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, 2016

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, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ
(Do not check if a smaller reporting company)

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 13, 2016 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		19
Item 4.	Controls and Procedures		19
Item 4T.	Controls and Procedures		19
PART II  OTHER INFORMATION
Item 1.	Legal Proceedings		20
Item 1A.	Risk Factors		20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 3.	Defaults Upon Senior Securities		25
Item 4.	Submission of Matters to a Vote of Security Holders		25
Item 5.	Other Information		25
Item 6.	Exhibits		26
Signatures			27

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PART I

ITEM 1. FINANCIAL STATEMENTS

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	August 31, 2016			February 29, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	387,601		$	2,062,873
Accounts receivable, net of allowance for doubtful accounts and sales returns
of $22,200 and $125,800, respectively		435,751			224,235
Related party receivables		44,704			39,575
Inventory, net		2,607,847			2,511,458
Prepaid expenses, deposits and other current assets		181,095			115,440
Total current assets		3,656,998			4,953,581
Property and equipment, net		201,051			222,926
Intangible assets, net		50,383			51,343
Deferred tax assets		999,348			613,716
Other assets		81,312			15,651
Total assets	$	4,989,092		$	5,857,217
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	229,312		$	415,226
Income taxes payable		157,145			317,145
Customer deposits		5,855			28,219
Capital lease obligations, current portion		4,690			9,390
Total current liabilities		397,002			769,980
Long-term liabilities:
Capital lease obligations, net of current		17,002			19,439
Total liabilities		414,004			789,419
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, 2016 and February 29, 2016, respectively		26,641			26,391
Additional paid-in capital		8,944,368			8,827,118
Accumulated deficit		(4,366,241	)		(3,773,431	)
Less Treasury Stock at Cost		(29,680	)		(12,280	)
Total stockholders' equity		4,575,088			5,067,798
Total liabilities and stockholders' equity	$	4,989,092		$	5,857,217

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,
	2016			2015
Sales	$	728,232		$	2,724,829
Cost of sales		358,432			1,319,711
Gross profit		369,800			1,405,118
Operating expenses
Selling, general, and administrative		608,121			602,371
Depreciation and amortization		20,779			20,395
Total  operating  expenses		628,900			622,766
Income (loss)  from operations		(259,100	)		782,352
Other income (expense)
Interest income		8			39
Interest expense		(388	)		(133	)
Other income (expense)		10,452			537
Total other income (expense)		10,072			443
Income (loss)  before income tax benefit (expense)		(249,028	)		782,795
Income tax benefit (expense)		100,562			(267,718	)
Net  income (loss)	$	(148,466	)	$	515,077
BASIC INCOME (LOSS) PER SHARE	$	(0.01	)	$	0.02
DILUTED  INCOME (LOSS) PER SHARE	$	(0.01	)	$	0.02
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		26,640,313			26,144,531
DILUTED WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		26,640,313			28,464,562

 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,
	2016			2015
Sales	$	1,627,368		$	5,072,012
Cost of sales		946,917			2,387,741
Gross profit		680,451			2,684,271
Operating expenses
Selling, general, and administrative		1,621,034			1,154,287
Depreciation and amortization		42,830			30,107
Total  operating  expenses		1,663,864			1,184,394
Income (loss)  from operations		(983,413	)		1,499,877
Other income (expense)
Interest income		15			228
Interest expense		(1,002	)		(292	)
Other income		12,231			771
Total other income		11,244			707
Income (loss)  before income tax benefit (expense)		(972,169	)		1,500,584
Income tax benefit (expense)		379,358			(513,009	)
Net  income (loss)	$	(592,811	)	$	987,575
BASIC INCOME (LOSS) PER SHARE	$	(0.02	)	$	0.04
DILUTED  INCOME (LOSS) PER SHARE	$	(0.02	)	$	0.04
BASIC WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		26,610,421			26,023,362
DILUTED WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		26,610,421			27,917,424

 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,
	2016			2015
OPERATING ACTIVITIES:
Net (loss) income	$	(592,811	)	$	987,575
Adjustments to reconcile net (loss) income to net cash provided by (used in)  operating activities:
Depreciation and amortization		42,830			30,107
Loss on disposal of assets		5,587			-
Stock-based compensation		117,500			217,698
Provision for doubtful accounts		(103,652	)		-
Deferred income tax expense (benefit)		(385,632	)		513,009
Changes in operating assets and liabilities:
Increase in accounts receivable		(107,864	)		(152,534	)
Increase in related party receivables		(5,129	)		(9,806	)
Increase in inventory		(96,389	)		(742,779	)
(Increase) decrease in prepaid expenses, deposits  and other assets		(131,314	)		19,748
Decrease in accounts payable and accrued expenses		(185,914	)		(47,689	)
Decrease in accrued legal and settlement fees		-			(532,103	)
Decrease in Income taxes payable		(160,000	)		-
Decrease in customer deposits		(22,364	)		(73,276	)
Net Cash Provided By (Used In) Operating Activities		(1,625,152	)		209,950
INVESTING ACTIVITIES:
Purchase of property and equipment		(25,582	)		(34,953	)
Net Cash Used In Investing Activities		(25,582	)		(34,953	)
FINANCING ACTIVITIES:
Repayment of  capital lease obligations		(7,138	)		(1,967	)
Repurchase of Common Stock		(17,400	)		-
Net Cash Used in Financing Activities		(24,538	)		(1,967	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,675,272	)		173,030
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		2,062,873			1,514,534
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	387,601		$	1,687,564
Supplemental disclosures of cash flow information:
Non-cash investing and financing activities:
Acquisition of equipment under capital leases	$	-		$	26,000
Cash paid for:
Interest		1,002			292
Income taxes	$	160,000		$	-

 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, 2016

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, 2016, 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.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the fiscal year ended February 29, 2016.  The results of operations for the periods ended August 31, 2016 and 2015 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 consolidated financial statements. The 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 these condensed consolidated financial statements and the February 29, 2016 consolidated financials included in the 10-K/A filed on June 16, 2016.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

NOTE 2:    MANAGEMENT'S PLAN AND LIQUIDITY

Our largest customer ceased placing orders in February 2016. There were no sales to this customer during the six month period ended August 31, 2016 and the likelihood of this customer continuing to purchase our product in the future is remote.  The loss of business from this customer has had a materially adverse effect on our revenues in the short term and may continue to have a materially adverse effect on our revenues in the long term if these revenues are not replaced by new products and other existing or new customers.

As of August 31, 2016, the Company had $387,601 in cash and cash equivalents, $435,751 in accounts receivable, working capital of $3,259,996 and a backlog of $51,756 in unshipped product. Additionally, the Company has developed an innovative new concept of a world filter product to sell in the world where quality drinking water is not available. Under this initiative, both the bottle and cap will to be sourced locally in each country to make the finished product competitive in the international market. The Company initiated these foreign sales plans during the six months ended August 31, 2016 with the appointment of its first international exclusive sales agent. Accordingly, management believes that over the next twelve months, sufficient working capital and liquidity will be obtained from sales to existing and new customers, in addition to debt and other capital sources as required to fund operations.  The TAM Trust ("TAM"), the Company's major stockholder, has also verbally committed to provide up to $500,000 in additional funding as a line of credit to Seychelle, if required but is not legally obligated to do so. 

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS

August 31, 2016

NOTE 3:    BASIC INCOME (LOSS) PER SHARE

Basic income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during each period presented.  Diluted income (loss) 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.  In periods when losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.  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 period ended August 31, 2016 did not include warrants as they would have been anti-dilutive. For the three and six month periods ended August 31, 2016,  6,407,221 warrants  were excluded from the denominator for diluted net income (loss) per share.

