10-Q

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ending August 31, 2018

o TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to __________________

Commission File No. 0-29373

Seychelle Environmental Technologies, Inc.

(Exact Name of registrant as specified in its charter)

Nevada	33-0836954
(State or other jurisdiction Of incorporation)	(IRS Employer File Number)
22 Journey
Aliso Viejo, California	92656
(Address of principal executive offices)	(zip code)

(949) 234-1999

(Registrant's telephone number, including area code)

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 þ  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(Section 232.405 of this chapter) during the preceding 12 months(or such shorter period that the registrant was required to submit and post such files. Yes þ  No o

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☑
(Do not check if smaller reporting company)	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

The number of shares outstanding of the Registrant's common stock, as of October 11, 2018 was 26,640,313.

References in this document to "us," "we," or "Company" refer to Seychelle Environmental Technologies, Inc., its predecessor and its subsidiaries.

FORM 10-Q

Securities and Exchange Commission

Washington, D.C. 20549

Seychelle Environmental Technologies, Inc.

TABLE OF CONTENTS

		Page
PART I  FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Condensed Consolidated Balance Sheets		3
	Condensed Consolidated Statements of Operations		4
	Condensed Consolidated Statements of Cash Flows		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		17
Item 4.	Controls and Procedures		17
Item 4T.	Controls and Procedures		17
PART II  OTHER INFORMATION
Item 1.	Legal Proceedings		19
Item 1A.	Risk Factors		19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3.	Defaults Upon Senior Securities		19
Item 4.	Submission of Matters to a Vote of Security Holders		19
Item 5.	Other Information		19
Item 6.	Exhibits		20
Signatures			21

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PART I

ITEM 1. FINANCIAL STATEMENTS

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	August 31, 2018			February 28, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	1,919,949		$	2,075,833
Accounts receivable, net of allowance for doubtful accounts of $11,770 and $8,617
respectively		594,680			829,790
Related party receivables		32,951			35,007
Inventory, net		1,073,355			998,296
Prepaid expenses, deposits and other current assets		102,413			159,980
Total current assets		3,723,348			4,098,906
Property and equipment, net		113,086			135,539
Other current assets		66,670			66,670
Total assets	$	3,903,104		$	4,301,115
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	234,161		$	441,866
Customer deposits		12,307			163,184
Capital lease obligations, current portion		5,664			5,402
Total current liabilities		252,132			610,452
Long-term liabilities:
Capital lease obligations, net of current		6,220			9,082
Total liabilities		258,352			619,534
Stockholders' equity:
Preferred stock, 6,000,000 shares authorized, none issued or outstanding		-			-
Common stock $0.001 par value, 50,000,000 shares authorized, 26,640,313     issued and outstanding at August 31, 2018 and February 28, 2018, respectively		26,641			26,641
Additional paid-in capital		8,944,368			8,944,368
Accumulated deficit		(5,296,577	)		(5,259,748	)
Less Treasury Stock at Cost (66,000 shares at August 31, 2018 and February 28, 2018 respectively)		(29,680	)		(29,680	)
Total stockholders' equity		3,644,752			3,681,581
Total liabilities and stockholders' equity	$	3,903,104		$	4,301,115

See accompanying notes to condensed consolidated financial statements.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended August 31,
	2018			2017
Sales	$	735,677		$	991,934
Cost of sales		351,073			491,509
Gross profit		384,604			500,425
Operating expenses
Selling, general, and administrative		498,309			393,854
Depreciation and amortization		13,532			17,380
Total  operating  expenses		511,841			411,234
(Loss) income from operations		(127,237	)		89,191
Other expense
Interest expense		(485	)		(1,848	)
Other expense		(1,901	)		(142	)
Total other income (expense)		(2,386	)		(1,990	)
(Loss)  income before income tax expense		(129,623	)		87,201
Income tax expense		-			(1,799	)
Net (loss) income	$	(129,623	)	$	85,402
BASIC INCOME (LOSS) PER SHARE	$	0.00		$	0.00
DILUTED  INCOME (LOSS) PER SHARE	$	0.00		$	0.00
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		26,574,313			26,640,313
DILUTED WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		26,574,313			26,640,313

 See accompanying notes to condensed consolidated financial statements.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Six Months Ended August 31,
	2018			2017
Sales	$	1,869,578		$	2,200,141
Cost of sales		954,513			1,155,291
Gross profit		915,065			1,044,850
Operating expenses
Selling, general, and administrative		922,771			754,945
Depreciation and amortization		28,003			35,055
Total  operating  expenses		950,774			790,000
(Loss) income from operations		(35,709	)		254,850
Other expense
Interest expense		(1,038	)		(3,274	)
Other expense		(84	)		(142	)
Total other expense		(1,122	)		(3,416	)
(Loss) income before income tax expense		(36,831	)		251,434
Income tax expense		-			(6,050	)
Net  (loss) income	$	(36,831	)	$	245,384
BASIC INCOME (LOSS) PER SHARE	$	0.00		$	0.01
DILUTED  INCOME (LOSS) PER SHARE	$	0.00		$	0.01
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		26,574,313			26,640,313
DILUTED WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		26,574,313			26,640,313

 See accompanying notes to condensed consolidated financial statements.

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  SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Six Months Ended August 31,
	2018			2017
OPERATING ACTIVITIES:
Net (loss) income	$	(36,831	)	$	245,384
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		28,003			35,055
Provision (recovery) for doubtful accounts		3,153			(34,644	)
Changes in operating assets and liabilities:
Accounts receivable		231,959			343,406
Related party receivables		2,056			300
Inventory		(75,059	)		289,920
Prepaid expenses, deposits and other current assets		57,567			(22,578	)
Accounts payable and accrued expenses		(207,705	)		(243,361	)
Customer deposits		(150,877	)		(48,626	)
Net cash (used in) provided by operating activities		(147,734	)		564,856
INVESTING ACTIVITIES:
Purchase of property and equipment		(5,550	)		(2,995	)
Net cash used in investing activities		(5,550	)		(2,995	)
FINANCING ACTIVITIES:
Repayment of  capital lease obligations		(2,600	)		(1,790	)
Net cash used in financing activities		(2,600	)		(1,790	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(155,884	)		560,071
CASH AND CASH EQUIVALENTS - beginning of period		2,075,833			732,112
CASH AND CASH EQUIVALENTS - end of period	$	1,919,949		$	1,292,183
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	1,038		$	3,274
Income taxes	$	-		$	-

 See accompanying notes to condensed consolidated financial statements.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
August 31, 2018

NOTE 1:    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements have been prepared by Seychelle Environmental Technologies, Inc., and subsidiaries (the "Company") without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at August 31, 2018, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended February 28, 2018.  The results of operations for the periods ended August 31, 2018 and 2017 are not necessarily indicative of the operating results for the full fiscal years.

