Sheervision, Inc. - Quarterly Report of Financial Condition (10QSB)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended May 31, 2008

o TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

For the transition period from to _______________

Commission File Number: 000-27629

SHEERVISION INC.

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

Delaware		23-2426437
(State of incorporation)		(I.R.S. Employer Identification No.)

	4030 Palo Verdes Drive N., Suite 104, Rolling Hills, CA 90274
	(Address of principal executive offices)

	(310) 265-8918
	(Issuer's telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x

No o

State the number of shares outstanding of each of the issuer's classes of common equity, as of July 11, 2008: 12,735,190 shares outstanding of the Company’s common stock, par value, $.001.

Transitional Small Business Disclosure Format (check one):

Yes o

No x

TABLE OF CONTENTS

HEADING		PAGE

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	2

Item 2.	Management's Discussion and Analysis or Plan of Operation	13

Item 3A(T).	Controls and Procedures	23

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	24

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	24

Item 3.	Defaults upon Senior Securities	24

Item 4.	Submission of Matters to a Vote of Securities Holders	24

Item 5.	Other Information	24

Item 6.	Exhibits	24

Signatures		25

SHEERVISION, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

	May 31,			August 31,
	2008			2007
	(Unaudited)			(derived from audited financial statements)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	164,179		$	265,262
Accounts receivable, net		276,182			50,397
Inventory		299,981			341,219
Prepaid expenses and other current assets		82,855			73,160

Total Current Assets		823,197			730,038

PROPERTY AND EQUIPMENT, net		147,214			117,864

INTANGIBLE ASSETS, net		7,662			8,090

	$	978,073		$	855,992

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Line of credit payable	$	152,515		$	-
Accounts payable		365,476			337,013
Accrued expenses and other current liabilities		179,307			88,957
Accrued dividends preferred series A		505,228			324,370
Total Current Liabilities		1,202,526			750,340


Preferred Stock, Series A, 9% cumulative convertible;
$.001 par value, $10 per share, Authorized 350,000
issued and outstanding 266,296 shares		266			270
Common Stock: par value $.001;
Authorized 90,000,000 shares -
issued and outstanding 12,735,190		12,735			12,694
Additional paid in capital		4,933,486			4,857,051
Accumulated deficit		(5,170,940	)		(4,764,363	)
Total Stockholders' Equity		(224,453	)		105,652

	$	978,073		$	855,992

See accompanying notes to consolidated condensed financial statements

SHEERVISION, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

NINE MONTHS ENDED

THREE MONTHS ENDED

MAY 31

2008

2007

2008

2007

NET SALES

3,070,877

3,200,074

1,119,633

1,115,911

COST OF GOODS SOLD

1,067,756

998,621

365,882

356,769

GROSS PROFIT

2,003,121

2,201,453

753,751

759,142

OPERATING EXPENSES:

Shipping

121,866

124,962

58,583

42,259

Selling and marketing

801,567

1,597,417

305,354

460,628

General and administrative

1,239,198

1,392,941

443,987

444,017

Product development

66,176

12,839

35,513

5,727

Total operating expenses

2,228,807

3,128,159

843,437

952,631

LOSS FROM OPERATIONS

(225,686

)

(926,706

)

(89,686

)

(193,489

)

OTHER INCOME (EXPENSE)

Interest income (expense), net

1,567

11,725

(835

)

1,038

LOSS BEFORE PROVISION FOR INCOME TAX

(224,119

)

(914,981

)

(90,521

)

(192,451

)

PROVISION FOR INCOME TAX-CURRENT

1,600

800

NET LOSS

(225,719

)

(916,581

)

(90,521

)

(193,251

)

ACCRUED PREFERRED STOCK DIVIDENDS

(180,858

)

(207,595

)

(59,917

)

(69,197

)

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS

(406,577

)

(1,124,176

)

(150,438

)

(262,448

)

BASIC AND DILUTED LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS:

Basic and Diluted

(0.03

)

(0.09

)

(0.01

)

(0.02

)

Weighted average number of shares outstanding

12,717,246

12,278,169

12,735,190

12,278,169

See accompanying notes to consolidated condensed financial statements

SHEERVISION, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	NINE MONTHS ENDED
	MAY 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(225,719	)	$	(916,581	)
Adjustments to reconcile net loss
Cash used in operating activities:
Depreciation and amortization		24,397			19,105
Non-cash compensation satisfied by issuance of options		76,472			-
Changes in assets and liabilities:
Accounts receivable		(225,785	)		(53,083	)
Inventory		41,238			(110,116	)
Prepaid expenses		(9,690	)		18,405
Accounts payable		28,463			174,390
Other current assets		-			-
Accrued expenses and other current liabilities		92,860			3,552