	For the six months ended
	August 31,
	2016			2015
Numerator:
Net income (loss) available to common shareholders	$	(592,811	)	$	987,575
Weighted average shares – basic		26,610,421			26,023,362
Net income (loss) per share – basic	$	(0.02	)	$	0.04
Dilutive effect of common stock equivalents:
Warrants		-			1,894,062
Weighted average shares – diluted		26,610,421			27,917,424
Net income (loss) per share – diluted	$	(0.02	)	$	0.04

	For the three months ended
	August 31,
	2016			2015
Numerator:
Net income (loss) available to common shareholders	$	(148,466	)	$	515,077
Weighted average shares – basic		26,640,313			26,144,531
Net income (loss) per share – basic	$	(0.01	)	$	0.02
Dilutive effect of common stock equivalents:
Warrants		-			2,320,031
Weighted average shares – diluted		26,640,313			28,464,562
Net income  (loss) per share – diluted	$	(0.01	)	$	0.02

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS

August 31, 2016

NOTE 4:   COMMON STOCK AND WARRANTS

Common Stock

During the six month period ended August 31, 2016, 250,000 shares of fully vested restricted common stock were issued by the Company to an employee.  The shares were valued at the closing price of the Company's common stock at date of grant for a total expense of $117,500.

During the six month period ended August 31, 2015, 115,000 shares of restricted common stock were issued to employees and officers of the Company. Additionally, 100,000, 20,000, and 10,000 shares of restricted common stock were issued to TAM, vendors, and TAM's trustee, respectively. All such shares were fully vested upon issuance. The value recorded in the accompanying condensed consolidated financial statements was based on the estimated fair value of the stock on the date of the grant and aggregated $83,000.

Warrants

The Company had previously granted warrants to selected members of management and determined the estimated value of warrants granted using the Black-Scholes option pricing model. The warrants became fully vested during the year ended February 29, 2016.  The amount of the expense charged to operations for these warrants was $0 and $67,200 for the three months ended August 31, 2016 and 2015, respectively.  The amount of expense charged to operations for these warrants was $0 and $134,200 for the six months ended August 31, 2016 and 2015, respectively.

A summary of warrant activity for the six months ended August 31, 2016 is as follows:

			Weighted-
			Average
	Warrants		Exercise
	Outstanding		Price
Outstanding at February 29, 2016		6,407,221		0.21
Granted		-		-
Exercised		-		-
Forfeited		-		0.21
Outstanding at August 31, 2016		6,407,221		0.21
Vested at August 31, 2015		6,407,221		0.21
Exercisable at August 31, 2015		6,407,221		0.21

The following table summarizes significant ranges of outstanding warrants as of August 31, 2016:

		Warrants Outstanding				Warrants Exercisable
			Weighted	Weighted			Weighted
			Average	Average			Average
Exercise		Number	Remaining	Exercise		Number	Exercise
Price		Outstanding	Life (Years)	Price		Outstanding	Price
	$0.21	6,407,221	4.29		$0.21	6,407,221		$0.21

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS

August 31, 2016

NOTE 5:    INVENTORY

The Company's inventory consisted of the following at August 31, 2016 and February 29, 2016:
	August 31, 2016			February 29, 2016
Raw materials	$	1,973,974		$	1,084,782
Finished goods		673,873			1,466,676
		2,647,847			2,551,458
Reserve for obsolete and slow moving inventory		(40,000	)		(40,000	)
	$	2,607,847		$	2,511,458

NOTE 6:    CONCENTRATIONS

Sales to one customer accounted for 27% and 35% of sales for the three and six month periods ended August 31, 2016, respectively. Accounts receivable from three customers amounted to $290,720 or approximately 63% of accounts receivable as of August 31, 2016.

Sales to two customers accounted for 61% and 66%, respectively, of sales for the three and six month periods ended August 31, 2015. Accounts receivable from these two customers amounted to $166,861 or approximately 37% of accounts receivable as of August 31, 2015. Two other customers amounted to $194,500 or approximately 43% of accounts receivable as of August 31, 2015.

NOTE 7:    INCOME TAXES

For the three and six month periods ended August 31, 2016, the Company  incurred tax net operating losses ("NOL's") approximating $249,000 and $972,000, respectively.  Such NOL's result in deferred tax assets of approximately $386,000 at August 31, 2016. Additionally, deferred tax assets at August 31, 2016 consists of stock compensation and temporary differences related to certain accrued expenses resulting in total deferred tax assets of approximately $999,000.

In assessing the realization of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. At August 31, 2016, management determined that a deferred tax asset valuation allowance was not necessary due to the Company's profitability in recent years. Management will continue to evaluate the need for a deferred tax asset valuation allowance going forward each reporting period.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS

August 31, 2016

 

 NOTE 8:    RELATED PARTY TRANSACTIONS

During the three month periods ended August 31, 2016 and 2015, the Company incurred consulting fees to related parties in the amounts of $25,000 and $25,000, respectively. During the six month periods ended August 31, 2016 and 2015, the Company incurred consulting fees to related parties in the amounts of $25,000 and $75,000, respectively. These fees were related to TAM, in which Cari Beck, is the trustee and current Board member, as well as a daughter of Carl Palmer, an officer and Board member. These amounts are included as a component of selling, general and administrative expenses on the condensed consolidated statements of operations. All amounts due to TAM had been paid in full as of August 31, 2016 and 2015.  

During the three month periods ended August 31, 2016 and 2015, TAM purchased, on behalf of the Company, $12,350 and $208,000, respectively, of raw materials from a vendor with which it already had a business relationship. During the six month periods ended August 31, 2016 and 2015, TAM purchased, on behalf of the Company, $20,090 and $393,000, respectively, of raw materials, and paid $0 and $3,500, respectively, for related tooling to a vendor with which it already had a business relationship.

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, 2016 and 2015, purchases facilitated through the related party accounted for approximately 34% and 30%, respectively, of total raw material purchases.

As of August 31, 2016 and February 29, 2016, the Company had receivables from employees of approximately $45,000 and $40,000. These amounts are being repaid through direct payroll withdrawals.

TAM has also verbally committed to provide up to $500,000 in funding as a line of credit on behalf of Seychelle, if required, but is not legally obligated to do so. 

 NOTE 9:  COMMITMENTS AND CONTINGENCIES

Leases

The Company is obligated on three operating leases at August 31, 2016: two in San Juan Capistrano, California (as previously reported in the Company's Form 10-K/A filed with the Securities and Exchange Commission for the year ended February 29, 2016) and one (new) in Aliso Viejo, California. The Company moved its corporate headquarters from San Juan Capistrano to Aliso Viejo during August 2016 and combined its corporate offices with warehouse and production space, which were previously in separate locations. The Company has sub-leased its prior office space location to a third party in connection with the move, and is attempting to sub-lease the remaining San Juan Capistrano location to other third parties.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS

August 31, 2016

NOTE 9:  COMMITMENTS AND CONTINGENCIES (continued)

The sub-lease was effective September 1, 2016, provides the Company with $6,505 per month, and expires July 31, 2017.

The Company's Aliso Viejo lease was effective August 1, 2016, requires monthly payments of $19,446, with graduated annual increases, and expires in July 2021.

Litigation

On September 26, 2016, the Company was served with a complaint by a former employee alleging breach of contract.  The Company believes the case is without merit and intends to vigorously defend itself in this matter. No outcome can be determined at this time.

NOTE 10: SUBSEQUENT EVENTS

On October 7, 2016, Mr. James Place, Director, President, Treasurer and CFO, resigned from the Board of Directors and the Company.  There were no disagreements between the Company and Mr. Place. Also on October 7, 2016, Mr. Carl Palmer became the President and Chief Financial Officer, as well as retaining the title of Chief Executive Officer. Ms. Cari Beck became the Treasurer as well as retaining the title of Secretary and Director.

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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, 2016 and 2015. 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 consolidated financial statements included in the Company's Annual Report on Form 10-K/A for the fiscal year ended February 29, 2016.  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 sales are concentrated to a few large customers, and loss of business from one or more could impact the Company's revenues, gross profit and operating results;
(4)	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;
(5)	the Company's water related product sales could be materially affected by weather conditions and government regulations;
(6)	the Company is subject to the risks of conducting business internationally; and
(7)	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 2016 Annual Report on Form 10-K/A.

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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 or 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, 2016 and 2015 are derived from our condensed consolidated financial statements included elsewhere in this report.

