Edgar Filing: SEYCHELLE ENVIRONMENTAL TECHNOLOGIES INC /CA

seychelle10k22809_52209.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

( X ) ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 28, 2009

( ) 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	(IRS Employer File Number)
Of incorporation)

33012 Calle Perfecto
San Juan Capistrano, California	92675
(Address of principal executive offices)	(zip code)

(949) 234-1999

(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Exchange Act: None

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.001 per share par value

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [] No [X].

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [] No [X].

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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 [] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is contained in this form and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. [X]

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 []	Accelerated filer []
Non-accelerated filer [] (Do not check if a smaller reporting company)	Smaller reporting company [X]

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

The number of shares outstanding of the registrant's common stock, as of February 28, 2009 was 25,824,146. Moreover, the aggregate market value of the voting stock of the Registrant held by non-affiliates as of May 22, 2009 was approximately $5,021,000.

References in this document to "us," "we," “Seychelle,” “SYEV,” or "the Company" refer to Seychelle Environmental Technologies, Inc., its predecessor and its subsidiary.

TABLE OF CONTENTS

PART I	Page

Item 1. Business	3

Item 1A. Risk Factors	7

Item 2. Property	11

Item 3. Legal Proceedings	11

Item 4. Submission of Matters to a Vote of Security Holders	11

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12

Item 6. Selected Financial Data	12

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	13

Item 7A. Quantitative and Qualitative Disclosures About Market Risk	19

Item 8. Financial Statements and Supplementary Data	19

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	45

Item 9A(T). Controls and Procedures	45

Item 9B. Other Information	46

PART III

Item 10. Directors, Executive Officers and Corporate Governance	46

Item 11. Executive Compensation	48

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50

Item 13. Certain Relationships and Related Transactions, and Director Independence	50

Item 14. Principal Accountant Fees and Services	51

Item 15. Exhibits Financial Statement Schedules	52

Financial Statements pages	20-45

Signatures	54

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PART I

Item 1. DESCRIPTION OF BUSINESS.

Business History of Seychelle

We are a Nevada corporation. Our principal business address is 33012 Calle Perfecto, San Juan Capistrano, California 92675. Our telephone number at this address is 949-234-1999.

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.

Organization

Our Company is presently comprised of Seychelle Environmental Technologies, Inc., a Nevada corporation, with one wholly-owned subsidiary, Seychelle Water Technologies, Inc., also a Nevada corporation (collectively, the Company or Seychelle). We use the trade name "Seychelle Water Filtration Products, Inc." in our commercial operations.

Business of Seychelle

General

Seychelle designs and manufactures unique, state-of-the-art ionic adsorption micron filters 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. Since human bodies are approximately 75% water, our mission is twofold: First, to help educate everyone to the fact that the quality of water they drink is important and second, to make available low-cost, effective filtration products that will meet the need for safe, great tasting, high quality drinking water.

As of February 28, 2009, Seychelle has sold over 2 million portable water filtration bottles throughout the world to customers such as individuals, dealers, distributors and to governments, military, agencies and emergency relief organizations such as the U.S. Marine Corps, the International Red Cross, Eco-Challenge, Kenya Wild Life Service, La Cruz Roja de Mexico and the N.Y. Institute for the Blind. In addition, the Company has donated thousands of portable bottles to church groups and missionaries worldwide.

In 2001, the World Bank placed the value of the world water market at close to $400 billion annually. Bottled water, according to Water Facts, has emerged as the second largest commercial beverage category by volume in the U.S. However, Seychelle products compete in a more limited market: the portable filtration product segment. Enviroscrub Technology estimated the U.S. household water filtration market, in March 2004 to be $500 million in size, growing at 10 percent annually. Additional information pertaining to the size of the portable water filtration market is not reasonably known to us.

In developing countries, many people in rural areas boil their water for drinking and cooking to kill bacteria, but this process does not remove the pyrogens, chemicals, toxins, volatile organisms, heavy metals and other pathogens that remain in the water. In Africa alone, according to Earth Prayers From Around the World, approximately 6,000 people die every day because of water borne diseases.

Business Plan

The management of Seychelle represents over 100 years of combined experience in developing improvements and innovations in the field of bottled water, reverse osmosis, ultra filtration and filter technology. As a result, our products can deliver up to .2-micron filtration, at pennies per gallon, with pressure as low as 5 pounds per square inch (PSI). Further, our point of difference filtration systems remove up to 99.99% of all known pollutants and contaminants most commonalty found in fresh drinking water supplies in the four major areas of concern as follows:

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AESTHETICS: Taste, chlorine, sand, sediment and odor problems.

BIOLOGICS: Pathogens such as Cryptosporidium, Giardia and E. coli bacteria.

CHEMICALS: Pesticides, detergents, toxic chemicals and industrial waste.

DISSOLVED SOLIDS: Heavy metals such as aluminum, asbestos, copper, lead, mercury and radon-222.

Seychelle filters have been tested by independent and government laboratories throughout the world and are approved for sale and distribution in the following countries: United States, Mexico, United Kingdom, Korea, Malaysia, Japan, The Peoples Republic of China, Vietnam, New Zealand, Australia, Brazil, Venezuela, Argentina, South Africa, and Pakistan. In the United States, Seychelle filters have been certified by California and Florida approved independent laboratories implementing Environmental Protection Agency, American National Standards Institute, and National Sanitation Foundation protocol, procedures, standards and methodology. Additionally, we offer a test pack for potential customers that include the test results from selected countries. In addition, results from the United States, United Kingdom and South Africa are displayed on our Website: www.seychelle.com. To our knowledge, no other water filtration system can achieve this level of removal of up to 99.99% of all known pollutants and contaminants most commonly found in fresh drinking water supplies in the four major areas of concern. The benefit of such filtration can save lives worldwide as awareness of Seychelle’s product line increases and is used.

Principal Products or Services and their Markets

Current Products

Seychelle has a varied line of portable filter bottles for people on the go. They include Pull Top and Flip Top’s and military style canteens - standard or with advanced filters (for virus and bacteria control). Sizes are from 18 ounce to 38 ounces, and provide up to 100 gallons of pure drinking water from any fresh water source; running or stagnant (such as rivers, lakes, ponds, streams and puddles).

The current products include: Flip-Top and Pull Top bottles, Canteens, Pure Water Pump, Bottoms-Up bottles, Emergency bottle, In-Line filter, Pure Water Bag, Pump N’ Pure, Pure Water Straw, Emergency Survival Pack, Water Pitcher and Replacement Filters.

New Products

We have re-engineered the Flip Top bottle to eliminate parts, reduce costs, provide a more streamlined look, and add a disinfectant capability. Additionally, the In-Line Filter has been changed to provide greater filter media, and meet field conditions that require a longer, narrower design. The Emergency Survival Pack meets the essential needs, including food, for two people to survive for three days during any kind of a disaster.

We signed an exclusive license agreement with Gary Hess (the License Agreement), doing business as Aqua Gear USA on June 6, 2002 for a product known as the "Hand Held Pump Technology." We licensed all proprietary rights associated with this technology. We pay a 2% royalty on our gross sales for the technology during the term of the License Agreement. The License Agreement was for an initial term of five years and was renewed with four successive five-year renewals remaining. This offers us an additional proprietary product in the portable filtration industry. We believe that this License Agreement compliments our current product line. As of the date of this document, this technology, which was completed in 2005, has resulted in a product called Pump N’ Pure which allows the user to draw filtered water from virtually any container or location. The Company continues to believe that the product will be viable in developing countries, as an emergency preparedness product, and for families where cost is a prime consideration. The Company commenced marketing the Hand Held Pump as part of its Aqua Gear product line in the U.S. sporting goods industry in fiscal 2008.

During July 2006, the Company signed a second exclusive license agreement (the Second Agreement) with Gary Hess, doing business as Aqua Gear USA. We will pay a 2% royalty on net sales for this technology up to $120,000 and 1% thereafter. This agreement included the issuing of 100,000 warrants to Gary Hess that is being amortized over three years. The Second Agreement shall continue indefinitely unless terminated due to a default or breach of the agreement. This affords the Company additional patent protection (patent # 6,136,188) and ownership of the trademark Aqua Gear. Products affected include all Aqua Gear trademarked filter bottles sold in the product line. As of the date of this document, approximately $30,300 in royalties has been paid under these license agreements.

During April 2006, the Company issued 50,000 shares of common stock to the shareholders of Continental Technologies, Inc. (Continental) with an approximate value of $16,100 for the Redi Chlor brand name, trademark and the use of the EPA Registration Number 55304-4-7126. As of the date of this document, the Company has commenced selling the Redi Chlor brand name water chlorine tablets to consumers, dealers, distributors and manufacturers. Under the agreement, the Company further agreed to remit to Continental a 10% commission on net sales, as defined, of the existing product and 10% on any product sold by Continental for us to their existing or new customers at our original equipment manufacturer (OEM) prices. The agreement is through the life of Seychelle. Through February 29, 2008, $3,011 has been paid in royalties.

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During July 2007, the Company received approval from the U.S Food and Drug Administration to import certain of the Company’s emergency preparedness products. As of the date of this document, the Company has sold approximately 2,250 units to its customers.

Manufacturing

The Company has determined that we will be able to produce some of our product components in China at a lower cost than in the U.S. while maintaining equivalent quality standards. Our proprietary filter will continue to be manufactured in the U.S. The final assembly of our products is completed at our facility in San Juan Capistrano, California.

On September 1, 2005, we signed an exclusive agreement with Huanghua Seychelle Plastic Co., Ltd to manufacture component parts.

Sales Channels

Sales channels to be pursued will include: Retail, Military, Government, Non-Governmental Agencies (NGO)’s, Foundations, Missionaries, Multi-Level Marketing, International, OEM and Joint Ventures. At present, we are talking to several multi-level marketing companies with over one million distributors worldwide who currently do not have a water product in their line. Seychelle, with over sixty years of combined multi-level and direct sales marketing experience is well positioned to help any of these companies make a meaningful impact within their sales organizations.

Several other distributors continue to represent the Company’s portable water filtration products to customers in specific distribution channels; including: retail, multi-national corporations, foundations, sports, governmental agencies, and the military (both US and International).

Another water filter marketing company has contacted us to private label products for them. They have many contacts within the retail and governmental channels and we are in discussions with them on a distribution rights agreement.

Raw Materials

Seychelle’s filters include the finest powdered water-activated coconut and three other media as components in the porous plastic ionic filter. The media itself, the formulation process, and manufacturing methodology are governed by trade secrets. To date, there is an adequate availability of material for all of our products. We do not expect this situation to change in the near future.

Customers and Competition

Seychelle products compete against all forms of drinking water: tap water supplied by municipal water districts, bottled water, and home water treatment systems provided by suppliers (such as independent dealers, distributors, catalogs, Internet sellers, etc.) in the form of reverse osmosis systems, distillation, and filtration systems. Therefore, Seychelles’ portable and home filtration products compete in a limited segment of the market as an alternative to other sources of drinking water.

Seychelle is an emerging company with negligible share of the world’s pure water market. Our products sell in a niche category of the market - portable filtration bottles that use ionic adsorption micron filtration technology, which remove many organic and inorganic contaminants that simple activated carbon filters cannot. Most activated carbon filters on the market remove Chlorine, sediment and dirt thus improving taste and odor, as well as a handful of other contaminants such as Lead, Mercury, Zinc and Copper. This would include leading brands such as Brita, PUR, General Electric and Culligan, who collectively dominate the market. In the portable segment of the market, there are hundreds of small companies selling a variety of specialized filters with no one company having a majority share and no industry data available. We believe that our current share of this market is negligible.

Seychelle sells its products in two ways. First, it sells its own brand to individuals, dealers, distributors, multilevel marketing companies and missionaries on a direct basis, and through our Internet Web Site. Second, the Company offers its products to the same customers as a private label supplier if purchasers buy in significant volume. In some instances, we may supply only filters for their bottles or hydration backpacks as opposed to completed products.

Currently, the majority of our sales are to customers in the U.S. However, with distribution agreements for the Peoples Republic of China, Hong Kong, Japan, Singapore, Taiwan and India, overseas sales could increase in the future as these countries have a greater need for safe drinking water. As of February 28, 2009, one customer (Welfare Services, 19%) accounted for greater than 10% of our total sales.

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Backlog

As of February 28, 2009, Ecousable. had approximately 11,500 stainless steel bottle filters on back order, with an estimated sales value of approximately $66,000. Additionally, as of February 28, 2009, Innova had approximately 9,700 bottles on back order with an estimated value of approximately $61,000. The total backlog amount as of February 28, 2009 was approximately $179,000.

