This Quarterly Report on Form 10-Q 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-Q.

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, 2009.

Overview

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

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

We have had a successful history of producing products for major industry leaders long before we became a public entity in 2006. This included a major long-term strategic alliance with one of the world's leading optical companies. Since then we also formed a major international strategic alliance with a large, Japanese dental company. With momentum from sales generated from this major strategic alliance, we initiated a fundamental shift in our marketing strategy, focusing primarily on indirect domestic and international sales. In addition to the expected effect this change has had on our business, we believe that it has helped minimize our exposure to, and impact of, the current economic challenges currently facing other companies and industries.

We have also looked to develop new distributor relationships through the launch of our International Distributor Program, and have increased our reach by successfully expanding our international distribution network in several countries. In March 2009, we ended our partnership with a global retailer of quality dental and medical products, and have hired an international sales manager with the goal of improving our sales results in growing this market segment. We believe our attraction is our breadth of innovative products, which can be resold at strong margins while maintaining a highly competitive end-user price point.

In 2009, we intend to continue to commit resources to direct sales and marketing in a targeted, more complementary manner. This includes participation in trade shows emphasizing the dental, veterinary, and medical markets, and growing our e-commerce powered web store, which has provided us with a cost-effective platform to sell products directly to the end user. In addition, we believe there may be selected opportunities to pursue additions to our current product lines by purchasing businesses with products that can now be distributed through our maturing distribution channels effectively.

We also continue to develop new products that not only enhance the SheerVision product portfolio, but also add greater value for our third party clients. In fiscal year 2008, we introduced our upgraded FireFly Infinity Ultra™ LED head light system, featuring our new Lithium Polymer battery pack. The development and launch of our Signature Flip-Up Prism (high magnification) Loupe product line expanded our penetration into horizontal and vertical market segments where we have historically had only limited success. Additionally, in August 2008, we introduced a new sports frame, to appeal to the younger, more fashionable demographic of the dental market. In 2009, we are continuing the investment in lighting products with the introduction of a new generation of headlights for the surgical, dental and veterinary markets that have higher light intensity, lower weight, and lighter, smaller battery cables. We wish to boost the awareness of our brand name and our reputation in the lighting markets by building upon the technical achievements and performance of our current designs that have the highest beam intensity and quality in the industry.

With the sophisticated design and engineering teams currently available to us, we have the ability to not only modify and incorporate SheerVision products into other company's offerings, but to also extend our design, engineering, and manufacturing capabilities to other company's product development. Toward that end, we are constantly evaluating new, small medical devices.

Throughout our recent history we have earned a reputation for innovation, 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 Infinity Ultra head light system have received multiple endorsements by a highly acclaimed and prestigious leading independent non-profit dental education and product testing foundation. Our Infinity Ultra head light system was recently named by this foundation as having the highest light intensity compared to other leading brands in the dental marketplace.

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:

Accounts Receivable

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

Revenue Recognition

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

Inventory

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

Income Taxes

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

Recent Accounting Pronouncements

Statements of Financial Accounting Standards (SFAS):

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

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

SFAS 162, The Hierarchy of Generally Accepted Accounting Principles - FAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section, 411 The Meaning of "Present Fairly in Conformity with Generally Accepted Accounting Principles" . The statement is intended to improve financial reporting by identifying a consistent hierarchy for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. Generally Accepted Accounting Principles (GAAP).

FASB Staff Positions (FSP):

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

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

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

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

SEC Staff Accounting Bulletin (SAB)

SAB 110 expresses the views of the SEC staff regarding the use of a "simplified" method, as discussed in SAB No. 107 ("SAB 107"), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company currently uses the simplified method for "plain vanilla" share options and warrants, and will assess the impact of SAB 110 for fiscal year 2009.

The Company is currently evaluating the aforementioned new accounting guidance but does not believe that adoption of any of the pronouncements will have a material impact on the Company's 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, 2009 and 2008
                                                        (in thousands)
                                                 2009                        2008

     Net Sales                       $   2,885           100.0 %    $ 3,071       100.0 %
     Cost of Goods Sold                  1,090            37.8 %      1,068        34.7 %
     Gross Profit                        1,795            62.2 %      2,003        65.2 %
     Operating Expenses
     Shipping Expenses                     105             3.6 %        122         4.0 %
     Selling Expenses                      746            25.9 %        802        26.1 %
     General & Administrative Exp        1,035            35.9 %      1,239        40.3 %
     Product Development Expenses           19             1.0 %         66         2.1 %
     Total Operating Expenses            1,905            66.0 %      2,229        72.6 %
     Income (Loss) from Operations        (110 )          (3.8 )%      (226 )      (7.4 )%
     Other Income (Expense)                120             4.2 %          2         0.1  %
     Provision for Income Tax                2               -            2           -  %
     Net Income (Loss)               $       8               - %    $  (226 )      (7.4 )%

Third quarter of fiscal year 2009 revenues overall were lower than during the corresponding period of fiscal year 2008 due to a temporary pause in orders from our largest single customer while they reduced inventory levels company-wide to cope with the generally poor international economic conditions. Fortunately, demand for the new lighting systems and loupe sales through other channels are tracking at or above prior year levels. Management recognizes that the new concentration from one large strategic partner can represent risk as well as opportunity to broaden distribution channels. Consequently, management is working aggressively to diversity its distribution channels even further using more domestic and international outlets for its products.