Three month period ended August 31, 2016 compared to the corresponding period in 2015

							Period over
	2016			2015			Period change			%
Sales	$	728,232		$	2,724,829			(1,996,597	)		(73%)
Cost of sales		358,432			1,319,711			(961,279	)		(73%)
Gross profit		369,800			1,405,118			(1,035,318	)		(74%)
Gross profit %		51%			52%			-			-
Selling general and administrative expenses		608,121			602,371			5,750			1%
Depreciation and amortization expense		20,779			20,395			384			2%
Other income		10,072			443			9,629			2174%
Income (loss) before income tax benefit (expense)		(249,028	)		782,795			(1,031,823	)		(132%)
Income tax benefit (expense)		100,562			(267,718	)		368,280			138%
Net income (loss)		(148,466	)		515,077			(663,543	)		(129%)

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Sales. The decrease in sales to approximately $728,000 during the three months ended August 31, 2016 from approximately $2.7 million during the three months ended August 31, 2015 (73%) is primarily due to our largest customer ceasing ordering in February 2016. There were no sales to this customer during the three month period ended August 31, 2016 and the likelihood of this customer continuing to purchase our product in the future is remote.  The loss of business from this customer has had a materially adverse effect on our revenues in the short term and may continue to have a materially adverse effect on our revenues in the long term if these revenues are not replaced by new products and other existing or new customers.

While the Company has experienced decreased sales and anticipates lower total sales in the current fiscal year, the Company has developed an innovative new concept of a world filter product to sell worldwide where quality drinking water is not available.  Both the bottle and the cap will be sourced locally to make the finished product competitive in the international market.  The Company initiated these foreign sales plans during the three months ended August 31, 2016 with the appointment of its first international sales agent in Sri Lanka.  In addition to this appointment, we have identified sales agents for India, South Korea and the Philippines and are pursuing other contacts to dramatically expand this effort to expand our customer base.  Accordingly, management believes that over the remainder of the fiscal year, sufficient working capital and liquidity will be obtained from revenues to sustain operations.  Management believes that sales will increase from the current quarter with the launch of this world filter product.

Cost of sales and gross profit percentage. As a percentage of sales, the gross profit margin during the three months ended August 31, 2016 decreased slightly to 51% from 52%. Variations such as this occur routinely based on product mix.

Selling, general and administrative expenses. These expenses remained relatively consistent period over period, increasing by approximately $6,000, or 1%, during the period ended August 31, 2016, compared to the same period in the prior year. The Company's management expects selling, general and administrative expenses to decrease during the remainder of the current fiscal year.

Depreciation and amortization expense.  Depreciation and amortization expense was relatively flat from period to period, but the slight increase is due to additional computer equipment purchased during the period ended August 31, 2016.

Income tax expense (benefit).  The Company recorded income tax benefit of approximately $101,000 due to the pretax loss of approximately $249,000 during the three months ended August 31, 2016, compared to an income tax expense of approximately $268,000 related  to  pretax income of approximately $783,000 during the three month period ended August 31, 2015. The Company has a net deferred tax asset at August 31, 2016 of approximately $999,000, and management believes no valuation allowance is needed at this time.

Net income (loss). Net loss for the three month period ended August 31, 2016 was approximately $148,000 compared to net income for the three month period ended August 31, 2015 of approximately $515,000.   This was primarily due to the decrease of approximately $2.0 million in sales (73%) and the loss of our largest customer as noted above. We remain focused on the primary factors affecting our bottom line and look to continue to improve the Company's profitability in the upcoming periods during fiscal 2017.

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Six month period ended August 31, 2016 compared to the corresponding period in 2015

									Period over
	2016				2015				Period change			%
Sales		$	1,627,368			$	5,072,012			(3,444,644	)		(68%)
Cost of sales			946,917				2,387,741			(1,440,824	)		(60%)
Gross profit			680,451				2,684,271			(2,003,820	)		(75%)
Gross profit %			42	%			53	%
Selling general and administrative expenses			1,621,034				1,154,287			466,747			41%
Depreciation and amortization expense			42,830				30,107			12,723			42%
Other income (expense)			11,244				707			10,537			1490%
Income (loss) before income tax benefit (expense)			(972,169	)			1,500,584			(2,472,753	)		(165%)
Income tax benefit (expense)			379,358				(513,009	)		892,367			(175%)
Net income (loss)			(592,811	)			987,575			(1,580,386	)		(160%)

Sales. The decrease in sales to approximately $1.6 million during the six months ended August 31, 2016 from approximately $5.1 million during the six months ended August 31, 2015 (68%) is primarily due to the loss of our largest customer as noted above.

As noted above, while the Company has experienced decreased sales and anticipates lower total sales in the current fiscal year, the Company has developed an innovative new concept of a world filter product to sell in the world where quality drinking water is not available. Both the bottle and the cap will be sourced locally to make the finished product competitive in the international market. The Company initiated these foreign sales plans during the six months ended August 31, 2016 with the appointment of its first international sales agent in Sri Lanka. In addition to this appointment, we have identified sales agents for India, South Korea, the Philippines, the Caribbean, South America, and Europe. We are pursuing other contacts to dramatically expand this effort to expand our customer base. Accordingly, management believes that over the remainder of the fiscal year, sufficient working capital and liquidity will be obtained from revenues to sustain operations. Management believes that sales will increase from the current quarter with the launch of this world filter product and some new domestic initiatives involving our new pH20 product through the balance of the fiscal year and beyond.

Cost of sales and gross profit percentage. As a percentage of sales, the gross profit margin during the six months ended August 31, 2016 decreased to 42% from 53% as compared to the comparable period of the previous year. The largest decrease to our sales was directly related to the launch of our aforementioned pH2O product line. During the six months ended August 31, 2016, we were selling this product with strict minimum order quantities that allowed us to achieve greater profit margins, averaging 68% during the six months ended August 31, 2015. As competition for home and portable pH products increased, we introduced lower priced pH products and also began selling below previously established minimum order quantities. As a result, profit margins on the pH products decreased, averaging 47% during the six months ended August 31, 2016. The remaining product mix sold during the six months ended August 31, 2016, resulted in a lower gross margin.  The product mix and timing of significant sales is always a significant factor in the resulting profit margins reported.  The Company expects to market its new world filter product at a 50% gross margin, and therefore believes that the average gross margin percentages overall will remain at approximately 45% in the foreseeable future.

Selling, general and administrative expenses. These expenses increased by approximately $467,000, or 41%, during the six months ended August 31, 2016 compared to the same period in the prior year. The increase was largely a direct result of the increase in legal and personnel costs incurred in a restructuring of the Company's management and Board of Directors that occurred during the six months ended August 31, 2016.   We expect to incur selling, general and administrative expenses of approximately $600,000 per quarter for the remainder of the fiscal year.

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Depreciation and amortization expense.  During the six months ended August 31, 2016 changed by approximately $13,000 compared to the depreciation for the six months ended August 31, 2015.

Income tax expense (benefit).  The Company recorded an income tax benefit of approximately $379,000 due to pretax loss of approximately $978,000 compared to an income tax expense of approximately $513,000 due to the pretax income of approximately $1,501,000 during the six month period ended August 31, 2015. The Company has a net deferred tax asset at August 31, 2016 of approximately $999,000, and management believes no valuation allowance is needed at this time.

Net income (loss). Net loss for the six month period ended August 31, 2016 was approximately $593,000 compared to net income of approximately $988,000 for the six month period ended August 31, 2015. This was primarily due to a decrease of approximately $3.4 million in sales (68%), related to our largest customer matter noted above. We remain focused on the primary factors affecting our bottom line and look to continue to improve the Company's profitability in the upcoming periods during fiscal 2017 as noted previously in both the sales and cost of sales/gross profit percentage sections.

Liquidity and Capital Resources

Net cash provided operating activities. During the six-month period ended August 31, 2016, cash used in operating activities was approximately $1,625,000, compared to cash provided of approximately $210,000 in the same period during 2015. This was primarily the result of our net loss of approximately $592,000, increase in accounts receivable of approximately $108,000, purchasing $96,000 in inventory, paying approximately $131,000 in prepaid expenses, deposits and other current assets, paying down approximately $186,000 in accounts payable, and the payment of $160,000 in income taxes. Additionally, there was a non-cash increase to the Company's deferred tax asset due to the current period's net loss of approximately $386,000.