The summary of significant accounting policies of the Company is presented to assist in understanding the Company's condensed consolidated financial statements. The condensed consolidated financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the condensed consolidated financial statements and the February 28, 2018 consolidated financials included in the 10-K filed on June 8, 2018.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Except for the accounting policy for revenue recognition, which was updated as a result of adopting a new accounting standard related to revenue recognition, there have been no material changes to our significant accounting policies in Note 2 - Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2018.

The Financial Accounting Standards Board, or FASB, issued an accounting standards update that creates a single source of revenue guidance under U.S. GAAP for all companies, in all industries. We adopted this guidance on February 1, 2018 using the modified retrospective approach. The adoption of this guidance did not have a significant impact on our condensed consolidated financial statements.  Refer to Note 5 of these Notes to Condensed Consolidated Financial Statements for additional information.

NOTE 2:    BASIC INCOME (LOSS) PER SHARE

Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding during each period presented.  Diluted income per share is determined using the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, assuming conversion, exercise, or issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per share.  If the inclusion of common stock equivalents in the weighted average number of common shares outstanding would be anti-dilutive these items would be omitted from the calculation of net income per common share.  The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
August 31, 2018

NOTE 2:    BASIC INCOME (LOSS) PER SHARE (CONTINUED)

The denominator for diluted income (loss) per share for the periods ended August 31, 2018 and 2017, respectively, did not include 6,407,221 warrants as they would have been an ti-dilutive.

	For the six months ended
	August 31,
	2018			2017
Net income (loss) available to common shareholders	$	(36,831	)	$	245,384
Weighted average common shares – basic		26,574,313			26,640,313
Net income (loss) per share – basic	$	0.00		$	0.01
Dilutive effect of common stock equivalents:
Warrants		-			-
Weighted average common shares – diluted		26,574,313			26,640,313
Net income (loss) per share – diluted	$	0.00		$	0.01

	For the three months ended
	August 31,
	2018			2017
Net income (loss) available to common shareholders	$	(129,623	)	$	85,402
Weighted average common shares – basic		26,574,313			26,640,313
Net income (loss) per share – basic	$	0.00		$	0.00
Dilutive effect of common stock equivalents:
Warrants		-			-
Weighted average common shares – diluted		26,574,313			26,640,313
Net income  (loss) per share – diluted	$	0.00		$	0.00

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NOTE 3:   COMMON STOCK

Common Stock

During the quarter ended August 31, 2018 and 2017, no securities were issued by the Company.

Warrants

A summary of warrant activity for the six months ended August 31, 2018 is shown below.

			Weighted-
			Average
	Warrants		Exercise
	Outstanding		Price
Outstanding at March 1, 2018		6,407,221		0.21
Granted		-		-
Exercised		-		-
Forfeited		-		-
Outstanding at August 31, 2018		6,407,221		0.21
Vested at August 31, 2018		6,407,221		0.21
Exercisable at February 28, 2018		6,407,221		0.21

The following table summarizes significant ranges of outstanding warrants as of August 31, 2018:

		Warrants Outstanding						Warrants Exercisable
				Weighted		Weighted				Weighted
				Average		Average				Average
				Remaining		Exercise		Number		Exercise
Exercise Price		Number		Life (Years)		Price		Outstanding		Price
	$0.21		6,407,221		2.27		$0.21		6,407,221		$0.21

NOTE 4:    INVENTORY

The Company's inventory consisted of the following at August 31, 2018 and February 28, 2018:

	August 31, 2018		February 28, 2018
Raw materials	$	759,324	$	860,424
Finished goods		316,051		137,872
		1,075,375	$	998,296

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
August 31, 2018

NOTE 5:    REVENUE RECOGNITION AND CONCENTRATIONS

We derive our revenue primarily from product sales.  We determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; (5) recognition of revenue when, or as, we satisfy a performance obligation.

The Company's performance obligations consist soley of product shipped to customers.  Revenue from product sales is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for these products.  Revenue is recognized net of returns and any taxes collected from customers.  We offer standard contractual terms in our purchase orders. In addition, we use the practical expedient related to commissions paid since they would be amortized in less than one year.

Sales to two customers accounted for 50% and 57% of sales for the three and six month periods ended August 31, 2018, respectively.  Accounts receivable from these customers amounted to $416,254 or approximately 70% of accounts receivable as of August 31, 2018.

Sales to one customer accounted for 29% and 31% of sales for the three and six month periods ended August 31, 2017, respectively. Accounts receivable from one customer amounted to $473,476 or approximately 73% of accounts receivable as of August 31, 2017.

NOTE 6:    RELATED PARTY TRANSACTIONS

During the six months ended August 31, 2018 and 2017, TAM purchased on behalf of the Company approximately $36,550 and $40,448 respectively.  All amounts due to TAM had been paid in full as of August 31, 2018.

The Company utilizes the services of an individual, who is a related party, to source materials and provide the manufacturing of component parts with third-party vendors in China. For the six months ended August 31, 2018 and 2017, purchases facilitated through the related party accounted for approximately 14% and 17%, respectively, of total raw material purchases. The Company paid approximately $31,000 and $22,000 in direct commissions to the related party consultant during the six months ended August 31, 2018 and 2017, respectively.

The Company had advanced amounts to an employee of approximately $26,000 and $27,000 as of August 31, 2018 and 2017, respectively. These amounts are being repaid through direct payroll withdrawals.

The Company had receivable from stockholders of approximately $7,000 and $0 as of August 31, 2018 and 2017 respectively.

