**UNITED
        STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**






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





For
      the
      fiscal year ended February 28, 2007





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





For
      the
      transition period from _______________ to __________________





*Commission
      File No. 0-29373*









**Seychelle
      Environmental Technologies, Inc.**


(Exact
      Name of registrant as specified in its charter)







Nevada
            33-0836954(State
                or other jurisdiction
            (IRS
                Employer File Number)Of
                incorporation)33012
                Calle PerfectoSan
                Juan Capistrano, California
            92675(Address
                of principal executive offices)
            (zip
                code)




(949)
      234-1999


(Registrant's
      telephone number, including area code)





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





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





Common
      Stock, $0.001 per share par value





Check
      whether the issuer (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: [] No:  [X]





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. [
      ]





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





State
      issuer's revenues for its most recent fiscal year $952,646. The aggregate market
      value of the voting stock of the Registrant held by non-affiliates as of
      February 28, 2007 was approximately $10,311,867. The number of shares
      outstanding of the Registrant's common stock, as of the latest practicable
      date,
      February 28, 2007, was 25,150,896.





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













**TABLE
      OF CONTENTS**




Item
            Description
            Page**Part
                  I**Item
                  1.
            Description
                  of the Business
            3Risk
                  Factors Related to Our Business
            8Item
                  2.
            Description
                  of Properties
            11Item
                  3.
            Legal
                  Proceedings
            12Item
                  4.
            Submission
                  of Matters to a Vote of Security Holders
            12**Part
                  II**Item
                  5.
            Market
                  for Common Equity and Related Stockholder Matters
            12Item
                  6.
            Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
            14Item
                  7.
            Financial
                  Statements
            21Item
                  8.
            Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
            62Item8A.
            Controls
                  and Procedures
            62Item
                  8B.
            Other
                  Information
            63**Part
                  III**Item
                  9.
            Directors,
                  Executive Officers, Promoters, Control Persons and Corporate Governance;
                  Compliance with Section 16(a) of the Exchange Act
            64Item
                  10.
            Executive
                  Compensation
            66Item
                  11.
            Security
                  Ownership of Certain Beneficial Owners and
                  Management
            69Item
                  12.
            Certain
                  Relationships and Related Transactions, and Director
                  Independence
            69**Part
                  IV**Item
                  13.
            Exhibits
                  List
            71Item
                  14.
            Principal
                  Accountant Fees and Services
            72Signatures
            74









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**PART
      I**





**ITEM
      1.                 
Description of the Business.**




**(a)  
          Business History of Seychelle**


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





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





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




As
          of
          February 28, 2007, the TAM Irrevocable Trust (TAM Trust), one of our principal
          shareholders, has loaned the Company funds to finance Company operations,
          with
          an outstanding balance of $299,175 at 10% simple interest, repayable after
          March
          1, 2011.  Accrued interest due to the TAM Trust amounted to $251,761
          as of February 28, 2007.   The Company believes that despite the
          increase in sales experienced during the fiscal years ended February 28,
          2006
          and 2007, additional funding may still be required from the TAM Trust or
          other
          shareholders.  During March 2007, the Company received an additional
          $100,000 in funds from the TAM Trust to continue the development of its
          new
          emergency preparedness products.  During June 2007, the TAM Trust committed
          to providing up to $250,000 in additional funding, if
          required.
  **Organization**




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




**(b)
      Business of Seychelle**




**General**





Seychelle
      designs and manufactures unique, state-of-the-art Ionic Adsorption Micron
      Filters that remove up to 99.8% of all pollutants and contaminants found in
      any
      fresh water source. Using breakthrough technology, Seychelle has also developed
      proprietary ozone systems. Patents or trade secrets cover all proprietary
      products. Since human bodies are 75% water, our mission is twofold: First,
      to
      help educate everyone to the fact that the quality of water they drink is
      important and second, to make available low-cost, effective filtration products
      that will meet the need for safe, great tasting, high quality drinking
      water.





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





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






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





**Business
      Plan**




The
      management of Seychelle represents over 100 years of combined experience in
      developing improvements and innovations in the field of micron technology.
      As a
      result, our products can deliver up to .2-micron filtration, at pennies per
      gallon, with pressure as low as 5 pounds per square inch (PSI). Further, our
      point of difference filtration systems remove up to 99.8% of all known
      pollutants and contaminants most commonly found in fresh drinking water supplies
      in the four major areas of concern as follows:




**AESTHETICS:**Taste, chlorine, sand, sediment and odor problems.
 **BIOLOGICS:**Pathogens such as Cryptosporidium, Giardia and E. coli
        bacteria.
 **CHEMICALS:**Pesticides, detergents, toxic chemicals and industrial
        waste.
 **DISSOLVED
        SOLIDS:**Heavy metals such as aluminum, asbestos, copper, lead, mercury
        and radon-222.




Seychelle
            filters have been tested by independent and government laboratories throughout
            the world and are approved for sale and distribution in the following
            countries:
            United States, Mexico, United Kingdom, Korea, Malaysia, Indonesia, Japan,
            The
            Peoples Republic of China, Vietnam, New Zealand, Australia, Brazil, Venezuela,
            Argentina, South Africa, and Pakistan. In the United States, Seychelle
            filters
            have been certified by California and Florida approved independent laboratories
            implementing Environmental Protection Agency, American National Standards
            Institute, and National Sanitation Foundation protocol, procedures, standards
            and methodology. Additionally, we offer a test pack for potential customers
            that
            include the test results from selected countries. In addition, results
            from the
            United States, United Kingdom and South Africa are displayed on our Website:
             www.seychelle.com.   To our knowledge, no other
            water filtration system can achieve this level of removal of up to 99.8%
            of all
            known pollutants and contaminants most commonly found in fresh drinking
            water
            supplies in the four major areas of concern.  The benefit of such
            filtration can save lives worldwide as awareness of Seychelle’s product line
            increases and is used.




**Principal
      Products or Services and their Markets**




**Portables
      Products**





Seychelle
      has a varied line of portable filters for people on the go. They include Flip
      Top’s and varied military style canteens - regular or with silverators (for
      further bacteria control). Sizes are from 18oz to 30oz, and provide up to 100
      gallons of pure drinking water from any fresh water source, running or stagnant
      (such as rivers, lakes, ponds, streams and puddles).




The
      current portable products include: Flip-Top, Survivor, Canteen, In-Line
      Eliminator, Pure Water Bag, Pump n’ Pure, Facial Mist and replacement
      filters.





**Home
      Products**





Seychelle
      technology has developed products for above the counter, below the counter,
      and
      to filter the whole house. Installation is easy, and unlike reverse osmosis
      (RO), only a low-pressure line is needed. No water is wasted in the filtration
      process. Seychelle also makes a variety of shower filters.





The
      current home products include: Point Of Entry, Total Home and all replacement
      filters, and feature technology developed for portable products.







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**New
      Products**





We
          have
          re-engineered the Flip Top bottle to eliminate parts, reduce costs, provide
          a
          more streamlined look, and add a disinfectant capability. Additionally,
          the
          In-Line Filter is being changed to provide greater filter media, and to
          meet
          field conditions that require a longer, narrower design.
 
 We
        signed
        a license agreement with Gary Hess (the License Agreement), doing business
        as
        Aqua Gear USA on June 6, 2002 for a product known as the "Hand Held Pump
        Technology." We licensed all proprietary rights associated with this technology.
        We pay a 2% royalty on our gross sales for the technology during the term
        of the
        License Agreement. The License Agreement is for an initial term of five years,
        with five successive five-year renewals. This offers us an additional
        proprietary product in the portable filtration industry. We believe that
        this
        License Agreement compliments our current product line. As of the date of
        this
        filing, this technology has resulted in a product called Pump N’ Pure which
        allows the user to draw filtered water from virtually any container or location.
        The Company continues to believe that the product will be viable in developing
        countries, as an emergency preparedness product, and for families where cost
        is
        a prime consideration. The Company plans to start marketing the Hand Held
        Pump
        as part of its Aqua Gear product line to the United States sporting goods
        industry in fiscal 2008. As of the date of this filing, approximately $12,000
        in
        royalties has been paid to date under this License Agreement.
  During
          July 2006 the Company signed a second license agreement (the Second Agreement)
          with Gary Hess, doing business as Aqua Gear USA. We will pay a 2% royalty
          on net
          sales for this technology up to $120,000 and 1% thereafter. The Second
          Agreement
          shall continue indefinitely unless terminated due to a default or breach
          of the
          agreement. This affords the Company additional patent protection (patent
          #
          6,136,188) and ownership of the trademark Aqua Gear.  Products affected
          include all Aqua Gear trademarked filter bottles and flip up bottles sold
          in the
          product line.
 During
          April 2006, the Company issued 50,000 common shares of common stock to
          shareholders of Continental Technologies, Inc. (Continental) with an approximate
          value of $16,100 for the Redi Chlor brand name, trademark and the use of
          the EPA
          Registration Number 55304-4-7126. As of the date of this filing, the Company
          has
          commenced selling the Redi Chlor brand name water chlorine tablets to consumers,
          dealers, distributors and manufacturers. Each tablet disinfects five gallons
          of
          source water.  Under the agreement, the Company further
          agreed to remit Continental a 10% commission on net sales, as defined,
          of the
          existing product and 10% on any product sold by Continental for us to their
          existing or new customers at our original equipment manufacturer
          (OEM)  prices. The agreement is for the life of
          Seychelle.
 **Manufacturing**
 The
              Company has determined that we will be able to produce some of our
              product
              components in China at a lower cost than in the U.S. while maintaining
              equivalent quality standards.   Our filter will continue to be
              manufactured in the U.S. The final assembly of our products is completed
              at our
              facility in San Juan Capistrano.
 On
        September 1, 2005, we signed an exclusive agreement with Huanghua Seychelle
        Plastic Co., Ltd. to manufacture component parts.





**Sales
      Channels**





Sales
      channels to be pursued will include: Retail, Military, Government, Multi-Level
      Marketing, International, OEM and Joint Ventures.





Seychelle
        has signed product distribution agreements with Confident, Inc.
        for  Peoples Republic of China, Taiwan, Hong Kong and Singapore and
        with ABMS Health Care for India and we are exploring opportunities in other
        countries. During the fiscal years ended February 28, 2007 and 2006, total
        sales
        to Confident, Inc. and their affiliated entities approximated $28,100 and
        $90,000, respectively. To date there have been no sales to AMBS Health
        Care.


In
      Japan,
      Vortex represents Seychelle as a non-exclusive distributor selling our product
      line to dealers, distributors and retail stores. During the fiscal years ended
      February 28, 2007 and 2006, total sales to Vortex approximated $30,000 and
      $7,400, respectively.





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In
                    the
                    U.S., Food For Health, Inc. a manufacturer and marketer of nutritional
                    food and
                    vitamin products based in Orem, Utah, has signed an agreement
                    with us to sell
                    certain water filtration products under the Aqua Gear brand name
                    to a variety of
                    their customers, including big-box stores in the U.S. and Canada.
                    To date, Food
                    For Health, Inc. has ordered 100,000 bottles.  As of February 28,
                    2007, approximately 53,000 bottles are on back order with an
                    approximate sales
                    value of $297,000.  Separately, Food For Health has contracted with us
                    to source varied products (such as pots, radios, utensils, thermal
                    blankets,
                    etc.) made in China for their Emergency Preparedness packs to be sold
                    to
                    their customers. These products will be shipped direct to Food
                    For Health from
                    China.  In fiscal 2007, we received approximately $110,000 in
                    distribution income relating to these shipments of approximately
                    $615,000 in
                    various emergency preparedness products.
 
 On
                    April
                    1, 2007, the exclusivity clause in the Food For Health distribution
                    agreement
                    expired.
  We
                        will
                        also continue to promote our products and technologies to
                        non-profit
                        organizations, such as the Red Cross, the U.S. and international
                        militaries,
                        missionaries, charitable and fund-raising groups and other
                        philanthropic
                        organizations.
 
