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)
|
Name
of Exchange on which registered:
|
|
Securities
registered pursuant to Section 12(g) of the Act:
|
Common
Stock, par value $0.001 per share
|
Name
of exchange on which registered:
|
OTCBB
|
Large
accelerated filer
o
|
Accelerated
filer
o
|
Non-accelerated
filer
o
|
Smaller reporting company
x
|
Item
1. Description of Business
|
3
|
Item
1A. Risk Factors
|
8
|
Item
2. Description of Property
|
13
|
Item
3. Legal Proceedings
|
13
|
Item
4. Submission of Matters to a Vote of Security Holders
|
13
|
Item
5. Market for Registrant's Common Equity and Related Stockholder
Matters
|
13
|
Item
6. Selected Financial Data
|
14
|
Item
7. Management’s Discussion and Analysis of Financial Condition and Results
of Operation
|
14
|
Item
7A. Quantitative and Qualitative Disclosures about Market
Risk
|
20
|
Item
8. Financial Statements and Supplementary Data
|
20
|
Item
9. Changes in and Disagreements with Accountants on Accounting And
Financial Disclosure
|
20
|
Item
9A (T). Controls and Procedures
|
20
|
Item
9B. Other Information
|
21
|
Item
10. Directors, Executive Officers and Corporate Governance
|
21
|
Item
11. Executive Compensation
|
24
|
Item
12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
27
|
Item
13. Certain Relationships and Related Transactions
|
28
|
Item
14. Principal Accountant Fees and Services
|
28
|
Item
15. Exhibits, Financial Statement Schedules
|
29
|
|
·
|
Launch an
Aggressive Initiative to Develop Strong Domestic Sales
Alliances
|
|
·
|
Build Upon
Sales Momentum in OEM
Markets
|
|
·
|
Continue to
Foster Direct to End-User
Sales
|
|
·
|
Expansion
of Market Share in International
Markets
|
|
·
|
Expansion
of our Product Lines to Achieve our Goal of Becoming a Full Service
Optical and Illumination
Company
|
|
·
|
Company
|
|
·
|
Brand
reputation and loyalty;
|
|
·
|
Product
quality, support, and durability;
|
|
·
|
Product
pricing;
|
|
·
|
Surgical & Dental Loupes
Product Attributes
Including:
|
|
·
|
Magnification/Clarity
.
Top quality optics are critical in this
regard;
|
|
·
|
Field-of-View
. A wide
field of vision is better than a smaller
one;
|
|
·
|
Depth-of-Field
. An
extended depth of field is preferable;
and
|
|
·
|
Weight
. Lighter loupes
are generally preferable to heavier
loupes.
|
|
·
|
Portable Headlight System
Product Attributes
Including:
|
|
·
|
Portability
. A portable
light system allows for maximum movement and flexibility. End users are no
longer tethered to a light box;
|
|
·
|
LED.
A portable light
source with an LED bulb is the brightest, whitest light on the market. It
is also economical in that it eliminates bulb replacement common with
fiber optic light sources;
|
|
·
|
Lightweight.
A good
portable light should have a small, lightweight battery pack and the
headlight should be sleek and worn seamlessly
;
|
|
·
|
Value.
Price combined
with quality is a driver of brand choice in the marketplace;
and
|
|
·
|
Mounting Options.
The
light source should mount on either a headband or directly to the loupes.
The unit should be able to be mounted onto loupes from all major competing
manufacturers to appeal to the widest possible user
base.
|
|
·
|
success in implementing our shift
in our business model;
|
·
|
acceptance of our products and
market penetration;
|
|
·
|
the amount and timing of capital
expenditures and other costs relating to the implementation of our
business plan, including acquisitions of, and investments in, competing or
complementary technologies;
|
|
·
|
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.
|
|
·
|
quarterly
variations in our operating
results;
|
|
·
|
operating
results that vary from the expectations of management, securities analysts
and investors;
|
|
·
|
changes
in expectations as to our business, prospects, financial condition, and
results of operations;
|
|
·
|
announcements
by us, our partners or our competitors regarding material
developments;
|
|
·
|
the
operating and securities price performance of other companies that
investors believe are comparable to
us;
|
|
·
|
future
sales of our equity or equity-related
securities;
|
|
·
|
changes
in general conditions in our industry and in the economy, the financial
markets and the domestic or international political
situation;
|
|
·
|
fluctuations
in oil and gas prices;
|
|
·
|
departures
of key personnel; and
|
|
·
|
regulatory
considerations.
|
2009
|
2008
|
|||||||||||||||
Fiscal
Year Ended August 31
|
High
|
Low
|
High
|
Low
|
||||||||||||
First
Quarter
|
$ | 0.18 | $ | 0.04 | $ | 0.52 | $ | 0.12 | ||||||||
Second
Quarter
|
0.18 | 0.04 | 0.74 | 0.12 | ||||||||||||
Third
Quarter
|
0.16 | 0.06 | 0.40 | 0.15 | ||||||||||||
Fourth
Quarter
|
0.11 | 0.02 | 0.44 | 0.18 |
TWELVE MONTHS ENDED AUGUST 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
(in thousands)
|
||||||||||||||||
Net
Sales
|
$ | 3,499 | 100.0 | % | $ | 4,418 | 100.0 | % | ||||||||
Cost
of Goods Sold
|
1,323 | 37.8 | 1,664 | 37.6 | ||||||||||||
Gross
Profit
|
2,176 | 62.2 | 2,754 | 62.3 | ||||||||||||
Operating
Expenses
|
||||||||||||||||
Selling
Expenses
|
905 | 25.9 | 1,081 | 24.5 | ||||||||||||
General
& Administrative Exp
|
1,427 | 40.8 | 1,894 | 54.1 | ||||||||||||
Total
Operating Expenses
|
2,332 | 66.6 | 2,976 | 85.1 | ||||||||||||
Loss
from Operations
|
(156 | ) | (4.5 | ) | (222 | ) | (5.0 | ) | ||||||||
Other
(Income)/Expense
|
85 | 2.5 | (2 | ) | - | |||||||||||
Net
Loss
|
$ | (71 | ) | (2.0 | ) | $ | (224 | ) | (5.0 | )% |
Name
|
Age
|
Position
|
||
Suzanne
Lewsadder
|
63
|
Chief
Executive Officer, Director and Treasurer
|
||
Patrick
Adams
|
52
|
Chief
Financial Officer
|
||
Shemiran
Hart
|
51
|
Director
|
||
Sharon
Biddle
|
57
|
Director
|
||
David
Frankel
|
61
|
Director
|
||
Jeffrey
Lewsadder
|
53
|
Director
|
||
Terri
Wiest
|
62
|
National
Sales Director, Dental Hygiene
|
||
Martin
Chaput
|
41
|
Online
Marketing Manager
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that
time;
|
|
·
|
any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offences);
|
|
·
|
being
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his or
her involvement in any type of business, securities or banking activities;
or
|
|
·
|
being
found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not
been reversed, suspended, or
vacated.
