End-User
                Sales***





We
      expect to continue to build upon the direct relationships that we have built
      up
      with our core group of end users, along with the growth through direct
      marketing, online marketing, and direct sales efforts. We also expect tradeshows
      will continue to be a key driver of direct sales in several key market segments.
      We also benefit by receiving direct feedback from our end-user customer base
      at
      these shows that is used for our new product development efforts. We expect
      to also be using targeted direct-mail efforts to sell directly to specific
      user
      groups. The eCommerce-powered web store has also provided us with a
      cost-effective platform to sell products and to communicate with prospective
      and
      current customers. We also anticipate that online revenues will continue to
      be a
      significant portion of our direct sales, as marketing and technical initiatives
      are implemented in order to increase site visitor traffic and to encourage
      online purchases.





***·***
            ***Expansion
                of Market Share in International
                Markets***





We
      have experienced significant acceptance of our branded products in the
      international marketplace. International distributors are being attracted to
      us
      and we are in a position to offer a wide assortment of innovative products
      which
      can be resold at strong margins while still offering the end-user a competitive
      price. Strategic sales alliances with international partners provide us with
      a
      method that has the potential to grow rapidly in a highly cost-effective manner.





We
      have developed a program to rapidly qualify and support international
      distribution partners who will sell SheerVision-branded products, using a
      turnkey approach referred to as the International Distributor Program
      (“ *IDP* ”).
      The IDP provides sales, marketing, and training tools to enable us to expand
      our
      distributor base worldwide. We believe that our innovative new products align
      well with the needs of many international markets that we do not currently
      directly or indirectly service. We also
      entered into a sales partnership agreement with a global detailer of quality
      dental and medical products. The intention of this new partnership is to
      increase the sales of the FireFly Infinity UltraTM LED Head Light system
      globally, which should further strengthen SheerVision’s overall financial
      performance. We also participate in international dental trade shows, which provide us a forum to
      both solicit new strategic alliances and introduce new products to existing
      sales partners. We expect to expand our sales network, which in turn is expected
      to produce significant sales growth.





***·***
            ***Expansion
                of our Product Lines to Achieve our Goal of Becoming a Full Service
                Optical and Illumination
                Company***





We
      launched our upgraded FireFly InfinityTM head light system (since renamed
      the FireFly
      Infinity UltraTM LED )
      during fiscal year 2008 which is powered by a new Lithium Polymer
      battery pack. The new microprocessor-controlled battery pack is smaller,
      lighter, durable, safer, and allows for 25-50% longer use between charges.
      This
      light was rated as a top performer by one of the most prestigious non-profit,
      independent dental labs in the country. The FireFly Infinity UltraTM LED based
      head light system provides us with a significant technological innovation that
      increases our lead over our competitors. The system provides a light beam with
      almost three times the intensity of our Original FireFlyTM LED and compares very favorably against tethered fiber
      optic lighting systems. Since the introduction of our new head light system,
      sales for the new FireFly
      Infinity UltraTM LED light have comprised a significant portion of our total sales. These strong
      sales continue to validate our research and development efforts focusing on
      introducing new and innovative, Market-driven products.





In
      addition, during this fiscal year we introduced to the market many new loupe
      designs. The Signature Prism Loupes provide 4.0x and 5.0x levels of
      magnification and are used by professionals for several specific types of
      medical procedures. These high-magnification loupes (4.0x & 5.0x) will allow
      us greater penetration in several dental and surgical market segments. SureFit
      TTLTM loupes are a type of loupe which is commonly used by many surgical and
      dental professionals were also introduced. Since its introduction, SheerVision
      can now offer its state of the art TTL technology to complement our award
      winning flip-up design. The new proprietary SureFit alignment system also
      enables customers to order our TTLs through our sales partners and also our
      online store, providing a significant competitive advantage. We also introduced
      our latest sports-type frame design, which is branded as the “Del Rey”. It is a
      fashionable frame design for mounting both Flip-Up and TTL loupes that is
      available in six vibrant colors, and is available for sale with two designer
      loupe carrying cases.




4





We
      continue to invest in the development of new loupe designs in order to create
      industry leadership in this key market segment. With the continued market
      acceptance of these products and the addition of new products currently in
      our
      pipeline, management is encouraged with our progress towards the goal of
      reaching profitability.




**Our
      Product Offering**





**Surgical
      & Dental Loupes**




Although
      dental offices have used some form of magnification for decades, the need for
      surgical loupes and light sources in the regular practice of everyday dentistry
      is rapidly becoming the standard of practice for all dental professionals,
      including dental hygienists. The visual aspects of magnification may appear
      to
      be the primary benefit, but there are significant ergonomic benefits to the
      use
      of surgical loupes. Many medical careers have been cut short due to the effects
      of chronic neck and back pain, a condition that can be minimized or eliminated
      through the use of surgical loupes.





Regular
      magnifying glasses create a larger but flatter image and therefore do not give
      the user any depth of field. To solve this problem, medical professionals use
      special “loupes” that provide a three-dimensional image. These loupes are either
      Galilean (compound) loupes, which range in price from $800 to $1,200 or
      Panoramic (prism) loupes, which generally cost $1,200 to $1,800 a pair.





We
      offer 2.5x, 3.0x, 3.5x, 4.0x and 5.0x magnification surgical loupes, as well
      as
      two ultra-lightweight models (2.5xx and 3.0xx) for added all-day comfort. The
      ultra-light loupes are available in either a Flip-Up or “through-the-lens” (TTL)
      design. All loupes can be mounted on either a light-weight titanium frame or
      a
      fashionable “Del Rey” sports frame available in six vibrant colors. Additional
      designer carrying cases for the loupes are also available.




**Light
      Systems** **





As
      surgical loupes allow the area under view greater magnification, they tend
      to
      require additional light or illumination. Illumination can be added to surgical
      loupes via our head mount (headband), or direct mount to the frame of the loupe.
      One of the key benefits of this type of illumination is to provide clinicians
      with shadow-free images. With the introduction of a superior quality portable
      LED light sources, SheerVision is able to provide a modern generation of
      illumination products to practitioners that currently use magnification that
      is
      extremely bright and completely portable. SheerVision offers two portable head
      light systems that are of great benefit to the user: the Original FireFlyTM LED,
      and the FireFly
      Infinity UltraTM LED Both
      are available with the FireFly FlipFilterTM, an accessory that is of great use to
      dental professionals to prevent the accidental curing of dental composite
      materials. Through our offering of loupes and headlight systems, we are often
      able to sell a package of both to provide a complete and cost effective solution
      to the user.





**The
      Advantages of Our Products and Services**





SheerVision
      surgical loupes are being used in private dental practices, clinical settings,
      college campuses, and medical institutions throughout the United States. Our
      surgical loupes are also endorsed by an independent non-profit dental education
      and product testing foundation and were featured in the foundation's 2005
      Buyer's Guide. Our surgical loupes were also featured in “Dental Lab Products”
2005 Buyer's Guide “Best of the Best” Offering as well as being listed in the
      2006 edition of Dentistry Today’s Top 100 Products. Our Original FireFlyTM LED
      head light was endorsed as one of the Best Products for 2007 by an independent
      non-profit dental education and product testing foundation.





Our
      Through-the-Lens (TTL) technology has opened new markets where customers prefer
      this type of loupe design. Estimated market preference for TTL loupes is 50%
      compared with 50% for the Flip-Up type loupes that we have traditionally
      offered. We can offer this state of the art TTL technology mounted in either
      our
      fashion sports frame or our designer titanium frame. With the introduction
      of
      our proprietary SureFit TTLTM alignment system, customers are now able to order
      our TTL loupes through our online store or by telephone, providing us with
      a
      significant competitive advantage because an on-site sales call is not required
      to complete the transaction.





Our
      recently introduced Signature Prism Loupes are assisting us in opening new
      markets for us with an introduction that began during the third and fourth
      quarters of fiscal year 2007. This new product line has greatly expanded our
      offering to the surgery marketplace beyond what we previously had in place.
      This
      introduction has helped us bring our distinctive business model to this large,
      established market.




5




The
      SheerVision Del Rey Frame provides a product advantage when compared with some
      of our competitors who currently do not provide a similar alternative for their
      loupe optics. This is a product for the young, fashion conscious user, as it
      features a wrap-around design that is available in six vibrant colors and
      accommodating both the Flip-Up and TTL loupes. Both of our FireFly light systems
      fit to this frame. Several major competitors appear to have been forced into
      launching sport-type frame designs during fiscal year 2007 as a response to
      our
      introduction of our predecessor to the Del Rey Frame. Many of these competitors
      have chosen to purchase a major-brand sunglass-type frame, which puts them
      at a
      considerable cost disadvantage when compared with the SheerVision Del Rey
      Frame.





We
      believe that the key selling points of SheerVision surgical loupes are brand
      name and reputation, high quality, competitive price, and attentive customer
      service. In addition, we offer an unlimited lifetime warranty against defects
      in
      materials and workmanship on all working parts of our loupes, a program
      unmatched by any major surgical loupe supplier.





Our
      FireFly line of light systems offers the latest in LED light projection
      technologies designed as a completely portable product coupled with value
      pricing. The FireFly
      Infinity UltraTM LED is
      twice as bright as many headlights with 7,000+ foot candles of light and the FireFly
      Infinity UltraTM LED outperforms
      many tethered fiber-optic lights without their high maintenance
      costs. In 2008,
      we introduced our new Lithium Polymer battery pack for the FireFly InfinityTM,
      the most advanced battery technology for this application on the market. Both
      FireFly models can be mounted to the major brands of loupes currently in use,
      and can also be mounted to a SheerVision headband.  The
      Original FireFlyTM LED received a rating as a top performer in the December 2007
      issue of the highly regarded Clinical Research Associates (CRA) Newsletter.
      Advantages of SheerVision’s headlight systems include shadow-free illumination,
      superior light uniformity, class-leading beam intensity, portability, and all
      day comfort at a great value over light sources based on fiber optic technology.





**Sales
      and Marketing**





We
      believe sales and marketing will continue to be important functions in order
      to
      continue our sales growth with both domestic and international customers.





As
      part of our previous branding and marketing initiatives we believe that the
      SheerVision brand is positioned among the top tier brands within the industry.
      The SheerVision brand name has been reinforced by the publicity received by
      becoming a publicly traded company, and through its direct mail and advertising
      initiatives. On June 20, 2006 we were granted federal registration of the
      trademark SheerVision® by the United States Patent and Trademark Office.





We
      plan to continue the select, targeted use of direct mail, SEM, and trade
      advertising campaigns to accelerate growth to our base of end-users that
      purchase directly from us. We have also increased our library of marketing
      materials to use in future direct and indirect marketing and sales efforts.
      We
      also increased our online marketing efforts in the areas of SEM and online
      advertising. We believe that our online marketing program will allow us to
      extend our reach into new markets beyond our traditional medical, dental, and
      veterinary marketplaces in the United States.





The
      launch of the International Distributor Program is intended to expand our
      network of distributors operating in specific international markets. IDP
      distributors purchase SheerVision surgical loupes and light systems and then
      resell them using their local expertise in sales and marketing. In order to
      assist them with their sales efforts, we have developed a marketing program
      to
      support our international partners, which includes the use of advertising,
      sales
      collateral and sales training materials.





**OEM
      Operations**





In
      addition to manufacturing and offering surgical loupes and head light systems
      under our own brand name, we offer our products for major OEMs. During fiscal
      year 2008, we added a significant new client in the medical market, and are
      in
      negotiations with several other major companies for OEM versions of our product
      designs. We believe that offering our products on an OEM basis will help
      SheerVision enter markets that it did not have previous access to, as well
      as
      the distribution of sunk R&D costs for those new product
      designs.





**Manufacturing**





Our
      contract manufacturers supply proprietary company-designed surgical loupe and
      light system components on an exclusive basis. An inventory of loupes and light
      systems is maintained at our offices in order to ensure rapid order processing
      and fulfillment. Production capacity is adequate to support a level of sales
      approximately twice the current level, and there are alternate sources of supply
      of the raw materials needed to produce surgical loupes and light systems. We
      believe that the quality of our products is a principal driver of purchasing
      decisions, and our third party manufacturers are required to conduct rigorous
      quality testing on a regular basis. We currently own and operate computer
      controlled assembly equipment to build customized loupe/headlight products
      and
      have key personnel assigned to perform production staging, final unit assembly,
      quality control, and shipping procedures.





**Competition**





The
      surgical loupe and portable headlight market is characterized by a number of
      participants, each dominant in one or more market segments. In each market
      segment, we compete with established manufacturers of surgical loupes and other
      specialty optical products, including Designs for Vision, Orascoptic (part
      of
      Danaher), and Surgitel. Due to our strategic investments in product development
      and branding, we are now recognized as one of the leading brands in the market.
      This was demonstrated as several major competitors appear to have been forced
      into launching sports-type frame designs during fiscal year 2007 after the
      introduction of our first sport frame design for loupes. Overall, we believe
      that competition is principally based upon the following three key
      areas:




6





·
            *Company*





·
            Brand
                reputation and loyalty;





·
            Product
                quality, support, and durability;





·
            Product
                pricing;





·
            *Surgical
                & Dental Loupes Product Attributes
                Including:*





·
            *Magnification/Clarity*.
                Top quality optics are critical in this
                regard;





·
            *Field-of-View*.
                A wide field of vision is better than a smaller
                one;





·
            *Depth-of-Field*.
                An extended depth of field is preferable;
                and





·
            *Weight*.
                Lighter loupes are generally preferable to heavier
                loupes.





·
            *Portable
                Headlight System Product Attributes
                Including:*





·
            *Portability*.
                A portable light system allows for maximum movement and flexibility.
                End
                users are no longer tethered to a light
                box;





·
            *LED.*A portable light source with an LED bulb is the brightest, whitest
                light
                on the market. It is also economical in that it eliminates bulb
                replacement common with fiber optic light
                sources;





·
            *Lightweight.*A good portable light should have a small, lightweight battery pack
                and
                the headlight should be sleek and worn seamlessly*;*





·
            *Value.*Price combined with quality is a driver of brand choice in the
                marketplace; and





·
            *Mounting
                Options.*The light source should mount on either a headband or directly to
                the
                loupes. The unit should be able to be mounted onto loupes from all
                major
                competing manufacturers to appeal to the widest possible user
                base.





We
      believe that we compete favorably in the dental, dental hygiene, surgical,
      and
      veterinary markets on the basis of these criteria and are rapidly expanding
      our
      products in other markets as well.





We
      have a number of valuable trade secrets that have demonstrated their
      effectiveness as significant barriers to competition. They relate to products,
      proprietary manufacturing processes, and sales and marketing techniques. We
      are
      evaluating the possibility of filing patent applications for components and/or
      products under development.





**Research
      and Development**





We
      are committed to an ongoing program of research and development to maintain
      our
      reputation for cutting-edge products that meet the evolving needs of the market.
      We conduct research and development activities to design and develop products
      that will enhance our competitive marketing position. Our newly developed
      products include a fully portable LED light system, a lithium-polymer battery
      source, a non-curing flip filter, a through-the-lens loupe, a high-magnification
      prism loupe, a wrap around sports frame, and fashionable loupe accessories.
      The
      Original FireFlyTM LED and FireFly
      Infinity UltraTM LED light
      systems have become best sellers in the dental market and contributed
      significantly to our rapid expansion into that market niche during fiscal year
      2008.





We
      have also forged a strategic alliance with a domestic company which provides
      us
      advanced product design and manufacturing development. This alliance, which
      we
      anticipate continuing into the foreseeable future, enables us to design and
      bring to market new products and enhancements to existing product lines
      rapidly.




During
      fiscal year ended 2008, we spent $99,276 on research and development and during
      fiscal year ended 2007, we spent $29,523 on research and
      development.





**Government
      Regulation**





Our
      products are classified as Class I Non-Invasive Medical Devices and, as such,
      there is no requirement to obtain FDA approval. We have nonetheless registered
      with the FDA on a voluntary basis and have CE certifications for international
      sales.





7





**Employees**





As
      of October 31, 2008, we employed 14 individuals and engaged the services of
      several consultants. Of our employees, 6 were engaged in sales and marketing,
      2
      in customer service/inside sales, 4 in quality control and production, and
      2 in
      executive/administrative functions.





**Background**





We
      were
      incorporated as “Escalator, Inc.” on April 17, 1986. On June 3, 1986, Lone Pine
      Resources, Inc. was merged with us through a reverse merger whereby the
      shareholders of Lone Pine Resources, Inc. received an equal number of shares
      in
      Escalator, Inc. Lone Pine Resources, Inc. was incorporated under the laws of
      Utah on June 23, 1983.





In
      the
      past, we conducted operations through three wholly-owned subsidiaries, Escalator
      Securities, Inc., Escalator Investments, Inc., and Frank Communications Corp.,
      each a Pennsylvania corporation. Escalator Investments, Inc. was incorporated
      in
      the State of Pennsylvania on August 15, 1984 and conducted financial planning
      activities through approximately 1992 as a Registered Investment Advisor under
      the Investment Advisors Act of 1940. Since 1992, Escalator Investments, Inc.
      has
      had no operations. Escalator Securities, Inc. was incorporated in the State
      of
      Pennsylvania on August 22, 1985, and conducted business as a registered
      broker-dealer under the Securities Exchange Act of 1934, as amended, and the
      Pennsylvania Securities Act of 1972 until 1997. On December 31, 1997, Escalator
      Securities, Inc. was closed by the NASD. In July 1990, we acquired Frank
      Communications Corp., a Pennsylvania corporation incorporated on May 30, 1989,
      which was in the business of financial public relations. In consideration of
      this acquisition, we paid $1,000. Frank Communications Corp. has no operations.
      On June 30, 1997, we transferred our holdings in Escalator Securities, Inc.
      to
      Escalator Investments, Inc. pursuant to the terms of an Agreement and Plan
      of
      Spinoff. The shareholders of Escalator, Inc. received all of the outstanding
      stock of Escalator Investments, Inc. and Escalator Securities, Inc., which
      then
      ceased being our wholly-owned subsidiaries.





On
      April
      22, 1998, we changed our name to Nu Electric Corporation. On June 30, 1999,
      we
      acquired Clean Water Technologies, Inc. (“ *Clean
      Water* ”),
      a
      Florida corporation, through an agreement and plan of merger whereby all of
      the
      outstanding and issued shares of Clean Water were exchanged for shares of Nu
      Electric. Pursuant to this agreement, we acquired all of the assets of the
      business of Clean Water. On September 21, 2000, we acquired Zorax, Inc.
      (“ *Zorax* ”),
      a
      Florida corporation, through an agreement and plan of merger whereby all of
      the
      issued and outstanding shares of Zorax were exchanged for shares of Nu Electric.
      Pursuant to this agreement, we acquired all of the assets of Zorax. On April
      4,
      2005, we eliminated our Zorax subsidiary.  On
      April
      2, 2002, we changed our name to Clean Water Technologies, Inc.