Employees

As of February 28, 2009, we had a President and two (2) executive employees managing the Company with two (2) administrative employees supporting that effort. In production, operations and warehousing we had one (1) full-time employee and two (2) independent contractors working to fill all sales orders.

Proprietary Information and Technology

We own a patent for the portable water filtration system with the filter cap assembly, Patent # 5,914,045 that expires on June 22, 2016. As described in the Abstract, it is "[a] filter assembly for a flexible, portable bottle having a sealing cap including a filter attached to the interior of the cap to filter out substantially all inorganics, organics, radiological chemicals and microbiology. The filter assembly also may include a second filter or iodinator sealed in the flexible bottle to further remove micro-organisms from water passing there-through. The filter assembly is designed so that the flexible bottle must be pressurized, as by being hand pressed, after it is filled with water to force flow of water through the [sic] either or both of the filters. The filter in the cap includes a check valve to allow the bottle to be re-pressurized after water has been dispensed from the bottle." The filter cap assembly is the core to the Company’s product lines, and will drive sales for many years to come as the Company adds new products and configurations.

We also own a patent, Patent #6,058,971 that expires on May 9, 2017 for a quick connect diverter valve. As described in the Abstract, it is "A quick-connect diverter valve for use in connecting existing water faucets and water filtration units in and around a kitchen, or other areas where clean water is desired." The quick connect diverter value is used in the above the counter filter system currently being sold in the United States, Pakistan and China. The Company believes this is a viable and growing product line for developing countries where the quality of water continues to deteriorate.

As these patents expire in 7 and 8 years, respectively, the Company cannot at this time estimate the financial impact of the expiration of these patents.

Trademark registrations have been filed with the United States Patent and Trademark Office for both Seychelle and Aqua Gear and are in progress.

We have a trade name, "Seychelle Water Filtration Products, Inc.," which we use in our commercial operations.

Government Regulation

We are not, as a company, subject to any material governmental regulation or approvals. However, our products are subject to inspection and evaluation by regulatory authorities that have jurisdiction over water quality standards. Such authorities are on the federal, state, and local level, both in the United States and overseas, where we market our products. Most of our products have already been inspected and evaluated by all applicable governmental authorities in the areas in which we operate or plan to operate in the near future. With respect to our current focus of operations, we do not know if governmental regulation will have a material impact on us in the future.

Research and Development

We have spent approximately $3,100 in research and development activities during the fiscal year ended February 28, 2009. As of the time of this filing, virtually all research, development and testing are being performed by Carl Palmer, the Company’s CEO, as part of his day-to-day duties.

Environmental Compliance

At the present time, Seychelle is not subject to any material costs for compliance with any environmental laws. With respect to our current focus of operations, we do not know if environmental compliance will have a material impact on us in the future.

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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.

Because we had incurred continuing operating losses, our accountants expressed doubts about our ability to continue as a going concern.

For the fiscal year ended February 28, 2009, the accountants for the Company expressed doubt about our ability to continue as a going concern as a result of continuing operating losses. Our ability to achieve and maintain profitability and positive cash flow will depend on the success of our business plan.

We do not have a successful operating history and may never become profitable.

Our Company was formed on January 23, 1998 and acquired the operations of a company that had been in existence since 1996. Since beginning operations, we have continued to expand our product lines but have not generated enough revenue to be profitable. This has required us to seek both investor capital and financing from time to time. Recent sales activity for the fiscal year ended February 28, 2009 has increased over the past year but not to the extent to be profitable. We have experienced in the past and may experience in the future under-capitalization, shortages, setbacks and many of the problems, delays and expenses encountered by any early stage business. These include:

-	operating as a public entity, incurring non-cost of sales expenses such as accounting, auditing, financial reporting and compliance, legal and costs to maintain full compliance with rules governing regulated reporting status, including continuing Sarbanes-Oxley requirements,
-	unplanned delays and expenses related to research, development and testing of our new products,
-	production and marketing problems that may be encountered in connection with our existing products and technologies,
-	competition from larger and more established companies, and
-	under-capitalization to challenge the lack of market acceptance of our new products and technologies.

As a result of our history of operations, it is not possible for us to predict when, if ever, we may achieve profitability. If we continue to be unprofitable, we may eventually go out of business. As a result, investors may lose some or all of their investment.

Because we are a Company with a no history of profitability, our operations will be extremely competitive and subject to numerous risks.

The water filtration business is highly competitive with many companies having access to the same market. Substantially all of them have greater financial resources and longer operating histories than we have and can be expected to compete within the business in which we engage and intend to engage. 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.

We have a limited product line, and the development of some of our technologies has taken longer than anticipated and could be additionally delayed.

Therefore, there can be no assurance of timely completion and introduction of improved products on a cost-effective basis, or that such products, if introduced, will achieve market acceptance such that, in combination with existing products, they will sustain us or allow us to achieve profitable operations.

As an organization, we are dependent upon technology for the development of our products.

We are operating in a business that requires extensive and 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 depend, 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, two 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 two 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.

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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.

Many of our competitors have substantially greater capabilities and resources and may be able to develop and commercialize products before we do.

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 more 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. Therefore, there are no assurances that we will ever be able to obtain and to maintain a profitable position in the marketplace. However, no company to date has been able to match our technology or our cost.

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 could have a materially adverse impact on our operations We will depend on our senior executive officers as well as other key personnel. If any key employee decides to terminate his employment with us, this termination could delay the commercialization of our products or prevent us from becoming profitable. 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.

We have a significant dependence on a few customers.

For the year ended February 28, 2009, one customer (Welfare Services, 19%) accounted for greater than 10% of our total sales. In addition four other customers (Emergency Essentials, Giles Butler, Wellness Enterprises, and Healthy Directions) individually account for approximately 5% of total sales. Management believes that if the targeted revenues are not achieved within their current marketing and distribution agreements, the revenues can be replaced through the sale of filters and related products to other direct marketing companies. 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 Senior Management’s Limited Experience Managing A Publicly Traded Company May Divert Management’s Attention From Operations and Harm Our Business.

Our management team has relatively limited recent experience managing a publicly traded company and complying with federal securities laws, including compliance with recently adopted disclosure requirements on a timely basis. Our management will be required to design and implement appropriate programs and policies in responding to increased legal, regulatory compliance and reporting requirements, and any failure to do so could lead to the imposition of fines and penalties and harm our business.

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 our future acquisitions 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 amortization expenses, 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.

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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 subject 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 to conform to generally accepted accounting principles, or GAAP, in the United States. These accounting principles are subject to interpretation by the Financial Accounting Standards Board (FASB), the Securities and Exchange Commission, the Public Company Accounting Oversight Board and various other bodies. 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.

For example, the Company has used stock warrants, restricted stock, and other equity incentives as a fundamental component of our executive compensation packages. The Company believes that stock warrants and other equity incentives directly motivate our executives to maximize long-term stockholder value and, through the use of vesting, encourage executives to remain with the Company. In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 123(R), which requires that grants of equity incentives be recognized on the income statement based upon their fair values. In addition, regulations implemented by the NASDAQ National Market generally require stockholder approval for all equity incentives. We may, as a result of these changes, incur increased compensation costs, change our equity compensation strategy or find it difficult to attract, retain and motivate employees, each of which could materially and adversely affect our business, operating results and financial condition.

Our Financial Results Could Vary Significantly From Quarter to Quarter and Are Difficult to Predict.

Our revenues and operating results could vary significantly from quarter to quarter because of a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. In addition, we may not be able to predict our future revenues or results of operations. We base our current and future expense levels on our internal operating plans and anticipated sales levels, and our operating costs are to a large extent fixed. As a result, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenues, and even a small shortfall in revenues could disproportionately and adversely affect financial results for that period. In addition, any payments due to us from our customers may be delayed because of changes or issues with those customers’ processes.

If We Continue to Fail in Maintaining Effective Internal Control Over Financial Reporting, The Price of Our Common Stock May be Adversely Affected. We Have Determined That Our Internal Control Over Financial Reporting Have Material Weaknesses and Conditions That Need to Be Addressed, The Disclosure of Which May Have an Adverse Impact on the Price of Our Common Stock.

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 actual of perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal control over financial reporting or disclosure of our independent registered public accounting firm’s attestation report, when applicable, on management’s assessment of our internal control over financial reporting may have an adverse impact of our common stock.

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Standards for Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 are Uncertain, and If We Fail to Comply 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 annual assessment of our internal control over financial reporting, and attestation of our assessment by our independent registered public accounting firm. Currently, we believe these two requirements apply to our annual reports for fiscal 2009 and 2010, respectively. The standards that must be met for the management to assess the internal control over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards. We have incurred, and expect to incur, significant expenses and to devote resources to Section 404 compliance during fiscal year 2010 and on an ongoing basis. It is difficult for us to predict how long it will take to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In addition, the attestation process by our independent registered public accounting firm is new and we may encounter problems or delays in completing the implementation of any requested improvements and receiving an attestation of our assessment by our independent registered public accounting firm. In the event that our Chief Executive Officer, Chief Financial Officer, or independent registered public accounting firm determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react of 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 Managements 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 will also involve substantial accounting related costs.

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.

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;

•	developments affecting our partners;

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

•	litigation; and

•	public concern as to the safety of our products.

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he 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 low-priced 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.

The lack of a broker or dealer to create or maintain a market in our common stock could adversely impact the price and liquidity of our securities.

We have no agreement with any broker or dealer to act as a market maker for our securities and there is no assurance that we will be successful in obtaining any market makers. The lack of a market maker for our securities could adversely influence the market for and price of our securities, as well as your ability to dispose of, or to obtain accurate information about, and/or quotations as to the price of, our securities.

We do not expect to pay dividends on 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

ITEM 2. DESCRIPTION OF PROPERTY.

As of February 28, 2009, our business office was located at 33012 Calle Perfecto, San Juan Capistrano, CA 92675. Our telephone number at this address is 949-234-1999. We pay a total of approximately $8,300 in rent per month for approximately 7,200 square feet of office, operations and warehousing. We have a lease with an unaffiliated third party, which was renewed in January 2008 will expire in August 2009. The Company is uncertain as to whether this lease will be renewed again upon expiration.

We own two patents and numerous trade secrets, see Proprietary Information and Technology above, and other proprietary information related to our business operations. We recently filed for two trademarks: Seychelle which has been used in commerce since 1997 and Aqua Gear, which had been previously abandoned by Aqua Gear USA, to capitalize on the license agreement we secured from them.

ITEM 3. LEGAL PROCEEDINGS.

As of the date of this document, we know of no legal proceedings pending or threatened or judgments entered against the Company or any of our directors or officers in his or her capacity as such.

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

We did not submit any matter to a vote of security holders through solicitation of proxies during the fourth quarter of our fiscal year.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Principal Market or Markets

Our Common Stock began trading in 1997 on the NASDAQ’s “Electronic Bulletin Board" OTCBB. Since the consummation of the Exchange Agreement between our Company and SWT, market makers and other dealers have provided bid and ask quotations of our Common Stock under the symbol "SYEV." We de-listed from the OTCBB in 2002 and were traded on the "Pink Sheets" from December 2002 to March 11, 2008 when we were re-listed on the OTCBB. The table below represents the range of high and low bid quotations of our Common Stock as reported during the reporting period herein. The following bid price market quotations represent prices between dealers and do not include retail markup, markdown, or commissions; hence, they may not represent actual transactions. For the fiscal year ended February 28, 2009, the common stock was at a High bid price of $.55 and a Low bid price of $.09.

Fiscal Year 2009	High Bid	Low Bid

Quarter Ended:

First Quarter May 2008	$.44	$.21


Second Quarter August 2008	$.40	$.09


Third Quarter November 2008	$.55	$.21


Fourth Quarter February 2009	$.25	$.10

Fiscal Year 2008	High Bid	Low Bid

Quarter Ended:

First Quarter May 2007	$.42	$.26


Second Quarter August 2007	$.42	$.29


Third Quarter November 2007	$.51	$.20


Fourth Quarter February 2008	$.40	$.19

Approximate Number of Holders of Common Stock

As of February 28, 2009, there were approximately 363 shareholders of record of our common stock.

Dividends

Holders of our common stock are entitled to receive such dividends as may be declared by our Board of Directors. Seychelle paid no dividends on the common stock during the periods reported herein nor do we anticipate paying such dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

A smaller reporting company is not required to provide the information in this Item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company and its subsidiary for the fiscal years ended February 29, 2008 and February 28, 2009. 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 elsewhere in this annual report on Form 10-K. 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.

