<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                     Annual Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                  For the Fiscal Year Ended: February 28, 2001
                           Commission File No. 0-29373

                   Seychelle Environmental Technologies, Inc.
        -----------------------------------------------------------------
        (Exact Name of Small Business Issuer as specified in its charter)

                Nevada                                   33-0836954
     -----------------------------               --------------------------
     (State or other jurisdiction                (IRS Employer File Number)
           of incorporation)

     32921 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 to be Registered Pursuant to Section 12(b) of the Act: None

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

                    Common Stock, $0.001 per share par value

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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:
                                              ---    ---

         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-KSB. [ ]

         State issuer's revenues for its most recent fiscal year $830,323. The
aggregate market value of the voting stock of the Registrant held by
non-affiliates as of February 28, 2001 was approximately $3,631,037. The number
of shares outstanding of the Registrant's common stock, as of the latest
practicable date, February 28, 2001, was 8,996,480.



<PAGE>   2

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

                                  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.

         LACK OF HISTORY. Our Company was formed on January 23, 1998 and
acquired the operations of a company which had only been in existence since
1995. Since beginning operations, we have operated at a loss. Nevertheless, we
have not engaged in any substantial business activity over a sustained period of
time, and thus cannot be said to have a successful operating history. Our
product lines have not generated enough revenue to support our Company.
Therefore, we have limited financial results upon which you may judge our
potential. We expect to continue to incur losses in the near future. We may not
ever become 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, many of which are
beyond our control. These include:

     -   substantial delays and expenses related to testing and development of
         our new products,

     -   production and marketing problems encountered in connection with our
         new and existing products and technologies,

     -   competition from larger and more established companies, and

     -   lack of market acceptance of our new products and technologies.

         LACK OF PROFITABILITY. Sales of our products may never generate
sufficient revenues to fund our continuing operations. We may never generate
positive cash flow or attain profitability. To date, we have incurred
significant losses. As of February 28, 2001, our accumulated deficit was
$3,207,880. For the fiscal year ended February 28, 2001, we incurred a net loss
of $878,742 and for the previous fiscal year a net loss of $188,465. These
losses have resulted primarily from:

     -   lack of sufficient sales to achieve profitability,

     -   significant costs associated with the development of our products,

     -   marketing of those products,

     -   significant legal and professional fees associated with litigation and
         becoming a SEC reporting entity.

         INHERENTLY RISKY-COMPETITION. Because we are a company with a limited
history, 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. We are subject to the risks which are common to start-up companies.
Therefore, investors should consider an investment in us to be an extremely
risky venture.

         NEED FOR ADDITIONAL FINANCING. For the foreseeable future, we expect to
rely principally upon our cash flow, although we have raised limited private
placement funds on occasion. We cannot guarantee the success of this plan. We
believe that from time to time, we may have to obtain additional financing in
order to conduct our business in a manner consistent with our proposed
operations. There can be no guaranty that additional funds will be available
when, and if, needed. If we are unable to obtain such financing, or if the terms
thereof are too costly, we may be forced to curtail proposed expansion of
operations until such time as alternative financing may be arranged, which could
have a materially adverse impact on our operations and our shareholders'
investment. At the present time, we have no definitive plans for additional
financing.

         POTENTIAL INABILITY TO CONDUCT SUCCESSFUL OPERATIONS. The results of
our operations will depend, among other things, upon our ability to develop and
to market our water filtration products. Further, it is possible that our
proposed operations will not generate income sufficient to meet operating
expenses or will generate income and capital



<PAGE>   3

appreciation, if any, at rates lower than those anticipated or necessary to
sustain ourselves. Our operations may be affected by many factors, some known by
us, some unknown, and some which are beyond our control. Any of these problems,
or a combination thereof, could have a materially adverse effect on our
viability as an entity and might cause the investment of our shareholders to be
impaired or lost. Our technologies and products are in various stages of
development. The development stage products may not be completed in time to
allow production or marketing due to the inherent risks of new product and
technology development, limitations on financing, competition, obsolescence,
loss of key personnel and other factors. Although we may license or market our
development technology at its current stage of development, there can be no
assurance that we will be able to do so. Unanticipated technical obstacles can
arise at any time and result in lengthy and costly delays or in a determination
that further development is not feasible.

         While we have a limited product line, the development of some of our
technologies have 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.

         DEPENDENCE UPON PRINCIPAL CUSTOMER. Currently, the majority of our
operations are based upon our relationship with Nikken Global, Inc. and Kenko
World, two affiliated entities which are private multi-level marketing
companies. We will collectively call them Nikken in this document. There can be
no assurance that our relationship with Nikken will continue at the present
level or at any level which could be profitable for us. In the event that our
relationship with Nikken, International, Inc. is dissolved, there can be no
guarantee that we can replace the loss in sales on any terms favorable to us.

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

         PROTECTION OF TECHNOLOGY. A successful challenge to our ownership of
our technology could materially damage our business prospects. We rely on a
combination of patents, trademarks, copyrights, trade secret laws,
confidentiality procedures and licensing arrangements to protect our
intellectual property rights. We currently have three U.S. patents issued and a
license on one patent. Any issued patent may be challenged and invalidated.
Patents may not issue 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 which we license.

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

         COMPETITION. 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

         SUCCESS DEPENDENT UPON MANAGEMENT. Our success is dependent upon the
decision making of our directors and executive officers. These individuals
intend to commit as much



<PAGE>   4

time as necessary to our business. The loss of any or all of these individuals
could have a materially adverse impact on our operations. We have no employment
agreement with any individuals and have not obtained key man life insurance on
the lives of any of these individuals.

                                     PART I

         (a) General Development of Business

         We are a Nevada corporation. Our principal business address is 32921
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.

         On January 31, 1998, we entered into a Purchase Agreement to acquire
all of the assets of Aqua Vision International, a private California entity.
This Purchase Agreement was amended on February 26, 1999 to provide for the
issuance of 8,000 shares of Series "AAA" 12% Cumulative Convertible Preferred
Shares in lieu of all consideration which had remained unpaid under the original
Purchase Agreement. Aqua Vision International had been in operation since 1996
to develop, manufacture, and market its own proprietary water filtration
systems.

         In March 2001, we entered into a celebrity consulting and endorsement
agreement with Mr. Pat Boone. This agreement calls for the issuance of 110,000
shares of common stock for services to be performed during the term of the
agreement, which expires on December 31, 2002. Additionally, we will make
commission payments of 2.5% of the gross revenue derived by us from sales of our
products in which Mr. Boone directly participates.

         In March 2000, we sold 235,295 shares of our common stock to an
unaffiliated third party investor in a private placement for $200,000 in cash.
We also granted a stock option to this investor to purchase an additional
235,295 restricted shares at $0.85 per share. This stock option expired in
September, 2000. We relied upon Sections 4(2) and 4(6) of the Securities Act of
1933, as amended, for our exemption from registration on these transactions.

         In April 2000, we entered into a consulting agreement with an
unaffiliated third party who will provide marketing and consulting services to
us. We granted this unaffiliated third party a stock option to purchase 250,000
restricted shares of our common stock at $1.125 per share. The option expires
after three years, and vests one-third per year based upon performance criteria
in the consulting agreement. The first one-third vested upon the execution of
the agreement.

Organization

         Our Company is presently comprised of one corporation with one
subsidiary, Seychelle Water Technologies, Inc., a Nevada corporation. We have a
trade name, "Seychelle Water Filtration Products, Inc.," which we use in our
commercial operations.

         (b) Operations

         General

         We are implementing a business plan to manufacture and market a range
of water filtration products. We are dedicated to improving the quality of life
by providing highly effective, economical, convenient, durable, reliable
filtration systems for assured quality drinking water. We design, manufacture
and supply water filtration systems to the general public. These systems will
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. We also have the capability of tailoring systems to meet the needs
of areas



<PAGE>   5

where specific water problems or severe water contamination exist, on a local or
worldwide basis.

         GENERAL BUSINESS PLAN

         The Environmental Protection Agency (EPA) has established Maximum
Contamination Levels in their National Primary Drinking Water Standards. There
are forty-six (46) disclosed key contaminants out of a total of seventy-nine
(79) listed by the EPA which are addressed by our products. These forty-six (46)
disclosed key contaminants may be grouped into Volatile Organic Compounds,
Inorganics, Microbiological Organisms, Trihalomethanes, and Radiologicals.

         Our patented products reduce up to 99.8% of the forty-six (46)
disclosed key contaminants listed by the EPA in these five basic areas. We
combine selective micron physical filtration, adsorption, and reduction using
sorbent medias and other materials. All products are engineered by first
analyzing the forty-six (46) disclosed key contaminants and the contaminants'
direct effect upon health from ingestion. These forty-six (46) disclosed key
contaminants are considered in the design effort in order to reach maximum
reduction percentages of these pollutants. Health claims are represented by the
reduction in volume percentages as determined by various independent labs.
Testing is continually performed, most recently achieving verification from Los
Angeles County Laboratories - up to 95% reduction of analyte Chromium 6.

         We develop and manufacture products in the area of water filtration. We
have historically focused our manufacturing on Portable Water Filtration
Systems.

         Our primary marketing focus, as of February, 2001, is our strategic
alliance with Nikken. We plan to give to Nikken, subject to certain
restrictions, the exclusive rights to distribute our products and technology for
a period of ten years, commencing from March 1, 2001. This relationship would be
renewable for three successive one-year periods thereafter, or until either
party gives three months notice prior to the end of the current term. The
arrangement is worldwide and royalty free.

         We plan to continue to design, develop and manufacture water filtration
products primarily for the demand of the Nikken worldwide distribution network.
We plan to work with Nikken to implement a product line to include various
portable systems, home and office models, all containing our patented
technologies.

         As of February, 2001, we have one product which we are currently
marketing through the strategic alliance which we have with Nikken: The 24oz.
PiMag Portable Water Filtration Bottle. The device fills from the top and has an
easy grip design that also fits into bike holders or a car caddy.

         This product, the Pi-Mag Portable Water Filtration Bottle, is a
filtration system built to go anywhere for use at any time. It is designed to be
a practical, effective, and a superior substitute for bottled water and to
provide additional protection against waterborne contaminants while traveling,
especially in foreign lands.

         Although we have developed the Ionic Filtration technology and have
sold products to international relief agencies and military units for several
years, our relationship with Nikken will require additional development of
portable products specifically for Nikken's efforts in supporting non-profit
organizations worldwide. However, we will also continue to sell our products and
technologies to non-profit organizations, such as the Red Cross and the U.S.
Armed Forces, which do not sell to distributors or resell to customers.