While cost containment efforts dramatically reduced the impact of our largest customer's inventory adjustments, we did report a net loss of $62,492 for the third quarter, although we also continued to be marginally profitable for the first nine months of 2009 with net income of $8,269.

We plan to continue reducing operating costs and streamlining our sales and marketing efforts. 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 is being mitigated. Through large orders from a growing number of distributors, we anticipate that these efforts will continue to improve the operating income in future quarters.

We reduced the retail sales force to a level that will support those existing demographic areas producing the greatest volume of sales. The number of trade shows for 2008-2009 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 increased due to cost pressures in the travel industry.

Management believes that we have positioned ourselves for steady sales growth through the rest of fiscal year 2009 and through the cost cutting measures already established, this should result in a stronger financial position relative to fiscal year 2008.

Nine Months Ended May 31, 2009 Compared to the Nine Months Ended May 31, 2008

Net Sales

Net Sales decreased by $185,622 or 6.0%, from $3,070,877 for the nine months ended May 31, 2008 to $2,885,255 for the nine months ended May 31, 2009. The reduction of sales in the nine months ended May 31, 2009 was due to a decrease during the third quarter of 2009 in purchase orders from our largest distributor so as to reduce its inventory levels for items that were not selling as well as originally projected. This reduction in sales was partially offset by increased light sales through all marketing channels and an increase in our loupe sales through direct sales channels. We are working diligently with our largest distributor to rebuild sales to historic levels.

Gross Profit

Gross profit decreased by $207,808 or 10.4%, from $2,003,121 for the nine months ended May 31, 2008 to $1,795,313 for the nine months ended May 31, 2009. Gross margin was 62% of net sales for the nine-month period ended May 31, 2009 compared to 65% of net sales for the nine-month period ended May 31, 2008. The decrease in margin was attributable to inventory adjustments during the second and third quarters of 2009. We do not expect any major adjustments to inventory in the future now that an unaudited physical inventory has been completed to update our records.

Operating Expenses

Operating expenses, which include shipping expenses, selling and marketing expenses, general and administrative expenses and product development decreased by $323,998, or 14.5%, to $1,904,809 for the nine months ended May 31, 2009 as compared to $2,228,807 for the nine months ended May 31, 2008. This reduction is primarily attributable to the decline in legal costs associated with the legal settlement that occurred in fiscal year 2008.

Shipping expenses decreased by $17,429 or 14.3% to $104,437 or 3.6% of net sales for the nine months ended May 31, 2009 as compared to $121,866 or 4.0% of net sales for the nine months ended May 31, 2008 attributable to decreased sales during the third quarter of 2009.

Selling and marketing expenses were $746,433 for the nine months ended May 31, 2009, a decrease of $55,134 or 6.9%, compared with $801,567 for the nine months ended May 31, 2008. This decrease was mainly related to our changes that reduced our direct sales force and increased use of OEM distributors and dealers.

General and administrative expenses were $1,035,397 for the nine months ended May 31, 2009 a decrease of $203,801, or 16.4% compared to $1,239,198 for the nine months ended May 31, 2008. This decrease is attributable to the decline in legal costs associated with the legal settlement that occurred in fiscal year 2008.

Product development costs decreased by $47,634 or 72%, from $66,176 for the nine months ended May 31, 2008 to $18,542 for the nine months ended May 31, 2009. Our elevated light development activity in the nine months ended May 31, 2008, resulted in a decrease in costs as compared to the same period in 2009. 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.

Income (Loss) from Operations

Loss from operations for the nine months ended May 31, 2009 decreased by $116,190 or 51.5% to $109,496 as compared to $225,686 for the nine months ended May 31, 2008. The reduction in loss from operations is related to the continuing refinement of our business model to reflect the changing distribution channel strategy and the one-time impact of the settlement of legal actions. These efforts have led to significant cost savings related to shipping, marketing, sales and customer service labor, and travel expenses. We anticipate improved operating profit performances in the upcoming quarters related to these changes.