Application of Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are affected by management’s application of accounting policies.

Critical accounting policies for us include our accounting for inventory reserves, intangible assets, and share based payment arrangements.

Inventory Reserves

At each balance sheet date, the Company evaluates its ending inventory for excess quantities and obsolescence. This evaluation includes an analysis of sales levels by product type. Among other factors, the Company considers current product configurations, historical and forecasted demand, market conditions and product life cycles when determining the net realizable value of the inventory. This requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, and the period over which cash flows will occur. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventory. The Company’s reserve for excess and obsolete inventory amounted to $134,313 as of February 28, 2009.

Intangible Assets

Intangible assets for us are patents, trademarks and other rights. Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, requires that goodwill and other intangible assets be tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition or sale or disposition of a significant portion of an operating unit. Application of the impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of intangibles to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using a discounted cash flow methodology. This requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, the useful life over which cash flows will occur, and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or intangible impairment.

Share Based Payment

SFAS No. 123(R), Share Based Payment, requires companies to estimate the fair value of share based payments on the date of grant. For stock grants, the Company uses the closing price on the date of grant. For warrants, we use the Black Scholes option pricing model. In order to estimate the fair value of the warrants, certain assumptions are made regarding future events. Such assumptions include the estimated future volatility of the Company’s stock price, the expected lives of the awards and the expected forfeiture rate. Changes in these estimates would change the estimated fair value of the awards and the corresponding accounting for the rewards.

Recent Accounting Pronouncements

In June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial position and results of operations if adopted.

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In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60”. SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its financial position, results of operations or cash flows.

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

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). The Company will adopt this Statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s financial position, results of operations or cash flows.

In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s financial position, results of operations or cash flows.

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In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities—Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entities first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. The Company adopted SFAS No. 159 beginning March 1, 2008. The adoption of this pronouncement did not have an impact on the Company’s financial position, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company adopted this statement March 1, 2008. The adoption of this pronouncement did not have an impact on the Company’s financial position, results of operations or cash flows.

Results of Operations

Our summary historical financial data is presented in the following table to aid you in your analysis. You should read this data in conjunction with this section entitled Management Discussion and Analysis of Financial Condition and Results of Operations, our consolidated financial statements and the related notes to the consolidated financial statements included elsewhere in this report. The selected consolidated statements of operations data for the fiscal years ended February 29, 2008 and February 28, 2008 are derived from our consolidated financial statements included elsewhere in this report

Fiscal year ended February 28, 2009 compared to the corresponding period in fiscal 2008.

Selected Financial Data

	Years Ended
	February 28,			February 29,						Percentage
	2009			2008			Difference			Change


Sales	$	1,123,370		$	858,769			264,601			31	%
Cost of sales		594,766			491,066			103,700			21	%
Gross profit		528,604			367,703			160,901			44	%
Gross profit percentage		47	%		43	%
Selling and marketing expenses		59,456			33,645			25,811			77	%
General and administrative expenses		520,305			719,517			(199,212	)		-28	%
Loss from operations		(332,926	)		(385,459	)		(52,533)			-14	%
Interest expense		(59,540	)		(55,851	)		(3,689)			-7	%
Interest income		56			7,887			(7,831	)		-99	%
Other income		62,255			169,961			(107,706	)	-63		%
Net loss		(330,155	)		(263,462	)		(66,693)			-25	%

Net cash provided by (used in) operating activities		255,424			(271,785	)		518,553			190	%
Net cash provided by (used in) investing activities		42,466			(135,967	)		185,527			-136	%
Net cash provided by (used in) financing activities		72,394			(118,946	)		175,590			-147	%

Sales. The increase in sales is primarily attributable to two new customers acquired throughout fiscal year ended February 28, 2009. Sales to these customers accounted for $289,000 of sales in fiscal year ended February 28, 2009. Overall, the number of bottles sold with or without replacement filters decreased by approximately 11% (from 85,000 bottles during 2008 to 76,000 bottles during 2009) while the average sales price per bottle increased by 17%. Customer concentration is constantly changing which contributes to most of the fluctuation in sales. During the fiscal year ended 2009, 9 customers accounted for 69% of total sales. Management is actively pursuing additional sales opportunities and we expect sales in the year ending February 28, 2010 to be comparable to or higher than the level in the year ended February 28, 2009.

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Cost of sales and gross profit percentage. The increase in cost of sales and corresponding increase in gross profit dollars and gross profit percentage is primarily due to an increase in sales of approximately the same percentage of increase for cost of sales. The average sales price for bottles increased by 17%; however the actual average cost of producing the bottles increased by 11% from fiscal year 2008 to fiscal year 2009. The increase in production costs was primarily due to changes made in the bottle design to reduce the number of components in each product and additional items constantly in developing stages. Since over a third of the sales in units were discontinued products and below a 40% gross margin in fiscal 2009, we expect the gross profit percentage to improve going forward.

Selling and marketing expenses. The increase in selling expenses is primarily due to sales commissions totaling $34,000 being paid to two representatives for bringing in customers. This increase was slightly offset by a decrease in advertising expense for the fiscal year ended February 28, 2009. Sales and marketing costs are expected to remain at approximately the same level in the year ending February 28, 2010 as compared to fiscal 2009.

General and administrative expenses. The decrease in general and administrative expenses was primarily due to the following : (1) There was a decrease in accounting fees of approximately $152,000 due to different vendors being used in fiscal year ended 2009 for auditing services and independent CPA services. (2) During the fiscal year ended February 28, 2009, the Company decreased their legal expenses by approximately $23,000. During the fiscal year ended February 28, 2009, the Company determined that there were no long lived assets in need of impairment.

Interest expense. There was not a significant change in interest expense for the fiscal year ended 2009 compared to the fiscal year ended 2008.

Interest income. The reduction in interest income was due to a combination of lower interest rates available on deposits and lower balances being carried in interest bearing accounts at the bank.

Other income. The other income during the year ended February 29, 2008 was a legal settlement. Other income during the year ended February 28, 2009 was due to customer deposits that were applied to miscellaneous income as per an agreement between Seychelle and the customer.

Net loss. The net loss for the fiscal year ended February 28, 2009 was $330,155 or 25% more than 2008 due to an increase of $103,700 in cost of goods sold and an increase of $25,811 in selling and marketing expenses. However, most of this variable cost increase was attributed to a 31% increase in sales as gross margins improved from 43% to 47%. Looking further, the drop in other income by $107,705 (due to a one-time gain of $168,000 in FY 2008) was the primary reason for the increase in the net loss of $66,693, As a result of better overall control of expenses and the continued emphasis on higher gross margin items with the discontinuance of products lower than 40%, we expect continued improvement in the profitability of the Company.

CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF BALANCE SHEET ARRANGEMENTS

The Company has various contractual obligations, which are recorded as liabilities in the consolidated financial statements. Other items, such as certain lease agreements are not recognized as liabilities in our consolidated financial statements but are required to be disclosed. For example, the Company is contractually committed to make certain minimum lease payments to rent its current corporate location.

The following table summarizes our significant contractual obligations on an undiscounted basis as of February 28, 2009 and the future periods in which such obligations are expected to be settled in cash or converted into the Company’s common stock. In addition, the table reflects the timing of principal and interest payments on outstanding borrowings. Additional details regarding these obligations are provided in footnotes, as referenced below:

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											Convertible
			Less Than						More Than		to Stock
	Total		1 Year		1- 2 Years		2-3 Years		3 Years		or Warrants


Accounts payable and accrued liabilities	$	92,818	$	92,817
Customer deposits		177,325		177,325
Accrued interest to related party		76,359									$	245,087
Note payable to related party		471,088							471,088
												40,000
Note payable		126,802		1 26,802

		1,113,119		445,555		-		-		471,088		285,087
Other contractual commitments (2)		45,957		43,668		2,289

Total contractual obligations	$	1,159,076	$	489,223	$	2,289	$		$	471,088	$	285,087

________________
(1) Increased to $100,000 in March 2008
(2) Office lease commitment expiring August 2009 and office equipment lease

The Company currently estimates monthly cash requirements of $46,000 to cover general and administrative overhead costs.

As of February 28, 2009, the Company has unrestricted cash of approximately $160,000 and a backlog of $179,000 in unshipped orders. The Company believes that additional funding may still be required in the form of related party notes or other shareholder investment. During March 2008, the Company received an additional $75,000 in related party notes to fund operations. During April 2008, the TAM Trust committed to providing up to $250,000 in additional funding, if required. As of February 28, 2009, $22,000 was available to Seychelle.

Liquidity and capital resources.

Net cash used in operating activities. During the fiscal years ended February 28, 2009 and February 29, 2008, the Company funded its operations though the utilization of customer deposits to pay for raw material and other production costs. The Company also continues to pay some of its vendors in common stock instead of cash. Additionally, the Company pays its related party interest expense in stock purchase warrants. These activities conserve cash despite the losses incurred during the year. Additionally, the Company has been successful in collecting its accounts receivable timely, which also helps with operating cash flow.

Net cash used in investing activities. The fiscal 2009 decrease in cash from investment activities is due to purchasing tooling throughout the year and the purchase of a bagging machine for production. The fiscal 2008 increase in cash from investment activities was primarily due to refinancing the airplane, resulting in a release from the requirement to hold $150,000 as restricted cash.

Net cash used in financing activities. In 2009, the Company exchanged the airplane for the remaining loan outstanding on the airplane. In 2008, the Company obtained additional financing by restructuring the airplane note and receiving additional loans from a related party.

Our principal sources of liquidity have historically been borrowings from one of our principal shareholders. As of February 28, 2009, the shareholder has loaned the Company $471,088 at 10% simple interest, repayable after March 1, 2011. The Company has accrued $76,359 for interest costs to the related party as of February 28, 2009. During March 2008, the Company received an additional $75,000 in funds from the TAM Trust to continue the development of its new emergency preparedness products. During April 2008, the TAM Trust committed to providing up to $250,000 in additional funding, if required. The Company believes it has liquidity and committed funds to meet its operating needs through fiscal 2010.

Capital expenditures.

We do not expect any significant capital expenditures in fiscal 2010, except for additional molds or tooling to supplement our existing capital equipment, which can be funded out of current cash flow.

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Research and development.

We are operating in a business that requires extensive and continuing research, development and testing efforts. However, there is no separate allocation of salaries for Carl Palmer in research and development. The portable filtration bottles are continuously being redesigned to find the most efficient way to produce the product while making all products as high quality as possible.

Employees.

We anticipate no additional executive and non-executive hiring. Any projected increase in the business can be handled through the addition of variable and independent plant contractors and outside consultants.

Causes for any material changes from period to period.

In the fiscal year ended February 28, 2009, sales were $1,123,170 compared to the same period in the prior year with sales of $858,769. Company management believes that the business is prepared to continue growth with both new and current (international and domestic) customers purchasing product. Our experience is that the general market for the sales of pure water increases during the summer months. Our experience to date has not shown measurable increases due to its very limited retail distribution. As previously noted, gross profit margins have increased due to lower outside assembly labor and raw material costs and higher sales prices and overall product mix. At this time, the Company does not know what the impact of the patents expiration will be, as the expiration will not occur for several years. Finally, there are no off-balance sheet arrangements to skew sales.

Any seasonal aspects

We have not experienced seasonal sales spikes in our sales as a result of our very limited retail distribution.

Off-Balance Sheet Arrangements : none

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

Consolidated Financial Statements

Fiscal Years Ended February 28, 2009 and February 29, 2008

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Seychelle Environmental Technologies Inc.

We have audited the accompanying consolidated balance sheets of Seychelle Environmental Technologies Inc. as of February 28, 2009, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years ended February 28, 2009 and February 29, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conduct our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Seychelle Environmental Technologies Inc. as of February 28, 2009, and the related statements of operations, stockholders’ deficit and cash flows for the years ended February 28, 2009 and February 29, 2008, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced recurring losses from operations and has an accumulated deficit of $7,015,849, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Moore & Associates, Chartered

Moore & Associates, Chartered

Las Vegas, Nevada

May 22, 2009

6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of Seychelle Environmental Technologies, Inc.:

We have audited the accompanying consolidated balance sheet of Seychelle Environmental Technologies, Inc. and subsidiary (the Company) as of February 29, 2008, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the fiscal year ended February 29, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Seychelle Environmental Technologies, Inc. and subsidiary as of February 29, 2008, and the results of their operations and their cash flows for the fiscal year ended February 29, 2008, in conformity with accounting principles generally accepted in the United States of America.