 On
                        June
                        14, 2007, the Company entered into a joint venture agreement
                        with H2O Age, Inc.,
                        a Nevada corporation.  The joint venture provides for certain
                        synergies for the two companies and includes the exclusive
                        rights to market and
                        sell under the H2O Age brand with "Seychelle Inside".   H2O Age will
                        market and sell on an exclusive basis to certain market channels
                        in the U.S. and
                        worldwide.  Seychelle and H2O Age are working on a market strategy to
                        promote safe and affordable drinking water to meet the needs
                        of the
                        consumer.
 **Raw
                Materials**
 
 Seychelle’s
                filters include the finest powdered water-activated coconut and three
                other
                media as components in the porous plastic ionic filter. The media
                itself, the
                formulation process, and manufacturing methodology are governed by
                trade
                secrets. To date, there is adequate availability of material for
                all of our
                products. We do not expect this situation to change in the near
                future.
  **Customers
          and Competition**
 
 Seychelle
          products compete against all forms of drinking water: tap water supplied
          by
          municipal water districts, bottled water, and home water treatment systems
          provided by suppliers (such as independent dealers, distributors, catalogs,
          Internet sellers, etc.) in the form of reverse osmosis systems, distillation,
          and filtration systems.  Therefore, Seychelle’s portable and home
          filtration products compete in a limited segment of the market as an alternative
          to other sources of drinking water.
 
 Seychelle
          is an emerging company with negligible share of the world’s pure water market.
          Our products sell in a niche category of the market - portable filtration
          bottles that use ionic adsorption micron filtration technology, which remove
          many organic and inorganic contaminants that simple activated carbon filters
          cannot. Most activated carbon filters on the market remove Chlorine, sediment
          and dirt thus improving taste and odor, as well as a handful of other
          contaminants such as Lead, Mercury, Zinc and Copper. This would include
          leading
          brands such as Brita, PUR, General Electric and Culligan, who dominate
          the
          market. In the portable segment of the market, there are hundreds of small
          companies selling a variety of specialized filters with no one company
          having a
          majority share and no industry data available. We believe that our current
          share
          of this market is negligible.
 
 Seychelle
          sells its products in two ways. First, it sells its own brand to individuals,
          dealers, distributors, multilevel marketing companies and missionaries
          on a
          direct basis, and through our Internet Web Site. Second, the Company offers
          its
          products to the same customers as a private label supplier if purchasers
          buy in
          significant volume. In some instances, we may supply only filters for their
          bottles or hydration backpacks as opposed to completed products.
 
 Currently,
                the majority of our sales are to customers in the U.S.  However, with
                distribution agreements for the Peoples Republic of China, Hong Kong,
                Japan, Singapore, Taiwan and India, overseas sales could increase
                in the future
                as these countries have a greater need for safe drinking water. As of
                February 28, 2007, two customers (Food For Health, 39% and Wellness
                Enterprises,
                14%) each account for greater than 10% of our total sales.
  **Backlog**
 
 As
                of
                February 28, 2007, Food For Health, Inc. has approximately 53,000
                bottles on
                back order, with an estimated sales value of approximately
                $297,000.  Additionally, as of February 28, 2007,the Company had open
                purchase orders from Wellness Enterprises for 24,000 bottles, with
                an estimated
                sales value of $163,000.


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**Employees**





As
            of
            February 28, 2007, we had a President and two (2) executive employees
            managing
            the Company with three (3) administrative employees supporting that
            effort.  In production, operations and warehousing we had one (1)
            full-time employee and four (4) independent contractors working to fill
            all
            sales orders.
  **Proprietary
            Information and Technology**
 
 We
                  own a
                  patent for the portable water filtration system with the filter
                  cap assembly,
                  Patent # 5,914,045 that expires on June 22, 2016. As described
                  in the Abstract,
                  it is "[a] filter assembly for a flexible, portable bottle having
                  a sealing cap
                  including a filter attached to the interior of the cap to filter
                  out
                  substantially all inorganics, organics, radiological chemicals
                  and microbiology.
                  The filter assembly also may include a second filter or iodinator
                  sealed in the
                  flexible bottle to further remove micro-organisms from water passing
                  there-through. The filter assembly is designed so that the flexible
                  bottle must
                  be pressurized, as by being hand pressed, after it is filled with
                  water to force
                  flow of water through the [sic] either or both of the filters.
                  The filter in the
                  cap includes a check valve to allow the bottle to be re-pressurized
                  after water
                  has been dispensed from the bottle." The filter cap assembly is
                  the core to the
                  Company’s product lines, and will drive sales for many years to come as
                  the
                  Company adds new products and configurations.
 
 We
                  also
                  own a patent, Patent #6,058,971 that expires on May 9, 2017 for
                  a quick connect
                  diverter valve. As described in the Abstract, it is "A quick-connect
                  diverter
                  valve for use in connecting existing water faucets and water filtration
                  units in
                  and around a kitchen, or other areas where clean water is desired."
                  The quick
                  connect diverter value is used in the above the counter filter
                  system currently
                  being sold in the United States, Pakistan and China. The Company
                  believes this
                  is a viable and growing product line for developing countries where
                  the quality
                  of water continues to deteriorate.
 
 As
                  these
                  patents expire in 9 and 10 years, respectively, the Company cannot
                  at this time
                  estimate the financial impact of the expiration of these patents.
 
 Trademark
                  registrations have been filed with the United States Patent and
                  Trademark Office
                  for both Seychelle and Aqua Gear and are in progress.
 
 We
                  have a
                  trade name, "Seychelle Water Filtration Products, Inc.," which
                  we use in our
                  commercial operations.
 **Government
            Regulation**
 
 We
            are
            not, as a company, subject to any material governmental regulation or
            approvals.
            However, our products are subject to inspection and evaluation by regulatory
            authorities that have jurisdiction over water quality standards. Such
            authorities are on the federal, state, and local level, both in the United
            States and overseas, where we market our products. Most of our products
            have
            already been inspected and evaluated by all applicable governmental authorities
            in the areas in which we operate or plan to operate in the near future.
            With
            respect to our current focus of operations, we do not know if governmental
            regulation will have a material impact on us in the future.
 
 **Research
            and Development**
 
 We
                have
                spent approximately $7,100 in research and development activities
                during the
                fiscal year ended February 28, 2007.  As of the time of this filing,
                virtually all research, development and testing are being performed
                by Carl
                Palmer, the Company’s CEO, as part of his day-to-day
                duties.
 **Environmental
            Compliance**
 
 At
            the
            present time Seychelle is not subject to any material costs for compliance
            with
            any environmental laws. With respect to our current focus of operations,
            we do
            not know if environmental compliance will have a material impact on us
            in the
            future.








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**Risk
      Factors Related to Our Business**





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.





**Inconsistent
        Operations.**Our Company was formed on January 23, 1998 and acquired the
        operations of a company that had been in existence since 1995. Since beginning
        operations, we have sold water filtration products to a number of customers.
        The
        Company has continued to expand its product lines but have not generated
        enough
        revenue to support operations. This has required us to seek both investor
        capital and financing to allow new management to reverse the downward sales
        trend.  Recent sales activity for the fiscal years ended February 28,
        2006 and 2007 have expanded suggesting a positive change in direction with
        the
        new management. Still, we have limited financial results upon which you may
        judge our potential. The Company is not engaged in enough consistent business
        activity over a sustained period of time to be said to have a successful
        operating history. We have experienced in the past and may experience in
        the
        future under-capitalization, shortages, setbacks and many of the problems,
        delays and expenses encountered by any early stage business. These
        include:





-
            operating
                as a public entity, incurring non-cost of sales expenses such as
                accounting, auditing, legal activities, and maintaining full compliance
                of
                a regulated reporting status including continuing Sarbanes-Oxley
                requirements.-
            unplanned
                delays and expenses related to research, development and testing
                of our
                new products





-
            production
                and marketing problems that may be encountered in connection with
                our
                existing products and technologies,-
            competition
                from larger and more established companies,
                and





-
            under-capitalization
                to challenge the lack of market acceptance of our new products and
                technologies.




**Lack
              of Profitability.**  To date, we have incurred significant
              losses. For the fiscal year ended February 28, 2007, our revenue was
              $952,646
              versus $751,844 in the prior fiscal year. This increase was due primarily
              to
              sales to one customer, Food For Health (see Sales Channels). Net loss
              for the
              fiscal year ended February 28, 2007 was $1,464,298, due to approximately
              $315,000 in accounting and legal fees to assist in the audit and preparation
              of
              the Form 10 and other SEC filings, $621,000 in financing costs with
              TAM Trust, a
              principal shareholder and the Company’s primary lender, the amortization of
              $146,000 in officer stock compensation, and the Company’s inventory adjustments
              of $215,000 for the countertop, water pitcher and inactive inventory
              products.
 
 **Inherently
              Risky-Competition.**  The water filtration business is highly
              competitive with many companies having access to the same market. Substantially
              all of them have greater financial resources and longer operating histories
              than
              we have and can be expected to compete within the business in which
              we engage
              and intend to engage. There can be no assurance that we will have the
              necessary
              resources to be competitive. Therefore, investors should consider an
              investment
              in us to be an extremely risky venture.
  **Delays
              in the Development of New Products.** We have a limited product line, and
              the development of some of our technologies has taken longer than anticipated
              and could be additionally delayed. Therefore, there can be no assurance
              of
              timely completion and introduction of improved products on a cost-effective
              basis, or that such products, if introduced, will achieve market acceptance
              such
              that, in combination with existing products, they will sustain us or
              allow us to
              maintain profitable operations.   As of the time of this filing,
              the Company has developed a new emergency preparedness product.  The
              Company intends to market these products during the fiscal year ending
              February 28, 2008.
  **Dependence
              Upon Technology.** We are operating in a business that requires extensive
              and continuing research, development and testing efforts.  As of the
              time of this filing, virtually all research, development and testing
              are being
              performed by Carl Palmer, the Company’s CEO as part of his day-to-day
              duties.  There can be no assurance that new products developed by our
              competitors will not render our products obsolete or non-competitive
              at some
              time in the future.





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





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





**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. However, to the best
      of
      management’s knowledge, no company to date has been able to match our technology
      or our cost.





**Success
      Dependent Upon Management.**Our success is dependent upon the decision
      making of our directors and executive officers. These individuals have made
      a
      full commitment to the business. The loss of any or all of these individuals
      could have a materially adverse impact on our operations.





**Our
      Senior Management’s Limited Experience Managing A Publicly Traded Company May
      Divert Management’s Attention From Operations and Harm Our
      Business**.  Our management team has relatively limited recent
      experience managing a publicly traded company and complying with federal
      securities laws, including compliance with recently adopted disclosure
      requirements on a timely basis.  Our management will be required to
      design and implement appropriate programs and policies in responding to
      increased legal, regulatory compliance and reporting requirements, and any
      failure to do so could lead to the imposition of fines and penalties and harm
      our business.





**The
      Acquisition of Other Technologies Could Result In Operating Difficulties,
      Dilution and Other Harmful Consequences**.  We may selectively
      pursue strategic acquisitions, any of which could be material to our business,
      operating results and financial condition.  Future acquisitions could
      divert management’s time and focus from operating our business.  In
      addition, integrating an acquired technology is risky and may result in
      unforeseen operating difficulties and expenditures.





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








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





**Changes
            to Financial Accounting or Other Standards May Affect Our Operating Results
            and
            Cause Us To Change Our Business
            Practices.**     We prepare our financial
            statements to conform to generally accepted accounting principles, or
            GAAP, in
            the United States.  These accounting principles are subject to
            interpretation by the Financial Accounting Standards Board (FASB), the
            Securities and Exchange Commission, the Public Company Accounting Oversight
            Board and various other bodies.  A change in those policies could have
            a significant effect on our reported results and may affect our reporting
            of transactions completed before a change is announced.
  For
                example, the Company has used stock warrants and other equity incentives
                as a
                fundamental component of our executive compensation packages.  The
                Company believes that stock warrants and other equity incentives
                directly
                motivate our executives to maximize long-term stockholder value and,
                through the
                use of vesting, encourage executives to remain with the Company.   In
                December 2004, the FASB issued Statement of Financial Accounting
                Standards
                (SFAS) No. 123(R), which requires that grants of equity incentives
                be recognized
                on the income statement based upon their fair values.  In addition,
                regulations implemented by the NASDAQ National Market generally require
                stockholder approval for all equity incentives.  We may, as a result
                of these changes, incur increased compensation costs, change our
                equity
                compensation strategy or find it difficult to attract, retain and
                motivate
                employees, each of which could materially and adversely affect our
                business,
                operating results and financial condition.
 **Our
        Financial Results Could Vary Significantly From Quarter to Quarter and Are
        Difficult to Predict**.   Our revenues and operating
        results could vary significantly from quarter to quarter because of a variety
        of
        factors, many of which are outside of the Company’s control.  As a
        result, comparing our operating results on a period-to-period basis may not
        be
        meaningful.  In addition, we may not be able to predict our future
        revenues or results of operations.  We base our current and future
        expense levels on our internal operating plans and anticipated sales levels,
        and
        our operating costs are to a large extent fixed.  As a result, we may
        not be able to reduce our costs sufficiently to compensate for an unexpected
        shortfall in revenues, and even a small shortfall in revenues could
        disproportionately and adversely affect financial results for that
        period.  In addition, any payments due to us from our customers may be
        delayed because of changes or issues with those customers’
processes.