This was offset by the add-back of non-cash expenses depreciation and amortization, the net of which was approximately $43,000.

Net cash used in investing activities. During the six month period ended August 31, 2016, the Company spent approximately $26,000 on capital expenditures.  In comparable period of the prior year, the Company spent approximately $35,000 on capital expenditures.

Net cash provided by financing activities. Cash used in financing activities during the six month period ended August 31, 2016 approximately $25,000 compared to approximately $2,000 during the comparable period. This was a result of the addition of a new capital lease. Additionally, the Company repurchased 30,000 shares of common stock at a cost of $17,400 during the six months ended August 31, 2016, with no comparable transactions during the six months ended August 31, 2015.

As of August 31, 2016, the Company had approximately $388,000 in cash and cash equivalents, approximately $436,000 in accounts receivable, working capital of approximately $3,260,000 and a backlog of approximately $52,000 in unshipped product. Additionally, the Company has developed an innovative new concept of a world filter product to sell in the world where quality drinking water is not available. Both the bottle and cap will to be sourced locally to make the finished product competitive in the international market. The Company initiated these foreign sales plans during the six months ended August 31, 2016 with the appointment of its first international exclusive sales agent. Accordingly, management believes that over the next twelve months, sufficient working capital and liquidity will be obtained from sales to existing and new customers to sustain operations.  The TAM Trust ("TAM"), the Company's major stockholder, has also committed to providing up to $500,000 in additional funding, if required. 

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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 2016 Annual Report on Form 10-K/A 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, 2016.

On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which is effective for public entities for annual reporting periods beginning after December 15, 2017. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle 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. ASU 2014-09 shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on the consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in fiscal year 2018.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern—Disclosures of Uncertainties about an entity's Ability to Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 provides new guidance related to management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures. This new guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company will adopt ASU 2014-15 at its current fiscal year-end on February 28, 2017.

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. We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this update change existing guidance related to accounting for employee share-based payments affecting the income tax consequences of awards, classification of awards as equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the potential impact of the adoption of this standard.

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 consolidated financial statements.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 4. CONTROLS AND PROCEDURES

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a -15(e) and 15(d)-15(e) under the Exchange Act), our Chief Executive Officer and the Chief Financial Officer  has concluded that an aggregation of control deficiencies as more fully discussed in the Company's Form 10-K/A for the year ended February 29, 2016 filed with the Securities and Exchange Commission have been addressed and remedied. However, as a result of the changes in internal control noted below, we have concluded that the Company has a material weakness resulting from inadequate segregation of duties in the accounting and financial reporting functions.  Therefore, we have concluded that our disclosure controls and procedures are not effective.

As of the date of this Form 10Q, we made changes in our internal control over financial reporting by combining the functions of Chief Executive Officer and the Chief Financial Officer with one person and having our staff controller report directly to that person. Otherwise, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 240.13a-15 or Rule 240.15d-15 of this chapter that occurred during our most recent fiscal three months that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This report does not include an attestation report by the Company's independent registered public accounting firm regarding internal control over financial reporting as we are not subject to this requirement.

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PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

On September 26, 2016, the Company was served with a complaint by a former employee alleging breach of contract in a case titled Josh Proffit vs. Seychelle Environmental Technologies, Inc., et, al., brought in the Superior Court for the State of California, Orange County District.  The Company believes the case is without merit and intends to vigorously defend itself in this matter. No outcome can be determined at this time.

ITEM 1A. RISK FACTORS

THE OWNERSHIP AND INVESTMENT IN OUR SECURITIES INVOLVES SUBSTANTIAL RISKS. OUR COMMON SHARES SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS RELATING TO OUR COMPANY

We Were Profitable for Our Most Recent Fiscal Year End and in Six of Our Seven Most Recent Fiscal Years. However, We Were Not Profitable In Our Most Recent Fiscal Quarter. We Cannot Guarantee That We Will Ever Continue to Conduct Profitable Operations.

We recorded a net loss of $148,466 for our most recent fiscal quarter. We also recorded net income and positive cash flows from operations for the most recent fiscal year ending February 29, 2016. We had the following net income (loss) for the years ending:

	Net Income (Loss)
February 29, 2016	$	1,032,941
February 28, 2015	$	(1,405,909	)
February 28, 2014	$	506,797
February 28, 2013	$	635,883
February 29, 2012	$	197,986
February 28, 2011	$	1,711,790
February 28, 2010	$	562,930

While we believe that we have had a successful operating history, we cannot guarantee that we will ever continue to be profitable.  If we do not continue to be profitable, we may go out of business, and an investor could lose his entire investment.

We Have a Significant Dependence on a Few Customers.

Sales to one customer accounted for 27% and 35% of sales for the three and six month periods ended August 31, 2016, respectively. Accounts receivable from three customers amounted to $290,720 or approximately 63% of accounts receivable as of August 31, 2016.

Sales to two customers accounted for 61% and 66%, respectively, of sales for the three and six month periods ended August 31, 2015. Accounts receivable from these two customers amounted to $166,861 or approximately 37% of accounts receivable as of August 31, 2015. Two other customers amounted to $194,500 or approximately 43% of accounts receivable as of August 31, 2015.

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During the fiscal year ended February 29, 2016, the Company had three customers who accounted for approximately 34%, 28% and 14% (or 76% total) of total sales during the fiscal year ended February 29, 2016. One of those customers accounted for approximately 22% of net accounts receivable as of February 29, 2016. As of February 28, 2015, the Company had four customers who accounted for approximately 76% of net accounts receivable (37%, 14%, 13% and 12%, respectively). These four customers accounted for approximately 7%, 33%, 12% and 14% (or 66% total) of total sales during the fiscal year ended February 28, 2015.  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.

Our most significant customer in fiscal 2016 appears to have ceased business and will presumably no longer be available to purchase our products. The loss of business from this customer could have a materially adverse effect on our revenues in the short term and in the long term if these revenues are not replaced by new products and other existing or new customers.

The Water Filtration Business is Subject to Intense Competition and Subject to Numerous Risks. Many of Our Competitors Have Substantially Greater Capabilities and Resources and May be Able to Develop and Commercialize Products Before We Do.

The water filtration business is highly competitive with many companies having access to the same market. Technological competition from larger and more established companies is significant and expected to increase. Most of the companies with which we compete and expect to compete have far greater capital resources and significant research and development staffs, marketing and distribution programs and facilities, and many of them have substantially greater experience in the production and marketing of products. Our ability to compete effectively may be adversely affected by the ability of these competitors to devote greater resources to the sale and marketing of their products than we can. In addition, one or more of our competitors may succeed or may already have succeeded in developing technologies and products that are more effective than any of those we currently offer or are developing. In addition, there can be no guarantee that we will be able to protect our technology from being copied or infringed upon. There can be no assurance that we will have the necessary resources to be competitive. Therefore, investors should consider an investment in us to be an extremely risky venture.

As an Organization, We are Dependent Upon Technology for the Development of Our Products.

We are operating in a business that requires continuing research, development and testing efforts. There can be no assurance that new products will not render our products obsolete or non-competitive at some time in the future.

Our Success as an Organization Depends, in Large Part, Upon Our Ability to Protect Our Intellectual Property Rights.

A successful challenge to the ownership of our technology could materially damage our business prospects. We rely principally on trade secrets as well as trade secret laws, two patents, five trademarks, copyrights, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We currently have two U.S. patents issued and a license on one patent. As these patents expire in 2016 and 2017, respectively, we cannot at this time estimate the financial impact of the expiration of these patents.  Any issued patent may be challenged and invalidated. Patents may not be issued from any of our future applications. Any claims allowed from existing or future pending patents may not be of sufficient scope or strength to provide significant protection for our products. Patents may not be issued in all countries where our products can be sold so as to provide meaningful protection or any commercial advantage to us. Our competitors may also be able to design around our patents or the patents that we license.