         We also have several products which we are not currently marketing but
which we may look at marketing in the future, either through Nikken or other
venues. In any event, our goal is to capture a significant share of the water
filtration market using these and other products which we have developed and
plan to develop. We plan to market our current products and to develop
additional products in the water filtration area primarily through Nikken. As a
result of expanded marketing, sales and manufacturing demands, we plan to
continue to produce high technology portable water filtration products. We are
also continuing to develop niche market products for the specific needs of our
customers.

         (d) Raw Materials

         The use of proprietary materials in the manufacturing of our line of
products is a major factor. We project production volumes to coordinate with raw
materials. However, at the present time, there is adequate availability of raw
materials for all of our products. We do not expect this situation to change in
the near future.



<PAGE>   6

         (e) Customers and Competition

         There are a number of established companies in the water filtration
business, with no one company dominating this business. However, Innova Pure
Water, Inc., with whom we have a patent license agreement, and our company hold
patents specifically covering the majority of all portable water filtration
bottle design concepts. We believe that competition will be intense. We cannot
guarantee that we will be able to successfully compete.

         Our primary customer is Nikken. Most of our revenues for the coming
fiscal year will be based upon our strategic alliance with Nikken.

         (f) Backlog

         As of February 28, 2001, we had a backorder of 70,000 portable water
filtration units.

         (g) Employees

         As of February 28, 2001, we had fourteen (14) employees, four (4)
corporate and administrative employees and ten (10) operations and warehouse
employees, who worked for us under a lease arrangement with an unaffiliated
third party Professional Employer Organization. We hire additional employees, on
a temporary or ongoing basis, as circumstances require.

         (h) Proprietary Information

         In January, 2001, we entered into a non-exclusive patent license
agreement with Innova which allows us, for a period of one year, to manufacture,
market, distribute and sell all portable water filtration bottles which are
filled from the top. The license is renewable on an annual basis providing the
minimum unit sales levels are achieved. These minimum unit level sales are
100,000 as a condition of renewal for the initial term and escalate in 100,000
unit increments, with 500,000 units as a condition for renewal for the fifth and
all subsequent renewal periods. The license agreement is worldwide and requires
a royalty for each unit sold.

         We have been granted a patent for the Portable Water Filtration System
with the filter cap assembly, Patent # 5,914,045. 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."

         We own a patent, Patent # 6,004,460, for the Portable Water Filtration
System that allows the user to fill the bottle from the bottom, thereby reducing
any chance of contaminating the filter that is attached to the top of the
bottle. The patent is described in the abstract as "[a] combination filter
assembly and flexible portable bottle having a bottom opening with a sealing cap
attached thereto, to filter out substantially all INORGANICS, ORGANICS,
RADIOLOGICAL CHEMICALS and MICROBIOLOGY held in water in the bottle. The filter
assembly may be attached to an adapter sealed to the top of the flexible bottle.
Water in the bottle passes through the filter assembly and out a top nozzle or
valve when the flexible bottle is squeezed. The flexible bottle is filled with
water through the bottom opening." This is the technology which we use for our
Bottom's UP product line.

         We own a patent, Patent #6,058,971, for 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."

         In addition, we have the trademark registration for "Pres 2 Pure,"
S.N.75/040,704.

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




<PAGE>   7
         (i) 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 who 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. 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.
Therefore, the impact of governmental regulation is not expected to be material
to our operations.

         (j) Research and Development

         We have spent approximately $1,000 and $38,000 in research and
development activities for the fiscal years ended February 28, 2001 and February
29, 2000, respectively.

         (k) Environmental Compliance

         At the present time we, as a company, are not subject to any material
costs for compliance with any environmental laws.

         (l) Subsequent Events

         In April 2001, we repurchased all of our issued and outstanding Series
A 13.5% Non-Voting, Cumulative Preferred Stock, $.01 par value per share. This
repurchase was combined with a comprehensive settlement agreement, for the
benefit of all parties, with the beneficial owner of the Preferred Stock. We
also retired all of these Series A 13.5% Non-Voting, Cumulative Preferred Stock,
$.01 par value per share, along with the liability for associated dividends. The
TAM Irrevocable Trust, one of our principal shareholders, loaned us $350,000.00
at 10% simple interest, repayable upon demand, to finance the transaction.

         During March, 2001, we sold discontinued inventory products to an
affiliate of TAM Irrevocable Trust for $12,000.

ITEM 2. Description of Properties.

         As of February 28, 2001, our business office was located at 32921 Calle
Perfecto, San Juan Capistrano, CA 92675. Our telephone number at this address is
949-234-1999. We pay a total of $8,020 in rent per month for approximately
13,000 square feet of office space through March 31, 2002, escalating to $8,750
per month through January 14, 2003. We have a three-year lease with an
unaffiliated third party. We own outright our manufacturing equipment, office
equipment and inventory.

         We own three patents, a trademark, a trade-name, trade secrets and a
non-exclusive patent license agreement with Innova, see Proprietary Information
above, and other proprietary information related to our business operations.

ITEM 3. Legal Proceedings.

         On May 1, 2001, Safewater Anywhere, LLC. filed a lawsuit against
"Seychelle Water Technologies, Inc., aka Seychelle Environmental Technologies,
Inc., Carl Palmer, and Does 1-20 inclusive" in the Orange County Superior Court,
State of California. The Complaint alleges breach of fiduciary duty,
constructive fraud, promissory fraud, rescission, constructive trust, unfair
trade practices, and conversion. We believe that the claims are completely
without merit and intend to aggressively defend the case. We have not yet
responded in this matter.

         Otherwise, no legal proceedings of a material nature to which we are a
party are pending, and we know of no legal proceedings of a material nature
pending or threatened or judgments entered against 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 the fiscal year covered by
this report.




<PAGE>   8
                                     PART II

ITEM 5.  Market for Common Equity and Related Stockholder Matters.

         (a) Principal Market or Markets

         Our Common Stock began trading in 1987. 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." Trading was conducted in the over-the-counter market on the NASD's
"Electronic Bulletin Board" until April 20, 2000. We traded on the "Pink Sheets"
until December, 2000, when we were re-listed on the NASD's "Electronic Bulletin
Board," where we currently trade. 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.

<TABLE>
<CAPTION>
Fiscal Year 2001                    High              Low
----------------                    -----            -----
<S>                                 <C>              <C>
First Quarter                       $1.43            $ .75
Common Shares

Second Quarter                      $1.10            $ .87
Common Shares

Third Quarter                       $1.47            $ .62
Common Shares

Fourth Quarter                      $1.62            $ .34
Common Shares
</TABLE>


<TABLE>
<CAPTION>
Fiscal Year 2000                    High              Low
----------------                    -----            -----
<S>                                 <C>              <C>
First Quarter                       $2.25            $0.50
Common Shares

Second Quarter                      $1.65            $1.20
Common Shares

Third Quarter                       $1.25            $0.70
Common Shares

Fourth Quarter                      $2.00            $0.56
Common Shares
</TABLE>


         (b) Approximate Number of Holders of Common Stock

         As of February 28, 2001, a total of 8,996,480 of our shares of Common
Stock were outstanding and approximately 273 holders of record owned these
shares. However, we believe that we have a significantly greater number of
shareholders because a substantial number of our shares are held in nominee
name.

         (c) Dividends

         Holders of Common Stock and Preferred Stock are entitled to receive
such dividends as may be declared by our Board of Directors. No dividends on the
Common Stock were paid by us during the periods reported herein nor do we
anticipate paying such dividends in the foreseeable future.

ITEM 6. Management's Discussion and Analysis or Plan of Operation.

Forward-Looking Statements

         The following discussion contains forward-looking statements regarding
our Company, its business, prospects and results of operations that are subject
to certain risks and uncertainties posed by many factors and events that could
cause our actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: our ability to successfully develop new products for new
markets, the impact of competition on our revenues, changes in law or regulatory
requirements that adversely affect or preclude customers from using our products
for certain applications, delays in our introduction of new products or
services, and our failure to keep pace with emerging technologies.



<PAGE>   9

         When used in this discussion, words such as "believes," "anticipates,"
"expects," "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
document. We undertake no obligation to revise any forward-looking statements in
order to reflect events or circumstances that may subsequently arise. Readers
are urged to carefully review and consider the various disclosures made by us in
this document and other reports filed with the Securities and Exchange
Commission that attempt to advise interested parties of the risks and factors
that may affect our business.

Results of Operations

         For the fiscal year ended February 28, 2001, we saw a decline in our
sales revenues from the prior year. Consequently, we are still unprofitable for
the fiscal year ended February 28, 2001. No material portion of the financial
information in this presentation reflects the impact of our strategic alliance
with Nikken. In February, 2001, we began this arrangement with Nikken, which is
ongoing. Our arrangement with Nikken requires a thirty percent deposit with the
purchase order and the balance due within fifteen days from delivery. Our first
fiscal quarter receivables with Nikken are also current and all negotiated terms
have been met. We believe that we may be profitable for the first fiscal quarter
of 2002 as a result of our receipt of approximately $1,600,000 in purchase
orders from Nikken through May 31, 2001. Our anticipated first quarter sales are
in the range of approximately $1,200,000.

         Our plan for the coming fiscal year will be to market our products
principally through Nikken. We also plan to market our products to certain,
targeted retailers in arrangements which do not interfere with our strategic
alliance with Nikken, such as sales to non-profit organizations which do not
resell to distributors or sell to consumers, such as the Red Cross or the U.S.
Armed Forces.

         Our revenues decreased for the fiscal year ended February 28, 2001
compared to the fiscal year ended February 29, 2000. They were $830,323 and
$1,637,821, respectively.

         Costs of sales include all costs incurred in the manufacturing process.
The major components of direct costs are direct labor and associated benefits,
materials and freight. The major components of indirect job costs are indirect
labor costs and associated benefits and depreciation of production equipment.
Our costs of sales as a percentage of revenue increased for the fiscal years
ended February 28, 2001 and February 29, 2000. They were 61.1% and 51.7%,
respectively.

         Gross profit from operations was $322,693 or 38.9% for the year ended
February 28, 2001, compared to $791,247, or 48.4% of revenue for the year ended
February 29, 2000.

         Our general and administrative expenses were $834,962 for the year
ended February 28, 2001 and $734,980 for the year ended February 29, 2000. The
major components of general and administrative expenses are office salaries and
associated payroll costs, general and health insurance costs, rent, telephone,
accounting and legal expenses.