NET CASH USED BY OPERATING ACTIVITIES		(197,764	)		(864,328	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(53,319	)		(42,201	)
Investment in intangibles		-			(8,562	)
NET CASH USED IN INVESTING ACTIVITIES		(53,319	)		(50,763	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit		150,000			-

NET CASH PROVIDED BY FINANCING ACTIVITIES		150,000			-

NET DECREASE IN CASH AND CASH EQUIVALENTS		(101,083	)		(915,091	)

CASH AND CASH EQUIVALENTS - beginning		265,262			1,114,626

CASH AND CASH EQUIVALENTS - ending	$	164,179		$	199,535


SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest	$	-		$	-

Income taxes	$	1,600		$	800

SUPPLEMENTAL DISCLOSURES OF NON - CASH INVESTING
AND FINANCING ACTIVITIES:

Accrued preferred stock dividends	$	180,858		$	207,595

See accompanying notes to consolidated condensed financial statements

SHEERVISION, INC.

CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

Total

Additional

Stockholders'

Preferred stock

Common stock

Paid-in

Accumulated

Equity

Shares

Amount

Shares

Amount

capital

deficit

(Deficiency)

BALANCE, August 31, 2007

270,046

270

12,693,523

12,694

4,857,051

(4,764,363

)

105,652

Preferred stock conversion

(3,750

)

41,667

(37

)

Dividend Accrued on Preferred Stock

(180,858

)

(180,858

)

Employee stock option grants

76,472

Net Loss

(225,719

)

(225,719

)

BALANCE, May 31, 2008

266,296

266

12,735,190

12,735

4,933,486

(5,170,940

)

(224,453

)

See accompanying notes to consolidated condensed financial statements

SHEERVISION, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

MAY 31, 2008

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 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.

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 May 31, 2008, the Company had an accumulated deficit of $5,170,940, and a negative working capital of $329,329.

NOTE 2 - INVENTORIES

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

	May 31, 2008		August 31, 2007
Finished Goods	$	288,484	$	331,642
Raw Materials		11,497		9,577
Total	$	299,981	$	341,219

NOTE 3 - PROPERTY AND EQUIPMENT

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

	Estimated	May 31,		August 31,
	Useful lives	2008		2007

Manufacturing equipment	7 years	$	144,154	$	93,765
Office and computer equipment	5 years		49,438		46,507
Leasehold improvement	15 years		7,179		7,179
			200,771		147,451
Less: Accumulated Depreciation & Amortization			53,557		29,587
Property and Equipment, net		$	147,214	$	117,864

Depreciation and amortization expense for the nine and three month periods ended May 31, 2008 amounted to $23,969 and $8,881, respectively as compared with the nine and three month period ended May 31, 2007, which amounted to $18,776 and $7,214 respectively.

SHEERVISION, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

MAY 31, 2008

NOTE 4 - INTANGIBLE ASSETS

During fiscal year 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 $900.

NOTE 5 - LINE OF CREDIT

On March 25, 2008, the Company entered into a loan agreement with an unrelated shareholder of the Company providing for a line of credit to the Company of up to $300,000 carrying an interest rate of 9% per annum. The loan agreement further provides that principal and interest of the loan is repayable nine months from the date of the execution of the loan agreement or earlier upon the occurrence of an event of default. The loan is secured by a first priority security interest in the Company’s inventories and accounts receivable . Additionally, the loan agreement provides the lender with an option to receive a warrant exercisable for up to 600,000 shares of the Company’s common stock (depending on the amount loaned) at an exercise price of $0.25 per share. As of May 31, 2008 the outstanding balance of the line of credit was $152,515, which includes accrued interest of $2,515.

NOTE 6 - 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:

	Nine Months Ended						Three Months Ended
	May 31,						May 31,
	2008			2007			2008			2007
Numerator:
Net loss	$	(225,719	)	$	(916,581	)	$	(90,521	)	$	(193,251	)
Series A Preferred Stock dividends		(180,858	)		(207,595	)		(59,917	)		(69,197	)
Net loss attributable to common stockholders:
-basic and diluted	$	(406,577	)	$	(1,124,176	)	$	(150,438	)	$	(262,448	)