Vigorous protection and pursuit of intellectual property rights or positions characterize our industry, which has resulted in significant and often protracted and expensive litigation. Therefore, our competitors may assert that our technologies or products infringe on their patents or proprietary rights. Problems with patents or other rights could increase the cost of our products or delay or preclude new product development and commercialization by us. If infringement claims against us are deemed valid, we may not be able to obtain appropriate licenses on acceptable terms or at all. Litigation could be costly and time-consuming but may be necessary to protect our future patent and/or technology license positions or to defend against infringement claims.

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Our Success is Dependent Upon the Decision Making of Our Directors and Executive Officers.

Our directors and executive officers have made a full commitment to our business. The loss of any or all of these individuals, particularly Mr. Carl Palmer, would have a materially adverse impact on our operations because we have no succession plan for any of them. We will depend on our senior executive officers, particularly Mr. Carl Palmer, as well as other key personnel.  If Mr. Palmer or any key employee decides to terminate his employment with us, this termination could delay the commercialization of our products or prevent us from sustaining our profitability. Competition for qualified employees is intense among companies in our industry and the loss of qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for the expansion of our activities, could hinder our ability to successfully develop and maintain marketable products. 

The Acquisition of Other Technologies Could Result In Operating Difficulties, Dilution and Other Harmful Consequences.  

We may selectively pursue strategic acquisitions, any of which could be material to our business, operating results and financial condition.  Future acquisitions could divert management's time and focus from operating our business.  In addition, integrating an acquired technology is risky and may result in unforeseen operating difficulties and expenditures.

The anticipated benefits of future acquisitions, if consummated, may not materialize.  Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, including our common stock, the incurrence of debt, contingent liabilities, or write-offs of intellectual properties any of which could harm our financial condition.  Future acquisitions may also require us to obtain additional financing, which may not be available on favorable terms or at all.

We Face Risks Associated With Currency Exchange Rate Fluctuations.  

Although we currently transact business primarily in U.S. dollars, a large portion of our revenues and related cost of goods sold may be determined in foreign currencies if we continue to expand our international operations.  Conducting business in currencies other than U.S. dollars subjects the Company to fluctuations in currency exchange rates that could have a negative impact on our reported operating results.  Fluctuations in the value of the U.S. dollar relative to other currencies may impact our revenue, cost of goods sold and operating gross margin, and result in foreign currency translation gains and losses.  Historically, we have not engaged in exchange rate hedging activities.

Changes to Financial Accounting or Other Standards May Affect Our Operating Results and Cause Us To Change Our Business Practices.    

We prepare our consolidated financial statements in accordance with generally accepted accounting principles, or GAAP, in the United States.  These accounting principles are issued by the Financial Accounting Standards Board (FASB).  The Securities and Exchange Commission also provides interpretation, guidance and principles in the preparation of financial statements.  A change in those policies could have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced.

We Recently Have Noted the Existence of A Material Weakness. If We Fail in Maintaining Effective Internal Control Over Financial Reporting, The Price of Our Common Stock May be Adversely Affected.  

As of the date of this Form 10Q, we made changes in our internal control over financial reporting by combining the functions of Chief Executive Officer and the Chief Financial Officer with one person and having our staff controller report directly to that person. As a result, the Company has concluded that, with this present organization, the Company has a material weakness resulting from inadequate segregation of duties in the accounting and financial reporting functions. We are required to establish and maintain appropriate internal control over financial reporting.  Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosure regarding our business, financial condition or results of operations.  In addition, our future assessments of internal control over financial reporting may identify additional weaknesses and conditions that need to be addressed in our internal control over financial reporting or other matters that may raise concerns for investors.  Any material weaknesses that needs to be addressed in management's assessment of our internal control over financial reporting or in the report on the effectiveness of our internal controls by our independent registered public accounting firm, when, and if, applicable, may have an adverse impact of our common stock.

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If We Fail to Comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a Timely Manner, Our Business Could Be Harmed and Our Stock Price Could Decline.  

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require management's annual assessment of our internal control over financial reporting.  The standards that must be met for the management to assess the internal control over financial reporting as effective are complex, and require significant documentation, testing, and possible remediation to meet the detailed standards.  We have incurred significant expenses and we devote resources to Section 404 compliance on an ongoing basis.  In the event that our Chief Executive Officer and Chief Financial Officer determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react on how the market prices of our shares will be affected, however, we believe that there is a risk that investor confidence and share value may be negatively impacted.

Maintaining and Improving Our Financial Controls and The Requirements Of Being a Public Company May Strain Our Resources, Divert Management's Attention, and Affect Our Ability to Attract and Retain Qualified Members For Our Board of Directors.  

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002.  The requirements of these rules and regulations increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and may also place undue strain on our personnel, systems, and resources.  The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.  Fulfilling this requirement can be difficult to achieve and maintain.

As a result, management's attention may be diverted from other business concerns, which could harm our business, operating results and financial condition.  These efforts also involve substantial costs

We May be Impacted By the Implementation of Regulatory Requirements as a Result of the Passage of the Dodd-Frank Act.

In July, 2010, Congress enacted the Dodd-Frank Act, which instituted major changes in the regulatory regime for public companies. At the present time, we do not believe that Seychelle will be impacted in a material way by this legislation. However, the implementation of the provisions of the Dodd-Frank Act is subject to regulations which have not yet been written and its statutory provisions have not been the subject of extensive judicial review, so we cannot guarantee that we may not come under its purview at some point in the future and be affected negatively by it.

Our Articles of Incorporation and Bylaws Could Discourage Acquisition Proposals, Delay a Change in Control, or Prevent Other Transactions.

Provisions of our articles of incorporation and bylaws, as well as provisions of the Nevada Business Corporation Act, may discourage, delay or prevent a change in control of our Company that you as a stockholder may consider favorable and may be in your best interest. Our certificate of incorporation and bylaws contain provisions that:

•  authorize the issuance of  "blank check" preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares and discourage a takeover attempt; and

•  Limit who may call special meetings of stockholders.

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Our Stock Price Can Be Volatile.

The future market price of our common stock could fluctuate widely because of:

• Future announcements about our Company or our competitors, including the results of testing, technological innovations or new commercial products;

• negative regulatory actions with respect to our potential products or regulatory approvals with respect to our competitors' products;

• changes in government regulations;

• developments in our relationships with our partners including customers, vendors and distributors;

• developments affecting our partners; including customers, vendors and distributors;

• our failure to acquire or maintain proprietary rights to the products we develop;

• litigation; and

• Public concern as to the safety of our products.

The stock market has experienced price and volume fluctuations that have particularly affected the market price for many emerging companies. These fluctuations have often been unrelated to the operating performance of these companies. These broad market fluctuations may cause the market price of our common stock to be lower or more volatile than otherwise expected.

Buying Penny Stocks is Very Risky and Speculative. The Applicability of the "Penny Stock Rules" to Broker-dealer Sales of Our Common Stock Will Have a Negative Effect on the Liquidity and Market Price of Our Common Stock.

Trading in our shares is subject to the "penny stock rules" adopted pursuant to Rule 15g-9 of the Securities and Exchange Act of 1934, as amended, which apply to companies that are not listed on an exchange and whose common stock trades at less than $5.00 per share or which have a tangible net worth of less than $5,000,000 - or $2,000,000 if we have been operating for three or more years. The penny stock rules impose additional sales practice requirements on broker-dealers which sell such securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the penny stock rules will affect the ability of broker-dealers to sell shares of our common stock and may affect the ability of shareholders to sell their shares in the secondary market, as compliance with such rules may delay and/or preclude certain trading transactions. The rules could also have an adverse effect on the market price of our common stock.

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for our common stock. Many brokers may be unwilling to engage in transactions in our common stock because of the added disclosure requirements, thereby making it more difficult for stockholders to dispose of their shares. You will also find it difficult to obtain accurate information about, and/or quotations as to the price of our common stock.

We have added a stock broker to create or maintain a market in our common stock, which could favorably impact the price and liquidity of our securities.

We Do Not Expect to Pay Dividends on Our Common Stock.

We have not paid any cash dividends with respect to our common stock, and it is unlikely that we will pay any dividends on our common stock in the foreseeable future, as we are a growth company.