As described in Notes 2 and 9 to the consolidated financial statements, effective March 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No.109."

/s/ Windes & McClaughry Accountancy Corporation

Windes & McClaughry Accountancy Corporation

Irvine, California

May 29, 2008

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

FEBRUARY 28, 2009 and FEBRUARY 29, 2008



ASSETS
	2009			2008
Current assets:
Cash and cash equivalents	$	160,415		$	19,851
Accounts receivable, net
		61,447			20,709
Inventory, net		409,353			383,372
Prepaid expenses and other current assets		77,827			23,386
Asset held for sale		-			149,111
Total current assets		709,042			596,429

Property and equipment, net		129,964			112,095
Intangible assets, net		16,374			23,468
Other assets		6,624			6,624
Total assets	$	862,004		$	738,616


LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	92,818		$	133,356
Customer deposits		177,325			66,951
Accrued interest due to related party		76,359			221,170
Notes payable		126,802			258,446
Total current liabilities		473,304			679,923

Long-term related party notes payable		471,088			396,088
Total liabilities		944,392			1,076,011

Commitments and contingencies (Note 10)


Stockholders' deficit:
Preferred stock, 6,000,000 shares authorized, none issued or outstanding		-			-
Common stock $0.001 par value, 50,000,000 shares authorized, 25,824,146 and 25,613,670 shares issued and outstanding, respectively		25,824			25,614
Additional paid-in capital		6,907,637			6,322,685
Accumulated deficit		(7,015,849	)		(6,685,694	)
Total stockholders' deficit		(82,388	)		(337,395	)
Total liabilities and stockholders' deficit	$	862,004		$	738,616

The accompanying notes are an integral part of these consolidated financial statements

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Years Ended
	February 28,			February 29,
	2009			2008


Revenues	$	1,123,370		$	858,769
Cost of sales		594,766			491,066
Gross profit		528,604			367,703
Operating Expenses
Selling and marketing expenses		59,456			33,645
General and administrative expenses		520,305			665,871
Compensation to executive officers		281,769			53,646
Total operating expenses		861,530			753,162
Loss from operations		(332,926	)		(385,459	)
Other Income(Expense)
Interest income		56			7,887
Interest expense-related parties		(47,766	)		(38,861	)
Interest expense-other		(11,774	)		(16,990	)

Miscellaneous expense(income)		62,255			169,961
Total other income(expense)		2,771			121,997
Loss before income tax expense		(330,155	)		(263,462	)
Provision for income taxes		-			-
Net loss	$	(330,155	)	$	(263,462	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.01	)	$	(0.01	)

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING		25,773,953			25,351,604

The accompanying notes are an integral part of these consolidated financial statements

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

	Common Stock						Additional			Accumulated
	Shares			Amount			Paid-In Capital			Deficit			Total

Balance at February 28, 2007		25,150,896		$	25,151		$	6,106,916		$	(6,422,232	)	$	(290,165	)

Contributed executive services								10,000						10,000
Issuance of common stock for compensation		83,500			84			24,545						24,629
Issuance of common stock as partial payment of accounts payable		389,274			389			125,783						126,172
Warrants issued as payment of accrued interest due to related party								60,509						60,509
Warrants issued for services								32,422						32,422
Buy back of common stock		(10,000	)		(10	)		(37,490	)					(37,500	)
Net loss											(263,462	)		(263,462	)
Balance at February 29, 2008		25,613,670			25,614			6,322,685			(6,685,694	)		(337,395	)

Contributed executive services		-			-			10,000			-			10,000
Issuance of common stock for compensation		40,000			40			11,960						12,000
Issuance of common stock as partial payment of accounts payable		230,476			230			66,504						66,734
Warrants issued as payment of accrued interest due to related party								224,970						224,970
Warrants issued for services								287,208						287,208
Buy back of common stock		(60,000	)		(60	)		(15,690	)					(15,750	)

Net loss											(330,155	)		(330,155	)

Balance at February 28,2009		25,824,146		$	25,824		$	6,907,637		$	(7,045,534	)	$	(82,388	)

The accompanying notes are an integral part of these consolidated financial statements

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended
	February 28,			February 29,
	2009			2008

OPERATING ACTIVITIES:
Net loss	$	(330,155	)	$	(263,462	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization		31,691			43,188
Stock-based compensation and interest expense		534,178			57,051
Contributed executive services					10,000
Provision for doubtful accounts		3,896			2,094
Gain on common stock issued as settlement of payables					(47,276	)
Reserve for obsolete and slow moving inventory					(49,785	)
Gain on disposal of property and equipment					(3,057	)

Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(44,634	)		50,071
(Increase) decrease in inventory		(25,981	)		24,776
(Increase) decrease in prepaid expenses and other assets		12,293	)		120,805
(Increase) decrease in asset held for sale		149,111			(11,239	)
Increase (decrease) in accounts payable and accrued expenses		(40,538	)		(17,545	)
Increase (decrease) in accrued interest payable to related party		(144,811	)		29,918
Increase (decrease) in customer deposits		110,374			(217,324	)
Net Cash Provided by (Used in) Operating Activities		255,424			(271,785	)

INVESTING ACTIVITIES:
Release of restricted cash		-			150,000
Proceeds from sale of property and equipment					3,500
Purchase in property and equipment		(42,466	)		(17,567	)
Increase in intangible assets					(84	)
Decrease in other assets					118
Net Cash Provided by (Used) in Investing Activities		(42,466	)		135,967

FINANCING ACTIVITIES:
Proceeds from related party notes payable		75,000			96,913
Proceeds from notes payable					179,500
Repayment of notes payable		(131,644	)		(137,467	)
Payments of buy back of common stock		(15,750	)		(20,000	)
Net Cash Provided by (Used) by Financing Activities		(72,394	)		118,946

NET INCREASE (DECREASE) IN CASH		140,564			(16,872	)

CASH AT BEGINNING OF YEAR		19,851			36,723

CASH AT END OF YEAR	$	160,415			19,851

NON-CASH INVESTING AND FINANCING ACTIVITIES
Stock issued for settlement of debt and accounts payable	$	66,734		$	173,448
Stock and warrants issued for services and interest	$	534,178		$	85,138


Supplemental disclosures of cash flow information:
Cash Paid for:
Interest	$	29,623		$	25,933
Income taxes	$	-		$	-

The accompanying notes are an integral part of these consolidated financial statements

- 25 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS

Organization

Seychelle Environmental Technologies, Inc. (SET) was incorporated under the laws of the State of Nevada on January 23, 1998 as a change in 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.

Seychelle Water Technologies (SWT) was formed as a corporation in February 1997 under the laws of the state of Nevada for the purpose of marketing the products of Aqua Vision International (Aqua Vision), a private California entity operating since 1996. Prior to January 1998, SWT operations were limited primarily to fundraising and marketing activities.

On January 30, 1998, SET entered into a stock exchange agreement with SWT, whereby SWT shareholders emerged as the majority stockholder of SET. This reverse acquisition resulted in SWT becoming a wholly owned subsidiary of SET.

On January 31, 1998, SET attempted a purchase of the assets of Aqua Vision for $9.5 million. Only $1.2 million was paid to the Aqua Vision owners and the transaction was not consummated. Effective February 28, 1999, the Company revised its Purchase Agreement and issued 8,000 shares of its Series “AAA” Preferred Stock Cumulative Preferred Voting Stock to Aqua Vision’s owners. As a result, Aqua Vision’s owners became the ultimate controlling stockholder of SET. Because the assets were acquired from existing shareholders, the $1.2 million payment was treated as a distribution and the Series “AAA” stock issuance was treated as a recapitalization.

Description of Business

The Company designs, manufactures and supplies water filtration systems to the general public. These systems range from portable water bottles that can be filled from nearly any available source to units which provide entire water facilities at the point of entry for a facility.

Management’s Plan

As reflected in the accompanying consolidated financial statements, the Company has experienced recurring losses from operations and has an accumulated deficit of $7,015,849 as of February 28, 2009. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheets is dependent upon continued operations of the Company, which, in turn, is dependent upon the Company’s ability to continue to raise capital and ultimately generate positive cash flows from operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue its existence.

Management’s plan regarding these matters is to develop a reliable source of revenues, and achieve a profitable level of operation. As of February 28, 2009 the Company had $160,415 in cash and a backlog of $179,000 in unshipped products. Over the next twelve months, management believes that sufficient working capital will be obtained from a combination of revenues and external financing. However, additional funding may still be required from the TAM Irrevocable Trust (TAM Trust), a related entity, or other shareholders. During June 2007, the TAM Trust committed to providing up to $250,000 in additional funding, if required. Available borrowings under this commitment as of February 28, 2009 were approximately $22,000. In April 2009, the TAM Trust committed to fund up to an addition $250,000 under similar terms as the current amount outstanding.

- 26 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 28, 2008

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Principles of Consolidation

The consolidated financial statements include the accounts of SET and its wholly owned subsidiary, SWT, (collectively the Company). All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made in preparing the consolidated financial statements include the allowance for doubtful accounts, sales returns, stock based compensation, inventory reserves, valuation allowances for property and equipment and intangible assets, deferred income tax valuation allowances and litigation. To the extent there are material differences between estimates and the actual results, future results of operations will be affected.

Cash and Cash Equivalents

Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits. The Company has not experienced any losses related to this concentration of risk.

Accounts Receivable

The Company performs periodic credit evaluations of its customers’ financial condition and does not require collateral. Trade receivables generally are due in 30 days. Credit losses have consistently been within management’s expectations. An allowance for doubtful accounts is recorded when it is probable that all or a portion of trade receivables balance will not be collected. The Company’s allowance for doubtful accounts of $3,986 and $2,094, as of February 28, 2009 and February 29, 2008, respectively.

As of February 28, 2009, the Company had four customers which accounted for 38%, 13%, 10%, and 9% of net accounts receivable. The Company had two customers during the fiscal year ended February 28, 2009 that accounted for 19% of total sales. The Company had two customers during the fiscal year ended February 29, 2008 that accounted for 26% and 18% of total sales., and four customers which accounted for 28%, 26%, 19% and 13% of net accounts receivable as of February 29, 2008.

Inventory

Inventory is stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis; and the inventory is comprised of raw materials and finished goods. Work in process of approximately $28,620 at February 28, 2009. Raw materials consist of fittings, caps and other components necessary to assemble the Company’s finished goods. Finished goods consist of water bottles and other filtration systems that are available for shipment to customers. Finished goods include the costs of materials, labor and an allocation of overhead. Total overhead allocated to inventory as of February 28, 2009 and February 29, 2008 amounted to $185,633 and $134,555., respectively.

At each balance sheet date, the Company evaluates its ending inventory for excess quantities and obsolescence. This evaluation includes an analysis of sales levels by product type. Among other factors, the Company considers current product configurations, historical and forecasted demand, market conditions and product life cycles when determining the net realizable value of the inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventory. The Company’s reserve for excess and obsolete inventory amounted to $134,313 as of February 28, 2009 and $193,645 as of February 29, 2008.

- 27 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 28, 2008

Asset Held For Sale

As of February 28, 2009, the Company no longer was in possession of any assets held for sale. As of February 28, 2008, the Company’s asset held for sale consisted of an airplane, which was stated at the lower of its carrying value or estimated fair value less cost to sell. The Company defaulted on a loan in July 2008 which held the Company’s airplane as collateral. A contingent liability exists due to this default.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets. The estimated useful lives used in determining depreciation are three to five years for tooling, five years for computers and vehicles, and five to seven years for furniture and equipment. Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions.

Maintenance and repairs are charged to expense as incurred; additions and betterments are capitalized. Upon retirement or sale, the cost and related accumulated depreciation of the disposed assets are removed, and any resulting gain or loss is recorded. Fully depreciated assets are not removed from the accounts until physical disposition.

Intangible Assets

Intangible assets include patents and purchased product rights and technology costs. All patents and purchased product rights and technology costs are capitalized and amortized over the expected economic life of five years using the straight-line method. The Company assesses whether there has been a permanent impairment of the value of intangible assets by considering factors such as expected future product revenues, anticipated product demand and prospects and other economic factors.

Long-Lived Assets

In accordance with FASB Statement No. 144 (Statement 144), Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Customer Deposits

Customer deposits represent advance payments received for products and are recognized as revenue in accordance with the Company’s revenue recognition policy.

