**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-KSB**


**(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, 2007**





**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:
            OTCBB





Check
      whether the issuer (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**











Check
      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-KSB or any
      amendment to this Form 10-KSB. **o**





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





The
      issuer’s revenues for fiscal year ended August 31, 2007 were $4,351,907.





As
      of
      October 31, 2007, the aggregate market value of the voting and non-voting common
      equity held by non-affiliates (3,412,304 shares) was approximately $853,076
      based upon the October 31, 2007 closing price ($0.25) of one share on such
      date.





Issuer
      had 12,693,523  issued
      and outstanding shares of common stock, par value $0.001 per share, as of
      October 31, 2007.








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











**FORWARD
      LOOKING STATEMENTS**





*This
      Annual Report on Form 10-KSB and any documents incorporated herein contain
      “forward-looking statements” within the meaning of the Private Securities
      Litigation Reform Act of 1995. Such forward-looking statements involve known
      and
      unknown risks, uncertainties and other factors which may cause the actual
      results, performance or achievements of the Company, or industry results, to
      be
      materially different from any future results, performance or achievements
      expressed or implied by such forward-looking statements. When used in this
      Annual Report, statements that are not statements of current or historical
      fact
      may be deemed to be forward-looking statements. Without limiting the foregoing,
      the words “plan,” “intend,” “may,” “will,” “expect,” “believe,” “could,”
“anticipate,” “estimate,” or “continue” or similar expressions or other
      variations or comparable terminology are intended to identify such
      forward-looking statements. Readers are cautioned not to place undue reliance
      on
      these forward-looking statements, which speak only as of the date hereof. Except
      as required by law, the Company undertakes no obligation to update any
      forward-looking statements, whether as a result of new information, future
      events or otherwise.*





*Any
      reference to the “Company,” “SheerVision,” the “Registrant,” the “Small Business
      Issuer,” “we,” “our” or “us” means SheerVision Inc.*











**Table
      of Contents**





Form
      10-KSB Index




Item
                  1. Description of Business
              2Item
                  1A. Risk Factors
              13Item
                  2. Description of Property
              20Item
                  3. Legal Proceedings
              20Item
                  4. Submission of Matters to a Vote of Security Holders
              21Item
                  5. Market for Registrant's Common Equity and Related Stockholder
                  Matters
              22Item
                  6. Management’s Discussion and Analysis of Financial
                  Condition
              24Item
                  7. Consolidated Financial Statements
              35Item
                  8. Changes in and Disagreements with Accountants on Accounting
                  And
                  Financial Disclosure
              35Item
                  8A. Controls and Procedures
              35Item
                  8B. Other Information
              36Item
                  9. Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(A) of the Exchange Act
              36Item
                  10. Executive Compensation
              41Item
                  11.Security Ownership of Certain Beneficial Owners and Management
                  and
                  Related Stockholder Matters
              44Item
                  12. Certain Relationships and Related Transactions
              45Item
                  13. Exhibits and Index of Exhibits
              46Item
                  14. Principal Accountant Fees and Services
              52










**PART
      I**





**ITEM
      1. DESCRIPTION OF BUSINESS**





**General**





We
      design
      and sell proprietary surgical loupes and headlight systems to the dental,
      medical and veterinary markets and have quickly captured a leading position
      in
      the dental hygiene market segment. 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 light systems
      directly to end-users and our distributor partners at substantially lower prices
      than 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 a new e-commerce online storefront and continued product development
      activities. We are poised for continued growth due to the development and launch
      of several new product lines during 2007 and through the development of global
      distributor relationships. By offering end-users their 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. For example, our major competitors have been forced to bring new
      frame
      designs to market as a response to our launch of the SV Sport Frame in the
      first
      quarter of fiscal year 2007. This was also the case with our LED light systems.
      SheerVision, with the introduction of the FireFly LED TM and
      FireFly Infinity TM ,
      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 designer and global marketer of high quality,
      value-priced surgical 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:





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





We
      have
      recently experienced significant acceptance of our branded products in the
      international marketplace. We have developed a program to rapidly sign and
      support international distributors 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 value-priced products align
      well
      with the needs of many international markets that are not directly or indirectly
      serviced by us. This expectation is driven by the overwhelming number of
      inquiries that were generated while exhibiting at the International Dental
      Show
      in April 2007 in Cologne, Germany. The International Dental Show provided a
      forum to both solicit new distributors and introduce new products to existing
      distributors. We recently signed an agreement with a major U.S. dental company,
      which will act as our global retailer given its strong relationships with dental
      distributors in Europe, the Middle East, and Asia. This new relationship is
      expected to add distributors into the SheerVision distributor network, which
      in
      turn is expected to produce significant sales volume. We plan to continue to
      seek out new distribution partners and broaden our outreach to a significant
      number of authorized distributors.





2





·  ***Launch
      an Aggressive Initiative to Capture Domestic
      Distributors***





The
      introduction of our portable LED illumination systems has provided an
      opportunity to pursue distributors within the United States. Both the original
      FireFly LEDTM and the new FireFly InfinityTM headlight systems can be mounted on
      any of our competitors’ loupes currently sold in the US dental market. This
      flexible mounting ability opens up a potentially lucrative domestic market.
      We
      are marketing this product both directly to the consumer as well as through
      distributor networks, which will expedite this introduction to the US market.
      Identifying and initiating domestic distributor relationships will be a major
      focus during fiscal year 2008.





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





A
      benefit
      of our research and development efforts has been the development of innovative
      products that would 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 un-adapted or
      customized products. We will continue to seek new partners in both domestic
      and
      international markets that can benefit from the technologies we have developed
      as we proceed into fiscal year 2008.





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





With
      the
      introduction of our new SureFit "through-the-lens" (TTL) loupe system, we can
      now offer this state of the art TTL technology in addition to our current award
      winning flip-up design. Our new proprietary SureFit TTL LoupesTM alignment
      system also enables customers to order our TTLs through our online store,
      providing a significant competitive edge. We also announced the launch of our
      line of Signature 4.0x and 5.0x Flip-Up Prism Loupes in September 2007. These
      high-magnification loupes will allow us greater penetration in several dental
      and surgical market segments. We were also successful with the launch of the
      new
      FireFly InfinityTM headlight system during fiscal year 2007. This new LED-based
      headlight system provides us with a significant technological innovation that
      places us one step ahead of our competitors. The system provides a light beam
      with almost twice the intensity as our original FireFly LEDTM and compares very
      favorably against tethered fiber optic lighting systems. Our launch of the
      FireFly FlipFilterTM accessory, which prevents the curing of dental composite
      materials due to the high light intensity of the Infinity, has also exceeded
      our
      expectations. We continue to invest in the development of new product designs
      in
      order to create industry leadership in this key market segment.





3





·  ***Dramatically
      Heighten Brand Awareness Through a Highly Visible Online
      Presence***





Since
      launching our newly redesigned website www.sheervision.com in August 2006,
      we
      have increased online sales volume in fiscal year 2007 by over 800% over
      our volume that occurred during fiscal year 2006. We anticipate that online
      revenues will become a significant portion of overall sales as marketing and
      technical initiatives are implemented in order to increase site visitor traffic
      and to encourage online purchases.





·  ***Continue
      to be a Strong Presence in Industry Tradeshows***





Since
      the
      introduction of our new light products at tradeshows, sales for the new FireFly
      InfinityTM light have comprised more than half of our sales. These strong sales
      continue to validate our research and development efforts which focus on
      introducing new and innovative, market driven products. This participation
      has
      assisted in our goal to be in touch with constantly changing customer
      preferences and competitor actions. We plan to focus additional resources on
      the
      remaining major domestic shows through 2008 to meet consumer demand and plan
      to
      continue this strategy in successive years.





·  ***Continue
      to Fortify our Dedicated Sales Force***





As
      the
      only loupe company in the dental industry with a dental hygiene division sales
      team, we have become recognized as the leading provider of surgical loupes
      in
      this market niche. This sales force along with our general sales force has
      helped us make significant inroads in the dental, surgical and veterinary
      markets.





During
      this fiscal year we introduced many new products including: SureFit TTLTM loupes,
      a type of loupe which is highly preferred by many surgical and dental
      professionals, Signature Prism Loupes that provide 4.0x and 5.0x levels of
      magnification and are preferred by professionals for several types of medical
      procedures, the Firefly InfinityTM LED head light system, the FireFly
      FlipFilterTM, which prevents the curing of dental composites, the SV Sport Frame,
      a fashionable frame for mounting both Flip-Up and TTL loupes that is available
      in eight vibrant colors, and two designer loupe carrying cases. The introduction
      of these new products has contributed to our continued year-on-year increase
      in
      sales. With the continued success 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.





We
      continue to grow our sales volume by developing new product offerings and by
      rapidly expanding our distribution network domestically, internationally, and
      online. Through the development of the SureFit TTL LoupesTM, the FireFly
      InfinityTM LED, the FireFly FlipFilterTM, and others, we have broadened our appeal
      to our dental, surgical and veterinary market segments. The eCommerce-powered
      web store has provided us with a cost-effective platform to sell products and
      to
      communicate with customers. With the launch of our International Distributor
      Program (IDP) we have already increased our reach by successfully expanding
      our
      international distribution network in several new countries. International
      distributors provide us with distribution channels that have the potential
      to
      grow rapidly in a highly cost-effective manner. 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 highly competitive price. We plan to continue these
      growth-oriented efforts as we continue to build our sales and product
      offerings.





4




**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.
      SheerVision Galilean products range in price from $650 to $900 and Prism
      products from $1,000 to $1,200.





***Criteria
      for Selection of Surgical & Dental Loupes***





Based
      upon our market experiences, we believe that the factors that are important
      in
      the selection of compound loupes include the following:





·
            *Brand
                reputation and loyalty;*





·
            *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;





·
            *Weight
                of Surgical Loupes.*Lighter surgical loupes are often preferable to heavier
                loupes;





·
            *Ability
                to offer a Flip-Up or Through-the-Lens (TTL) loupe option*(to
                appeal to either customer preference);





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





·
            *Ability
                to offer a frame style that suits customer preference*(for
                quality, protection capability, weight, and
                style).





5





**Light
      Systems**





As
      surgical loupes allow the area under view to become more magnified, they tend
      to
      require additional light or
      illumination. Illumination can be added to surgical loupes in either a head
      mount (headband) or a direct mount on the frame of the surgical loupes. One
      of
      the key benefits of this illumination is to provide clinicians with shadow-free
      images. With the introduction of a superior quality portable LED light sources,
      we are able to provide the next generation of illumination products to
      practitioners that currently use magnification.





***Criteria
      for Selection of Light Systems***





Based
      on
      our market experience, factors that are important in the selection of light
      sources are:





·
            *Brand
                reputation and company
                support;*





·
            *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.





·
            *Compact.*The light source should be small to save valuable counter
                space.





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





·
            *Composite
                Filter.*The light source should have the ability to prevent the curing of
                dental
                composite materials.





·
            *Rechargeable
                Battery.*





·
            *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.




**Our
      Product Offerings**





We
      offer
      2.5x, 3.0x, 3.5x, 4.0x and 5.0x magnification surgical loupes, as well as
      double-x models (2.5xx and 3.0xx) with an ultra-lightweight design 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 sports frame available in eight
      vibrant colors. Additional designer carrying cases for the loupes are also
      available. We also currently offer two portable headlight systems: the Original
      FireFly LED TM ,
      and the
      FireFly Infinity TM LED.
      Both light sources are available with the FireFly FlipFilterTM, a patent pending
      accessory that is of great use to our customers in the dental profession.
      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.
      We believe that the key selling points of these products are brand name and
      reputation, high quality, value-based 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.