The Company had sales to two companies related to a member of the Board of Directors.  Specifically, sales to Sovereign Earth, LLC (dba Revolve) totaled approximately $438,000 and $227,000 for the six months ended August 31, 2018 and 2017, respectively and sales to Amazon Seychelle totaled approximately $56,000 and $0 for the six months ended August 31, 2018 and 2017, respectively.  Sovereign Earth, LLC (dba Revolve) is the sole and exclusive seller of the following products in worldwide markets, including Amazon World Marketplaces:  amazon.com, amazon.co uk, amazon.de, amazon.fr, amazon.jp, amazon, it, amazon.ca, amazon.cn, amazon.in, and amazon.com.mx for the duration of the agreement:  Generation#1 Filter Pitcher:  All filter iterations (regular, standard, advanced, radiological, extreme, supreme, etc.)

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
August 31, 2018

NOTE 7:  COMMITMENTS AND CONTINGENCIES

The Company entered into a lease agreement on one facility for its corporate offices, inventory and production at 22 Journey in Aliso Viejo, CA for a term of 5 years at a monthly rental of approximately $19,000.

 Legal Proceedings

The Company was involved in litigation during the fiscal quarter ended August 31, 2018.  In June, 2018, the Company resolved a Discrimination complaint in the Superior Court of the State of California, County of Orange filed by a former employee. 

In addition there is a pending action titled Rolling Tides, LLC vs. Carl Palmer, Seychelle Environmental Technologies, Inc., and other defendants.  The case was brought in the Superior Court of the State of California, County of Orange.  The action alleges certain fraudulent transfers occurred from Seychelle to the various defendants.  The plaintiffs have refused to identify any such transfers by date or amount.  The matter is in early discovery and no trial date is set.  All the defendants have denied the allegations of the complaint and are vigorously defending the matter.  It is not likely that the case will be settled without trial.  The Company believes that the case has no merit.

Licenses

The Company has historically entered into licensing agreements with third-parties for product proprietary rights, patent and trademark ownership, and use of product name. In return, the Company agrees to pay licensing fees and/or royalties on sales of those products. During the six months ended August 31, 2018 and 2017, the Company paid $4,051 and $14,963, respectively, in royalties and licensing fees related under these agreements.

NOTE 8: SUBSEQUENT EVENTS

Management has evaluated subsequent events from August 31, 2018 through the date the condensed consolidated financial statements were issued, and has concluded that no subsequent events have occurred that would require recognition or disclosure in these condensed consolidated financial statements.

NOTE 9:  INCOME TAX

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. statutory corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. U.S. GAAP requires that deferred income tax assets and liabilities be remeasured at the income tax rate expected to apply when those temporary differences reverse, and that the effects of any change to such income tax rate be recognized in the period when the change was enacted.

In connection with the Company's initial analysis of the impact of the TCJA, the Company recorded a discrete net tax expense of $282,408 in the year ended February 28, 2018. This net expense is primarily due to the remeasurement of the Company's existing deferred tax assets and liabilities. Due to the Company having a full valuation allowance related to their deferred taxes, the $282,408 discrete tax expense associated with the remeasurement is equally offset by the valuation allowance causing an overall net zero impact on the Company's current tax rate.

The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. To the extent that a company's accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
August 31, 2018

NOTE 9:  INCOME TAX (CONTINUED)

We recorded the effects of the TCJA for year ended February 28, 2018 using our best estimates and the information available to us through the date the financial statements were issued. However, our analysis is ongoing and as such, the income tax effects that we have recorded are provisional.

Tax Provision

The Company expects its effective tax rate for the 2019 fiscal year to be different from the federal statutory rate due primarily to a change in valuation allowance.

We recorded a provision for income taxes of $0 and $1,800 for the quarter ended August 31, 2018 and 2017 respectively, related to federal and state taxes, based on the Company's expected annual effective tax rate.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion summarizes the significant factors affecting the operating results, financial condition and liquidity and cash flows of Seychelle Environmental Technologies, Inc., and subsidiaries (the "Company") as of and for the three and six month periods ended August 31, 2018 and 2017. The discussion and analysis that follows should be read together with the consolidated financial statements of Seychelle Environmental Technologies, Inc. and the notes to the condensed consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 2018.  Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company's control.

Forward-Looking Statements

Certain statements contained herein are "forward-looking" statements.  Forward-looking statements include statements which are predictive in nature; which depend upon or refer to future events or conditions; or which include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or variations or negatives thereof or by similar or comparable words or phrases. In addition, any statement concerning future financial performance, ongoing business strategies or prospects, and possible future Company actions that may be provided by management are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about the Company; and economic and market factors in the countries in which the Company does business, among other things. These statements are not guarantees of future performance, and the Company has no specific intentions to update these statements. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors including, among others:

(1) the portable water filtration industry is in a state of rapid technological change, which can render the Company's products obsolete or unmarketable;

(2) any failure by the Company to anticipate or respond to technological developments or changes in industry standards or customer requirements, or any significant delays in product development or introduction, could have a material adverse effect on the Company's business, operating results and financial condition;

(3) the Company's cost of sales may be materially affected by increases in the market prices of the raw materials used in the Company's assembly processes;

(4) the Company's dependence on a few customers. Sales to these customers are unpredictable and difficult to estimate, and as such, may result in material fluctuations in sales from period to period. Management believes that if future revenues from its significant customers decline, those revenues can be replaced through the sales to other customers.  However, there can be no assurance that this will occur, which could result in an adverse effect on the Company's financial condition or results of operations in the future;

(4) the Company's water related product sales could be materially affected by weather conditions and government regulations;

(5) the Company is subject to the risks of conducting business internationally; and

(6) the industries in which the Company operates are highly competitive. Additional risks and uncertainties are outlined in the Company's filings with the Securities and Exchange Commission, including its most recent fiscal Annual Report on Form 10-K for the fiscal year ended February 28, 2017.

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Description of the Business

We were incorporated under the laws of the State of Nevada on January 23, 1998 as a change of domicile to Royal Net, Inc., a Utah corporation that was originally incorporated on January 24, 1986. Royal Net, Inc. changed its state of domicile to Nevada and its name to Seychelle Environmental Technologies, Inc. effective in January 1998.

On January 30, 1998, we entered into an Exchange Agreement with Seychelle Water Technologies, Inc., a Nevada corporation ("SWT"), whereby we exchanged our issued and outstanding capital shares with the shareholders of SWT on a one share for one share basis. We became the parent company and SWT became a wholly owned subsidiary. SWT had been formed in 1997 to market water filtration systems of Aqua Vision International.