- 24 -

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

During the fiscal quarter ended August 31, 2016, 250,000 shares of restricted stock were issued by the Company to an employee.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5.  OTHER INFORMATION

On October 7, 2016, Mr. James Place, Director, President, Treasurer and CFO, resigned from the Board of Directors and the Company.  There are no disagreements between the Company and Mr. Place. Also on October 7, 2016, Mr. Carl Palmer became the President and Chief Financial Officer, as well as retaining the title of Chief Executive Officer and Director. Ms. Cari Beck became the Treasurer well as retaining the title of Secretary and Director.

- 25 -

 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

 Reports on Form 8-K

Three reports were filed under cover of Form 8-K for the fiscal quarter ended August 31, 2016 regarding Seychelle's financial operations (July 18, 2016); the election of two new directors (August 10, 2016); and the change of Seychelle's independent CPA's (August 31, 2016).

- 26 -

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 14, 2016	By:	/s/ Carl Palmer
		Carl Palmer Director, Chief Executive Officer and Chief Financial Officer

- 27 -

EX-31

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL 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 me 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 my supervision, to provide reasonable assurance 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 my 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 14, 2016	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, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Carl Palmer, Chief Executive Officer and 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 14, 2016	By:	/s/ Carl Palmer
		Carl Palmer
		Chief Executive Officer and
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Aug. 31, 2016	Oct. 13, 2016
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, 2016
Amendment Flag	false
Current Fiscal Year End Date	--02-28
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		26,640,313
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2016

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Aug. 31, 2016	Feb. 29, 2016
ASSETS
Cash and cash equivalents	$ 387,601	$ 2,062,873
Accounts receivable, net of allowance for doubtful accounts and sales returns of $22,200 and $125,800, respectively	435,751	224,235
Related party receivables	44,704	39,575
Inventory, net	2,607,847	2,511,458
Prepaid expenses, deposits, and other current assets	181,095	115,440
Total current assets	3,656,998	4,953,581
Property and equipment, net	201,051	222,926
Intangible assets, net	50,383	51,343
Deferred tax assets	999,348	613,716
Other assets	81,312	15,651
Total assets	4,989,092	5,857,217
Current Liabilities:
Accounts payable and accrued expenses	229,312	415,226
Income taxes payable	157,145	317,145
Customer deposits	5,855	28,219
Capital lease obligation, current portion	4,690	9,390
Total current liabilities	397,002	769,980
Long term Liabilities:
Capital lease obligation, net of current	17,002	19,439
Total liabilities	414,004	789,419
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, 2016 and February 29, 2016, respectfully	26,641	26,391
Additional paid-in capital	8,944,368	8,827,118
Accumulated deficit	(4,366,240)	(3,773,431)
Less treasury stock at cost (66,000 and 36,000 shares at May 31, 2016 and February 29, 2016 respectively)	(29,680)	(12,280)
Total Stockholders' Equity	4,575,088	5,067,798
Total liabilities and stockholders' equity	$ 4,989,092	$ 5,857,217

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Aug. 31, 2016	Feb. 29, 2016
CURRENT ASSETS
Net of allowance for doubtful accounts	$ 22,200	$ 125,800
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	26,390,313
Common stock, outstanding shares	26,640,313	26,390,313

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	Aug. 31, 2016	Aug. 31, 2015
Condensed Consolidated Statements Of Income
Sales	$ 728,232	$ 2,724,829	$ 1,627,368	$ 5,072,012
Cost of sales	358,432	1,319,711	946,917	2,387,741
Gross profit	369,800	1,405,118	680,451	2,684,271
OPERATING EXPENSES
Selling, General, and Administrative Expenses	608,121	602,371	1,621,034	1,154,287
Depreciation and Amortization	20,779	20,395	42,830	30,107
Total operating expenses	628,900	622,766	1,663,864	1,184,394
Income (Loss) from Operations	(259,100)	782,352	(983,413)	1,499,877
OTHER INCOME (EXPENSE)
Interest income	8	39	15	228
Interest expense	(388)	(133)	(1,002)	(292)
Other income	10,452	537	12,231	771
Total other income (expense)	10,072	443	11,244	707
Income (loss) before income tax benefit (expense)	(249,028)	782,795	(972,169)	1,500,584
Income tax benefit (expense)	100,562	(267,718)	379,358	(513,009)
Net income (loss)	$ (148,466)	$ 515,077	$ (592,811)	$ 987,575
BASIC INCOME (LOSS) PER SHARE	$ (0.01)	$ 0.02	$ (0.02)	$ 0.04
DILUTED INCOME (LOSS) PER SHARE	$ (0.01)	$ 0.02	$ (0.02)	$ 0.04
BASIC WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING	26,640,313	26,144,531	26,610,421	26,023,362
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING	26,640,313	28,464,562	26,610,421	27,917,424

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Aug. 31, 2016	Aug. 31, 2015
OPERATING ACTIVITIES:
Net income (loss)	$ (592,811)	$ 987,575
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	42,830	30,107
Loss on disposal of assets	5,587
Stock-based compensation	117,500	217,698
Provision for doubtful accounts and sales returns	(103,652)
Deferred tax expense (benefit)	(385,632)	513,009
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(107,864)	(152,534)
Increase in related party receivables	(5,129)	(9,806)
Increase in inventory	(96,389)	(742,779)
Increase in prepaid expenses, deposits and other assets	(131,314)	19,748
Increase (decrease) in accounts payable and accrued expenses	(185,914)	(47,689)
Decrease in accrued legal and settlement fees		(532,103)
Decrease in income taxes payable	(160,000)
Increase (decrease) in customer deposits	(22,364)	(73,276)
Net Cash Used In Operating Activities	(1,625,152)	209,950
INVESTING ACTIVITIES:
Purchase of property and equipment	(25,582)	(34,953)
Net Cash Used In Investing Activities	(25,582)	(34,953)
FINANCING ACTIVITIES:
Repayment of capital lease obligation	(7,138)	(1,967)
Repurchase of treasury stock	(17,400)
Net Cash Used in Financing Activities	(24,538)	(1,967)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(1,675,272)	173,030
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	2,062,873	1,514,534
CASH AND CASH EQUIVALENTS AT END OF PERIOD	387,601	1,687,564
Non-cash investing and financing activities:
Acquisition of equipment under capital leases		26,000
Cash paid for:
Interest	1,002	292
Income taxes	$ 160,000

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1.BASIS OF PRESENTATION

6 Months Ended

Aug. 31, 2016

Notes to Financial Statements

BASIS OF PRESENTATION

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, 2016, 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.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the fiscal year ended February 29, 2016.  The results of operations for the periods ended August 31, 2016 and 2015 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 consolidated financial statements. The 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 these condensed consolidated financial statements and the February 29, 2016 consolidated financials included in the 10-K/A filed on June 16, 2016.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

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2. MANAGEMENT'S PLAN AND LIQUIDITY

6 Months Ended

Aug. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

MANAGEMENT'S PLAN AND LIQUIDITY

NOTE 2:    MANAGEMENT'S PLAN AND LIQUIDITY

Our largest customer ceased placing orders in February 2016. There were no sales to this customer during the six month period ended August 31, 2016 and the likelihood of this customer continuing to purchase our product in the future is remote.  The loss of business from this customer has had a materially adverse effect on our revenues in the short term and may continue to have a materially adverse effect on our revenues in the long term if these revenues are not replaced by new products and other existing or new customers.

As of August 31, 2016, the Company had $387,601 in cash and cash equivalents, $435,751 in accounts receivable, working capital of $3,259,996 and a backlog of $51,756 in unshipped product. Additionally, the Company has developed an innovative new concept of a world filter product to sell in the world where quality drinking water is not available. Under this initiative, both the bottle and cap will to be sourced locally in each country to make the finished product competitive in the international market. The Company initiated these foreign sales plans during the six months ended August 31, 2016 with the appointment of its first international exclusive sales agent. Accordingly, management believes that over the next twelve months, sufficient working capital and liquidity will be obtained from sales to existing and new customers, in addition to debt and other capital sources as required to fund operations.  The TAM Trust ("TAM"), the Company's major stockholder, has also verbally committed to provide up to $500,000 in additional funding as a line of credit to Seychelle, if required but is not legally obligated to do so. 