|
|
·
|
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.
|
Name and
Principal Position
|
Year
(1)
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)(2)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Non-qualified
Deferred
Compensation
($)
|
All Other
Compensation
($) (3)
|
Total
($)
|
|||||||||||||||||||||||||
Suzanne
Lewsadder
|
2009
|
175,000 | 27,314 | — | — | — | — | 25,384 | 227,698 | |||||||||||||||||||||||||
Chairman
and Chief
|
||||||||||||||||||||||||||||||||||
Executive
Officer
|
2008
|
112,500 | 27,686 | — | — | — | — | 28,028 | 168,214 | |||||||||||||||||||||||||
Jeffrey
Lewsadder
|
2009
|
142,324 | 35,382 | — | — | — | — | 23,409 | 201,115 | |||||||||||||||||||||||||
Former
President and
|
||||||||||||||||||||||||||||||||||
Secretary(4)
|
2008
|
112,500 | 20,750 | — | — | — | — | 26,330 | 159,580 | |||||||||||||||||||||||||
Patrick
Adams
|
2009
|
37,500 | (5) | — | — | — | — | — | 5,568 | 43,068 | ||||||||||||||||||||||||
Chief
Financial Officer
|
2008
|
— | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Terri
Wiest
|
||||||||||||||||||||||||||||||||||
National
Sales Director,
|
2009
|
84,988 | (6) | — | — | — | — | 7,764 | 92,752 | |||||||||||||||||||||||||
Dental
Hygiene Division
|
2008
|
107,733 | (7) | — | — | 15,734- | — | — | 8,503 | 131,970 | ||||||||||||||||||||||||
Martin
Chaput
|
2009
|
80,000 | — | — | — | — | 16,070 | 96,070 | ||||||||||||||||||||||||||
Online
Marketing
|
2008
|
80,000 | — | — | 7,867 | — | — | 12,276 | 100,143 | |||||||||||||||||||||||||
Manager
|
|
(1)
|
The
information is provided for each fiscal year referenced beginning
September 1 and ending August 31.
|
|
(2)
|
The
amounts reflect the compensation expense in accordance with FAS 123(R) of
these option awards. The assumptions used to determine the fair value of
the option awards for fiscal year ended August 31, 2009 are set forth in
Note 9 of our audited consolidated financial statements included in our
Form 10-K for fiscal year ended August 31, 2009. Our named executive
officers will not realize the value of these awards in cash unless and
until these awards are exercised and the underlying shares subsequently
sold.
|
|
(3)
|
See
“All Other Compensation” table
below.
|
(4)
|
On
July 9, 2009, our Board of Directors terminated Mr. Lewsadder as our
President and Secretary and ratified termination of Mr. Lewsadder’s
employment effective June 26,
2009.
|
|
(5)
|
The
referenced individual is entitled to a salary of $100,000 per annum, and a
guaranteed bonus of $25,000. The amount referenced reflects the amount
earned during fiscal year
2009.
|
(6)
|
Includes
$14,988 in commission.
|
(7)
|
Includes
$44,400 in commission.
|
Name
|
Year
|
Automobile
Related Expenses
($)
|
Medical
Related Expenses
($)
|
Insurance
Premium
($)
|
Total
($)
|
|||||||||||||
Suzanne
|
2009
|
9,331 | 15,151 | 902 | 25,384 | |||||||||||||
Lewsadder
|
2008
|
11,043 | 16,082 | 902 | 28,058 | |||||||||||||
Jeffrey
|
2009
|
17,239 | 5,743 | 428 | 23,410 | |||||||||||||
Lewsadder
|
2008
|
11,312 | 14,447 | 570 | 26,330 | |||||||||||||
Patrick
|
2009
|
— | 5,430 | 138 | 5,568 | |||||||||||||
Adams
|
2008
|
— | — | — | ||||||||||||||
Terri
|
2009
|
— | 7,173 | 592 | 7,765 | |||||||||||||
Wiest
|
2008
|
— | 7,957 | 546 | 8,503 | |||||||||||||
Martin
|
2009
|
— | 15,969 | 101 | 16,070 | |||||||||||||
Chaput
|
2008
|
— | 12,216 | 60 | 12,276 |
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive Plan
Awards
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock Held
That Have
Not Vested
(#)
|
Market
Value of
Shares or
Units of
Stock Held
That Have
Not Vested
($)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#)
|
Equity
Incentive Plan
Awards:
Market
or
Payout Value
of Unearned
Shares, Units
or Other
Rights
That
Have Not
Vested ($)
|
|||||||||||||||||||||||||||
Suzanne
Lewsadder, CEO and Treasurer
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Jeffrey
Lewsadder
|
||||||||||||||||||||||||||||||||||||
Former
President and Secretary
|
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Patrick
Adams
|
||||||||||||||||||||||||||||||||||||
Chief
Financial Officer(1)
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Terri
Wiest;
National
Sales Director,
Dental
Hygiene Division
|
100,000 | (1) | — | — | 0.20 |
03/20/18
|
— | — | — | — | ||||||||||||||||||||||||||
Martin
Chaput
Online
Marketing Manager
|
50,000 | (1) | — | — | 0.20 |
03/20/18
|
— | — | — | — |
(1)
|
These
options were granted under our 2007 Stock Option Plan, the first half of
which vested on March 20, 2008 and the second half of which vested on
December 31, 2008.
|
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) | 72.3 | % | ||||
Jeffrey
Lewsadder(1)
|
9,219,137 | (3) | 72.3 | % | ||||
Shemiran
Hart(1)
|
0 | 0 | % | |||||
Sharon
Biddle(1)
|
29,166 | (4) | * | % | ||||
David
Frankel(1)
|
29,166 | (4) | * | % | ||||
Patrick
Adams(2)
|
0 | 0 | % | |||||
Terri
Wiest
|
100,000 | (5) | * | % | ||||
Martin
Chaput
|
50,000 | (5) | * | % | ||||
All
Current Executive Officers and
|
||||||||
Directors
as a Group (6 persons)
|
9,277,469 | (6) | 72.5 | % |
*
|
Less
than one percent
|
(1)
|
Indicates
Director.