6





**The
      Advantages of Our Products and Services**





When
      we
      entered the market, there was no competition for a quality surgical loupe at
      an
      affordable price. We designed our own products and entered into an exclusive
      manufacturing relationship to produce cost effective surgical loupes. As a
      result, we are able to sell our surgical loupes for $650 to $900, a significant
      savings to the end user and a distinct competitive advantage over other similar
      products.





Our
      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. They are also sold
      internationally through distributors located in Canada, Mexico, United Kingdom,
      Spain, Italy, Portugal, Greece, Australia, Saudi Arabia, India, and Taiwan.





Our
      new
      Through-the-Lens (TTL) technology opens new markets where customers have a
      preference for this type of loupe. Estimated market preference for TTL loupes
      is
      50% compared with 50% for the Flip-Up type loupes that we have traditionally
      offered. We are the first major U.S. company to offer a TTL loupe with a
      manufacturer-direct domestic sales model. We can offer this state of the art
      TTL
      technology mounted in either our new 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 prism loupes will help to open new markets for us with
      a
      market 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 well
      established market.





The
      SheerVision SV Sport 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 fashion conscious user, featuring a
      wrap-around sports frame available in eight vibrant colors and accommodating
      both the Flip-Up and TTL loupes. Both of our FireFly light systems can also
      be
      fitted to this frame. Several major competitors appear to have been forced
      into
      launching sport-type frame designs during fiscal year 2007. We believe that
      the
      durability of some of these designs is lacking. Also, some of our competitors’
models do not support the installation of prescription lenses often requiring
      their customers to pay a significantly greater price for their designs.





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 LEDTM produces a beam measured at 2,400 foot candles. The
      FireFly InfinityTM is twice as bright as many headlights with 5,000 foot candles
      of light and the FireFly InfinityTM outperforms many tethered fiber-optic lights
      without their high maintenance costs. Benefits include shadow-free illumination,
      superior light uniformity, and all day comfort at a great value over light
      sources based on fiber optic technology. Both FireFly models can be mounted
      to
      the major brands of loupes currently in use, and can also be mounted to a
      SheerVision headband.





7





There
      are
      hundreds of accredited dental hygiene schools in the U.S. and Canada. In
      addition, industry experts believe that of the 155,000 practicing hygienists
      in
      the U.S., 15% to 18% are currently using surgical loupes in their practices.
      We
      identified this largely untapped market in 2003 and initiated a sales and
      marketing strategy geared towards it. We were able to design and bring to market
      - in less than one year - a new, ultra-light surgical loupe that has become
      our
      best seller in the dental hygiene market.





Our
      offerings of high quality yet affordable loupes are particularly desirable
      to
      price-sensitive dental hygiene practitioners. Most of our competitors focus
      on
      the high-end dentist and physician markets, including practicing professionals
      and medical/dental schools. Although these markets are highly competitive and
      more heavily penetrated, there are always selling opportunities for a high
      quality, low cost provider such as us. We believe that, to date, our products'
      price points are unmatched in the marketplace when coupled with their
      exceptional quality.





Finally,
      we believe that the international market represents a huge ongoing opportunity.
      There are over 680,000 practicing dentists internationally, approximately 30%
      of
      whom are currently using dental loupes. We believe that our ability to
      differentiate ourselves from our competitors by offering a unique combination
      of
      quality and price enables us to be an effective participant in any
      dental/medical market segment. The major factors driving our success in the
      United States appear to apply in English-speaking international markets. As
      English has become the leading language of the worldwide business and medical
      communities, our ability to market to these groups grows. We have processed
      orders from over twenty major countries because our product and service
      advantages coupled with our direct sales model is well-suited to the needs
      of
      international customers through our e-commerce enabled website and telephone
      call center. Our growing sales and brand name recognition has also attracted
      numerous inquires from volume purchasers in international markets. The
      introduction process in international markets is rather long, but we continue
      to
      develop strong relationships in a number of countries and are currently working
      with distributors in Canada, Mexico, United Kingdom, Spain, Italy, Portugal,
      Greece, Australia, Saudi Arabia, India, and Taiwan.





**Sales
      and Marketing**





We
      believe advertising and marketing will continue to be our key areas of strategic
      investment. In September 2006, we initiated a direct mail campaign targeted
      at
      the practicing dentist, dental school, practicing hygienist and hygiene school
      markets, with the goal of expanding our sales of loupes and lights. We plan
      to
      continue the rollout of our direct mail, SEM, and trade advertising campaigns
      to
      accelerate growth. In addition to the direct mail campaign discussed above,
      we
      have placed full-page advertisements in seven major dental and dental hygiene
      publications. The SheerVision FireFly LED TM received
      a positive evaluation in the January 2007 issue of the highly regarded Clinical
      Research Associates (CRA) Newsletter. 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.





8




As
      part
      of our marketing initiatives, we have developed a branding campaign to reinforce
      recognition of our unique business model, products, services, and technologies.
      The SheerVision brand has been reinforced by the publicity received by the
      company 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.
      As a result, we believe that the SheerVision brand is now positioned among
      the
      top tier brands within the industry.





In
      May
      2007, we launched our International Distributor Program (IDP) to expand our
      network of distributors operating in specific international markets. We believe
      that these international distributors have found that SheerVision products
      are
      of exceptional value in worldwide markets due to their quality and advanced
      technology. IDP distributors purchase SheerVision surgical loupes and light
      systems and then re-sell them using their local expertise in sales and
      marketing. We have developed a marketing program to support our international
      distribution partners which includes advertising materials, sales collateral,
      sales training, and sales training aides.





We
      have a
      dedicated outside sales staff of professionals covering the U.S. and Canada.
      Sales representatives make presentations to dental and dental hygiene schools,
      call on individual dental offices, and participate in local professional
      organization events and meetings. To date, we are the only company in our
      industry with a separate dental hygiene division comprised exclusively of
      registered dental hygienists. All have advanced degrees, and clinical and
      teaching experience, enabling them to speak with authority during sales
      presentations. In addition, we exhibit at over 70 trade shows each year,
      undertake numerous direct marketing campaigns, contribute articles to trade
      magazines and oversee an aggressive online marketing program.





**OEM
      Operations**





In
      addition to manufacturing and offering surgical loupes under our own brand
      name,
      we offer our surgical loupes as an OEM for major companies. During fiscal year
      2007, we partnered with a large OEM customer for a private-label loupe product
      being sold in the Japanese marketplace. We believe that by offering our products
      directly, as well as through major companies, we were able to gain market share
      not only by focusing on cost and quality conscious consumers, but also by
      focusing on brand name conscious consumers.





**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 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.





9





**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 believe that we are now recognized as one of the leading brands
      in the market. This was further 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 SV Sport Frame. Overall, we believe that
      competition is principally based upon the following three key areas:





·
            *Company*





o
            Brand
                reputation and loyalty;





o
            Product
                quality, support, and durability;





o
            Product
                pricing;





·
            *Surgical
                & Dental Loupes Product Attributes
                Including:*





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





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





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





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





·
            *Portable
                Headlight System Product Attributes
                Including:*





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





o
            *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.





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





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





o
            *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.





10




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 have filed
      a
      domestic patent application for one of the components to our product offerings
      and are evaluating the possibility of filing further 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 non-curing flip filter,
      a
      through-the-lens loupe, a high-magnification prism loupe, a wrap around sports
      frame, and fashionable loupe accessories. The FireFly LEDTM and FireFly InfinityTM
light systems have become best sellers in the dental market and contributed
      significantly to our rapid expansion into that market niche during fiscal year
      2007.





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.





**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 also have CE certifications for
      international sales.





**Employees**





As
      of
      October 31, 2007, we had employed 17 individuals and engaged the services of
      several consultants. Of our employees, 6 were engaged in sales and marketing,
      4
      in customer service/inside sales, 3 in quality control and production, and
      4 in
      executive/administrative functions.





**Our
      Background**





SheerVision,
      Inc., a Delaware corporation, was 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.





11





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. Since this date, Escalator Securities,
      Inc. has had no operations. 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.




12





**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**





**As
      we have a limited operating history, investors may not have a sufficient history
      on which to base an investment decision.**





A lthough
      we were incorporated in April 1986, our recently acquired operating subsidiary
      SheerVision-CA commenced operations in 1999. Accordingly, we may be deemed
      to
      have a limited operating history. Investors must consider the risks and
      difficulties frequently encountered by early stage companies, particularly
      in
      rapidly evolving markets such as the medical optical industry. Such risks
      include:





·
            competition;





·
            need
                for acceptance of products;





·
            ability
                to anticipate and adapt to a competitive market and rapid technological
                developments;





·
            amount
                and timing of operating costs and capital expenditures relating to
                expansion of our business, operations, and infrastructure;
                and





·
            dependence
                upon key personnel.





We
      cannot
      be certain that our strategy will be successful or that we will successfully
      address these risks. If we do not successfully address these risks, our
      business, prospects, financial condition, and results of operations could be
      materially and adversely affected. Information regarding all of our past
      operations can be found in our reports and registration statements that have
      been previously filed with the Securities and Exchange Commission.





**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.**





Although
      we believe that our existing cash and cash equivalents will be sufficient to
      support our current operations through May 31, 2008, we will have 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 in 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.





13





**We
      have a limited history of profitability and, consequently, cannot predict
      whether we will become profitable.**





Although
      SheerVision-CA commenced operations in 1999, it has recorded profits
      inconsistently to date as it has endeavored to expand its business, product
      line, and operations. Our net income (losses) for the years ended August 31,
      2007, 2006 and 2005 were $(905,286), $(2,349,374) and $21,006 respectively.
      Moreover, we will need to increase significantly our operating expenses to
      implement our business plan. As a result of the foregoing factors, we could incur
      significant losses on a quarterly and annual basis for the foreseeable future.
      Our ability to generate revenue and profits in the long term will depend
      primarily upon the successful implementation of our business plan. We can
      provide no assurance that we will be successful in implementing our business
      plan or that we will generate sufficient revenue to achieve
      profitability.





**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. As a result of our
      limited operating history, we believe that period to period comparisons of
      our
      operating results may not be a good indication of our future performance. It
      is
      possible that our future operating results may be below the expectations of
      investors or market analysts. If this occurs, our stock price may decline.
      Factors that will affect our financial results include:





·
            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 companies or
                technologies;





·
            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.




14





**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,
      or
      obtain our products rapidly when needed, we may experience difficulty
      commercializing them. 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. See “ *Management
      - Employment Agreement.* ”





**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.





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





As
      of
      October 31, 2007, Suzanne Lewsadder and Jeffrey Lewsadder, our Chief Executive
      Officer and President, respectively, beneficially own approximately 72.6% 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.




15





**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.





On
      January 10, 2007, a complaint was filed in the United States District Court
      Central District of California by Martin Hogan Pty, Ltd. which is currently
      brought against us and our Chief Executive Officer and President. Plaintiff,
      a
      former supplier of frames of ours, alleges copyright and trade dress
      infringement in its frames and is seeking damages as well as permanent
      injunctive relief. On June 19, 2007, the Court issued an order which, among
      other things, denied plaintiff’s motion for a preliminary injunction, dismissed
      the plaintiff’s state law claims and denied our motion to stay the proceedings.
      On July 10, 2007, the plaintiff filed an amended complaint and on August 17,
      2007, we filed a motion to dismiss the plaintiff’s state law and trade dress
      infringement claims in its amended complaint. We intend to continue vigorously
      defending ourselves in this action and based on our understanding of the
      relevant facts and circumstances and the denial of the plaintiff’s preliminary
      injunction, we believe that we have meritorious defenses.