On
      March
      27, 2006, we entered into a Share Exchange and Reorganization Agreement (the
      “ *Exchange
      Agreement* ”)
      with
      SheerVision, Inc., a California corporation (including its predecessor,
“ *Sheervision-CA* ”)
      and
      Suzanne Lewsadder and Jeffrey Lewsadder, our Chief Executive Officer and
      President, respectively, and the beneficial holders of all of the outstanding
      capital stock of SheerVision-CA, which set forth the terms and conditions of
      our
      business combination with SheerVision-CA in which all shareholders of
      SheerVision-CA exchanged all of the outstanding and issued capital stock of
      SheerVision-CA for an aggregate of 9,525,137 shares of our common stock,
      representing 95% of the outstanding common stock immediately after giving effect
      to such transaction. As a result of this transaction, SheerVision-CA became
      our
      wholly-owned subsidiary and the shareholders of SheerVision-CA became our
      controlling stockholders. On June 15, 2006, we changed our name to SheerVision,
      Inc.





We
      have
      not been a party to any bankruptcy, receivership or similar proceeding. Since
      such date, except as described herein, we have not been involved in any material
      reclassification, merger, consolidation, purchase or sale of a significant
      amount of assets not in the ordinary course of business.





8


**ITEM
      1A. RISK FACTORS**





Our
      business, prospects, financial condition, and results of operations may be
      materially and adversely affected due to any of the following risks. The trading
      of our common stock could decline due to any of these risks. Some of the
      statements in “Risk Factors” are forward looking statements. See “ *Special
      Note Regarding Forward Looking Statements* .”





**Risks
      Related To Our Business**




**Our
      accountants have raised substantial doubt with respect to our ability to
      continue as a going concern.**




We
      had
      negative cash flow from operations of $245,569, negative working capital of
      $411,318 and an accumulated deficit of $5,228,744 at August 31, 2008, and
      recurring losses from operations. The
      audit
      report of Miller, Ellin & Company, LLP for the fiscal year ended August 31,
      2008 contained a paragraph that emphasizes the substantial doubt as to our
      continuance as a going concern. This is a significant risk to investors who
      purchase shares of our common stock because there is an increased risk that
      we
      may not be able to generate and/or raise enough resources to remain operational
      for an indefinite period of time.




**If
      we are unable to generate significant revenues from our operations, our business
      will fail.**




As
      we pursue our business plan, we are incurring significant expenses. We incurred
      operating expenses for the year ended August 31, 2008 in the amount of
      $2,924,996 and had gross profit of $2,753,786 on sales of $4,417,887 for the
      same period. We incurred operating expenses for the year ended August 31, 2007
      in the amount of $3,829,941 and had gross profit of $2,914,851 on sales of
      $4,351,907 for such period. The success and viability of our business is
      contingent upon generating significant revenues from the sale of our surgical
      loupes and related products such that we are able to pay our operating expenses
      and operate our business at a profit. It is not possible at this time for us
      to
      predict with assurance the outcome of these matters. In the event that we remain
      unable to generate significant revenues to pay our operating expenses, we will
      not be able to achieve profitability or continue operations.





**Our
      ability to continue as a going concern may be dependent on raising additional
      capital, which we may not be able to do on favorable terms, or at
      all.**





We
      may need to raise additional capital to support our current operations and
      fund
      our sales and marketing and research and development programs. We can provide
      no
      assurance that additional funding will be available on a timely basis, on terms
      acceptable to us, or at all. If we are unsuccessful raising additional funding,
      our business may not continue as a going concern. Even if we do find additional
      funding sources, we may be required to issue securities with greater rights
      than
      those currently possessed by holders of our common stock. We may also be
      required to take other actions that may lessen the value of our common stock
      or
      dilute our common stockholders, including borrowing money on terms that are
      not
      favorable to us or issuing additional equity securities. If we experience
      difficulties raising money in the future, our business and liquidity will be
      materially adversely affected.





**Because
      we have a relatively short operating history and have implemented a shift in
      our
      business model, it is difficult to evaluate our future prospects and this
      increases the risk of your investment.**




Although
      we were incorporated in April 1986, our operating subsidiary SheerVision-CA
      commenced operations in 1999. SheerVision-CA has not been profitable since
      it
      became our operating subsidiary in 2006. In
      addition, during fiscal year ended 2008, we shifted the focus of our business
      to
      generating most of our revenues from OEMs, third parties and international
      distributors. While management remains cautiously optimistic about its
      prospects, the results of this shift require further evaluation. Accordingly,
      you have a limited opportunity to evaluate our business and future prospects
      because we have a limited operating history under our current business model.
      There is no certainty that future operations will be profitable. There is a
      risk
      that we will be unable to develop a broad enough customer base to conduct enough
      volume to pay our operating costs. A limited operating history requires frequent
      evaluation to improve operations and/or remedy unforeseen difficulties that
      may
      occur. If we are unable to remedy unforeseen difficulties that materialize,
      our
      ability to achieve profitable operations could be impaired. An investor should
      consider the risks, expenses and uncertainties of a company like ours that
      has a
      limited operating history. If we are unsuccessful in addressing these risks,
      we
      will likely be required to discontinue operations.





**Our
      financial results may fluctuate from period to period as a result of several
      factors which could adversely affect our stock price.** ******





** Our
      operating results may fluctuate significantly in the future as a result of
      a
      variety of factors, many of which are outside our control. Factors that will
      affect our financial results include:





·
            success
                in implementing our shift in our business
                model;





·
            acceptance
                of our products and market
                penetration;





·
            the
                amount and timing of capital expenditures and other costs relating
                to the
                implementation of our business plan, including acquisitions of, and
                investments in, competing or complementary
                technologies;




9




·
            the
                introduction of new products by our
                competitors;





·
            pricing
                changes in the surgical loupe and light systems manufacturing or
                assembly
                industries;





·
            technical
                difficulties with respect to the use of our
                products;





·
            regulatory
                changes; and





·
            general
                economic conditions and economic conditions specific to our
                industry.





As
      a
      strategic response to changes in the competitive environment, we may from time
      to time make certain pricing, service, or marketing decisions or acquisitions
      that could have a material adverse effect on our business, prospects, financial
      condition, and results of operations.





**We
      are dependent upon third party suppliers of our raw materials.**





We
      are
      dependent on outside vendors for our supplies of raw materials. While we believe
      that there are numerous sources of supply available, if the third party
      suppliers were to cease production or otherwise fail to supply us with quality
      raw materials in sufficient quantities on a timely basis and we were unable
      to
      contract on acceptable terms for these services with alternative suppliers,
      our
      ability to produce our products would be materially adversely affected.





**We
      have limited manufacturing facilities and are largely dependent upon third
      parties to manufacture our products.**


****


We
      have limited manufacturing facilities and expertise and have entered into
      manufacturing arrangements with third parties to manufacture our products.
      Accordingly, our ability to commercialize our products is partially dependent
      on
      our relationships with our third party contract manufacturers and their ability
      to manufacture our products on a timely basis in accordance with our
      specifications. While we believe that there are numerous other third party
      manufacturers capable of manufacturing our products, should we not be able
      to
      continue to obtain contract manufacturing on commercially reasonable terms
      with
      our current suppliers, we may experience difficulty obtaining inventory rapidly
      when needed. Any
      of
      such events may materially, adversely affect our business, prospects, financial
      condition, and results of operations.





**We
      are dependent on key members of management.**





Our
      performance is substantially dependent on our key executive officers - Suzanne
      Lewsadder and Jeffrey Lewsadder, our Chief Executive Officer and President,
      respectively - for sales and marketing, research and development, manufacturing,
      and intellectual property protection and licensing. Although these officers
      are
      our major stockholders, there can be no assurance they will continue to serve
      as
      our officers or directors. The inability to retain and continue to attract
      and
      retain qualified management and staff could significantly delay and may prevent
      the achievement of our research, development and business objectives, and could
      have a material adverse effect on our business, prospects, financial conditions,
      and results of operations.





**The
      industry in which we operate is highly competitive.**





Numerous
      well-known companies, which have substantially greater capital, research and
      development capabilities and experience than we have, are presently engaged
      in
      the surgical loupe market. By virtue of having or introducing competitive
      products on the market before us, these entities may gain a competitive
      advantage. Future technological developments may render some or all of our
      current or future products noncompetitive or obsolete, and we may not be able
      to
      make the enhancements to our products necessary to compete successfully with
      newly emerging technologies. If we are unable to successfully compete in our
      chosen markets, our business prospects, financial condition, and results of
      operations would be materially adversely affected.





**We
      may, in the ordinary course of business, be subject to claims of infringement
      of
      third party intellectual property rights and we could suffer significant
      litigation costs, licensing expenses or be prevented from selling our
      products.**





Intellectual
      property rights are uncertain and involve complex legal and factual questions.
      We may be unknowingly infringing upon the intellectual property rights of others
      and may be liable for that infringement, which could result in significant
      liability for us. If we do infringe upon the intellectual property rights of
      others, we could be forced to either seek a license to those intellectual
      property rights or alter our products so that they no longer infringe. A license
      could be very expensive to obtain or may not be available at all. Similarly,
      changing our products or processes to avoid infringing upon the rights of others
      may be costly or impractical. Litigation or other proceedings could require
      us
      to spend significant time and money and could otherwise adversely affect our
      business.





**Our
      failure to protect our intellectual property could have an adverse affect on
      us.**





We
      rely on trademark and trade secrets to protect our intellectual property. We
      cannot be sure that these intellectual property rights can be successfully
      asserted in the future or will not be invalidated, circumvented, or challenged.
      Our failure to protect our proprietary information and any successful
      intellectual property challenges or infringement proceedings against us could
      have a material adverse effect on our business, prospects, financial condition
      and results of operations.




10




**Our
      failure to maintain and develop our brand names could adversely affect our
      revenues.** ****** **





We
      believe that maintaining and developing our brand names, including the trademark
      “ *SheerVision* ®”,
      are
      critical to our success. The importance of our name recognition may increase
      as
      our products gain market acceptance and as we enter additional markets. If
      our
      brand building strategy is unsuccessful, we may be unable to increase our future
      revenues or expand our products and services. Such events would have a material
      adverse effect on our business, prospects, financial condition and results
      of
      operations.





**Any
      inability by us to respond to changes in consumer demands in a timely manner
      could materially adversely affect our business, prospects, financial condition,
      and results of operations.**





Our
      success depends on our ability to identify, originate and define product trends
      in our markets, as well as to anticipate, gauge and react to changing consumer
      demands in a timely manner. Our products must appeal to a broad range of
      consumers whose preferences cannot be predicted with certainty and are subject
      to periodic change. We may not be able to meet changing consumer demands in
      the
      future. If we misjudge the market for our products, we may be faced with
      significant excess inventories for some products and missed opportunities for
      other products. Either of such events could have a material adverse effect
      on
      our business, prospects, financial condition, and results of
      operations.





**We
      could experience losses due to u** **nexpected
      warranty expenses or service claims.**





We
      generally maintain a warranty reserve on our balance sheet for potential
      warranty or service claims that could occur in the future. This reserve is
      adjusted based on our ongoing operating experience with equipment and
      installations. It is possible, perhaps due to bad supplier material that we
      would have actual expenses substantially in excess of the reserves we maintain.
      Our failure to accurately predict future warranty claims could result in
      unexpected expense.





**Risks
      Related To Our Common Stock**





**Our
      stock price may be volatile, which could result in substantial losses
      for investors.**





The
      price of our common stock is quoted on the OTCBB and fluctuates significantly.
      As a result of these fluctuations, it may make it difficult for you to sell
      your
      shares of common stock when you want or at prices you find attractive. These
      fluctuations may result from a variety of factors, many of which are beyond
      our
      control. These factors include:





·
            quarterly
                variations in our operating
                results;





·
            operating
                results that vary from the expectations of management, securities
                analysts
                and investors;





·
            changes
                in expectations as to our business, prospects, financial condition,
                and
                results of operations;





·
            announcements
                by us, our partners or our competitors regarding material
                developments;





·
            the
                operating and securities price performance of other companies that
                investors believe are comparable to
                us;





·
            future
                sales of our equity or equity-related
                securities;





·
            changes
                in general conditions in our industry and in the economy, the financial
                markets and the domestic or international political
                situation;





·
            fluctuations
                in oil and gas prices;





·
            departures
                of key personnel; and


·
            regulatory
                considerations.





In
      addition, the stock market in general has recently experienced extreme price
      and
      volume fluctuations. This volatility has had a significant effect on the market
      price of securities issued by many companies for reasons often unrelated to
      their operating performance. These broad market fluctuations may adversely
      affect our stock price, regardless of our operating results.





11





**Future
      sales of common stock or the issuance of securities senior to our common stock
      or convertible into, or exchangeable or exercisable for, common stock could
      adversely affect the trading price of our common stock and our ability to raise
      funds in new equity offerings.**





Future
      sales of substantial amounts of our common stock or other equity-related
      securities in the public market or privately, or the perception that such sales
      could occur, could adversely affect prevailing trading prices of our common
      stock and could impair our ability to raise capital through future offerings
      of
      equity or other equity-related securities. We can make no prediction as to
      the
      effect, if any, that future sales of shares of common stock or equity-related
      securities, or the availability of shares of common stock for future sale,
      will
      have on the trading price of our common stock.




**Our
      common stock is deemed a “penny stock,” which may make it more difficult for
      investors to sell their shares due to suitability
      requirements.**




The
      SEC has adopted regulations that generally define “penny stock” to be an equity
      security that has a market price of less than $5.00 per share, subject to
      specific exemptions. The market price of our common stock is currently less
      than $5.00 per share and therefore is a “penny stock” according to SEC rules.
      This designation requires any broker or dealer selling these securities to
      disclose certain information concerning the transaction, obtain a written
      agreement from the purchaser and determine that the purchaser is reasonably
      suitable to purchase the securities. These rules may restrict the ability of
      brokers or dealers to sell our common stock and may affect the ability of
      investors to sell their shares.




**As
      the ownership of our voting securities is concentrated in our founders,
      executive officers, and directors, such individuals control us.**





As
      of October 31, 2008, Suzanne Lewsadder and Jeffrey Lewsadder, our Chief
      Executive Officer and President, respectively, beneficially own approximately
      72.4% of our outstanding common stock. Accordingly, these individuals will
      be
      able to elect our directors and control the outcome of virtually all important
      stockholder decisions and may make such decisions in their own interest, which
      may not be in the best interests of other stockholders.





**We
      do not expect to pay cash dividends on our common stock in the foreseeable
      future.**





We
      have
      not declared or paid any cash dividends on our common stock and do not expect
      to
      do so in the foreseeable future. As a result, investors may have to sell their
      shares of our common stock to realize their investment. We currently intend
      to
      retain all future earnings for use in the operation of our business and to
      fund
      future growth. In addition, the terms of our Series A Preferred Stock limit
      our
      ability to pay dividends. If this prohibition were to be waived, our ability
      to
      pay future cash dividends on our common stock would depend upon our results
      of
      operations, financial condition, cash requirements, the availability of a
      surplus and other factors.





**We
      are subject to anti-takeover provisions that could affect the price of our
      common stock.** ****** **





Some
      provisions of our Second Amended and Restated Certificate of Incorporation,
      as
      amended, our by-laws, and laws of the State of Delaware could make it more
      difficult for a third party to acquire us, even if doing so might be beneficial
      to our stockholders.





We
      are
      subject to the provisions of Section 203 of the Delaware General Corporation
      Law
      (“ *Section
      203* ”).
      Section 203 provides, with certain exceptions, that a Delaware corporation
      may
      not engage in any of a broad range of business combinations with a person or
      an
      affiliate, or an associate of such person, who is an “interested stockholder”
for a period of three years from the date that such person became an interested
      stockholder unless: (i) the transaction resulting in a person becoming an
      interested stockholder, or the business combination, is approved by the board
      of
      directors of the corporation before the person becomes an interested
      stockholder; (ii) the interested stockholder acquired 85% or more of the
      outstanding voting stock of the corporation in the same transaction that makes
      such person an interested stockholder (excluding shares owned by persons who
      are
      both officers and directors of the corporation, and the shares held by certain
      employee stock ownership plans); or (iii) on or after the date the person
      becomes an interested stockholder, the business combination is approved by
      the
      corporation's board of directors and by the holders of at least 66-2/3% of
      the
      corporations outstanding voting stock at an annual or special meeting, excluding
      the shares owned by the interested stockholder. Under Section 203, an
“interested stockholder” is defined as any person who is: (i) the owner of 15%
      or more of the outstanding voting stock of the corporation or (ii) an affiliate
      or associate of the corporation and who was the owner of 15% or more of the
      outstanding voting stock of the corporation at any time within the three-year
      period immediately prior to the date on which it is sought to be determined
      whether such person is an interested stockholder.




12




A
      corporation may, at its option, exclude itself from coverage of Section 203
      by
      amending its certificate of incorporation or bylaws, by action of its
      stockholders, to exempt itself from coverage, provided that such certificate
      of
      incorporation amendment or bylaw shall not become effective until 12 months
      after the date it is adopted. We have not adopted such an amendment to our
      Second Amended and Restated Certificate of Incorporation, as amended, or
      By-Laws.





In
      addition, our Second Amended and Restated Certificate of Incorporation, as
      amended, authorizes our board of directors to issue up to 10,000,000 shares
      of
      preferred stock, which may be issued in one or more series, the terms of which
      may be determined at the time of issuance by the board without further action
      by
      stockholders, and may include voting rights (including the right to vote as
      a
      series on particular matters), preferences as to dividends and liquidation,
      conversion and redemption rights and sinking fund provisions. The issuance
      of
      any such preferred stock could materially adversely affect the rights of holders
      of shares of our common stock and, therefore, could reduce the price of our
      common stock. In addition, specific rights granted to future holders of
      preferred stock could be used to restrict our ability to merge with, or sell
      our
      assets to, a third party. The ability of our board of directors to issue
      preferred stock could have the effect of rendering more difficult, delaying,
      discouraging, preventing, or rendering more costly an acquisition or a change
      in
      control of us thereby preserving control of by the current controlling
      stockholders.




**ITEM
      1B. UNRESOLVED STAFF COMMENTS**




We
      are a
      smaller reporting company as defined by Rule 12b-2 of the Exchange Act and
      are
      not required to provide the information required under this item.




**ITEM
      2. DESCRIPTION OF PROPERTY**





Our
      corporate office, customer service and shipping operations are located at 4030
      Palos Verdes Drive North, Suite 104 Rolling Hills Estates, California, and
      is
      approximately 2090 square feet in size. We lease this facility from an
      unaffiliated third party, pursuant to a lease which expires December 1, 2010.
      Satellite operations are currently in the states of Arizona, California, and
      Texas. If we should require additional or alternative facilities, we believe
      that such facilities can be obtained on short notice at competitive
      rates.





**ITEM
      3. LEGAL PROCEEDINGS**





On
      January 10, 2007, a complaint was filed in the United States District Court,
      Central District of California, by Martin Hogan Pty, Ltd., which was brought
      against the Company and our Chief Executive Officer and President. Plaintiff,
      a
      former supplier of frames of ours, alleged copyright and trade dress
      infringement in its frames and sought damages as well as permanent injunctive
      relief. On August 8, 2008, the parties entered into a settlement agreement
      pursuant to which we paid the plaintiff $50,000 and agreed to cease the sale
      of
      our SV sport frame after August 31, 2008, with no admission of wrongdoing.
      We
      have since replaced our SV sport frame with our “Del Rey” frame. We do not
      expect the terms of the settlement to have a material effect on our financial
      condition or operations.