**Dependence
      on One or a Few Customers.**As of February 28, 2007, two
      customers (Food For Health and Wellness Enterprises) individually account for
      greater than 10 percent of total sales. Management believes that if the targeted
      revenues are not achieved within their current marketing and distribution
      agreements, the revenues can be replaced through the sale of bottles, filters
      and related products to other direct marketing companies. However, there can
      no
      assurance that this will occur which could result in an adverse effect on the
      Company’s financial condition or results of operations in the
      future.




On
            April
            1, 2007, the exclusivity clause in the Food For Health distribution agreement
            expired.
 On
                  June
                  14, 2007, the Company entered into a joint venture agreement with
                  H2O Age, Inc.,
                  a Nevada corporation.  The joint venture provides for certain
                  synergies for the two companies and includes the exclusive rights
                  to market and
                  sell under the H2O Age brand with "Seychelle Inside".  H2O Age will
                  market and sell on an exclusive basis to certain market channels
                  in the U.S. and
                  worldwide.  Seychelle and H2O Age are working on a market strategy to
                  promote safe and affordable drinking water to meet the needs of
                  the
                  consumer.


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**If
        The Company Fails To Maintain An Effective System of Internal Controls, The
        Company Might Not Be Able To Report Our Financial Results Accurately or Prevent
        Fraud; In That Case Our Stockholders Could Lose Confidence In Our Financial
        Reporting, Which Would Harm Our Business and Could Negatively Impact The
        Price
        Of Our Stock.**  Effective internal controls are necessary for
        us to provide reliable financial reports and prevent fraud.  In
        addition, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to
        evaluate and report on our internal control over financial reporting for
        the
        fiscal year ending February 28, 2008 and have our independent registered
        public
        accounting firm attest to our evaluation beginning with our Annual Report
        on
        Form 10-KSB for the year ending February 28, 2009.  We are in the
        process of preparing and implementing an internal plan of action for compliance
        with Section 404 and strengthening and testing our system of internal controls
        to provide the basis for our report.  The process of implementing our
        internal controls and complying with Section 404 will be expensive and time
        consuming, and will require significant attention of management.  We
        cannot be certain that these measures will ensure that we implement and maintain
        adequate controls over our financial processes and reporting in the
        future.  Even if we conclude, and our independent registered public
        accounting firms concurs, that our internal control over financial reporting
        provides reasonable assurance regarding the reliability of financial reporting
        and the preparation of financial statements for external purposes in accordance
        with generally accepted accounting principles, because of its inherent
        limitations, internal control over financial reporting may not prevent or
        detect
        fraud or misstatements.  Failure to implement required new or improved
        controls, or difficulties encountered in their implementation, could harm
        our
        operating results or cause us to fail to meet our reporting
        obligations.  If we or our independent registered public accounting
        firm discover a material weakness or reportable condition, the disclosure
        of
        that fact, even if quickly remedied, could reduce the market’s confidence in our
        financial statements and harm our stock price.
 
 **Maintaining
        And Improving Our Financial Controls And The Requirements Of Being A Public
        Company May Strain Our Resources, Divert Managements Attention and Affect
        Our
        Ability To Attract And Retain Qualified Members For Our Board Of
        Directors.**     As a public company, we are
        subject to the reporting requirements of the Securities Exchange Act of 1934
        and
        the Sarbanes-Oxley Act of 2002.  The requirements of these rules and
        regulations increase our legal, accounting and financial compliance costs,
        make
        some activities more difficult, time-consuming and costly and may also place
        undue strain on our personnel, systems and resources.  The
        Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain
        effective disclosure controls and procedures and internal control over financial
        reporting.  This can be difficult to achieve and
        maintain.
  In
        order
        to maintain and improve the effectiveness of our disclosure controls and
        procedures and internal control over financial reporting, the Company needs
        to
        expend significant resources and provide significant management
        oversight.  We have a substantial effort ahead of us to implement
        appropriate processes, document the system of internal control over relevant
        processes, assess their design, remediate any deficiencies identified and
        test
        their operating effectiveness.  As a result, management’s attention
        may be diverted from other business concerns, which could harm our business,
        operating results and financial condition.  These efforts will also
        involve substantial accounting related costs.





**ITEM
      2.                 
Description of Properties.**





As
          of
          February 28, 2007, our business office was located at 33012 Calle Perfecto,
          San
          Juan Capistrano, CA 92675. Our telephone number at this address is 949-234-1999.
          We pay a total of approximately $7,800 in rent per month for approximately
          7,200
          square feet of office, operations and warehousing. We have a lease with
          an
          unaffiliated third party, which expires February 2008.   Upon
          expiration of the lease the Company intends to continue renting the facilities
          on a month-to-month basis.
  We
          own
          two patents and numerous trade secrets, see Proprietary Information and
          Technology above, and other proprietary information related to our business
          operations. We recently filed for two trademarks: Seychelle which has been
          used
          in commerce since 1997 and Aqua Gear, which had been previously abandoned
          by
          Aqua Gear USA, to capitalize on the license agreement we secured from
          them.








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**ITEM
      3.                 
Legal Proceedings.**




During
        May 2001, SWT was named and served with a lawsuit originally filed by SafeWater
        Anywhere, Inc. and John Ferguson as plaintiffs. This lawsuit was filed in
        State
        Superior Court in Orange County, California. Mr. Carl Palmer was also named
        as a
        defendant. The complaint alleged breach of fiduciary duty, constructive fraud,
        promissory fraud, rescission, constructive trust, unfair trade practices,
        and
        conversion, and sought unspecified damages and injunctive relief. The original
        suit was dismissed upon motion of the defendants, but was subsequently re-filed
        by John M. Ferguson individually on or about October 13, 2004. The re-filed
        suit
        was again brought against SWT and Carl Palmer, and again alleged breach of
        fiduciary duty, constructive fraud, promissory fraud, rescission, constructive
        trust, unfair trade practices, and conversion, and sought unspecified damages
        and injunctive relief. The plaintiff essentially alleged that defendants
        SWT and
        Carl Palmer fraudulently induced plaintiff to enter into an agreement to
        relinquish 4,000,000 shares of the stock of defendant SWT. The plaintiff
        alleged
        that he originally entered into a joint venture and stock subscription agreement
        with DuSean Berkich (“Berkich”), pursuant to which Berkich and plaintiff formed
        and controlled SWT. The plaintiff alleged that when he discovered certain
        improprieties by Berkich, he became concerned, and ultimately agreed to the
        repurchase by Berkich of his interest in the SWT stock. The plaintiff is
        now
        suing to recover damages he allegedly suffered as a result of the repurchase
        by
        Berkich of his interest in SWT. As of February 28, 2007, an agreement to
        settle
        the lawsuit has been reached for 5,000 restricted shares of common stock.
        Final
        dismissal is pending.
 
 In
        May
        2007, the Company received a one-time payment to resolve a business dispute
        for  $168,000.  In accordance with SFAS No. 5 *Accounting
        for Contingencies*, the gain has not been recognized in fiscal 2007
        since doing so would result in recognizing income before its
        realization.  The Company received the settlement and recorded the
        gain during the first quarter of fiscal 2008.
  As
        of the
        date of this filing, we know of no legal proceedings 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.








**PART
      II**





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





(a)  
       Principal Market or Markets





Our
      Common Stock began trading in 1997. Since the consummation of the Exchange
      Agreement between our Company and SWT, market makers and other dealers have
      provided bid and ask quotations of our Common Stock under the symbol "SYEV."
      We
      traded on the "Pink Sheets" until December 2000, when we were re-listed on
      the
      NASDAQ's "Electronic Bulletin Board." The table below represents the range
      of
      high and low bid quotations of our Common Stock as reported during the reporting
      period herein. The following bid price market quotations represent prices
      between dealers and do not include retail markup, markdown, or commissions;
      hence, they may not represent actual transactions. For the fiscal year ended
      February 28, 2007, the common stock was at a High of $.81 and a Low of
      $.30.





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Fiscal Year 2007
              High
                  Bid
              Low
                  BidQuarter
                  Ended:First
                  Quarter May 2006
              $.81
              $.43Second
                  Quarter August 2006
              $.59
              $.40Third
                  Quarter November 2006
              $.70
              $.30Fourth
                  Quarter February 2007
              $.51
              $.40
   Fiscal
                  Year 2006
              High
                  Bid
              Low
                  BidQuarter
                  Ended:First
                  Quarter May 2005
              $.36
              $.28Second
                  Quarter August 2005
              $.36
              $.17Third
                  Quarter November 2005
              $.35
              $.11Fourth
                  Quarter February 2006
              $.99
              $.27




(b)   
      Approximate Number of Holders of Common Stock




As
      of
      February 28, 2007, there were approximately 377 shareholders of record of our
      common stock.





(c)   
      Dividends




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







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**ITEM
      6.               
 Management's Discussion and Analysis of Financial Condition and Results
      of Operations**





This
      discussion summarizes the significant factors affecting the operating results,
      financial condition and liquidity and cash flows of the Company and its
      subsidiary for the fiscal years ended February 28, 2006 and 2007.  The
      discussion and analysis that follows should be read together with the
      consolidated financial statements of Seychelle Environmental Technologies,
      Inc.
      and the notes to the consolidated financial statements included elsewhere in
      this annual report on Form 10-KSB.  Except for historical information,
      the matters discussed in this section are forward looking statements that
      involve risks and uncertainties and are based upon judgments concerning various
      factors that are beyond the Company’s control.





**Application
      of Critical Accounting Policies and Estimates**





Our
        consolidated financial statements and accompanying notes are prepared in
        accordance with U.S. GAAP. Preparing financial statements requires management
        to
        make estimates and assumptions that affect the reported amounts of assets,
        liabilities, revenue, and expenses. These estimates and assumptions are affected
        by management’s application of accounting policies. Critical accounting policies
        for us include  impairment of goodwill and other intangible assets,
        accounting for transactions which potentially could be settled in a company’s
        own stock,  and accounting for stock-based
        compensation.





Goodwill
      and Other Intangible Assets





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




Transactions
      Potentially Settled in a Company’s Own Stock




EITF
      No.
      00-19 establishes standards for the accounting for transactions in which an
      entity exchanges its equity instruments for goods or services. It also addresses
      transactions in which an entity incurs liabilities in exchange for goods or
      services that are based on the fair value of the entity’s equity instruments or
      that may be settled by the issuance of those equity instruments.




EITF
      No.
      00-19 is based on the concept that contracts requiring net-cash settlement
      are
      assets or liabilities and contracts that require settlement in shares are equity
      instruments.   These contracts may be settled in a variety of
      methods.





Contracts
      that include any provision that could require net-cash settlement cannot be
      accounted for as equity of the company.  Company management believes the
      warrants issued by the Company would be classified as a physical settlement
      as
      the buyer pays a predetermined price for a fixed number of shares, therefore,
      no
      net-cash settlement is required and classification as equity is
      appropriate.





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Stock-Based
        Compensation


Prior
        to
        the adoption of SFAS No. 123(R), the Company accounted for stock based awards
        using the intrinsic value method in accordance with Accounting Principles
        Board
        Opinion (APB) No. 25, *Accounting for Stock Issued to Employees* (APB No.
        25) as allowed under SFAS No. 123, *Accounting for Stock Based
        Compensation* (SFAS No. 123). Under the intrinsic value method, no stock
        based compensation expense had been recognized in the Company’s consolidated
        statements of operations, other than as related to warrants or restricted
        common
        shares granted below the fair market value of the underlying stock at the
        date
        of grant.
 