|
(2)
|
Indicates
Officer.
|
(3)
|
In
the case of Suzanne Lewsadder, includes the shares of common stock
beneficially owned by Jeffrey Lewsadder. In the case of Jeffrey Lewsadder,
includes the shares of common stock beneficially owned by Suzanne
Lewsadder.
|
(4)
|
Includes
20,833 shares of common stock issuable upon the conversion of Series A
Preferred Stock.
|
(5)
|
Represents
shares of common stock issuable upon exercise of options within 60 days
following October 31, 2009.
|
(6)
|
Includes
41,666 shares of common stock issuable upon the conversion of Series A
Preferred Stock.
|
Plan Category
|
Number of securities to be issued
upon exercise of outstanding options,
warrants and rights
(a)
|
Weight-average exercise price
of outstanding options,
warrants and rights
(b)
|
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
(c)
|
|||||||||
Equity
compensation
plans
approved
by
security
holders
|
386,000 | (1) | $0.20 | 2,814,000 | (2) | |||||||
Equity
compensation
plans
not
approved by
security
holders
|
— | — | — | |||||||||
Total
|
386,000 | (1) | $0.20 | 2,814,000 | (2) |
(1)
|
Represents
shares of our common stock issuable upon exercise of outstanding options
under our 2007 Stock Option Plan.
|
(2)
|
Represents
up to 2,614,000 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.
|
Summary:
|
2009
|
2008
|
||||||
Audit
fees
|
$ | 103,193 | (1) | $ | 83,152 | (2) | ||
Audit
related fees
|
- | - | ||||||
Tax
fees
|
- | - | ||||||
Other
fees
|
- | - |
(1)
|
Amount
represents $58,000 billed to us by Berman & Company P.A. and $45,193
billed to us by Miller Ellin & Company
LLP.
|
(2)
|
Amount
represents fees billed to us by Miller Ellin & Company
LLP.
|
Exhibit No.
|
Description
|
|
2.1
|
Acquisition
of Escalator, Inc. (incorporated by reference to Exhibit 2.1 to Current
Report on Form 10-SB of SheerVision, Inc., a Delaware corporation
(formerly Clean Water Technologies, Inc.), filed with the Securities and
Exchange Commission on October 13, 1999).
|
|
2.2
|
Lone
Pine Resources, Inc. Merger (incorporated by reference to Exhibit 2.2 to
Current Report on Form 10-SB of SheerVision, Inc., a Delaware corporation
(formerly Clean Water Technologies, Inc.), filed with the Securities and
Exchange Commission on October 13, 1999).
|
|
2.3
|
Agreement
and Plan of Spinoff (incorporated by reference to Exhibit 2.3 to Current
Report on Form 10-SB of SheerVision, Inc., a Delaware corporation
(formerly Clean Water Technologies, Inc.), filed with the Securities and
Exchange Commission on October 13, 1999).
|
|
2.4
|
Acquisition
of Clean Water Technologies, Inc. (incorporated by reference to Exhibit
2.4 to Current Report on Form 10-SB of SheerVision, Inc., a Delaware
corporation (formerly Clean Water Technologies, Inc.), filed with the
Securities and Exchange Commission on October 13,
1999).
|
|
2.5
|
Acquisition
of Zorax, Inc. (incorporated by reference to Exhibit 2.5 to Current Report
on Form 10KSB of SheerVision, Inc., a Delaware corporation (formerly Clean
Water Technologies, Inc.), filed with the Securities and Exchange
Commission on August 16, 2001).
|
|
3.1
|
Second
Amended and Restated Certificate of Incorporation of SheerVision, Inc.
(incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K of
SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
June 20, 2006).
|
|
3.2
|
By-laws
of SheerVision, Inc., a Delaware corporation (incorporated by reference to
Exhibit 3.2 to Current Report on Form 10-QSB of SheerVision, Inc., a
Delaware corporation), filed with the Securities and Exchange Commission
on October 13, 1999).
|
|
3.3
|
Form
of Common Stock Certificate (incorporated by reference to Exhibit 3.3 to
Current Report on Form SB-2A of SheerVision Inc., a Delaware corporation,
filed with the Securities and Exchange Commission on September 29,
2006).
|
|
3.4
|
Articles
of Incorporation of SheerVision, Inc., a California corporation
(incorporated by reference to Exhibit 3.3 to Current Report on Form 8-K/A
of SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
March 28, 2006).
|
|
3.5
|
Certificate
of Amendment of Articles of Incorporation of SheerVision, Inc., a
California corporation (incorporated by reference to Exhibit 3.4 to
Current Report on Form 8-K/A of SheerVision, Inc., a Delaware corporation
(formerly Clean Water Technologies, Inc.), filed with the Securities and
Exchange Commission on March 28, 2006).
|
|
3.6
|
By-laws
of SheerVision, Inc., a California corporation (incorporated by reference
to Exhibit 3.5 to Current Report on Form 8-K/A of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on March 28,
2006).
|
|
3.7
|
Form
of Certificate of Designations, Preferences, Rights, and Limitations
of Series A Cumulative Convertible Preferred Stock as filed with the
Secretary of State of Delaware (incorporated by reference to Exhibit 3.1
to Current Report on Form 8-K of SheerVision, Inc., a Delaware corporation
(formerly Clean Water Technologies, Inc.), filed with the Securities and
Exchange Commission on May 11,
2006)
|
4.1
|
Warrant,
issued to Patricia Hall (Hallmark Capital), dated as of September 28, 2005
(incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K/A
of SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
March 28, 2006).
|
|
4.2
|
Warrant,
issued to Northeast Securities, dated as of September 19, 2005, in
connection with the 2005 Private Placement (incorporated by reference to
Exhibit 4.2 to Current Report on Form 8-K/A of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on March 28,
2006).
|
|
4.3
|
Form
of Warrant issued to investors in the 2005 Private Placement (incorporated
by reference to Exhibit 4.3 to Current Report on Form 8-K/A of
SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
March 28, 2006).
|
|
4.4
|
Form
of 12% Secured Promissory Note issued to investors in the 2005 Private
Placement (incorporated by reference to Exhibit 10.15 to Current Report on
Form 8-K/A of SheerVision, Inc., a Delaware corporation (formerly Clean
Water Technologies, Inc.), filed with the Securities and Exchange
Commission on March 28, 2006).
|
|
4.5
|
Form
of Warrant issued to investors in the 2006 Private Placement (incorporated
by reference to Exhibit 4.1 to Current Report on Form 8-K of SheerVision,
Inc., a Delaware corporation (formerly Clean Water Technologies, Inc.),
filed with the Securities and Exchange Commission on May 11,
2006).