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3. BASIC INCOME (LOSS) PER SHARE

6 Months Ended

Aug. 31, 2016

Earnings Per Share [Abstract]

BASIC INCOME (LOSS) PER SHARE

NOTE 3:    BASIC INCOME (LOSS) PER SHARE

Basic income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during each period presented.  Diluted income (loss) 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.  In periods when losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.  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 period ended August 31, 2016 did not include warrants as they would have been anti-dilutive. For the three and six month periods ended August 31, 2016,  6,407,221 warrants  were excluded from the denominator for diluted net income (loss) per share.

	For the six months ended
	August 31,
	2016			2015
Numerator:
Net income (loss) available to common shareholders	$	(592,811	)	$	987,575
Weighted average shares – basic		26,610,421			26,023,362
Net income (loss) per share – basic	$	(0.02	)	$	0.04
Dilutive effect of common stock equivalents:
Warrants		-			1,894,062
Weighted average shares – diluted		26,610,421			27,917,424
Net income (loss) per share – diluted	$	(0.02	)	$	0.04

	For the three months ended
	August 31,
	2016			2015
Numerator:
Net income (loss) available to common shareholders	$	(148,466	)	$	515,077
Weighted average shares – basic		26,640,313			26,144,531
Net income (loss) per share – basic	$	(0.01	)	$	0.02
Dilutive effect of common stock equivalents:
Warrants		-			2,320,031
Weighted average shares – diluted		26,640,313			28,464,562
Net income  (loss) per share – diluted	$	(0.01	)	$	0.02

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4.COMMON STOCK AND WARRANTS

6 Months Ended

Aug. 31, 2016

Notes to Financial Statements

COMMON STOCK AND WARRANTS

NOTE 4:   COMMON STOCK AND WARRANTS

Common Stock

During the six month period ended August 31, 2016, 250,000 shares of fully vested restricted common stock were issued by the Company to an employee.  The shares were valued at the closing price of the Company's common stock at date of grant for a total expense of $117,500.

During the six month period ended August 31, 2015, 115,000 shares of restricted common stock were issued to employees and officers of the Company. Additionally, 100,000, 20,000, and 10,000 shares of restricted common stock were issued to TAM, vendors, and TAM's trustee, respectively. All such shares were fully vested upon issuance. The value recorded in the accompanying condensed consolidated financial statements was based on the estimated fair value of the stock on the date of the grant and aggregated $83,000.

Warrants

The Company had previously granted warrants to selected members of management and determined the estimated value of warrants granted using the Black-Scholes option pricing model. The warrants became fully vested during the year ended February 29, 2016.  The amount of the expense charged to operations for these warrants was $0 and $67,200 for the three months ended August 31, 2016 and 2015, respectively.  The amount of expense charged to operations for these warrants was $0 and $134,200 for the six months ended August 31, 2016 and 2015, respectively.

A summary of warrant activity for the six months ended August 31, 2016 is as follows:

			Weighted-
			Average
	Warrants		Exercise
	Outstanding		Price
Outstanding at February 29, 2016		6,407,221		0.21
Granted		-		-
Exercised		-		-
Forfeited		-		0.21
Outstanding at August 31, 2016		6,407,221		0.21
Vested at August 31, 2015		6,407,221		0.21
Exercisable at August 31, 2015		6,407,221		0.21

The following table summarizes significant ranges of outstanding warrants as of August 31, 2016:

		Warrants Outstanding				Warrants Exercisable
			Weighted	Weighted			Weighted
			Average	Average			Average
Exercise		Number	Remaining	Exercise		Number	Exercise
Price		Outstanding	Life (Years)	Price		Outstanding	Price
	$0.21	6,407,221	4.29		$0.21	6,407,221		$0.21

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5. INVENTORY

6 Months Ended

Aug. 31, 2016

Notes to Financial Statements

INVENTORY

NOTE 5:    INVENTORY

The Company's inventory consisted of the following at August 31, 2016 and February 29, 2016:
	August 31, 2016			February 29, 2016
Raw materials	$	1,973,974		$	1,084,782
Finished goods		673,873			1,466,676
		2,647,847			2,551,458
Reserve for obsolete and slow moving inventory		(40,000	)		(40,000	)
	$	2,607,847		$	2,511,458

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6. CONCENTRATIONS

6 Months Ended

Aug. 31, 2016

Notes to Financial Statements

CONCENTRATIONS

NOTE 6:    CONCENTRATIONS

Sales to one customer accounted for 27% and 35% of sales for the three and six month periods ended August 31, 2016, respectively. Accounts receivable from three customers amounted to $290,720 or approximately 63% of accounts receivable as of August 31, 2016.

Sales to two customers accounted for 61% and 66%, respectively, of sales for the three and six month periods ended August 31, 2015. Accounts receivable from these two customers amounted to $166,861 or approximately 37% of accounts receivable as of August 31, 2015. Two other customers amounted to $194,500 or approximately 43% of accounts receivable as of August 31, 2015.

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7. INCOME TAXES

6 Months Ended

Aug. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 7: INCOME TAXES

For the three and six month periods ended August 31, 2016, the Company incurred tax net operating losses (“NOL’s”) approximating $249,000 and $972,000, respectively. Such NOL’s result in deferred tax assets of approximately $385,000 at August 31, 2016. Additionally, deferred tax assets at August 31, 2016 consists of stock compensation and temporary differences related to certain accrued expenses resulting in total deferred tax assets of approximately $999,000.

In assessing the realization of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. At August 31, 2016, management determined that a deferred tax asset valuation allowance was not necessary due to the Company’s profitability in recent years. Management will continue to evaluate the need for a deferred tax asset valuation allowance going forward each reporting period.

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8. RELATED PARTY TRANSACTIONS

6 Months Ended

Aug. 31, 2016

Notes to Financial Statements

RELATED PARTY TRANSACTIONS

NOTE 8:    RELATED PARTY TRANSACTIONS

During the three month periods ended August 31, 2016 and 2015, the Company incurred consulting fees to related parties in the amounts of $20,240 and $25,000, respectively. During the six month periods ended August 31, 2016 and 2015, the Company incurred consulting fees to related parties in the amounts of $20,240 and $75,000, respectively. These fees were related to TAM, in which Cari Beck, is the trustee and current Board member, as well as a daughter of Carl Palmer, an officer and Board member. These amounts are included as a component of selling, general and administrative expenses on the condensed consolidated statements of operations. All amounts due to TAM had been paid in full as of August 31, 2016 and 2015.  

During the three month periods ended August 31, 2016 and 2015, TAM purchased, on behalf of the Company, $12,350 and $208,000, respectively, of raw materials from a vendor with which it already had a business relationship. During the six month periods ended August 31, 2016 and 2015, TAM purchased, on behalf of the Company, $20,090 and $393,000, respectively, of raw materials, and paid $0 and $3,500, respectively, for related tooling to a vendor with which it already had a business relationship. The Company reimbursed TAM for these outlays in full during the six months ended August 31, 2016 and 2015.

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, 2016 and 2015, purchases facilitated through the related party accounted for approximately 34% and 30%, respectively, of total raw material purchases.

As of August 31, 2016 and February 29, 2016, the Company had receivables  from   employees of approximately $45,000 and $40,000. These amounts are being repaid through direct payroll withdrawals.

TAM has also verbally committed to provide up to $500,000 in funding as a line of credit on behalf of Seychelle, if required, but is not legally obligated to do so. 

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9. COMMITMENTS AND CONTINGENCIES

6 Months Ended

Aug. 31, 2016

Notes to Financial Statements

COMMITMENTS AND CONTINGENCIES

NOTE 9:  COMMITMENTS AND CONTINGENCIES

Leases

The Company is obligated on three operating leases at August 31, 2016: two in San Juan Capistrano, California (as previously reported in the Company's Form 10-K/A filed with the Securities and Exchange Commission for the year ended February 29, 2016) and one (new) in Aliso Viejo, California. The Company moved its corporate headquarters from San Juan Capistrano to Aliso Viejo during August 2016 and combined its corporate offices with warehouse and production space, which were previously in separate locations. The Company has sub-leased its prior office space location to a third party in connection with the move, and is attempting to sub-lease the remaining San Juan Capistrano location to other third parties.