In
      addition,
      on June 25, 2007, General Scientific Corporation initiated a “Section 337”
complaint against us 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. The complainant seeks a permanent exclusion order prohibiting entry
      into the United States of the purportedly infringing products together with
      a
      cease and desist order prohibiting us from selling the purportedly infringing
      products in the United States. On July 26 2007, the ITC instituted an
      investigation into actions based on the complainant’s allegations. On August 17
      2007, we answered the complaint by denying the allegations and asserting various
      defenses and on October 29, 2007 we filed a motion for summary determination
      of
      non-infringement which on November 26, 2007 was denied. Though
      we
      view the claims as completely frivolous and without merit, we are currently
      in
      negotiations with the complainant to settle this action.





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





We
      rely
      on trademark, patent 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.





16





**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. We
      are
      incurring substantial expenditures to create and maintain brand name recognition
      and loyalty. 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.





**Risks
      Related To Our Common Stock**





**As
      the market price of our common stock may fluctuate significantly, this may
      make
      it difficult for you to sell your shares of common stock when you want or at
      prices you find attractive.** **





The
      price
      of our common stock is quoted on the OTCBB and constantly changes. In recent
      years, the stock market in general has experienced extreme price and volume
      fluctuations. We expect that the market price of our common stock will continue
      to fluctuate. 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;





17





·
            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.





As
      a
      result of these fluctuations, our shareholders may experience difficulty selling
      shares of our common stock when desired or at acceptable prices.





**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 to be 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
      c ommon
      stock and may affect the ability of investors to sell their shares.





**Future
      sales of our common stock by our existing stockholders could adversely affect
      our stock price.** ****** **





The
      market price of our common stock could decline as a result of sales of a large
      number of shares of our common stock in the market, or the perception that
      these
      sales could occur. These sales also might make it more difficult for us to
      sell
      equity securities in the future at a time and at a price that we deem
      appropriate. As of October 31, 2007, we have outstanding 12,693,523 shares
      of
      common stock. Of these shares, 3,168,386 shares are freely tradeable. Giving
      effect to the exercise in full of our outstanding warrants and conversion in
      full of our outstanding Series A Preferred Stock, at October 31, 2007, we would
      have outstanding 17,183,035 shares of common stock. Of these shares, 7,657,898
      shares would be freely tradeable. This leaves 9,525,137 shares eligible for
      sale
      in the public market, the vast majority of which are beneficially owned by
      Suzanne Lewsadder and Jeffrey Lewsadder, our Chief Executive Officer and
      President, respectively.





18





Some
      of
      our warrant holders, holding warrants exercisable for approximately 977,279
      shares of common stock, have the right, subject to a number of conditions and
      limitations, to include their shares in registration statements relating to
      our
      securities. By exercising their registration rights and causing a large number
      of shares to be registered and sold in the public market, these holders may
      cause the market price of the common stock to fall. In addition, any demand
      to
      include these shares in our registration statements could adversely effect
      our
      ability to raise needed capital.





**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 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.





19





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 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
      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 month to month lease providing for annual
      rental payments of approximately $50,000. We are currently negotiating the
      terms
      of the renewal of this lease through December 1, 2010. Satellite operations
      are
      currently in the states of Arizona, California, Georgia, Illinois, Massachusetts
      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**





As
      previously reported, on January 10, 2007, a complaint was filed in the United
      States District Court Central District of California by Martin Hogan Pty, Ltd.
      which is currently brought against us and our Chief Executive Officer and
      President. Plaintiff, a former supplier of frames of ours, alleges copyright
      and
      trade dress infringement in its frames and is seeking damages as well as
      permanent injunctive relief. On June 19, 2007, the Court issued an order which,
      among other things, denied plaintiff’s motion for a preliminary injunction,
      dismissed the plaintiff’s state law claims and denied our motion to stay the
      proceedings. On July 10, 2007, the plaintiff filed an amended complaint and
      on
      August 17, 2007, we filed a motion to dismiss the plaintiff’s state law and
      trade dress infringement claims in its amended complaint. We intend to continue
      vigorously defending ourselves in this action and based on our understanding
      of
      the relevant facts and circumstances and the denial of the plaintiff’s
      preliminary injunction, we believe that we have meritorious defenses.





20





As
      previously reported, on June 25, 2007, General Scientific Corporation initiated
      a “Section 337” complaint against us 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. The complainant seeks a permanent exclusion order prohibiting entry
      into the United States of the purportedly infringing products together with
      a
      cease and desist order prohibiting us from selling the purportedly infringing
      products in the United States. On July 26 2007, the ITC instituted an
      investigation into actions based on the complainant’s allegations. On August 17
      2007, we answered the complaint by denying the allegations and asserting various
      defenses and on October 29, 2007 we filed a motion for summary determination
      of
      non-infringement which on November 26, 2007 was denied. Though
      we
      view the claims as completely frivolous and without merit, we are currently
      in
      negotiations with the complainant to settle this action.





**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 2007.





21





**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.” From March 22, 2006 to June 15, 2006, our common stock traded
      on the OTCBB under the symbol “CWTT” and previously traded on the OTCBB under
      the symbol “CWTI.” The quarterly high and low reported sales prices for our
      common stock as quoted on the OTCBB for the periods indicated are as follows:





**Year
                Ended August 31, 2007**
            **High**
            **Low**Three
                Months Ended November 30, 2006
            1.10
            .25Three
                Months Ended February 28, 2007
            .99
            .30Three
                Months Ended May 31, 2007
            1.01
            .30Three
                Months Ended August 31, 2007
            .62
            .25**Year
                Ended August 31, 2006**
            **High**
            **Low**Three
                Months Ended November 30, 2005
            .10
            .06Three
                Months Ended February 28, 2006
            .04
            .04Three
                Months Ended May 31, 2006
            4.50
            .04Three
                Months Ended August 31, 2006
            1.50
            1.00





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 23, 2007, the last reported sale price per share of common stock as
      quoted on the OTCBB was $0.12. As of such date, we had 12,693,523 shares of
      common stock outstanding. Based on information available from our registrar
      and
      transfer agent, we estimate that we had approximately 179 stockholders of record
      on October 31, 2007.





**Dividends**





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 the Board may deem relevant.




22





**Recent
      Sales of Unregistered Securities**





We
      made
      no sales of unregistered securities during the year ended August 31,
      2007.





**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, 2007.




**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, 2007:





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
                andrights
              (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
            --
            --
            3,200,000*Equity
              compensation
                plans
              not
                approved by
              security
                holders
            --
            --
            --Total
            --
            --
            3,200,000


___________


*
      Represents up to 3,000,000 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.




23





**ITEM
      6.**  **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, 2007 and 2006*** ***,
      and the notes thereto, all of which financial statements are included elsewhere
      in this Form 10-KSB. In addition to historical information, the following
      discussion and other parts of this Form 10-KSB 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
      10KSB.***




**Overview**




We
      design
      and sell proprietary surgical loupes and light systems to the dental, medical,
      veterinary, and dental hygiene market segments. Through our exclusive
      arrangement with component manufacturers based in Asia, and in combination
      with
      our U.S. assembly and testing facilities, we can provide top quality loupes
      and
      light systems directly to end-users and our distributor partners at
      substantially lower prices than our competitors.




Since
      our
      inception in 1999, we have rapidly established a significant base of operations
      characterized by steady sales growth, a dedicated sales force, strategic
      marketing programs, the initiation of an aggressive web presence through the
      introduction of a new online retail store, expansion into new global markets,
      and continued product development activities.





During
      fiscal year 2007 we introduced many new products including a new fashionable
      sports frame in eight vibrant colors, the SureFit TTL loupes, the Firefly
      infinity light systems, and designer cases. The introduction of these new
      products has contributed to our continued year over year increase in sales.
      With
      the continued success of these products and the addition of new products
      currently in our pipeline, management is encouraged with our progress and goals
      of reaching profitability.





We
      continue to grow our sales volume by developing new product offerings and by
      rapidly expanding distribution network domestically, internationally, and
      online. Through the development of the SureFit TTL Loupes, the FireFly InfinityTM
LED, the FireFly FlipFilterTM, and related accessories, we have broadened our
      appeal to our core market segments of dental, surgical and veterinary. The
      eCommerce powered webstore has provided us with a cost-effective platform to
      sell products and to communicate with customers. With the launch of our
      International Distributor Program (IDP) we have already increased our reach
      by
      successfully expanding our international distribution network in several new
      countries. International distributors provide us with distribution channels
      with
      the potential to grow rapidly in a highly cost-effective manner. 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 highly competitive price. We plan on continuing
      these growth-oriented efforts as we continue to build our sales and product
      offerings.





24





On
      March
      27, 2006, we entered into a Share Exchange and Reorganization Agreement with
      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 sets forth the terms and
      conditions of our business combination 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 effective April 13, 2006, and the shareholders of
      SheerVision-CA became our controlling stockholders. For financial reporting
      purposes, this transaction has been treated as a reverse-merger, where
      SheerVision-CA is the acquirer. Because this transaction is treated as a
      purchase of SheerVision,Inc., a Delaware corporation, the historical financial
      statements of SheerVision-CA became our historical financial statements after
      the transaction.





**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
      collectibility 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 Equivalents.***





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





***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.





25





***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.





***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. No inventory valuations were warranted as of August
      31, 2007 and August 31, 2006.





***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.





***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.





***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.





26





***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.





**Recently
      Issued Accounting Pronouncements Not Yet Effective**





The
      following accounting pronouncements have been issued but were not effective
      for
      the fiscal years ended August 31, 2007 or 2006:





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


·  SFAS
      155, *Accounting
      for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133
      and 140* ;





·  SFAS
      156, *Accounting
      for Servicing of Financial Assets—an amendment of FASB Statement No.
      140* ;





·  SFAS
      157, *Fair
      Value Measurements* ;





·  SFAS
      159, *The
      Fair Value Option for Financial Assets and Financial Liabilities—including an
      amendment of FASB Statement No. 115.*





***FASB
      Interpretations (FIN):***


·  FIN
      48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109* .





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


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





·  FSP
      FIN
      48-1, *"Definition
      of Settlement in FASB Interpretation No. 48"* ;





·  FSP
      FIN
      39-1, *"Amendment
      of FASB Interpretation No. 39"* ;





·  FSP
      FAS
      158-1, *"Conforming
      Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No.
      106
      and to the Related Staff Implementation Guides"* ;




·  FSP
      EITF
      00-19-2, *"Accounting
      for Registration Payment Arrangements"* ;




·  FSP
      FAS
      126-1, *"Applicability
      of Certain Disclosure and Interim Reporting Requirements for Obligors for
      Conduit Debt Securities"* ;





·  FSP
      AUG
      AIR-1, *"Accounting
      for Planned Major Maintenance Activities"* ;




·  FSP
      FAS
      13-2, *"Accounting
      for a Change or Projected Change in the Timing of Cash Flows Relating to Income
      Taxes Generated by a Leveraged Lease Transaction"* ;




·  FSP
      FTB
      85-4-1, *"Accounting
      for Life Settlement Contracts by Third-Party Investors"* .