Fair Value of Financial Instruments

For certain financial instruments, including accounts receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their relatively short maturities. In the case of the notes payable, the interest rate on the notes approximates the market rate of interest for similar borrowings. Consequently the carrying value of the notes payable also approximates the fair value. It is not practicable to estimate the fair value of the related party notes payable due to the relationship of the counterparty.

- 28 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

Operating Segments

The Company operates in one operating segment.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, title has passed, the price to the buyer is fixed or determinable and collectability is reasonably assured. These criteria are typically met when the product is shipped. Revenue is not recognized at the time of shipment if these criteria are not met.

Certain of the Company’s sales include a right for the customer to return the product if they are not satisfied. The Company has an unconditional return policy for the first 90 days. Customers may return the product for a full refund, or they may receive a replacement at no charge. The same policy applies to any product sold from the period 91 days after purchase to one year, for any defects in materials or workmanship. In accordance with Statement of Financial Accounting Standards (SFAS) No. 48, Revenue Recognition When Right of Return Exists, the Company makes periodic assessments of return activity and if necessary records a reserve for product returns.

Cost of Sales

Cost of sales is comprised primarily of the cost of purchased product, as well as labor, inbound freight costs and other material costs required to complete products. Overhead costs such as rent, depreciation, purchasing and inspection costs are allocated between production and administrative costs. The costs allocated to production are capitalized into inventory and recognized as cost of sales as the related products are sold.

Shipping and Handling

All amounts billed to customers relating to shipping and handling are reported as a component of product sales. Costs incurred by the Company for shipping and handling, including transportation costs paid to third party shippers, are reported as a component of cost of sales.

Sales Tax

The Company collects sales tax in various jurisdictions. Upon collection from customers, it records the amount as a payable to the related jurisdiction. On a periodic basis, it files a sales tax return with the jurisdictions and remits the amount indicated on the return. Any difference between what it collected and what it remits to the taxing authorities is recorded on a net basis into operations.

Advertising Expenses

Advertising expenses are expensed as incurred. Total advertising expenses amounted to $nil and $12,161 for the fiscal years ended February 28, 2009 and February 29, 2008, respectively, and are included in selling and marketing expenses in the accompanying consolidated statements of operations.

Research and Development

Research and development costs are expensed as incurred and amounted to $3,101 and $1,940 for the fiscal years ended February 28, 2009 and February 29, 2008, respectively. These costs are included in general and administrative expenses in the accompanying consolidated statements of operations.

- 29 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

Share Based Payment

On March 1, 2006, the Company adopted SFAS No. 123 (revised 2004), Share Based Payment, (SFAS No. 123(R)) which establishes standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on accounting for transactions where an entity obtains services in share based payment transactions. SFAS No. 123(R) requires entities to measure the cost of services received in exchange for an award of equity instruments, including stock options and warrants, based on the grant date fair value of the award and to recognize it as compensation expense over the period required to provide service in exchange for the award, usually the vesting period. SFAS No. 123(R) superseded the Company’s previous accounting under Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees.

The Company adopted SFAS No. 123(R) on March 1, 2006 using the modified prospective transition method. Consequently, the Company’s consolidated financial statements as of and for the fiscal years ended February 28, 2009 and February 29, 2008 reflect the impact of SFAS No. 123(R).

In accordance with SFAS No. 123(R), the fair value of share based awards is calculated using the Black Scholes option-pricing model. This model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions. As such, the values derived from using that model can differ significantly from other methods of valuing the Company’s share based payment arrangements. The Black Scholes model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. These factors could change in the future, affecting the determination of share based payment expense in future periods.

The weighted average fair value of stock based compensation is based on the single option valuation approach. The Company applied an estimated forfeiture rate of 0% for officer grants, as the vesting periods are substantially complete. As of February 28, 2009 and February 29, 2008, there were no warrants granted to non-officers of the Company and therefore, no forfeiture rate was utilized. The estimated fair value of share based compensation awards is amortized using the straight line method over the vesting period of the warrants or restricted common shares, as such method is consistent with the officer's contractual obligation. The Company’s fair value calculations for share based compensation awards for the fiscal years ended February 28, 2009 and February 29, 2008 were based on the following assumptions.

	Years Ended
	February 28,	February 29,
	2009	2008

Expected life in years	2	2
Stock price volatility	139-161%	167%
Risk free interest rate	2.3 - 3.1%	2.3 - 3.1%
Expected dividends	None	None
Forfeiture rate	0%	0%

The assumptions used in the Black Scholes models referred to above are based upon the following data: (1) The expected life of the warrant is estimated by considering the contractual term of the warrant, the vesting period of the warrant, the officer’s expected exercise behavior and the officer’s post-vesting turnover rate, if any. (2) The expected stock price volatility of the underlying shares over the expected term of the warrants is based upon historical share price data. (3) The risk free interest rate is based on published U.S. Treasury Department interest rates for the expected terms of the underlying warrants. (4) Expected dividends are based on historical dividend data and expected future dividend activity. (5) The expected forfeiture rate is based on historical forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Beginning with the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) as of March 1, 2007, the Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Prior to the adoption of FIN 48, the Company recognized the effect of income tax positions only if such positions were probable of being sustained.

The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses.

Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of outstanding common shares (restricted and free trading) during the periods presented. Basic loss per share and diluted loss per share are the same amount because the impact of additional common shares that might have been issued under the Company’s outstanding and exercisable warrants would be anti-dilutive.

There were 6,215,642 potentially dilutive shares that were excluded from the shares used to calculate diluted loss per share for the years ended February 28, 2009 and February 29, 2008, respectively, as their inclusion would dilute the net loss per share.

Concentrations

The Company has an agreement for a third party to manufacture the Company’s component parts in China. As of February 28, 2009 and February 29, 2008, the Company had prepaid inventory in China of approximately $12,084 and $2,000, respectively. For the fiscal years ended February 28, 2009 and February 29, 2008, this vendor accounted for approximately 42% and 77%, respectively, of total raw material purchases.

Reclassifications

Certain amounts in fiscal 2008 consolidated financial statements have been reclassified to conform to the fiscal 2009 presentation. Specifically, compensation to executive officers was reclassified from general and administrative expenses and interest expense-related parties was reclassified from interest expense-other.

Recent Accounting Pronouncements

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial position and results of operations if adopted.

- 31 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’ This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s financial position, results of operations or cash flows.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

NOTE 3: INVENTORY

The Company’s inventory consisted of the following at February 28, 2009 and February 29, 2008:

	2009			2008
Raw materials	$	230,018		$	210,417
Work in Progress		53,187			-
Finished goods		260,461			366,600
		543,666			577,017
Reserve for obsolete and slow moving inventory		(134,313	)		(193,645	)
	$	409,353		$	383,372

NOTE 4: PROPERTY AND EQUIPMENT

The following is a summary of property and equipment at February 28, 2009 and February 29, 2008:

	2009			2008
Tooling	$	311,918		$	285,242
Equipment		56,654			26,654
Vehicles		10,000			10,000
Furniture and fixtures		15,775			15,775
Computer equipment		16,520			15,124
Leasehold equipment		4,710			4,710
		415,577			357,505
Less: accumulated depreciation
and amortization		(285,613	)		(245,410	)

	$	129,964		$	112,095

Fixed assets outside the United States included $115,415 and $88,739 in tooling costs located in China at February 28, 2009 and February 28, 2008, respectively. Depreciation expense for the fiscal years ended February 28, 2009 and February 29, 2008 was $24,271 and $43,229, respectively.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

NOTE 5: INTANGIBLE ASSETS

The following is a summary of intangible assets at February 28, 2009 and February 28, 2009:

	2009			2008
Redi Chlor brand name and trademark	$	16,100		$	16,100
Hand pump		8,000			8,000
Patents		13,052			12,727
		37,152			36,825
Less: accumulated amortization		(20,778	)		(13,359	)

	$	16,374		$	23,468

The patents expire in nine to ten years; however they and the other intangible assets are amortized over their estimated useful economic lives of five years. Amortization expense related to intangibles was $7,420 and $7,160 during the years ended February 28, 2009 and February 29, 2008, respectively. Amortization expense for the next four years is estimated as follows.

Year Ending
February 28,

	$
2010		5,606
2011		5,145
2012		5,145
2013		478

Total	$	16,374

- 35 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

NOTE 6: NOTES PAYBLE

Notes payable outstanding as of February 28, 2009 and February 29, 2008 consisted of the following:

	2009		2008
Line of credit with a bank with a maximum borrowing of $100,000 is collateralized by all business assets. Any principal amounts outstanding accrue interest at the bank's index rate (5.785% as of February 28, 2009) plus 2% per annum. There were no available borrowings as of February 28, 2009. This line of credit is due in June 2009. The line of credit does not contain any restrictive financial covenants and the Company intends to renew the line of credit for another year when it becomes due.	$	100,000	$	80,000

Bridge note payable received from an individual in February 2008, due within six months after issuance and earning no interest. The outstanding amount has been converted to common stock subsequent to February 29, 2008 (see Note 8).		-		40,000

Note payable due to a financial institution, collateralized by the Company's airplane, with interest at 7.375% per annum and due in monthly payments through September 2032. As the Company expected to dispose of the airplane within 2008 and use the proceeds to pay off the balance of the note payable, the amounts were classified as a current liability on the accompanying consolidated balance sheet. The Company defaulted on this loan in July 2008 which held the Company’s airplane as collateral. A contingent liability exists due to this default.		-		138,446

Bagging machine financed for production from Capital Network Leasing Corporation. Lease term is 27 months at an annual interest rate of 32.575%.		26,802		-

	$	126,802	$	258,446

All of the above notes payable are classified as current liabilities as of February 28, 2009 and February 29, 2008.

NOTE 7: RELATED PARTY NOTES PAYABLE AND ACCRUED INTEREST

At February 28, 2009 and February 29, 2008, the Company had outstanding notes payable from the Company’s primary investor (the TAM Trust) totaling $471,088 and $396,088, respectively. These notes bear interest at 10% per annum. The advances are not repayable until after March 1, 2011 and the repayment of is subordinate to the Company’s line of credit and note payable to a financial institution (see Note 6).

As of February 28, 2009 and February 29, 2008, accrued interest on the related party notes payable amounted to $76,359 and $221,170, respectively, which is included in accrued interest due to related party on the accompanying consolidated balance sheets.

On December 19, 2007, the Company granted 250,000 warrants to purchase the Company’s common stock at an exercise price of $0.19 per share as partial payment of accrued interest. On January 24, 2008, the Company granted an additional 107,221 warrants to purchase the Company’s common stock at an exercise price of $0.29 per share as payment of accrued interest. The total value of the warrants amounted to $60,509 using the Black Scholes option pricing model, which has been recorded as a reduction of the accrued interest due to related party.

During June 2007, the TAM Trust committed to providing up to $250,000 in additional funding, if required, to help fund the operations of the Company. Through February 29, 2008, approximately $22,000 of the original $250,000 was still available to the Company.

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SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

NOTE 8: EQUITY TRANSACTIONS

Restricted Stock Grants

On June 27, 2007, the Company granted 42,500 restricted shares of common stock to employees as payment for services over the next 24 months. The shares vest and will be distributed in equal installments over the two-year service period ended June 2009. As of the grant date, the market value of the shares granted amounted to $17,000. The Company is amortizing the fair market value of the shares as compensation expense over the two-year vesting period. Total compensation expense relating to these shares recorded for the year ended February 29, 2008 amounted to $5,667.

On October 23, 2007, the Company granted 41,000 restricted shares of common stock to employees as a bonus. As of the grant date, the market value of the shares granted amounted to $15,170. The shares vested immediately and the fair market value of the shares was recorded as compensation expense during the year ended February 29, 2008.

During the year ended February 29, 2008, the Company recognized compensation expense of $3,792 relating to restricted shares of common stock granted to employees during the year ended February 28, 2007. These restricted shares were all fully vested and expensed as of February 29, 2008.

During the year ended February, 29, 2008, the Company granted 389,274 restricted shares of common stock to a vendor as payment of accounts payable. The total value of the services provided amounted to $173,448. The market value of the shares granted amounted to $126,173. The gain on the shares issued as payment for services amounted to $47,276 was recorded as a reduction of general and administrative expenses in the consolidated statement of operations for the year ended February 29, 2008.

In 2009, the Company issued 133,333 shares of restricted common stock as repayment of a bridge note payable outstanding in the amount of $40,000 (Note 6). The Company also issued 97,143 shares of restricted common stock for $26,734 of accounts payable.

In 2009, the Company issued 40,000 shares of restricted common stock for service valued at $12,000.

A summary of restricted stock grant activity is as follows.