Our Company is presently comprised of Seychelle Environmental Technologies, Inc., a Nevada corporation, with two wholly-owned subsidiaries, Seychelle Water Technologies, Inc. and Fill 2 Pure International, Inc., also Nevada corporations (collectively, the "Company" or "Seychelle"). We use the trade name "Seychelle Water Filtration Products, Inc." in our commercial operations.

Seychelle designs, assembles and distributes unique, state-of-the-art ionic absorption micron filters for portable filter devices that remove up to 99.99% of all pollutants and contaminants found in any fresh water source.  Patents and trade secrets cover all proprietary products.

Our principal business address is 22 Journey, Aliso Viejo, California 92656. Our telephone number at this address is 949-234-1999.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Our summarized historical financial data is presented in the following table to aid in your analysis. You should read this data in conjunction with this section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations, our condensed consolidated financial statements and the related notes to the condensed consolidated financial statements included elsewhere in this report. The selected condensed consolidated statements of operations data for the three and six month periods ended August 31, 2018 and 2017 are derived from our condensed consolidated financial statements included elsewhere in this report.

Three month period ended August 31, 2018 compared to the corresponding period in 2017

							Period over
	2018			2017			Period change			%
Sales	$	735,677		$	991,934			(256,257	)		(26	%)
Cost of sales		351,073			491,509			(140,436	)		(29	%)
Gross profit		384,604			500,425			(115,821	)		(23	%)
Gross profit %		52	%		50	%		45	%		-
Selling, general, and administrative expenses		498,309			393,854			104,455			27	%
Depreciation and amortization		13,532			17,380			(3,848	)		(22	%)
Other income (expense)		(2,386	)		(1,990	)		(396	)		20	%
(Loss) income before income tax benefit (expense)		(129,623	)		87,201			(216,824	)		(249	%)
Provision for income taxes		-			(1,799	)		1,799			(100	%)
Net (loss) income		(129,623	)		85,402			(215,025	)		(252	%)

Sales. Sales decreased by $256,257 or (26%) to $735,677 during the three months ended August 31, 2018 from $991,934 during the three months ended August 31, 2017.  The decrease is primarily due to decrease in sales of our bottle, portable retail, pitcher replacement and pitcher custom product lines. Sales during the three months ended August 31, 2017 of this product line were $535,055, compared to $338,226 in the comparable current period 2018.

- 14 -

Cost of sales and gross profit percentage. As a percentage of sales, the gross profit margin during the three months ended August 31, 2018 increased to 52% from 50%.   The product mix and timing of significant sales is always an important factor in the resulting profit margins reported.  The Company believes that the average gross margin percentages overall could decrease to a range around approximately 45% in the foreseeable future.

Selling, general, and administrative expenses. These expenses increased by $104,455, or 27%, during the three months ended August 31, 2017 compared to the same period ended in the prior year.  The increase was a direct result of the increase in legal and advertising costs.

Depreciation and amortization.  Depreciation and amortization expense was decreased due to fully depreciated fixed assets.

Income tax benefit (expense).  The Company recorded provision of $0 due to a pretax loss of $129,623 during the three month period ended August 31, 2018 compared to income tax benefit of $1,799 due to the pretax income of $87,201 during the three months ended August 31, 2017.

Net (loss) income. Net (loss) for the three month period ended August 31, 2018 was $129,623 compared to net income for the three month period ended August 31, 2017 of $85,402.  This was primarily due to the decrease of $256,257 or (26%) in sales and an increase of $104,455 in selling, general and administrative expenses.

Six month period ended August 31, 2018 compared to the corresponding period in 2017

							Period over
	2018			2017			Period change			%
Sales	$	1,869,578		$	2,200,141			(330,563	)		(15	%)
Cost of sales		954,513			1,155,291			(200,778	)		(17	%)
Gross profit		915,065			1,044,850			(129,785	)		(12	%)
Gross profit %		49	%		47	%		39	%
Selling, general, and administrative expenses		922,771			754,945			167,826			22	%
Depreciation and amortization		28,003			35,055			(7,052	)		(20	%)
Other income (expense)		(1,122	)		(3,416	)		2,294			(67	%)
(Loss) income before income tax benefit (expense)		(36,831	)		251,434			(288,265	)		(115	%)
Income tax benefit		-			(6,051	)		6,051			(100	%)
(Loss) net income		(36,831	)		245,384			(287,214	)		(115	%)

Sales. The decrease in sales to $1,869,578 during the six months ended August 31, 2018 from $2,200,141 during the six months ended August 31, 2017.  The decrease of 15% is primarily due to decrease in sales of our bottle, portable retail and pitcher product lines.

Cost of sales and gross profit percentage. As a percentage of sales, the gross profit margin during the six months ended August 31, 2018 increased to 49% from 47%.  The product mix and timing of significant sales is always an important factor in the resulting profit margins reported.  The Company believes that the average gross margin percentages overall could decrease to a range around approximately 45% in the foreseeable future.

Selling, general, and administrative expenses. These expenses increased by $167,826, or 22%, during the six months ended August 31, 2018 compared to the same period in the prior year.  The increase was a direct result of the increase in legal and advertising costs.

- 15 -

Depreciation and amortization.  Depreciation and amortization was decreased due to fully depreciated fixed assets.

Income tax benefit (expense).  The Company recorded an income tax $0 due to pretax loss of $36,831 compared to an income tax of $6,050 due to the pretax income of $251,435 during the six month period ended August 31, 2017.

Net (loss) income. Net loss for the six month period ended August 31, 2018 was $36,831 compared to net income of $245,384 for the six month period ended August 31, 2017.

Net cash from operating activities. During the six-month period ended August 31, 2018, cash used in operating activities was $147,734, compared to cash provided in operating activities of  $564,856 in the same period during 2017.This was primarily the result of decreased sales and increased expenses combined with collections of accounts receivable.

Net cash from investing activities. During the six month period ended August 31, 2018, the Company spent approximately $5,550 on capital expenditures.  In comparable period of the prior year, the Company spent $2,995 on capital expenditures.

Net cash from financing activities. Cash used in financing activities during the six month period ended August 31, 2018 was $2,600 compared to $1,790 during the comparable period. This was a result of the addition of a new capital lease in this fiscal year compared to various leases added in the previous year.