27




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


·  EITF
      Issue No. 05-1, *"Accounting
      for the Conversion of an Instrument That Became Convertible upon the Issuer's
      Exercise of a Call Option"* ;





·  EITF
      Issue No. 06-1, *"Accounting
      for Consideration Given by a Service Provider to a Manufacturer or Reseller
      of
      Equipment Necessary for an End-Customer to Receive Service from the Service
      Provider"* ;





·  EITF
      Issue No. 06-2, *"Accounting
      for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement
      No.
      43, Accounting for Compensated Absences"* ;





·  EITF
      Issue No. 06-3, *"How
      Taxes Collected from Customers and Remitted to Governmental Authorities Should
      Be Presented in the Income Statement (That Is, Gross versus Net
      Presentation)"* ;





·  EITF
      Issue No. 06-4, *"Accounting
      for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
      Split-Dollar Life Insurance Arrangements"* ;





·  EITF
      Issue No. 06-5, *"Accounting
      for Purchases of Life Insurance-Determining the Amount That Could Be Realized
      in
      Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases
      of
      Life Insurance"* ;





·  EITF
      Issue No. 06-7, *"Issuer's
      Accounting for a Previously Bifurcated Conversion Option in a Convertible Debt
      Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria
      in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
      Activities"* ;





·  EITF
      Issue No. 06-8, *"Applicability
      of the Assessment of a Buyer's Continuing Investment under FASB Statement No.
      66, Accounting for Sales of Real Estate, for Sales of
      Condominiums”* ;





· EITF
      Issue No. 06-9, *"Reporting
      a Change in (or the Elimination of) a Previously Existing Difference between
      the
      Fiscal Year-End of a Parent Company and That of a Consolidated Entity or between
      the Reporting Period of an Investor and That of an Equity Method
      Investee"* ;





·  EITF
      Issue No. 06-10, *"Accounting
      for Collateral Assignment Split-Dollar Life Insurance
      Arrangements"* ;





·  EITF
      Issue No. 06-11, *"Accounting
      for Income Tax Benefits of Dividends on Share-Based Payment
      Awards"* ;





·  EITF
      Issue No. 07-3, *"Accounting
      for Nonrefundable Advance Payments for Goods or Services Received for Use in
      Future Research and Development Activities".*





28





***Statement
      133 Implementation (Derivatives Implementation Group or DIG) Issues:***




·  Statement
      133 Implementation Issue No. B40, *"Application
      of Paragraph 13(b) to Securitized Interests in Prepayable Financial
      Assets"* ;




·  Statement
      133 Implementation Issue No. G26, *"Hedging
      Interest Cash Flows on Variable-Rate Assets and Liabilities That Are Not Based
      on a Benchmark Interest Rate"*





***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.*





The
      Company does not believe that adoption of any of the above pronouncements that
      may apply will have a material impact on its financial position or results
      of
      operations.




29





**Results
      of Operations**





The
      following table sets forth, for the periods indicated, financial information
      related to operations, as well as expressed as a percentage of our net
      sales:





THREE
                MONTHS ENDED AUGUST 31,(in
                thousands)2007
            
            2006Net
                Sales
            
            $
            1,152
            
            
            100.0%
            
            $
            638
            
            
            100.0%Cost
                of Goods Sold
            
            
            438
            
            
            38.1%
            
            
            196
            
            
            30.7%Gross
                Profit
            
            
            714
            
            
            61.9%
            
            
            442
            
            
            69.3%Operating
                ExpensesShipping
                Expenses
            
            
            38
            
            
            3.3%
            
            
            43
            
            
            6.7%Selling
                Expenses
            
            
            284
            
            
            24.6%
            
            
            493
            
            
            77.3%General
                & Administrative Exp
            
            
            363
            
            
            31.5%
            
            
            419
            
            
            65.8%Product
                Development Expenses
            
            
            17
            
            
            1.4%
            
            
            1
            
            
            .1%Total
                Operating Expenses
            
            
            702
            
            
            86.8%
            
            
            956
            
            
            149.9%Profit
                (Loss) from Operations
            
            
            12
            
            
            1.0%
            
            
            (514)
            
            
            (80.6)%Other
                (Income)/Expense
            
            
            1
            
            
            .1%
            
            
            (398)
            
            
            (62.4)%Provision
                (Benefit) for Income Tax
            
            
            1
            
            
            .1%
            
            
            (24)
            
            
            (3.8)%Net
                Profit (Loss)
            
            $
            12
            
            
            1.0%
            
            $
            (888)
            
            
            (139.3)%





TWELVE
                MONTHS ENDED AUGUST 31,(in
                thousands)2007
            
            2006Net
                Sales
            
            $
            4,352
            
            
            100.0%
            
            $
            2,981
            
            
            100.0%Cost
                of Goods Sold
            
            
            1,437
            
            
            33.0%
            
            
            1,135
            
            
            38.1%Gross
                Profit
            
            
            2,915
            
            
            67.0%
            
            
            1,846
            
            
            61.9%Operating
                ExpensesShipping
                Expenses
            
            
            163
            
            
            3.7%
            
            
            135
            
            
            4.5%Selling
                Expenses
            
            
            1,881
            
            
            43.2%
            
            
            1,525
            
            
            51.2%General
                & Administrative Exp
            
            
            1,756
            
            
            40.4%
            
            
            1,421
            
            
            47.6%Product
                Development Expenses
            
            
            30
            
            
            0.7%
            
            
            30
            
            
            1.0%Total
                Operating Expenses
            
            
            3,830
            
            
            88.0%
            
            
            3,111
            
            
            104.3%Loss
                from Operations
            
            
            (915)
            
            
            (21.0)%
            
            
            (1,265)
            
            
            (42.3)%Other
                (Income)/Expense
            
            
            13
            
            
            .3%
            
            
            1,104
            
            
            37.2%Provision
                (Benefit) for Income Tax
            
            
            (3)
            
            
            0.0%
            
            
            (20)
            
            
            (.6)%Net
                Loss
            
            $
            (905)
            
            
            (20.8)%
            
            $
            (2,349)
            
            
            (78.9)%




Fourth
      quarter revenues increased in part due to sales to our international distributor
      base. These revenues generated lower profit margins, but selling expenses
      reduced as compared to sales generated in the retail markets. Fourth quarter
      revenues overall were slightly lower than expected due to delays incurred in
      the
      manufacturing process of our power source that supports our LED light systems.
      Currently we are contracting with additional manufacturers to increase
      production volume for this product in order to meet the demand on a real time
      basis. We anticipate this increased level of production to start during the
      second quarter of fiscal year 2008.





30





Through
      cost cutting efforts in our retail sales and marketing programs we were able
      to
      post a fourth quarter net profit of $11,295. This is our first quarterly profit
      since becoming a public entity. Net profits were reduced however by over
      $170,000 of expenses incurred in legal fees to support defending two competitor
      lawsuits alleging product copyright, trade dress and patent infringement on
      specific components of our surgical loupes. We are encouraged that these issues
      will be settled in the near future in a way that will not affect future sales
      potential, and are using our best efforts to mitigate these expenses in the
      future.





We
      concentrated efforts on reducing operating costs and streamlining our sales
      and
      marketing efforts during the last half of fiscal year 2007. As we focus more
      heavily on distributor relationships to generate sales, the exposure to
      escalating costs in sales and travel related expenses in the domestic retail
      market can be mitigated. Through large orders from a growing number of
      distributors, we anticipate that these efforts will improve the operating income
      (loss) in future quarters.





We
      reduced the retail sales force to a level that will support those demographic
      areas producing the greatest volume of sales. The number of tradeshows for
      2008
      has been scaled down as well, and several of the smaller localized shows which
      in the past generated exposure to our product lines but not necessarily
      immediate revenues, have been eliminated. This action will also reduce excessive
      travel related expenses which have skyrocketed during 2007 due to cost pressures
      in the travel industry from ever increasing oil prices.





Management
      believes that we have positioned ourselves for steady sales growth in fiscal
      year 2008 and through the cost cutting measures already established, this should
      result in a stronger financial position for the coming fiscal year.





**Year
      Ended August 31, 2007 Compared to the Year Ended August 31,
      2006**





***Net
      Sales***





Net
      Sales
      increased by $1,371,323, or 46.0%, from $2,980,584 for the year ended August
      31,
      2006 to $4,351,907 for the year ended August 31, 2007. During the twelve month
      period ended August 31, 2007, we generated more revenue than in any twelve
      month
      period since our inception. This increase was directly related to sales from
      one
      of our newest products, the Firefly LEDTM, and the newly enhanced Firefly
      InfinityTM LED light system. Sales increases were aided by the previously
      implemented strategic branding/marketing campaign as well as a direct response
      mailing to our core dental market. Additional sales were generated by our
      International Distributor Program through new and existing dealers. The increase
      in sales in our illumination product lines has enabled us to diversify our
      revenue streams organically so as not to be dependent on exclusively
      magnification products. By now being better positioned to satisfy additional
      needs for each customer and potential customer, the average order size per
      customer increased over the period due to the introduction of product bundling
      with price advantages. We maintained our position with our competitive pricing
      edge and therefore did not institute a price increase to our customers during
      the first seven months of the fiscal year. During the later half of the year
      we
      instituted a modest price increase to our end-users relative to our
      magnification product line. However, increased sales were primarily attributable
      to the increase in unit sales, and not the effect of the price increase.





31





***Cost
      of Goods Sold***





Cost
      of
      goods sold increased by $302,540, or 26.7%, from $1,134,516 for the year ended
      August 31, 2006 to $1,437,056 for the year ended August 31, 2007. As a
      percentage of sales, cost of goods sold decreased from 38.1% of sales for the
      year ended August 31, 2006 to 33.0% of sales for the year ended August 31,
      2007.
      This decrease is due to the effects of additions and changes in the mix of
      products being sold.





***Gross
      Profit***





Gross
      profit increased by $1,068,783, or 57.9% from $1,846,068 for the year ended
      August 31, 2006 to $2,914,851 for the year ended August 31, 2007. The increase
      in gross profit was attributable to increased sales volume and the effects
      of
      the cost of goods on the current product mix. The gross profit was 67.0% of
      net
      sales for the year ended August 31, 2007 compared to 61.9% of net sales for
      the
      year ended August 31, 2006. Our growth in the sale of illumination products,
      which have higher margins than magnification products, was the major factor
      in
      this improvement in gross margins. During the twelve month period ended August
      31, 2007 distributor sales represented 16.2% of total sales as compared to
      11.1%
      during the twelve month period ended August 31, 2006. Pricing of products direct
      to distributors are lower than pricing direct to consumers primarily because
      the
      sales costs associated with the sale are born by the distributor which reduces
      the sales and marketing expenses for the company. During fiscal year 2008 we
      anticipate our distributor sales will include our light systems as well as
      our
      loupe systems. We do anticipate our profit margins will see improvement as
      this
      volume increases.





***Operating
      Expenses***





Operating
      expenses, which include shipping expenses, selling and marketing expenses,
      general and administrative expenses and product development increased by
      $718,491, or 23.1%, to $3,829,941 for the year ended August 31, 2007 as compared
      to $3,111,450 for the year ended August 31, 2006.





Shipping
      expenses were $163,015 or 3.7% of net sales for the year ended August 31, 2007
      as compared to $135,044 or 4.5% of net sales for the year ended August 31,
      2006.
      This increase of $27,971 was directly attributable to the increase in sales
      volume.





Selling
      and marketing expenses were $1,881,242 for the year ended August 31, 2007 an
      increase of $356,285 or 23.2% over the year end selling and marketing expenses
      of $1,524,957 at August 31, 2006. During the year ended August 31, 2007, we
      aggressively positioned ourselves through a strategic sales and marketing
      program to develop brand awareness and enhance market share through a
      coordinated advertising and direct mail campaign. The expense associated with
      this program accounted for the majority of this increase in selling and
      marketing expenses.





General
      and administrative expenses were $1,756,161 for the year ended August 31, 2007
      an increase of $334,494 or 23.5% over the year end general and administrative
      expenses of $1,421,667 at August 31, 2006. This increase is attributable to
      the
      increase in operational staff salaries and benefits to support our growth in
      all
      areas of administration, customer service, and order processing. In addition
      legal expenses as discussed above accounted for approximately $170,000 or 50%
      of
      the increase.





32





Product
      development costs decreased by $259 or 0.9% from $29,782 for the year ended
      August 31, 2006 to $29,523 for the year ended August 31, 2007. 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***





As
      a
      result of the foregoing, we had a net loss from operations for the year ended
      August 31, 2007 of $915,090 compared to a loss from operations of $1,265,382
      for
      the year ended August 31, 2006.