				Weighted-
				Average
	Restricted			Grant Date
	Shares			Fair Value

Outstanding at March 1, 2007		-		$	-
Granted		472,774			0.33
Forfeited		-			-
Vested		(444,441	)		0.33
Outstanding at February 29, 2008		28,333
Granted		271,476			0.29
Forfeited		(61,000)			0.26
Vested		-			0.00
Outstanding at February 28, 2009		238,809		$	0.40

- 37 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

As of February 28, 2009, the Company had a total of 238,809 unvested restricted shares outstanding. As of February 29, 2008, the Company had a total of 28,333 unvested restricted shares outstanding, which vest through June 2009. The total unrecognized compensation expense as of February 28, 2009 to be recognized over this period amounted to $11,333.

Warrants

On July 25, 2006, the Company granted a consultant 100,000 warrants to purchase restricted shares of the Company’s common stock at an exercise price of $0.40 per share for services rendered. The warrants become fully vested August 1, 2008 and expire August 1, 2010. The grant date fair value of the warrants was $39,320 using the Black Scholes option pricing model. The warrants resulted in expense of $21,818 during the fiscal year ended February 29, 2008.

On December 19, 2007, the Company granted two of its officers an aggregate total of 350,000 warrants to purchase restricted common stock of the Company at an exercise price of $0.19 per share for management services provided. These warrants become fully vested on December 1, 2008 and expire December 1, 2010. The grant date fair value of the warrants was $51,250 using the Black Scholes option valuation model. The warrants resulted in compensation expense of $10,604 during the fiscal year ended February 29, 2008.

On December 19, 2007 and January 24, 2008, the Company granted an aggregate total of 357,221 warrants to purchase restricted common stock of the Company as payment of accrued interest (see Note 7). These warrants become fully vested on December 1, 2008 and expire December 1, 2010.

In April 2008, the Company issued 1,000,000 warrants with an exercise price of $0.33 in payment of accrued interest. The total grant date fair value of the warrants was $224,970 which was calculated using the Black Scholes option pricing model.

In April 2008, the Company issued 700,000 warrants to two executives with an exercise price of $0.33 for payment of expanded management services. The total grant date fair value of the warrants was $287,208 which was calculated using the Black Scholes option pricing model and will be amortized over the two year service period for which the warrants were granted.

As of February 29, 2008, total unrecognized compensation expenses related to unvested stock warrants was approximately $41,000, which was recognized as an expense over the period ending December 2008.

- 38 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

A summary of warrant activity for the fiscal years ended February 28, 2009 and February 29, 2008 are as follows.

			Weighted-
			Average
	Warrants		Exercise
	Outstanding		Price

Outstanding at March 1, 2007		6,100,000	$	0.23
Granted		707,221		0.40
Exercised		-		-
Forfeited		-		-
Outstanding at February 29, 2008		6,807,221		0.23
Granted		1,730,000		0.33
Exercised		-		-
Forfeited		2,000,000		-
Outstanding at February 28, 2009		6,537,221		0.25

Vested or expected to vest at February 28, 2009		5,700,000		0.25

Exercisable at February 28, 2009		5,700,000		0.25

The following table summarizes significant ranges of outstanding warrants as of February 28, 2009:

		Warrants Outstanding						Warrants Exercisable
				Weighted		Weighted				Weighted
				Average		Average				Average
				Remaining		Exercise		Number		Exercise
Exercise		Number		Life (Years)		Price		Outstanding		Price

$	0.19		600,000		2.51	$	0.19		-	$	0.19
	0.23		4,000,000		0.50		0.23		4,000,000		0.23
	0.29		107,221		2.51		0.29		-		0.29
	0.40		100,000		2.17		0.40		-		0.40
	0.33		1,700,000		2.51		0.33		1,700,000		0.33
	0.16		30,000		2.17		0.16				0.16
	0.25		10,000		2.29		0.25				0.25
	0.40		2,500		2.19		0.40				0.40
			6,549,721			$	0.25		5,700,000	$	0.25

- 39 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

Contributed Executive Services

As the President of the Company has decided not to accept his salary until the Company has become profitable, the Company recorded $10,000, the contractual value of these services, as additional paid in capital in the accompanying consolidated statements of changes in stockholders’ deficit for the fiscal years ended February 28, 2009 and February 29, 2008, respectively.

NOTE 9: INCOME TAXES

The components of the provision for income taxes for the fiscal years ended February 28, 2009 and February 29, 2008 are as follows:

	Years Ended
	February 28,			February 29,
	2009			2008
Deferred
Federal	$	55,238		$	77,045
State		(10,488)			21,975
		44,750			99,020
Change in Valuation Allowance		(44,750	)		(99,020	)

Provision	$	-		$	-

The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes were as follows:

	Years Ended
	February 28,			February 29,
	2009			2008

Federal statutory rate		-34.00	%		-34.00	%
State taxes - net of federal benefit		-5.50	%		-5.61	%
Meals and entertainment		0.00	%		0.62	%
Contributed Services		0.00	%		0.66	%
Penalties		0.00	%		0.03	%
Change in valuation allowance		39.50	%		38.31	%

		0.00	%		0.00	%

- 40 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

Significant components of deferred tax assets and (liabilities) are as follows:


	February 28,			February 29,
	2009			2008

Net operating loss	$	1,875,437		$	1,745,026
Interest to related parties		85,302			94,749
Inventory reserve		59,522			82,958
Fixed assets and intangibles		116,019			116,019
Tax credits		16,348			16,348
Accrued expenses		1,769			1,769
Warrant amortization		262,608			473,608
Other		148			148

Total deferred tax assets		2,417,153			2,530,625

Deferred tax liabilities - State taxes		(109,068	)		(130,613	)

Net deferred tax asset		2,308,085			2,400,012
Valuation Allowance		(2,308,085	)		(2,400,012	)

Net	$	-		$	-

At February 28, 2009, the Company has net operating loss carry forwards for income tax reporting purposes of approximately $4,242,000 and $2,232,000 available to offset future federal and California taxable income, respectively. Based on current tax law, the Company’s federal and state net operating loss carry forwards will begin to expire in the year ending February 28, 2013 and 2011, respectively.

At February 28, 2009, the Company had available tax credit carry forwards comprised of federal and state research credits of approximately $10,000 and $6,200, respectively. The federal research credit carry forwards will begin to expire in the year ending February 28, 2013 and the state research credit will be carried forwarded until exhausted.

We periodically evaluate the likelihood of the realization of deferred tax assets, and adjust the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than not. We consider many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carry forward periods available to it for tax reporting purposes, and other relevant factors.

At February 28, 2009, based on the weight of available evidence, including cumulative losses in recent years and expectations of future taxable income, the Company determined that it was not more likely that its deferred tax assets would not be realized and has recorded a $2.5 million valuation allowance associated with its deferred tax assets.

On March 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income taxes (FIN 48). FIN 48 prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain position may be recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information.

- 41 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

Upon adoption of FIN 48, there was no impact to the Company's consolidated financial statements. In addition, future changes in the unrecognized tax benefit will have no impact on the effective tax rate due to the existence of the valuation allowance. The Company estimates that the unrecognized tax benefit will not change significantly within the next twelve months. The Company will continue to classify income tax penalties and interest as part of general and administrative expense in its statements of operations. Accrued interest on uncertain tax positions is not significant. There are no penalties accrued as of February 28, 2009. The following table summarizes the open tax years for each major jurisdiction:

Jurisdiction	Open Tax Years

Federal	2005 – 2008
California	2004 - 2008

As the Company has significant net operating loss carry forwards, even if certain of the Company’s tax positions were disallowed, it is not foreseen that the Company would have to pay any taxes in the near future. Consequently, the Company does not calculate the impact of interest or penalties on amounts that might be disallowed.

NOTE 10: COMMITMENTS AND CONTINGENCIES

The Company leases an office and production facility under an operating lease that expires in August 2009. The Company also leases office equipment under an operating lease that expires in September 2010. Total rent expense amounted to $45,957 and $104,076 for the fiscal years ended February 28, 2009 and February 29, 2008, respectively.

Future minimum base lease payments are as follows:

Year Ending
February 28,

2010	$	43,668
2011		2,289
Total	$	45,957

Legal Proceedings

From time to time, the Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

In May 2007, the Company settled a legal dispute which resulted in the Company receiving a total cash payment of $168,000. This was a matter involving the potential infringement of proprietary rights of the Company. No litigation was involved and the settlement was informally negotiated. Neither party admitted liability and all parties released all claims with respect to each other. The cash payment was recorded as other income in the accompanying consolidated statement of operations for the year ended February 29, 2008.

Significant Agreements

Effective December 1, 2001, the Company entered into an employment agreement with the President of the Company. The agreement is for five years and provides for a salary of $10,000 per year plus one percent of the net after tax profits of the Company as reported in the Company's Form 10-K. The agreement shall be automatically renewed for successive one-year terms unless the Company or employee provides written notice of non-renewal.

- 42 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

In June 2002 the Company entered into a license agreement for a product known as the “Hand Held Pump Technology.” The Company licensed all proprietary rights associated with this technology. The Company will pay a 2% royalty on its gross sales for the technology during the term of the license agreement. The license agreement is for an initial term of five years, with five successive five-year renewals. This technology has resulted in a product called Pump N’ Pure which allows the user to draw filtered water from virtually any container or location. The Company has commenced marketing the Hand Held Pump as part of its Aqua Gear product line to the United States sporting goods industry.

During July 2006, the Company signed a second exclusive license agreement for a patent and ownership of the trademark Aqua Gear. The Company will pay a 2% royalty on net sales for this technology up to $120,000 and 1% thereafter. The license agreement shall continue indefinitely unless terminated due to a default or breach of the agreement. Products affected include all Aqua Gear trademarked filter bottles and flip up bottles sold in the product line. As of the date of this document, approximately $30,300 in royalties has been paid under these license agreements.

During April 2006, the Company issued 50,000 common shares with an approximate value of $16,100 for the Redi Chlor brand name, trademark and the use of the EPA Registration Number 55304-4-7126. During the fiscal year ended February 28, 2007, the Company commenced selling the Redi Chlor brand name water chlorine tablets to consumers, dealers, distributors and manufacturers. In connection with this agreement, the Company is also obligated to remit a 10% commission on net sales, as defined, of the existing product, or any new products sold directly by the Company, and 10% on any product sold by the counterparty on behalf of Seychelle. The agreement is for the life of the Company. Through February 28, 2009, the Company has paid $4,011 in royalties under this agreement.

NOTE 11: RELATED PARTY TRANSACTIONS

The Company has certain notes payable and accrued interest payable to a related party (see Note 7).

During October 2006, and continuing through December 2007, the Company paid a monthly monitoring fee of $5,000 to a related party. Five payments of $2,500 were made to the related party during fiscal year ended 2009 which were included in interest expense. Total fees paid to the related party aggregates $62,500 and $50,000 during the years ended February 28, 2009 and February 29, 2008, respectively, and are included as a component of general and administrative expenses on the consolidated statements of operations.

During October 2006, the Company commenced paying a monthly stipend of $2,500 to J. Place and D. Parsons, executive officers of the Company, through December 2007. The Company has recorded compensation expense for these services in the accompanying consolidated statements of operations.

The Company has an employment agreement with the Company President (see Note 10).

NOTE 12: GEOGRAPHIC AREAS

The Company sells its products throughout the United States and internationally. Geographic sales information for the fiscal years ended February 28, 2009 and February 29, 2008 is as follows:

	2009		2008
Water filtration products sold to
external customers (1) in:
The United States	$	998,100	$	800,277
China		3,573		5,021
Asia, except China		17,101		27,495
United Kingdom		74,180		12,808
Other countries		30,416		13,168

Total	$	1,123,370	$	858,769

_____________________

(1) Sales to external customers are based on the country of residence of the customer.

- 43 -

SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 and February 29, 2008

Long lived assets at February 28, 2009 are in the following geographic areas:

	United
	States		China		Total

Property and equipment, net	$	64,261	$	65,103	$	129,364
Intangible assets		16,373		-		16,373
Other assets		6,624		-		6,624
	$	87,258	$	65,103	$	152,361

Long lived assets at February 29, 2008 are in the following geographic areas:

	United
	States		China		Total

Property and equipment, net	$	49,624	$	62,471	$	112,095
Intangible assets		23,468		-		23,468
Other assets		6,624		-		6,624
	$	79,716	$	62,471	$	142,187

- 44 -

ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

We did not have any disagreements on accounting and financial disclosures with our present accounting firm during the reporting period.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). As a result of this evaluation, we identified no material weaknesses in our internal control over financial reporting as of February 29, 2009. Accordingly, we concluded that our disclosure controls and procedures were effective as of February 29, 2009.