         We had a net loss of $878,742 for the year ended February 28, 2001 and
$188,465 for the year ended February 29, 2000. Our basic and diluted loss per
share for the year ended February 28, 2001 was $.11 and $.03 for the year ended
February 29, 2000.

Liquidity and Capital Resources

         Our cash flows from operating activities used a net $155,408 during the
year ended February 28, 2001, compared to providing $22,982 during the year
ended February 29, 2000. The primary reasons came from continued operating
losses offset by increase in customer deposits and lengthening of vendor
payment terms.

         Our investing activities used $29,366 during the year ended February
28, 2001, compared to $46,160 for the year ended February 29, 2000. All
investing activities were directed toward the purchase of and sale of equipment.

         Financing activities provided $260,000 for the year ended February 28,
2001 compared to February 29, 2000 of $6,538. The cash for these activities came
principally from sales of common stock and stockholder advances.

         Our net cash increased to $111,017 at February 28, 2001 from $35,791 at
February 29, 2000.

         Inventories decreased by $118,579 the year ended February 28, 2001,
compared to a decrease of $92,570 for the year ended February 29, 2000.

ITEM 7. Financial Statements.

<PAGE>   10


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------



Independent Auditor's Report                                        F-1 to F-2

Financial Statements

      Consolidated Balance Sheet                                    F-3 to F-4

      Consolidated Statements of Operations                         F-5

      Consolidated Statements of Changes in Stockholders' Deficit   F-6 to F-7

      Consolidated Statements of Cash Flows                         F-8 to F-9

      Notes to Consolidated Financial Statements                    F-10 to F-29



<PAGE>   11



                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors
Seychelle Environmental Technologies, Inc.
San Juan Capistrano, California

We have audited the accompanying consolidated balance sheet of Seychelle
Environmental, Technologies, Inc. and subsidiary as of February 28, 2001, and
the related consolidated statements of operations, changes in stockholders'
deficit, and cash flows for the fiscal year then ended. The 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
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 at February 28, 2001
and the consolidated results of their operations and their cash flows for the
fiscal year then ended in conformity with generally accepted accounting
principles.


/s/ Rushall, Reital & Randall
RUSHALL, REITAL & RANDALL

Solana Beach, California
June 5, 2001





                                       F-1

<PAGE>   12
INDEPENDENT AUDITORS' REPORT


To the Board of Directors
Seychelle Environmental Technologies, Inc.
San Juan Capistrano, California

We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity, and cash flows for the year ended February 29, 2000 for
Seychelle Environmental Technologies, Inc., The 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
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 results of operations and
cash flows for the year ended February 29, 2000 for Seychelle Environmental
Technologies, Inc., in conformity with generally accepted accounting principles
in the United States of America.





                                                /s/ RAIMONDO PETTIT GROUP
                                                RAIMONDO PETTIT GROUP
Torrance, California
June 6, 2000


                                      F-2
<PAGE>   13


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                           CONSOLIDATED BALANCE SHEET
                                February 28, 2001

--------------------------------------------------------------------------------

                                     ASSETS

<TABLE>
<S>                                             <C>
CURRENT ASSETS
   Cash                                         $    111,017
   Trade receivables, net of allowance for
       doubtful accounts $41,013                      15,667
   Inventories, net                                  349,461
   Prepaid expenses                                   12,084
                                                ------------

       Total current assets                          488,229
                                                ------------

PROPERTY AND EQUIPMENT, NET                          135,244

INTANGIBLE ASSETS, NET                                14,943

OTHER ASSETS                                          13,350
                                                ------------

       Total non-current assets                      163,537
                                                ------------

TOTAL ASSETS                                    $    651,766
                                                ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-3

<PAGE>   14


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                     CONSOLIDATED BALANCE SHEET (CONTINUED)
                               February 28, 2001

--------------------------------------------------------------------------------

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
<S>                                                                           <C>

CURRENT LIABILITIES
    Accounts payable                                                          $     88,460
    Accrued expenses                                                               411,123
    Customer deposits                                                              206,375
    Income taxes payable                                                             1,600
    Stockholder advances                                                           107,038
                                                                              ------------

        Total current liabilities                                                  814,596
                                                                              ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
    Preferred stock, $.01 par value -
        Series "A", non-voting, cumulative, convertible preferred stock,
          1,000,000 shares authorized; 17 shares
          issued and outstanding                                                         0
        Series "AAA", preferred stock, 8,000 shares
          authorized, issued and outstanding                                            80
    Common stock $.001 par value - 50,000,000 shares
      authorized; 8,921,480 shares issued and outstanding                            8,921
    Additional paid-in capital                                                   3,130,002
    Accumulated deficit                                                         (3,207,880)
    Unearned compensation                                                          (93,953)
                                                                              ------------

        Total stockholders' deficit                                               (162,830)
                                                                              ------------

TOTAL LIABILITIES AND
     STOCKHOLDERS' DEFICIT                                                    $    651,766
                                                                              ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>   15

                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
         For Fiscal Years Ended February 28, 2001 and February 29, 2000

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                    2001            2000
                                                ------------    ------------
<S>                                             <C>             <C>
SALES                                           $    830,323    $  1,637,821

COST OF SALES                                        507,630         846,574
                                                ------------    ------------

        Gross profit                                 322,693         791,247
                                                ------------    ------------

OPERATING EXPENSES
    Selling                                          230,369         225,096
    General and administrative                       834,962         734,980
                                                ------------    ------------

        Total expenses                             1,065,331         960,076
                                                ------------    ------------

LOSS FROM OPERATIONS                                (742,638)       (168,829)

OTHER INCOME (EXPENSES)
    Interest expense                                  (1,895)         (1,534)
    Miscellaneous income (expense)                     9,699         (16,502)
    Write down due to discontinuance
        of product lines                            (142,308)              0
                                                ------------    ------------

        Total other income (expense)                (134,504)        (18,036)
                                                ------------    ------------

LOSS BEFORE PROVISION
    FOR INCOME TAXES                                (877,142)       (186,865)

PROVISION FOR INCOME TAXES                             1,600           1,600
                                                ------------    ------------

        Net loss                                $   (878,742)   $   (188,465)
                                                ============    ============

BASIC AND DILUTED (LOSS)
    PER SHARE                                   $      (0.11)   $      (0.03)
                                                ============    ============

WEIGHTED AVERAGE NUMBER OF
    SHARES: BASIC AND DILUTED                   $  8,772,289    $  9,770,607
                                                ============    ============
</TABLE>



          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>   16
                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
         For Fiscal Years Ended February 28, 2001 and February 29, 2000

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                           Additional
                                                 Preferred Stock                 Common Stock                Paid-in
                                              Shares          Amount         Shares          Amount          Capital
                                           ------------    ------------   ------------    ------------    ------------
<S>                                        <C>             <C>            <C>             <C>             <C>

Balance at February 28, 1999                      8,043    $         80     11,200,643    $     11,201    $  2,240,026

Stockholder advances                                  0               0              0               0               0

Conversion of Series "AA"
        preferred stock                             (26)              0      1,337,509           1,338          (1,338)

Issuance of common stock in
        connection with settlement
        of lawsuit                                    0               0        100,000             100          20,213

Issuance of common stock for
        compensation and services                     0               0        327,000             327         163,173

Issuance of common stock for
        commissions                                   0               0         75,000              75          37,425

Cancellation of common stock of
        former consultant                             0               0        (80,000)            (80)             80

Cancellation of common stock in
        connection with Berkich
        lawsuit                                       0               0     (4,440,666)         (4,441)          4,441

Issuance of common stock in
        consideration for settlement
        of note payable                               0               0         30,560              30          30,530

Contributed executive services                        0               0              0               0          60,000

Purchase of common stock of
        former employee                               0               0        (75,000)            (75)        (10,425)

Net loss for the fiscal year ended
           February 29, 2000                          0               0              0               0               0
                                           ------------    ------------   ------------    ------------    ------------

Balance, February 29, 2000                        8,017              80      8,475,046           8,475       2,544,125

<CAPTION>
                                                                          Stock Subscription
                                                                            Receivable and        Total
                                            Accumulated      Unearned         Stockholder      Stockholders'
                                              Deficit      Compensation       Receivable          Equity
                                           ------------    ------------   ------------------   -------------
<S>                                        <C>             <C>            <C>                  <C>
Balance at February 28, 1999               $ (2,140,673)   $          0      $    (23,588)     $     87,046

Stockholder advances                                  0               0            (2,021)           (2,021)

Conversion of Series "AA"
        preferred stock                               0               0                 0                 0

Issuance of common stock in
        connection with settlement
        of lawsuit                                    0               0                 0            20,313

Issuance of common stock for
        compensation and services                     0               0                 0           163,500

Issuance of common stock for
        commissions                                   0               0                 0            37,500

Cancellation of common stock of
        former consultant                             0               0                 0                 0

Cancellation of common stock in
        connection with Berkich
        lawsuit                                       0               0                 0                 0

Issuance of common stock in
        consideration for settlement
        of note payable                               0               0                 0            30,560

Contributed executive services                        0               0            12,000            72,000

Purchase of common stock of
        former employee                               0               0                 0           (10,500)

Net loss for the fiscal year ended
           February 29, 2000                   (188,465)              0                 0          (188,465)
                                           ------------    ------------      ------------      ------------

Balance, February 29, 2000                   (2,329,138)              0           (13,609)          209,933
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-6

<PAGE>   17
                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (CONTINUED)
         For Fiscal Years Ended February 28, 2001 and February 29, 2000

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                    Additional
                                           Preferred Stock                  Common Stock              Paid-in
                                         Shares         Amount         Shares          Amount         Capital
                                      ------------   ------------   ------------    ------------    ------------
<S>                                   <C>            <C>            <C>             <C>             <C>

Issuance of common stock in
        connection with celebrity
        consulting contract                      0              0        110,000             110         145,090

Issuance of stock options
        for services                             0              0              0               0          59,375

Issuance of common stock for
        compensation and
        services                                 0              0        109,139             109         109,030

Issuance of common stock to
        employees                                0              0         35,000              35          14,183

Issuance of common stock to
        former consultant                        0              0         37,000              37             (37)

Cancellation of common stock
        of former consultant                     0              0        (80,000)            (80)             80

Sale of common stock                             0              0        235,295             235         199,765

Contributed executive services                   0              0              0               0          58,391

Net loss from fiscal year ended
           February 28, 2001                     0              0              0               0               0
                                      ------------   ------------   ------------    ------------    ------------

Balance, February 28, 2001                   8,017   $         80   $  8,921,480    $      8,921    $  3,130,002
                                      ============   ============   ============    ============    ============