***Interest
      Expense***





We
      did
      not incur any interest expense during the year ended August 31, 2007 as compared
      to $227,355 incurred during the year ended August 31, 2006, which was primarily
      related to the issuance of 12% secured convertible notes. These notes were
      paid
      in full as of August 31, 2006. Interest expense incurred under a bank line
      of
      credit during the years ended August 31, 2007 and 2006 was $0 and $6,945
      respectively.





***Interest
      Income***





Interest
      income earned from the investment in variable money market funds was $12,706
      for
      the year ended August 31, 2007 as compared to $31,909 for the year ended August
      31, 2006.





***Registration
      Penalties***





We
      had an
      obligation under a registration rights agreement with respect to our 9%
      convertible notes to pay penalties if we failed to meet the registration
      deadline for the preferred stock issuance. Upon failing to meet the deadline,
      we
      incurred a penalty in the amount of $45,105 which is reflected in the August
      31,
      2006 financial statements.





***Amortization
      and Depreciation***





Amortization
      for the year ended August 31, 2007 amounted to $472 which was related to our
      cost of obtaining patent protection as compared to $864,117 for the year ended
      August 31, 2006 which was related to the amortization of deferred financing
      costs associated with the issuance of secured convertible notes in September
      2005. Depreciation expense was $25,681 and $3,906, respectively for the years
      ended August 31, 2007 and 2006. Amortization and depreciation expense are
      included in general and administrative expenses for the year ended August 31,
      2007. For the year ended August 31, 2006 amortization of deferred financing
      costs were shown as other expense.





***Income
      Taxes***





For
      the
      twelve months ended August 31, 2007 we recorded a current income tax provision
      of $2,902.





33





***Net
      Loss***





As
      a
      result of the foregoing, we had a net loss for the year ended August 31, 2007
      of
      $905,286, compared to a net loss of $2,349,374 for the year ended August 31,
      2006.





Our
      loss
      per common share for the year ended August 31, 2007 was $0.09 compared to a
      loss
      per common share of $0.47 for the year ended August 31, 2006.





**Liquidity
      and Capital Resources**





As
      of
      August 31, 2007, we had $265,262 in cash which primarily resulted from funds
      raised in our previous private offerings of common and preferred stock. As
      of
      August 31, 2007, we had current assets in the amount of $730,038 and current
      liabilities in the amount of $750,340. As a result we had a working capital
      deficit of $20,302, as compared to working capital of $1,178,605 at August
      31,
      2006. Included in current liabilities are the accrued dividends on Preferred
      Series A Stock in the amount of $324,370, which is not anticipated to be paid
      within the next 12 months, however these dividends will continue to
      accrue.





Inventory
      as of August 31, 2007 was $341,219. This is an increase of $64,297 from
      inventory of $276,922 as of August 31, 2006.





We
      generated
      revenues of $4,351,907 and $2,980,584 for the years ended August 31, 2007 and
      2006 respectively, and recorded a net loss of $905,286 and $2,349,374,
      respectively, during these periods. In addition, during the years ended August
      31, 2007 and 2006, net cash used in operating activities was $807,163 and
      $1,865,679, respectively. Net cash used in investing activities during the
      years
      ended August 31, 2007 and 2006 was $42,201 and $730,251, respectively. Net
      cash
      used in financing activities during the years ended August 31, 2007 and 2006
      was
      $0 and $3,708,720, respectively.





To
      date,
      we have financed operations principally through internally generated funds,
      a
      bank line 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. We will 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. We have engaged a
      placement agent to secure us financing. 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.





Our
      ability to generate positive operational cash flow depends upon increasing
      revenues through the sales of existing product lines and the generation of
      additional lines through our research and development processes. There can
      be no
      assurance that we will be successful in generating a positive operational cash
      flow.





34





**Contractual
      Obligations**





We are
      currently negotiating a three year non-cancellable lease effective December
      1, 2007 and expiring December 1, 2010. The lease obligation based on minimum
      monthly rents is expected to be as follows:





Fiscal
                Years Ended2008
            
            
            50,6792009
            
            
            55,0072010
            
            
            56,657$
            162,343





Rent
      expense
      for the years ended August 31, 2007 and 2006 was $48,268, and $35,646,
      respectively.





**Off
      Balance Sheet Arrangements**





We
      have
      no off-balance sheet arrangements.





**Quantitative
      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
      7. FINANCIAL STATEMENTS**





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





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





None.





**ITEM
      8A. CONTROLS AND PROCEDURES**




Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, has 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 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 Chief Financial Officer, as
      appropriate to allow timely decisions regarding required
      disclosure.





35





There
      were no changes in our internal controls over financial reporting which occurred
      during the most recent fiscal quarter covered by this report that has materially
      affected, or is reasonably likely to materially affect, our internal controls
      over financial reporting.





**ITEM
      8B. OTHER INFORMATION**





None.








**PART
      III**







**ITEM
      9. 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
            PositionSuzanne
                Lewsadder
            61
            Chief
                Executive Officer, Director and TreasurerJeffrey
                Lewsadder
            51
            President,
                Director and SecretarySuzanne
                Puente
            49
            Chief
                Financial OfficerShemiran
                Hart
            49
            DirectorSharon
                Biddle
            55
            DirectorDavid
                Frankel
            59
            DirectorTerri
                Wiest
            60
            National
                Sales Director, Dental HygieneMartin
                Chaput
            39
            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.





36





Suzanne
      Puente has served as our Chief Financial Officer since December, 2005. Ms.
      Puente has over 15 years experience in financial management and strategic
      planning in public and private companies. Previously, she was Vice President,
      Finance and Human Resources for a medical research and development firm, where
      she managed all accounting, financial, personnel and IT system activities from
      1995 to 2005. Ms. Puente holds a B.S. degree in Business
      Administration/Accounting from California State University.





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. 
She brings over fifteen years experience in public company financial management
      to her role as a member of our board. Previously, Ms. Hart was Division
      Controller of Teradyne, Inc., an S&P 500 corporation, from 1999 to 2005. 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.





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.





37





**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, 2007, our board of directors held one meeting and
      took
      actions by written consent on three 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.





38





*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.





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 annually 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 during the coming year. 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-KSB 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.




39




**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
                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.





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.





40





**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, 2007, was
      a
      director, officer, or beneficial owner of more than 10% of the common stock
      of
      the Company 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 except
      with respect to the following individuals who have not made filings and/or
      timely filed for the fiscal year ended August 31, 2007: Jeffrey Lewsadder and
      Suzanne Lewsadder each failed to file a Form 5.





**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**




**Summary
      Compensation**




The following
      table sets forth the
      compensation earned during the years ended
      August 31 ,
      2007
      and 2006 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”:




41




**Name
                and**
              **Principal****Position**
            **Year**
              **(1)**
            **Salary**
              **($)**
            **Bonus**
              **($)**
            **Stock
                Awards**
              **($)**
            **Option
                Awards**
              **($)**
            **Non-Equity**
              **Incentive
                Plan Compen****sation**
              **($)**
            **Non-qualified**
              **Deferred
                Compensation**
              **($)**
            **All
                Other**
              **Compensation**
              **($)**
            **Total**
              ($)Suzanne
                Lewsadder;
              Chairman
                and Chief Executive Officer
            2007
            112,500
            44,073
            --
            --
            --
            --
            26,091(2)
            182,6642006
            112,500
            --
            --
            --
            --
            --
            8,187(2)
            120,687Jeffrey
                Lewsadder;
              President
                and Secretary
            2007
            112,500
            27,443
            --
            --
            --
            --
            26,568(2)
            166,5112006
            112,500
            --
            --
            --
            --
            --
            14,707(2)
            127,207Suzanne
                Puente;
              Chief
                Financial Officer
            2007
            100,008
            40,000
            --
            --
            --
            --
            16,511(2)
            156,5192006
            75,000(3)
            --
            --
            --
            --
            --
            11,711(2)
            86,711Terri
                Wiest;
              National
                Sales Director,
              Dental
                Hygiene Division
            2007
            60,000
            55,228(4)
            --
            --
            --
            --
            6,660(2)
            121,8882006
            60,000
            67,877(4)
            --
            --
            --
            --
            3,889
            131,766Martin
                Chaput;
              Online
                Marketing Manager
            2007
            80,000
            --
            --
            --
            --
            --
            12,026(2)
            92,0262006
            15,179(5)
            --
            --
            --
            --
            --
            2,010(2)
            17,189


**___________**




1
            The
                information is provided for each fiscal year referenced beginning
                September 1 and ending August 31.2
            See
                “All Other Compensation” table below.3
            The
                referenced individual is entitled to a salary of $100,000 per annum.
                The
                amount referenced reflects the amount earned during fiscal year 2006
                since
                commencement of employment on December 1, 2005.4
            Referenced
                amount represents sales commissions earned.5
            The
                referenced individual is entitled to a salary of $80,000 per annum.
                The
                amount referenced represents the amount earned during fiscal year
                2006
                since commencement of employment in June
                2006.




42





**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
              Lewsadder
            2007
            11,253
            13,936
            902
            26,0912006
            4,207
            3,078
            902
            8,187Jeffrey
              Lewsadder
            2007
            11,108
            14,890
            570
            26,5682006
            11,019
            1,902
            1,786
            14,707Suzanne
              Puente
            2007
            --
            16,311
            200
            16,5112006
            
            11,511
            200
            11,711Terri
              Wiest
            2007
            --
            6,401
            259
            6,6602006
            --
            3,889
            --
            3,889Martin
              Chaput
            2007
            --
            11,991
            35
            12,0262006
            --
            2,010
            --
            2,010





**Outstanding
      Equity Awards**





As
      of
      August 31, 2007, we have no outstanding equity awards.





**Compensation
      of Directors**





During
      the fiscal year ended August 31, 2007, 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”* below.





**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, 2007. 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.





43





**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, 2007, no awards
      have been made 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,
      2007, no awards have been made under the Directors Plan.





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.





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





The
      following table sets forth, as of August 31, 2007 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-KSB, 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
      12,693,523 shares of our common stock issued and outstanding as of August 31,
      2007.





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.





44





**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)
            72.6%Jeffrey
                Lewsadder(1)(2)
            9,219,137(3)
            72.6%Shemiran
                Hart(1)
            0
            0%Sharon
                Biddle(1)
            31,041
            *%David
                Frankel(1)
            31,041
            *%Suzanne
                Puente(2)
            0
            0%Terri
                Wiest
            0
            0%Martin
                Chaput
            0
            0%All
                Current Executive Officers and
              Directors
                as a Group (6 persons)
            9,281,219
            73%




*
                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.





**ITEM
      12. 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.





On
      April
      18, 2007, we entered into a consulting agreement for investor and public
      relations services. In consideration for consultant's services, he is 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.





In
      December 2005, we entered into a credit line which provided us with a revolving
      credit facility of up to $300,000. The credit line expired April 15, 2007.
      The
      credit line bore interest at 1.25% above the bank prime rate and was
      collateralized by a security interest in all of the assets of SheerVision-CA.
      All obligations under the credit line were personally guaranteed by Suzanne
      Lewsadder and Jeffrey Lewsadder, our Chief Executive Officer and President,
      respectively. Outstanding indebtedness under the credit line was $0 in each
      of
      the years ended August 31, 2007 and 2006.





45





**ITEM
      13. EXHIBITS AND INDEX OF EXHIBITS.**





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





Exhibit
              No.
            
            Description2.1
            
            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 10-KSB 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).




46





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).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).





47





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 10-KSB 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).




48





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).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).




49





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).




50





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).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
                SheerVistion, 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).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.




51




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 200231.2
            
            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.