 On
        March
        1, 2006, the Company adopted SFAS No. 123 (revised 2004), *Share Based
        Payment*, (SFAS 123(R)) which establishes standards for the accounting of
        transactions in which an entity exchanges its equity instruments for goods
        or
        services, primarily focusing on accounting for transactions where an entity
        obtains services in share based payment transactions. SFAS No. 123(R) requires
        a
        public entity to measure the cost of services received in exchange for an
        award
        of equity instruments, including stock warrants, based on the grant date
        fair
        value of the award and to recognize it as compensation expense over the period
        required to provide service in exchange for the award, usually the vesting
        period. SFAS No. 123(R) supersedes the Company’s previous accounting under APB
        No. 25).
  The
        Company adopted SFAS No. 123(R) using the modified prospective transition
        method, which requires the application of the accounting standard as of March
        1,
        2006, the first day of the Company’s fiscal year 2007. The Company’s
        consolidated financial statements as of and for the fiscal year ended February
        28, 2007 reflect the impact of SFAS No. 123(R).  In accordance with the
        modified prospective transition method, the Company’s consolidated financial
        statements as of and for the fiscal year ended February 28, 2006 have not
        been
        restated to reflect, and do not include, the impact of SFAS
        No.123(R).
  SFAS
        No.
        123(R) requires companies to estimate the fair value of share based payment
        awards on the date of grant using an option-pricing model. The value of the
        portion of the award that is ultimately expected to vest is recognized as
        expense over the requisite service periods in the Company’s consolidated
        statements of operations.
 
 **Results
        of Operations**
 
 Our
        summary historical financial data is presented in the following table to
        aid you
        in your analysis.  You should read this data in conjunction with this
        section entitled Management Discussion and Analysis of Financial Condition
        and
        Results of Operations, our consolidated financial statements and the related
        notes to the consolidated financial statements included elsewhere in this
        report.  The selected consolidated statements of operations data for
        the fiscal years ended February 28, 2006 and 2007 are derived from our
        consolidated financial statements included elsewhere in this
        report.





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**Fiscal
      year ended February 28, 2007 compared to the corresponding period in
      2006.**




Selected
                  Financial Data
              
              2006
              
              
              2007
              
              
              Year
                  Over Year
                Change
              
              
              %Sales
              
              $
              751,844
              
              
              $
              952,646
              
              
              $
              200,802
              
              
              
              27Cost
                  of sales
              
              $
              430,134
              
              
              $
              798,870
              
              
              $
              368,736
              
              
              
              86Gross
                  profit
              
              $
              321,710
              
              
              $
              153,776
              
              
              $
              (167,934
              )
              
              
              (52
              )Gross
                  profit percentage
              
              
              43
              %
              
              
              16
              %
              
              
              (27
              )
              
              
              -Selling
                  expenses
              
              $
              59,459
              
              
              $
              101,338
              
              
              $
              41,879
              
              
              
              70General
                  and administrative expenses
              
              $
              583,157
              
              
              $
              697,093
              
              
              $
              113,936
              
              
              
              20Compensation
                  to executive officers
              
              $
              211,293
              
              
              $
              151,919
              
              
              $
              (59374
              )
              
              
              (28
              )Impairment
                  of intellectual properties
              
              $
              104,000
              
              
              $
              3,200
              
              
              $
              (100,800
              )
              
              
              (97
              )Interest
                  expense to related parties
              
              $
              272,653
              
              
              $
              621,069
              
              
              $
              348,416
              
              
              
              128Net
                  cash used in operating activities
              
              $
              (205,072
              )
              
              $
              (361,621
              )
              
              $
              (156,549
              )
              
              
              (76
              )Net
                  cash used in investing activities
              
              $
              (117,251
              )
              
              $
              (216,000
              )
              
              $
              (98,749
              )
              
              
              (84
              )Net
                  cash provided by (used in) financing activities
              
              $
              934,110
              
              
              $
              (21,225
              )
              
              $
              (955,335
              )
              
              
              (102
              )




**Sales.**
      The increase in sales is primarily attributable to approximately $329,000 in
      sales of 18 ounce bottles and related accessories to Food For Health combined
      with approximately $110,000 in distribution income relating to shipments of
      approximately $615,000 in various emergency preparedness products manufactured
      and shipped directly from the Chinese manufacturer to Food For
      Health.  These increases in sales were partially offset by normal
      fluctuation of sales with a significant distributor.   Sales to
      Wellness Enterprises decreased from approximately $183,000 during 2006 to
      $115,000 in 2007. Also, one-time sales of flip-top caps with an approximate
      value of $91,000 and $39,000, were made to two separate customers during
      2006.  Overall, the number of bottles sold with or without replacement
      filters increased by approximately 13% (from 95,800 bottles during 2006 to
      108,000 bottles during 2007).  The average sales price per bottle
      decreased by 3% from approximately $6.01 during 2006 to $5.80 during
      2007.   This decrease in average sales price is due to volume
      discounts provided to Food For Health.  The Company does not
      anticipate any additional distribution income to be earned during the fiscal
      year ending February 28, 2008.


**Cost
          of sales and gross profit percentage.**The increase in cost
          of sales and corresponding decrease in gross profit percentage is primarily
          due
          to the following –  (1) the Company’s write off of inactive and
          obsolete inventory of approximately $215,400, which reduces the gross profit
          percentage by 13%; and (2) change in pricing of bottles without a
          corresponding change in product costs reduces the gross profit percentage
          by
          11%. As previously noted, the average sales price for bottles decreased,
          however, the actual average cost of producing the bottles increased from
          $2.38
          as of February 28, 2006 to $2.65 as of February 28, 2007.   The
          increase in production costs was primarily due to increased raw material
          and
          outside assembly costs.
 **Selling
        expenses**.  The increase in selling expenses is primarily due
        to a public relations campaign during the 2007 fiscal year of approximately
        $45,000, combined with increased advertising to promote the Company’s new
        products.
  **General
        and administrative expenses.**The increase in general and administrative
        expenses was primarily due to the following - (1) approximate $32,000 increase
        in salaries and related benefits as the Company hired an administrative
        assistant during June 2005; (2) approximate $52,000 increase in legal fees,
        including $19,000 relating to a claim settlement; (3) approximate $33,000
        increase in consulting expense as the Company engaged an outside consultant
        to
        maintain its accounting records, as well as engaged various individuals to
        perform design and engineering procedures, including amortization of the
        estimated value of warrants; (4) approximate $17,000 increase in bonuses
        to
        employees or consultants as the Company issued restricted common shares as
        additional compensation; and (5) approximate $16,000 increase in depreciation
        expense.  These increases were partially offset by a reduction of
        approximately $67,000 in accounting fees since in the prior year the Company
        incurred higher fees to catch up on SEC filings and respond to SEC comment
        letters.




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**Compensation
          to executive officers.** The decrease in compensation was primarily due
          to the end of the vesting period (December 1, 2006) for all grants of common
          stock or warrants issued to Messrs. Parsons and
          Place.   Previously, since the common stock and warrants were at
          a purchase price below the Company’s market price on the date of grant, the
          Company amortized the difference over the vesting period.  This
          decrease in compensation was partially offset by the Company, commencing
          October
          2006, paying a monthly stipend of $2,500 to Messrs. Parsons and Place (total
          stipends paid during fiscal 2007 were $25,000).
  **Impairment
        of intellectual properties.**  During the fiscal year ended
        February 28, 2007, the Company recorded an impairment charge
        of  $3,200 due to the expiration of a patent.  During the
        fiscal year ended February 28, 2006, the Company determined that the
        Enviro(3)Care system was no longer economically feasible and recorded an
        impairment charge of $104,000.
 
 **Interest
        expense to related parties.**The increase in interest expense was due to
        the Company adopting SFAS No. 123(R) during the first quarter of fiscal 2007,
        which changed the valuation methodology of the non-vested common stock /
        warrants and amortized the difference over the vesting
        period.
  **Net
          loss.** Net loss for the fiscal year ended February 28, 2007 of
          $1,464,298 were greater than in the prior year of $932,456 due to approximately
          $315,000 in accounting and legal fees to assist in the audit and preparation
          of
          the Form 10 and other SEC filings, $621,000 in financing costs with TAM
          Trust,
          the Company’s primary lender, the amortization of $146,000 in officer stock
          compensation,  $46,000 in warrants provided to Gary Hess in connection
          with Aqua Gear products and the Company’s inventory reserve adjustment of
          $215,000 for the countertop and water pitcher products were the primary
          reasons
          for the result.


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**Fiscal
      year ended February 28, 2006 compared to the corresponding period in
      2005.**




Selected
                  Financial Data
              
              2005
              
              
              2006
              
              
              Year
                  Over Year
                Change
              
              
              %Sales
              
              $
              341,106
              
              
              $
              751,844
              
              
              $
              410,738
              
              
              
              120Cost
                  of sales
              
              $
              155,113
              
              
              $
              430,134
              
              
              $
              275,021
              
              
              
              177Gross
                  profit
              
              $
              185,993
              
              
              $
              321,710
              
              
              $
              135,717
              
              
              
              73Gross
                  profit percentage
              
              
              55
              %
              
              
              43
              %
              
              
              (12
              )
              
              
              -General
                  and administrative expenses
              
              $
              264,362
              
              
              $
              583,157
              
              
              $
              318,795
              
              
              
              121Compensation
                  to executive officers
              
              $
              45,292
              
              
              $
              211,293
              
              
              $
              166,001
              
              
              
              367Impairment
                  of intellectual properties
              
              $
              -
              
              
              $
              104,000
              
              
              $
              104,000
              
              
              
              -Interest
                  expense to related parties
              
              $
              124,629
              
              
              $
              272,653
              
              
              $
              148,024
              
              
              
              119Net
                  cash used in operating activities
              
              $
              (64,262
              )
              
              $
              (205,072
              )
              
              $
              (140,810
              )
              
              
              (219
              )Net
                  cash used in investing activities
              
              $
              (12,434
              )
              
              $
              (117,251
              )
              
              $
              (104,817
              )
              
              
              (843
              )Net
                  cash provided financing activities
              
              $
              31,710
              
              
              $
              934,110
              
              
              $
              902,400
              
              
              
              2846




**Sales.**
          The increase in sales is primarily attributable to continued increased
          sales
          with two customers - approximately $189,000 sales to Wellness Enterprises
          and
          $91,000 to BK Pakistan. Additionally, during the fiscal year ended February
          28,
          2006, the Company entered into a five (5) year exclusive distribution agreement
          with Confident, Inc. to sell its water filtration products in the markets
          of The
          Peoples Republic of China, Taiwan, Singapore and Hong Kong. During the
          fiscal
          year ended February 28, 2006, total sales to Confident, Inc. and its affiliated
          entities approximated $90,000.  Overall the number of bottles sold
          with or without replacement filters increased by approximately 157% (from
          37,283
          bottles during 2005 to 95,800 bottles during 2006). The average sales price
          per
          bottle decreased by twelve percent from approximately $6.81 during 2005
          to $6.01
          during 2006.  This decrease in average sales price is due to volume
          discounts provided in the new distribution agreements entered into by the
          Company during 2006.  In addition to the increase in the number of
          bottles sold, the Company also had a one-time sale of flip-top caps for BK
          Pakistan.
 
 **Cost
          of sales and gross profit.** During November 2005, the Company recorded
          an inventory reserve for its countertop product. If such reserve had not
          been
          recorded, the gross profit percentage for the fiscal year ended February
          28,
          2006 would have been 53%. The remaining slight decrease in gross profit
          is
          primarily due to increased raw material costs and increased cost for sub
          assemblies.
 
 **General
          and administrative expenses.** The increase in general and administrative
          expenses was primarily due to the following - (1) $270,000 increase in
          legal and
          accounting fees as the Company incurred such costs to catch up on SEC filings;
          (2) $15,000 increase in consulting expense as the Company engaged an outside
          consultant to maintain its accounting records, as well as, engaged various
          individuals to perform design and engineering procedures: (3) $27,000 increase
          in salaries and related employee benefits for administrative assistant
          hired
          June 2005; and (4) and $5,000 increase in depreciation expense as the Company
          purchased $135,000 in new equipment and tooling during the past twelve
          months.