|
|
4.6
|
Form
of Warrant, issued to Northeast Securities, dated as of April ____, 2006,
in connection with the 2006 Private Placement (incorporated by reference
to Exhibit 4.2 to Current Report on Form 8-K of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on May 11,
2006).
|
|
4.7
|
Form
of 9% Convertible Promissory Note issued to investors in the 2006 Private
Placement (incorporated by reference to Exhibit 10.2 to Current Report on
Form 8-K of SheerVision, Inc., a Delaware corporation (formerly Clean
Water Technologies, Inc.), filed with the Securities and Exchange
Commission on May 11, 2006).
|
|
10.1
|
Sublicense
Agreement, effective as of October 22, 1999, between SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), and GSA
Resources, Inc., an Arizona corporation (incorporated by reference to
Exhibit 10 to Current Report on Form 10KSB of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on September 26,
2000).
|
|
10.2
|
Securities
Purchase Agreement, dated as of November 30, 2005, among SheerVision,
Inc., a California corporation, Laurie C. Scala and Howard A. Scala, and
SheerVision, Inc., a Delaware corporation (formerly, Clean Water
Technologies, Inc.) (Schedules intentionally omitted) (incorporated by
reference to Exhibit 10.1 to Current Report on Form 8-K of SheerVision,
Inc., a Delaware corporation (formerly Clean Water Technologies, Inc.),
filed with the Securities and Exchange Commission on December 7,
2005).
|
|
10.3
|
License
Assignment Agreement, dated March 16, 2006, by and between SheerVision,
Inc., a Delaware corporation (formerly, Clean Water Technologies, Inc.)
and Water Technology Partners LLC, a Florida limited liability company
(incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K
of SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
March 22, 2006).
|
|
10.4
|
Sublicense
Assignment Agreement, dated March 16, 2006, by and between SheerVision,
Inc., a Delaware corporation (formerly, Clean Water Technologies, Inc.)
and Water Technology Partners LLC, a Florida limited liability company
(incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K
of SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
March 22, 2006).
|
|
10.5
|
Commercial
Real Estate Lease, by and among Academy Center LLC and Suzanne Lewsadder
(d/b/a SheerVision, Inc.), dated as of August 26, 2005 (incorporated by
reference to Exhibit 10.2 to Current Report on Form 8-K/A of SheerVision,
Inc., a Delaware corporation (formerly Clean Water Technologies, Inc.),
filed with the Securities and Exchange Commission on April 5,
2006).
|
|
10.6
|
Letter
of Engagement with Northeast Securities, dated as of August 3, 2005
(incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K/A
of SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
March 28,
2006).
|
10.7 |
Confidentiality
and Non-Disclosure Agreement, dated as of August 3, 2005, between
SheerVision, Inc., a California corporation, and Northeastern Securities
(incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K
of SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
March 28, 2006).
|
|
10.8
|
Letter
of Engagement, dated as of December 14, 2004, between SheerVision, Inc., a
California corporation, and Hallmark Capital Corp. (incorporated by
reference to Exhibit 10.5 to Current Report on Form 8-K/A of SheerVision,
Inc., a Delaware corporation (formerly Clean Water Technologies, Inc.),
filed with the Securities and Exchange Commission on March 28,
2006).
|
|
10.9
|
Letter
of Engagement, dated as of October 1, 2005, between SheerVision, Inc., a
California corporation, and Hallmark Capital Corp. (incorporated by
reference to Exhibit 10.6 to Current Report on Form 8-K/A of SheerVision,
Inc., a Delaware corporation (formerly Clean Water Technologies, Inc.),
filed with the Securities and Exchange Commission on March 28,
2006).
|
|
10.10
|
Letter
Agreement, dated as of November 14, 2005, between SheerVision, Inc., a
California corporation, and Javier Schmidt & Kalma, S.A, and addendum
(incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K/A
of SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
March 28, 2006).
|
|
10.11
|
Promissory
Note, dated as of December 7, 2005, issued by SheerVision, Inc. in favor
of Vineyard Bank, in the principal amount of $300,000 (incorporated by
reference to Exhibit 10.8 to Current Report on Form 8-K/A of SheerVision,
Inc., a Delaware corporation (formerly Clean Water Technologies, Inc.),
filed with the Securities and Exchange Commission on March 28,
2006).
|
|
10.12
|
Commercial
Security Agreement, dated as of December 7, 2005, between SheerVision,
Inc., a California corporation, and Vineyard Bank (incorporated by
reference to Exhibit 10.9 to Current Report on Form 8-K/A of SheerVision,
Inc., a Delaware corporation (formerly Clean Water Technologies, Inc.),
filed with the Securities and Exchange Commission on March 28,
2006).
|
|
10.13
|
Business
Loan Agreement, dated as of December 7, 2005, between SheerVision, Inc., a
California corporation, and Vineyard Bank (incorporated by reference to
Exhibit 10.10 to Current Report on Form 8-K/A of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on March 28,
2006).
|
|
10.14
|
Agreement
to Provide Insurance, dated as of December 7, 2005, between SheerVision,
Inc., a California corporation, and Vineyard Bank (incorporated by
reference to Exhibit 10.11 to Current Report on Form 8-K/A of SheerVision,
Inc., a Delaware corporation (formerly Clean Water Technologies, Inc.),
filed with the Securities and Exchange Commission on March 28,
2006).
|
|
10.15
|
Commercial
Guaranty, dated as of December 7, 2005, by Suzanne Lewsadder, on behalf of
SheerVision, Inc., a California corporation (incorporated by reference to
Exhibit 10.12 to Current Report on Form 8-K/A of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on March 28,
2006).
|
|
10.16
|
Commercial
Guaranty, dated as of December 7, 2005, by Jeffrey Lewsadder, on behalf of
SheerVision, Inc., a California corporation (incorporated by reference to
Exhibit 10.13 to Current Report on Form 8-K/A of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on March 28,
2006).
|
|
10.17
|
Change
in Terms Agreement, dated as of January 5, 2006, between SheerVision,
Inc., a California corporation, and Vineyard Bank and accompanying
Disbursement Request and Authorization for the Variable Rate
Nondisclosable Revolving Line of Credit (incorporated by reference to
Exhibit 10.14 to Current Report on Form 8-K of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on March 28,
2006).
|
|
10.18
|
Form
of Intercreditor Agreement, dated as of September 13, 2005, with
SheerVision, Inc., a California corporation (incorporated by reference to
Exhibit 10.17 to Current Report on Form 8-K/A of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on March 28,
2006).