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




We
      incurred
      the following fees to Miller Ellin & Company LLP for services rendered
      during the fiscal year ended August 31, 2007 and 2006:








**Summary:**
            
            **2005**
            **2006**
            **2007**Audit
                fees
            
            -----
            110,407
            87,401Audit
                related fees
            
            -----
            -----
            -----Tax
                fees
            
            -----
            -----
            38,943*Other
                fees
            
            -----
            -----
            -----


_________


*
      Amount
      represents fees for preparation of our tax returns.





52





**SIGNATURES**





In
      accordance with 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
              29, 2007SHEERVISION
              INC.By:
            /s/
              Suzanne LewsadderSuzanne
                LewsadderChief
              Executive Officer







In
      accordance with 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/ Suzannne Lewsadder
              
              Chief
                  Executive Officer
              November
                  29, 2007Suzanne
                  Lewsadder
              
              and
                  Director(Principal
                  Executive Officer)/s/ Jeffrey Lewsadder
              
              President
                  and Director
              November
                  29, 2007Jeffrey
                  Lewsadder/s/ Suzanne Puente
              
              Chief
                  Financial Officer
              November
                  29, 2007Suzanne
                  Puente(Principal
                  Financial andAccounting
                  Officer)/s/ Sharon Biddle
              
              Director
              November
                  29, 2007Sharon
                  Biddle/s/ David Frankel
              
              Director
              November
                  29, 2007David
                  Frankel









SHEERVISION,
      INC. AND SUBSIDIARY


FINANCIAL
        STATEMENTS
 FOR
        THE
        YEARS ENDED AUGUST 31, 2007 AND 2006
 
 TABLE
        OF
        CONTENTS
  PageReport
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheets - August 31, 2007 and 2006
              F-3Consolidated
                  Statements of Operations Years Ended August 31, 2007 and
                  2006
              F-4Consolidated
                  Statements of Cash Flows Years Ended August 31, 2007 and
                  2006
              F-5Consolidated
                  Statements of Changes in Stockholders’ Equity Years Ended August 31, 2007
                  and 2006
              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, 2007 and 2006, and the related consolidated statements of
      operations, stockholders’ equity, and cash flows for the years then ended. These
      c onsolidated 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, 2007 and 2006 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 $807,163 in 2007, an accumulated deficit of $4,764,363
      at August 31, 2007, 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
      29, 2007





F-2




SHEERVISION,
                  INC. AND
                  SUBSIDIARYCONSOLIDATED
                  BALANCE SHEETSAugust
                  31,
              
              August
                  31,2007
              
              2006ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              265,262
              
              $
              1,114,626Accounts
                  receivable, net
              
              
              50,397
              
              
              73,864Inventory
              
              
              341,219
              
              
              276,922Prepaid
                  expenses and other current assets
              
              
              73,160
              
              
              76,429Total
                  Current Assets
              
              
              730,038
              
              
              1,541,841PROPERTY
                  AND EQUIPMENT, net
              
              
              117,864
              
              
              101,345INTANGIBLE
                  ASSETS, net
              
              
              8,090
              
              
              -$
              855,992
              
              $
              1,643,186LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIES:Accounts
                  payable
              
              $
              337,013
              
              $
              204,153Accrued
                  expenses and other current liabilities
              
              
              88,957
              
              
              103,725Accrued
                  dividends preferred series A
              
              
              324,370
              
              
              55,358Total
                  Current Liabilities
              
              
              750,340
              
              
              363,236Preferred
                  Stock, Series A, 9% cumulative convertible;$.001
                  par value, $10 per share, Authorized 350,000issued
                  and outstanding 270,046 shares
              
              
              270
              
              
              308Common
                  Stock: par value $.001;Authorized
                  90,000,000 shares -issued
                  and outstanding 12,693,523
              
              
              12,694
              
              
              12,278Additional
                  paid in capital
              
              
              4,857,051
              
              
              4,857,429Accumulated
                  deficit
              
              
              (4,764,363
              )
              
              (3,590,065
              )Total
                  Stockholders' Equity
              
              
              105,652
              
              
              1,279,950$
              855,992
              
              $
              1,643,186
 See
          accompanying notes to consolidated financial
          statements





F-3


SHEERVISION,
                      INC. AND
                      SUBSIDIARYCONSOLIDATED
                    STATEMENTS OF OPERATIONSYEARS
                    ENDEDAUGUST
                    31,2007
                
                2006NET
                    SALES
                
                $
                4,351,907
                
                $
                2,980,584COST
                    OF GOODS SOLD
                
                
                1,437,056
                
                
                1,134,516GROSS
                    PROFIT
                
                
                2,914,851
                
                
                1,846,068OPERATING
                    EXPENSES:Shipping
                
                
                163,015
                
                
                135,044Selling
                    and marketing
                
                
                1,881,242
                
                
                1,524,957General
                    and administrative
                
                
                1,756,161
                
                
                1,421,667Product
                    development
                
                
                29,523
                
                
                29,782Total
                    operating expenses
                
                
                3,829,941
                
                
                3,111,450PROFIT
                    (LOSS) FROM OPERATIONS
                
                
                (915,090
                )
                
                (1,265,382
                )OTHER
                    INCOME (EXPENSE)Interest
                    expense
                
                
                -
                
                
                (227,355
                )Interest
                    income
                
                
                12,706
                
                
                31,909Registration
                    penatly on preferred stock issuance
                
                
                -
                
                
                (45,105
                )Amortization
                    of deferred financing Costs
                
                
                -
                
                
                (864,117
                )Total
                    other income (expense)
                
                
                12,706
                
                
                (1,104,668
                )GAIN
                    (LOSS) BEFORE INCOME TAX
                
                
                (902,384
                )
                
                (2,370,050
                )PROVISION
                    FOR INCOME TAX-CURRENT
                
                
                2,902
                
                
                (20,676
                )NET
                    PROFIT (LOSS)
                
                $
                (905,286
                )
                $
                (2,349,374
                )ACCRUED
                    PREFERRED STOCK DIVIDENDS
                
                
                (269,012
                )
                
                (55,358
                )NET
                    LOSS APPLICABLE TO COMMON SHAREHOLDERS
                
                $
                (1,174,298
                )
                $
                (2,404,732
                )BASIC
                    AND DILUTED LOSS PER SHARE APPLICABLE TO COMMON
                    SHAREHOLDERS:Basic
                    and Diluted
                
                $
                (0.09
                )
                $
                (0.47
                )Weighted
                    average number of shares outstanding
                
                
                12,373,888
                
                
                5,072,015
 See
          accompanying notes to consolidated financial
          statements





F-4




SHEERVISION,
                    INC. AND
                    SUBSIDIARYCONSOLIDATED
                  STATEMENTS OF CASH FLOWSYEARS
                  ENDEDAUGUST
                  31,2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (905,286
              )
              $
              (2,349,374
              )Adjustments
                  to reconcile net loss to netcash
                  used in operating activities:Depreciation
              
              
              25,681
              
              
              3,906Amortization
              
              
              472
              
              
              864,117Deferred
                  interest expense
              
              
              -
              
              
              68,838Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              23,467
              
              
              (35,922
              )Inventory
              
              
              (64,297
              )
              
              (137,028
              )Deferred
                  financing costs
              
              
              -
              
              
              (222,422
              )Deferred
                  patent costs
              
              
              (8,562
              )
              
              -Prepaid
                  expenses
              
              
              3,269
              
              
              (9,510
              )Accounts
                  payable
              
              
              132,861
              
              
              (22,319
              )Other
                  current assets
              
              
              -
              
              
              3,580Accrued
                  expenses and other current liabilities
              
              
              (14,768
              )
              
              (29,545
              )NET
                  CASH USED IN OPERATING ACTIVITIES
              
              
              (807,163
              )
              
              (1,865,679
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of property and equipment
              
              
              (42,201
              )
              
              (105,251
              )Purchase
                  of stock - CWTI
              
              
              -
              
              
              (625,000
              )NET
                  CASH USED IN INVESTING ACTIVITIES
              
              
              (42,201
              )
              
              (730,251
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from the issuance of debt
              
              
              -
              
              
              4,345,577Offering
                  costs
              
              
              -
              
              
              (642,645
              )Issuance
                  of common stock
              
              
              -
              
              
              2,251Issuance
                  of Preferred stock
              
              
              -
              
              
              308Proceeds
                  from exercise of warrants
              
              
              -
              
              
              3,229NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              -
              
              
              3,708,720NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (849,364
              )
              
              1,112,790CASH
                  AND CASH EQUIVALENTS - beginning
              
              
              1,114,626
              
              
              1,836CASH
                  AND CASH EQUIVALENTS - ending
              
              $
              265,262
              
              $
              1,114,626SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOWS:Cash
                  paid during the period for:Interest
              
              $
              -
              
              $
              158,759Income
                  taxes
              
              $
              3,200
              
              $
              3,340SUPPLEMENTAL
                  DISCLOSURES OF NON - CASH INVESTINGAND
                  FINANCING ACTIVITIES:Accrued
                  preferred stock dividends
              
              $
              269,012
              
              $
              -Adjustments
                  related to reverse merger into public shell
              
              $
              -
              
              $
              1,125,335
 
 See
        accompanying notes to consolidated financial
        statements





F-5




SHEERVISION,
                    INC. AND
                    SUBSIDIARYCONSOLIDATED
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITYYEARS
                  ENDED AUGUST 31, 2007 AND 2006Preferred
                  stock
              
              Common
                  stock
              
              Additional
                  Paid-in
              
              Accumulated
              
              Total
                  Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              capital
              
              deficit
              
              equityBALANCE,
                  August 31, 2005
              
              
              
              
              
              
              
              
              135,135
              
              $
              135
              
              $
              865
              
              $
              (59,998
              )
              $
              (58,998
              )Fair
                  Value of warrant issued with 12% notes
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              68,838
              
              
              -
              
              
              68,838Fair
                  Value of agent warrants issued with 12% notes
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              182,711
              
              
              -
              
              
              182,711Purchase
                  of majority ownership of Clean Water Technologies, Inc.
                  (CWTI)
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              (625,000
              )
              
              -
              
              
              (625,000
              )Recapitalization
                  from acquisition transaction
              
              
              
              
              
              
              
              
              9,891,593
              
              
              9,892
              
              
              1,115,445
              
              
              (1,125,335
              )
              
              -Issuance
                  of common stock in connection with private placement offering,
                  net of
                  offering expenses
              
              
              
              
              
              
              
              
              1,366,874
              
              
              1,367
              
              
              382,510
              
              
              -
              
              
              383,878Conversion
                  of 12% converible notes
              
              
              
              
              
              
              
              
              773,917
              
              
              774
              
              
              217,234
              
              
              -
              
              
              218,009-Fair
                  value of warrants issued with 9% convertible notes
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              245,460
              
              
              -
              
              
              245,460Fair
                  value of agent warrants issued in connection with private
                  placement
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              162,950
              
              
              
              
              
              162,950Issuance
                  of preferred stock for 9% convertible preferred noteS
              
              
              307,546
              
              
              308
              
              
              
              
              
              
              
              
              3,075,161
              
              
              
              
              
              3,075,469Conversion
                  of 12% converible notes
              
              
              
              
              
              
              
              
              99,220
              
              
              99
              
              
              28,026
              
              
              -
              
              
              28,125Warrants
                  exercised
              
              
              
              
              
              
              
              
              11,430
              
              
              11
              
              
              3,229
              
              
              
              
              
              3,240Dividend
                  Accrued on Preferred Stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              (55,358
              )
              
              (55,358
              )Net
                  Loss
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,349,374
              )
              
              (2,349,374
              )BALANCE,
                  August 31, 2006
              
              
              307,546
              
              $
              308
              
              
              12,278,169
              
              $
              12,278
              
              $
              4,857,429
              
              $
              (3,590,065
              )
              $
              1,279,950Preferred
                  stock conversion
              
              
              (37,500
              )
              
              (38
              )
              
              416,667
              
              
              417
              
              
              (379
              )
              
              
              
              
              -Reduction
                  for bond reserve
              
              
              
              
              
              
              
              
              (1,313
              )
              
              (1
              )
              
              1
              
              
              
              
              
              -Dividend
                  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
              )
              $
              105,652
  See
        accompanying notes to consolidated financial
        statements


F-6




SHEERVISION,
      INC. AND SUBSIDIARY


NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **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 our exclusive arrangement with manufacturers
        based
        in Asia, we can provide top quality surgical loupes and light systems directly
        to end-users at substantially lower prices than similar competitors' products.
 