There
      is no litigation pending or, to our knowledge, threatened litigation or
      administrative action (including litigation or action involving our officers,
      directors or other key personnel) which in our opinion has, or is expected
      to
      have, a material adverse effect upon our financial condition or
      operations.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





No
      matters were submitted to a vote of our shareholders during the fourth quarter
      of the fiscal year 2008.





13


**PART
      II**




**ITEM
      5.**  **MARKET
      FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**





**Market
      Information**





Our
      common stock is quoted on the OTC Bulletin Board (the " *OTCBB* ")
      under the symbol “SVSO.OB” The quarterly high and low reported sales prices for
      our common stock as quoted on the OTCBB for the periods indicated are as
      follows:





**2008**
            
            **2007****Fiscal
                Year Ended August 31**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low**First
                Quarter
            
            $
            0.52
            
            $
            0.12
            
            $
            1.10
            
            $
            0.25Second
                Quarter
            
            
            0.74
            
            
            0.12
            
            
            0.99
            
            
            0.30Third
                Quarter
            
            
            0.40
            
            
            0.15
            
            
            1.01
            
            
            0.30Fourth
                Quarter
            
            
            0.44
            
            
            0.18
            
            
            0.62
            
            
            0.25





The
      foregoing quotations were provided by Yahoo finance and the quotations reflect
      inter-dealer prices, without retail mark-up, mark-down or commission and may
      not
      represent actual transactions.





On
      November 17, 2008, the last reported sale price per share of common stock as
      quoted on the OTCBB was $0.06. Based on information available from our registrar
      and transfer agent, we estimate that we had approximately 174 stockholders
      of
      record on October 31, 2008.





**Dividends**





Although
      we have accrued dividends related to our Series A Preferred Stock, we have
      not
      paid any dividends to date and do not anticipate paying dividends in the
      foreseeable future. Our board of directors will review our dividend policy
      from
      time to time to determine the desirability and feasibility of paying dividends
      after giving consideration to our earnings, financial condition, capital
      requirements and such other factors as our board may deem relevant.




**Recent
      Sales of Unregistered Securities**





We
      made
      no sales of unregistered securities during the year ended August 31, 2008 that
      were not otherwise reported in a Quarterly Report on Form 10-QSB or in a Current
      Report on Form 8-K.





**Purchases
      of Equity Securities by the Issuer and Affiliated
      Purchasers**




We
      did not purchase any of our shares of common stock or other securities during
      the year ended August 31, 2008.




14





**ITEM
      6. SELECTED FINANCIAL DATA**





We
      are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act
      and
      are not required to provide the information required under this
      item.





**ITEM
      7.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





*The
      following discussion and analysis should be read in conjunction with our audited
      financial statements for each of the two years ended August 31, 2008 and 2007,
      and the notes thereto, all of which financial statements are included elsewhere
      in this Form 10-K. In addition to historical information, the following
      discussion and other parts of this Form 10-K contain forward looking information
      that involves risks and uncertainties. Actual results could differ materially
      from those anticipated by such forward-looking information due to factors
      discussed under “Description of Business” and elsewhere in this Form
      10-K.*





**Overview**





SheerVision
      designs and sells proprietary surgical loupes and light systems for the dental,
      medical, and veterinary markets. Since our inception in 1999, we have rapidly
      established a significant base of operations through our dedicated sales force,
      strategic marketing programs, aggressive web presence, expansion into global
      markets, and commitment to new product development. Worldwide sales are achieved
      by sales into direct and indirect sales channels, and by strategic alliances
      with dental and medical partners. Exclusive partnerships with Asian component
      manufacturers and domestic assembly and testing facilities, allow us to provide
      superior quality loupes and light systems at competitive prices.





In
      2006,
      we launched an aggressive marketing campaign with the objective of expanding
      direct sales and promoting name brand recognition in the dental market. This
      campaign established SheerVision as one of the premier magnification and
      illumination providers in the country. In 2007, with our new position in the
      marketplace, we identified third-party and OEM relationships as a necessary
      component of an overall strategy to continued realization of our aggressive
      sales and profitability goals. This revised strategy resulted in our
      introduction of a number of new product designs to a wider audience in a rapid,
      cost effective manner.





Our
      first
      major strategic alliance was with a large, international Japanese dental
      company. With momentum from sales generated from this effort, we
      initiated a
      fundamental shift in our marketing strategy, focusing primarily on indirect
      domestic and international sales. In fiscal year 2008, we launched two domestic
      alliances, allowing us to grow sales by effectively leveraging the dedicated
      sales forces of these two large dental companies. In addition to the expected
      effect this change has had on our business, we believe that it has minimized
      our
      exposure to, and impact of, the current economic challenges currently facing
      other companies and industries.





We
      have also looked to develop new distributor relationships through the launch
      of
      our International Distributor Program, and have increased our reach by
      successfully expanding our international distribution network in several
      countries. In fiscal year 2008, w e
      entered
      into a sales partnership agreement with a global detailer of quality dental
      and
      medical products, and continue to be approached by a number of international
      distributors. We believe our attraction is our breadth of innovative products
      which can be resold at strong margins, while maintaining a highly competitive
      end-user price point.





We
      intend
      to continue to commit resources to direct sales and marketing in a targeted,
      more complimentary manner. This includes participation in trade shows
      emphasizing the dental, veterinary, and medical markets, and growing our
      e-commerce powered web store, which has provided us with a cost-effective
      platform to sell products directly to the end user.





We
      also
      continue to develop new products that not only enhance the SheerVision product
      portfolio, but also add greater value for our third party clients. In fiscal
      year 2008, we introduced our upgraded FireFly Infinity UltraTM LED head light
      system, featuring our new Lithium Polymer battery pack. This revolutionary
      light
      system, which we believe employs the most advanced battery technology available
      for this application, has been rated a top performer by one of the most
      prestigious non-profit, independent dental labs in the country. The development
      and launch of our Signature Flip-Up Prism (high magnification) Loupe product
      line expanded our penetration into horizontal and vertical market segments
      where
      we have historically had only limited success. Additionally, in August 2008,
      we
      introduced a new sports frame, to appeal to the younger, more fashionable
      demographic of the dental market. Continued success of these products, and
      future success of products currently in our pipeline, validates and ensures
      continued support of R&D efforts.





We
      are
      always evaluating small medical devices, in an ongoing effort to increase and
      enhance our private label product line-up. With the sophisticated design and
      engineering teams currently available to us, we have the ability to not only
      modify and incorporate SheerVision products into other company’s offerings, but
      to also extend our design, engineering, and manufacturing capabilities to other
      company’s product development.





Throughout
      our recent history we have earned a reputation for leadership and value in
      optical and lighting technology, supporting dentists, dental hygienists, and
      doctors throughout the world. Our Ultra-Light Loupes have received the “Best of
      the Best” award by Dental Lab Products’ Buyers Guide - 2006 Edition and named a
      Dentistry Today top 100 product for 2006.




15




SheerVision
      loupes and our FireFly light system have also received an endorsement by a
      highly acclaimed and prestigious leading independent non-profit dental education
      and product testing foundation. Our Firefly light system is the only LED light
      system to receive the coveted “Highly Rated” designation.





**Critical
      Accounting Policies**





Our
      financial statements are prepared in accordance with accounting principles
      generally accepted in the United States. The preparation of our financial
      statements requires management to make estimates and judgments that affect
      the
      reported amounts of assets, liabilities, revenues, expenses and related
      disclosures. We base our estimates on historical experience and various other
      assumptions that are believed to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Actual results may differ from these estimates. Below is a brief description
      of
      our critical accounting policies:





***Use
      of Estimates***





The
      preparation of financial statements in conformity with accounting principals
      generally accepted in the United States requires management to make estimates
      and assumptions that affect the amounts reported in the financial statements
      and
      accompanying notes. Significant estimates and assumptions relate to estimates
      of
      collectability of accounts receivable, the realizability of deferred tax assets
      and the adequacy of inventory reserves. Management bases its estimates and
      assumptions on historical experience and on various other assumptions that
      it
      believes are reasonable under the circumstances. Actual results could differ
      from those estimates.





***Cash
      and Cash Equuivalents***





We
      consider highly liquid investments with an original maturity of three months
      or
      less to be cash equivalents.





***Cost
      of Goods Sold***





Cost
      of
      goods sold consists of costs of raw materials and finished goods purchased
      from
      several manufacturers. Factors affecting our cost of goods sold include, but
      are
      not limited to, currency fluctuations as they relate to our foreign
      manufacturers and inflationary price increases.





***Accounts
      Receivable***





Accounts
      receivable are reported net of any write-off for uncollectible accounts.
      Accounts are written off when significantly past due after exhaustive efforts
      at
      collection.





***Revenue
      Recognition***





Our
      surgical loupes and lighting products need no installation and are ready for
      use
      upon receipt by the customer. Products sold are delivered by shipments made
      through common carrier and revenue is recognized upon shipment to the customer.
      Discounts and sales incentives are recognized as a reduction of revenue at
      the
      time of sale. We offer an unconditional satisfaction guarantee for a 30-day
      period and permit product returns within 30 days of purchase, at which time
      returns are accepted and refunds are made. Shipping charges and special orders
      are nonrefundable. Allowances for returns are provided for based upon an
      analysis of our historical patterns of product returns. To date, there have
      been
      no significant product returns and such returns have been within our
      estimates.





***Inventory***





Inventory
      is stated at the lower of cost (first-in, first-out method) or market and
      consists of raw materials and finished goods. Materials associated with the
      manufacturing of our product lines are readily available within the US and
      international markets with relatively short ordering cycles and therefore
      inventory on hand normally represents a two to three month selling cycle.
      Inventory valuations depend on quantities on hand, sales history and expected
      near term sales prospects. On a regular basis, we evaluate inventory balances
      for excess quantities and obsolescence by analyzing estimated demand, inventory
      on hand, sales levels and other information. Based on these evaluations,
      inventory balances are reduced, if necessary.





***Income
      Taxes***





We
      account for income taxes using the liability method as prescribed by Statement
      of Financial Accounting Standards No. 109, *Accounting for Income Taxes* .
      Deferred income taxes reflect temporary differences in reporting assets and
      liabilities for income tax and financial accounting purposes. Valuation
      allowances are established when necessary to reduce deferred tax assets to
      the
      amount expected to be realized.





16





***Concentration
      of Credit Risk***





We
      maintain cash balances with various financial institutions, which at times
      may
      exceed the Federal Deposit Insurance Corporation limit. We have not experienced
      any losses to date as a result of this policy and management believes that
      there
      is little risk of loss.





***Basic
      and Diluted Loss Per Share***





In
      accordance with the Financial Accounting Standards Board's (“ *FASB* ”)
      SFAS
      No. 128, *Earnings
      Per Share,* the
      basic loss per common share, which excludes dilution, is computed by dividing
      the net loss available to common shareholders by the weighted average number
      of
      common shares outstanding. Diluted loss per common share reflects the potential
      dilution that could occur if all potential common shares had been issued and
      if
      the additional common shares were dilutive.





***Fair
      Value of Financial Instruments***





The
      estimated fair values for financial instruments under SFAS No. 107, *Disclosures
      about Fair Value of Financial Instruments* ,
      are
      determined at discrete points in time based on relevant market information.
      These estimates involve uncertainties and cannot be determined with precision.
      For certain of our financial instruments, including certain assets, accounts
      payable and accrued liabilities, the carrying amounts approximate fair value
      due
      to their short term nature.





***Long
      Lived Assets***





Our
      management evaluates the recoverability of our long-lived assets whenever events
      or changes in circumstances indicate that their carrying amounts may not be
      recoverable. Any impairment of value will be recognized as an expense in the
      statement of operations.




***Stock-Based
      Compensation***




In
      conjunction with the adoption of our stock option plans on January 25,
      2007 ,
      we began accounting for stock options under the provisions of Statement of
      Financial Accounting Standards No. 123R, *Share-Based
      Payment* (“ *SFAS
      123R* ”).
      SFAS 123R requires entities to recognize the cost of employee services received
      in exchange for awards of equity instruments based on the grant-date fair value
      of those awards. The fair value of stock options is estimated using a
      Black-Scholes option valuation model. This model requires the input of
      subjective assumptions, including expected stock price volatility, estimated
      life and estimated forfeitures of each award. The fair value of equity-based
      awards is amortized over the vesting period of the award, and we have elected
      to
      use the straight-line method.




**Recently
      Issued Accounting Pronouncements Not Yet Effective**




The
      following accounting pronouncements have been issued but were not effective
      for
      fiscal year ended August 31, 2008:





***Statements
      of Financial Accounting Standards (SFAS):***





SFAS
      141
      (R), *Business
      Combinations* —
retains
      the fundamental requirements in Statement 141 that the acquisition method of
      accounting (which Statement 141 called the purchase method) be used for all
      business combinations and for an acquirer to be identified for each business
      combination




SFAS
      157, *Fair
      Value Measurements* —
defines
      fair value, establishes a framework for measuring fair value, and expands
      disclosures about fair value measurements





SFAS
      159, *The
      Fair Value Option for Financial Assets and Financial Liabilities—including an
      amendment of FASB Statement No. 115* —
permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value





SFAS
      160, *Noncontrolling
      Interests in Consolidated Financial Statements* —
changes
      the way the consolidated income statement is presented





FASB
      Statement No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities - an Amendment of FASB
      Statement 133* —
      enhances required disclosures regarding derivatives and hedging
      activities




SFAS
      163, *Accounting
      for Financial Guarantee Insurance Contracts* —
      clarifies how FASB Statement No. 60, Accounting and Reporting by Insurance
      Enterprises, applies to financial guarantee insurance contracts issued by
      insurance enterprises, including the recognition and measurement of premium
      revenue and claim liabilities




17


***FASB
      Staff Positions (FSP):***





FSP
      APB
      14-1, *Accounting
      for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
      (Including Partial Cash Settlement)*





FSP
      FAS
      117-1, *Endowments
      of Not-for-Profit Organizations: Net Asset Classification of Funds Subject
      to an
      Enacted Version of the Uniform Prudent Management of Institutional Funds Act,
      and Enhanced Disclosures for All Endowment Funds*





FSP
      FAS
      133-1 and FIN 45-4, *Disclosures
      about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement
      No. 133 and FASB Interpretation No. 45; and Clarification of the Effective
      Date
      of FASB Statement No. 161* —
amends
      FASB Statement No. 133, *Accounting
      for Derivative Instruments and Hedging Activities*





FSP
      FAS
      140-3, *Accounting
      for Transfers of Financial Assets and Repurchase Financing
      Transactions* —
amends
      FASB Statement 140





FSP
      FAS
      142-3, *Determination
      of the Useful Life of Intangible Assets* —
amends
      the factors that should be considered in developing renewal or extension
      assumptions used to determine the useful life of a recognized intangible asset
      under FASB Statement No. 142, *Goodwill
      and Other Intangible Assets*





FSP
      FAS
      157-1, *Application
      of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting
      Pronouncements That Address Fair Value Measurements for Purposes of Lease
      Classification or Measurement under Statement 13* —
amends
      FASB Statement No. 157, Fair Value Measurements





FSP
      FAS
      157-2, *Effective
      Date of FASB Statement No. 157* —
delays
      the effective date of FASB Statement No. 157, Fair Value
      Measurements





FSP
      FIN
      46(R)-7, *Application
      of FASB Interpretation No. 46(R) to Investment Companies*





FSP
      SOP
      94-3-1 and AAG HCO-1, *Omnibus
      Changes to Consolidation and Equity Method Guidance for Not-for-Profit
      Organizations*





FSP
      SOP
      07-1-1, — indefinitely delays the effective date of AICPA Statement of Position
      07-1, *Clarification
      of the Scope of the Audit and Accounting Guide Investment Companies and
      Accounting by Parent Companies and Equity Method Investors for Investments
      in
      Investment Companies*





FSP
      EITF
      03-6-1, — *Determining
      Whether Instruments Granted in Share-Based Payment Transactions Are
      Participating Securities*





***EITF
      Consensuses (EITF):***





EITF
      Issue No. 07-1, *Accounting
      for Collaborative Arrangements*





EITF
      Issue No. 07-4, *Application
      of the Two-Class Method under FASB Statement No. 128, Earnings per Share, to
      Master Limited Partnerships*





EITF
      Issue No. 07-5, *Determining
      Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own
      Stock*





EITF
      Issue No. 08-3, *Accounting
      by Lessees for Maintenance Deposits*





EITF
      Issue No. 08-5, *Issuer's
      Accounting for Liabilities Measured at Fair Value with a Third-Party Credit
      Enhancement*





EITF
      Issue No. 08-6, *Equity
      Method Investment Accounting Considerations*





EITF
      Issue No. 08-7, *Accounting
      for Defensive Intangible Assets*





EITF
      Issue No. 08-8, *Accounting
      for an Instrument (or an Embedded Feature) with a Settlement Amount That Is
      Based on the Stock of an Entity's Consolidated Subsidiary*





***AICPA
      Statements of Position (SOP):***





SOP
      07-01, *Clarification
      of the Scope of the Audit and Accounting Guide Investment Companies and
      Accounting by Parent Companies and Equity Method Investors for Investments
      in
      Investment Companies*





We
      do not believe that adoption of any of the above pronouncements that may apply
      will have a material impact on our financial position or results of
      operations.




18




**Results
      of Operations**





The
      following table sets forth selected financial information related to operations
      for the periods indicated expressed in dollars as well as a percentage of
      sales:




**TWELVE
                MONTHS ENDED AUGUST 31,****2008**
            
            **2007****(in
                thousands)**Net
                Sales
            
            $
            4,418
            
            
            100.0
            %
            $
            4,352
            
            
            100.0
            %Cost
                of Goods Sold
            
            
            1,664
            
            
            37.7
            
            
            1,437
            
            
            33.0Gross
                Profit
            
            
            2,754
            
            
            62.3
            
            
            2,915
            
            
            67.0Operating
                ExpensesShipping
            
            
            156
            
            
            3.5
            
            
            163
            
            
            3.7Selling
                and Marketing
            
            
            1,081
            
            
            24.4
            
            
            1,881
            
            
            43.2General
                & Administrative
            
            
            1,589
            
            
            35.9
            
            
            1,756
            
            
            40.4Product
                Development
            
            
            99
            
            
            2.2
            
            
            30
            
            
            0.7Total
                Operating Expenses
            
            
            2,925
            
            
            66.1
            
            
            3,830
            
            
            88.0Loss
                from Operations
            
            
            (171
            )
            
            (3.8
            )
            
            (915
            )
            
            (21.0
            )Other
                Income/(Expense)
            
            
            (52
            )
            
            (1.2
            )
            
            13
            
            
            0.3Provision
                for Income Taxes
            
            
            -
            
            
            -
            
            
            (3
            )
            
            -Net
                Loss
            
            $
            (224
            )
            
            (5.0
            )
            $
            (905
            )
            
            (20.8
            )%





**Year
      Ended August 31, 2008 Compared to the Year Ended August 31,
      2007**





***Net
      Sales***





Net
      sales increased by $65,980, or 1.5%, from $4,351,907 for the year ended August
      31, 2007 to $4,417,887 for the year ended August 31, 2008. This relatively
      flat year over year sales growth is mainly due to our strategic shift from
      selling directly to end users to indirectly through international distributors,
      OEM and third party relationships. Although we began to experience an increase
      in sales as a result of this shift, the increase in unit sales has been
      partially offset by a decrease in sales price. During
      the twelve-month period ended August 31, 2008, OEM and distributor sales
      represented 50% of total sales as compared to 30% during the twelve month period
      ended August 31, 2007. ****





***Gross
      Profit***





Gross
      profit decreased by $161,065, or 5.5% from $2,914,851 for the year ended August
      31, 2007 to $2,753,786 for the year ended August 31, 2008. The decrease in
      gross
      profit was attributable to a reduction in average unit sales price. In addition,
      with the release of our new Lithium Polymer battery pack, all customers who
      purchased the predecessor battery pack from us were eligible for an upgrade
      at
      substantial discount. As most customers did upgrade to the new model, this
      resulted in a decrease in sales for this product reducing overall gross profit.
      The gross margin was 62.3% of net sales for the year ended August 31, 2008
      compared to 67.0% of net sales for the year ended August 31, 2007.