<CAPTION>

                                                                     Stock Subscription
                                                                       Receivable and         Total
                                       Accumulated      Unearned         Stockholder      Stockholders'
                                         Deficit      Compensation        Receivable      Equity(Deficit)
                                      ------------    ------------   ------------------   ---------------
<S>                                   <C>             <C>            <C>                  <C>

Issuance of common stock in
        connection with celebrity
        consulting contract                      0         (93,953)                  0           51,247

Issuance of stock options
        for services                             0               0                   0           59,375

Issuance of common stock for
        compensation and
        services                                 0               0                   0          109,139

Issuance of common stock to
        employees                                0               0                   0           14,218

Issuance of common stock to
        former consultant                        0               0                   0                0

Cancellation of common stock
        of former consultant                     0               0                   0                0

Sale of common stock                             0               0                   0          200,000

Contributed executive services                   0               0              13,609           72,000

Net loss from fiscal year ended
           February 28, 2001              (878,742)              0                   0         (878,742)
                                      ------------    ------------        ------------     ------------

Balance, February 28, 2001            $ (3,207,880)   $    (93,953)       $          0     $   (162,830)
                                      ============    ============        ============     ============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>   18


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
         For Fiscal Years Ended February 28, 2001 and February 29, 2000

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                       2001            2000
                                                                   ------------    ------------
<S>                                                                <C>             <C>


CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                        $   (878,742)   $   (188,465)
   Adjustments to reconcile net loss to net
   cash (used) provided by operating activities:
        Depreciation and amortization                                    72,481          69,584
        Provision for doubtful accounts                                  22,551          11,711
        Fair market value of stock options issued for services           59,375               0
        Fair market value of stock issued for services                  116,762               0
        Write down due to discontinuance
           of product lines                                             142,308               0
        Contributed executive services                                   72,000          72,000
        (Gain) loss on disposal of equipment                            (11,514)         16,503
   Changes in operating assets and liabilities:
        Trade receivables                                                  (600)         90,523
        Inventory                                                      (118,579)        (92,570)
        Other current assets                                             (2,784)          7,992
        Receivable from stockholders                                          0          (2,021)
        Intangible and other assets                                     (10,160)         (1,775)
        Accounts payable                                                  8,057           5,938
        Accrued expenses                                                174,265          33,093
        Customer deposits                                               199,172          (1,131)
        Income taxes payable                                                  0           1,600
                                                                   ------------    ------------

   Net cash (used) provided by operating activities                    (155,408)         22,982
                                                                   ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from sale of equipment                                       25,000               0
   Purchase of equipment                                                (54,366)        (46,160)
                                                                   ------------    ------------

   Net cash used by investing activities                                (29,366)        (46,160)
                                                                   ------------    ------------
</TABLE>



          See accompanying notes to consolidated financial statements.


                                      F-8
<PAGE>   19


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
         For Fiscal Years Ended February 28, 2001 and February 29, 2000

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                  2001            2000
                                                              ------------    ------------
<S>                                                           <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from sale of common stock                         $    200,000    $          0
   Proceeds from stockholder's advances                             80,000          21,088
   Repayments on stockholder's advances                            (20,000)         (4,050)
   Purchase of stock from former employees                               0         (10,500)
                                                              ------------    ------------

   Net cash provided by financing activities                       260,000           6,538
                                                              ------------    ------------

   NET INCREASE (DECREASE)  IN CASH                                 75,226         (16,640)

Cash, beginning of year                                             35,791          52,431
                                                              ------------    ------------

Cash, end of year                                             $    111,017    $     35,791
                                                              ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION

   Cash paid during the period for:
        Interest                                              $        347    $          0
                                                              ============    ============

        Income taxes                                          $      1,600    $      3,973
                                                              ============    ============

NON-CASH INVESTING AND FINANCING ACTIVITIES

   Stock issued for services and settlement of litigation     $    109,140    $    221,313
                                                              ============    ============

   Contributed executive services                             $     58,391    $     60,000
                                                              ============    ============

   Settlement of stockholders' receivable for services        $     13,609    $     12,000
                                                              ============    ============

   Stock options issued for services                          $     59,375    $          0
                                                              ============    ============

   Settlement of accounts payable
        by stockholder advance                                $     30,000    $          0
                                                              ============    ============

   Stock issued from settlement of debt                       $          0    $     30,560
                                                              ============    ============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                      F-9
<PAGE>   20


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE A:  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. SWT had no material operations for the three years
         ended February 28, 2001.

         On January 31, 1998, SET purchased 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 (described in Note E) to Aqua Vision's
         owners. The Company sued Mr. Berkich, its controlling stockholder, and
         the controlling stockholder returned his shares to the Company during
         the year ended February 29, 2000 (See Note G). 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.
         There are a number of established companies in the water filtration
         business, with no one company dominating the business.

         During February 2001, SET entered into a strategic alliance with Nikken
         Global, Inc. and Kenko World (collectively "Nikken"), whereby Nikken is
         expected to obtain exclusive rights to distribute the SET products and
         technology for a period


                                      F-10
<PAGE>   21


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE A:  ORGANIZATION AND DESCRIPTION OF BUSINESS, continued

         of 10 years commencing March 1, 2001 and expiring March 1, 2011. Nikken
         is one of the leading direct distribution organizations in the world.
         The agreement renews automatically for 3 additional successive 1-year
         periods, or until either of the parties gives 3 months written notice
         prior to the end of the current term. The agreement will be worldwide
         and royalty free.

         The agreement is expected to contain minimum unit or sales levels, and
         requires Nikken to deposit 30 percent of the total cost of each order.
         The balance of each order is due within fifteen days of delivery.
         During January 2001, the Company received $250,000 as deposit towards
         purchase orders of $390,000.

         SET reserved its rights to continue marketing and selling its products
         and technology to nonprofit organizations that do not resell to
         distributors or sell to consumers, for example the Red Cross, US Armed
         Forces and similar organizations.

         Prior to entering into this strategic alliance, the Company entered
         into a patent license agreement with Innova Pure Water, Inc. (Innova),
         whereby Innova granted the Company a limited non-exclusive license to
         manufacture, market, distribute and sell all portable water filtration
         bottles that are filled from the top for a period of one year (initial
         term). The Company and Innova, respectively, hold patents covering the
         majority of all portable water filtration bottle design concepts. The
         agreement is renewable on an annual basis providing the minimum unit
         sales levels are achieved. The minimum unit sales level of 100,000 is a
         condition of renewal for the initial term and escalates in 100,000 unit
         increments with 500,000 units as a condition for renewal for the fifth
         and all subsequent renewal periods. The license agreement is worldwide
         and requires a royalty ranging from $.25 to $.40 for each unit sold.
         During the fiscal year ended February 28, 2001, the Company paid Innova
         estimated royalties of $20,000 for this license agreement. Royalty
         expense for the fiscal year ended February 28, 2001 was approximately
         $7,000 based upon actual deliveries with the remaining balance of
         approximately $12,000 recorded as a prepaid expense.

         As a result of the Nikken agreement, the Company recorded non-recurring
         charges of approximately $142,000, consisting of an inventory write
         down of $126,000 and tooling costs of $16,000 to discontinue its former
         product lines no longer sold through the Company's new direct
         distribution agreement with Nikken.



                                      F-11
<PAGE>   22



                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE A:  ORGANIZATION AND DESCRIPTION OF BUSINESS, continued

         Prior to February 2001, SET developed, manufactured and sold its water
         filtration products through retailers and multilevel marketing
         programs. The Company sells its products throughout the United States
         and abroad including Europe and Asia. Geographic information for the
         fiscal years ended February 28, 2001 and February 29, 2000 is as
         follows:

<TABLE>
<CAPTION>
                                                       2001         2000
                                                    ----------   ----------
         <S>                                        <C>          <C>
         Water filtration products sold to
          external customers (1) (2) in:
               The United States                    $  828,017   $1,620,278
               Canada                                    1,639       16,222
               Japan                                       667          921
                                                    ----------   ----------
          Total                                     $  830,323   $1,637,821
                                                    ==========   ==========
</TABLE>

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

         (2)  Long lived assets outside the United States included $65,400 and
              $91,900 in tooling costs located in Asia at February 28, 2001 and
              February 29, 2000, respectively.

         Basis of Presentation

         The Company has experienced recurring net losses of $878,742 and
         $188,465 during the years ended February 28, 2001 and February 29,
         2000, respectively. Additionally, the Company has experienced an
         approximate 50 percent decline in revenues from the previous fiscal
         year due to a shift in focus from supplying for private label
         distribution to directly to wholesale and retail markets. These matters
         raise substantial doubt about the Company's ability to continue as a
         going concern.

         The Company believes that the strategic alliance with Nikken and the
         Company's continued review of controllable expenses will provide
         sufficient liquidity for it to continue as a going concern in its
         present form. Accordingly, the consolidated financial statements do not
         include any adjustments relating to the recoverability and
         classification of recorded asset amounts or the amount and
         classification of liabilities or other adjustments that might be
         necessary should the Company be unable to continue as a going concern
         in its present form.



                                      F-12
<PAGE>   23


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE A:  ORGANIZATION AND DESCRIPTION OF BUSINESS, continued

         During March 2001, the Company reduced its administrative staff and
         expects this reduction to reduce operating expenses by approximately
         $81,000 on an annualized basis.

NOTE B:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation

         The accompanying 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.

         Revenue Recognition

         Revenues and cost of sales are recognized when products are shipped.

         Inventories

         Inventories are stated at the lower of cost or market using the average
         cost method and consist of the following at February 28, 2001:

<TABLE>
<CAPTION>
         <S>                                                       <C>
         Raw materials                                             $    322,077
         Work in progress                                                61,759
         Finished goods                                                 143,421
                                                                   ------------
                                                                        527,257

         Less: Reserve for obsolete or slow moving inventory           (177,796)
                                                                   ------------

         Net inventories                                           $    349,461
                                                                   ============
</TABLE>


         As previously noted (Note A), the Company in anticipation of the Nikken
         agreement recorded a $126,000 inventory write down, primarily raw
         materials, due to the discontinuance of previous product lines.

         Management reviews and estimates realization of inventory on a regular
         basis with respect to obsolete and slow moving inventory. Although
         management believes its evaluations are sound, it is at least
         reasonably possible that such estimates may change in the near term.



                                      F-13
<PAGE>   24


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE B:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

         Property and Equipment

         Property and equipment, including significant improvements thereto, are
         stated at cost and are depreciated using the straight-line method over
         estimated useful lives ranging from 3 to 5 years. Maintenance and
         repairs are charged to expense as incurred.