 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 SheerVison, 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, 2007, the Company had an
        accumulated deficit of $4,764,363, recurring losses from operations and negative
        cash flow from operating activities of $807,163 for the year then ended.
        The
        Company also had a negative working capital of $20,302 as of August 31,
        2007.
  F-7
 
 SHEERVISION,
        INC. AND SUBSIDIARY
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        1** - **DESCRIPTION
        OF BUSINESS (CONTINUED)**
 
 The
        Company intends to fund operations through increased sales and debt and/or
        equity financing arrangements, which may be insufficient to fund its capital
        expenditures, working capital or other cash requirements for the year ending
        August 31, 2008. The Company is seeking additional funds to finance its
        immediate and long-term operations. 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 its retail operations into both
        domestic and international distributor relationships;
 
 ·  the
        Company is aggressively signing up new international distributors through
        its
        IDP program; and
 
 ·  the
        Company is seeking investment capital.
  **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. Such financial
        statements and accompanying notes are the representation of the Company’s
        management, which is responsible for their integrity and objectivity. 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.
  **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.
 F-8
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
        (CONTINUED)**
 
 **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.  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 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 $507
        and
        $1,723 at August 31, 2007 and August 31, 2006, respectively.
 
 **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.
 
  F-9
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
        (CONTINUED)**
 
 **Inventory**
 
 Inventory
        is valued at the lower of cost or market, determined on a first-in, first-out
        basis. At August 31, 2007 and 2006, 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,
        of
        five 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
   F-10
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
        (CONTINUED)**
 
 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
                  revenue date of the temporary difference.
 
 **Long-Lived
        Assets**
 
 Property,
        equipment and certain other long-lived assets are amortized over their useful
        lives. Useful lives are based on management’s estimates of the period that the
        assets will generate revenues. Management evaluates the recoverability of
        the
        Company’s 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. The Company recorded
        no impairments for the years ended August 31, 2007 and 2006.
 
 **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
        No. 123 (R)* ”),
        which
        is a revision of SFAS No. 123. SFAS No. 123 (R) supersedes APB Opinion No.
        25, *Accounting
        for Stock Issued to Employees* ,
        and
        amends FASB Statement No. 95, *Statement
        of Cash Flows* ,
        Generally, the approach to accounting for share-based payments in SFAS No.
        123
        (R) is similar to the approach described in SFAS No. 123.
 
 However,
        SFAS 123 (R) requires all new share-based payments to employees, including
        grants of employee stock options, to be recognized in the financial statements
        based on their fair values. Pro forma disclosure of the fair value of new
        share-based payments is no longer an alternative to financial statement
        recognition.
  F-11
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
        (CONTINUED)**
 
 **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 collectibility 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-12
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        3 -** **LINE
        OF CREDIT**
 
 The
        Company had an agreement with a bank for a revolving credit facility of up
        to
        $300,000 (the “ *Line* ”)
        which
        expired on April 15, 2007 which has not been renewed. The Line’s interest
        rate was 1.25% above the bank's prime rate and was collateralized by a security
        interest in all of the assets of the Company. In addition, all obligations
        to
        the bank were personally guaranteed by two stockholders of the Company who
        are
        also officers and directors. There were no outstanding borrowings under the
        Line
        as of August 31, 2007 and August 31, 2006. Interest expense for the 12 months
        ended August 31, 2007 and August 31, 2006 under the Line amounted to $0 and
        $6,945, respectively.
 
 
 **NOTE
        4 - INVENTORIES**
 
 Inventories
        are valued at the lower of cost (first-in, first-out method) or market, and
        consist of the following:
 
 August
                  31,2007
              
              2006Finished
                  Goods
              
              $
              331,642
              
              $
              196,026Raw
                  Materials
              
              
              9,577
              
              
              80,896Total
              
              $
              341,219
              
              $
              276,922
 
  F-13
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        5 -** **PROPERTY
        AND EQUIPMENT**
 
 Property
        and equipment are stated at cost less accumulated depreciation and amortization,
        and consist of the following:
  August
                  31,Estimated
              
              2007
              
              2006Useful
                  livesManufacturing
                  equipment
              
              
              7
                  years
              
              $
              93,765
              
              $
              57,923Office
                  and computer equipment
              
              
              5
                  years
              
              
              46,507
              
              
              40,148Leasehold
                  improvement
              
              
              15
                  years
              
              
              7,179
              
              
              7,179147,451
              
              
              105,250Less:
                  Accumulated Depreciation & Amortization
              
              
              
              
              
              29,587
              
              
              3,905Property
                  and Equipment, net
              
              
              
              
              $
              117,864
              
              $
              101,345
  Depreciation
        and amortization expense for the years ended August 31, 2007 and 2006 amounted
        to $25,681 and $3,906, respectively.
 
 **NOTE
        6 - 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.
        The Company has received notification of patent pending status. The cost
        incurred by the Company was $8,562 and is being amortized on a straight-line
        basis over a period of 15 years and is stated net of accumulated amortization
        of
        $472.
 
 **NOTE
        7 - LOSS PER COMMON SHARE**
 
 Basic
        loss per share is based on the weighted average number of common shares
        outstanding without consideration of potential common shares. Diluted loss
        per
        share is based on the weighted number of common and potential common shares
        outstanding. The calculation takes into account 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-14
 SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
  **NOTE
          7 - LOSS PER COMMON SHARE - (CONTINUED)**
 Twelve
                  Months Ended
              
              Three
                  Months EndedAugust
                  31,
              
              August
                  31,2007
              
              2006
              
              2007
              
              2006Numerator:Net
                  profit(loss)
              
              $
              (905,286
              )
              $
              (2,349,374
              )
              $
              11,292
              
              $
              (888,113
              )Series
                  A preferred - Stock dividends
              
              
              (269,012
              )
              
              (
                  55,358
              )
              
              (
                  61,417
              )
              
              (
                  55,358
              )Net
                  loss attributable to common stockholders:-basic
                  and diluted
              
              $
              (1,174,298
              )
              $
              (2,404,732
              )
              $
              (
                  50,125
              )
              $
              (943,471
              )Denominator:Basic
                  - weighted average common shares
              
              
              12,373,888
              
              
              5,072,015
              
              
              12,670,375
              
              
              10,740,325Warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -Convertible
                  preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -Diluted-weighted
                  average common shares
              
              
              12,373,888
              
              
              5,072,015
              
              
              12,670,375
              
              
              10,740,325Basic
                  and diluted loss per common share
              
              $
              (0.09
              )
              $
              (0.47
              )
              $
              (0.00
              )
              $
              (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 and
        three
        months ended August 31, 2007 and 2006, respectively, because the effect of
        their
        inclusion would be antidilutive.
  Twelve
                  months ended
              
              Three
                  months endedAugust
                  31,
              
              August
                  31,2007
              
              2006
              
              2007
              
              2006Warrants
                  to purchase - common stock
              
              
              1,488,989
              
              
              1,488,989
              
              
              1,488,989
              
              
              1,488,279Convertible
                  preferred stock
              
              
              3,000,523
              
              
              -
              
              
              3,000,523
              
              
              -4,489,512
              
              
              1,488,989
              
              
              4,489,512
              
              
              1,488,279
 
  F-15
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        8 - 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, 2007 and 2006 is comprised
        of the following components:
 
 2007
              
              2006Net
                  operating losses carry forwards
              
              $
              1,386,000
              
              $
              928,000Less:
                  Valuation allowance
              
              
              (1,386,000
              )
              
              (928,000
              )Net
                  deferred tax asset
              
              $
              -0-
              
              $
              -0-
 
 
 At
        August
        31, 2007, the Company has net operating loss carry forwards for federal tax
        purposes of approximately $3,747,000, which expire in years 2024 through
        2027.
 
 
  F-16
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        8 - INCOME TAXES- (CONTINUED)**
  The
        provision (benefit) for income taxes for the years ended August 31, 2007
        and
        2006 are
        summarized as follows:
 2007
                
                2006Current
                
                -
                    federal
                
                $
                -
                
                $
                --
                    state
                
                
                2,902
                
                
                1,7212,902
                
                
                1,721Deferred
                
                -
                    federal
                
                
                -
                
                
                (17,975
                )-
                    state
                
                
                -
                
                
                (4,422
                )-
                
                
                (22,397
                )Total
                    provision (benefit)
                
                
                
                $
                2,902
                
                $
                (20,676
                )
  A
          reconcilation of the provision (benefit) for income taxes with amounts
          determined by applying the
          statutory U.S. Federal income tax rate to income before income taxes is
          as
          follows:
 Years
                    Ended August 31,2007
                
                2006Computed
                    tax at the federal statutory rate of 34%
                
                $
                (307,000
                )
                $
                (806,000
                )State
                    income tax, net of federal benefit
                
                
                (54,000
                )
                
                (122,000
                )Valuation
                    allowance
                
                
                361,000
                
                
                928,000Other
                
                
                2,902
                
                
                (20,676
                )$
                2,902
                
                $
                (20,676
                )
 
  F-17
 
 SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        9 - COMMITMENTS AND CONTINGENCIES**
 
 **Operating
        Leases**
 
 The
        Company is negotiating a new three year non-cancellable lease effective December
        1, 2007 and expiring December 1, 2010. The lease obligation based on minimum
        monthly rents is expected to be as follows:
 
 FISCAL
                    YEARS ENDED2008
              
              
              50,6792009
              
              
              55,0072010
              
              
              56,657$
              162,343
 
  Rent
        expense for the years ended August 31, 2007 and 2006 amounted to $48,268
        and
        $35,646, 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 is currently
        brought against the Company and our Chief Executive Officer and President.
        Plaintiff, a former supplier of frames of ours, alleges copyright and trade
        dress infringement in its frames and is seeking damages as well as permanent
        injunctive relief. On June 19, 2007, the Court issued an order which, among
        other things, denied plaintiff’s motion for a preliminary injunction, dismissed
        the plaintiff’s state law claims and denied our motion to stay the proceedings.
        On July 10, 2007, the plaintiff filed an amended complaint and on August
        17,
        2007, the Company filed a motion to dismiss the plaintiff’s state law and trade
        dress infringement claims in its amended complaint. The Company intends to
        continue vigorously defending itself in this action and based on its
        understanding of the relevant facts and circumstances and the denial of the
        plaintiff’s preliminary injunction, the Company believes that it has meritorious
        defenses.
 
 
  F-18
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)**
 
 On
        June
        25, 2007, General Scientific Corporation initiated a “Section 337” complaint
        against us 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. The complainant
        seeks a permanent exclusion order prohibiting entry into the United States
        of
        the purportedly infringing products together with a cease and desist order
        prohibiting the Company from selling the purportedly infringing products
        in the
        United States. On July 26 2007, the ITC instituted an investigation into
        actions
        based on the complainant’s allegations. On August 17 2007, the Company answered
        the complaint by denying the allegations and asserting various defenses and
        on
        October 29, 2007 the Company filed a motion for summary determination of
        non-infringement which on November 26, 2007 was denied. Though the Company
        views
        the claims as completely frivolous and without merit, the Company is currently
        in negotiations with the complainant to settle this action.
 