***Operating
      Expenses***





Operating
      expenses, which include shipping expenses, selling and marketing expenses,
      general and administrative expenses and product development, decreased by
      $904,945, or 23.6%, to $2,924,996 for the year ended August 31, 2008 as compared
      to $3,829,941 for the year ended August 31, 2007.





Shipping
      expenses were $155,598 or 3.5% of net sales for the year ended August 31, 2008
      as compared to $163,015 or 3.7% of net sales for the year ended August 31,
      2007.
      This decrease of $7,417 was directly attributable to the increased international
      distributor, OEM and third party sales, which tend to require bulk shipping
      as
      opposed to the individual, end user shipments.





Selling
      and marketing expenses were $1,081,425 for the year ended August 31, 2008,
      a
      decrease of $799,817 or 42.5% from $1,881,242 for the previous year ended August
      31, 2007. This decrease is mainly related to our enhanced channel sales efforts
      where we decreased our direct sales, marketing, advertising and direct mail
      campaigns resulting in savings of $588,961. We also realized $110,563 in
      decreased travel costs related to our redirected and refocused sales
      efforts.





General
      and administrative expenses were $1,588,697 for the year ended August 31, 2008,
      a decrease of $167,464 or 9.5% over the previous year ended August 31, 2007
      of
      $1,756,161. This
      decrease was attributable to the cost containment efforts implemented in the
      areas of personnel, staff related and SEC related expenses as well as a
      reduction in our direct sales efforts. The efforts of expense reduction
      were partially offset by the legal expenses to defend two competitor
      lawsuits, alleging product copyright, trade dress and patent infringement
      on specific components of our surgical loupes, which have now been settled.
      In
      addition, the decrease was also partially offset by stock based compensation
      expense of $96,825 for stock option grants awarded to the Company’s employees
      during the fiscal year 2008.




19




Product
      development costs increased by $69,753 or 236.3% from $29,523 for the year
      ended
      August 31, 2007 to $99,276 for the year ended August 31, 2008. This increase
      is
      a result of our engineering efforts within our optics and LED light product
      lines and in particular our Lithium Polymer battery pack which was released
      in
      May 2008. Product development costs are expected to increase in the future
      as we
      continue to expend resources to enhance our existing product lines as well
      as
      develop new products.





***Loss
      from Operations***





Loss
      from operations for the year ended August 31, 2008 decreased by $743,880 or
      81.3% to $171,210 as compared to $915,090 for the year ended August 31, 2007.
      As
      mentioned previously, this reduction is mainly related to our strategic
      shift from selling directly to end users to indirectly through international
      distributors, OEM and third party relationships. These efforts have led to significant cost savings related to shipping,
      marketing, advertising and travel expenses. We expect this strategic shift
      to
      help achieve profitability as well as allow for additional resources for
      continued research and development.





***Other
      Income (Expense)***





Interest
      expense for the year ended August 31, 2008 was $5,918 as compared to $0 for
      the
      year ended August 31, 2007. This increase was related to the line of credit
      that
      we obtained in 2008. Interest income for the year ended August 31, 2008 was
      $4,320 as compared to $12,706 for the year ended August 31, 2007, a decrease
      of
      $8,386. The decrease was attributable to less cash being available to be
      invested in variable money market funds during the year ended August 31, 2008.
      In addition, in July 2008, we reached a settlement in a copyright and trade
      dress infringement case in which we were the defendant. We paid the
      plaintiff $50,000 which is rejected in other income and expenses in the
      accompanying financial statements.





***Income
      Taxes***





During
      the year ended August 31, 2008, there was an $800 provision for minimum state
      income taxes due to our net loss, and a valuation allowance on the resulting
      deferred tax asset. For
      the twelve months ended August 31, 2007 we recorded a current income tax
      provision of $2,902.





***Net
      Loss***





Net
      loss for the year ended August 31, 2008 was $223,607 as compared to $905,286
      for
      the year ended August 31, 2007. Loss per common share was $0.04 and $0.09 for
      the years ended August 31, 2008 and 2007, respectively.





**Liquidity
      and Capital Resources**





We
      assess our liquidity by our ability to generate cash to fund operations.
      Significant factors in the management of liquidity are: funds generated by
      operations; levels of accounts receivable, inventories, accounts payable and
      capital expenditures; adequate lines of credit; and financial flexibility to
      attract long-term capital on satisfactory terms. As of August 31, 2008, we
      had
      cash and equivalents of $111,887.





To
      date, we have financed operations principally through lines of credit and equity
      capital. Our ability to generate positive operational cash flow is dependent
      upon increasing revenues through the sales of existing product lines. There
      can
      be no assurance that we will be successful in generating a positive operational
      cash flow.





We
      may require substantial additional financing to support our current operations,
      for sales and marketing and research and development programs, including
      significant requirements for operating expenses and for intellectual property
      protection and enforcement. As we raise additional funds through the issuance
      of
      equity securities and equity securities equivalents, the percentage ownership
      of
      our existing stockholders will be reduced. If we are unable to raise sufficient
      funds on acceptable terms, then we may not succeed in executing our business
      plan and achieving our business objectives. In particular, we could be forced
      to
      limit our product development and marketing activities, forego business
      opportunities, and we may lose the ability to respond to competitive pressures.
      There can be no assurance that any funding will be available on a timely basis
      on terms acceptable to us or at all, nor can any assurance be made that our
      business operations will prove to be profitable or that we can remain in
      business as a going concern.





The
      accompanying consolidated financial statements have been prepared assuming
      we
      will continue as a going concern, which contemplates, among other things, the
      realization of assets and satisfaction of liabilities in the ordinary course
      of
      business. As of August 31, 2008, we had an accumulated deficit of $5,228,744,
      recurring losses from operations and negative cash flows from operating
      activities of $245,569 for the year then ended. We also had a negative working
      capital of $411,318 as of August 31, 2008.





These
      factors, among others, raise doubt about our ability to continue as a going
      concern. The accompanying financial statements do not include any adjustments
      related to recoverability and classification of asset carrying amounts or the
      amount and classification of liabilities that might result should we be unable
      to continue as a going concern.




20





In
      response to these problems, management has taken the following
      actions:





·
            we
                are expanding our revenue base beyond direct sales to OEM and third
                party
                sales;





·
            we
                are aggressively signing up new international distributors through
                our IDP
                program; and





·
            we
                are seeking third party financing.





Net
      cash used in operating activities was $245,569 and $807,163 for the years ended
      August 31, 2008 and 2007, respectively. The
      improvement in operating cash flows was a direct result of our strategic
      shift from selling directly to end users to indirectly through international
      distributors, OEM and third party relationships. Utilization of our partner
      resources to market and sell our products allowed for the reduction in internal
      sales and marketing expenditures.





Net
      cash used in investing activities during the years ended August 31, 2008 and
      2007 was $57,806 and $42,201, respectively. These expenditures were mainly
      related to the purchase of manufacturing equipment.





Net
      cash received from financing activities during the year ended August 31, 2008
      and 2007 was $150,000 and $0, respectively. The cash inflow resulted from the
      proceeds from a line of credit with
      an unrelated shareholder of the Company, entered into on March 25,
      2008, providing for a line of credit to us of up to $300,000 carrying an
      interest rate of 9% per annum. The agreement provides that principal and
      interest of the loan is repayable nine months from the date of the execution
      of
      the agreement or earlier upon the occurrence of an event of default. As of
      August 31, 2008, the outstanding balance of the line of credit was $155,918,
      which includes accrued interest of $5,918.





We
      also owe accrued dividends on Series A Preferred Stock in the amount of
      $565,145, which is not anticipated to be paid within the next 12 months.





**Contractual
      Obligations**





The
      following table is a summary of our contractual obligations as of October 31,
      2008, which consist of lease obligations based on minimum monthly rents:





**Fiscal
                Years Ended**2009
            
            $
            55,0072010
            
            
            56,657$
            111,664





Rent
      expense for the years ended August 31, 2008 and 2007 amounted to $52,464 and
      $48,268, respectively.





**Off
      Balance Sheet Arrangements**





We
      have no off-balance sheet arrangements.


21


**ITEM7A.
      QUANTITIVATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





We
      are exposed to certain financial market risks, including changes in interest
      rates. All of our revenue, expenses and capital spending are transacted in
      U.S.
      dollars. Our exposure to market risk for changes in interest rates relates
      primarily to our cash and cash equivalent balances. The majority of our
      investments are in short-term instruments and subject to fluctuations in US
      interest rates. Due to the nature of our short-term investments, we believe
      that
      there is no material risk exposure.





**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





Attached
      hereto and filed as a part of this Annual Report on Form 10-K are our
      Consolidated Financial Statements, beginning on page F-1.





**ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





None.





**ITEM
      9A(T). CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**





Our
      management, with the participation of our Chief Executive Officer and Interim
      Chief Financial Officer, have evaluated the effectiveness of our disclosure
      controls and procedures (as such term is defined in Rules 13a-15(e) and
      15d-15(e) under the Exchange Act) as of the end of the period covered by this
      report. Based on that evaluation, our Chief Executive Officer and Interim Chief
      Financial Officer have concluded that, as of the end of such period, our
      disclosure controls and procedures are effective to ensure that information
      required to be disclosed by us in the reports that we file or submit under
      the
      Exchange Act is (i) recorded, processed, summarized and reported, within the
      time periods specified in the SEC's rules and forms; and (ii) accumulated and
      communicated to management, including our Chief Executive Officer and Interim
      Chief Financial Officer, as appropriate to allow timely decisions regarding
      required disclosure.





**Management's
      Report on Internal Control over Financial Reporting**




Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting. Our internal control over financial reporting has been
      designed to provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external purposes
      in
      accordance with generally accepted accounting principles in the United States
      of
      America.




Our
      internal control over financial reporting includes policies and procedures
      that
      pertain to the maintenance of records that, in reasonable detail, accurately
      and
      fairly reflect transactions and dispositions of our assets; provide reasonable
      assurance that transactions are recorded as necessary to permit preparation
      of
      financial statements in accordance with accounting principles generally accepted
      in the United States of America, that receipts and expenditures are being made
      only in accordance with authorization of our management and directors; and
      provide reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a
      material effect on our financial statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Therefore, even those systems determined to
      be
      effective can provide only reasonable assurance with respect to financial
      statement preparation and presentation. Projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




Management
      assessed the effectiveness of our internal control over financial reporting
      at
      August 31, 2008. In making this assessment, management used the criteria set
      forth by the Committee of Sponsoring Organizations of the Treadway Commission
      in Internal
      Control—Integrated Framework .
      Based
      on that assessment under those criteria, management has determined that, at
      August 31, 2008, our internal control over financial reporting was effective.




This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management's report was not subject
      to attestation by our registered public accounting firm pursuant to temporary
      rules of the SEC that permit us to provide only management's report in this
      annual report.




**Changes
      in Internal Control over Financial Reporting**




There
      have been no changes in our internal control over financial reporting (as such
      term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
      during the fourth quarter of fiscal year 2008 that have materially affected,
      or
      are reasonably likely to materially affect, our internal control over financial
      reporting.




22




**ITEM
      9B. OTHER INFORMATION**





The
      following disclosure would have otherwise been filed on Form 8-K under the
      heading “Item 5.02 - Departure of Directors or Certain Officers; Election of
      Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain
      Officers”





On
      September 22, 2008, the Board of Directors appointed Stephen Rochman to serve
      as
      our Interim Chief Financial Officer, effective immediately.





Mr.
      Rochman is the founder and sole owner of Revotech, an international contract
      manufacturing company based in Los Angeles, CA which he founded in September,
      2002. Since 2002, Mr. Rochman has also acted as a business consultant to
      numerous companies in manufacturing and other industries. From October 2000
      to
      November 2001, Mr. Rochman served as Director of Finance and Accounting for
      Digital Transit, a software development firm. Prior to that, from 1994 to 2000,
      Mr. Rochman served as Controller and then Director of Finance for Antex
      Electronics Corp., a digital audio hardware manufacturer. Mr. Rochman has over
      20 years experience in financial management, primarily in a manufacturing
      environment, in both public and private companies.  Mr. Rochman holds a
      B.A. degree in Economics from University of California, Irvine.





Revotech
      currently supplies us with certain components required in the production of
      our
      SheerVision products. To date, the value of purchases from Revotech has been
      immaterial.




23





**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH SECTION 16(A) OF THE EXCHANGE ACT**





**Directors,
      Executive Officers and Significant Employees**





Set
      forth below is certain information with respect to the individuals who are
      our
      directors, executive officers and significant employees.





**Name**
            **Age**
            **Position**Suzanne
                Lewsadder
            62
            Chief
                Executive Officer, Treasurer and DirectorJeffrey
                Lewsadder
            52
            President,
                Director and SecretaryStephen
                Rochman
            43
            Interim
                Chief Financial OfficerShemiran
                Hart
            50
            DirectorSharon
                Biddle
            56
            DirectorDavid
                Frankel
            60
            DirectorTerri
                Wiest
            61
            National
                Sales Director, Dental HygieneMartin
                Chaput
            40
            Online
                Marketing Manager





Suzanne
      Lewsadder has served as our Chief Executive Officer, Treasurer and a director
      since November 30, 2005. Ms. Lewsadder has also served as SheerVision-CA's
      Chief
      Executive Officer since co-founding the company in 1999. Ms. Lewsadder has
      over
      twenty-five years experience starting and building enterprises, with a focus
      on
      operational management and strategic business development. As our Chief
      Executive Officer, Ms. Lewsadder runs day-to-day operations, oversees strategic
      alliances and develops marketing strategies. Ms. Lewsadder holds a B.A. degree
      in Organization Communications, Cum Laude, from California State University.
      Suzanne Lewsadder is the wife of Jeffrey Lewsadder.





Jeffrey
      Lewsadder has served as our President, Secretary and a director since November
      30, 2005. Mr. Lewsadder has also served as SheerVision-CA's President since
      co-founding the company in 1999. Mr. Lewsadder is a veteran sales and marketing
      executive largely from the medical device industry. As our President, Mr.
      Lewsadder is responsible for the overall sales and marketing activities of
      the
      firm, including trade shows, as well as product development. He is credited
      with
      the design and development of our product line. Jeffrey Lewsadder is the husband
      of Suzanne Lewsadder.





Stephen
      Rochman has served as our Interim Chief Financial Officer since September 2008.
      Mr. Rochman is the founder and sole owner of Revotech, an international contract
      manufacturing company based in Los Angeles, CA which he founded in September,
      2002. Since 2002, Mr. Rochman has also acted as a business consultant to
      numerous companies in manufacturing and other industries. From October 2000
      to
      November 2001, Mr. Rochman served as Director of Finance and Accounting for
      Digital Transit, a software development firm. Prior to that, from 1994 to 2000,
      Mr. Rochman served as Controller and then Director of Finance for Antex
      Electronics Corp., a digital audio hardware manufacturer. Mr. Rochman has over
      20 years experience in financial management, primarily in a manufacturing
      environment, in both public and private companies.  Mr. Rochman holds a
      B.A. degree in Economics from University of California, Irvine.





Shemiran
      Hart has served as one of our directors since March 16, 2006. Ms. Hart is Vice
      President and General Manager of Veeco Slider Process Equipment of semiconductor
      manufacturer Veeco Instruments, Inc., where she has served in that capacity
      since July 2007.  Other positions held with Veeco include Division
      Controller and Senior Director of Operations since joining Veeco in 2005. 
Previously, Ms. Hart was Division Controller of Teradyne, Inc., an S&P 500
      corporation, from 1999 to 2005. She brings over fifteen years experience in
      public company financial management to her role as a member of our board. Ms.
      Hart holds a B.S. in Business Administration, Magna Cum Laude, from the
      University of Southern California.





Sharon
      Biddle has served as one of our directors since March 16, 2006. Ms. Biddle
      is
      President and Publisher of The Real Estate Book for San Luis Obispo County,
      California, where she has served in that capacity since 2000. She brings over
      twenty-five years experience in corporate marketing and public relations to
      her
      role as a member of our board. Previously, Ms. Biddle served as the Vice
      President of Marketing for Jazzercise, Inc. Ms. Biddle holds a B.A. in
      Journalism and Marketing from Long Beach State University.





David
      Frankel has served as one of our directors since March 16, 2006. Mr. Frankel
      is
      a CPA/ABV and a principal in the accounting firm of David Frankel, an
      accountancy corporation. Prior to July 1, 2006 Mr. Frankel was a partner for
      thirteen years in the accounting firm of Frankel and Kohn. He brings over
      twenty-five years experience in financial consulting to his role as a member
      of
      our board. Mr. Frankel has been a financial and tax consultant to SheerVision-CA
      since its inception in 1999 and briefly served as its interim CFO during 2005.
      Mr. Frankel holds a B.S. in Business Administration and is ABV
      accredited.




24




Terri
      Wiest has served as our National Sales Director, Dental Hygiene Division since
      July 2003. In this capacity, Ms. Wiest is responsible for the sales and
      marketing activities of the Dental Hygiene market, overseeing a dedicated sales
      force covering 280 schools, as well as dental meetings, in the U.S. &
Canada. Ms. Wiest was President of the Arizona State Dental Hygienists’
Association from 2003 to 2004. A licensed dental hygienist in Arizona and
      California, Ms. Wiest practiced clinical dental hygiene for over 20 years prior
      to joining us after completing her professional education at Phoenix
      College.





Martin
      Chaput has served as our Online Marketing Manager since June 2006. In this
      capacity, Mr. Chaput is responsible for the design and implementation of
      SheerVision’s online marketing programs, as well as the technology that supports
      these transactions. Prior to joining us, Mr. Chaput was Product Marketing
      Manager for Louis and Company from 2002 to 2006. Mr. Chaput holds an MBA in
      Marketing and IT Management/E-Commerce from the Merage School of Business,
      University of California, Irvine.





**Directors
      and Officers**





Each
      director is elected for a period of one year at our annual meeting of
      stockholders and serves until the next such meeting and until his or her
      successor is duly elected and qualified. The board of directors may also appoint
      additional directors up to the maximum number permitted by our By-Laws. A
      director so chosen or appointed will hold office until the next annual meeting
      of stockholders.