Denominator:
Basic - weighted average common shares		12,717,246			12,278,169			12,735,190			12,278,169
Warrants		-			-			-			-
Convertible preferred stock		-			-			-			-
Diluted-weighted average common shares		12,717,246			12,278,169			12,735,190			12,278,169
Basic and diluted loss per common share		(0.03	)	$	(0.09	)	$	(0.01	)	$	(0.02	)

SHEERVISION, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

MAY 31, 2008

NOTE 6 - LOSS PER COMMON SHARE (CONTINUED)

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

	Nine Months Ended				Three months ended
	May 31,				May 31,
	2008		2007		2008		2007
Warrants to purchase - common stock		1,488,989		1,488,279		1,488,989		1,488,279
Convertible preferred stock		2,958,856		3,417,190		2,958,856		3,417,190
		4,447,845		4,906,179		4,447,845		4,906,179

NOTE 7 - INCOME TAXES

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

	2008			2007
Net operating losses carry forwards	$	928,092		$	1,386,000
Less: Valuation allowance		(928,092	)		(1,386,000	)
Net deferred tax asset	$	-0-		$	-0-

At May 31, 2008, the Company has net operating loss carry forwards for federal tax purposes of approximately $3,747,000, which expire in years 2024 through 2027.

The provision for income taxes is summarized as follows:

		May 31,
		2008		2007
Current	- federal	$	-	$	-
	- state		1,600		1,600
			1,600		1,600

Deferred	- federal		-		-
	- state		-		-

Total provision		$	1,600	$	1,600

SHEERVISION, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

MAY 31, 2008

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases space under a non-cancellable lease effective December 1, 2007 and expiring December 1, 2010. At May 31, 2008, the lease obligation based on minimum monthly rents is expected to be as follows:

FISCAL YEARS ENDING AUGUST 31,	Annual Amount
2008	$	12,700
2009		55,007
2010		56,657
	$	124,364

Rent expense for the nine and three months ended May 31, 2008 amounted to $39,015 and $13,449, respectively as compared to the nine and three months ended May 31, 2007 which amounted to $36,151 and $12,117, respectively.

Litigation

On January 10, 2007, a complaint was filed in the United States District Court, Central District of California, by Martin Hogan Pty, Ltd., which was brought against the Company and the Company’s Chief Executive Officer and President. Plaintiff, a former supplier of frames of the Company, alleged copyright and trade dress infringement in its frames and sought damages as well as permanent injunctive relief. On May 5, 2008, the parties reached a settlement in principle pursuant to which the Company agreed, subject to a definitive settlement agreement, to pay the plaintiff $50,000 and agreed to no longer sell its existing SV sport frame after August 31, 2008, with no admission of wrongdoing. The Court subsequently dismissed the action and we are presently negotiating the final terms of a definitive settlement agreemen t. The Company does not expect the terms of the settlement to have a material effect on the Company’s financial condition or operations. As of May 31, 2008 an accrued liability of $50,000 relating to this settlement is included on the balance sheet.

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

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

SHEERVISION, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

MAY 31, 2008

NOTE 9 - STOCKHOLDERS EQUITY

Preferred Stock

The Company has authorized 350,000 shares of Series A Preferred Stock, par value $0.001 (“ Series A Preferred Stock ”). As of February 28, 2008, the Company has 266,296 shares of Series A Preferred Stock issued and outstanding. On June 12, 2006, the Company issued 9% convertible notes in the aggregate amount of $3,075,469 which automatically converted at $10.00 per share into 307,546 shares of Series A 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. In December 2007, 3,750 shares of preferred stock at a stated value of $10 per share, were converted into 41,667 shares of Company common stock.

As of May 31, 2008, cumulative preferred dividends are $505,228 and are reflected on the balance sheet.

Common Stock

The Company has authorized 90,000,000 shares of common stock, par value $0.001 per share. As of May 31, 2008, the Company had 12,735,190 shares of common stock issued and outstanding.

On December 1, 2005, SheerVision, Inc., a California corporation (“ SheerVision-CA ”) (which as a result of the share exchange and reorganization described below became the Company’s subsidiary) 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% convertible note 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.

On August 30, 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 reservation purposes only and are not outstanding.

In December 2007, 3,750 shares of preferred stock at a stated value of $10 per share were converted into 41,667 shares of Company common stock.

SHEERVISION, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

MAY 31, 2008

NOTE 10 - WARRANTS

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

	Number of Shares		Weighted Average Price Per Share

Outstanding at August 30, 2007		1,488,989	$	0.53
Granted		—
Exercised		—
Canceled or expired		—
Outstanding at May 31, 2008		1,488,989	$	0.53

NOTE 11 - 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 Company’s 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 (the “ Exchange Act ”) 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. 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.