 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.
 
 **NOTE
        10 -** **FINANCING
        TRANSACTIONS**
 
 **12%
        Secured Convertible Note**
 
 In
        a
        September 12, 2005 private placement, SheerVision-CA issued 24 investment
        units
        each consisting of a $50,000, 12% secured convertible note that matured
        September 12, 2006 (the “ *12%
        notes* ”)
        and
        1,200 five-year common stock purchase warrants entitling the holder to purchase
        Company common stock at $2.70 per share, or $0.28346 after giving effect
        to the
        exchange agreement with CWTI. The conversion of the 12% notes is subject
        to
        anti-dilution adjustment. Each note-holder is entitled to convert up to 22.5%
        of
        the principal amount of the 12% notes into shares of Company common stock.
        Interest is payable at the date of maturity. As of August 31, 2006, principal
        and interest were paid in full.
 
 Based
        on
        relative fair values, the Company has attributed $68,838 of the total proceeds
        to the warrants, accounted for as a discount to the convertible note and
        as
        additional paid-in capital.
 
  F-19
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 
 **NOTE
        10 -** **FINANCING
        TRANSACTIONS (CONTINUED)**
 
 In
        connection with the issuance of the 12% notes, SheerVision-CA gave its placement
        agent warrants to purchase 238,128 shares of Company common stock and its
        financial advisor warrants to purchase 476,257 shares of Company common stock
        at
        an exercise price of $0.28346 per share, for a term of five years. Accordingly,
        the fair value totaling $182,711 of those warrants has been charged to deferred
        financing costs and was amortized over the 12-month term of the 12%
        notes.
 
 Interest
        expense for the fiscal years ended August 31, 2007 and August 31, 2006 amounted
        to $0 and $101,550 respectively. SheerVision-CA was required to prepay the
        principal and any accrued interest on the 12% notes upon the closing of an
        equity financing having gross proceeds of at least $3 million. In connection
        with a private placement in May 2006 of units of securities described below,
        eleven holders of the notes elected to convert 22.5% ($174,375) of their
        12%
        notes in the aggregate amount of $775,000 into 615,165 shares of Company
        common
        stock, with the $600,625 balance from the private placement converted into
        an
        aggregate principal amount of $450,000 of 9% convertible notes, 200,004 shares
        of Company common stock, and warrants to acquire 45,000 additional shares
        of
        Company common stock. Six holders elected to extend their 12% notes having
        an
        aggregate amount of $263,750 for the remaining term, one holder elected to
        convert 22.5% of the principal ($11,250) into 39,688 shares of common stock,
        and
        four holders elected to receive cash of $116,250 and 119,064 shares of Company
        common stock with a value of $33,750 in full payment of the 12% notes. Accrued
        interest of $70,375 on the 12% notes surrendered for conversion or payment
        was
        paid on June 4, 2006.
  Upon
        the
        maturity date of August 31, 2006 of the 12% notes, two holders elected to
        convert 22.5% principal of $28,125 into 99,220 shares of Company common stock
        at
        a purchase price of $.28346 per share. The remaining principal balance of
        all
        remaining holders of $235,625 and accrued interest of $31,175 was repaid
        in cash
        at August 31, 2006.
 
  F-20
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 
 **NOTE
        10 -** **FINANCING
        TRANSACTIONS (CONTINUED)**
 
 **9%
        Convertible Notes**
 
 In
        May
        2006, the Company completed a private offering of convertible debt and equity
        securities. The Company sold 82 units for $4,100,625, of which $3,500,000
        (70
        units) was paid in cash and $600,625 (12 units) was paid by the surrender
        of 12%
        notes in the principal amount of $600,625. Each unit comprised a 9% convertible
        note (“ *9%
        notes* ”)
        in the
        principal amount of $37,500, 16,667 shares of Company common stock and three
        year warrants to acquire an aggregate of 3,750 shares of Company common stock
        at
        a price of $1.00 per share. The purchase price per unit was $50,000. The
        9%
        notes were convertible into shares of the Company's Series A 9% cumulative
        convertible preferred stock, at a price of $0.90 per share, with a stated
        value
        of $10 per share.
 
 In
        connection with the issuance of the 9% notes, the Company gave its placement
        agent warrants to purchase 204,167 shares of Company common stock, at an
        exercise price of $1.00 per share for a term of three years, and having a
        fair
        value of $245,460.
 
 On
        June
        12, 2006, the 9% notes in the aggregate amount of $3,075,469 automatically
        converted into 307,546 shares of the Company's 9% cumulative convertible
        preferred stock upon the effectiveness of the filing of the Company's amended
        and restated certificate of incorporation to change the Company's name from
        CWTI
        to SheerVision, Inc., and make a corresponding designation regarding such
        preferred stock. Dividends accrue at the rate of 9% per annum and are payable
        every June 30 and December 31, commencing June 30, 2006. To the extent not
        paid,
        accrued dividends shall be accumulated until paid. At the option of the holder,
        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.
 
 If
        the
        Company did not timely perform under a registration rights agreement, or
        if the
        Company was unable to timely register its common stock, it had agreed to
        pay its
        investors damages in the amount equal to 0.5% per month, up to a maximum
        of 5%,
        of the aggregate amount invested. The Company recorded an expense of $45,106
        as
        of August 31, 2006 related to the registration penalty it was required to
        pay.
 
  F-21
   SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 
 **NOTE
        10 -** **FINANCING
        TRANSACTIONS (CONTINUED)**
 
 Commencing
        on November 8, 2006, a date six months following the final closing, the
        preferred shares convert without any action by a preferred shareholder of
        the
        Company, if the closing price in its trading market for a share of the common
        stock equals or exceeds 200% of the then preferred stock conversion price
        for 15
        of any 30 consecutive trading days. The conversion price of the preferred
        stock
        and the number of shares subject to conversion are to be subject to adjustment
        in the event of stock splits, stock dividends, reverse stock splits, and
        similar
        events. Further, in the event that the Company issues shares of its common
        stock
        at an effective price per share less than $0.90, the conversion price and
        the
        number of shares subject to the preferred stock conversion adjust on a weighted
        average basis to reflect the dilution.
 
 The
                  Company paid the placement agent for the May 2006 private placement
                  a cash
                  commission of $273,000 (approximately 8% of the net proceeds) and
                  issued
                  to it warrants to purchase, at $1.00 per share, 204,167 shares
                  of Company
                  common stock, (5% of the shares of common stock and common stock
                  equivalents sold). The warrants expire April 28, 2009. The Company
                  also
                  paid a financial consultant an advisory fee of 5% of the gross
                  proceeds,
                  or $205,000, of which the advisor paid $100,000 to acquire two
                  units in
                  the private placement.
 
 The
                  values of the warrants issued has been determined using the Black-Scholes
                  option-pricing model (with the same assumptions as those used for
                  the
                  option), assuming expected lives of 3 or 5 years, a risk free interest
                  rate of 3.67%, no expected dividends, and a stock price volatility
                  of 144%
                  based on the volatilities of companies comparable in size and type
                  of
                  business.
 
 A
                  total of 511,714 warrants having an exercise of $1.00 per share
                  and
                  988,719 warrants having an exercise price of $0.28346 per share
                  (after
                  giving effect to the exchange agreement) were issued during the
                  twelve
                  months ended August 31, 2006.
 
  F-22
  
 SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        11 - STOCKHOLDERS EQUITY**
 
 **Preferred
                  Stock**
 
 The
                  Company has authorized 350,000 shares of series A preferred stock,
                  par
                  value $0.001 per share. As of August 31, 2007 there were 270,046
                  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 be accumulated until paid. At the
                  option of
                  the holder, preferred stock may be converted into common stock
                  at any time
                  at a conversion price of $0.90 per share. As of August 31, 2007
                  and 2006
                  cumulative preferred dividends were $324,370 and $55,358
                  respectively.
 
 **Common
        Stock**
 
 The
        Company has authorized 90,000,000 shares of common stock, par value $0.001
        per
        share. As of August 31, 2007 the Company had 12,693,523 shares of common
        stock
        issued and outstanding.
 
 On
        December 1, 2005, SheerVision-CA acquired 4,517,800 (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 capital 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.
 
 On
        May 8,
        2006 the Company issued 1,366,874 shares of its common stock in connection
        with
        the 9% private placement offering and 773,917 shares of its common stock
        in
        connection with the conversion of the 12% convertible notes (see Note
        10).
 
 On
        August
        17, 2006 the Company issued 11,430 shares of its common stock upon the election
        to exercise warrants by a certain investor in connection with the Company’s 12%
        Notes.
 
 
  F-23
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        11 - STOCKHOLDERS EQUITY (CONTINUED)**
 
 On
        August
        31, 2006, two holders of the remaining 12% Notes elected to convert 22.5%
        principal of $28,125 into 99,220 shares of common stock at a purchase price
        of
        $.28346 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.
 
 There
        was
        a reduction of 1,313 shares of common stock previously recorded as issued
        and
        outstanding from the original CWTI shares. However, these shares were issued
        for
        reserve purposes only and are not outstanding.
 
 **NOTE
        12 - WARRANTS**
 
 Transactions
        involving the Company's warrant issuance are summarized as follows:
  Number
                of
                  Shares
              
              Weighted
                Average
                Price
                  Per
                ShareOutstanding
                  at August 31, 2006
              
              
              1,488,989
              
              $
              0.53Granted
              
              
              --Exercised
              
              
              --Canceled
                  or expired
              
              
              --Outstanding
                  at August 31, 2007
              
              
              1,488,989
              
              $
              0.53
 
  F-24
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        13 - 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. This Plan is 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.
        An
        independent Director is defined as a Director meeting the requirements of
        Section 10A(m) under the Securities Exchange Act of 1934 and as defined by
        any
        exchange or market on which the Common Stock is traded or is listed. A
        Non-Employee Director is defined by reference to its definition in Rule 16b-3
        under the Securities Exchange Act.
 
 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.
 
 The
        Company will charge the grant date fair value of options granted to expenses
        as
        they become vested. The fair value of stock options will be determined using
        an
        appropriate option-pricing model and based on observable market prices.
 
  F-25
  SHEERVISION,
          INC. AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
        ENDED AUGUST 31, 2007 AND 2006
 
 **NOTE
        13 - EQUITY BASED COMPENSATION PLANS (CONTINUED)**
 
 Modifications
        such as lowering the exercise prices or extending the expiration dates are
        treated as new grants and could result in material changes to the Company's
        non-cash expenses. As of August 31, 2007, no options under the Plan or Directors
        Plan have been granted.
 
 **NOTE
        14 - ECONOMIC DEPENDENCE**
 
 **Major
        Customer**
 
 For
        the
        years ended August 31, 2007 and 2006, two customers accounted for approximately
        13% and 10%, respectively, of the Company’s net sales.
 
 As
        of
        August 31, 2007 and 2006, there was no open accounts receivable balance from
        these customers. The Company believes that its relationship with these customers
        is strong and has never experienced any losses with these
        customers.
 
 **Major
        Vendors**
 
 For
        the
        years ended August 31, 2007 and 2006, one vendor accounted for approximately
        77%
        and 51%, respectively, of the Company’s purchases. The Company believes that its
        relationship with this vendor is good.
 
 As
        of
        August 31, 2007 and 2006, this vendor accounted for approximately 3% and
        0%,
        respectively, of the Company’s accounts payable.
 
 **NOTE
        15 - RELATED PARTY TRANSACTIONS**
 
 On
        April
        18, 2007, the Company entered into a consulting agreement to provide investor
        and public relations services by the consultant. In consideration for
        consultant's services, he is entitled to $5,000 per month for the twelve
        month
        term of the agreement, unless terminated sooner. In addition, 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, 2007 consulting service fees in the amount of $6,500
        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.
  F-26