Our internal control over financial reporting (ICFR) are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U. S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

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

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

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

Management’s Annual Report on Internal Control Over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management has concluded, as of February 29, 2009, we did maintain effective control over the financial reporting process.

Inherent Limitations Over Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Remediation of Material Weakness

As discussed in Management’s Annual Report on Internal Control over Financial Reporting, as of February 29, 2008, there were material weaknesses in our internal control over financial reporting. We authorized the addition of additional information technology and financial consultants to ensure that there are sufficient resources within the department to prepare our interim and annual consolidated financial statements and disclosures in accordance with accounting principles generally accepted in the United States of America. We have taken steps to create more compensating controls in the financial statement close process to ensure that there is adequate review and approval by management.

Through these steps, we believe we have addressed the deficiencies that affected our internal control over financial reporting as of February 29, 2008. However, the effectiveness of any system of internal controls is subject to inherent limitations and there can be no assurance that our internal control over financial reporting will prevent or detect all errors. We intend to continue to evaluate and strengthen our ICFR systems. These efforts require significant time and resources. If we are unable to maintain adequate ICFR systems, we may encounter difficulties in the audit or review of our consolidated financial statements by our independent registered public accounting firm which in turn may have a material adverse effect on our ability to prepare consolidated financial statements in accordance with U. S. GAAP and to comply with our SEC reporting obligations.

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Attestation Report of the Registered Public Accounting Firm.

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

Changes in Internal Control Over Financial Reporting.

We have made no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

Not Applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Our Directors and Executive Officers, their ages and positions held in the Company as of February 29, 2008 are as follows:

NAME	AGE	POSITION HELD

Carl Palmer	75	President, Chief Executive Officer and Director
Richard Parsons	75	Executive Vice President, Secretary and Director
James Place	71	Chief Operating Officer, Chief Financial Officer, Treasurer and Director

Our Directors have served and will serve in such capacity until the next annual meeting of our shareholders and until their successors have been elected and qualified. The officers serve at the discretion of our Directors. The Board of Directors as a whole serves as the audit committee and Mr. Place is the “financial expert” within the meaning of the rules and regulations of the SEC. The Board of Directors has determined that each of its members is able to read and understand fundamental financial statements and has substantial business experience that results in that member’s financial sophistication. Accordingly, our Board of Directors believes that each of its members has sufficient knowledge and experience necessary to fulfill the duties and obligations that an audit committee would have. There are no family relationships among the Directors or Officers of the Company. None of the Directors have been involved in the types of litigation specified in Item 401d of Regulation S-B.

Biographies of Our Executive Officers and Directors

Carl Palmer. Mr. Palmer has been the President, CEO and a Director of the Company since January 1998. He is the founder of our Company, innovator of the complete line of Seychelle water filtration products and primary spokesperson worldwide. He is an internationally recognized expert in the field for over 35 years and pioneered the development of the reverse osmosis (RO) home and office pure water business in the U.S. in the late 1970’s. That company, Aq-Ro-Matic, was later sold to Coca-Cola in 1973. He developed the cellulose triacetate membrane, a breakthrough technological development in the industry and subsequently, created and sold pure water companies to Coca Cola Los Angeles as noted previously, AMF/Cuno in 1985 and Shaklee in 1989. Also, in the late 1980’s Mr. Palmer developed the Best Water reverse osmosis business for Shaklee and sold over $53 million in above-the-counter systems. Carl’s 30 years of direct sales experience has led to many significant business relationships, many of which continue today. He is the inventor of thirteen patented products related to water purification. Mr. Palmer received a Bachelors Degree from Whittier College.

Richard Parsons. Mr. Parsons has been Secretary, Executive Vice President and a Director of the Company since November 2004. In March 2005, he assumed additional responsibilities for international sales activities in Asia, including China and India. He has over 30 years experience in bottled water, reverse osmosis and water filtration with major companies such as Coca-Cola, Arrowhead, Shaklee, and Canadian Glacier. Mr. Parsons was a General Manager at Coca-Cola in 1974, a Vice President at Arrowhead from 1975 to 1985, a consultant with Shaklee in 1988, and Vice President of U.S. Operations for Canadian Glacier from 1989 to 1990.

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For the past five years, Mr. Parsons acted as a consultant, and then became chairman of The Beverage Group, Inc. in 2002. In November 2004, he joined the Company as Executive Vice President. Mr. Parsons ran his own successful consulting business in water and related beverages with clients such as General Foods, Coke-USA, The Beverage Group, Coke-Japan and Mitsubishi Industries for many years. He also has over 20 years experience in direct sales and multilevel marketing with companies such as Avon, Holiday Magic, Arrowhead and National Education. Mr. Parsons has a Bachelors Degree from Principia College.

James Place. Mr. Place has been Treasurer, COO and a Director of our Company since November 2004. In March 2005, he assumed additional responsibilities for manufacturing, operations and became the Chief Financial Officer (CFO). In November 2004, he joined the Company as Chief Operating Officer. He has over 30 years experience in food, beverages and bottled water. While at Arrowhead, he took the liter, still and sparkling water business from $10 million to $75 million in 5 years. Mr. Place also had extensive marketing, new product development and operating experience with Fortune 100 companies such as Carnation, Kerr Glass and Hunt-Wesson. Mr. Place was Vice President and General Manager of the Grocery Products Division at Arrowhead from 1981 to 1988, a Vice President of Sales/Marketing - New Products at Kerr Glass from 1988 to 1990, Manager, New Products at Carnation from 1979 to 1981 and Sales/Marketing Manager at Hunt-Wesson Foods from 1970 to 1976.

Mr. Place also has substantial experience in business development, mergers and acquisitions and with the investment community. Mr. Place ran his own consulting business in consumer products including water and other beverages with small to medium sized companies from 1990 to 2004. This included working successfully with these companies on financing plans for both new products and expansion programs. Mr. Place has an MBA from Michigan State University and a Bachelors degree from Albion College.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s outstanding equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on its review of the copies of such reports furnished to the Company during the fiscal year ended February 28, 2009, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.

Code of Ethics for Chief Executive Officer and Senior Financial Officers

On May 20, 2006, the Board of Directors of the Company adopted the Code of Ethics for the Chief Executive Officer and Senior Financial Officers. The Code is designed to deter wrong-doing and promote honest and ethical behavior, full, fair, timely, accurate and understandable disclosure and compliance with applicable governmental laws, rules and regulations. It is also designed to encourage prompt internal reporting of violations of the Code to an appropriate person and provides for accountability for adherence to the Code. We will provide to any person without charge, upon written request to our principal executive offices, a copy of our Code. Any waiver of the Code pertaining to one of our executive officers will be disclosed in a report on Form 8-K filed with the SEC.

Indemnification of Directors and Officers.

The Company's Bylaws provide that it will indemnify its officers and directors to the full extent permitted by Nevada state law. The Company's bylaws likewise provide that it will indemnify and hold harmless its officers and directors for any liability including reasonable costs of defense arising out of any act or omission taken on behalf of the Company, to the full extent allowed by Nevada law, if the officer or director acted in good faith and in a manner the officer or director reasonably believed to be in, or not opposed to, the best interests of the corporation.

In so far as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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Item 11. EXECUTIVE COMPENSATION

The following table sets forth the Summary Compensation Table for the Chief Executive Officer and the executive officers at the end of the last three completed fiscal years. Compensation does not include minor business-related and other expenses paid by us. Such amounts in the aggregate do not exceed $10,000.

SUMMARY COMPENSATION TABLE
						Long Term Compensation
			Annual Compensation			Awards		Payouts
(a)	(b)		(c)	(d)	(e)	(f)	(g)	(h)	(i)
Name and Principle Position	Fiscal Year		Salary ($)	Bonus ($)	Other Annual Compensation ($)	Restricted Stock Award(s) ($)(9)	Securities Underlying Option/SARs (#)	LTIP Payouts ($)	All Other Compensation ($)

Carl Palmer President & CEO Director		2009 2008 2007	$10,000(2) $10,000(2) $10,000(2)	$0.00 $0.00 $0.00	$0.00 $0.00 $0.00	$0.00 $0.00 $0.00	0 0 0	$0.00 $0.00 $0.00	$0.00 $0.00 $0.00

Richard Parsons (1) Executive VP Director		2009 2008 2007	$0.00 $0.00 $0.00	$0.00 $0.00 $0.00	$0.00 $0.00 $0.00	(3)(5) (3)(5) (3)(5)	(4)(6)(10) (4)(6) (4)(6)	$0.00 $0.00 $0.00	$7,158(8) $23,883(8) $12,500(8)

James Place (1) COO & CFO Director	2009 2008 2007		$0.00 $0.00 $0.00	$0.00 $0.00 $0.00	$0.00 $0.00 $0.00	(3) (3) (3)	(4)(10) (4) (4)(6)	$0.00 $0.00 $0.00	$2,104(8) $14,160(8) $12,500(8)

__________________

(1)	Elected to Board of Directors during November 2004.

(2)	Effective December 1, 2001, the Company entered into an employment agreement with the President of the Company. The President of the Company has decided not to accept his salary until the Company becomes profitable.

(3)

During November 2004, Messrs. Parsons and Place were granted 240,000 shares of restricted common stock, which vest over two years beginning December 1, 2004. The estimated fair market value of the stock as of November 30, 2004 was $225,600. The Company amortized the estimated fair market value of the unearned compensation over the two-year vesting period. On March 1, 2006, the Company adopted SFAS No. 123(R), which required the Company to revalue the non-vested portion of this grant. As of March 1, 2006, the unearned compensation relating to this grant was decreased by approximately $50,500. The Company has recorded compensation expense of approximately $4,000 and $75,200 for the fiscal years ended February 29, 2007 and 2006, respectively.

(4)

During March 2005, Messrs. Parsons and Place were granted warrants to purchase 250,000 shares of restricted common stock at $0.225 per share. The first third vested on the effective date of the agreement as an enticement to enter into the agreement. The remaining warrants vest in equal installments on December 1, 2005 and 2006 but are exercisable through December 1, 2008. The fair market value of the warrants as of November 30, 2004 was estimated at $55,300.

(5)

During March 2005, Mr. Parsons was granted 316,312 shares of restricted common stock. The first third vested on the effective date of the agreement as an enticement to enter into the agreement. The remaining common stock vests in equal installments on December 1, 2005 and 2006. The fair market value of the restricted shares as of November 30, 2004 was estimated at $79,100.

(6)

During July 2005, the Company expanded the employment agreements with Messrs. Parsons and Place to provide management services for the Company. As further consideration for services to be rendered, the officers were granted 500,000 warrants redeemable into restricted shares of the Company’s common stock at $0.225 per share. The warrants are exercisable any time after December 1, 2006 and expire December 1, 2008. The fair market value of the warrants as of July 27, 2005 was estimated at $30,000.

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(7)

During January 2006, the Company issued Mr. Parsons 37,500 shares of common stock for services rendered. As the common stock was issued below the Company’s market price at date of grant ($nil cost per share), the Company recorded compensation expense relating to the estimated value of these shares of $8,437.

(8)	During October 2006, the Company commenced paying a monthly stipend of $2,500 to J. Place and D. Parsons through December 2007. The Company recorded compensation expense of $38,043 and $25,000 for the fiscal year ended February 29, 2008 and February 28, 2007, respectively.

(9)

Restricted Stock (RS)– Awards of restricted stock are valued by multiplying the number of shares granted by the closing price on the date of grant, minus any consideration paid by the named executives. Holders of restricted stock have voting and dividend rights with respect to their restricted shares. To date, the Company has not declared or paid any dividends.

Restricted Stock – Year End Holdings and Value. At February 29, 2008, the named executive officers held the total number of shares of restricted stock indicated in the following chart. The year-end value of the total number of restricted shares, as indicated below, is based on the closing price of the Company’s stock on February 29, 2008 ($0.41).

(10)

During April 2008, Messr. Parsons was granted warrants for expanded management responsibilities to purchase 500,000 shares and Messr. Place were granted warrants to purchase 200,000 shares of restricted common stock at $0.33 per share. The warrants are exercisable any time after December 1, 2008 and expire December 1, 2010. The fair market value of the warrants as of April 30, 2008 was estimated at $158,174.