|
|
10.19
|
Letter
Agreement, dated as of April 6, 2003, and Addendum, dated as of April 5,
2003 (filed in redacted form pursuant to a confidential treatment request)
(incorporated by reference to Exhibit 10.19 to Current Report on Form 8-K
of SheerVision, Inc., a Delaware corporation (formerly Clean Water
Technologies, Inc.), filed with the Securities and Exchange Commission on
April 5, 2006).
|
10.20
|
Consulting
Agreement, dated as of February 15, 2005, and Addendum, dated as of March
6, 2005 (filed in redacted form pursuant to a confidential treatment
request) (incorporated by reference to Exhibit 10.20 to Current Report on
Form 8-K of SheerVision, Inc., a Delaware corporation (formerly Clean
Water Technologies, Inc.), filed with the Securities and Exchange
Commission on April 5, 2006).
|
|
10.21
|
Supply
and License Agreement, dated as of April 7, 2003 (filed in redacted form
pursuant to a confidential treatment request) (incorporated by reference
to Exhibit 10.21 to Current Report on Form 8-K of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on April 5,
2006).
|
|
10.22
|
Form
of Engagement Letter, dated April 11, 2006, between Northeast Securities
and Clean Water Technologies, Inc. (incorporated by reference to Exhibit
10.3 to Current Report on Form 8-K of SheerVision, Inc., a Delaware
corporation (formerly Clean Water Technologies, Inc.), filed with the
Securities and Exchange Commission on May 11, 2006).
|
|
10.23
|
Form
of Side Letter, dated as of April 20, 2006, between Northeast Securities
and Clean Water Technologies, Inc. (incorporated by reference to Exhibit
10.4 to Current Report on Form 8-K of SheerVision, Inc., a Delaware
corporation (formerly Clean Water Technologies, Inc.), filed with the
Securities and Exchange Commission on May 11, 2006).
|
|
10.24
|
Form
of Registration Rights Letter delivered by Clean Water Technologies, Inc.
in connection with the 2006 Private Placement (incorporated by reference
to Exhibit 10.5 to Current Report on Form 8-K of SheerVision, Inc., a
Delaware corporation (formerly Clean Water Technologies, Inc.), filed with
the Securities and Exchange Commission on May 11,
2006).
|
|
10.25
|
Form
of Registration Rights Letter delivered by Clean Water Technologies, Inc.
in connection with the 2005 Private Placement (incorporated by reference
to Exhibit 10.25 to Form SB-2/A of SheerVision, Inc., a Delaware
corporation (formerly Clean Water Technologies, Inc.), filed with the
Securities and Exchange Commission on September 22,
2006).
|
|
10.26
|
2007
Stock Option Plan (incorporated by reference to Exhibit A to the
Information Statement pursuant to Section 14C of the Securities and
Exchange Act of 1934 on Form Def-14C filed with the Securities and
Exchange Commission on March 13, 2007).
|
|
10.27
|
2007
Stock Option Plan for Independent and Non-Employee Directors (incorporated
by reference to Exhibit B to the Information Statement pursuant to Section
14C of the Securities and Exchange Act of 1934 on Form Def-14C filed with
the Securities and Exchange Commission on March 13,
2007).
|
|
10.28
|
Investor
and Public Relations Consulting Agreement dated April 18, 2007 between
SheerVision, Inc, a Delaware corporation and Mark Taggatz (incorporated by
reference to Exhibit 10.1 to Current Report on Form 8K of SheerVision,
Inc. filed with the Securities and Exchange Commission on April 24,
2007).
|
|
10.29
|
Form
of Settlement and Release Agreement dated as of January 4, 2008 between
General Scientific Corporation, SheerVision, Inc. and Asia Sourcing
Corporation (incorporated by reference to Exhibit 10.1 to Current Report
on Form 8K of SheerVision, Inc. filed with the Securities and Exchange
Commission on January 18, 2008).
|
|
10.30
|
Form
of Loan Agreement dated March 19, 2008 (incorporated by reference to
Exhibit 10.1 to Current Report on Form 8K of SheerVision, Inc. filed with
the Securities and Exchange Commission on March 19,
2008).
|
|
14.1
|
Code
of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1
to Current Report on Form 8-K/A of SheerVision, Inc., a Delaware
corporation (formerly Clean Water Technologies, Inc.), filed with the
Securities and Exchange Commission on March 28, 2006).
|
|
21.1
|
Subsidiaries
of SheerVision, Inc.*
|
|
31.1
|
Certification
of Principal Executive Officer required by Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
31.2
|
Certification
of Principal Financial Officer required by Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
Dated:
December 15, 2009
|
|
|
SHEERVISION
INC.