SHEERVISION, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

MAY 31, 2008

NOTE 11 - EQUITY BASED COMPENSATION PLANS (-Cont)

On March 20, 2008, the Company granted 1,025,000 incentive stock options to purchase shares of the Company’s common stock under the Plan to employees and consultants of the Company. Of the options granted, 400,000 of such options granted to Suzanne Lewsadder and Jeffrey Lewsadder, both officers and directors of the Company, were declined prior to issuance. The remaining 625,000 options have an exercise price of $0.20 per share and vest one half on the grant date and the remaining half on December 31, 2008. The fair value of the options issued was estimated at the date of the grant using the Black-Scholes pricing model with the following assumptions: a risk free interest rate of 4.50%, no dividend yield, and a volatility factor of 330%, the expected market price over the estimated life of the options of 10 years. The calculated fair value of the option grants was $118,000. The Company is recognizing a stock based compensation expense of $76,472 as of May 31, 2008 for the vested portion of the stock grants. The remaining stock based compensation expense of $41,528 will be expensed over the remaining vesting period through December 31, 2008.

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

	Number of shares			Weighted Average Exercise Price
Options granted		625,000			.20
Options cancelled		(50,000	)		___
Options exercised		-0-

Outstanding at May 31, 2008		575,000			.20
Exercisable at May 31, 2008		312,500			.20

The Company’s non-vested share options as of May 31, 2008 and changes during the three months ended May 31, 2008, are summarized as follows:

	Number of shares			Weighted Average Exercise Price
Nonvested at March 20, 2008		312,500			.20
Options forfeited		(50,000	)		.20
Options exercised		-0-
Nonvested at May 31, 2008		262,500			.20

NOTE 12 - SUBSEQUENT EVENTS

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

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This Quarterly Report on Form 10-QSB and the 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 our actual results, performance or achievements, 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 quarterly 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, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-QSB.

Unless the context indicates otherwise, any reference to "Sheervision", the "Company", "we", "us", "our" or the "Registrant" refers to Sheervision, Inc., a Delaware corporation, and its subsidiaries as of May 31, 2008.

Overview

We design and sell proprietary surgical loupes and light systems to the dental, medical, veterinary, and dental hygiene market segments. Our sales are achieved through both direct and indirect sales channels focusing on strategic alliances with Dental/Medical companies. Through our exclusive arrangement with component manufacturers based in Asia, and in combination with our U.S. manufacturing, 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 established a significant base of operations characterized by steady sales growth, strategic alliances with dental and medical companies, strategic marketing programs, the initiation of a web presence through the introduction of a new online retail store, dedicated sales team, expansion into new global markets, and continued product development activities. Although management is optimistic about the prospects of the company, there are currently economic challenges that have hindered our ability to keep pace with the prior year’s growth. We have recently shifted our primary business model from a direct to an indirect sales platform, in which the results of this transition are expected in future quarters.

Through the development of the SureFit TTL Loupes, the FireFly Infinity(TM) LED, the FireFly FlipFilter(TM), Prism surgical loupes and related accessories, we have broadened our appeal to our core market segments of dental, surgical and veterinary. Our 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. We recently entered into a sales partnership agreement with a global detailer of quality dental and medical products. The intention of this new alliance is to increase the sales and profitability of the FireFly Infinity(TM) LED light system in all corners of the world, further strengthening SheerVisions’s overall financial performance. International distributors provide us with distribution channels with the potential to grow rapidly in a highly cost-effective manner 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.

We have benefited from our significant investments in new product design and manufacturing that have occurred over the previous 18 months. The development of the Infinity Ultra LED Head Light, the Signature Prism Loupes, and the SureFit TTL loupes has opened new markets for us. We have developed a new state-of-the-art lithium-polymer battery system for the FireFly Infinity headlight system that launched with limited distribution in the third quarter of fiscal 2008. Full distribution is expected during the fourth quarter of 2008. We also expect to launch several new product designs during the balance of 2008. Each of these products will allow us to seek additional revenues in our vertical and horizontal market segments.

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

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

Critical Accounting Policies

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

Use of Estimates.

The preparation of financial statements in conformity with accounting principals generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions relate to estimates of 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.

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.

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 May 31, 2008 and May 31, 2007.

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.