Each
      of our executive officers serves at the discretion of our board of directors
      and
      holds office until his or her successor is elected or until his or her earlier
      resignation or removal in accordance with our Second Amended and Restated
      Certificate of Incorporation and By-Laws.





**Meetings
      and Committees of the Board**





During
      the year ended August 31, 2008, our board of directors held one meeting and
      took
      actions by written consent on two occasions. ****





**Committees
      of the Board of Directors**





On
      April 21, 2006, we established an audit committee and a compensation committee,
      which are responsible, respectively, for the matters described
      below.





***Audit
      Committee***





The
      audit committee is responsible for the following:





·
            reviewing
                the results of the audit engagement with the independent
                auditors;





·
            identifying
                irregularities in the management of our business in consultation
                with our
                independent accountants, and suggesting appropriate courses of
                action;





·
            reviewing
                the adequacy, scope, and results of the internal accounting controls
                and
                procedures;





·
            reviewing
                the degree of independence of the auditors, as well as the nature
                and
                scope of our relationship with our independent
                auditors;





·
            reviewing
                the auditors' fees; and





·
            recommending
                the engagement of auditors to the full board of
                directors.





A
      charter has been adopted to govern the audit committee. The members of the
      audit
      committee are Sharon Biddle and Shemiran Hart. At the date hereof, each member
      is deemed an audit committee financial expert and is considered an independent
      director under Rule 4200(a)(15) of the Nasdaq Marketplace Rules, even though such
      definition does not currently apply to us because we are not listed on
      Nasdaq.





***Compensation
      Committee***





The
      compensation committee determines the salaries and incentive compensation of
      our
      officers and provides recommendations for the salaries and incentive
      compensation of our other employees and consultants. The members of the
      compensation committee are David Frankel and Sharon Biddle.




25




The
      compensation of our executive officers is generally determined by the
      compensation committee of the board of directors, subject to applicable
      employment agreements. Our compensation programs are intended to enable the
      attraction, motivation, reward, and retention of the management talent required
      to achieve corporate objectives and thereby increase stockholder value. Our
      policy has been to provide incentives to our senior management to achieve both
      short-term and long-term objectives and to reward exceptional performance and
      contributions to the development of our business. To achieve these objectives,
      the executive compensation program may include a competitive base salary, cash
      incentive bonuses, and stock-based compensation.





The
      compensation committee establishes, subject to the approval of our board of
      directors and any applicable employment agreements, the salaries that will
      be
      paid to our executive officers. In setting salaries, the compensation committee
      intends to take into account several factors, including the
      following:





·
            competitive
                compensation data;





·
            the
                extent to which an individual may participate in the stock plans
                which may
                be maintained by us; and





·
            qualitative
                factors bearing on an individual's experience, responsibilities,
                management and leadership abilities, and job
                performance.





***Nominating
      Committee***





Each
      member of our board of directors participates in the consideration of director
      nominees. Stockholders may submit in writing to our secretary at our address
      set
      forth elsewhere in this Annual Report on Form 10-K the names and five year
      backgrounds for the board of directors' consideration in its selection of
      nominees for directors. Currently, our share ownership is relatively
      concentrated in Suzanne Lewsadder and Jeffrey Lewsadder, our Chief Executive
      Officer and President, respectively; as such, it is improbable that any board
      nominee found to be unqualified or unacceptable by the majority stockholders
      could be selected as a member of the board of directors. Accordingly, there
      is
      no nominating committee and we do not rely on pre-approval policies and
      procedures for our nomination process. We intend to implement the necessary
      formation of a nominating committee and will establish proper policies and
      procedures upon such time as our share ownership is more
      diversified.




**Involvement
      in Certain Legal Proceedings**





None
      of our directors, executive officers, promoters or control persons have been
      involved in any of the following events during the past five years:





·
            any
                bankruptcy petition filed by or against any business of which such
                person
                was a general partner or executive officer either at the time of
                the
                bankruptcy or within two years prior to that
                time;





·
            any
                conviction in a criminal proceeding or being subject to a pending
                criminal
                proceeding (excluding traffic violations and other minor
                offences);





·
            being
                subject to any order, judgment, or decree, not subsequently reversed,
                suspended or vacated, of any court of competent jurisdiction, permanently
                or temporarily enjoining, barring, suspending or otherwise limiting
                his or
                her involvement in any type of business, securities or banking activities;
                or





·
            being
                found by a court of competent jurisdiction (in a civil action), the
                Commission or the Commodity Futures Trading Commission to have violated
                a
                federal or state securities or commodities law, and the judgment
                has not
                been reversed, suspended, or
                vacated.





**Code
      of Ethics**





We
      adopted a Code of Ethics that applies to our officers, employees and directors,
      including our principal executive officers, principal financial officers and
      principal accounting officers. The code of ethics sets forth written standards
      that are designed to deter wrongdoing and to promote:





·
            Honest
                and ethical conduct, including the ethical handling of actual or
                apparent
                conflicts of interest between personal and professional
                relationships;





·
            Full,
                fair, accurate, timely and understandable disclosure in reports and
                documents that we file with, or submit to, the SEC and in other public
                communications made by us;





·
            Compliance
                with applicable governmental laws, rules and
                regulations;





·
            The
                prompt internal reporting of violations of the code to an appropriate
                person or persons identified in the code of ethics;
                and





·
            Accountability
                for adherence to the code of
                ethics.




26




We
      will provide a copy of our Code of Ethics to any person without charge, upon
      request. Requests can be made to: SheerVision, Inc., 4030 Palos Verdes Drive
      North, Suite 104 Rolling Hills Estates, California 90274.





**Compliance
      with Section 16(a) of the Exchange Act**





Section
      16(a) of the Exchange Act requires our directors and officers, and persons
      who
      own more than 10% of a registered class of our equity securities, to file
      reports of ownership and changes in ownership with the SEC. Officers, directors
      and greater than 10% stockholders are required by SEC regulation to furnish
      us
      with copies of all the Section 16(a) forms they file.




Based
      solely upon a review of Forms 3, 4 and 5 furnished to us, we are not aware
      of
      any person who, at any time during the fiscal year ended August 31, 2008, was
      a
      director, officer, or beneficial owner of more than 10% of our common stock
      and
      who failed to file on a timely basis reports required by Section 16(a) of the
      Securities Exchange Act of 1934 during such fiscal year.





**ITEM
      11.**  **EXECUTIVE
      COMPENSATION**




The following table sets forth the compensation earned during the years ended August 31 ,
      2008 and 2007 by our Chief Executive Officer, President and Chief Financial
      Officer and our two most highly compensated non-executive officers. We refer
      to
      such individuals as “named executive officers”:


**Name
                  and**
                **Principal
                  Position**
              
              **Year**
                **(1)**
              
              **Salary**
                **($)**
              
              **Bonus**
                **($)**
              
              **Stock
                  Awards**
                **($)**
              
              **Option
                  Awards**
                **($)(2)**
              
              **Non-Equity**
                **Incentive
                  Plan Compensation**
                **($)**
              
              **Non-qualified**
                **Deferred
                  Compensation**
                **($)**
              
              **All
                  Other**
                **Compensation**
                **($)
                  (3)**
              
              **Total**
                **($)**Suzanne
                  Lewsadder
              
              
              2008
              
              
              112,500
              
              
              27,686
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              28,028
              
              
              168,214Chairman
                  and Chief
                Executive
                  Officer
              
              
              2007
              
              
              112,500
              
              
              44,073
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              26,091
              
              
              182,664Jeffrey
                  Lewsadder
              
              
              2008
              
              
              112,500
              
              
              20,750
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              26,330
              
              
              159,580President
                  and Secretary
              
              
              2007
              
              
              112,500
              
              
              27,443
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              26,568
              
              
              166,511Suzanne
                  Puente
              
              
              2008
              
              
              100,008
              
              
              10,000
              
              
              --
              
              
              23,601
              
              
              --
              
              
              --
              
              
              18,174
              
              
              151,783Chief
                  Financial Officer(4)
              
              
              2007
              
              
              100,008
              
              
              40,000
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              16,511
              
              
              156,519Terri
                  Wiest
              
              
              2008
              
              
              107,733(5
              )
              
              --
              
              
              --
              
              
              15,734
              
              
              --
              
              
              --
              
              
              8,503
              
              
              131,970National
                  Sales Director,
                Dental
                  Hygiene Division
              
              
              2007
              
              
              115,228(6
              )
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              6,660
              
              
              121,888Martin
                  Chaput
              
              
              2008
              
              
              80,000
              
              
              --
              
              
              --
              
              
              7,867
              
              
              --
              
              
              --
              
              
              12,276
              
              
              100,143Online
                  Marketing Manager
              
              
              2007
              
              
              80,000
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              12,026
              
              
              92,026


**________________**


(1)
            The
                information is provided for each fiscal year referenced beginning
                September 1 and ending August 31.(2)
            The
                amounts reflect the compensation expense in accordance with FAS 123(R)
                of
                these option awards. The assumptions used to determine the fair value
                of
                the option awards for fiscal year ended August 31, 2008 are set forth
                in
                Note 12 of our audited consolidated financial statements included
                in our
                Form 10-K for fiscal year ended August 31, 2008. Our named executive
                officers will not realize the value of these awards in cash unless
                and
                until these awards are exercised and the underlying shares subsequently
                sold.(3)
            See
                “All Other Compensation” table below.(4)
            Ms.
                Puente resigned as Chief Financial Officer, effective August 31,
                2008.(5)
            Includes
                $44,400 in commission.(6)
            Includes
                $55,228 in commission.




27


**All
      Other Compensation**





All
      Other Compensation amounts in the Summary Compensation Table consist of the
      following:




**Name**
              
              **Year**
              
              **Automobile**
                **Related
                  Expenses**
                **($)**
              
              **Medical**
                **Related
                  Expenses**
                **($)**
              
              **Insurance**
                **Premium**
                **($)**
              
              **Total**
                **($)**Suzanne
              
              
              2008
              
              
              11,043
              
              
              16,082
              
              
              902
              
              
              28,058Lewsadder
              
              
              2007
              
              
              11,253
              
              
              13,936
              
              
              902
              
              
              26,091Jeffrey
              
              
              2008
              
              
              11,312
              
              
              14,447
              
              
              570
              
              
              26,330Lewsadder
              
              
              2007
              
              
              11,108
              
              
              14,890
              
              
              570
              
              
              26,568Suzanne
              
              
              2008
              
              
              --
              
              
              17,832
              
              
              342
              
              
              18,174Puente
              
              
              2007
              
              
              --
              
              
              16,311
              
              
              200
              
              
              16,511Terri
              
              
              2008
              
              
              --
              
              
              7,957
              
              
              546
              
              
              8,503Wiest
              
              
              2007
              
              
              --
              
              
              6,401
              
              
              259
              
              
              6,660Martin
              
              
              2008
              
              
              --
              
              
              12,216
              
              
              60
              
              
              12,276Chaput
              
              
              2007
              
              
              --
              
              
              11,991
              
              
              35
              
              
              12,026






28


**Outstanding
      Equity Awards at Fiscal Year-End**





The
      following table sets forth information concerning stock options and stock awards
      held by the named executive officers as of August 31, 2008.


Option
                  Awards
              
              Stock
                  AwardsName
              
              Number
                  of Securities Underlying Unexercised
                Options
                (#)
                Exercisable
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Unexercisable
              
              Equity
                  Incentive Plan Awards Number of Securities Underlying
                  Unexercised
                Unearned
                  Options
                (#)
              
              Option
                  Exercise
                Price
                ($)
              
              Option
                  Expiration Date
              
              Number
                  of Shares or Units of Stock Held That Have Not Vested
                (#)
              
              Market
                  Value of Shares or Units of Stock Held
                That
                  Have
                Not
                  Vested
                ($)
              
              Equity
                  Incentive Plan Awards: Number of Unearned
                Shares,
                  Units or Other Rights That Have Not
                Vested
                  (#)
              
              Equity
                  Incentive Plan Awards: Market
                or
                Payout
                  Value of Unearned Shares, Units or Other Rights
                That
                Have
                  Not Vested ($)Suzanne
                Lewsadder,
                  CEO
                and
                  Treasurer
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Jeffrey
                  LewsadderPresident
                  and
                Secretary
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Suzanne
                  PuenteChief
                  Financial
                Officer(1)
              
              
              75,000(2
              )
              
              —
              
              
              —
              
              
              0.20
              
              
              11/29/08
              
              
              —
              
              
              —
              
              
              —
              
              
              —Terri
                  Wiest;
                National
                  Sales
                Director,
                Dental
                  Hygiene
                Division
              
              
              50,000(2
              )
              
              
              
              
              50,000(3
              )
              
              0.20
              
              
              03/20/18
              
              
              —
              
              
              —
              
              
              —
              
              
              —Martin
                  Chaput
                Online
                  Marketing
                Manager
              
              
              25,000(2
              )
              
              
              
              
              25,000(3
              )
              
              0.20
              
              
              03/20/18
              
              
              —
              
              
              —
              
              
              —
              
              
              —





(1)
            Referenced
                individual resigned as Chief Financial Officer effective August 31,
                2008.
                On such date 75,000 unvested options expired.(2)
            These
                options were granted under our 2007 Stock Option Plan and vested
                on March
                20, 2008.(3)
            These
                options were granted under our 2007 Stock Option Plan and vest on
                December
                31, 2008.




**Employment
      Agreements**





Currently,
      we do not maintain employment agreements with our executive officers. We intend
      to enter into an employment agreement with each executive officer prior to
      December 31, 2008. We anticipate that these agreements will contain provisions
      which will be comparable to those of similarly situated companies in our
      industry with respect to confidentiality, non-competition and assignment of
      intellectual property.





**Stock
      Option Plans**





***2007
      Stock Option Plan***




On
      January 25, 2007, our board of directors adopted, and on the same date, holders
      of a majority of the voting power of the outstanding shares of our capital
      stock
      approved, our 2007 Stock Option Plan (the “ *Plan* ”).
      The Plan authorizes the grant of options and stock purchase rights with respect
      to up to an aggregate of 3,000,000 shares of our common stock to our or our
      subsidiaries’ employees and directors and individuals, including consultants,
      performing services for us or our subsidiaries. As of August 31, 2008, 511,000
      options are outstanding under the Plan.





***2007
      Stock Option Plan for Independent and Non-Employee
      Directors***




On
      January 25, 2007, our board of directors adopted, and on the same date, holders
      of a majority of the voting power of the outstanding shares of our capital
      stock
      approved, the 2007 Stock Option Plan for Independent and Non-Employee Directors
      (the “ *Directors
      Plan* ”)
      for the purpose of promoting our interests and those of our stockholders by
      increasing the proprietary and vested interest of such directors in our growth
      and performance. The Directors Plan authorizes the grant of options with respect
      to up to an aggregate of 200,000 shares of our common stock. As of August 31,
      2008, no options are outstanding under the Directors
      Plan.




29




The
      Directors Plan provides that each newly elected independent or non-employee
      director upon first election or appointment to the board will receive options
      to
      purchase 2,000 shares of our common stock and, immediately following each annual
      meeting of stockholders, each such director who has served in such capacity
      for
      more than twelve months preceding such meeting will receive an option to
      purchase an additional 3,000 shares of our common stock.




**Compensation
      of Directors**





During
      the fiscal year ended August 31, 2008, directors received no compensation for
      their services as directors. Pursuant to our By-Laws, directors may receive
      such
      compensation for their services and such reimbursement of expenses for attending
      meetings as our board of directors may determine from time to time. Pursuant
      to
      our 2007 Stock Option Plan for Independent and Non-Employee Directors, our
      independent directors are entitled to a grant of options to purchase our common
      stock. See “ *Executive
      Compensation - Stock Option Plans”* above.








**ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**





The
      following table sets forth, as of October 31, 2008 the beneficial ownership
      of
      (i) each person known by us to beneficially own five percent (5%) or more of
      the
      outstanding shares; (ii) our named executive officers; and (iii) our officers
      and directors as a group.





As
      used in the table below and elsewhere in this Annual Report on Form 10-K, the
      term “beneficial ownership” with respect to a security consists of sole or
      shared voting power, including the power to vote or direct the vote and/or
      sole
      or shared investment power, including the power to dispose or direct the
      disposition, with respect to the security through any contract, arrangement,
      understanding, relationship, or otherwise, including a right to acquire such
      power(s) during the next 60 days following the date hereof. Except as otherwise
      indicated, the stockholders listed in the table have sole voting and investment
      powers with respect to the shares indicated. The table below is based on
      12,735,190 shares of our common stock issued and outstanding as of October
      31,
      2008.





Except
      as otherwise noted, the address of the referenced individual is c/o SheerVision,
      Inc., 4030 Palos Verdes Drive North, Suite 104, Rolling Hills, California
      90274.




**Name
                  and Address of**
                **Beneficial
                  Owner**
              **Shares
                  of Common**
                **Stock
                  Beneficially**
                **Owned**
              **Percentage
                  of Class**
                **Beneficially
                  Owned**Suzanne
                  Lewsadder(1)(2)
              9,219,137(3)
              72.4%Jeffrey
                  Lewsadder(1)(2)
              9,219,137(3)
              72.4%Shemiran
                  Hart(1)
              0
              0%Sharon
                  Biddle(1)
              31,041(4)
              *%David
                  Frankel(1)
              31,041(4)
              *%Stephen
                  Rochman(2)
              0
              0%Terri
                  Wiest
              50,000(5)
              *%Martin
                  Chaput
              25,000(5)
              *%All
                  Current Executive Officers and
                Directors
                  as a Group (6 persons)
              9,281,219(6)
              72.7%


*
              Less
                  than one percent(1)
              Indicates
                  Director.(2)
              Indicates
                  Officer.(3)
              In
                  the case of Suzanne Lewsadder, includes the shares of common stock
                  beneficially owned by Jeffrey Lewsadder. In the case of Jeffrey
                  Lewsadder,
                  includes the shares of common stock beneficially owned by Suzanne
                  Lewsadder.(4)
              Includes
                  20,833 shares of common stock issuable upon the conversion of Series
                  A
                  Preferred Stock and 1,875 shares of common stock issuable upon
                  exercise of
                  warrants within 60 days following October 31, 2008.(5)
              Represents
                  shares of common stock issuable upon exercise of options within
                  60 days
                  following October 31, 2008.(6)
              Includes
                  41,666 shares of common stock issuable upon the conversion of Series
                  A
                  Preferred Stock and 3,750 shares of common stock issuable upon
                  exercise of
                  warrants within 60 days following October 31,
                  2008.




30


**Equity
      Compensation Plan Information**





The
      following table sets forth information with respect to our 2007 Stock Option
      Plan and our 2007 Stock Option Plan for Independent and Non-Employee Directors
      as of August 31, 2008:




**Plan
                  Category**
              **Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights**
                **(a)**
              **Weight-average
                  exercise price**
                **of
                  outstanding options,**
                **warrants
                  and rights**
                **(b)**
              **Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in column
                  (a))**
                **(c)**Equity
                compensation
                  plans
                approved
                  by
                security
                  holders
              511,000(1)
              $0.20
              2,689,000(2)Equity
                compensation
                  plans
                not
                  approved by
                security
                  holders
              --
              --
              --Total
              511,000(1)
              $0.20
              2,689,000(2)




___________





(1)
            Represents
                shares of our common stock issuable upon exercise of outstanding
                options
                under our 2007 Stock Option Plan.