         Intangible Assets

         Intangible assets include patents, product rights and technology costs.
         All patent, product rights and technology costs are capitalized and
         amortized over ten 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. Intangible assets net of accumulated amortization
         amounted to $14,943 at February 28, 2001.

         Customer Deposits

         Customer deposits represent advance payments received for products,
         primarily from Nikken, and is recognized as revenue when products are
         shipped.

         Accounting For Long-Lived Assets

         Long-lived and intangible assets are reviewed for impairment whenever
         events or changes in circumstances indicate that the carrying value of
         an asset may not be recoverable. In that case, if the sum of the
         expected future cash flows is less than the carrying amount of the
         asset, an impairment loss is recognized for the difference between the
         carrying amount of the asset and the fair value of the asset.

         Research and Development Expenses

         Research and development costs are expensed as incurred and amounted to
         approximately $1,000 and $38,000 for the fiscal years ended February
         28, 2001 and February 29, 2000, respectively, and are included in cost
         of sales in the accompanying consolidated statements of operations.

         Advertising Expenses

         Advertising expenses are expensed as incurred. Total advertising
         expenses amounted to approximately $30,000 and $22,000 for the fiscal
         years ended February 28, 2001 and February 29, 2000, respectively, and
         are included in selling expenses in the accompanying consolidated
         statements of operations.


                                      F-14
<PAGE>   25


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE B:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

         Concentration of Credit Risk

         The Company performs periodic credit evaluations of its customers'
         financial condition and generally 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.

         For the fiscal years ended February 28, 2001 and February 29, 2000, SET
         had several customers which individually accounted for at least 10% of
         total sales. The following table summarizes total sales and accounts
         receivable for the fiscal years then ended for these customers:

         <TABLE>
         <CAPTION>
                                     2001                       2000
                           ------------------------   ------------------------
                              Sales       Accounts       Sales       Accounts
                           Percentage    Receivable   Percentage    Receivable
                           ----------    ----------   ----------    ----------
         <S>               <C>           <C>          <C>           <C>

         Customer 1                18%   $        0            0%   $        0
         Customer 2                16%        7,310           15%            0
         Customer 3                11%            0            2%          603
         Customer 4                 0             0           13%       23,923
         </TABLE>

         As previously disclosed (Note A), during February 2001, SET began
         discussions aimed at entering into a strategic alliance agreement with
         Nikken. Revenues from the Company's sales to Nikken approximated
         $70,000 for the fiscal year ended February 28, 2001.

         During the fiscal year ended February 29, 2000, the Company lost its
         second largest customer in relation to total sales for the fiscal year
         then ended.


                                      F-15
<PAGE>   26


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE B:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

         For the fiscal years ended February 28, 2001 and February 29, 2000, SET
         had a vendor which individually supplied at least 10% of 2001
         purchases. The following table summarizes total raw material purchases
         and accounts payable for the fiscal years then ended.

         <TABLE>
         <CAPTION>
                                     2001                       2000
                           ------------------------   ------------------------
                            Purchase      Accounts     Purchase      Accounts
                           Percentage     Payable     Percentage      Payable
                           ----------    ----------   ----------    ----------
         <S>               <C>           <C>          <C>           <C>

         Vendor 1                  34%   $   35,971           10%   $   15,369
         Vendor 2                  20             0            0             0
         Vendor 3                  13         3,620            0             0
         Vendor 4                   7             0           27         3,992
         </TABLE>

         Management believes that these raw materials can be purchased through
         other comparable suppliers.

         Income Taxes

         The Company accounts for income taxes in accordance with the provisions
         of Statement of Financial Accounting Standards ("SFAS") No. 109,
         "Accounting for Income Taxes," which requires the recognition of
         deferred tax liabilities and assets for the expected future tax
         consequences of events that have been included in the consolidated
         financial statements or tax returns. Under this method, deferred tax
         liabilities and assets are determined based on the difference between
         the consolidated financial statements and the tax basis of assets and
         liabilities using enacted rates in effect for the year in which the
         differences are expected to reverse. Valuation allowances are
         established when necessary to reduce deferred tax assets to the amount
         expected to be realized.

         Issuance of Stock for Services

         Shares of the Company's common stock issued for services are recorded
         in accordance with SFAS No. 123, "Accounting for Stock-Based
         Compensation", at the fair market value of the stock issued or the fair
         market value of the services provided, whichever value is the more
         clearly evident.


                                      F-16
<PAGE>   27


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE B:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

         Stock Compensation Plan

         The Company accounts for stock-based compensation using the intrinsic
         value method prescribed in APBO No. 25, "Accounting for Stock Issued to
         Employees," and related interpretations. Accordingly, compensation cost
         for stock options is measured as the excess, if any, of the quoted
         market price of the Company's stock at the date of the grant over the
         amount an employee must pay to acquire the stock.

         Loss Per Common Share

         Basic net loss per common share is computed by dividing net loss by the
         weighted average number of outstanding common shares 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 stock option plan, warrants and
         convertible debt would be anti-dilutive.

         Comprehensive Income

         Comprehensive income is defined as net income adjusted for changes to
         equity resulting from events other than net income or transactions
         related to an entity's capital structure. Comprehensive income equaled
         net income for all periods presented.

         Management's Estimates

         The preparation of the consolidated financial statements in conformity
         with generally accepted accounting principles, 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
         period. Actual results could differ from those estimates.

         Segment Disclosures

         SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
         Information" requires public enterprises to report financial and
         descriptive information about reportable operating segments and
         establishes standards for related disclosures about product and
         services, geographic areas, and major customers. At this time, the
         Company has only one operating segment.



                                      F-17
<PAGE>   28


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE B:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

         Reclassifications

         Certain amounts in the 2000 financial statements have been reclassified
         to conform to the 2001 presentation.

NOTE C:  PROPERTY AND EQUIPMENT

         The following is a summary of property and equipment at February 28,
         2001:

<TABLE>
         <S>                               <C>
         Tooling                           $  219,279
         Equipment                             14,434
         Vehicles                              31,433
         Furniture and fixtures                15,775
         Computer equipment                    15,726
                                           ----------

                                              296,647

         Less:  Accumulated depreciation     (161,403)
                                           ----------

                                           $  135,244
                                           ==========
</TABLE>

         Total depreciation expense for the years ended February 28, 2001 and
         February 29, 2000 was approximately $71,000 and $70,000, respectively.

NOTE D:  ACCRUED EXPENSES

         Accrued expenses consist of the following at February 28, 2001:

<TABLE>
         <S>                                <C>
         Accrual for returned products       $   64,359
         Accrued legal expenses                 213,246
         Accrued inventory purchases             35,388
         Accrued settlement                      12,750
         Accrued wages and benefits              43,512
         Accrued commissions                      9,871
         Accrued outside services                 4,218
         Other accrued expenses                  27,779
                                             ----------

                                             $  411,123
                                             ==========
</TABLE>



                                      F-18
<PAGE>   29

                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE D:  ACCRUED EXPENSES, continued

         The Company provides a liability for returned products generally for a
         period of twelve months. Such costs are included in cost of sales.
         Total costs for returned products for the fiscal years ended February
         28, 2001 and February 29, 2000 was approximately $64,000 and $0,
         respectively. Management periodically reviews its estimate for
         potentially returnable products. Although management believes its
         recorded liability is adequate, it is at least reasonably possible that
         such estimate may change in the near term.

         The accrued legal expenses represent the attorney fees the Company
         incurred in connection with various litigation, of which approximately
         $211,000 will be paid in stock. In January, 2001, the Company approved
         approximately $47,500 in accrued legal expenses through the issuance of
         250,000 shares of common stock, which were paid in May, 2001.

         The accrued settlement represents an estimate of the settlement of an
         employment-related claim, of which $12,750 will be paid in stock.

         During fiscal 2000, the Company replaced all of its employees with
         leased employees from a Professional Employer Organization (PEO). The
         accrued wages and benefits represent amounts due to the PEO for the
         outstanding amounts due at February 28, 2001.

NOTE E:  CAPITAL STRUCTURE

         Common Stock

         The holders of Common Stock have one vote per share on all matters
         (including election of Directors) without provisions for cumulative
         voting. The Common Stock is not redeemable and has no conversion or
         preemptive rights.

         In the event of liquidation of the Company, the holders of Common Stock
         will share equally in any balance of the Company's assets available for
         distribution to them after satisfaction of creditors and the holders of
         the Company's senior securities. The Company may pay dividends, in cash
         or in securities or other property, when and as declared by the Board
         of Directors from assets legally available. To date, the Company has
         not declared or paid dividends on its Common Stock.

         During March 2000, the Company sold 235,295 shares of common stock to
         an investor for $200,000. The Company also issued this investor a stock
         option to purchase an additional 235,295 shares at the then estimated
         fair market value of $0.85 per share. The stock option expired
         unexercised in September 2000.


                                      F-19
<PAGE>   30

                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE E:  CAPITAL STRUCTURE, continued

         During the fiscal year ended February 28, 2001, the Company issued
         35,000 shares for compensation; and 219,139 shares for services
         provided.

         During the fiscal year ended February 29, 2000, the Company issued
         137,000 shares for compensation; 190,000 shares for services provided;
         100,000 shares in settlement of a lawsuit; 75,000 shares for
         commissions due; and 30,560 shares in settlement of a note payable.

         Preferred Stock

         The Board of Directors has the authority to issue Preferred Stock and
         to fix and determine its series, relative rights and preferences to the
         fullest extent permitted by the laws of the State of Nevada and its
         articles of incorporation. As of February 28, 2001, three classes of
         Preferred Stock were authorized and two were outstanding.

         Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock

         Series "A" Preferred Stock has rights which are superior to all other
         securities of the Company, including upon liquidation and as to payment
         of dividends, if any, carries a cumulative dividend of 13.5% per annum,
         is non-voting, and is redeemable by the Company at any time at face
         value and is convertible into common shares of the Company at the
         lesser of $10 per share or 85% of the last five closing bid prices. A
         total of 17 shares were issued and outstanding as of February 28, 2001
         and February 29, 2000.

         During April 2001, the Company repurchased all outstanding Series "A"
         stock for $350,000 (Note J).

         Series "AA" Non Voting, Cumulative, Convertible Preferred Stock

         Series "AA" Preferred Stock had rights superior to all other securities
         of the Company except to Series "A" Preferred Stock, including upon
         liquidation and as to payment of dividends, if any, carried a 10%
         cumulative dividend, was non-voting, redeemable by the Company at any
         time at face value and was convertible into common shares of the
         Company at 85% of the last five closing bid prices. On June 14, 1999,
         all of the Series "AA" Non Voting, Cumulative Convertible Preferred
         Stock was converted into 1,337,509 shares of Common Stock at the
         original conversion terms.