Recently Issued Accounting Pronouncements Not Yet Effective

The following are potentially relevant accounting pronouncements that have been issued but are not yet effective :

Statements of Financial Accounting Standards (SFAS):

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

· SFAS 157, Fair Value Measurements;

FASB Staff Positions (FSP):

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

EITF Consensuses (EITF):

· 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. 06-9, 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. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards;

· EITF Issue No. 07-1, Accounting for Collaborative Arrangemants Related to the Development and Commercialization of Intellectual Property;

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

AICPA Statements of Position (SOP):

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

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

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:

		NINE MONTHS ENDED MAY 31,
		(in thousands)
		2008					2007
Net Sales	$	3,071		100.0	%	$	3,200		100.0	%
Cost of Goods Sold		1,068		34.8	%		999		31.2	%
Gross Profit		2,003		65.2	%		2,201		68.8	%
Operating Expenses
Shipping Expenses		122		4.0	%		125		3.9	%
Selling Expenses		802		26.1	%		1,597		49.9	%
General & Administrative Exp		1,239		40.4	%		1,393		43.5	%
Product Development Expenses		66		2.1	%		13		0.4	%
Total Operating Expenses		2,229		72.6	%		3,128		97.8	%
Income (Loss) from Operations		(226	)	(7.3	)%		(927	)	(29.0	)%
Other (Income)/Expense		(1	)	0.0	%		(11	)	(0.3	)%
Provision (Benefit) for Income Tax		1		0.0	%		1		0.0	%
Net Income (Loss)	$	(226	)	(7.3	)%	$	(917	)	(28.7	)%

During the first nine months of fiscal year 2008 revenues overall were slightly lower than expected due to delays incurred in both the manufacturing process of our power source that supports our LED light systems and the additional R&D time required to bring our next generation LED light system to market. If orders in our pipeline had been able to be fulfilled at the time the orders were taken, sales would have exceeded our prior year results and we recently started receiving products from these manufacturing facilities enabling us to begin shipping our pipeline of backorders. We also experienced a decline in our tradeshow revenues over the prior year. Overall attendance at tradeshows by dental professionals has declined and sales suffered as a direct result. We believe that the current economic impact of high energy costs has directly impacted the participation at major events. We also suffered loss of revenues when one of the largest annual dental tradeshows held in Atlanta this year was cancelled on the first day due to tornado damage to the convention center where the event was being held.

Through cost cutting efforts in our retail sales and marketing programs, we were able to post a first quarter net income of $19,788, however we incurred a net loss in the second quarter of $154,986 due to product shipping delays and 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. One suit was settled during the second quarter of fiscal year 2008 without monetary obligations and during the third quarter of fiscal year 2008 we reached a settlement in principle of our remaining lawsuit pursuant to which we agreed, subject to a definitive settlement agreement, to pay the plaintiff $50,000 and agreed to no longer sell our existing SV sport frame after August 31, 2008, with no admission of wrongdoing. We have treated the $50,000 as an accrued liability as reflected in our balance sheet. We experienced a net loss in the third quarter of $90,521 which included stock based compensation expense of $76,472 resulting from the grant of employee stock options for the first time in our history.

The results of our efforts on reducing operating costs and streamlining our sales and marketing efforts have demonstrated a substantial reduction in net losses compared to the prior year. As a result of the prior year ’ s marketing and advertising branding initiatives SheerVision established a presence in the marketplace that has facilitated recognition from both domestic and international dental companies. During this quarter we also entered into a private label manufacturing agreement with a large domestic dental company. Product shipments began in May 2008. As we focus more heavily on distributor and OEM/private label relationships to generate sales, the exposure to escalating costs in sales and travel related expenses in the domestic retail market have been mitigated. Through the development of large orders from a growing number of distributors, we anticipate that these efforts will continue to reduce the operating losses in future quarters.

We reduced our retail sales force to a level that will support existing demographic areas producing the greatest volume of sales. We have recently secured an arrangement with a dental company of long standing that has allowed us to acquire their seniority points in selecting prime booth locations at major dental trade shows. The number of overall 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 due to cost pressures in the travel industry from ever increasing oil prices.