(2)
            Represents
                up to 2,489,000 shares of our common stock authorized for issuance
                under
                our 2007 Stock Option Plan and up to 200,000 shares of our common
                stock
                authorized for issuance under our 2007 Stock Option Plan for Independent
                and Non-Employee Directors.








**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





Our
      policy is to enter into transactions with related parties on terms that, on
      the
      whole, are more favorable, or no less favorable, than those available from
      unaffiliated third parties. Based on our experience in the business sectors
      in
      which we operate and the terms of our transactions with unaffiliated third
      parties, we believe that all of the transactions described below met this policy
      standard at the time they occurred.





Except
      as otherwise indicated below, we have not been a party to any transaction,
      proposed transaction, or series of transactions required to be disclosed
      pursuant to Item 404 of Regulation S-K.





On
      April
      18, 2007, we entered into a consulting agreement for investor and public
      relations services. In consideration for the consultant's
      services, he was entitled to $5,000 per month for the twelve-month
      term of the agreement, unless terminated sooner. In addition, Suzanne Lewsadder
      and Jeffery Lewsadder, our Chief Executive Officer and President, respectively,
      and beneficial holders of a majority of our outstanding common stock transferred
      an aggregate of 306,000 shares of our common stock to the
      consultant.




On
      September 22, 2008, Stephen Rochman was appointed as our Interim Chief Financial
      Officer. Mr. Rochman is the founder of Revotech, a contract manufacturer that
      supplies us with certain components of our SheerVision products. To date, the
      value of purchases from Revotech has been immaterial.




During
        the year ended 2008, consulting service fees in the amount of $4,000 were
        paid
        to an individual who is a relative of a major shareholder, officer and director
        of the Company. This individual provides consulting services in connection
        with
        online marketing strategies and planning.


**ITEM
      14: PRINCIPAL ACCOUNTANT FEES AND SERVICES**




As
      of August 31, 2008, aggregate fees billed to us by our independent registered
      public accounting firm Miller Ellin & Company LLP are as
      follows:





**Summary:**
            
            **2008**
            
            **2007**Audit
                fees
            
            $
            83,152
            
            $
            87,401Audit
                related fees
            
            
            -
            
            
            -Tax
                fees(1)
            
            
            -
            
            
            38,943Other
                fees
            
            
            -
            
            
            -


_________


(1)
      Amount represents fees for preparation of our tax returns.





31





**ITEM
      15. EXHIBITS AND INDEX OF EXHIBITS**





The
      Exhibits below are included as part of this Annual Report on Form
      10-K.





**Exhibit
                No.**
            
            **Description**2.1
            
            Acquisition
                of Escalator, Inc. (incorporated by reference to Exhibit 2.1 to Current
                Report on Form 10-SB of SheerVision, Inc., a Delaware corporation
                (formerly Clean Water Technologies, Inc.), filed with the Securities
                and
                Exchange Commission on October 13, 1999).2.2
            
            Lone
                Pine Resources, Inc. Merger (incorporated by reference to Exhibit
                2.2 to
                Current Report on Form 10-SB of SheerVision, Inc., a Delaware corporation
                (formerly Clean Water Technologies, Inc.), filed with the Securities
                and
                Exchange Commission on October 13, 1999).2.3
            
            Agreement
                and Plan of Spinoff (incorporated by reference to Exhibit 2.3 to
                Current
                Report on Form 10-SB of SheerVision, Inc., a Delaware corporation
                (formerly Clean Water Technologies, Inc.), filed with the Securities
                and
                Exchange Commission on October 13, 1999).2.4
            
            Acquisition
                of Clean Water Technologies, Inc. (incorporated by reference to Exhibit
                2.4 to Current Report on Form 10-SB of SheerVision, Inc., a Delaware
                corporation (formerly Clean Water Technologies, Inc.), filed with
                the
                Securities and Exchange Commission on October 13,
                1999).2.5
            
            Acquisition
                of Zorax, Inc. (incorporated by reference to Exhibit 2.5 to Current
                Report
                on Form 10KSB of SheerVision, Inc., a Delaware corporation (formerly
                Clean
                Water Technologies, Inc.), filed with the Securities and Exchange
                Commission on August 16, 2001).3.1
            
            Second
                Amended and Restated Certificate of Incorporation of SheerVision,
                Inc.
                (incorporated by reference to Exhibit 3.1 to Current Report on Form
                8-K of
                SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                June 20, 2006).3.2
            
            By-laws
                of SheerVision, Inc., a Delaware corporation (incorporated by reference
                to
                Exhibit 3.2 to Current Report on Form 10-QSB of SheerVision, Inc.,
                a
                Delaware corporation), filed with the Securities and Exchange Commission
                on October 13, 1999).3.3
            
            Form
                of Common Stock Certificate (incorporated by reference to Exhibit
                3.3 to
                Current Report on Form SB-2A of SheerVision Inc., a Delaware corporation,
                filed with the Securities and Exchange Commission on September 29,
                2006).3.4
            
            Articles
                of Incorporation of SheerVision, Inc., a California corporation
                (incorporated by reference to Exhibit 3.3 to Current Report on Form
                8-K/A
                of SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                March 28, 2006).3.5
            
            Certificate
                of Amendment of Articles of Incorporation of SheerVision, Inc., a
                California corporation (incorporated by reference to Exhibit 3.4
                to
                Current Report on Form 8-K/A of SheerVision, Inc., a Delaware corporation
                (formerly Clean Water Technologies, Inc.), filed with the Securities
                and
                Exchange Commission on March 28, 2006).3.6
            
            By-laws
                of SheerVision, Inc., a California corporation (incorporated by reference
                to Exhibit 3.5 to Current Report on Form 8-K/A of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on March 28,
                2006).3.7
            
            Form
                of Certificate of Designations, Preferences, Rights, and Limitations
                of Series A Cumulative Convertible Preferred Stock as filed with the
                Secretary of State of Delaware (incorporated by reference to Exhibit
                3.1
                to Current Report on Form 8-K of SheerVision, Inc., a Delaware corporation
                (formerly Clean Water Technologies, Inc.), filed with the Securities
                and
                Exchange Commission on May 11, 2006)4.1
            
            Warrant,
                issued to Patricia Hall (Hallmark Capital), dated as of September
                28, 2005
                (incorporated by reference to Exhibit 4.1 to Current Report on Form
                8-K/A
                of SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                March 28, 2006).




32




4.2
            
            Warrant,
                issued to Northeast Securities, dated as of September 19, 2005, in
                connection with the 2005 Private Placement (incorporated by reference
                to
                Exhibit 4.2 to Current Report on Form 8-K/A of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on March 28,
                2006).4.3
            
            Form
                of Warrant issued to investors in the 2005 Private Placement (incorporated
                by reference to Exhibit 4.3 to Current Report on Form 8-K/A of
                SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                March 28, 2006).4.4
            
            Form
                of 12% Secured Promissory Note issued to investors in the 2005 Private
                Placement (incorporated by reference to Exhibit 10.15 to Current
                Report on
                Form 8-K/A of SheerVision, Inc., a Delaware corporation (formerly
                Clean
                Water Technologies, Inc.), filed with the Securities and Exchange
                Commission on March 28, 2006).4.5
            
            Form
                of Warrant issued to investors in the 2006 Private Placement (incorporated
                by reference to Exhibit 4.1 to Current Report on Form 8-K of SheerVision,
                Inc., a Delaware corporation (formerly Clean Water Technologies,
                Inc.),
                filed with the Securities and Exchange Commission on May 11,
                2006).4.6
            
            Form
                of Warrant, issued to Northeast Securities, dated as of April ____,
                2006,
                in connection with the 2006 Private Placement (incorporated by reference
                to Exhibit 4.2 to Current Report on Form 8-K of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on May 11,
                2006).4.7
            
            Form
                of 9% Convertible Promissory Note issued to investors in the 2006
                Private
                Placement (incorporated by reference to Exhibit 10.2 to Current Report
                on
                Form 8-K of SheerVision, Inc., a Delaware corporation (formerly Clean
                Water Technologies, Inc.), filed with the Securities and Exchange
                Commission on May 11, 2006).10.1
            
            Sublicense
                Agreement, effective as of October 22, 1999, between SheerVision,
                Inc., a
                Delaware corporation (formerly Clean Water Technologies, Inc.), and
                GSA
                Resources, Inc., an Arizona corporation (incorporated by reference
                to
                Exhibit 10 to Current Report on Form 10KSB of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on September 26,
                2000).10.2
            
            Securities
                Purchase Agreement, dated as of November 30, 2005, among SheerVision,
                Inc., a California corporation, Laurie C. Scala and Howard A. Scala,
                and
                SheerVision, Inc., a Delaware corporation (formerly, Clean Water
                Technologies, Inc.) (Schedules intentionally omitted) (incorporated
                by
                reference to Exhibit 10.1 to Current Report on Form 8-K of SheerVision,
                Inc., a Delaware corporation (formerly Clean Water Technologies,
                Inc.),
                filed with the Securities and Exchange Commission on December 7,
                2005).10.3
            
            License
                Assignment Agreement, dated March 16, 2006, by and between SheerVision,
                Inc., a Delaware corporation (formerly, Clean Water Technologies,
                Inc.)
                and Water Technology Partners LLC, a Florida limited liability company
                (incorporated by reference to Exhibit 10.1 to Current Report on Form
                8-K
                of SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                March 22, 2006).10.4
            
            Sublicense
                Assignment Agreement, dated March 16, 2006, by and between SheerVision,
                Inc., a Delaware corporation (formerly, Clean Water Technologies,
                Inc.)
                and Water Technology Partners LLC, a Florida limited liability company
                (incorporated by reference to Exhibit 10.2 to Current Report on Form
                8-K
                of SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                March 22, 2006).10.5
            
            Commercial
                Real Estate Lease, by and among Academy Center LLC and Suzanne Lewsadder
                (d/b/a SheerVision, Inc.), dated as of August 26, 2005 (incorporated
                by
                reference to Exhibit 10.2 to Current Report on Form 8-K/A of SheerVision,
                Inc., a Delaware corporation (formerly Clean Water Technologies,
                Inc.),
                filed with the Securities and Exchange Commission on April 5,
                2006).10.6
            
            Letter
                of Engagement with Northeast Securities, dated as of August 3, 2005
                (incorporated by reference to Exhibit 10.3 to Current Report on Form
                8-K/A
                of SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                March 28, 2006).10.7
            
            Confidentiality
                and Non-Disclosure Agreement, dated as of August 3, 2005, between
                SheerVision, Inc., a California corporation, and Northeastern Securities
                (incorporated by reference to Exhibit 10.4 to Current Report on Form
                8-K
                of SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                March 28, 2006).




33




10.8
            
            Letter
                of Engagement, dated as of December 14, 2004, between SheerVision,
                Inc., a
                California corporation, and Hallmark Capital Corp. (incorporated
                by
                reference to Exhibit 10.5 to Current Report on Form 8-K/A of SheerVision,
                Inc., a Delaware corporation (formerly Clean Water Technologies,
                Inc.),
                filed with the Securities and Exchange Commission on March 28,
                2006).10.9
            
            Letter
                of Engagement, dated as of October 1, 2005, between SheerVision,
                Inc., a
                California corporation, and Hallmark Capital Corp. (incorporated
                by
                reference to Exhibit 10.6 to Current Report on Form 8-K/A of SheerVision,
                Inc., a Delaware corporation (formerly Clean Water Technologies,
                Inc.),
                filed with the Securities and Exchange Commission on March 28,
                2006).10.10
            
            Letter
                Agreement, dated as of November 14, 2005, between SheerVision, Inc.,
                a
                California corporation, and Javier Schmidt & Kalma, S.A, and addendum
                (incorporated by reference to Exhibit 10.7 to Current Report on Form
                8-K/A
                of SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                March 28, 2006).10.11
            
            Promissory
                Note, dated as of December 7, 2005, issued by SheerVision, Inc. in
                favor
                of Vineyard Bank, in the principal amount of $300,000 (incorporated
                by
                reference to Exhibit 10.8 to Current Report on Form 8-K/A of SheerVision,
                Inc., a Delaware corporation (formerly Clean Water Technologies,
                Inc.),
                filed with the Securities and Exchange Commission on March 28,
                2006).10.12
            
            Commercial
                Security Agreement, dated as of December 7, 2005, between SheerVision,
                Inc., a California corporation, and Vineyard Bank (incorporated by
                reference to Exhibit 10.9 to Current Report on Form 8-K/A of SheerVision,
                Inc., a Delaware corporation (formerly Clean Water Technologies,
                Inc.),
                filed with the Securities and Exchange Commission on March 28,
                2006).10.13
            
            Business
                Loan Agreement, dated as of December 7, 2005, between SheerVision,
                Inc., a
                California corporation, and Vineyard Bank (incorporated by reference
                to
                Exhibit 10.10 to Current Report on Form 8-K/A of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on March 28,
                2006).10.14
            
            Agreement
                to Provide Insurance, dated as of December 7, 2005, between SheerVision,
                Inc., a California corporation, and Vineyard Bank (incorporated by
                reference to Exhibit 10.11 to Current Report on Form 8-K/A of SheerVision,
                Inc., a Delaware corporation (formerly Clean Water Technologies,
                Inc.),
                filed with the Securities and Exchange Commission on March 28,
                2006).10.15
            
            Commercial
                Guaranty, dated as of December 7, 2005, by Suzanne Lewsadder, on
                behalf of
                SheerVision, Inc., a California corporation (incorporated by reference
                to
                Exhibit 10.12 to Current Report on Form 8-K/A of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on March 28,
                2006).10.16
            
            Commercial
                Guaranty, dated as of December 7, 2005, by Jeffrey Lewsadder, on
                behalf of
                SheerVision, Inc., a California corporation (incorporated by reference
                to
                Exhibit 10.13 to Current Report on Form 8-K/A of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on March 28,
                2006).10.17
            
            Change
                in Terms Agreement, dated as of January 5, 2006, between SheerVision,
                Inc., a California corporation, and Vineyard Bank and accompanying
                Disbursement Request and Authorization for the Variable Rate
                Nondisclosable Revolving Line of Credit (incorporated by reference
                to
                Exhibit 10.14 to Current Report on Form 8-K of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on March 28,
                2006).10.18
            
            Form
                of Intercreditor Agreement, dated as of September 13, 2005, with
                SheerVision, Inc., a California corporation (incorporated by reference
                to
                Exhibit 10.17 to Current Report on Form 8-K/A of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on March 28,
                2006).10.19
            
            Letter
                Agreement, dated as of April 6, 2003, and Addendum, dated as of April
                5,
                2003 (filed in redacted form pursuant to a confidential treatment
                request)
                (incorporated by reference to Exhibit 10.19 to Current Report on
                Form 8-K
                of SheerVision, Inc., a Delaware corporation (formerly Clean Water
                Technologies, Inc.), filed with the Securities and Exchange Commission
                on
                April 5, 2006).10.20
            
            Consulting
                Agreement, dated as of February 15, 2005, and Addendum, dated as
                of March
                6, 2005 (filed in redacted form pursuant to a confidential treatment
                request) (incorporated by reference to Exhibit 10.20 to Current Report
                on
                Form 8-K of SheerVision, Inc., a Delaware corporation (formerly Clean
                Water Technologies, Inc.), filed with the Securities and Exchange
                Commission on April 5, 2006).




34




10.21
            
            Supply
                and License Agreement, dated as of April 7, 2003 (filed in redacted
                form
                pursuant to a confidential treatment request) (incorporated by reference
                to Exhibit 10.21 to Current Report on Form 8-K of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on April 5,
                2006).10.22
            
            Form
                of Engagement Letter, dated April 11, 2006, between Northeast Securities
                and Clean Water Technologies, Inc. (incorporated by reference to
                Exhibit
                10.3 to Current Report on Form 8-K of SheerVision, Inc., a Delaware
                corporation (formerly Clean Water Technologies, Inc.), filed with
                the
                Securities and Exchange Commission on May 11, 2006).10.23
            
            Form
                of Side Letter, dated as of April 20, 2006, between Northeast Securities
                and Clean Water Technologies, Inc. (incorporated by reference to
                Exhibit
                10.4 to Current Report on Form 8-K of SheerVision, Inc., a Delaware
                corporation (formerly Clean Water Technologies, Inc.), filed with
                the
                Securities and Exchange Commission on May 11, 2006).10.24
            
            Form
                of Registration Rights Letter delivered by Clean Water Technologies,
                Inc.
                in connection with the 2006 Private Placement (incorporated by reference
                to Exhibit 10.5 to Current Report on Form 8-K of SheerVision, Inc.,
                a
                Delaware corporation (formerly Clean Water Technologies, Inc.), filed
                with
                the Securities and Exchange Commission on May 11,
                2006).10.25
            
            Form
                of Registration Rights Letter delivered by Clean Water Technologies,
                Inc.
                in connection with the 2005 Private Placement (incorporated by reference
                to Exhibit 10.25 to Form SB-2/A of SheerVision, Inc., a Delaware
                corporation (formerly Clean Water Technologies, Inc.), filed with
                the
                Securities and Exchange Commission on September 22,
                2006).10.26
            
            2007
                Stock Option Plan (incorporated by reference to Exhibit A to the
                Information Statement pursuant to Section 14C of the Securities and
                Exchange Act of 1934 on Form Def-14C filed with the Securities and
                Exchange Commission on March 13, 2007).10.27
            
            2007
                Stock Option Plan for Independent and Non-Employee Directors (incorporated
                by reference to Exhibit B to the Information Statement pursuant to
                Section
                14C of the Securities and Exchange Act of 1934 on Form Def-14C filed
                with
                the Securities and Exchange Commission on March 13,
                2007).10.28
            
            Investor
                and Public Relations Consulting Agreement dated April 18, 2007 between
                SheerVision, Inc, a Delaware corporation and Mark Taggatz (incorporated
                by
                reference to Exhibit 10.1 to Current Report on Form 8K of SheerVision,
                Inc. filed with the Securities and Exchange Commission on April 24,
                2007).10.29
            
            Form
                of Settlement and Release Agreement dated as of January 4, 2008 between
                General Scientific Corporation, SheerVision, Inc. and Asia Sourcing
                Corporation(incorporated
                by reference to Exhibit 10.1 to Current Report on Form 8K of SheerVision,
                Inc. filed with the Securities and Exchange Commission on January
                18,
                2008).10.30
            
            Form
                of Loan Agreement dated March 19, 2008(incorporated
                by reference to Exhibit 10.1 to Current Report on Form 8K of SheerVision,
                Inc. filed with the Securities and Exchange Commission on March 19,
                2008).14.1
            
            Code
                of Business Conduct and Ethics (incorporated by reference to Exhibit
                14.1
                to Current Report on Form 8-K/A of SheerVision, Inc., a Delaware
                corporation (formerly Clean Water Technologies, Inc.), filed with
                the
                Securities and Exchange Commission on March 28, 2006).21.1
            
            Subsidiaries
                of SheerVision, Inc.*31.1
            
            Certification
                of Principal Executive Officer required by Rule 13a-14(a) or Rule
                15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.*31.2
            
            Certification
                of Principal Financial Officer required by Rule 13a-14(a) or Rule
                15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*


__________________


*
            Filed
            herewith


35





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




Dated:
                November 21, 2008SHEERVISION
                INC.By:
            /s/
                Suzanne LewsadderSuzanne
                LewsadderChief
                Executive Officer







Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of registrant and in the
      capacities and on the dates indicated.