|
||
By:
|
/s/
Suzanne Lewsadder
|
|
Suzanne
Lewsadder
|
||
Chief
Executive Officer
|
Title
|
Date
|
|||
/s/
Suzanne Lewsadder
|
Chief
Executive Officer
|
December
15, 2009
|
||
Suzanne
Lewsadder
|
and
Director
|
|||
(Principal
Executive Officer)
|
||||
/s/
Patrick Adams
|
Chief
Financial Officer
|
December
15, 2009
|
||
Patrick
Adams
|
(Principal
Financial and
|
|||
Accounting
Officer)
|
||||
/s/
Shemiran Hart
|
Director
|
December
15, 2009
|
||
Shemiran
Hart
|
||||
/s/
Sharon Biddle
|
Director
|
December
15, 2009
|
||
Sharon
Biddle
|
||||
/s/
David Frankel
|
Director
|
December
15, 2009
|
||
David
Frankel
|
Page(s)
|
||
Report
of Independent Registered Public Accounting Firm
|
F-3
|
|
Financial
Statements:
|
||
Consolidated
Balance Sheets as of August 31, 2009 and 2008
|
F-5
|
|
Consolidated
Statements of Operations for the years ended
|
||
August
31, 2009 and 2008
|
F-6
|
|
Consolidated
Statement of Changes in Stockholders’ Equity/ (Deficit)
|
||
for
the years ended August 31, 2009 and 2008
|
F-7
|
|
Consolidated
Statements of Cash Flows for the years ended
|
||
August
31, 2009 and 2008
|
F-8
|
|
Notes
to Consolidated Financial Statements
|
|
F-9
- F-27
|
/s/
Miller, Ellin & Company, LLP
|
MILLER
ELLIN & COMPANY, LLP
|
August 31, 2009
|
August 31, 2008
|
|||||||
Assets
|
||||||||
Assets:
|
||||||||
Cash
|
$ | 17,651 | $ | 111,887 | ||||
Accounts
receivable
|
257,616 | 399,950 | ||||||
Inventory
|
339,663 | 254,052 | ||||||
Prepaid
expenses and other current assets
|
87,654 | 45,387 | ||||||
Total
Current Assets
|
702,584 | 811,276 | ||||||
Property
and equipment - net
|
134,981 | 141,894 | ||||||
Intangible
assets - net
|
- | 7,520 | ||||||
Total
Assets
|
$ | 837,565 | $ | 960,690 | ||||
Liabilities and Stockholders'
Deficit
|
||||||||
Liabilities:
|
||||||||
Accounts
payable
|
$ | 415,838 | $ | 423,180 | ||||
Accrued
expenses and other current liabilities
|
77,184 | 84,269 | ||||||
Line
of credit
|
75,000 | 150,000 | ||||||
Accrued
dividends - Series A convertible preferred stock
|
804,813 | 565,145 | ||||||
Derivative
liabilities - warrants
|
58,568 | - | ||||||
Total
Current Liabilities
|
1,431,403 | 1,222,594 | ||||||
Stockholders'
Deficit:
|
||||||||
Preferred
stock, Series A, 9% cumulative convertible, ($0.001 par
value, $10 per share stated value, liquidation preference of
$3,449,023, 350,000 shares authorized, 264,421 and 266,296
issued and outstanding)
|
264 | 266 | ||||||
Common
stock, ($0.001 par value, 90,000,000 shares authorized, 12,756,023 and
12,735,190 shares issued and outstanding)
|
12,756 | 12,735 | ||||||
Additional
paid in capital
|
4,985,343 | 4,953,839 | ||||||
Accumulated
deficit
|
(5,592,201 | ) | (5,228,744 | ) | ||||
Total
Stockholders' Deficit
|
(593,838 | ) | (261,904 | ) | ||||
Total
Liabilities and Stockholders' Deficit
|
$ | 837,565 | $ | 960,690 |
For
the Years Ended August 31,
|
||||||||
2009
|
2008
|
|||||||
Sales
- net
|
$ | 3,499,407 | $ | 4,417,887 | ||||
Cost
of sales
|
1,323,498 | 1,664,101 | ||||||
Gross
profit
|
2,175,909 | 2,753,786 | ||||||
Operating
expenses:
|
||||||||
General
and administrative
|
1,426,980 | 1,894,371 | ||||||
Selling
and marketing
|
904,655 | 1,081,425 | ||||||
Total
operating expenses
|
2,331,635 | 2,975,796 | ||||||
Loss
from operations
|
(155,726 | ) | (222,010 | ) | ||||
Other
income (expense)
|
||||||||
Interest
income
|
458 | 4,320 | ||||||
Other
income
|
126,797 | - | ||||||
Interest
expense
|
(8,784 | ) | (5,918 | ) | ||||
Impairment
loss
|
(15,577 | ) | - | |||||
Change
in fair value of derivative liabilities - warrants
|
(18,544 | ) | - | |||||
Total
other income - net
|
84,350 | (1,598 | ) | |||||
Net
loss
|
$ | (71,376 | ) | $ | (223,608 | ) | ||
Less:
Preferred stock dividends - Series A convertible preferred
stock
|
(239,668 | ) | (240,774 | ) | ||||
Net
loss applicable to common shareholders
|
$ | (311,044 | ) | $ | (464,382 | ) | ||
Net
loss per common share - basic and diluted
|
$ | (0.02 | ) | $ | (0.04 | ) | ||
Weighted
average number of common shares outstanding during the year - basic and
diluted
|
12,751,114 | 12,721,720 |
Preferred
Stock, $0.001 Par Value
|
Common
Stock, $0.001 Par Value
|
Additional
|
Accumulated
|
Stockholders'
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Paid
in Capital
|
Deficit
|
Equity/(Deficit)
|
||||||||||||||||||||||
Balance,
August 31, 2007
|
270,046 | $ | 270 | 12,693,523 | $ | 12,694 | $ | 4,857,051 | $ | (4,764,363 | ) | $ | 105,652 | |||||||||||||||
Conversion
of preferred stock
|
(3,750 | ) | (4 | ) | 41,667 | 41 | (37 | ) | - | - | ||||||||||||||||||
Share
based payment
|
- | - | - | - | 96,825 | - | 96,825 | |||||||||||||||||||||
Dividends
accrued on preferred stock
|
- | - | - | - | - | (240,774 | ) | (240,774 | ) | |||||||||||||||||||
Net
loss, 2008
|
- | - | - | - | - | (223,607 | ) | (223,607 | ) | |||||||||||||||||||
Balance,
August 31, 2008
|
266,296 | 266 | 12,735,190 | 12,735 | 4,953,839 | (5,228,744 | ) | (261,904 | ) | |||||||||||||||||||
Conversion
of preferred stock
|
(1,875 | ) | (2 | ) | 20,833 | 21 | (19 | ) | - | - | ||||||||||||||||||
Share
based payment
|
- | - | - | - | 19,134 | - | 19,134 | |||||||||||||||||||||
Reclassification
of derivative liability at fair value in connection with expiration of
warrants
|
- | - | - | - | 12,389 | - | 12,389 | |||||||||||||||||||||
Recognition
of derivative liability related to adoption of FASB ASC
815-40-15
|
- | - | - | - | - | (52,413 | ) | (52,413 | ) | |||||||||||||||||||
Dividends
accrued on preferred stock
|
- | - | - | - | - | (239,668 | ) | (239,668 | ) | |||||||||||||||||||
Net
loss, 2009
|
- | - | - | - | - | (71,376 | ) | (71,376 | ) | |||||||||||||||||||
Balance,
August 31, 2009
|
264,421 | $ | 264 | 12,756,023 | $ | 12,756 | $ | 4,985,343 | $ | (5,592,201 | ) | $ | (593,838 | ) |