Nine Months Ended May 31, 2008 Compared to the Nine Months Ended May 31, 2007

Net Sales

Net Sales decreased by $129,197 or 4.0%, from $3,200,074 for the nine months ended May 31, 2007 to $3,070,877 for the nine months ended May 31, 2008. This decrease was directly related to manufacturing delays in the newly enhanced components of our Firefly LED(TM) light systems and the delay in introducing our new FireFly Infinity Ultra head light system. If orders in our pipeline had been able to be shipped at the time the orders were taken, sales would have exceeded our prior year results. Sales relating to our loupe product lines increased by over 4.0% as compared to the previous fiscal nine months ended May 31, 2007. This increase was aided primarily by the distributor program. Light sales decreased by 16% as compared to the previous fiscal nine months ended May 31, 2007. This decrease was a direct result of orders not shipped due to manufacturing delays of an enhanced component of the light system. The manufacturing process is now complete and we are currently completing our backorders and expect to meet real time sales needs during the fourth quarter. During the remainder of fiscal year 2008 we also anticipate our distributor sales will include our light systems as well as our loupe systems. The average order size per retail customer increased over the period due to the aggressive product bundling with price advantages. We maintained our position with our competitive pricing edge and were able to increase product pricing during the latter half of the third quarter.

Cost of Goods Sold

Cost of goods sold increased by $69,135, or 6.9%, from $998,621 for the nine months ended May 31, 2007 to $1,067,756 for the nine months ended May 31, 2008. As a percentage of sales, cost of goods sold increased from 31.2% of sales for the nine months ended May 31, 2007 to 34.8% of sales for the nine months ended May 31, 2008. This increase is due to the effects of distributor versus retail pricing structures of products being sold.

Gross Profit

Gross profit decreased by $198,332, or 9.0%, from $2,201,453 for the nine months ended May 31, 2007 to $2,003,121 for the nine months ended May 31, 2008. The decrease in gross profit was attributable to a slight decrease in sales volume and the effects of the cost of goods on the current product mix. The gross profit was 65.2% of net sales for the nine months ended May 31, 2008 compared to 68.8% of net sales for the nine months ended May 31, 2007. Our growth in distributor sales, which have smaller margins than retail sales, was the major factor in this decrease in gross margins. During the nine month period ended May 31, 2008, distributor sales represented 37.2% of total sales as compared to 6.1% during the nine month period ended May 31, 2007. Pricing of products sold to distributors are lower than pricing direct to consumers primarily because the sales costs associated with the sale are absorbed by the distributor which reduces our sales and marketing expenses.

Operating Expenses

Operating expenses, which include shipping expenses, selling and marketing expenses, general and administrative expenses and product development decreased by $899,352, or 28.7%, to $2,228,807 for the nine months ended May 31, 2008 as compared to $3,128,159 for the nine months ended May 31, 2007.

Shipping expenses were materially unchanged at $121,866, or 4.0%, of net sales for the nine months ended May 31, 2008 as compared to $124,962, or 3.9%, of net sales for the nine months ended May 31, 2007.

Selling and marketing expenses were $801,567 for the nine months ended May 31, 2008, a decrease of $795,850, or 49.8%, over the nine months selling and marketing expenses of $1,597,417 at May 31, 2007. During the nine months ended May 31, 2007, a strategic sales and marketing program was instituted to develop brand awareness and enhance market share through a coordinated advertising and direct mail campaign. With the completion of this marketing program, these expenses were not incurred during the nine months ended May 31, 2008.

General and administrative expenses were $1,239,198 for the nine months ended May 31, 2008, a decrease of $153,743, or 11.0%, over the general and administrative expenses of $1,392,941 for the nine months ended May 31, 2007. This decrease is attributable to the cost containment efforts implemented in the areas of personnel, staff related and SEC related expenses. The efforts of expense reduction however were mitigated due to the legal expenses to support defending two competitor lawsuits alleging product copyright, trade dress and patent infringement on specific components of our surgical loupes. Stock based compensation expense of $76,472 was also recorded for the first time during this period for stock option grants awarded to the Company’s employees during the third quarter of fiscal year 2008.

Product development costs increased by $53,337, or 415.4%, from $12,839 for the nine months ended May 31, 2007 to $66,176 for the nine months ended May 31, 2008. Product development costs are expected to increase in the future as we continue to expend resources to enhance our existing product lines as well as develop new products continually ramping up to meet consumer demands.

Loss from Operations

As a result of the foregoing, we had net loss from operations for the nine months ended May 31, 2008 of $225,686 compared to a loss from operations of $926,706 for the nine months ended May 31, 2007.

Interest Income (expense)

Interest income earned from the investment in variable money market funds was $4,082 for the nine months ended May 31, 2008 as compared to $11,725 for the nine months ended May 31, 2007. Interest expense related to a line of credit amounted to $2,515 and $0 for the nine months ended May 31, 2008 and 2007, respectively.

Amortization and Depreciation

Amortization for the nine months ended May 31, 2008 was $427 which was related to our cost of obtaining patent protection as compared to $330 for the nine months ended May 31, 2007. Depreciation expense was $23,969 and $18,776, respectively, for the nine months ended May 31, 2008 and 2007. Amortization and depreciation expense are included in general and administrative expenses.