Other Income (Expense)

Interest expense for the nine months ended May 31, 2009 was $7,083 as compared to $0 in interest expense for the nine months ended May 31, 2008. These changes reflected the use of a line of credit established in fiscal year 2008. At the end of the first nine months of fiscal 2009, the balance owing on the line was $75,000, not including $3,014 in accrued interest expense. In addition, during the second quarter of 2009 we received a one-time payment of $126,797 for an insurance settlement arising out of a claim filed by us partially reimbursing legal expenses incurred in the defense of a competitor lawsuit.

Net Income (Loss)

Net income for the nine months ended May 31, 2009 was $8,269 compared with a net loss of $225,719 for the nine months ended May 31, 2008. Earnings per share was $0.01 for the nine months ended May 31, 2009, compared with a loss per share of $0.03 for the nine months ended May 31, 2008.

Three Months Ended May 31, 2009 Compared to the Three Months Ended May 31, 2008

Net Sales

Net Sales decreased by $278,100 or 24.8%, from $1,119,633 for the three months ended May 31, 2008 to $841,533 for the three months ended May 31, 2009. The reduction of sales in the third quarter was due to a decrease in purchase orders from our largest distributor so as to reduce its inventory levels for items that were not selling as well as originally projected. This reduction in sales was partially offset by increased light sales through all marketing channels and an increase in our loupe sales through direct sales channels. We are working diligently with our largest distributor to rebuild sales to historic levels.

Gross Profit

Gross profit decreased by $195,737, or 26%, from $753,751 for the three months ended May 31, 2008 to $558,014 for the three months ended May 31, 2009. Gross margin was 66.3 % of net sales for the three-month period ended May 31, 2009 compared to 67.3% of net sales for the three-month period ended May 31, 2008. The decrease in margin was attributable to an inventory adjustment resulting from a reduction in inventory levels of our largest distributor. We do not expect any major adjustments to inventory in the future now that an unaudited physical inventory has been completed to update our records.

Operating Expenses

Operating expenses, which include shipping expenses, selling and marketing expenses, general and administrative expenses and product development decreased by $226,177, or 26.8%, to $617,260 for the three months ended May 31, 2009 as compared to $843,437 for the three months ended May 31, 2008. This reduction is primarily attributable to the decline in legal costs associated with the legal settlement that occurred in fiscal year 2008.

Shipping expenses decreased $22,006 or 37.6% to $36,577 or 4.3% of net sales for the three months ended May 31, 2009 as compared to $58,583 or 5.2% of net sales for the three months ended May 31, 2008 attributable to decreased sales during the quarter.

Selling and marketing expenses were $219,577 for the three months ended May 31, 2009, a decrease of $85,777 or 28.1%, compared with $305,354 for the three months ended May 31, 2008. This decrease was mainly related to our changes that reduced our direct sales force and increased use of OEM distributors and dealers.

General and administrative expenses were $360,056 for the three months ended May 31, 2009, a decrease of $83,931, or 18.9% compared to $443,987 for the quarter ended May 31, 2008. This decrease is attributable to the decline in legal costs associated with the legal settlement that occurred in fiscal 2008.

Product development costs decreased by $34,463 or 97%, from $35,513 for the three months ended May 31, 2008 to $1,050 for the three months ended May 31, 2009. Our elevated light development activity in the three months ended May 31, 2008, resulted in a decrease in costs as compared to the same period in 2009. 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.

Income (Loss) from Operations

Loss from operations for the quarter ended May 31, 2009 decreased by $30,440 or 33.9% to $59,246 as compared to $89,686 for the quarter ended May 31, 2008. The reduction in loss from operations is related to the continuing refinement of our business model to reflect the changing distribution channel strategy and the one-time impact of the settlement of legal actions. These efforts have led to significant cost savings related to shipping, marketing, sales and customer service labor, and travel expenses. We anticipate improved operating profit performances in the upcoming quarters related to these changes.

Other Income (Expense)

Interest expense for the three months ended May 31, 2009 was $1,701 as compared to $835 in interest income for the quarter ended May 31, 2008. These changes reflected the use of a line of credit established in fiscal year 2008. At the end of the first nine months of fiscal 2009, the balance owing on the line was $75,000, not including $3,014 in accrued interest expense.

Net Income (Loss)

The net loss for the three months ended May 31, 2009 was $62,492 compared with a net loss of $90,521 for the quarter ended May 31, 2008. The loss per share was $0.01 for the three months ended May 31, 2009, compared with a loss per share of $0.01 for the three months ended May 31, 2008.

Liquidity and Capital Resources

We assess our liquidity by our ability to generate cash to fund operations. Significant factors in the management of liquidity are: funds generated by operations; levels of accounts receivable; inventories, accounts payable and capital expenditures; adequate lines of credit; and financial flexibility to attract long-term capital on satisfactory terms. As of May 31, 2009, we had cash of $88,772.

To date, we have financed operations principally through lines of credit and . . .