For
the Years Ended August 31,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
(loss)
|
$ | (71,376 | ) | $ | (223,608 | ) | ||
Adjustments
to reconcile net (loss) to net cash provided by (used in) operating
activities:
|
||||||||
Depreciation
and amortization
|
45,195 | 34,346 | ||||||
Stock
based compensation
|
19,134 | 96,825 | ||||||
Impairment
loss
|
15,577 | - | ||||||
Change
in fair value of derivative liabilities - warrants
|
18,544 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
Decrease in:
|
||||||||
Accounts
receivable
|
142,334 | (349,553 | ) | |||||
Inventory
|
(85,611 | ) | 87,167 | |||||
Prepaid
expenses and other current assets
|
(42,267 | ) | 27,777 | |||||
Increase
(Decrease) in:
|
||||||||
Accounts
payable
|
(7,342 | ) | 86,167 | |||||
Accrued
expenses and other current liabilities
|
(7,085 | ) | (4,690 | ) | ||||
Net
Cash Provided by (Used in) Operating Activities
|
27,103 | (245,569 | ) | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase
of property and equipment
|
(46,339 | ) | (57,806 | ) | ||||
Net
Cash Used in Investing Activities
|
(46,339 | ) | (57,806 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from line of credit
|
- | 150,000 | ||||||
Repayment
on line of credit
|
(75,000 | ) | - | |||||
Net
Cash Provided by (Used in) Financing Activities
|
(75,000 | ) | 150,000 | |||||
Net
Decrease in Cash
|
(94,236 | ) | (153,375 | ) | ||||
Cash
and Cash Equivalents - Beginning of Year
|
111,887 | 265,262 | ||||||
Cash
and Cash Equivalents - End of Year
|
$ | 17,651 | $ | 111,887 | ||||
SUPPLEMENTARY CASH FLOW
INFORMATION:
|
||||||||
Cash
paid during the period for:
|
||||||||
Income
taxes
|
$ | 2,400 | $ | 1,600 | ||||
Interest
|
$ | 9,986 | $ | - | ||||
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
|
||||||||
Accrued
preferred stock dividends - Series A convertible preferred
stock
|
$ | 239,668 | $ | 240,774 | ||||
Issuance
of common stock in connection with conversion of Series A convertible
preferred stock
|
$ | 21 | $ | 41 | ||||
Recognition
of derivative liability related to adoption of FASB ASC
815-40-15
|
$ | 52,413 | $ | - | ||||
Reclassification
of derivative liability at fair value in connection with expiration of
warrants
|
$ | 12,389 | $ | - |
|
a)
|
Equity
if they (i) require physical settlement or net-share settlement, or
(ii) gives the Company a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share
settlement), or as
|
|
b)
|
Assets
or liabilities if they (i) require net-cash settlement (including a
requirement to net cash settle the contract if an event occurs and if that
event is outside the Company
’
s control),
or (ii) give the counterparty a choice of net-cash settlement or
settlement in shares (physical settlement or net-share
settlement).
|
August 31, 2009
|
August 31, 2008
|
|||||||
Convertible
preferred stock
|
2,938,011 | 2,958,844 | ||||||
Stock
options
|
386,000 | 511,000 | ||||||
Stock
warrants
|
977,276 | 1,488,989 | ||||||
Total
common stock equivalents
|
4,301,287 | 4,958,833 |
·
|
the
Company is expanding its revenue base beyond direct sales to OEM, original
equipment manufacturing, and third party sales in the international and
medical/surgical markets;
|
·
|
the
Company is aggressively signing up new international
distributors;
|
·
|
the
Company is seeking third party debt and/or equity
financing;
|
·
|
the
Company is cutting operating costs;
and
|
·
|
the
Company is currently negotiating an extension on its line of
credit.
|
|
·
|
Level
1 inputs utilize unadjusted quoted prices in active markets for identical
assets or liabilities that the Company has the ability to
access;
|
|
·
|
Level
2 inputs utilize other-than-quoted prices that are observable, either
directly or indirectly. Level 2 inputs include quoted prices for similar
assets and liabilities in active markets, and inputs such as interest
rates and yield curves that are observable at commonly quoted intervals;
and
|
|
·
|
Level
3 inputs are unobservable and are typically based on the
Company’s own assumptions, including situations where there is
little, if any, market
activity.
|
Level 1:
Quoted Prices in
Active Markets
for Identical
Liabilities
|
Level 2:
Significant Other
Observable Inputs
|
Level 3:
Significant
Unobservable
Inputs
|
Total at August
31, 2009
|
|||||||||||||
Derivative
Liabilities
|
$ | - | $ | - | $ | 58,568 | $ | 58,568 | ||||||||
Total
|
$ | - | $ | - | $ | 58,568 | $ | 58,568 |
August 31, 2009
|
August 31, 2008
|
|||||||
Finished
goods
|
$ | 339,663 | $ | 249,802 | ||||
Raw
materials
|
- | 4,250 | ||||||
Total
|
$ | 339,663 | $ | 254,052 |
Estimated
Useful
Lives
|
August 31, 2009
(audited)
|
August 31. 2008
(audited)
|
||||||||
Manufacturing
equipment
|
7
years
|
$ | 183,491 | $ | 148,640 | |||||
Office
and computer equipment
|
5
years
|
43,218 | 49,437 | |||||||
Leasehold
improvement
|
15
years
|
7,179 | 7,179 | |||||||
233,888 | 205,256 | |||||||||
Less:
accumulated depreciation
|
(98,907 | ) | (63,362 | ) | ||||||
Property
and equipment - net
|
$ | 134,981 | $ | 141,894 |
Fiscal
Year Ended August 31,
|
||||
2010
|
$ | 77,497 | ||
2011
|
77,497 | |||
2012
|
77,497 | |||
2013
|
77,497 | |||
2014
|
64,581 | |||
Total
minimum lease payments
|
$ | 374,569 |
Warrants
|
Weighted Average Exercise Price
|
|||||||
Outstanding
– August 31, 2007
|
1,488,989 | $ | 0.53 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Outstanding
– August 31, 2008
|
1,488,989 | $ | 0.53 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Forfeited
|
(511,713 | ) | $ | 1.00 | ||||
Outstanding
– August 31, 2009
|
977,276 | $ | 0.28 | |||||
Exercisable
–August 31, 2009
|
977,276 | $ | 0.28 |
Warrants Outstanding
|
Warrants Exercisable
|
||||||||||||||||||||
Range of
exercise price