Income Taxes

For the nine months ended May 31, 2008, we recorded a current state income tax provision of $1,600.

Net Loss

As a result of the foregoing, we had a net loss for the nine months ended May 31, 2008 of $225,719 compared to a net loss of $916,581 for the nine months ended May 31, 2007.

Our loss per common share for the nine months ended May 31, 2008 was $0.03 compared to a loss per common share of $0.09 for the nine months ended May 31, 2007.

Three Months Ended May 31, 2008 Compared to the Three Months Ended May 31, 2007

Net Sales

Net Sales amounted to $1,119,633 for the three months ended May 31, 2008 an increase of $3,722 from sales for the three months ended May 31, 2007 of $1,115,911. Increases in third quarter revenues were hindered as a result of manufacturing delays in the newly enhanced components of our Firefly LED(TM) light systems and the introduction of our new next generation LED Infinity Ultra Plus light system.

Cost of Goods Sold

Cost of goods sold increased by $9,113, or 2.6%, from $356,769 for the three months ended May 31, 2007 to $365,882 for the three months ended May 31, 2008. As a percentage of sales, cost of goods sold increased from 32.0% of sales for the three months ended May 31, 2007 to 32.7% of sales for the three months ended May 31, 2008.

Gross Profit

Gross profit for the three months ended May 31, 2008 amounted to $753,751, as compared to $759,142 for the three months ended May 31, 2007. The slight decrease in gross profit was attributable to the effects of the cost of goods on the current product mix. The gross profit was 67.3% of net sales for the three months ended May 31, 2008 compared to 68.0% of net sales for the three months ended May 31, 2007.

Operating Expenses

Operating expenses, which include shipping expenses, selling and marketing expenses, general and administrative expenses and product development decreased by $109,194, or 16.4%, to $843,437 for the three months ended May 31, 2008 as compared to $952,631 for the three months ended May 31, 2007.

Shipping expenses were $58,583, or 5.2%, of net sales for the three months ended May 31, 2008 as compared to $42,259, or 3.8%, of net sales for the three months ended May 31, 2007. This increase of $16,324 was directly attributable to increases in fuel costs being charged by our common carriers. To date the Company has not increased its’ shipping costs to the retail customer.

Selling and marketing expenses were $305,354 for the three months ended May 31, 2008, a decrease of $155,274, or 33.7%, over the three months selling and marketing expenses of $460,628 at May 31, 2007. During the three months ended May 31, 2007, an aggressive sales and marketing program was in place to develop brand awareness and enhance market share through a coordinated advertising and direct mail campaign. These expenses were not incurred during the three months ended May 31, 2008.

General and administrative expenses were $443,987 for the three months ended May 31, 2008, as compared to $444,017 for the three months ended May 31, 2007. The efforts of expense reduction were mitigated due to the legal expenses incurred and accrued in support of settling a case of alleged copyright infringment. This case was settled in principle on May 5, 2008. Stock based compensation expense of $76,472 was also recorded for the first time during this period for stock option grants awarded to the Company’s employees.

Product development costs increased by $29,786, or 520.1%, from $5,727 for the three months ended May 31, 2007 to $35,513 for the three months ended May 31, 2008. Product development costs are expected to increase in the future as we continue to expend resources to enhance our existing product lines as well as develop new products.

Loss from Operations

As a result of the foregoing, we had a net loss from operations for the three months ended May 31, 2008 of $89,686 compared to a loss from operations of $193,489 for the three months ended May 31, 2007.

Interest Income (expense)

Interest income earned from the investment in variable money market funds was $1,680 for the three months ended May 31, 2008 as compared to $1,038 for the three months ended May 31, 2007. Interest expense related to a line of credit amounted to $2,515 and 0.0 for the three months ended May 31, 2008 and 2007, respectively.

Amortization and Depreciation

Amortization for the quarter ended May 31, 2008 amounted to $142 which was related to our cost of obtaining patent protection as compared to $142 for the quarter ended May 31, 2007. Depreciation expense was $8,882 and $7,454, respectively, for the three months ended May 31, 2008 and 2007. Amortization and depreciation expense are included in general and administrative expenses.

Net Loss

As a result of the foregoing, we had a net loss for the three months ended May 31, 2008 of $90,521 compared to a net loss of $193,251 for the three months ended May 31, 2007.

Our loss per common share for the quarter ended May 31, 2008 was $0.01 compared to a loss per common share of $0.02 for the three months ended May 31, 2007.