                                      F-20
<PAGE>   31


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE E:  CAPITAL STRUCTURE, continued

         Series "AAA" 12 % Cumulative, Convertible Preferred Shares

         Series "AAA" Preferred Stock has rights which are superior to all other
         securities of the Company except Series "A" and the Series "AA"
         Preferred Stock, including upon liquidation and as to payment of
         dividends, if any. Series "AAA" Cumulative, Convertible Preferred
         Voting Stock carries a 12% per annum dividend payable in stock or cash,
         is voting, with each share equal to 100 shares of Common Stock, and is
         redeemable, at the Company's option, according to the following
         procedure: upon written notice of conversion from the holders, the
         Company shall have 45 days from receipt of such notice to repurchase
         for cash up to 2,000 shares of the Series "AAA" 12% Cumulative,
         Convertible Preferred Shares at $1,000 per share.

         As a result of the settlement of the litigation involving the Company
         and its former Chairman, in which the Company was seeking to rescind
         the issuance of all common shares in the Company previously issued to
         the former Chairman, the number of common shares issuable to the
         holders pursuant to the conversion provisions of the Series "AAA"
         Cumulative, Convertible Preferred Shares were reduced from 8,000,000
         shares to 4,500,000 shares (but after pro rata adjustments, if any, for
         stock dividends, stock splits, reverse stock splits, and any other
         similar capital stock adjustments of a general nature). There are 8,000
         shares issued and outstanding at February 28, 2001 and February 29,
         2000. The cumulative dividend shall be computed based on the Preferred
         Stock $80 par value.

         Cumulative Dividends

         Aggregate preferred redemption value and cumulative dividends in
         arrears at February 28, 2001 is as follows:

<TABLE>
         <S>                                             <C>
         Series "A"

                Aggregate redemption value                    $1,087,375
                Cumulative preferred dividend in arrears         352,125
                Per share cumulative preferred dividend              .32

         Series "AAA"

                Aggregate redemption value                    $4,500,010
                Cumulative preferred dividend in arrears              29
                Per share cumulative preferred dividend              .00
</TABLE>



                                      F-21
<PAGE>   32


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE E:  CAPITAL STRUCTURE, continued

         As previously noted, during April 2001, the Company repurchased all
         outstanding Series "A" stock and settled all liability for dividends
         for $350,000 (Note J).

         Stockholder's Receivable

         Represents advances made to a stockholder and not reimbursed at
         February 29, 2000. Such advances were settled during the fiscal year
         ended February 28, 2001.

         Contributed Executive Services

         Contributed executive services represents an estimate of the fair value
         of services donated by the President of the Company.

         Celebrity Endorsement Contract

         During March 2000, the Company entered into a celebrity consulting and
         endorsement contract, which calls for the issuance of 110,000 shares of
         common stock for services to be performed during the term of the
         contract, which ends December 31, 2002. The shares were issued and
         recorded to contributed capital at fair market value of $145,200 and
         the related expense is amortized over the life of the contract, with a
         contra equity account of $93,953 representing unearned compensation at
         February 28, 2001. Additionally, commission payments are to be made for
         2.5% of gross revenue derived by the Company from sales of the
         Company's products in which the consultant directly participates, for
         example the Red Cross, US Armed Forces and similar organizations. No
         such sales occurred during the fiscal year ended February 28, 2001.

         Consulting Agreement

         During April 2000, the Company entered into a one-year consulting
         agreement with an individual who will provide marketing and consulting
         services for the Company. The agreement can be extended one year by the
         Company. As consideration for services to be rendered, the consultant
         received a stock option agreement to purchase 250,000 restricted shares
         of the Company's common stock at $1.125 per share.

         The options expire after three years, and vest one third per year based
         on performance benchmarks to be achieved according to the contract. The
         first third vested on the effective date of the agreement as an
         enticement to enter into the agreement. The fair market value for these
         options was estimated at the date of grant using a Black-Scholes option
         pricing model with the following assumptions



                                      F-22
<PAGE>   33


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE E:  CAPITAL STRUCTURE, continued

         for the fiscal year 2001: risk-free interest rate of 6%; expected life
         of the option of 3 years; zero dividend yield; and a volatility factor
         of the expected market price of SET common stock of 60%. The fair
         market value of the options earned during the fiscal year ended
         February 28, 2001 was estimated at $59,375 and recorded to expense with
         an offset to additional paid in capital.

         During May 2001, the parties mutually agreed to terminate the
         consulting agreement.

         Stock Compensation Plan

         During July 2000, the Company adopted a stock compensation plan to be
         administered by the Board of Directors, or a Compensation Committee to
         be appointed by the Board. Consultants, advisors, and employees of the
         Company are eligible to participate in the Plan. The Plan provides for
         the issuance of 300,000 shares of common stock to be issued as stock
         grants, or under stock option agreements. During October 2000, the
         Company settled approximately $109,200 of its accrued expenses through
         the issuance of 109,139 shares of common stock.

         The exercise price of each stock option is not to be greater than the
         fair market value of the stock at the date of grant, or the par value
         of the stock at the date of grant. However, the Board, or Compensation
         Committee, at its discretion, may grant options with an exercise price
         less than fair market value at the date of grant, but not less than the
         greater of the par value of the stock or 50% of the fair market value.
         Fair market value is defined as the mean of the sale or bid prices on
         each of the five trading days immediately preceding the date as of
         which such determination is made.

         Stock options expire on the earlier of (a) ten years form the date of
         grant, (b) six months from the date an employee terminates employment
         due to permanent disability, (c) the date of termination for an
         employee for reasons other than retirement, disability of death
         (however, may be extended by the Board for up to three years), or (d)
         three months from the date an employee retires with permission from the
         Board. The date at which the options may be exercised will be
         determined by the Board at the time of grant. There were no options
         outstanding under this Plan at February 28, 2001.



                                      F-23
<PAGE>   34



                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE E:  CAPITAL STRUCTURE, continued

         Warrants

         Outstanding warrants at February 29, 2000 were as follow:

<TABLE>
<CAPTION>
                                                   2000
                                                   ----

                                         Shares            WAEP*
         <S>                            <C>                <C>

         Outstanding, beginning
            of year                      100,000           1.50
         Granted                               0             .0
         Canceled-expired               (100,000)          1.50
                                        --------

         Outstanding, end of year              0
                                        ========

         Exercisable, end of year              0
                                        ========
</TABLE>

         * Weighted average exercise price

         There was no warrant activity during the fiscal year ended February 28,
         2001.

NOTE F:  INCOME TAXES

         The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                       February 28, 2001  February 29, 2000
                                       -----------------  -----------------
         <S>                           <C>                <C>
         Current:
              State                       $      1,600      $      1,600
              Federal                                0                 0

         Deferred:
              State                            (40,430)          (12,111)
              Federal                         (166,724)          (51,196)
              Valuation allowance              207,154            63,307
                                          ------------      ------------

         Provision for income taxes       $      1,600      $      1,600
                                          ============      ============
</TABLE>



                                      F-24
<PAGE>   35


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE F:  INCOME TAXES, continued

         The reconciliation of the effective tax rates and U.S. statutory tax
         rates are as follows:

<TABLE>
<CAPTION>
                                              February 28, 2001   February 29, 2000
                                              -----------------   -----------------
         <S>                                  <C>                 <C>

         Tax (benefit) of statutory rate            (34)%               (34)%
         Deferred tax effect of goodwill
              relating to Aqua Vision
              Acquisition                           (12)%               (12)%
         Contributed executive services              12 %                12 %
         Effect of state tax benefit                 (3)%                (3)%
         Other                                        4 %                (6)%
         Change in valuation allowance               33 %                43 %
                                                    ---                 ---
</TABLE>

         Effective tax Rate                           0 %                 0 %
                                                    ===                 ===

         At February 28, 2001, the Company has net operating loss carry
         forwards, for income tax reporting purposes, of approximately
         $1,828,000 and $914,000 available to offset future federal and
         California taxable income, respectively. The federal carryforwards
         expire through 2016 and the California carryforwards expire through
         2007.

         At February 2001, the Company had available tax credit carry forwards
         comprised of federal and state research and experimentation credits of
         approximately $8,000 and $4,000, respectively. The research and
         experimentation credit carryforwards expire through 2020 for federal
         purposes and do not expire for California purposes.

         The components of the net deferred tax asset and (liability) are as
         follows:

<TABLE>
<CAPTION>
                                               February 28, 2001  February 29, 2000
                                               -----------------  -----------------

         <S>                                    <C>                <C>
         Net operating loss carryforward        $       589,042    $       453,342
         Depreciation and amortization                    6,781              8,989
         Inventory & bad debt reserves                   79,066             30,336
         Other                                           28,914              3,982
                                                ---------------    ---------------

                                                        703,803            496,649
         Less:  Valuation allowance                    (703,803)          (496,649)
                                                ---------------    ---------------

         Net deferred tax asset (liability)     $             0    $             0
                                                ===============    ===============
</TABLE>



                                      F-25
<PAGE>   36


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE G:  COMMITMENTS AND CONTINGENCIES

         The Company leases an office and production facility under an operating
         lease that expires in fiscal year 2003. Total rent expense amounted to
         approximately $99,000 and $91,000 for the fiscal years ended February
         28, 2001 and February 29, 2000, respectively.

         Future minimum lease payments are as follows:

<TABLE>
<CAPTION>
         Year Ending
         -----------
         <S>                             <C>
             2002                        $   99,288
             2003                            92,812
                                         ----------

                                         $  192,100
                                         ==========
</TABLE>

         Legal Proceedings

         During June 2000, Seychelle Water Technologies, Inc. was served with a
         lawsuit filed by Safe Water Anywhere, Inc. The lawsuit was filed in
         State Superior Court in Orange County, California. Seychelle Water
         Technologies, Inc. "dba Seychelle Environmental Technologies, Inc." and
         an officer were named as defendants. The lawsuit alleged trade
         disparagement, interference with prospective business advantage, and
         unfair business practices and seeked unspecified damages and injunctive
         relief. The lawsuit was dismissed, without prejudice, during October
         2000.

         During May 2001, Safewater Anywhere LLC filed a lawsuit against
         Seychelle Water Technologies, Inc., an officer of the Company and
         others in the Orange County Superior Court. The complaint alleges
         breach of fiduciary duty, constructive fraud, promissory fraud,
         rescission, constructive trust, unfair trade practices and conversion.
         The Company believes that the claims are without merit and intends to
         aggressively defend the case. Accordingly, no accrual has been made for
         potential damages.