Name	Grant date	Type	Vesting Schedule	Restricted Shares Awarded	Grant Date Price	Grant Date Value	Total Restricted Shares at February 29, 2008	Year End Value
Richard Parsons	11/30/2004	RS	33.3% on 12/1/04; 33.3% on 12/01/05; 33.3% on 12/1/06	240,000	$0.03	$112,800	240,000	$ 46,248

Richard Parsons	03/29/2005	RS	33.3% on 12/1/04; 33.3% on 12/01/05; 33.3% on 12/1/06	316,312	$0.03	$ 79,100	316,312	$129,688

James Place	11/30/2004	RS	33.3% on 12/1/04; 33.3% on 12/01/05; 33.3% on 12/1/06	240,000	$0.03	$112,800	240,000	$ 46,248

OPTION/SAR GRANTS IN LAST FISCAL YEAR. The Company granted no options during the fiscal years ended February 29, 2008. The Company had no options outstanding as of the fiscal year ended February 29, 2008.

AGGREGATED OPTIONS/SARS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES. There were no outstanding options as of the fiscal year ended February 28, 2009.

EMPLOYMENT CONTRACTS WITH EXECUTIVE OFFICERS. Effective December 1, 2001, the Company entered into an employment agreement with the President of the Company. The agreement is for five years and provides for a salary of $10,000 per year plus one percent of the net after tax profits of the Company as reported in the Company's Form 10-K. The agreement shall be automatically renewed for successive one-year terms unless the Company or employee provides written notice of non-renewal.

DIRECTOR COMPENSATION. The Company did not pay any compensation to any of its directors in fiscal 2009, or 2008.

The Board of Directors as a whole acts as a compensation committee. We have no retirement, pension, sharing, stock option, insurance or other similar programs.

We do not have a separately designated audit, compensation or nominating committee of our Board of Directors. Although we are not a “listed company” under SEC rules and are therefore not required to have separate committees comprised of independent directors, we have, however, determined that James Place is “independent” as that term is defined in Section 4200 of the Marketplace Rules required by the NASDAQ Stock Market.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following sets forth the number of shares of our $0.001 par value common stock beneficially owned by (i) each person who, as of February 28, 2009, was known by us to own beneficially more than five percent (5%) of its common stock; (ii) our individual Directors and (iii) our Officers and Directors as a group. As of February 28, 2009 there were total of 25,824,146, common shares were issued and outstanding and 6,549,721, warrants for a total of 32,373,867 shares.

NAME AND ADDRESS	AMOUNT AND NATURE OF		PERCENT OF
OF BENEFICIAL OWNER	BENEFICIAL OWNERSHIP (1)(2)(4)		CLASS

The TAM Irrevocable Trust	14,097,799	(3)	43.55%
4012 S. Rainbow #K111
Las Vegas, NV 80103-2012

Carl Palmer	-0-		-0-
251 Jeanell Dr., Ste 3
Carson City, NV 89703

Richard Parsons	2,109,763		6.52%
251 Jeanell Dr., Ste 3
Carson City, NV 89703

James Place	1,255,000		3.88%
251 Jeanell Dr., Ste 3
Carson City, NV 89703

All officers and directors as a Group (three persons)	3,446,312		10.40%

_______________

(1)	All ownership is beneficial and of record, unless indicated otherwise.

(2)	Beneficial owners listed above have sole voting and investment power with respect to the shares shown, unless otherwise indicated.

(3)

The TAM Irrevocable Trust is an irrevocable trust for the benefit of certain family members of Mr. Carl Palmer. Mr. Palmer disclaims any beneficial ownership or interest in this Trust. Cari Beck, his daughter, is the Trustee of the Trust and has total beneficiary rights, including all voting rights and investment power as the Trustee. The Trust is held in her name (50%) as well as that of Lindsay Helvey (25%) and Casey Helvey (25%), both granddaughters.

(4)	There are no other financial instruments, including stock warrants, etc. that are issuable within sixty days from the filing of this document.

(5)	All three officers spend 100% of their time managing the affairs of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Effective December 1, 2001, the Company entered into an employment agreement with Carl Palmer, the President of the Company. The agreement is for five years and provides for a salary of $10,000 per year plus one percent of the net after tax profits of the Company. The agreement shall be automatically renewed for successive one-year terms unless the Company or employee provides written notice of non-renewal.

During November 2004, the Company entered into employment agreements with Messrs. Parsons and Place to provide management services for the Company as Executive Vice President and Chief Operating Officer, respectfully. As consideration for services to be rendered, the Messrs. Parsons and Place received 480,000 restricted shares of the Company’s common stock. The common shares were distributed in equal installments commencing on December 1, 2004, 2005 and 2006.

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At February 28, 2009 and February 29, 2008, the Company had outstanding notes payable from the Company’s primary investor (the TAM Trust, in which Cari Beck, is the trustee as well as a daughter of Carl Palmer an officer and Board member) totaling and $471,088 and $396,088, respectively. These notes bear interest at 10% per annum. The advances are not repayable until after March 1, 2011 and the repayment of is subordinate to the Company’s line of credit and note payable to a financial institution (see Note 6).

As of February 28, 2009 and February 29, 2008, accrued interest on the related party notes payable amounted to $245,087 and $221,170, respectively, which is included in accrued interest due to related party on the accompanying consolidated balance sheet.

During December 2004, the Company granted the TAM Trust restricted common stock of 1,266,667 shares for interest on prior advances of funds. The fair market value of the restricted shares was estimated at $228,000. During April 2005, the Company settled this liability through the issuance of common stock.

On March 29, 2005, the Company expanded the employment agreement with Mr. Parsons to provide management services for the Company. As consideration for services to be rendered, the employee received 316,312 restricted shares of the Company’s common stock. The first third vested on the effective date of the agreement as an enticement to enter into the agreement. The remaining common stock vested in equal installments on December 1, 2005 and 2006.

On March 29, 2005, the Company expanded the employment agreements with Messrs. Parsons and Place to provide management services for the Company. As further consideration for services to be rendered, the employees were granted 1,000,000 warrants redeemable into restricted shares of the Company’s common stock at $.225 per share. The first third vested on the effective date of the agreement as an enticement to enter into the agreement. The remaining warrants vested in equal installments on December 1, 2005 and 2006 and are exercisable through December 1, 2008.

On March 29, 2005, the Company granted the TAM Trust 500,000 warrants redeemable into restricted shares of the Company’s common stock at $.225 per share for additional interest charged to the Company for previous unpaid notes and continued financial support. The first third vested on the effective date of the agreement as an enticement to enter into the agreement. The remaining warrants vested in equal installments on December 1, 2005 and 2006 and are exercisable through December 1, 2008

On July 27, 2005, the Company granted the TAM Trust 2,000,000 warrants redeemable on restricted shares of the Company’s common stock at $.225 per share. The warrants are exercisable any time after December 1, 2006 and expire December 1, 2008.

On July 27, 2005, the Company expanded the employment agreements with Messrs. Parsons and Place to provide management services for the Company. As further consideration for services to be rendered, the employees were granted 500,000 warrants redeemable on restricted shares of the Company’s stock at $.225 per share. The warrants are exercisable any time after December 1, 2006 and expire December 1, 2008.

On January 23, 2006, the Company issued to the TAM Trust 37,500 common shares for continued financial support.

On January 23, 2006, the Company issued to the Mr. Parsons 37,500 common shares for services rendered.

During October 2006, the Company commenced paying a monthly stipend of $2,500 to J. Place and D. Parsons through December 2007.

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

Effective May 30, 2008, Moore & Associates became our principal independent auditing firm. All audit work was performed by the full time employees of Moore & Associates. Our Board of Directors does not have an audit committee. The functions customarily delegated to an audit committee are performed by our full Board of Directors. Our Board of Directors approves in advance, all services performed by Moore & Associates. Our Board of Directors has considered whether the provision of non-audit services is compatible with maintaining the principal accountant’s independence, and has approved such services.

Windes & McClaughry Accountancy Corporation (Windes & McClaughry) was the company’s principal independent auditing firm from February 28, 2006 through May 30, 2008.

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The following table sets forth fees billed by our auditors during the last two fiscal years for services rendered for the audit of our annual consolidated financial statements and the review of our quarterly financial statements, services by our auditors that are reasonably related to the performance of the audit or review of our consolidated financial statements and that are not reported as audit fees, services rendered in connection with tax compliance, tax advice and tax planning, and all other fees for services rendered.

	February 29, 2008		February 29, 2008

Audit fees	$	24,000	$	86,837
Audit related fees		-0-	$	2,632
Tax fees		-0-		-0-
All other fees		-0-		-0-

The audit fees in fiscal 2009 include $24,000 of fees billed by Moore & Associates related to the audit of our consolidated financial statements for the fiscal year ended February 28, 2009 and to the review of our quarterly financial statements. Audit related fees include $2,632 of fees billed by Windes & McClaughry for accounting services related to the review of other SEC filings.

ITEM 15. EXHIBITS FINANCIAL STATEMENT SCHEDULES.

Exhibits

Exhibit No.	Description

2A*	Plan of Exchange between Seychelle Environmental Technologies, Inc. and Seychelle Water Technologies, Inc. dated January 30, 1998 as filed with Form 10-SB 12 G on February 8, 2000.

3A*	Articles of Incorporation dated January 23, 1998 as filed with Form 10-SB 12 G on February 8, 2000.

3B*	Articles of Merger of Royal Net, Inc. into Seychelle Environmental Technologies, Inc as filed with Form 10-SB 12 G on February 8, 2000.

3C*	Amendment to Articles of Incorporation re: Series "A" Preferred Stock as of January 31, 1998 as filed with Form 10-SB 12 G on February 8, 2000.

3D*	Amendment to Articles of Incorporation re: Series "AA" Preferred Stock as of June 5, 1998 as filed with Form 10-SB 12 G on February 8, 2000.

3E*	Amendment to Articles of Incorporation re: Series "AAA" Preferred Stock as of February 18, 1999 as filed with Form 10-SB 12 G on February 8, 2000.

3F*	Bylaws as filed with Form 10-SB 12 G on February 8, 2000.

10A*	Purchase Agreement with Aqua Vision as filed with Form 10-SB 12 G on February 8, 2000.

10B*	Amended Purchase Agreement with Aqua Vision as filed with Form 10-SB 12 G on February 8, 2000.

10C*	2000 Stock Compensation Plan I, dated July 1, 2000 as filed with Registration Statement on Form S-8 on August 31, 2000.

10D*	2002 Stock Compensation Plan I, dated February 12, 2002 as filed with Registration Statement on Form S-8 on February 27, 2002.

10E*	Purchase Agreement with Aqua Gear as filed with Annual Report on Form 10-K on June 14, 2002.

10F*	Employment Contract with Carl Palmer as filed with Annual Report on Form 10-K on June 14, 2002.

10G*	Management Consulting Contract with Richard Parsons

10H*	Management Consulting Contract with James Place

10I*	Joint Venture Agreement with Huanghua Plastic Co. Ltd. dated September 1, 2005

10J*	ABMS Health Care Pvt. Ltd. Distribution Rights Agreement dated April 1, 2006

10K*	Confident, Inc. Exclusive Distribution Rights Agreement dated January 1, 2006

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Exhibit No.		Description


10L*		Continental Technologies. Inc., Purchase Agreement dated April 26, 2006

10M*		Promissory Note to TAM Irrevocable Trust dated May 1, 2001

10N*		Promissory Note to TAM Irrevocable Trust dated February 28, 2002

10O*	Promissory Note to TAM Irrevocable Trust dated February 28, 2003

10P*	Promissory Note to TAM Irrevocable Trust dated November 1, 2003

10Q*	Promissory Note to TAM Irrevocable Trust dated February 28, 2004

10R*	Food For Health Purchase Agreement

10S*	Food For Health Distribution Agreement

10T*	Seychelle Environmental Technologies, Inc. License Agreement with Mr. Gary Hess

31.1**	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes Oxley Act of 2002)

31.1**	Certification of the 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 pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

32.2**	Certification of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)

23.1**	Auditor’s Consent

99*	Code of Ethics for Chief Executive Officer and Senior Financial Officers

___________________

* Previously filed with the Securities and Exchange Commission as indicated and incorporated by reference herein

** Attached hereto

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

Date: May 22, 2009	By:	/s/ Carl Palmer
		Carl Palmer Chief Executive Officer




Date: May 22, 2009	By:	/s/ Jim Place
		Jim Place Chief Financial Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


/s/ Carl Palmer
Carl Palmer, Director		May 22, 2009

/s/ Jim Place
Jim Place, Director		May 22, 2009

/s/ Richard Parsons
Richard Parsons, Director		May 22, 2009

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