**Compensation
            to executive officers.** The increase in compensation was due to the
            engagement of two officers / employees, Messrs. Parsons and Place, during
            December 2004. Both Messrs. Parsons and Place received restricted common
            stock
            at below the estimated market value upon commencement of providing services
            to
            the Company. The increase in compensation expense relates to the amortization
            of
            the discount on the restricted common stock. As further consideration
            for
            services to be rendered, the employees were granted warrants during March
            and
            July 2005 redeemable into restricted shares of the Company’s stock at $.225 per
            share. As the warrants provide for the purchase of common stock at below
            the
            Company’s market price on the date of grant, the Company recorded unearned
            compensation relating to the estimated value of these warrants and is
            amortizing
            the difference over the vesting period of the warrants.
 **Impairment
          of intellectual properties.**  During the fiscal year ended
          February 28, 2006, the Company determined that the Enviro(3)Care system
          was no
          longer economically feasible and recorded an impairment charge of
          $104,000.
 
 **Interest
          expense to related parties.** The increase in interest expense was due to
          the amortization of the beneficial conversion feature of the warrants issued
          to
          TAM Trust during March and July 2005.







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**Net
              loss.** Even though profits for the year ended February 28, 2006
              were
              negative by $932,456, $274,000 in accounting and legal fees to assist
              in the
              audit and preparation of the Form 10 and other SEC filings, in addition
              to,
              $272,000 in financing costs with TAM the primary lender, the amortization
              of
              $201,000 in officer stock compensation who received no salaries, the
              Company’s
              inventory reserve adjustment of $79,000 for the countertop product
              and an
              impairment charge of $104,000 for the discontinue of the Enviro(3)Care
              technology were the primary reasons for the
              result.






**CONTRACTUAL
      OBLIGATIONS, COMMITMENTS AND OFF BALANCE SHEET
      ARRANGEMENTS**





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


The
        following table summarizes our significant contractual obligations on an
        undiscounted basis as of February 28, 2007 and the future periods in which
        such
        obligations are expected to be settled in cash or converted into the Company’s
        common stock. In addition, the table reflects the timing of principal and
        interest payments on outstanding borrowings. Additional details regarding
        these
        obligations are provided in footnotes, as referenced in the
        table:




Payments
                  Due by PeriodConvertibleLess
                  than
              
              
              
              
              
              
              
              
              More
                  than
              
              
              to
                  commonTotal
              
              
              1
                  year
              
              
              2
                  years
              
              
              3
                  years
              
              
              3
                  years
              
              
              stockAccounts
                  payable and accrued liabilities
              
              $
              306,849
              
              
              $
              100,999
              
              
              
              
              
              
              
              
              
              
              
              $
              205,850Line
                  of credit
              
              
              80,000
              
              
              
              80,000Accrued
                  interest due to related party (2)
              
              
              251,761
              
              
              
              
              
              
              
              
              
              
              
              
              $
              251,761Customer
                  deposits (3)
              
              
              284,275Note
                  payable to financial institution
              
              
              136,413
              
              
              
              136,413Notes
                  payable to related parties (2)
              
              
              299,175
              
              
              
              
              
              
              
              
              
              
              
              
              
              299,1751,358,473
              
              
              
              317,412
              
              
              
              -
              
              
              
              -
              
              
              
              550,936
              
              
              
              205,850Other
                  (1)
              
              
              223,078
              
              
              
              223,078
              
              
              
              -
              
              
              
              -Total
                  contractual obligations (4)
              
              $
              1,581,551
              
              
              $
              540,490
              
              
              
              -
              
              
              
              -
              
              
              $
              550,936
              
              
              $
              205,850





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_____________


(1)
              Other
                    commitments is comprised of operating lease agreement for our
                    office and
                    warehouse facility through February 2008, a monthly stipend of $2,500
                    to J. Place and D. Parsons through December 2007, a $5,000 monthly
                    monitoring fee payable to Pacific Financial through December
                    2007 and
                    interest at 6.5% payable to financial institution through February
                    2008(2)
              As
                  of the date of this filing, the Company and its primary debt holder
                  do not
                  anticipate remitting interest payments for current or future interest
                  cost
                  on notes payable due related parties(3)
              As
                  of the date of this filing, the products have been manufactured
                  and
                  shipping to the customer is anticipated during the second quarter
                  of the
                  fiscal year ending February 28, 2008.  Therefore, no
                  reimbursement of deposit is required(4)
              Comprised
                  of the following:




Liabilities
                  recorded on the balance sheet
              
              $
              1,358,473Commitments
                  not recorded on the balance sheet
              
              
              223,078Total
              
              $
              1,581,551




The
        Company currently estimates monthly cash requirements of $56,000 to cover
        general and administrative overhead costs.
 
 As
                of
                February 28, 2007, the Company has unrestricted cash of approximately
                $37,000
                and a backlog of $460,000 in unshipped orders.  The Company believes
                that despite the increase in sales experienced during the fiscal
                years ended
                February 28, 2006 and 2007, additional funding may still be required
                from TAM
                Trust or other shareholders. During March 2007, the Company received
                an
                additional $100,000 in funds from TAM Trust to continue development
                of the new
                emergency preparedness products.  During June 2007, TAM Trust
                committed to providing up to $250,000 in additional funding, if
                required.
 
 **Liquidity
                    and capital resources.**
 
 **Net
                    cash used in operating activities.** During the fiscal year ended
                    February 28, 2007, the Company funded its operations though the
                    utilization of
                    customer deposits to fund raw material and other production costs
                    while during
                    the prior fiscal year the Company funded its operations by the
                    sale of
                    restricted common stock. During the fiscal year ended February
                    28, 2007, the net
                    loss of approximately $1,464,000 was offset by approximately
                    $998,000 non-cash
                    expenditures. These non-cash expenses primarily relate to approximately
                    $596,000
                    in financing costs, the amortization of approximately $146,000
                    in officer stock
                    compensation, the Company’s inventory adjustments of $215,000 for the
                    countertop, water pitcher and inactive inventory products,  and the
                    issuance of approximately $36,000 in restricted common stock
                    for services
                    rendered.
 
 **Net
                    cash used in investing activities.** The 2007 increase in cash used by
                    investment activities was primarily due to the $150,000 in restricted
                    cash
                    required as collateral for the purchase of certain capital
                    expenditures.  The increase was partially offset by a reduction in
                    capital expenditures.  During the fiscal year ended February 28, 2006,
                    the Company incurred approximately $136,000 in capital expenditures
                    to prepare
                    for its new water distribution products.
 **Net
                  cash used in financing activities.** The 2007 decrease in cash provided
                  by financing activities was due to a reduction in the sale of restricted
                  common
                  stock to finance the Company’s operations, This decrease in cash provided was
                  further reduced by a $64,000 repayment of a related party
                  advances.   During the fiscal year ended February 28, 2006, the
                  Company had sold approximately $1,014,000 in restricted common
                  stock.
 
 Our
                    principal sources of liquidity have historically been funds generated
                    from
                    operating activities and borrowings from the TAM Trust, one of
                    our principal
                    shareholders.  As of February 28, 2007, the TAM Trust has loaned the
                    Company $299,175 at 10% simple interest, repayable after March
                    1,
                    2011.   The Company believes that despite the increase in sales
                    experienced during the fiscal years ended February 28, 2006 and
                    2007, additional
                    funding may still be required from the TAM Trust or other
                    shareholders.  During March 2007, the Company received an additional
                    $100,000 in funds from the TAM Trust to continue the development
                    of its new
                    emergency preparedness products.  During June 2007, the TAM Trust committed
                    to providing up to $250,000 in additional funding, if required.  The
                    Company believes it has liquidity and committed funds to meet
                    its operating
                    needs through fiscal 2008.
 
 **Capital
                  expenditures .**





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





**Research
      and development.**





We
        are
        operating in a business that requires extensive and continuing research,
        development and testing efforts.   The in-line filter is being
        redesigned to make it more applicable to field
        conditions.


**Employees.****





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





**Causes
      for any material changes from period to period**.





In
          the
          fiscal year ended February 28, 2007, sales were $952,646 compared to the
          same
          period in the prior year with sales of $751,844. Since sales for the fiscal
          year
          ended February 28, 2007 have increased from the fiscal year ended February
          28,
          2006, Company management believe that the business is improving with both
          new
          and current (international and domestic) customers purchasing product.
          Our
          experience is that the general market for the sales of pure water increases
          during the summer months. Our experience to date has not shown measurable
          increases due to its very limited retail distribution. As previously noted,
          gross profit margins have decreased due to the Company recording inventory
          reserve adjustments for its countertop and water pitcher products combined
          with higher outside assembly labor and raw material costs and lower sales
          prices. At this time, the Company does not know what the impact of the
          patents
          expiration will be, as the expiration will not occur for several years.
          Finally,
          there are no off-balance sheet arrangements to skew
          sales.




**Any
      seasonal aspects**




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




**Off-Balance
      Sheet Arrangements**: none








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**Item
      7.                   
Financial Statements**













**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**




**Consolidated
        Financial Statements**
 **Fiscal
        Years Ended February 28, 2007 and 2006**









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**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**









To
      the
      Board of Directors and Stockholders


of
      Seychelle Environmental
      Technologies, Inc.:


We
        have
        audited the accompanying consolidated balance sheet of Seychelle Environmental
        Technologies, Inc. and subsidiary (the Company) as of February 28, 2007,
        and the
        related consolidated statements of operations, changes in stockholders’ deficit,
        and cash flows for the fiscal years ended February 28, 2007 and 2006.
        These consolidated financial statements are the responsibility of the Company’s
        management. Our responsibility is to express an opinion on these consolidated
        financial statements based on our audits.
  We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audit included consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, assessing the accounting principles used and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
  In
              our
              opinion, the consolidated financial statements referred to above present
              fairly,
              in all material respects, the consolidated financial position of Seychelle
              Environmental Technologies, Inc. and subsidiary as of February 28,
              2007, and the
              results of their operations and their cash flows for the fiscal years ended
              February 28, 2007 and 2006, in conformity with accounting principles
              generally
              accepted in the United States of America.
  As
              discussed in Notes 2 and 9 to the consolidated financial statements,
              effective
              March 1, 2006, the Company adopted the fair value method of accounting
              for
              stock-based compensation as required by Statement of Financial Accounting
              Standards No. 123(R), *Share**-**Based
              Compensation*.
 /S/WINDES
        & McCLAUGHRY ACCOUNTANCY CORPORATION
 Windes
        & McClaughry Accountancy Corporation
 Irvine,
        California
 
 August
        17, 2007








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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        BALANCE SHEET**
 **FEBRUARY
        28, 2007**




ASSETSCURRENT
                  ASSETSCash
              
              $
              36,723Restricted
                  cash
              
              
              150,000Trade
                  receivables72,874Inventories,
                  net
              
              
              358,363Prepaid
                  expenses
              
              
              144,191Asset
                  held for sale
              
              
              137,872Total
                  current assets
              
              
              900,023PROPERTY
                  AND EQUIPMENT, NET
              
              
              130,999INTANGIBLE
                  ASSETS, NET
              
              
              30,544OTHER
                  ASSETS
              
              
              6,742Total
                  non-current assets
              
              
              168,285TOTAL
                  ASSETS
              
              $
              1,068,308




See
      accompanying notes to consolidated financial statements.




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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        BALANCE SHEET (CONTINUED)**
 **FEBRUARY
        28, 2007**






LIABILITIES
                  AND STOCKHOLDERS' DEFICITCURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              42,956Accrued
                  expenses
              
              
              263,893Line
                  of credit
              
              
              80,000Note
                  payable to financial institution
              
              
              136,413Accrued
                  interest due to related parties
              
              
              251,761Customer
                  deposits
              
              
              284,275Total
                  current liabilities
              
              
              1,059,298NOTES
                  PAYABLE TO RELATED PARTIES
              
              
              299,175Total
                  long-term liabilities
              
              
              299,175COMMITMENTS
                  AND CONTINGENCIESSTOCKHOLDERS'
                  DEFICITPreferred
                    stock, 6,000,000 shares authorized, noneissued
                    or outstanding as of February 28, 2007
              
              
              -Common
                  stock $.001 par value,  50,000,000 sharesauthorized;
                  25,150,896 shares issued andoutstanding
                  as of February 28, 2007
              
              
              25,151Additional
                  paid-in capital
              
              
              6,106,916Accumulated
                  deficit
              
              
              (6,422,232
              )Total
                  stockholders' deficit
              
              
              (290,165
              )TOTAL
                  LIABILITIES ANDSTOCKHOLDERS'
                  DEFICIT
              
              $
              1,068,308




See
      accompanying notes to consolidated financial statements.