         No other legal proceedings of a material nature to which the Company is
         a defending party are pending at February 28, 2001.

         During July 1999, the Company settled a lawsuit, which it had brought
         against its formal Chairman, Mr. Berkich, and certain of his
         affiliates. Under the terms of the settlement, Mr. Berkich and his
         affiliates returned a total of 4,440,666 common shares for cancellation
         by the Company, and the Company released Mr. Berkich and his affiliates
         from all future liability to the Company.



                                      F-26
<PAGE>   37

                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE G:  COMMITMENTS AND CONTINGENCIES, continued

         Other Commitments and Contingencies

         The Company's current management believes that the Company's and SWT's
         former management entered into certain contracts, agreements and
         transactions which were not properly authorized or consummated. At the
         date of these consolidated financial statements, the Company is not
         aware of any formal claim relating to these contracts, agreements or
         transactions and believe that any such claims would be without merit.
         The Company cannot currently estimate the potential liability that
         would arise if such claim were to be made. Accordingly, no accrual has
         been made for these contingencies.

NOTE H:  RELATED PARTY TRANSACTIONS

         A Board member's firm provided legal services for the Company during
         the fiscal year ended February 28, 2001 for which the firm was granted
         100,000 shares of common stock valued at $19,000. The board member was
         also granted 50,000 shares of common stock valued at $9,500. During May
         2001, the Company issued these granted shares.

         The board member was previously granted 150,000 shares of common stock
         valued at $75,000 during the fiscal year 2000 as consideration for
         services rendered as a member of the board of directors during the 1999
         fiscal year.

         During fiscal year 2000, another board member was granted 40,000 shares
         of common stock valued at $20,000 for services rendered as a member of
         the board of directors during the 1999 fiscal year. Additionally, a
         company affiliated with this board member purchased $5,720 in product
         from the Company during the 2000 fiscal year.

         During the 2001 fiscal year, a stockholder of the Company advanced
         $110,000 to the Company, of which $20,000 was repaid prior to yearend.
         Outstanding stockholder advances accrue interest at 7.5 percent per
         annum and mature on dates ranging from November 2001 through January
         2002.

         During the 2001 fiscal year, an entity affiliated with the Company's
         principal shareholder purchased tooling from the Company for $25,000
         resulting in a gain on sale of approximately $8,000.



                                      F-27
<PAGE>   38


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE I:  LOSS PER SHARE

<TABLE>
<CAPTION>
                                            February 28, 2001  February 29, 2000
                                            -----------------  -----------------
         <S>                                 <C>                <C>

         Numerator:
           Net loss                          $      (878,742)   $      (188,465)
           Preferred stock dividends                (114,760)          (114,760)
                                             ---------------    ---------------

           Loss available to common
             stockholders                    $      (993,502)   $      (303,225)
                                             ===============    ===============

         Denominator:
           Weighted average shares
             Outstanding                           8,772,289          9,770,607
                                             ===============    ===============

         Basic and diluted profit (loss)
             per share                       $         (0.11)   $         (0.03)
                                             ===============    ===============
</TABLE>

         Options to purchase common stock were outstanding during the 2001 and
         2000 fiscal years (see Note E) but were excluded in the computation of
         the diluted loss per share because their inclusion would have an
         anti-dilutive effect.

         Also excluded from the computation of diluted loss per share because of
         their anti-dilutive effect was preferred stock convertible to
         approximately 5,587,000 shares of common stock at February 28, 2001 and
         February 29, 2000, respectively.

NOTE J:  SUBSEQUENT EVENTS

         Repurchase of Preferred Stock

         During April 2001, the Company repurchased for $350,000 all issued and
         outstanding Series A 13.5 percent non-voting, cumulative preferred
         stock, $0.01 par value per share and settled all liability for
         dividends. This repurchase was done in conjunction with a comprehensive
         settlement agreement with the beneficial owner of the preferred stock.

         The stock repurchase was funded by a loan made by one of the Company's
         principal stockholders.

         Stockholders' Transactions

         During March 2001, the Company sold discontinued inventory products to
         an affiliated entity of the principal shareholder of the Company for
         $12,000.




                                      F-28
<PAGE>   39


                   SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 2001

--------------------------------------------------------------------------------

NOTE J:  SUBSEQUENT EVENTS, continued

         During April and May 2001, the Company repaid $27,500 and $50,000,
         respectively, in stockholders' advances.

         During January, 2001, the Company approved approximately $47,500 in
         accrued legal expenses through the issuance of 250,000 shares of common
         stock, which were paid in May, 2001. Additionally, the Company paid
         approximately $3,800 in other accrued expenses through the issuance of
         20,000 shares of common stock.

         In connection with the repurchase of preferred stock, the Company's
         principal stockholder loaned the Company $350,000. This loan bears
         interest at 10 percent and is repayable upon demand.








                                      F-29
<PAGE>   40


ITEM 8. Disagreements With Accountants on Accounting and Financial Disclosure.

         On January 8, 2001, we engaged the firm of Rushall Reital & Randall, as
our independent accountants for the fiscal year ended February 28, 2001. On
January 9, 2001, we dismissed Raimondo Pettit Group, our independent auditors
for the fiscal years ending February 29, 2000 and February 28, 1999. The change
of accountants was approved by our Board of Directors. In the periods from their
date of engagement to the date of their dismissal and the date of the engagement
of our new accountants, which covers our fiscal years ending in 1999 and 2000
and any later interim period, we and Raimondo Pettit Group, had no disagreement
in accounting principles or practices, financial statement disclosure, or
auditing scope or procedure or other events reportable under Item 304 of
Regulation S-K, including, but not limited to, any disagreements during our most
recent fiscal year and any subsequent interim period preceding the date of
dismissal. Further, the former auditor's report on the financial statements did
not contain an adverse opinion or a disclaimer of opinion, nor was it qualified
or modified as to uncertainty, audit scope, or accounting principles.

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

                                    PART III

ITEM 9. Directors, Executive Officers, Promoters, and Control Persons;
Compliance with Section 16(a) of the Exchange Act.

         Our Directors and Executive Officers, their ages and positions held in
the Company as of February 28, 2001 are as follows:

<TABLE>
<CAPTION>
NAME                                     AGE             POSITION HELD
---------------------                    ---             ---------------------------------
<S>                                      <C>             <C>
Carl Palmer                              67              President, Chief Executive Officer
                                                         Treasurer and Director

Paul H. Lusby                            45              Secretary and Director

Donald S. Whitlock                       30              Director

Michelle Rae Palmer                      37              Vice President

Kenneth Rawald                           76              Vice President - Engineering
</TABLE>

         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.
There are no family relationships among the Company's officers and directors,
nor are there any arrangements or understandings between any of the directors or
officers of the Company or any other person pursuant to which any officer or
director was or is to be selected as an officer or director.

         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 personally oversees every aspect of operations. He is
the inventor of thirteen patented products related to water purification. Mr.
Palmer received a Bachelors Degree from Whittier College.

         Paul H. Lusby. Mr. Lusby has been Secretary and a director of the
Company since January, 1998. For the past six years he has been a principal of
the law firm of Cooper Kardaras & Kelleher LLP, formerly Cooper, Kardaras &
Scharf LLP. He has a Juris Doctor from the University of Virginia and a Bachelor
of Arts from the University of Virginia. He has been an active member of the
California Bar since 1982. He is also currently the Chairman of the Board of
Pacific Clinics, a non-profit organization dedicated to providing behavioral and
mental health care to children and adults suffering from behavioral and mental
health disorders.



<PAGE>   41

         Donald S. Whitlock. Mr. Whitlock has been a director of our Company
since January, 1998. For the past six years, he has been a principal of
International Corporate Development, Ltd., an investment banking firm
headquartered in Aspen, Colorado. Mr. Whitlock is a Fellow of the Aspen
Institute. He has a Bachelors degree in Economics from Loyola Marymount College.

         Michelle Rae Palmer. Ms. Palmer has been Vice President of our Company
since January, 1998. Her past and present responsibilities include all aspects
of accounting, reporting, corporate structure, operational configurations,
implementation of product lines. She was co-inventor of the Pres 2 Pure(TM)
water filtration system. She received a Bachelor of Arts Degree from California
State University, Long Beach.

         Kenneth Rawald. Mr. Rawald has been a Vice President of Engineering
since January, 1998. His primary responsibilities include product design and
engineering, fixture design and assembly procedures. He provides necessary
engineering drawings as well as presentation perspective sketches in various
mediums for our Company and patent offices. He received a certification in
Engineering from Pratt Institute.

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

         Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act")
requires our officers and directors and persons owning more than ten percent of
our Common Stock, to file initial reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Additionally, Item 405 of
Regulation S-B under the 34 Act requires us to identify in our Form 10-KSB and
proxy statement those individuals for whom one or more of the above referenced
reports was not filed on a timely basis during the most recent fiscal year or
prior fiscal years. Given these requirements, we have the following report to
make under this section. Mr. Lusby made an untimely filing of his Form 5 in the
last fiscal year. The TAM Irrevocable Trust and Select Property Investments,
LLC. also made untimely filings of its Forms 5 in the last fiscal year.

ITEM 10. Executive Compensation.

         The following table sets forth the Summary Compensation Table for the
Chief Executive Officer and the compensated executive officers with salaries in
excess of $100,000 per annum who were serving as 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.

<TABLE>
<CAPTION>
                                           SUMMARY COMPENSATION TABLE

                           Annual Compensation                 Long Term Compensation
                           -------------------                 ----------------------
                                               Awards                  Payouts
                                       ----------------------  ----------------------
Name                                              Other
 and                       Salary      Annual     Stock(1)(3)  Restricted      All
Principal(1)(2)(3)         Compen-      Bonus     Compen-         LTIP        Other
Position           Year    sation($)     ($)      sation ($)     Award(s)    Options/
------------------ ----    ---------   ------     -----------  -----------   --------
<S>                <C>     <C>         <C>        <C>          <C>           <C>
Carl               2001    $ 13,600      --           --            --           --
Palmer             2000    $ 12,000      --           --            --           --
President(1)       1999      --          --           --            --           --

Michelle Rae       2001    $101,901      --           --            --           --
Palmer             2000    $101,901      --           --            --           --
Vice President     1999    $ 88,624      --           --            --           --

Jeff DeLong        2001      --          --           --            --           --
Vice               2000      --          --           --            --           --
President(2)       1999    $120,000      --           --            --           --
</TABLE>

(1) The fair value of Mr. Palmer's compensation, for accounting purposes, was
estimated at $72,000 for fiscal 2001, 2000 and 1999, of which $58,400, $60,000
and $72,000 respectively was treated as capital contribution. Mr. Palmer serves
as our President on a full-time basis.