Management's Plan. As of August 31, 2018, the Company had $1,919,949 in cash and cash equivalents, $594,680 in accounts receivable and a backlog of $91,138 in unshipped product.  This year, Seychelle plans to release a variety of new products in the upcoming months that introduce hollow fiber technology and further improvements to our filter effectiveness and production.  We anticipate an increase in earnings with the addition of our innovative technology to products that focus on water soluble medical cannabis in conjunction with our portable products. 

Critical Accounting Policies and Estimates

The Company's discussion and analysis of its financial condition and results of operations are based upon its condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

The Company believes that the estimates, assumptions and judgments involved in the accounting policies described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of its most recent fiscal 2018 Annual Report on Form 10-K have the greatest potential impact on its consolidated financial statements, so it considers these to be its critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates the Company uses in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for inventory reserves and stock-based compensation. These policies require that the Company make estimates in the preparation of its consolidated financial statements as of a given date.

Within the context of these critical accounting policies, the Company is not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. There were no material changes to the Company's critical accounting policies or estimates during the six-month period ended August 31, 2018.

- 16 -

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updated ("ASU") 2014-09, Revenue from Contracts with Customers, issued as a new Topic, ASC Topic 606 ("ASU 2014-09"). The new revenue recognition standard provides a step analysis of transactions to determine when and how revenue is recognized. The premise of the standard is that a Company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the guidance beginning in fiscal 2019 using the modified retrospective approach. The adoption of this guidance did not have a significant impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," which will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the potential impact this standard will have on its condensed consolidated financial statements and related disclosures.

Management does not believe any other recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company's present or future condensed consolidated financial statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 4.  CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow for timely decisions regarding required disclosure. As required by Rule 15d-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.  Based on the foregoing, our principal executive and principal financial officer concluded that our disclosure controls and procedures are not effective to ensure the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed and reported within the time periods specified in the SEC's rules and forms.

- 17 -

Management's Annual Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and includes those policies and procedures that:

● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

● provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements;

● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

● provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Management has used the framework set forth in the report entitled Internal Control-Integrated Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, management has concluded that our internal control over financial reporting was not effective as of August 31, 2018.

A material weakness is a deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses at August 31, 2018:

(1) lack of a functioning audit committee and lack of a majority of outside directors on the Company's Board of Directors capable to oversee the audit function;

(2) inadequate segregation of duties due to limited number of personnel, which makes the reporting process susceptible to management override;

Management believes that the material weaknesses set forth in items (1) through (2) above did not have an effect on the Company's financial reporting during the period ended August 31, 2018.

We are committed to improving our financial organization. We planned and implemented sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements.

- 18 -

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

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

Changes in Internal Control over Financial Reporting

There was no change in internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during our first fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  In addition, management improved written policies and procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements and controls over period end financial disclosure and reporting processes.  Management believes this addressed certain aspects of this material weakness previously identified.  Management will continue to assess the effectiveness of its remediation efforts in connection with policies and procedures for accounting and financial reporting.

PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

The Company was involved in litigation during the fiscal quarter ended August 31, 2018.  In June, 2018, the Company resolved a Discrimination complaint in the Superior Court of the State of California, County of Orange filed by a former employee. 

In addition there is a pending action titled Rolling Tides, LLC vs. Carl Palmer, Seychelle Environmental Technologies, Inc., and other defendants.  The case was brought in the Superior Court of the State of California, County of Orange.  The action alleges certain fraudulent transfers occurred from Seychelle to the various defendants.  The plaintiffs have refused to identify any such transfers by date or amount.  The matter is in early discovery and no trial date is set.  All the defendants have denied the allegations of the complaint, and are vigorously defending the matter.  It is not likely that the case will be settled without trial.  The Company believes that the case has no merit.

ITEM 1A. RISK FACTORS

There have been no changes to our Risk Factors included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 8, 2018.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended August 31, 2018, the Company did not issue any securities.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5.  OTHER INFORMATION

None

- 19 -

 ITEM 6.  EXHIBITS

Exhibits

Exhibit No.	Description
31.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)
32.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

- 20 -

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the Registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. 

	Seychelle Environmental Technologies, Inc.
Date: October 12, 2018	By:	/s/ Carl Palmer
		Carl Palmer Director, Chief Executive Officer and Chief Financial Officer

- 21 -

EX-31

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Carl Palmer, as to Seychelle Environmental Technologies, Inc. (the "Registrant"), certify that:

1. I have reviewed this Quarterly Report on Form 10-Q;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.  I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurnce regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.  I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: October 12, 2017	By:	/s/ Carl Palmer
		Carl Palmer
		Chief Executive Officer and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTIONS 1350

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly report of Seychelle Environmental Technologies, Inc. (the "Registrant") on Form 10-Q  for the three-month period ended August 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Carl Palmer, Chief Executive Officer/Chief Financial Officer of the Registrant certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of the undersigned's knowledge and belief:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.

Date: October 12, 2017	By:	/s/ Carl Palmer
		Carl Palmer
		Chief Executive Officer and Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Aug. 31, 2018	Oct. 11, 2018
Document And Entity Information
Entity Registrant Name	SEYCHELLE ENVIRONMENTAL TECHNOLOGIES INC /CA
Entity Central Index Key	0001056757
Document Type	10-Q
Document Period End Date	Aug. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--02-28
Is Entity an Emerging Growth Company	false
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Is Entity a Entity a Small Business	true
Entity Common Stock, Shares Outstanding		26,640,313
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Aug. 31, 2018	Feb. 28, 2018
ASSETS
Cash and cash equivalents	$ 1,919,949	$ 2,075,833
Accounts receivable, net of allowance for doubtful accounts and sales returns of $11,770 and $8,617	594,680	829,790
Related party receivables	32,951	35,007
Inventory, net	1,073,355	998,296
Prepaid expenses, deposits, and other current assets	102,413	159,980
Total current assets	3,723,348	4,098,906
Property and equipment, net	113,086	135,539
Other current assets	66,670	66,670
Total assets	3,903,104	4,301,115
Current Liabilities:
Accounts payable and accrued expenses	234,161	441,866
Customer deposits	12,307	163,184
Capital lease obligation, current portion	5,664	5,402
Total current liabilities	252,132	610,452
Long term Liabilities:
Capital lease obligation, net of current	6,220	9,082
Total liabilities	258,352	619,534
STOCKHOLDERS' EQUITY
Preferred stock, 6,000,000 shares authorized, none issued or outstanding
Common stock $0.001 par value, 50,000,000 shares authorized, 26,640,313 and 26,390,313 issued and outstanding at August 31, 2018 and February 28, 2018, respectively	26,641	26,641
Additional paid-in capital	8,944,368	8,944,368
Accumulated deficit	(5,296,577)	(5,259,748)
Less treasury stock at cost (66,000 and 36,000 shares at August 31, 2018 and February 28, 2018 respectively)	(29,680)	(29,680)
Total Stockholders' Equity	3,644,752	3,681,581
Total liabilities and stockholders' equity	$ 3,903,104	$ 4,301,115