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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **For
        The Fiscal Years Ended February 28, 2007 and 2006**
   2007
                
                
                2006SALESProduct
                    sales
                
                $
                842,646
                
                
                $
                751,844Distribution
                    income
                
                
                110,000Total
                    sales
                
                
                952,646
                
                
                
                751,844COST
                    OF SALES
                
                
                798,870
                
                
                
                430,134Gross
                    profit
                
                
                153,776
                
                
                
                321,710OPERATING
                    EXPENSESSelling
                
                
                101,338
                
                
                
                59,459General
                    and administrative
                
                
                697,093
                
                
                
                583,157Compensation
                    to executive officers
                
                
                151,919
                
                
                
                211,293Impairment
                    of intellectual property
                
                
                3,200
                
                
                
                104,000Loss
                    on disposal or sale of property and equipment
                
                
                48,673
                
                
                
                30,000Total
                    expenses
                
                
                1,002,223
                
                
                
                987,909LOSS
                    FROM OPERATIONS
                
                
                (848,447
                )
                
                
                (666,199
                )OTHER
                    INCOME (EXPENSES)Interest
                    expense to related parties
                
                
                (621,069
                )
                
                
                (272,653
                )Other
                    interest expense
                
                
                (10,987
                )
                
                
                -Miscellaneous
                    income
                
                
                16,205
                
                
                
                6,396Total
                    other income (expense)
                
                
                (615,851
                )
                
                
                (266,257
                )Net
                    loss
                
                $
                (1,464,298
                )
                
                $
                (932,456
                )BASIC
                    AND DILUTED LOSS PER SHARE
                
                $
                (0.06
                )
                
                $
                (0.05
                )WEIGHTED
                    AVERAGE NUMBER OFSHARES:
                    BASIC AND DILUTED
                
                
                25,013,807
                
                
                
                17,969,317
   See
        accompanying notes to consolidated financial statements.





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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **CONSOLIDATED
          STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT**
 **For
          The Fiscal Years Ended February 28, 2007 and
          2006**




Common
              
              
              Common
              
              
              Additional
              
              
              
              
              
              TotalStock
              
              
              Stock
              
              
              Paid-in
              
              
              Accumulated
              
              
              Stockholders'Shares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              Equity
                  (Deficit)Balance,
                  February 28, 2005
              
              
              18,922,272
              
              
              $
              18,922
              
              
              $
              3,541,579
              
              
              $
              (4,025,478
              )
              
              $
              (464,977
              )Contributed
                  executive services
              
              
              -
              
              
              
              -
              
              
              
              10,000
              
              
              
              -
              
              
              
              10,000Issuance
                  of shares for compensation or services rendered
              
              
              161,800
              
              
              
              162
              
              
              
              35,625
              
              
              
              -
              
              
              
              35,787Issuance
                  of common stock for cash
              
              
              2,474,225
              
              
              
              2,474
              
              
              
              564,282
              
              
              
              -
              
              
              
              566,756Issuance
                  of common shares with detachable stock warrants with conversion
                  price at
                  below market value
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              448,000
              
              
              
              -
              
              
              
              450,000Issuance
                  of shares to settle accrued interest to primary debt
                  holder
              
              
              1,266,667
              
              
              
              1,267
              
              
              
              226,733
              
              
              
              -
              
              
              
              228,000Issuance
                  of common shares to primary debt holder for continued financial
                  support
              
              
              37,500
              
              
              
              38
              
              
              
              8,400
              
              
              
              -
              
              
              
              8,438Issuance
                  of common shares for settlement of debt
              
              
              312,784
              
              
              
              312
              
              
              
              125,093
              
              
              
              -
              
              
              
              125,405Payment
                  of finders fees
              
              
              -
              
              
              
              -
              
              
              
              (11,800
              )
              
              
              -
              
              
              
              (11,800
              )Surrender
                  of common shares due to failure to perform services
              
              
              (250,000
              )
              
              
              (250
              )
              
              
              (32,250
              )
              
              
              -
              
              
              
              (32,500
              )




See
      accompanying notes to consolidated financial statements.




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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDAIRY**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT**
 **For
        The Fiscal Years Ended February 28, 2007 and 2006**




***Continued***




Common
              
              
              Common
              
              
              Additional
              
              
              
              
              
              TotalStock
              
              
              Stock
              
              
              Paid-in
              
              
              Accumulated
              
              
              Stockholders'Shares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              Equity
                  (DeficitRepurchase
                  of shares from investor
              
              
              (210,238
              )
              
              
              (210
              )
              
              
              (32,636
              )
              
              
              -
              
              
              
              (32,846
              )Interest
                  expense on common stock and warrants issued to primary lender at
                  below
                  fair value
              
              
              -
              
              
              
              -
              
              
              
              228,920
              
              
              
              -
              
              
              
              228,920Stock
                  based compensation for common stock and warrants issued to officers
                  at
                  below fair value
              
              
              -
              
              
              
              -
              
              
              
              168,394
              
              
              
              -
              
              
              
              168,394





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**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT**


**For
      Fiscal Years Ended February 28, 2007 and 2006**




***Continued***




Common
              
              
              Common
              
              
              Additional
              
              
              
              
              
              TotalStock
              
              
              Stock
              
              
              Paid-in
              
              
              Accumulated
              
              
              Stockholders'Shares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              Equity
                  (Deficit)Net
                  loss from fiscal year ending February 28, 2006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (932,456
              )
              
              
              (932,456Balance,
                  February 28, 2006
              
              
              24,715,010
              
              
              
              24,715
              
              
              
              5,280,340
              
              
              
              (4,957,934
              )
              
              
              347,121Contributed
                  executive services
              
              
              -
              
              
              
              -
              
              
              
              10,000
              
              
              
              -
              
              
              
              10,000Issuance
                  of common stock for cash
              
              
              53,000
              
              
              
              53
              
              
              
              12,697
              
              
              
              -
              
              
              
              12,750Issuance
                  for common stock in exchange for debt
              
              
              258,597
              
              
              
              259
              
              
              
              165,141
              
              
              
              -
              
              
              
              165,400Issuance
                  of common stock for intellectual property – Continental
                  Technologies
              
              
              50,000
              
              
              
              50
              
              
              
              
              
              
              
              
              
              
              
              50Issuance
                  of common stock for compensation or services
              
              
              74,289
              
              
              
              74
              
              
              
              36,526
              
              
              
              -
              
              
              
              36,600Stock  based   interest
                  expense for warrants issued
              
              
              -
              
              
              
              -
              
              
              
              466,230
              
              
              
              -
              
              
              
              466,230Stock
                  based officer compensation for warrants issued
              
              
              -
              
              
              
              -
              
              
              
              135,982
              
              
              
              -
              
              
              
              135,982Net
                  loss from fiscal year ended February 28, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,464,298
              )
              
              
              (1,464,298Balance,
                  February 28, 2007
              
              
              25,150,896
              
              
              $
              25,151
              
              
              $
              6,106,916
              
              
              $
              (6,422,232
              )
              
              $
              (290,165


See
      accompanying notes to consolidated financial statements







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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **For
        the Fiscal Years Ended February 28, 2007 and 2006**






2007
              
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (1,464,298
              )
              
              $
              (932,456
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Depreciation
                  and amortization
              
              
              42,560
              
              
              
              26,407Compensation
                  and interest expense on stock and warrants
              
              
              602,212
              
              
              
              422,519Accrued
                  interest due to related parties
              
              
              82,446
              
              
              
              34,797Contributed
                  executive services
              
              
              10,000
              
              
              
              10,000Stock
                  issued for services
              
              
              36,600
              
              
              
              25,350Provision
                  for losses on doubtful accounts
              
              
              3,988
              
              
              
              2,047Impairment
                  of intellectual property
              
              
              3,200
              
              
              
              104,000Inventory
                  write downs
              
              
              216,053
              
              
              
              79,789Loss
                  on disposal of property and equipment
              
              
              48,673
              
              
              
              30,000Return
                  of shares due to failure to perform services
              
              
              -
              
              
              
              (32,500
              )Changes
                  in operating assets and liabilities:Trade
                  receivables
              
              
              (43,260
              )
              
              
              (15,602
              )Inventories
              
              
              (182,774
              )
              
              
              (157,676
              )Prepaid
                  expenses and other assets
              
              
              (98,920
              )
              
              
              (37,329
              )Accounts
                  payable
              
              
              (18,054
              )
              
              
              35,831Accrued
                  expenses
              
              
              144,726
              
              
              
              196,614Customer
                  deposits
              
              
              255,227
              
              
              
              3,137Net
                  cash used by operating activities
              
              
              (361,621
              )
              
              
              (205,072
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESProceeds
                  from sale of property and equipment
              
              
              2,500
              
              
              
              20,000Increase
                  in restricted cash
              
              
              (150,000
              )
              
              
              -Purchase
                  of property and equipment
              
              
              (67,483
              )
              
              
              (135,811
              )Increase
                  in patents
              
              
              (1,017
              )
              
              
              (1,440
              )Net
                  cash used by investing activities
              
              
              (216,000
              )
              
              
              (117,251
              )




See
      accompanying notes to consolidated financial statements.







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**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (CONTINUED)**


**Fiscal
      Years Ended February 28, 2007 and 2006**






2007
            
            
            2006CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                from sale of common stock
            
            $
            12,750
            
            
            $
            1,013,756Purchase
                of common stock
            
            
            -
            
            
            
            (32,846
            )Payment
                of finders fees
            
            
            -
            
            
            
            (11,800
            )Proceeds
                from line of credit
            
            
            30,000
            
            
            
            50,000Repayments
                on related party notes payable
            
            
            (63,975
            )
            
            
            (85,000
            )Net
                cash (used in) provided by financing activities
            
            
            (21,225
            )
            
            
            934,110NET
                (DECREASE) INCREASE IN CASH
            
            
            (598,846
            )
            
            
            611,787Cash,
                beginning of year
            
            
            635,569
            
            
            
            23,782Cash,
                end of year
            
            $
            36,723
            
            
            $
            635,569SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATIONCash
                paid during the year for:Interest
            
            $
            10,987
            
            
            $
            -Income
                taxes
            
            $
            4,800
            
            
            $
            1,997NON-CASH
                INVESTING AND FINANCING ACTIVITIESStock
                issued for services
            
            $
            36,633
            
            
            $
            25,350Stock
                issued for settlement of debt
            
            $
            165,388
            
            
            $
            125,405Stock
                issued for accrued interest
            
            $
            -
            
            
            $
            228,000Purchase
                  of property and equipmentwith debt
            
            $
            136,413
            
            
            $
            -Return
                of shares due to non-performance of services
            
            $
            -
            
            
            $
            32,500Stock
                issued for purchase of technology
            
            $
            16,100
            
            
            $
            -






See
      accompanying notes to consolidated financial statements.







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****


**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**









NOTE
      1:                
ORGANIZATION AND DESCRIPTION OF BUSINESS





Organization





Seychelle
        Environmental Technologies, Inc. (SET), was incorporated under the laws of
        the
        State of Nevada on January 23, 1998 as a change in domicile to Royal Net,
        Inc.,
        a Utah corporation that was originally incorporated on January 24, 1986.
        Royal
        Net, Inc. changed its state of domicile to Nevada and its name to Seychelle
        Environmental Technologies, Inc. effective in January 1998.
 
 Seychelle
        Water Technologies (SWT) was formed as a corporation in February 1997 under
        the
        laws of the state of Nevada for the purpose of marketing the products of
        Aqua
        Vision International (Aqua Vision), a private California entity operating
        since
        1996. Prior to January 1998, SWT operations were limited primarily to
        fundraising and marketing activities.