Liquidity and Capital Resources

As of May 31, 2008, we had $164,179 in cash. As of May 31, 2008, we had current assets in the amount of $823,197 and current liabilities in the amount of $1,202,526. As a result, we had a working capital deficit of $379,329, as compared to a working capital deficit of $20,302 at August 31, 2007. Included in current liabilities are the accrued dividends on Preferred Series A Stock in the amount of $505,228, which is not anticipated to be paid within this fiscal year, however these dividends will continue to accrue.

Inventory as of May 31, 2008 was $299,981. This is a decrease of $41,238 from inventory of $341,219 as of August 31, 2007.

We generated revenues of $3,070,877 and $3,200,074 for the nine months ended May 31, 2008 and 2007, respectively, and recorded a net loss of $225,719 and a net loss of $916,581, respectively, during these periods. In addition, during the nine months ended May 31, 2008, the net cash used by operations was $197,764 and during the nine months ended May 31, 2007, the net cash used in operating activities was $864,328. Net cash used in investing activities during the nine months ended May 31, 2008 and 2007 was $53,319 and $50,763, respectively. Cash flows from financing activities during the nine months ended May 31, 2008 and 2007 was $150,000 and $0, respectively. Net decrease in cash and cash equivalents was $101,083 and $915,091 during the nine months ended May 31, 2008 and 2007, respectively.

On March 25, 2008, we entered into a loan agreement with an unaffiliated shareholder of ours providing for a loan of up to $300,000 carrying an interest rate of 9% per annum. The loan agreement further provides that principal and interest of the loan is repayable nine months from the date of the execution of the loan agreement. As of May 31, 2008 and June 30, 2008, the outstanding principal of the loan was $150,000 and accrued and unpaid interest at May 31, 2008 and June 30, 2008 was $2,515 and $3,625 respectively.

Although we believe that our existing cash, cash equivalents and recently executed loan agreement will be sufficient to support our current operations through December 31, 2008, we may have to raise additional capital to support and fund our sales, 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.

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.

Contractual Obligations

We lease space under a non-cancellable lease effective December 1, 2007 and expiring December 1, 2010. The lease obligation based on minimum monthly rents as of May 31, 2008 is as follows:

Fiscal Years Ending August 31,

2008	$	12,700
2009		55,007
2010		56,657
	$	124,364

Rent expense for the nine months ended May 31, 2008 and 2007 was $39,015, and $36,151, 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. Our manufacturing contracts overseas are price sensitive to changes in foreign exchange rates and we are currently experiencing price adjustments when importing our products due to the weakening of the US dollar. If the dollar continues to weaken we may be forced to increase our pricing to the end user.

ITEM 3A(T). 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.

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.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

On January 10, 2007, a complaint was filed in the United States District Court, Central District of California, by Martin Hogan Pty, Ltd., which was brought against the Company and our Chief Executive Officer and President. Plaintiff, a former supplier of frames of ours, alleged copyright and trade dress infringement in its frames and sought damages as well as permanent injunctive relief. On May 5, 2008, the parties reached a settlement in principle pursuant to which we agreed, subject a definitive settlement agreement, to pay the plaintiff $50,000 and agreed to no longer sell our existing SV sport frame after August 31, 2008, with no admission of wrongdoing. The Court subsequently dismissed the action and we are presently negotiating the final terms of a definitive settlement agreemen t. We do not expect the terms of the settlement to have a material effect on our financial condition or operations.

ITEM 2.

UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

Except as set forth below, none other than as previously disclosed in Current Reports on Form 8-K filed during the reporting period.

On July 14, 2008, we granted 36,000 incentive stock options to purchase shares of our common stock under our 2007 Stock Option Plan to an employee at an exercise price of $0.25 per share, with half of the options vesting on the date of grant and the other half vesting on December 31, 2008.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

None.

ITEM 5.

OTHER INFORMATION

The following disclosure would have otherwise been filed on Form 8-K under the heading “Item 8.01 - Other Events.”

An aggregate of 400,000 options to purchase shares of our common stock granted on March 20, 2008 under our 2007 Stock Option Plan to Suzanne Lewsadder and Jeffrey Lewsadder were declined prior to their issuance. Suzanne Lewsadder, serves as our Chief Executive Officer, Treasurer and is a member of our Board of Directors and Jeffrey Lewsadder, serves as our President and Secretary and is also a member of our Board of Directors.

ITEM 6.		EXHIBITS

Exhibit 31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 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.

Exhibit 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.

SIGNATURE

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