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Aug. 31, 2018	Feb. 28, 2018
CURRENT ASSETS
Net of allowance for doubtful accounts	$ 11,770	$ 8,617
STOCKHOLDERS' EQUITY
Preferred stock, authorized shares	6,000,000	6,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Preferred stock, par value	$ 0	$ 0
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized shares	50,000,000	50,000,000
Common stock, issued shares	26,640,313	26,640,313
Common stock, outstanding shares	26,640,313	26,640,313

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2018	Aug. 31, 2017	Aug. 31, 2018	Aug. 31, 2017
Condensed Consolidated Statements Of Income
Sales	$ 735,677	$ 991,934	$ 1,869,578	$ 2,200,141
Cost of sales	351,073	491,509	954,513	1,155,291
Gross profit	384,604	500,425	915,065	1,044,850
OPERATING EXPENSES
Selling, general, and administrative expenses	498,309	393,854	922,771	754,945
Depreciation and amortization	13,532	17,380	28,003	35,055
Total operating expenses	511,841	411,234	950,774	790,000
(Loss) income from operations	(127,237)	89,191	(35,709)	254,850
OTHER EXPENSE
Interest expense	(485)	(1,848)	(1,038)	(3,274)
Other income	(1,901)	(142)	(84)	(142)
Total other income (expense)	(2,386)	(1,990)	(1,122)	(3,416)
(Loss) income before income tax expense	(129,623)	87,201	(36,831)	251,434
Income tax expense		(1,799)		(6,050)
Net (loss) income	$ (129,623)	$ 85,402	$ (36,831)	$ 245,384
BASIC INCOME (LOSS) PER SHARE	$ 0.00	$ 0.01	$ 0.00	$ 0.01
DILUTED INCOME (LOSS) PER SHARE	$ 0.00	$ 0.00	$ 0.00	$ 0.01
BASIC WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING	26,574,313	26,640,313	26,574,313	26,640,313
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING	26,574,313	26,640,313	26,574,313	26,640,313

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Aug. 31, 2018	Aug. 31, 2017
OPERATING ACTIVITIES:
Net (loss) income	$ (36,831)	$ 245,384
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	28,003	35,055
Provision (recovery) for doubtful accounts	3,153	(34,644)
Changes in operating assets and liabilities:
Accounts receivable	231,959	343,406
Related party receivables	2,056	300
Inventory	(75,059)	289,920
Prepaid expenses, deposits and other assets	57,567	(22,578)
Accounts payable and accrued expenses	(207,705)	(243,361)
Customer deposits	(150,877)	(48,626)
Net cash (used in) provided by operating activities	(147,734)	564,856
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(5,550)	(2,995)
Net cash used in investing activities	(5,550)	(2,995)
CASH FLOW FROM FINANCING ACTIVITIES:
Repayment of capital lease obligation	(2,600)	(1,790)
Net Cash Used in Financing Activities	(2,600)	(1,790)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(155,884)	560,071
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	2,075,833	732,112
CASH AND CASH EQUIVALENTS AT END OF PERIOD	1,919,949	1,292,183
Cash paid for:
Interest	1,038	3,274
Income taxes

XML

1. CONDENSED FINANCIAL STATEMENTS

6 Months Ended

Aug. 31, 2018

Notes to Financial Statements

CONDENSED FINANCIAL STATEMENTS

NOTE 1:    CONDENSED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements have been prepared by Seychelle Environmental Technologies, Inc., and subsidiaries (the "Company") without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at August 31, 2018, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended February 28, 2018.  The results of operations for the periods ended August 31, 2018 and 2017 are not necessarily indicative of the operating results for the full fiscal years.

The summary of significant accounting policies of the Company is presented to assist in understanding the Company's condensed consolidated financial statements. The condensed consolidated financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the condensed consolidated financial statements and the February 28, 2018 consolidated financials included in the 10-K filed on June 8, 2018.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. "GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Except for the accounting policy for revenue recognition, which was updated as a result of adopting a new accounting standard related to revenue recognition, there have been no material changes to our significant accounting policies in Note 2 - Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2018.

The Financial Accounting Standards Board, or FASB, issued an accounting standards update that creates a single source of revenue guidance under U.S. GAAP for all companies, in all industries. We adopted this guidance on February 1, 2018 using the modified retrospective approach. The adoption of this guidance did not have a significant impact on our condensed consolidated financial statements.  Refer to Note 5 of these Notes to Condensed Consolidated Financial Statements for additional information.

XML

2. BASIC INCOME (LOSS) PER SHARE

6 Months Ended

Aug. 31, 2018

Earnings Per Share [Abstract]

BASIC INCOME (LOSS) PER SHARE

NOTE 2:    BASIC INCOME (LOSS) PER SHARE

Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding during each period presented.  Diluted income per share is determined using the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, assuming conversion, exercise, or issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per share.  If the inclusion of common stock equivalents in the weighted average number of common shares outstanding would be anti-dilutive these items would be omitted from the calculation of net income per common share.  The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method. 

The denominator for diluted income (loss) per share for the periods ended August 31, 2018 and 2017, respectively, did not include 6,407,221 warrants as they would have been an ti-dilutive.