Title
            Date/s/
                Suzanne Lewsadder
            
            Chief
                Executive Officer
            November
                21, 2008Suzanne
                Lewsadder
            
            and
                Director(Principal
                Executive Officer)/s/
                Steve Rochman
            
            Interim
                Chief Financial Officer
            November
                21, 2008Stephen
                Rochman
            
            (Principal
                Financial andAccounting
                Officer)/s/
                Jeffrey Lewsadder
            
            Director
            November
                21, 2008Jeffrey
                Lewsadder/s/
                Shemiran Hart
            
            Director
            November
                21, 2008Shemiran
                Hart/s/
                Sharon Biddle
            
            Director
            November
                21, 2008Sharon
                Biddle/s/
                David Frankel
            
            Director
            November
                21, 2008David
                Frankel


36




**SHEERVISION,
      INC. AND SUBSIDIARY**


**FINANCIAL
      STATEMENTS**


**FOR
      THE YEARS ENDED AUGUST 31, 2008 AND 2007**





**TABLE
      OF CONTENTS**




**Page**Report
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                Balance Sheets - August 31, 2008 and 2007
            F-3Consolidated
                Statements of Operations Years Ended August 31, 2008 and
                2007
            F-4Consolidated
                Statements of Cash Flows Years Ended August 31, 2008 and
                2007
            F-5Consolidated
                Statements of Changes in Stockholders’ Equity (Deficiency) Years Ended
                August 31, 2008 and 2007
            F-6Notes
                to Consolidated Financial Statements
            F-7







F-1


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





Board
      of Directors and Shareholders,


SheerVision,
      Inc. and Subsidiary





We
      have audited the accompanying consolidated balance sheet of SheerVision,
      Inc. (the “Company”) and Subsidiary, as of August 31, 2008 and 2007, and the
      related consolidated statements of operations, stockholders’ equity
      (deficiency), and cash flows for the years then ended. These
      consolidated financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform an audit of its internal controls over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purposes of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall financial statement presentation.
      We believe that our audits provide a reasonable basis for our
      opinion.





In
      our opinion, the consolidated financial statements referred to above
      present fairly, in all material respects, the consolidated financial
      position of SheerVision, Inc. as of August 31, 2008 and 2007 and the
      consolidated results of its operations and its cash flows for the years
      then ended, in conformity with accounting principles generally accepted in
      the
      United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that the Company will continue as a going concern. The Company had negative
      cash
      flow from operations of $245,569, negative working capital of $411,318 and
      an
      accumulated deficit of $5,228,744 at August 31, 2008, and recurring losses
      from
      operations. These factors, among others, raise doubt about the Company’s ability
      to continue as a going concern. Management’s plans regarding these matters are
      also described in Note 1. The accompanying consolidated financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.





/s/
      Miller, Ellin & Company, LLP


MILLER
      ELLIN & COMPANY, LLP





New
      York, New York


November
      21, 2008




F-2





**SHEERVISION,
                INC. AND SUBSIDIARY****CONSOLIDATED
                BALANCE SHEETS**




**August
                31,**
            
            **August
                31,****2008**
            
            **2007****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            111,887
            
            $
            265,262Accounts
                receivable, net
            
            
            399,950
            
            
            50,397Inventory
            
            
            254,052
            
            
            341,219Prepaid
                expenses and other current assets
            
            
            45,387
            
            
            73,160Total
                Current Assets
            
            
            811,276
            
            
            730,038Property
                and equipment, net
            
            
            141,894
            
            
            117,864Intangible
                assets, net
            
            
            7,520
            
            
            8,090$
            960,690
            
            $
            855,992******LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIENCY)**CURRENT
                LIABILITIES:Line
                of credit payable
            
            $
            155,918
            
            $
            -Accounts
                payable
            
            
            423,180
            
            
            337,013Accrued
                expenses and other current liabilities
            
            
            78,351
            
            
            88,957Accrued
                dividends - Series A Preferred Stock
            
            
            565,145
            
            
            324,370Total
                Current Liabilities
            
            
            1,222,594
            
            
            750,340STOCKHOLDERS’
                EQUITY (DEFICIENCY):Preferred
                Stock, Series A, 9% cumulative convertible; $.001 par value, $10
                per
                share:Authorized
                - 350,000 shares;Issued
                and outstanding - 266,296 and 270,046 shares, respectively
            
            
            266
            
            
            270Common
                Stock: par value $.001;Authorized
                - 90,000,000 shares -Issued
                and outstanding - 12,735,190 and 12,693,523 shares,
                respectively
            
            
            12,735
            
            
            12,694Additional
                paid in capital
            
            
            4,953,839
            
            
            4,857,051Accumulated
                deficit
            
            
            (5,228,744
            )
            
            (4,764,363
            )Total
                Stockholders' Equity (Deficiency)
            
            
            (261,904
            )
            
            105,652$
            960,690
            
            $
            855,992





See
      accompanying notes to consolidated financial statements




F-3





**SHEERVISION,
                INC. AND SUBSIDIARY**


**CONSOLIDATED
                STATEMENTS OF OPERATIONS**




**Years
                Ended August 31,****2008**
            
            **2007**NET
                SALES
            
            $
            4,417,887
            
            $
            4,351,907COST
                OF GOODS SOLD
            
            
            1,664,101
            
            
            1,437,056GROSS
                PROFIT
            
            
            2,753,786
            
            
            2,914,851OPERATING
                EXPENSES:Shipping
            
            
            155,598
            
            
            163,015Selling
                and marketing
            
            
            1,081,425
            
            
            1,881,242General
                and administrative
            
            
            1,588,697
            
            
            1,756,161Product
                development
            
            
            99,276
            
            
            29,523Total
                operating expenses
            
            
            2,924,996
            
            
            3,829,941LOSS
                FROM OPERATIONS
            
            
            (171,210
            )
            
            (915,090
            )OTHER
                INCOME (EXPENSE)Interest
                expense
            
            
            (5,918
            )
            
            -Interest
                income
            
            
            4,320
            
            
            12,706Legal
                Settlement
            
            
            (50,000
            )
            
            -Total
                other income (expense)
            
            
            (51,597
            )
            
            12,706LOSS
                BEFORE PROVISION FOR INCOME TAXES
            
            
            (222,807
            )
            
            (902,384
            )PROVISION
                FOR INCOME TAXES - CURRENT
            
            
            800
            
            
            2,902NET
                LOSS
            
            $
            (223,607
            )
            $
            (905,286
            )ACCRUED
                PREFERRED STOCK DIVIDENDS
            
            
            (240,774
            )
            
            (269,012
            )NET
                LOSS APPLICABLE TO COMMON SHAREHOLDERS
            
            $
            (464,381
            )
            $
            (1,174,298
            )BASIC
                AND DILUTED LOSS PER SHARE APPLICABLE TO COMMON
                SHAREHOLDERS:-
                basic and diluted
            
            $
            (0.04
            )
            $
            (0.09
            )Weighted
                average number of shares outstanding
            
            
            12,721,720
            
            
            12,373,888





See
      accompanying notes to consolidated financial statements





F-4




**SHEERVISION,
                INC. AND SUBSIDIARY****CONSOLIDATED
                STATEMENTS OF CASH FLOWS**




**Years
                Ended****August
                31,****2008**
            
            **2007**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (223,607
            )
            $
            (905,286
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and Amortization
            
            
            34,346
            
            
            26,153Stock-based
                compensation
            
            
            96,825
            
            
            -Changes
                in assets and liabilities:
            
            
            
            
            
            -Accounts
                receivable
            
            
            (349,553
            )
            
            23,467Inventory
            
            
            87,167
            
            
            (64,297
            )Deferred
                patent costs
            
            
            -
            
            
            (8,562
            )Prepaid
                expenses
            
            
            27,777
            
            
            3,269Accounts
                payable
            
            
            86,167
            
            
            132,861Accrued
                expenses and other current liabilities
            
            
            (4,691
            )
            
            (14,768
            )NET
                CASH USED IN OPERATING ACTIVITIES
            
            
            (245,569
            )
            
            (807,163
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of property and equipment
            
            
            (57,806
            )
            
            (42,201
            )NET
                CASH USED IN INVESTING ACTIVITIES
            
            
            (57,806
            )
            
            (42,201
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from line of credit
            
            
            150,000
            
            
            -Net
                cash provided by financing activities
            
            
            150,000
            
            
            -Net
                decrease in cash and cash equivalents
            
            
            (153,375
            )
            
            (849,364
            )Cash
                and cash equivalents at beginning of year
            
            
            265,262
            
            
            1,114,626Cash
                and cash equivalents at end of year
            
            $
            111,887
            
            $
            265,262SUPPLEMENTAL
                DISCLOSURES OF CASH FLOWS:Cash
                paid during the period for:Income
                taxes
            
            $
            1,600
            
            $
            3,200SUPPLEMENTAL
                DISCLOSURES OF NON - CASH INVESTINGAND
                FINANCING ACTIVITIES:Accrued
                interest on line of credit
            
            $
            5,918
            
            $
            -Accrued
                preferred stock dividends
            
            $
            240,774
            
            $
            269,012Conversion
                of preferred stock to common
            
            $
            41
            
            $
            417





See
      accompanying notes to consolidated financial statements




F-5




**SHEERVISION,
                INC. AND SUBSIDIARY****CONSOLIDATED
                STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                (DEFICIENCY)****YEARS
                ENDED AUGUST 31, 2008 AND
                2007**





**Preferred
                  Stock**
              
              **Common
                  Stock****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Additional
                    Paid-inCapital**
              
              **Accumulated
                  Deficit**
              
              **Total
                    Stockholders'**
                  **Equity
                      (Deficiency)**Balance,
                  August 31, 2006
              
              
              307,546
              
              $
              308
              
              
              12,276,856
              
              $
              12,277
              
              $
              4,857,430
              
              $
              (3,590,065
              )
              $
              1,279,950Preferred
                  stock conversion
              
              
              (37,500
              )
              
              (38
              )
              
              416,667
              
              
              417
              
              
              (379
              )
              
              
              
              
              -Dividends
                  accrued on Preferred Stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (269,012
              )
              
              (269,012
              )Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (905,286
              )
              
              (905,286
              )Balance,
                  August 31, 2007
              
              
              270,046
              
              $
              270
              
              
              12,693,523
              
              $
              12,694
              
              $
              4,857,051
              
              $
              (4,764,363
              )
              $
              105,652Preferred
                  stock conversion
              
              
              (3,750
              )
              
              (4
              )
              
              41,667
              
              
              41
              
              
              (37
              )
              
              
              
              
              -Stock-based
                  compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              96,825
              
              
              
              
              
              96,825Dividends
                  accrued on Preferred Stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (240,774
              )
              
              (240,774
              )Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (223,607
              )
              
              (223,607
              )Balance,
                  August 31, 2008
              
              
              266,296
              
              $
              266
              
              
              12,735,190
              
              $
              12,735
              
              $
              4,953,839
              
              $
              (5,228,744
              )
              $
              (261,904
              )


See
      accompanying notes to consolidated financial statements




F-6


**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**




**NOTE
      1** - **DESCRIPTION OF BUSINESS**





SheerVision,
      Inc. (the “ *Company* ”),
      a Delaware corporation, designs and sells high quality, value-priced surgical
      loupes, light systems and related optical products for the dental, medical
      and
      veterinary markets. Through its exclusive arrangements with manufacturers
      based in Asia, it can provide top quality surgical loupes and light systems
      directly to end-users at substantially lower prices than similar competitors'
      products. The Company has also recently negotiated favorable terms with multiple
      United States manufacturers, and is currently manufacturing a number of products
      domestically.





On
      December 1, 2005, SheerVision, Inc., a California corporation (“ *SheerVision-CA* ”)
      acquired 4,517,800 shares (610,514 shares after giving effect to the 1 for
      7.4
      reverse stock split to its then stockholders) of the common stock, par value
      $0.001, of the Company which was then called Clean Water Technologies, Inc.
      (“ *CWTI* ”),
      or
      54.579% of the outstanding shares of CWTI, from two individuals for a purchase
      price of $625,000.





On
      March
      27, 2006, CWTI entered into a Share Exchange and Reorganization Agreement with
      SheerVision-CA, and its shareholders thereof, in which all SheerVision-CA
      shareholders exchanged all of the outstanding and issued common stock of
      SheerVision-CA for an aggregate of 9,525,137 shares of CWTI common stock,
      representing 95% of its outstanding common stock after giving effect to the
      transaction. As a result, SheerVision-CA became a wholly-owned subsidiary of
      CWTI and all options, warrants exercisable for, and securities convertible
      into,
      shares of SheerVision-CA common stock, became exercisable for or convertible
      into such number of shares of CWTI common stock as the holder thereof would
      have
      received if such options and warrants had been exercised, or such convertible
      securities converted, immediately prior to closing.





Effective
      June 19, 2006, the Company formally changed its name from Clean Water
      Technologies, Inc. to SheerVision, Inc.





**Going
      Concern Considerations**





The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern, which contemplates, among other
      things, the realization of assets and satisfaction of liabilities in the
      ordinary course of business. As of August 31, 2008, the Company had an
      accumulated deficit of $5,228,744, recurring losses from operations and negative
      cash flows from operating activities of $245,569 for the year then ended. The
      Company also had a negative working capital of $411,318 as of August 31,
      2008.





The
      Company intends to fund operations through increased sales, which may be
      insufficient to fund its capital expenditures, working capital or other cash
      requirements for the year ending August 31, 2009. The Company may seek
      additional funds to finance its immediate and long-term operations through
      debt
      and/or equity financing. The successful outcome of future financing activities
      cannot be determined at this time and there is no assurance that if achieved,
      the Company will have sufficient funds to execute its intended business plan
      or
      generate positive operating results.





These
      factors, among others, raise doubt about the Company’s ability to continue as a
      going concern. The accompanying financial statements do not include any
      adjustments related to recoverability and classification of asset carrying
      amounts or the amount and classification of liabilities that might result should
      the Company be unable to continue as a going concern.





In
      response to these problems, management has taken the following
      actions:





·
            the
                Company is expanding its revenue base beyond direct sales to OEM
                and third
                party sales;





·
            the
                Company is aggressively signing up new international distributors
                through
                its International Distributor Program;
                and





·
            the
                Company is seeking third party
                financing.





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





The
      summary of significant accounting policies presented below is designed to assist
      in understanding the Company’s consolidated financial statements. These
      accounting policies conform to accounting policies generally accepted in the
      United States of America (“ *GAAP* ”)
      in all material respects, and have been consistently applied in preparing the
      accompanying consolidated financial statements. 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,
      the
      reported amounts of revenues and expenses during the reporting period, and
      related disclosures. Actual results could differ from those
      estimates.




F-7




**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**




**Principles
      of Consolidation**





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




**Revenue
      Recognition**





The
      Company’s surgical loupes and lighting products need no installation and are
      ready for use upon receipt by the customer.  Products sold are delivered by
      shipments made through common carrier and revenue is recognized upon shipment
      to
      the customer.  Discounts and sales incentives are recognized as a reduction
      of revenue at the time of sale.  The Company offers an unconditional
      satisfaction guarantee for a 30 day period and permits product returns within
      30
      days of purchase, at which time returns are accepted and refunds are made. 
Returns are minimal, therefore management has determined that no reserve is
      required. Shipping charges and special orders are nonrefundable.





**Cash
      and Cash Equivalents**




The
      Company considers highly liquid investments with an original maturity of three
      months or less to be cash equivalents.





**Accounts
      Receivable**





Accounts
      receivable represent balances due from customers for the sale of the Company’s
      products. An allowance for doubtful accounts is provided for those accounts
      receivable considered to be potentially uncollectible, based upon historical
      experience and management’s evaluation of outstanding accounts receivable at the
      end of the year. Management has provided an allowance for doubtful accounts
      of
      $0 and $507 at August 31, 2008 and August 31, 2007, respectively. Management
      did
      not provide an allowance at August 31, 2008 as substantially all receivables
      were subsequently collected.





**Concentrations
      of Credit Risk**





Financial
      instruments and related items that potentially subject the Company to
      concentrations of credit risk consist primarily of cash, cash equivalents and
      trade receivables. The Company places its cash and temporary cash investments
      with credit quality institutions. At times, such investments may be in excess
      of
      the FDIC insurance limit. To date, the Company has not experienced any such
      losses and believes it is not exposed to any significant credit
      risk.





**Inventory**





Inventory
      is valued at the lower of cost or market, determined on a first-in, first-out
      basis. At August 31, 2008 and 2007, inventory consisted of finished goods and
      raw materials. Because of the technical nature of the products, the Company
      may
      be exposed to a number of factors that could result in portions of its inventory
      becoming either obsolete or in excess of anticipated usage. These factors
      include, but are not limited to, technological changes in its markets,
      competitive pressures in products and prices, and the introduction of new
      product lines. The Company regularly evaluates its ability to realize the value
      of its inventory based on a combination of factors, including historical usage
      rates, forecasted sales, product life cycles, and market acceptance of new
      products. When inventory that is obsolete or in excess of anticipated usage
      is
      identified, it is written down to realizable value or an inventory valuation
      reserve is established.





**Property
      and Equipment**





Property
      and equipment are stated at cost and are being depreciated using the
      straight-line method over the estimated useful lives of the related assets,
      generally five to seven years. **** Leasehold
      improvements are amortized on a straight-line basis over the shorter of the
      estimated useful lives of the assets or the remaining lease terms. The Company
      follows the practice of charging maintenance renewals and minor repairs to
      expense as incurred. Renewals and betterments that materially increase the
      value
      of the property are capitalized.





**Income
      Taxes**




Deferred
      income taxes are recognized for temporary differences between financial
      statement and income tax basis of assets and liabilities and loss carryforwards
      for which income tax benefits are expected to be realized in future years.
      A
      valuation allowance is established, when necessary, to reduce deferred tax
      assets to the amount expected to be realized. In estimating future tax
      consequences, the Company generally considers all expected future events other
      than an enactment of changes in the tax laws or rates. The deferred tax asset
      is
      continually evaluated for realizability. To the extent the Company’s judgment
      regarding the realization of the deferred tax assets changes, adjustment to
      the
      allowance is recorded, with an off setting increase or decrease, as appropriate,
      to income tax expense. Such adjustments are recorded in the period in which
      the
      Company’s estimate as to the realizability of the asset changed that it is “more
      likely than not” that all of the deferred tax assets will be realized. The “more
      likely than not” standard is subjective, and is based upon the Company’s
      estimate of a greater than 50% probability that its long range business plan
      can
      be realized. Deferred tax liabilities and assets are classified as current
      or
      non-current based on the classification of the related asset or liability for
      financial reporting. A deferred tax liability or asset that is not related
      to an
      asset or liability for financial reporting, including deferred tax assets
      related to NOL carry forwards, are classified according to the expected
      occurence date of the temporary difference.