(2) Mr. DeLong also received a car allowance of $500 per month, of which $3,500
had been paid in cash through February 28, 1999. He resigned in February, 2000
to pursue other opportunities.

         We have no compensation committee, retirement, pension, sharing, stock
option, insurance or other similar programs but plan to establish such programs
in the future, although there are no definitive plans to do so at this time.

         During the 2001 fiscal year we issued 35,000 shares of our Common Stock
as additional compensation to our employees for the 2001 fiscal year.

         For the fiscal years 2001 and 2000, we paid health care insurance for
our employees. We have no pension plan. We have no plans or agreements which
provide compensation in the event of a change in control. We have no plans or
agreements which provide compensation in the event of termination of employment.
<PAGE>   42


         We do not customarily pay members of our Board of Directors any fees
for attendance or similar remuneration, but reimburse them for any out-of-
pocket expenses incurred by them in connection with their activities.

         Mr. Paul Lusby, one of our directors and shareholders, provided legal
services through his law firm for us during the 1999 fiscal year for which his
firm was compensated $2,000 in cash and 100,000 shares of Common Stock, with a
value of $50,000. During the fiscal year ended February 29, 2000, we granted but
did not yet issue Mr. Paul Lusby 150,000 shares of Common Stock, valued at
$75,000, as consideration for past services rendered as a member of the Board of
Directors. During the fiscal year ended February 28, 2001, we granted Mr. Lusby
an additional 50,000 shares of common stock and his law firm, a total of 100,000
shares of our common stock. These shares were issued after February 28, 2001.

         Mr. Donald S. Whitlock, one of our directors and shareholders, provided
advice to us, through a firm with which he is associated, on capitalization and
business development matters during the 1998 and 1999 fiscal years. The firm
with which he is associated was issued 559,266 shares at inception and was paid
$54,478 and $150,451, respectively. Subsequent to the 1999 fiscal year end, he
was personally granted 40,000 shares of common stock valued at $20,000 for past
services rendered as a member of our Board of Directors.

ITEM 11. Security Ownership of Certain Beneficial Owners and Management.

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, 2001, was
known by us to own beneficially more than five percent (5%) of our Common Stock;
(ii) our individual directors and (iii) our officers and directors as a group.
As of February 28, 2001, there were a total of 8,996,480 shares of Common Stock
issued and outstanding.

<TABLE>
<CAPTION>
NAME AND ADDRESS                    AMOUNT AND NATURE OF                    PERCENT OF
OF BENEFICIAL OWNER                 BENEFICIAL OWNERSHIP(1)(2)              CLASS
-------------------                 --------------------------              ----------
<S>                                 <C>                                     <C>
The TAM Irrevocable Trust                   3,300,000(3)                     36.7%
4012 S. Rainbow #K111
Las Vegas, NV 80103-2012

FTS Worldwide Corp.                         1,337,509                        14.9%
24 Route De Malagnon
1208 Geneva, Switzerland

Carl Palmer(3)                                     -0-                         -0-
32921 Calle Perfecto
San Juan Capistrano, CA 92675

Donald S. Whitlock                             40,000(5)                      .45%
720 East Hyman Ave., Suite 301
Aspen, CO 81611

Paul H. Lusby                                   2,500(6)                      .03%
141 East Walnut Street
Pasadena, California 91103

Michelle Palmer                               102,000(4)                     1.13%
32921 Calle Perfecto
San Juan Capistrano, CA 92675

Kenneth Rawald                                 67,000                         .74%
32921 Calle Perfecto
San Juan Capistrano, CA 92675

All officers and directors                    211,500                        2.35%
as a Group (five persons)
</TABLE>

(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. In addition, this entity owns shares of our Series
"AAA" 12% Cumulative Convertible Preferred Shares.

(4) Does not include shares owned by Select Property Investments, LLC, a limited
liability company owned by Ms. Michelle Palmer. This entity owns no common
shares directly but owns shares of our Series "AAA" 12% Cumulative Convertible
Preferred Shares.

(5) Does not include 4,700 shares owned of record by the wife of Mr. Whitlock.
Mr. Whitlock disclaims any beneficial ownership or interest in these shares.

(6) During the fiscal year ended February 29, 2000, we granted but did not yet
issue Mr. Paul Lusby, one of our directors, 150,000 shares of Common Stock,
valued at $75,000, as consideration for past services rendered as a member of
the Board of Directors. During the fiscal year ended February 28, 2001, we
granted Mr. Lusby an additional 50,000 shares of common stock and his law firm,
Cooper Kardaras & Scharf, LLP, a total of 100,000 shares of our common stock.
These shares were issued after February 28, 2001.
<PAGE>   43

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         We have entered into a Purchase Agreement and an Amended Purchase
Agreement for the acquisition of Aqua Vision International, a private California
entity controlled by the TAM Irrevocable Trust and Select Property Investments,
LLC. 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. Select Property Investments, LLC is a
limited liability company owned by Ms. Michelle Palmer. Mr. Palmer also
disclaims any beneficial ownership or interest in this limited liability
company. Under the terms of these agreements, these entities received 8,000
shares of Series "AAA" 12% Cumulative Convertible Preferred Shares.

         From its inception through its acquisition by Seychelle Environmental
Technologies, Inc. on January 30, 1998, Seychelle Water Technologies, Inc. spent
most of its time and effort to raise funds to finance the common venture and to
market Aqua Vision products. The owners of both companies at the time came to
believe that both organizations would mutually profit from an affiliation
between the two companies. Mr. Palmer negotiated the transaction as an agent of
Aqua Vision. The original Purchase Agreement was negotiated by Seychelle Water
Technologies, Inc. Seychelle Environmental Technologies, Inc. acquired Aqua
Vision the day after the Seychelle Environmental Technologies, Inc. transaction.
The original Purchase Agreement and the Amended Purchase Agreement were approved
by the Board of Directors of SET after the January 30, 1998 acquisition. Mr.
Palmer was a member of the Board of Directors but did not participate in the
voting.

         Mr. Paul Lusby, one of our directors and shareholders, provided legal
services through his law firm for us during the 1999 fiscal year for which his
firm was compensated $2,000 in cash and 100,000 shares of Common Stock, with a
value of $50,000. During the fiscal year ended February 29, 2000, we granted but
did not yet issue Mr. Paul Lusby 150,000 shares of Common Stock, valued at
$75,000, as consideration for past services rendered as a member of the Board of
Directors. During the fiscal year ended February 28, 2001, we granted Mr. Lusby
an additional 50,000 shares of common stock and his law firm, a total of 100,000
shares of our common stock. These shares were issued after February 28, 2001.

         Mr. Donald S. Whitlock, one of our directors and shareholders, provided
advice to us, through a firm with which he is associated, on capitalization and
business development matters during the 1998 and 1999 fiscal years. The firm
with which he is associated was issued 559,266 shares at inception and was paid
$54,478 and $150,451, respectively. Subsequent to the 1999 fiscal year end, he
was personally granted 40,000 shares of common stock valued at $20,000 for past
services rendered as a member of our Board of Directors.

         During the fiscal year ended February 28, 2001, The TAM Irrevocable
Trust, one of our principal shareholders, advanced $110,000 to us, of which
$20,000 was repaid prior to the fiscal year end. In April & May, 2001, we repaid
$27,500 and $50,000, respectively. These advances accrue interest at a rate of
7.5% per annum and mature on dates ranging from November, 2001 to January, 2002.

         During the fiscal year ended February 28, 2001, Pacific Financial,
Inc., an affiliate of TAM Irrevocable Trust, purchased tooling from us for
$25,000.

         In January, 2001, we authorized the issuance of a total of 270,000 of
our common shares for past services, valued at $.19 per share, to various
entities, including a total of 150,000 of our common shares to Mr. Paul Lusby,
one of our directors, and his law firm.

         In April 2001, we repurchased and retired all of our issued and
outstanding Series A 13.5% Non-Voting, Cumulative Preferred Stock, $.01 par
value per share. This retirement eliminated all accrued dividends on this Stock.
This repurchase was combined with a comprehensive settlement agreement, for the
benefit of all parties, with the beneficial owner of the Preferred Stock. The
TAM Irrevocable Trust, one of our principal shareholders, loaned us $350,000.00
at 10% simple interest, repayable upon demand, to finance the transaction.



<PAGE>   44

                                     PART IV

ITEM 13. Exhibits and Reports on Form 8-K.

         (a) The following financial information is filed as part of this
report:

             (1)     Financial Statements

             (2)     Schedules

             (3)     Exhibits. The following exhibits required by Item 601 to be
                     filed herewith are incorporated by reference to previously
                     filed documents:



Exhibit No.                Description

  2A*             Plan of Exchange between Seychelle Environmental Technologies,
                  Inc. and Seychelle Water Technologies, Inc.

  3A*             Articles of Incorporation

  3B*             Articles of Merger of Royal Net, Inc. into Seychelle
                  Environmental Technologies, Inc

  3C*             Amendment to Articles of Incorporation re: Series "A"
                  Preferred Stock

  3D*             Amendment to Articles of Incorporation re: Series "AA"
                  Preferred Stock

  3E*             Amendment to Articles of Incorporation re: Series "AAA"
                  Preferred Stock

  3F*             Bylaws

 10A*             Purchase Agreement with Aqua Vision

 10B*             Amended Purchase Agreement with Aqua Vision

 10C*             Consulting Agreement with Mr. Stan Esecson

 10D*             Consulting Agreement with Mr. Pat Boone

----------
* Previously filed

         (b) Reports on Form 8-K. The Company filed one report on Form 8-K,
dated January 10, 2001, regarding our change of accountants.



<PAGE>   45

                                   SIGNATURES

         In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                      SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

Dated: 6/11/01                        By: /s/ Carl Palmer
                                         ---------------------------
                                              Carl Palmer
                                              President

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

                                      CHIEF FINANCIAL OFFICER

Dated: 6/11/01                        By: /s/ Carl Palmer
                                         ---------------------------
                                              Carl Palmer
                                              Treasurer and Director

Dated: 6/11/01                        By: /s/ Paul H. Lusby
                                         ---------------------------
                                              Paul H. Lusby
                                              Secretary and Director

Dated: 6/11/01                        By: /s/ Donald S. Whitlock
                                         ---------------------------
                                              Donald S. Whitlock
                                              Director