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
Weighted
Average
Exercise Price
|
Number
Exercisable
|
Weighted Average
Exercise Price
|
|||||||||||||||
$ | 0.28 | 977,276 |
1.05
years
|
$ | 0.28 | 977,276 | $ | 0.28 |
Exercise
price
|
$ | 0.28 | ||
Expected
dividends
|
0 | % | ||
Expected
volatility
|
580.97 | % | ||
Risk
free interest rate
|
1.55 | % | ||
Expected
life of warrant in years
|
1.72 | |||
Expected
forfeitures
|
0 | % |
Exercise
price
|
$ | 1.00 | ||
Expected
dividends
|
0 | % | ||
Expected
volatility
|
580.97 | % | ||
Risk
free interest rate
|
1.55 | % | ||
Expected
life of warrant in years
|
0.32 – 0.35 | |||
Expected
forfeitures
|
0 | % |
Exercise
price
|
$ | 1.00 | ||
Expected
dividends
|
0 | % | ||
Expected
volatility
|
641.28 - 641.29 | % | ||
Risk
fee interest rate
|
1.87 - 2.15 | % | ||
Expected
life of warrant in years
|
0 | |||
Expected
forfeitures
|
0 | % |
Exercise
price
|
$ | 0.28 | ||
Expected
dividends
|
0 | % | ||
Expected
volatility
|
673.10 | % | ||
Risk
fee interest rate
|
2.39 | % | ||
Expected
life of warrant in years
|
1.07 | |||
Expected
forfeitures
|
0 | % |
Options
|
Weighted Average Exercise Price
|
|||||||
Outstanding
– August 31, 2007
|
- | $ | - | |||||
Granted
|
661,000 | 0.20 | ||||||
Exercised
|
- | - | ||||||
Forfeited
|
(150,000 | ) | $ | 0.20 | ||||
Outstanding
– August 31, 2008
|
511,000 | $ | 0.20 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Forfeited
|
(125,000 | ) | $ | 0.20 | ||||
Outstanding
– August 31, 2009
|
386,000 | $ | 0.20 | |||||
Exercisable
– August 31, 2009
|
386,000 | $ | 0.20 | |||||
Weighted
average fair value of options
granted
during the period ended
August
31, 2009
|
- | $ | - | |||||
Weighted
average fair value of options
exercisable
at August 31, 2009
|
$ | 79,000 | $ | 0.20 |
Options Outstanding
|
|||||||||||||
Range of
exercise price
|
Number
Outstanding
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
Weighted
Average
Exercise
Price
|
||||||||||
$ | 0.20-$0.25 | 386,000 |
8.58
years
|
$ | 0.20 |
Options Exercisable
|
|||||||||||||
Range of
exercise price
|
Number
Exercisable
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
Weighted
Average
Exercise
Price
|
||||||||||
$ | 0.20-$0.25 | 386,000 |
8.58
years
|
$ | 0.20 |
Options
|
Weighted
Average
Grant Date
Fair Value
|
|||||||
Outstanding
– August 31, 2007
|
- | - | ||||||
Granted
|
661,000 | $ | 0.20 | |||||
Vested
|
(205,500 | ) | 0.20 | |||||
Cancelled
or forfeited
|
(150,000 | ) | 0.20 | |||||
Outstanding
– August 31, 2008
|
305,500 | $ | 0.20 | |||||
Granted
|
- | - | ||||||
Vested
|
(180,500 | ) | 0.20 | |||||
Cancelled
or forfeited
|
(125,000 | ) | 0.20 | |||||
Outstanding
–August 31, 2009
|
- | $ | - |
(1)
|
Dividends
|
|
a.
|
Dividends,
at 9% per year, are payable on June 30 and September 30 each
year. If there are not sufficient funds to pay these dividends,
the Company will continue to accrue until such funds are
available.
|
|
b.
|
Since
inception, the Company has not had sufficient funds to pay the accrued
dividends on the convertible preferred shares that were converted into
common shares. The accrued dividends remain as a current
liability.
|
|
c.
|
During
the year ended August 31, 2009 and 2008, the Company accrued dividends on
its preferred stock of $239,668 and $240,774, resulting in a cumulative
balance of $804,813 and $565,145 in accrued
dividends.
|
(2)
|
Voting
- voted with the common stock on an as converted basis based upon the
number of shares of common stock into which the convertible preferred
stock is convertible at the record date for any stockholder
action.
|
(3)
|
Stated
value is $10 per share.
|
(4)
|
Liquidation
rights-
c
onvertible
preferred stock holders are senior to any other classes of stock in
liquidation. These will be paid equivalent to $10 per share
plus accrued
dividends.
|
(5)
|
Conversion
rights
|
|
a.
|
Series
A Preferred Stock are convertible into shares of common stock at $0.90 per
share, after giving effect to the stated value of $10 per share, subject
to adjustment in certain anti-dilutive
events.
|
|
b.
|
In
the event that the closing price for the common shares shall equal or
exceed 200% of the then effective conversion price for 15 of any 30
immediately preceding consecutive trading days, the preferred stock shall
convert automatically.
|
(A)
|
Accounts
Receivable
|
Customer
|
August 31, 2009
|
August 31, 2008
|
||
A
|
59%
|
86%
|
(B)
|
Sales
– net
|
Customer
|
August 31, 2009
|
August 31, 2008
|
||
A
|
38%
|
21%
|
(C)
|
Purchases
|
Vendor
|
August 31, 2009
|
August 31, 2008
|
||
A
|
19%
|
18%
|
||
B
|
10%
|
-
|
2009
|
2008
|
|||||||
Gross
deferred tax assets:
|
||||||||
Net
operating loss carryforwards
|
$ | (1,549,000 | ) | $ | (1,537,000 | ) | ||
Total
deferred tax assets
|
1,549,000 | 1,537,000 | ||||||
Less:
valuation allowance
|
(1,549,000 | ) | (1,537,000 | ) | ||||
Net
deferred tax asset recorded
|
$ | - | $ | - |
2009
|
2008
|
|||||||
Expected
tax expense (benefit) – Federal
|
$ | (22,000 | ) | $ | (83,000 | ) | ||
Expected
tax expense (benefit) – State
|
(6,000 | ) | (13,000 | ) | ||||
Non-deductible
stock compensation
|
8,000 | - | ||||||
Impairment
loss
|
6,000 | - | ||||||
Meals
and entertainment
|
2,000 | - | ||||||
Change
in Valuation Allowance
|
12,000 | 96,000 | ||||||
Actual
tax expense (benefit)
|
$ | - | $ | - |
Name
|
State of Incorporation
|
|
SheerVision,
Inc. (100% owned)
|
California
|
Date:
December 15, 2009
|
/s/
Suzanne Lewsadder
|
|
Suzanne
Lewsadder, Chief Executive Officer
|
Date:
December 15, 2009
|
/s/Patrick
Adams
|
|
Patrick
Adams, Chief Financial Officer
|
Dated:
December 15, 2009
|
|
By:
|
/s/
Suzanne Lewsadder
|
Suzanne
Lewsadder
|
|
Chief
Executive Officer
|
Dated:
December 15, 2009
|
|
By:
|
/s/
Patrick Adams
|
Patrick
Adams
|
|
Chief
Financial Officer
|