The sub-lease was effective September 1, 2016, provides the Company with $6,505 per month, and expires July 31, 2017.

The Company's Aliso Viejo lease was effective August 1, 2016, requires monthly payments of $19,446, and expires in July 2021.

Litigation

On September 26, 2016, the Company was served with a complaint by a former employee alleging breach of contract.  The Company believes the case is without merit and intends to vigorously defend itself in this matter. No outcome can be determined at this time.

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10. SUBSEQUENT EVENTS

6 Months Ended

Aug. 31, 2016

Subsequent Events [Abstract]

9. SUBSEQUENT EVENTS

NOTE 10: SUBSEQUENT EVENTS

On October 7, 2016, Mr. James Place, Director, Treasurer, President and CFO, resigned from the Board of Directors and the Company.  There are no disagreements between the Company and James Place. Also on October 7, 2016, Mr. Carl Palmer became the President and Chief Financial Officer, as well as retaining the title of Chief Executive Officer and Director. Ms. Cari Beck, Secretary, became the Treasurer as well as retaining the title of Director.

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

6 Months Ended

Aug. 31, 2016

Earnings Per Share [Abstract]

Basic and Diluted income (loss) per share

	For the six months ended
	August 31,
	2016			2015
Numerator:
Net income (loss) available to common shareholders	$	(592,811	)	$	987,575
Weighted average shares – basic		26,610,421			26,023,362
Net income (loss) per share – basic	$	(0.02	)	$	0.04
Dilutive effect of common stock equivalents:
Warrants		-			1,894,062
Weighted average shares – diluted		26,610,421			27,917,424
Net income (loss) per share – diluted	$	(0.02	)	$	0.04

	For the three months ended
	August 31,
	2016			2015
Numerator:
Net income (loss) available to common shareholders	$	(148,466	)	$	515,077
Weighted average shares – basic		26,640,313			26,144,531
Net income (loss) per share – basic	$	(0.01	)	$	0.02
Dilutive effect of common stock equivalents:
Warrants		-			2,320,031
Weighted average shares – diluted		26,640,313			28,464,562
Net income  (loss) per share – diluted	$	(0.01	)	$	0.02

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4. COMMON STOCK PURCHASE WARRANTS (Tables)

6 Months Ended

Aug. 31, 2016

Common Stock Purchase Warrants Tables

Summary of warrant activity

			Weighted-
			Average
	Warrants		Exercise
	Outstanding		Price
Outstanding at February 29, 2016		6,407,221		0.21
Granted		-		-
Exercised		-		-
Forfeited		-		0.21
Outstanding at August 31, 2016		6,407,221		0.21
Vested at August 31, 2015		6,407,221		0.21
Exercisable at August 31, 2015		6,407,221		0.21

Significant ranges of outstanding warrants

		Warrants Outstanding				Warrants Exercisable
			Weighted	Weighted			Weighted
			Average	Average			Average
Exercise		Number	Remaining	Exercise		Number	Exercise
Price		Outstanding	Life (Years)	Price		Outstanding	Price
	$0.21	6,407,221	4.29		$0.21	6,407,221		$0.21

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5. INVENTORY (Tables)

6 Months Ended

Aug. 31, 2016

Inventory Tables

Inventory

The Company's inventory consisted of the following at August 31, 2016 and February 29, 2016:
	August 31, 2016			February 28, 2016
Raw materials	$	1,973,974		$	1,084,782
Finished goods		673,873			1,466,676
		2,647,847			2,551,458
Reserve for obsolete and slow moving inventory		(40,000	)		(40,000	)
	$	2,607,847		$	2,511,458

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3. BASIC INCOME (LOSS) PER SHARE - Basic and Diluted income (loss) per share (Details) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	Aug. 31, 2016	Aug. 31, 2015
Numerator:
Net (loss) income available to common shareholders	$ (148,466)	$ 515,077	$ (427,605)	$ 472,498
Weighted average shares, basic	26,640,313	26,144,531	26,580,530	25,913,646
Net income (loss) per share - basic	$ (0.01)	$ 0.02	$ (0.02)	$ 0.04
Dilutive effect of common stock equivalents:
Warrants		2,320,031		585,972
Weighted average shares, diluted	26,640,313	28,464,562	26,610,421	27,917,424
Net income (loss) per share - diluted	$ (0.01)	$ 0.02	$ (0.02)	$ 0.04

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4.COMMON STOCK AND WARRANTS (Details) - USD ($)	6 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	Feb. 29, 2016
Common Stock Purchase Warrants Details
Number of restricted common shares issued to employee	250,000	1,145,000
Value of restricted common shares issued to employee	$ 117,500	$ 83,000
Warrants Outstanding	6,407,221
Warrants, Outstanding	6,407,221
Vested	6,407,221
Exercisable	6,407,221
Warrants Weighted Average Exercise Price per Share, Outstanding	$ 0.21
Warrants Weighted Average Exercise Price per Share, Granted	0.21
Warrants Weighted Average Exercise Price per Share, Exercised	0.21
Warrants Weighted Average Exercise Price per Share, Forfeited	0.21
Warrants Weighted Average Exercise Price per Share, Outstanding	0.21
Weighted Average Exercise Price Warrants Vested	0.21		$ 0.21
Weighted Average Exercise Price Warrants Exercisable	$ 0.21		$ 0.21

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5. INVENTORY (Details) - USD ($)	Aug. 31, 2016	Feb. 29, 2016
Inventory Details
Raw materials	$ 1,973,974	$ 1,084,782
Finished goods	673,873	1,466,676
Inventory	2,647,847	2,551,458
Reserve for obsolete and slow moving inventory	(40,000)	(40,000)
Inventory, Net	$ 2,607,847	$ 2,511,458

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2. MANAGEMENT'S PLAN (Details Narrative)	6 Months Ended
	Aug. 31, 2016 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Cash	$ 747,846
Accounts receivable	299,156
Working capital	3,565,796
Backlog of unshipped product	$ 34,000

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4.COMMON STOCK AND WARRANTS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	Aug. 31, 2016	Aug. 31, 2015
Common Stock Purchase Warrants Details Narrative
Expense charged to operations for warrants	$ 0	$ 67,200	$ 0	$ 134,200

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6. CONCENTRATIONS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	Aug. 31, 2016	Aug. 31, 2015
Concentrations Details Narrative
Percentage of sales attributable to one customer	27.00%		35.00%
Percentage of accounts receivable attributable to three customers				63.00%
Total dollar amount of accounts receivable attributable to three customers as of the end of the period				$ 290,720
Percentage of sales attributable to two customers		61.00%		66.00%
Accounts receivable from two customers				$ 166,861
Percentage of sales attributable to two customers as of the end of the period				37.00%
Percentage of accounts receivable from two other customers				43.00%
Accounts receivable from two other customers as of the end of the period				$ 194,500

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8. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Aug. 31, 2016	Aug. 31, 2015	Aug. 31, 2016	Aug. 31, 2015	Feb. 29, 2016
Related Party Transactions Details Narrative
Payments to Irrevocable Trust for consulting services in which Cari Beck is a trustee as well as the daughter of the Company's President	$ 20,240	$ 25,000	$ 20,240	$ 75,000
Payment to TAM for future purchase of intellectual property retained by TAM	12,350	208,000	20,090	393,000
Raw materials purchased	0	3,500	0	3,500
Tooling from vendor				$ 3,500
Direct commissions paid to related party consultant	3,000	$ 11,000
Receivables due from employees	$ 45,000		$ 45,000		$ 40,000

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7. INCOME TAXES (Details Narrative)	3 Months Ended	6 Months Ended
	Aug. 31, 2016 USD ($)	Aug. 31, 2016 USD ($)
Income Tax Disclosure [Abstract]
Net operating loss	$ 249,000	$ 972,000
Deferred tax assets	385,000	385,000
Total deferred tax assets	$ 999,000	$ 999,000

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9. COMMITMENTS AND CONTINGENCIES (Details)	6 Months Ended
	Aug. 31, 2016 USD ($)
Commitments And Contingencies Details
Lease payments per month	$ 19,446
Sub-lease payments per month	$ 6,505