On
      January 30, 1998, SET entered into a stock exchange agreement with SWT, whereby
      SWT shareholders emerged as the majority stockholder of SET. This reverse
      acquisition resulted in SWT becoming a wholly owned subsidiary of SET. SWT
      had
      no material operations for each of the nine fiscal years ended February 28,
      2007.





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




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.





Significant
        Agreements
 
 On
        September 1, 2005, the Company signed an exclusive agreement with Huanghua
        Seychelle Plastic Co., Ltd to manufacture component parts.  During the
        third quarter of fiscal 2005, the Company commenced production in China.
        As of
        February 28, 2007 and 2006, the Company has prepaid inventory in China of
        approximately $97,000 and $33,000, respectively. The Company believes this
        agreement will allow the Seychelle brand to be sold at a very competitive
        price
        to U.S., China, Asia and other international markets.







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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**




NOTE
      1:                  ORGANIZATION
      AND DESCRIPTION OF BUSINESS, continued




In  June
            2002 the Company entered into a license agreement with Gary Hess, doing
            business
            as Aqua Gear USA, for a product known as the “Hand Held Pump Technology.” The
            Company licensed all proprietary rights associated with this technology.
            The
            Company will pay a 2% royalty on its gross sales for the technology during
            the
            term of the license agreement. The license agreement is for an initial
            term of
            five years, with five successive five-year renewals. This offers the
            Company an
            additional proprietary product in the portable filtration industry. The
            Company
            believes that this license agreement compliments its current product
            line. As of
            the date of this filing, this technology has resulted in product called
            Pump N’
Pure which allows the user to draw filtered water from virtually any
            container
            or location. The Company continues to believe that the product will be
            viable in
            developing countries, as an emergency preparedness product, and for families
            where cost is a prime consideration. The Company plans to commence marketing
            the
            Hand Held Pump as part of its Aqua Gear product line to the United States
            sporting goods industry in fiscal 2008.
  During
            July 2006, the Company signed a second exclusive license agreement with
            Gary
            Hess doing business as Aqua Gear USA. The Company will pay a 2% royalty
            on net
            sales for this technology up to $120,000 and 1% thereafter. The license
            agreement shall continue indefinitely unless terminated due to a default
            or
            breach of the agreement. This affords the Company additional patent protection
            (patent # 6,136,188) and ownership of the trademark Aqua Gear.  Products
            affected include all Aqua Gear trademarked filter bottles and flip up
            bottles
            sold in the product line.
  During
            April 2006, the Company issued 50,000 common shares to shareholders of
            Continental Technologies, Inc. (Continental) with an approximate value
            of
            $16,100 for the Redi Chlor brand name, trademark and the use of the EPA
            Registration Number 55304-4-7126. During the fiscal year ended February
            28,
            2007, the Company commenced selling the Redi Chlor brand name water chlorine
            tablets to consumers, dealers, distributors and manufactures. Each tablet
            disinfects five gallons of source water. The Company further agrees to
            remit
            Continental a 10% commission on net sales, as defined, of the existing
            product,
            or any new products sold directly by the Company, and 10% on any
            product sold by Continental for Seychelle to their existing or new customers
            at
            Seychelle’s OEM prices. The agreement is for the life of the
            Company.


The
        Company sells its products throughout the United States and internationally.
        Geographic information for the fiscal years ended February 28, 2007 and 2006
        is
        as follows:


2007
            
            2006Water
                filtration products sold toexternal
                customers (1) (2) in:The
                  United States
            
            $
            870,772
            
            $
            523,077Pakistan
            
            
            -
            
            
            91,700China
            
            
            36,564
            
            
            90,000Asia
                  except
                  Pakistan and China
            
            
            35,917
            
            
            35,115United
                  Kingdom
            
            
            3,109
            
            
            11,952Other
                  countries
            
            
            6,284
            
            
            -Total
            
            $
            952,646
            
            $
            751,844




____________ 
 (1)    Sales
        to external customers are based on the country of residence of the
        customer.
 
 (2)   
        Long
        lived assets outside the United States included $63,413and $77,602 in tooling costs located in China at February 28, 2007
        and
        2006, respectively.


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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**










NOTE
      2:                
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES







Basis
      of Presentation


.


The
          Company’s consolidated financial statements are prepared using accounting
          principles generally accepted in the United States of America applicable
          to a
          going concern, which contemplates the realization of assets and liquidation
          of
          liabilities in the normal course of business. The Company has experienced
          recurring losses from operations and has an accumulated deficit of $6,422,232
          as
          of February 28, 2007. These factors, among others, raise substantial doubt
          as to
          the Company’s ability to have the necessary resources to market its new
          products.
  In
            order
            to continue as a going concern, the Company needs to develop a reliable
            source
            of revenues, and achieve a profitable level of operation. During the
            fiscal year
            ended February 28, 2007, the Company funded its operations by utilizing
            customer
            deposits to fund related purchase orders and the sale of common stock.
            As of
            February 28, 2007 the Company had $36,723 in unrestricted cash, a backlog
            of
            $460,000 in unshipped products and $20,000 of available borrowings under
            its
            line of credit. The line of credit does not contain any limitations on
            borrowing or any restrictive debt covenants.   Over the next twelve
            months, management believes that sufficient working capital may be obtained
            from
            a combination of revenues and external financing to meet the Company’s
            liabilities and commitments as they become payable. However, if required
            additional funding may still be required from the TAM Irrevocable Trust
            (TAM
            Trust), a related entity, or other shareholders.   During March
            2007, the TAM Trust loaned the Company an additional $100,000 to fund
            development of its new products.  During June 2007, the TAM Trust
            committed to providing up to $250,000 in additional funding, if
            required.


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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**




NOTE
      2:                  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued




Accordingly,
      the consolidated financial statements are accounted for as if the Company is
      a
      going concern and 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 be Company
      be
      unable to continue as a going concern.





Revenue
      Recognition





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


On
        direct
        sales to Food For Health, the Company functions as a broker and therefore,
        receives only a fee for coordinating sales from Huanghua Seychelle Plastic
        Co.,
        Ltd. to the customer. Since the Company has no risk of inventory ownership,
        the
        Company records its distribution income from each transaction which represents
        the fee associated with each product shipment  in accordance with
        Emerging Issues Task Force (EITF) Issue No. 99-19, *Reporting Revenue Gross
        as a Principal versus Net as an Agent*.




Cost
      of Sales




Cost
      of
      sales is comprised primarily of the cost of purchased product, as well as,
      labor, inbound freight costs and other material costs required to complete
      products. Overhead costs such as rent, depreciation, purchasing and inspection
      costs are capitalized in inventory and recognized as cost of sales in accordance
      with the Company’s revenue recognition policy.





Shipping
      and handling





All
        amounts billed to a customer in a sales transaction related to shipping and
        handling represent revenues earned and is reported as revenue. Costs incurred
        by
        the Company for shipping and handling, including transportation costs paid
        to
        third party shippers, are reported as a component of cost of sales.


General
      and Administrative Expenses





General
        and administrative expenses are comprised primarily of legal and accounting
        fees
        incurred to assist the Company with SEC filings, consulting costs for outside
        accounting personal and design and engineering projects, salaries and related
        costs for an administrative assistant and other administrative costs (i.e.
        telephone, utilities, etc.) to support operations.


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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**







NOTE
      2:                 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued








Product
      Return Reserve





The
        Company provides a reserve for returned products. Such costs are reflected
        as a
        reduction in revenues. Total costs for returned products for the fiscal years
        ended February 28, 2007 and 2006 was $nil.
 
 Management
        reviews and estimates the reserve for returned products on a regular basis.
        Although management believes its evaluations are sound, it is at least
        reasonably possible that such estimates may change in the near
        term.
 
 The
        Company has an unconditional return policy for the first 90 days. Customers
        may
        return the product for a full refund, or they may receive a replacement at
        no
        charge. The same policy applies to any product sold from the period 91 days
        after purchase to one year, for any defects in materials or
        workmanship.
  Restricted
        cash
 
 As
        of
        February 28, 2007, the Company had $150,000 in restricted cash pledged as
        additional collateral for the purchase of certain property and equipment
        (Notes
        4 and 7).   Under the terms of the pledge agreement, the Company
        is entitled to receive the income generated from the restricted cash and
        to make
        investment decisions, but is restricted from using the pledged restricted
        cash
        for any other purpose until the term loan is cancelled or repaid.
  Inventories
 
 Inventories
          are stated at the lower of cost or market. Cost is determined using the
          first-in, first-out method and consist of the following as of February
          28,
          2007:
 Raw
                  materials
              
              $
              309,933Work
                  in progress
              
              
              65,275Finished
                  goods
              
              
              226,586601,794Reserve
                  for obsolete or slow moving inventory
              
              
              (243,431
              )Net
                  inventories
              
              $
              358,363





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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**







NOTE
      2:                
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued






Finished
        goods inventory includes material, labor and manufacturer overhead
        costs.





Management
        reviews and estimates realization of inventory on a regular basis with respect
        to obsolete and slow moving inventory. During February 2007, the Company
        re-evaluated its countertop water filtration systems and water pitcher products
        and determined that an additional inventory reserve of approximately $163,000
        was required.   Previously, during the fiscal year ended February
        28, 2006, the Company evaluated its countertop water filtration systems and
        recorded an inventory reserve adjustment of approximately $79,800. Additionally,
        during February 2007, the Company decided to write off inventory products,
        with
        an estimated value of approximately $52,400, which were no longer being
        utilized.  Although management believes its evaluations are sound, it
        is at least reasonably possible that such estimates may change in the near
        term.
 
 Asset
        Held For Sale
 
 As
            of
            February 28, 2007, asset held for sale, which is stated at the lower
            of its
            carrying value or estimated fair value less cost to sell, consists of
            an
            airplane.  The Company determined that the airplane is no longer
            necessary in performing sales activities and has committed to sell
            it.  The airplane was purchased during August 2006.  The
            Company expects to dispose of this asset within the next twelve months
            and does
            not expect any material loss on the disposition.


Property
      and Equipment





Property
      and equipment are stated at cost. Depreciation is computed using the
      straight-line method over the estimated useful lives of the depreciable assets.
      The estimated useful lives used in determining depreciation are three to five
      years for tooling and five years for computers, furniture and equipment and
      vehicles. Management evaluates useful lives regularly in order to determine
      recoverability taking into consideration current technological conditions.
      Maintenance and repairs are charged to expense as incurred; additions and
      betterments are capitalized. Upon retirement or sale, the cost and related
      accumulated depreciation of the disposed assets are removed, and any resulting
      gain or loss is recorded. Fully depreciated assets are not removed from the
      accounts until physical disposition. During the fiscal year ended February
      28,
      2007 and 2006, the Company disposed of certain tooling and equipment, as well
      as
      scrapped certain fully depreciated assets (Note 4).





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. During the fiscal year ended February
            28,
            2007, the Company wrote off its "bottoms up" patent as the patent had
            expired
            and recorded an impairment loss of approximately $3,200 (Note
            5).  During the fiscal year ended February 28, 2006, the Company
            determined that the Enviro(3)Care system was no longer economically feasible
            and
            recorded an impairment charge of $104,000 (Note
            5).


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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**







NOTE
      2:                
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





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 estimated fair
          value
          of the asset.
 
 Customer
          Deposits
 
 Customer
          deposits represent advance payments received for products and are recognized
          as
          revenue in accordance with the Company’s revenue recognition
          policy.
 
 Research
          and Development Expenses
 
 Research
          and development costs are expensed as incurred and amounted to approximately
          $7,100 and $14,800 for the fiscal years ended February 28, 2007 and 2006,
          respectively, and are included in general and administrative expenses in
          the
          accompanying consolidated statements of operations.
 
 Advertising
          Expenses
 
 Advertising
          expenses are expensed as incurred. Total advertising expenses amounted
          to
          approximately $44,100 and $19,400 for the fiscal years ended February 28,
          2007
          and 2006, respectively, and are included in selling expenses in the accompanying
          consolidated statements of operations.
 