F-8


**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**




**Long-Lived
      Assets**





We
      account for long-lived assets in accordance with Statement of Financial
      Accounting Standards No. 144, (“ *SFAS
      144* ”) *Accounting
      for the Impairment or Disposal of Long-Lived Assets* . 
      Accordingly, we evaluate the carrying value of long-lived assets, including
      intangible assets, whenever events or changes in business circumstances or
      our
      planned use of long-lived assets indicate that their carrying amounts may not
      be
      fully recoverable or that their useful lives are no longer appropriate. 
Reviews are performed to determine whether the carrying values of long-lived
      assets are impaired based on a comparison to the undiscounted expected future
      net cash flows.  If the comparison indicates that impairment exists,
      long-lived assets that are classified as held and used are written down to
      their
      respective fair values and long-lived assets classified as held for sale are
      written down to their respective fair values less costs to sell. 
Significant management judgment is required in the forecast of future operating
      results that is used in the preparation of expected undiscounted cash flows.
      The
      Company recorded no impairments for the years ended August 31, 2008 and 2007.





**Stock
      - Based Employee Compensation**





Effective
      January 25, 2007, the Company adopted the provisions of statement of Financial
      Standards No. 123 (revised 2004), *Share-Based Payment* (“ *SFAS
      123R* ”),
      requiring recognition of expenses equivalent to the fair value of stock-based
      compensation awards. Prior to adoption, the Company had no outstanding options
      and therefore the adoption has had no financial statement impact from the
      transition. SFAS 123R requires that options issued be recognized in the
      financial statements at fair value over the vesting period.





**Basic
      and Diluted Loss Per Share**





In
      accordance with the Financial Accounting Standards Board’s SFAS No.
      128, *Earnings Per Share* ,
      the basic loss per common share, which excludes dilution, is computed by
      dividing the net loss available to common shareholders by the weighted average
      number of common shares outstanding. Diluted loss per common share reflects
      the
      potential dilution that could occur if all potential common shares had been
      issued and if the additional common shares were dilutive.





**Research
      and Development**





Research
      and development costs are expensed as incurred.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the amounts reported in the
      financial statements and accompanying notes. Significant estimates made by
      management include revenue recognition, estimates of collectability of accounts
      receivable, the realizability of deferred tax assets and the adequacy of
      inventory reserves. Management bases its estimates and assumptions on historical
      experience and on various other assumptions that it believes are reasonable
      under the circumstances. Actual results could differ from those
      estimates.





**Fair
      Value of Financial Instruments**





The
      estimated fair values for financial instruments under SFAS No. 107, *Disclosures about Fair Value of Financial Instruments* ,
      are determined at discrete points in time based on relevant market information.
      These estimates involve uncertainties and cannot be determined with precision.
      For certain of the Company’s financial instruments, including certain assets,
      accounts payable and accrued liabilities, the carrying amounts approximate
      fair
      value due to their short term nature.





F-9





**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**





**NOTE
      3 - INVENTORIES**





Inventories
      are valued at the lower of cost (first-in, first-out method) or market, and
      consist of the following:





**August
                31,****2008**
            
            **2007**Finished
                Goods
            
            $
            249,802
            
            $
            331,642Raw
                Materials
            
            
            4,250
            
            
            9,577Total
            
            $
            254,052
            
            $
            341,219








**NOTE
      4 - PROPERTY AND EQUIPMENT**





Property
      and equipment are stated at cost less accumulated depreciation and amortization,
      and consist of the following:




**Estimated**
            
            **August
                31,****Useful
                lives**
            
            **2008**
            
            **2007**Manufacturing
                equipment
            
            
            7
                years
            
            $
            148,640
            
            $
            93,765Office
                and computer equipment
            
            
            5
                years
            
            
            49,437
            
            
            46,507Leasehold
                improvement
            
            
            15
                years
            
            
            7,179
            
            
            7,179205,257
            
            
            147,451Less:
                Accumulated Depreciation & Amortization
            
            
            
            
            
            63,362
            
            
            29,587Property
                and Equipment, net
            
            
            
            
            $
            141,894
            
            $
            117,864




Depreciation
      and amortization expense for the years ended August 31, 2008 and 2007 amounted
      to $34,346 and $26,153, respectively.






**NOTE
      5 - INTANGIBLE ASSETS**





During
      the year ended August 31, 2007, the Company filed for patent protection with
      the
      United States Patent and Trademark Office for certain developed technologies.
      As
      of the year ended August 31, 2008, the Company was evaluating the technology
      under this provisional patent to determine if it fits into its redefined
      business strategy. The cost incurred by the Company was $8,562 which is being
      amortized on a straight-line basis over a period of 15 years and is stated
      net
      of accumulated amortization of $1,042 at August 31, 2008. Should the Company
      determine it will not pursue this patent, it will write-off the remaining
      balances at the time the determination is made.








**NOTE
      6 - LOSS PER SHARE**





In
      accordance with the Financial Accounting Standards Board’s SFAS No.
      128, *Earnings Per Share* ,
      the basic loss per common share, which excludes dilution, is computed by
      dividing the net loss available to common shareholders by the weighted average
      number of common shares outstanding. Diluted loss per common share reflects
      the
      potential dilution that could occur if all potential common shares had been
      issued and if the additional common shares were dilutive. Potential common
      shares are the shares that may be issued upon the exercise of warrants, reduced
      by the shares that may be repurchased with the funds received from the exercise,
      based on the average price during the period, plus conversion of convertible
      preferred stock into common shares.





The
      following table sets forth the computation of basic and diluted loss per common
      share:




F-10




**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**


**Twelve
                Months Ended August 31,****2008**
            
            **2007**Numerator:Net
                loss
            
            $
            (223,607
            )
            $
            (905,286
            )Series
                A preferred stock dividends
            
            
            (240,774
            )
            
            (269,012
            )Net
                loss attributable to common stock
            
            $
            (464,381
            )
            $
            (1,174,298
            )Denominator:Weighted
                average common shares - basic and diluted
            
            
            12,721,720
            
            
            12,373,888Basic
                and diluted loss per common share
            
            $
            (0.04
            )
            $
            (0.09
            )





Warrants,
      and convertible preferred stock, in accordance with the following table, were
      excluded from the computation of diluted loss per share for the twelve months
      ended August 31, 2008 and 2007, respectively, because the effect of their
      inclusion would be antidilutive.






**Twelve
                  months ended**
                **August
                  31,****2008**
            
            **2007**Warrants
                to purchase - common stock
            
            
            1,488,989
            
            
            1,488,989Convertible
                preferred stock
            
            
            2,958,844
            
            
            3,000,5234,447,833
            
            
            4,489,512








**NOTE
      7 - INCOME TAXES**





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes. For financial reporting purposes,
      the
      Company has incurred substantial losses which have caused management to doubt,
      based on the available objective evidence whether it was more likely than not
      that the net deferred tax assets would be fully realizable. Accordingly, the
      Company has provided for a full valuation allowance against its net deferred
      tax
      asset. The Company's deferred tax asset at August 31, 2008 and 2007 is comprised
      of the following components:





**August
                31,****2008**
            
            **2007**Net
                operating losses carry forwards
            
            $
            1,537,550
            
            $
            1,386,000Less:
                Valuation allowance
            
            
            (1,537,550
            )
            
            (1,386,000
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -








At
      August 31, 2008, the Company has net operating loss carry forwards for federal
      tax purposes of approximately $3,915,000, which expire in years 2025 through
      2028.





The
      provision for income taxes for the years ended August 31, 2008 and 2007 are
      summarized as follows:





**August
                31,****2008**
            
            **2007**Current
            
            
            -
                federal
            
            $
            -
            
            $
            --
                state
            
            
            800
            
            
            2,902800
            
            
            2,902Deferred
            
            
            -
                federal
            
            
            -
            
            
            --
                state
            
            
            -
            
            
            --
            
            
            -Total
                provision
            
            
            
            
            $
            800
            
            $
            2,902




F-11




**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**





A
      reconciliation of the provision for income taxes with amounts determined by
      applying the statutory U.S. Federal income tax rate of 34% for 2008 and 2007,
      respectively, to income before income taxes is as follows:




**Years
                Ended August 31,****2008**
            
            **2007**Computed
                tax at the federal statutory rate of 34%
            
            $
            (82,800
            )
            $
            (307,000
            )State
                income tax, net of federal benefit
            
            
            (13,400
            )
            
            (54,000
            )Valuation
                allowance
            
            
            96,200
            
            
            361,000Other
            
            
            800
            
            
            2,902$
            800
            
            $
            2,902








**NOTE
      8 - COMMITMENTS AND CONTINGENCIES**





**Operating
      Leases**





During
      2008, the Company finalized execution of the three-year, non-cancellable lease
      of its headquarters effective December 1, 2007 and expiring December 1, 2010.
      The lease obligation based on minimum monthly rents is as follows:




**FISCAL
                YEARS
                ENDED**2009
            
            $
            55,0072010
            
            
            56,657$
            111,664





Rent
      expense for the years ended August 31, 2008 and 2007 amounted to $52,464 and
      $48,268, respectively.




**Litigation**





On
      January 10, 2007, a complaint was filed in the United States District Court,
      Central District of California, by Martin Hogan Pty, Ltd., which was brought
      against the Company and our Chief Executive Officer and President. Plaintiff,
      a
      former supplier of frames of the Company, alleged copyright and trade dress
      infringement in its frames and sought damages as well as permanent injunctive
      relief. On August 8, 2008, the parties entered into a settlement agreement
      pursuant to which the Company paid the plaintiff $50,000 and agreed to cease
      the
      sale of its SV sport frame after August 31, 2008, with no admission of
      wrongdoing. The Company has since replaced its SV sport frame with its “Del Rey”
frame. The Company does not expect the terms of the settlement to have a
      material effect on its financial condition or operations.





On
      June
      25, 2007, General
      Scientific Corporation (“*GSC*”)
      initiated a “Section 337” complaint against the Comapny with the International
      Trade Commission (“*ITC*”)
      alleging the unlawful importation and sale in the United States of certain
      magnifying loupe products which allegedly infringe certain of the complainant's
      patents. On January 17, 2008, the Company entered into a settlement with GSC
      and
      a co-defendant pursuant to which the Company and the co-defendant agreed to
      cease the importation of a particular type of metal frame, GSC covenanted not
      to
      bring patent infringement claims against the Company and the co-defendant with
      respect to certain SheerVision products and the pending investigation by the
      ITC
      was terminated. The settlement involved no monetary payment by the Company
      and
      no admission of wrongdoing.The
      Company does not expect the terms of the settlement to have a material effect
      on its financial condition or operations.





There
      is no other litigation pending or, to the Company's knowledge, threatened
      litigation or administrative action (including litigation or action involving
      the Company's officer, directors or other key personnel) which in the Company's
      opinion has, or is expected to have, a material adverse effect upon its
      financial condition or operations.





F-12





**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**





**NOTE
      9 - LINE OF CREDIT**





On
      March 25, 2008, the Company entered into an agreement with an unrelated
      shareholder of the Company providing for a line of credit to the Company of
      up
      to $300,000 carrying an interest rate of 9% per annum. The agreement provides
      that principal and interest on amounts borrowed against the line of credit
      is
      repayable nine months from the date of the execution of the agreement or earlier
      upon the occurrence of an event of default. The line of credit is secured by
      a
      first priority security interest in the Company’s inventories and accounts
      receivable. Additionally, the agreement provides the lender with an option
      to
      receive a warrant exercisable for up to 600,000 shares of the Company’s common
      stock (depending on the amount loaned) at an exercise price of $0.25 per share.
      As of August 31, 2008, the outstanding balance on the line of credit was
      $155,918, which includes accrued interest of $5,918.





The
      Company previously had a bank revolving credit facility for up to $300,000
      at
      1.25% above the bank's prime rate, collateralized by a security interest in
      all
      of the assets of the Company which expired on April 15, 2007.




**NOTE
      10 - STOCKHOLDERS' EQUITY**





**Preferred
      Stock**





The
      Company has authorized 350,000 shares of Series A Preferred Stock (“ *Preferred
      Stock* ”),
      par value $0.001 per share. As of August 31, 2008 there were 266,296 shares
      of
      Preferred Stock issued and outstanding. Dividends accrue at the rate of 9%
      per
      annum and are payable every June 30 and December 31. To the extent not paid,
      accrued dividends shall accumulate until paid. At the option of the holder,
      the
      Preferred Stock may be converted into common stock at any time at a conversion
      price of $0.90 per share. In June 2007, 37,500 shares of Preferred Stock at
      a
      stated value of $10 per share were converted into 416,667 shares of Company
      common stock. In December 2007, 3,750 shares of Preferred Stock at a stated
      value of $10 were converted into 41,667 shares of Company common
      stock.





As
      of August 31, 2008 and 2007, accrued cumulative preferred dividends were
      $565,145 and $324,370, respectively.





**Common
      Stock**





The
      Company has authorized 90,000,000 shares of common stock, par value $0.001
      per
      share. At August 31 2008 and 2007 there were 12,735,190 and 12,693,523 shares
      of
      common stock issued and outstanding, respectively.






**NOTE
      11 - WARRANTS**





Transactions
      involving the Company's warrant issuance are summarized as follows:




**Number**
              **of
                Shares**
            
            **Weighted
                Average**
              **Price
                Per Share**Outstanding
                at August 31, 2006
            
            
            1,488,989
            
            $
            0.53Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            -
            
            
            -Outstanding
                at August 31, 2007
            
            
            1,488,989
            
            $
            0.53Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            -
            
            
            -Outstanding
                at August 31, 2008
            
            
            1,488,989
            
            $
            0.53








F-13


**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**


**NOTE
      12 - EQUITY BASED COMPENSATION PLANS**





Effective
      January 25, 2007, the Company adopted the SheerVision Inc. 2007 Stock Option
      Plan (the “ *Plan* ”).
      Awards granted under the Plan may include incentive stock options, which are
      qualified under Section 422 of the Internal Revenue Code and stock options
      other
      than incentive stock options, which are not qualified under Section 422 of
      the
      Code and stock purchase rights. Awards may be granted to employees and directors
      of the Company or its subsidiaries and individuals, including consultants,
      performing services to the Company. The maximum number of shares reserved for
      the Plan is 3,000,000 shares and administered by the Board of Directors (the
      “ *Board* ”)
      or a committee appointed by the Board. The Plan administrator determines the
      terms of each option granted including (1) the purchase price of shares subject
      to options, (2) the dates on which options become exercisable and (3) the
      expiration date of each option (which may not exceed ten years from the date
      of
      grant). The minimum per share exercise price for options granted under the
      Plan
      for incentive stock options is the fair market value at the grant date or if
      the
      optionee is more than a 10% holder, 110% of the fair market value at the grant
      date, of one share of the Company’s common stock on the date the option is
      granted.





Effective
      January 25, 2007, the Company adopted the SheerVision Inc. 2007 Stock Option
      Plan for Independent and Non-Employee Directors (the “ *Directors
      Plan* ”).
      A maximum of 200,000 shares of Company common stock options may be granted
      to
      eligible directors who are defined as independent or non-employee directors.
      The
      Directors Plan is to be administered by the Board or a compensation committee.
      The Directors Plan specifies that each newly elected Independent or Non-Employee
      Director, upon first election or appointment to the Board, will receive options
      to purchase 2,000 shares. Immediately following each annual meeting of
      stockholders each Director who has been an eligible Director for more than
      12
      months immediately preceding and including such meeting shall be granted an
      additional option to purchase 3,000 shares. As of August 31, 2008 and 2007,
      there were no options outstanding under the Directors Plan.





On
      March 20, 2008, the Company granted 1,025,000 incentive stock options to
      purchase shares of the Company’s common stock under the Plan to employees
      and consultants of the Company. Of the options granted, 400,000 of such options
      granted to Suzanne Lewsadder and Jeffrey Lewsadder, both officers and directors
      of the Company, were declined prior to issuance. The remaining 625,000 options
      have an exercise price of $0.20 per share and vest one half on the grant date
      and the remaining half on December 31, 2008. The fair value of the options
      issued was estimated at the date of the grant using the Black-Scholes pricing
      model with the following assumptions: (i) a risk free interest rate of 4.50%,
      (ii) no dividend yield, (iii) and a volatility factor of 330%, and (iv) an
      estimated life of 10 years. The aggregate calculated fair value of the option
      grants was $118,000 of which $96,825 was recognized as stock based compensation
      expense, included in General and Administrative costs during the year ended
      August 31, 2008. The remaining stock based compensation expense of $21,175
      will
      be expensed over the remaining vesting period through December 31, 2008.





On
      July 14, 2008, the Company granted 36,000 incentive stock options to purchase
      shares of the Company’s common stock under the Plan to an employee at an
      exercise price of $0.25 per share, with half of the options vesting on the
      date
      of grant and the other half vesting on December 31, 2008.





Stock
      option activity as of August 31, 2008 is summarized as follows:





**Number
                of shares**
            
            **Weighted
                Average**
              **Exercise
                Price**Options
                outstanding at August 31, 2006
            
            $
            -
            
            $
            -Granted
            
            
            -
            
            
            -Forfeited
                or cancelled
            
            
            -
            
            
            -Options
                outstanding at August 31, 2007
            
            $
            -
            
            $
            -Granted
            
            
            661,000
            
            
            .20Forfeited
                or cancelled
            
            
            (150,000
            )
            
            .20Options
                outstanding at August 31, 2008
            
            $
            511,000
            
            $
            .20




F-14




**SHEERVISION,
        INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **YEARS
        ENDED AUGUST 31, 2008 AND 2007**




Options
                Outstanding
            
            Options
                ExercisableRange
                of
              Exercise
                Prices
            
            Outstanding
            
            Weighted
                Average Remaining Contractual
            
            Weighted
                Average Exercise Price
            
            Exercisable
            
            Weighted
                Average Exercise Price$
                0.20 - $ 0.25
            
            
            511,000
            
            
            9.6
            
            $
            0.20
            
            
            305,500
            
            $
            0.20





The
      weighted average grant-date fair value of options granted during the year-ended
      August 31, 2008 was $ 0.20.







**NOTE
      13 - RELATED PARTY TRANSACTIONS**





In
      April,
      2007, the Company entered into a consulting agreement to receive investor and
      public relations services. As part of the agreement two of the Company’s major
      shareholders who are also officers and directors transferred an aggregate of
      306,000 shares of the Company’s common stock to the consultant. For the year
      ended August 31, 2008, $10,000 was paid to this consultant and the agreement
      has
      been terminated. In addition the Company paid consulting fees in the amount
      of
      $4,000 to an individual who is a relative of a major shareholder, officer and
      director of the Company.This
      individual provides consulting services in connection with online marketing
      strategies and planning.





On
      September 22, 2008, Stephen Rochman was appointed as the Company’s interim Chief
      Financial Officer. Mr. Rochman is the founder of Revotech, a contract
      manufacturer that supplies the Company with certain components required in
      the
      production of our SheerVision products. To date, the value of purchases from
      Revotech has been immaterial.





F-15