	For the six months ended
	August 31,
	2018			2017
Net income (loss) available to common shareholders	$	(36,831	)	$	245,384
Weighted average common shares – basic		26,574,313			26,640,313
Net income (loss) per share – basic	$	0.00		$	0.01
Dilutive effect of common stock equivalents:
Warrants		-			-
Weighted average common shares – diluted		26,574,313			26,640,313
Net income (loss) per share – diluted	$	0.00		$	0.01

	For the three months ended
	August 31,
	2018			2017
Net income (loss) available to common shareholders	$	(129,623	)	$	85,402
Weighted average common shares – basic		26,574,313			26,640,313
Net income (loss) per share – basic	$	0.00		$	0.00
Dilutive effect of common stock equivalents:
Warrants		-			-
Weighted average common shares – diluted		26,574,313			26,640,313
Net income  (loss) per share – diluted	$	0.00		$	0.00

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3.COMMON STOCK

6 Months Ended

Aug. 31, 2018

Notes to Financial Statements

COMMON STOCK

NOTE 3:   COMMON STOCK

Common Stock

During the quarter ended August 31, 2018 and 2017, no securities were issued by the Company.

Warrants

A summary of warrant activity for the six months ended August 31, 2018 is shown below.

			Weighted-
			Average
	Warrants		Exercise
	Outstanding		Price
Outstanding at March 1, 2018		6,407,221		0.21
Granted		-		-
Exercised		-		-
Forfeited		-		-
Outstanding at August 31, 2018		6,407,221		0.21
Vested at August 31, 2018		6,407,221		0.21
Exercisable at February 28, 2018		6,407,221		0.21

The following table summarizes significant ranges of outstanding warrants as of August 31, 2018:

		Warrants Outstanding						Warrants Exercisable
				Weighted		Weighted				Weighted
				Average		Average				Average
				Remaining		Exercise		Number		Exercise
Exercise Price		Number		Life (Years)		Price		Outstanding		Price
	$0.21		6,407,221		2.27		$0.21		6,407,221		$0.21

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4. INVENTORY

6 Months Ended

Aug. 31, 2018

Notes to Financial Statements

INVENTORY

NOTE 4:    INVENTORY

The Company's inventory consisted of the following at August 31, 2018 and February 28, 2018:

	August 31, 2018		February 28, 2018
Raw materials	$	759,324	$	860,424
Finished goods		316,051		137,872
		1,075,375	$	998,296

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5. REVENUE RECOGNITION AND CONCENTRATIONS

6 Months Ended

Aug. 31, 2018

Notes to Financial Statements

CONCENTRATIONS

NOTE 5:    REVENUE RECOGNITION AND CONCENTRATIONS

We derive our revenue primarily from product sales.  We determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; (5) recognition of revenue when, or as, we satisfy a performance obligation.

The Company’s performance obligations consist solefy of product shipped to customers. Revenue from product sales is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for these products.  Revenue is recognized net of returns and any taxes collected from customers.  We offer standard contractual terms in our purchase orders. In addition, we use the practical expedient related to commissions paid since they would be amortized in less than one year.

Sales to two customers accounted for 50% and 57% of sales for the three and six month periods ended August 31, 2018, respectively.  Accounts receivable from these customers amounted to $416,254 or approximately 70% of accounts receivable as of August 31, 2018.

Sales to one customer accounted for 29% and 31% of sales for the three and six month periods ended August 31, 2017, respectively. Accounts receivable from one customer amounted to $473,476 or approximately 73% of accounts receivable as of August 31, 2017.

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6 RELATED PARTY TRANSACTIONS

6 Months Ended

Aug. 31, 2018

Notes to Financial Statements

RELATED PARTY TRANSACTIONS

NOTE 6:    RELATED PARTY TRANSACTIONS

During the six months ended August 31, 2018 and 2017, TAM purchased on behalf of the Company approximately $36,550 and $40,448 respectively.  All amounts due to TAM had been paid in full as of August 31, 2018.

The Company utilizes the services of an individual, who is a related party, to source materials and provide the manufacturing of component parts with third-party vendors in China. For the six months ended August 31, 2018 and 2017, purchases facilitated through the related party accounted for approximately 14% and 17%, respectively, of total raw material purchases. The Company paid approximately $31,000 and $22,000 in direct commissions to the related party consultant during the six months ended August 31, 2018 and 2017, respectively.

The Company had advanced amounts to an employee of approximately $26,000 and $27,000 as of August 31, 2018 and 2017, respectively. These amounts are being repaid through direct payroll withdrawals.

The Company had receivable from stockholders of approximately $7,000 and $0 as of August 31, 2018 and 2017 respectively.

The Company had sales to two companies related to a member of the Board of Directors.  Specifically, sales to Sovereign Earth, LLC (dba Revolve) totaled approximately $438,000 and $227,000 for the six months ended August 31, 2018 and 2017, respectively and sales to Amazon Seychelle totaled approximately $56,000 and $0 for the six months ended August 31, 2018 and 2017, respectively.  Sovereign Earth, LLC (dba Revolve) is the sole and exclusive seller of the following products in worldwide markets, including Amazon World Marketplaces:  amazon.com, amazon.co uk, amazon.de, amazon.fr, amazon.jp, amazon, it, amazon.ca, amazon.cn, amazon.in, and amazon.com.mx for the duration of the agreement:  Generation#1 Filter Pitcher:  All filter iterations (regular, standard, advanced, radiological, extreme, supreme, etc.)

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7. COMMITMENTS AND CONTINGENCIES

6 Months Ended

Aug. 31, 2018

Notes to Financial Statements

COMMITMENTS AND CONTINGENCIES

NOTE 7:  COMMITMENTS AND CONTINGENCIES

The Company entered into a lease agreement on one facility for its corporate offices, inventory and production at 22 Journey in Aliso Viejo, CA for a term of 5 years at a monthly rental of approximately $19,000.

 Legal Proceedings

The Company was involved in litigation during the fiscal quarter ended August 31, 2018.  In June, 2018, the Company resolved a Discrimination complaint in the Superior Court of the State of California, County of Orange filed by a former employee. 

In addition there is a pending action titled Rolling Tides, LLC vs. Carl Palmer, Seychelle Environmental Technologies, Inc., and other defendants.  The case was brought in the Superior Court of the State of California, County of Orange.  The action alleges certain fraudulent transfers occurred from Seychelle to the various defendants.  The plaintiffs have refused to identify any such transfers by date or amount.  The matter is in early discovery and no trial date is set.  All the defendants have denied the allegations of the complaint and are vigorously defending the matter.  It is not likely that the case will be settled without trial.  The Company believes that the case has no merit.

Licenses

The Company has historically entered into licensing agreements with third-parties for product proprietary rights, patent and trademark ownership, and use of product name. In return, the Company agrees to pay licensing fees and/or royalties on sales of those products. During the six months ended August 31, 2018 and 2017, the Company paid $4,051 and $14,963, respectively, in royalties and licensing fees related under these agreements.

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8. SUBSEQUENT EVENTS

6 Months Ended

Aug. 31, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 8: SUBSEQUENT EVENTS

Management has evaluated subsequent events from August 31, 2018 through the date the condensed consolidated financial statements were issued, and has concluded that no subsequent events have occurred that would require recognition or disclosure in these condensed consolidated financial statements.

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9. INCOME TAXES

6 Months Ended

Aug. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 9:  INCOME TAX

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. statutory corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. U.S. GAAP requires that deferred income tax assets and liabilities be remeasured at the income tax rate expected to apply when those temporary differences reverse, and that the effects of any change to such income tax rate be recognized in the period when the change was enacted.

In connection with the Company's initial analysis of the impact of the TCJA, the Company recorded a discrete net tax expense of $282,408 in the year ended February 28, 2018. This net expense is primarily due to the remeasurement of the Company's existing deferred tax assets and liabilities. Due to the Company having a full valuation allowance related to their deferred taxes, the $282,408 discrete tax expense associated with the remeasurement is equally offset by the valuation allowance causing an overall net zero impact on the Company's current tax rate.

The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. To the extent that a company's accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

We recorded the effects of the TCJA for year ended February 28, 2018 using our best estimates and the information available to us through the date the financial statements were issued. However, our analysis is ongoing and as such, the income tax effects that we have recorded are provisional.

Tax Provision

The Company expects its effective tax rate for the 2019 fiscal year to be different from the federal statutory rate due primarily to a change in valuation allowance.

We recorded a provision for income taxes of $0 and $1,800 for the quarter ended August 31, 2018 and 2017 respectively, related to federal and state taxes, based on the Company's expected annual effective tax rate.

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2. BASIC INCOME (LOSS) PER SHARE (Tables)

6 Months Ended

Aug. 31, 2018

Earnings Per Share [Abstract]

Basic and Diluted income (loss) per share

	For the six months ended
	August 31,
	2018			2017
Net income (loss) available to common shareholders	$	(36,830	)	$	245,384
Weighted average shares – basic		26,574,313			26,640,313
Net income (loss) per share – basic	$	0.00		$	0.01
Dilutive effect of common stock equivalents:
Warrants		-			-
Weighted average shares – diluted		26,574,313			26,640,313
Net income (loss) per share – diluted	$	0.00		$	0.01

	For the three months ended
	August 31,
	2018			2017
Net income (loss) available to common shareholders	$	(129,623	)	$	85,402
Weighted average shares – basic		26,574,313			26,640,313
Net income (loss) per share – basic	$	0.00		$	0.00
Dilutive effect of common stock equivalents:
Warrants		-			-
Weighted average shares – diluted		26,574,313			26,640,313
Net income  (loss) per share – diluted	$	0.00		$	0.00

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4. INVENTORY (Tables)

6 Months Ended

Aug. 31, 2018

Inventory Tables

Inventory

	August 31, 2018		February 28, 2018
Raw materials	$	759,324	$	860,424
Finished goods		316,051		137,872
		1,075,375	$	998,296

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2. BASIC INCOME (LOSS) PER SHARE (Details) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2018	Aug. 31, 2017	Aug. 31, 2018	Aug. 31, 2017
Numerator:
Net (loss) income available to common shareholders	$ (36,830)	$ 245,384	$ (36,830)	$ 245,384
Weighted average shares, basic	26,574,313	26,640,313	26,574,313	26,640,313
Net income (loss) per share - basic	$ 0.00	$ 0.01	$ 0.00	$ 0.01
Dilutive effect of common stock equivalents:
Warrants
Weighted average shares, diluted	26,574,313	26,640,313	26,574,313	26,640,313
Net income (loss) per share - diluted	$ 0.00	$ 0.00	$ 0.00	$ 0.01

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3.COMMON STOCK (Details)	Aug. 31, 2018 $ / shares shares
Common Stock Purchase Warrants Details
Vested | shares	6,407,221
Weighted Average Exercise Price Warrants Vested	$ .21
Weighted Average Exercise Price Warrants Exercisable	$ .21

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4. INVENTORY (Details) - USD ($)	Aug. 31, 2018	Feb. 28, 2018
Inventory Details
Raw materials	$ 759,324	$ 860,424
Finished goods	316,051	137,872
Inventory, Net	$ 1,073,355	$ 998,296

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4.COMMON STOCK AND WARRANTS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2018	Aug. 31, 2017	Aug. 31, 2018	Aug. 31, 2017
Common Stock Purchase Warrants Details Narrative
Expense charged to operations for warrants	$ 0	$ 67,200	$ 0	$ 134,200

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5. REVENUE RECOGNITION AND CONCENTRATIONS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2018	Aug. 31, 2017	Aug. 31, 2018	Aug. 31, 2017
Concentrations Details Narrative
Percentage of sales attributable to one customer		29.00%		31.00%
Accounts receivable from one customer		$ 473,476
Percentage of accounts receivable attributable to one customer		73.00%
Percentage of sales attributable to two customers	50.00%		57.00%
Accounts receivable from two customers		$ 416,254
Percentage of accounts receivable from two other customers		63.00%

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6 RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	6 Months Ended
	Aug. 31, 2018	Aug. 31, 2017
Advances to employees	$ 26,000	$ 27,000
TAM purchase of raw materials on behalf of the comapany	36,550	40,448
Direct commissions to related party	31,000	0
Receivable from stockholders	7,000	0
Sovereign Earth, LLC
Revenue from related party	438,000	227,000
Amazon Seychelle
Revenue from related party	$ 7,000	$ 0

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7. COMMITMENTS AND CONTINGENCIES (Details) - USD ($)	6 Months Ended
	Aug. 31, 2018	Aug. 31, 2017
Commitments And Contingencies
Aproximate lease payments per month	$ 19,000
Lease term	5 years
Royalties and licensing fees	$ 4,051	$ 14,963

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9. INCOME TAXES (Details Narrative) - USD ($)	3 Months Ended
	Aug. 31, 2018	Aug. 31, 2017
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 0	$ 1,800
Net operating loss	249,000
Deferred tax assets	282,408
Total deferred tax assets	$ 282,408