 Concentration
          of Credit Risks
 
 *Cash
          and Restricted Cash*
 
 The
          Company maintains its cash in various accounts at several financial
          institutions. At various times during the year, the amount on deposit with
          a
          single financial institution may exceed federal depository insurance limits.
          At
          February 28, 2007, the Company had balances on deposit approximating $87,000
          in
          excess of such limits. Management does not believe this represents a significant
          risk to the Company.







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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**









NOTE
      2:                
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





*Trade
      Receivables*





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





For
              the
              fiscal years ended February 28, 2007 and 2006, the Company had several
              customers, which individually accounted for at least 10% of total sales.
              The
              following table summarizes total sales, excluding distribution income,
              and
              accounts receivable for these customers:
  2007
                  
                  2007
                  
                  2006Sales
                  
                  Accounts
                  
                  SalesPercentage
                  
                  Receivable
                  
                  PercentageFood
                      For Health
                  
                  
                  39
                  %
                  
                  
                  $
                  62,342
                  
                  
                  
                  -
                  %Wellness
                      Enterprises
                  
                  
                  14
                  %
                  
                  
                  
                  -
                  
                  
                  
                  25
                  %EFT
                  
                  
                  -
                  
                  
                  
                  
                  -
                  
                  
                  
                  12
                  %
  During
          the fiscal years ended February 28, 2007 and 2006, the Company entered
          into
          several marketing and distribution agreements to sell its products
          internationally on both an exclusive and non-exclusive basis. As previously
          noted, during August 2006 the Company signed an agreement with Food For
          Health,
          Inc. to sell certain water filtration products, using the Aqua Gear brand
          name.
          Total sales to Food For Health during the fiscal year ended February 28,
          2007
          were approximately $329,600.  Management believes that if the targeted
          revenues are not achieved, the revenues can be replaced through the sale
          of
          filters and related products to other direct marketing companies. However,
          there
          can be no assurance that this will occur which could result in an adverse
          effect
          on the Company’s financial condition or results of operations in the
          future.


On
            April
            1, 2007, the exclusivity clause in the Food For Health distribution agreement
            expired. (Note 15)
 
 On
                June
                14, 2007, the Company signed a joint venture agreement with H2O Age,
                Inc. to
                market and sell on an exclusive basis to certain market channels
                in the U.S. and
                worldwide (Note 15).
 *Accounts
            Payable*
 
 For
            the
            fiscal years ended February 28, 2007 and 2006, the Company had several
            vendors,
            which individually supplied at least 10% of total purchases. The following
            table
            summarizes total raw material purchases and accounts payable for the
            fiscal
            years then ended.
  2007
                    
                    2007
                    
                    2006Purchase
                    
                    Accounts
                    
                    PurchasePercentage
                    
                    Payable
                    
                    PercentageHuanghua
                        Seychelle Plastic
                    
                    
                    47
                    %
                    
                    
                    $
                    10,835
                    
                    
                    
                    44
                    %Hebei
                        RO Environmental
                    
                    
                    -
                    
                    
                    
                    
                    -
                    
                    
                    
                    14
                    %







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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**







NOTE
      2:                
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





The
        Company signed an exclusive agreement with Huanghua Seychelle Plastic Co.
        Ltd.
        on September 1, 2005 to manufacture component parts.  Management
        believes there is adequate availability of material for all of the Company’s
        products.  However, there can be no assurance that this will occur
        which could result in an adverse effect on the Company’s financial condition or
        results of operations in the future.
 
 Income
        Taxes
 
 The
        Company utilizes Statement of Financial Accounting Standards (SFAS) No. 109,
        *Accounting for Income Taxes*, which requires the recognition of deferred
        tax assets and liabilities 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 assets and liabilities are determined based
        on
        temporary differences between the amount of taxable income and pretax financial
        income and between the tax bases of assets and liabilities and their reported
        amounts in the consolidated financial statements. Deferred tax assets and
        liabilities are included in the consolidated financial statements at currently
        enacted income tax rates applicable to the period in which the deferred tax
        assets and liabilities are expected to be realized or settled. Valuation
        allowances are established, when necessary, to reduce deferred tax assets
        to the
        amount expected to be realized.
 
 Stock
        Based Compensation
 
 On
        March
        1, 2006, the Company adopted SFAS No. 123 (revised 2004), *Share Based
        Payment*, (SFAS No. 123(R)) which establishes standards for the accounting
        of transactions in which an entity exchanges its equity instruments for goods
        or
        services, primarily focusing on accounting for transactions where an entity
        obtains services in share based payment transactions. SFAS No. 123(R) requires
        a
        public entity to measure the cost of services received in exchange for an
        award
        of equity instruments, including stock warrants, based on the grant date
        fair
        value of the award and to recognize it as compensation expense over the period
        required to provide service in exchange for the award, usually the vesting
        period. SFAS No. 123(R) supersedes the Company’s previous accounting under
        Accounting Principles Board Opinion (APB) No. 25, *Accounting for Stock
        Issued to Employees*.
  The
        Company adopted SFAS No. 123(R) using the modified prospective transition
        method, which requires the application of the accounting standard as of March
        1,
        2006, the first day of the Company’s 2007 fiscal year. The Company’s
        consolidated financial statements as of and for the fiscal year ended February
        28, 2007 reflect the impact of SFAS No. 123(R).  In accordance with the
        modified prospective transition method, the Company’s consolidated financial
        statements as of and for the fiscal year ended February 28, 2006 have not
        been
        restated to reflect, and do not include, the impact of SFAS No.
        123(R).


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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**







NOTE
      2:                
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued







Prior
          to
          the adoption of SFAS No. 123(R), the Company accounted for stock based
          awards
          using the intrinsic value method in accordance with APB No. 25 as allowed
          under SFAS No. 123. Under the intrinsic value method, no stock based
          compensation expense had been recognized in the Company’s consolidated
          statements of operations, other than as related to warrants or restricted
          common
          stock granted below the fair market value at the date of
          grant.
 
 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 (restricted and free trading) during
          the
          periods presented. Basic loss per share and diluted loss per share are
          the same
          amount because the impact of additional common shares that might have been
          issued under the Company’s outstanding and
          exercisable  warrants  would be anti-dilutive.
  Fair
          Value of Financial Instruments
  SFAS
          No.
          107, *Disclosures About Fair Value of Financial Instruments,*requires
          disclosure of fair value information about financial instruments when it
          is
          practicable to estimate that value. The carrying amounts of the Company’s
          financial instruments as of February 28, 2007 and 2006 approximate their
          respective fair values because of the nature of these instruments. Such
          instruments consist of trade receivables and accounts payable, inventories,
          certain accrued expenses, line of credit, note payable to financial institution
          and fair market value of warrants. The fair value of the related party
          accrued
          liabilities and notes payable are not determinable.
 
 Management’s
          Estimates
 
 The
          preparation of the consolidated financial statements in conformity with
          generally accepted accounting principles in the United States, requires
          management to make estimates and assumptions that affect the reported amounts
          of
          assets and liabilities and disclosure of contingent assets and liabilities
          at
          the date of the consolidated financial statements and the reported amounts
          of
          revenues and expenses during the reporting periods. Significant estimates
          made
          in preparing the consolidated financial statements include the allowance
          for
          doubtful accounts, sales returns, inventory reserves, deferred income tax
          valuation allowances and litigation. To the extent there are material
          differences between estimates and the actual results, future results of
          operations will be affected.
 
 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. The Company evaluated SFAS No. 131 and determined
          that the
          Company operates in multiple segments (Note 13).







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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**







NOTE
      2:
               
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued






Recent
        Accounting Pronouncements
  In
          February 2006, Financial Accounting Standards Board (FASB) issued SFAS
          No. 155,
*Accounting for Certain Hybrid Financial Instruments*. SFAS No. 155
          amends SFAS No 133, *Accounting for Derivative Instruments and Hedging
          Activities,* and SFAS No. 140, *Accounting for Transfers and Servicing of
          Financial Assets and Extinguishments of Liabilities*.  SFAS No. 155,
          permits fair value remeasurement for any hybrid financial instrument that
          contains an embedded derivative that otherwise would require bifurcation,
          clarifies which interest-only strips and principal-only strips are not
          subject
          to the requirements of SFAS No. 133, establishes a requirement to evaluate
          interest in securitized financial assets to identify interests that are
          freestanding derivatives or that are hybrid financial instruments that
          contain
          an embedded derivative requiring bifurcation, clarifies that concentrations
          of
          credit risk in the form of subordination are not embedded derivatives,
          and
          amends SFAS No. 140 to eliminate the prohibition on the qualifying
          special-purpose entity from holding a derivative financial instrument that
          pertains to a beneficial interest other than another derivative financial
          instrument.  This statement is effective for all financial instruments
          acquired or issued after the beginning of the Company’s first fiscal year that
          begins after September 15, 2006, which is the Company’s 2008 fiscal
          year.  The Company is currently assessing the potential effect of SFAS
          No. 155 on its consolidated financial statements.
 
 In
          June
          2006, the FASB issued Interpretation No. 48, *Accounting for Uncertainty in
          Income Taxes*– an interpretation of FASB Statement No. 109, which clarifies
          the accounting for uncertainty in income taxes recognized in an enterprise’s
          financial statements in accordance with SFAS No. 109, *Accounting for Income
          Taxes*.   This interpretation prescribes a comprehensive
          model for how a company should recognize, measure, present and disclose
          in its
          financial statements uncertain tax positions that it has taken or expects
          to
          take on a tax return, including a decision whether to file or not to file
          a
          return in a particular jurisdiction.  Under the Interpretation, the
          financial statements must reflect expected future tax consequences of these
          positions presuming the taxing authorities full knowledge of the position
          and
          all relevant facts.  The Interpretation also revises disclosure
          requirements and introduces a prescriptive annual, tabular roll-forward
          of the
          unrecognized tax benefits.  This Interpretation is effective for
          fiscal years beginning after December 15, 2006, which is the Company’s 2008
          fiscal year, although early adoption is permitted.  The Company is
          currently in the process of evaluating the impact of this pronouncement
          on its
          consolidated financial statements.
 
 In
          September 2006, the FASB issued SFAS No. 157, *Fair Value
          Measurements*.  SFAS No. 157 establishes a framework for measuring
          the fair value of assets and liabilities.  This framework is intended
          to provide increased consistency in how fair value determinations are made
          under
          various existing accounting standards that permit, or in some cases require,
          estimates of fair market value.  SFAS No. 157 is effective for fiscal
          years beginning after November 15, 2007, and interim periods within those
          fiscal
          years.  Earlier adoption is encouraged, provided that the reporting
          entity has not yet issued financial statements for that fiscal year, including
          any financial statements for an interim period within that fiscal
          year.  The Company has not yet determined the impact of applying SFAS
          No. 157.





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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**




NOTE
        2:
               
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





In
        February 2007, FASB issued SFAS No. 159, *The Fair Value Option for Financial
        Assets and Financial Liabilities*, which gives companies the option to
        measure eligible financial assets, financial liabilities and firm commitments
        at
        fair value (i.e., the fair value option), on an instrument-by-instrument
        basis,
        that are otherwise not permitted to be accounted for at fair value under
        other
        accounting standards. The election to use the fair value option is available
        when an entity first recognizes a financial asset or liability or upon entering
        into a firm commitment. Subsequent changes in fair value must be recorded
        in
        earnings. SFAS No. 159 is effective for financial statements issued for fiscal
        year beginning after November 15, 2007. The Company does not expect adoption
        of
        SFAS No. 159 will have a material impact on its consolidated results of
        operations or financial position.


In
        November 2005, the FASB issued FASB Staff Position 123(R)-3 (“FSP 123(R)”),
*Transition Election Related to Accounting for the Tax Effect of Share-based
        Payment Awards*, that provides an elective alternative transition method of
        calculating the pool of excess tax benefits available to absorb tax deficiencies
        recognized subsequent to the adoption of SFAS No. 123(R) to the method otherwise
        required by paragraph 81 of SFAS No. 123(R).  The Company may take up
        to one year from the effective date of this FSP to evaluate its available
        alternatives and make it one-time election.  The Company is currently
        evaluating the alternative methods.  Until and unless the Company
        elects the transition method described in this FSP, the Company will follow
        the
        transition method described in paragraph 81 of SFAS No.
        123(R).


In
      December 2006, the FASB issued FASB Staff Position EITF  No. 00-19-2,
*Accounting for Registration Payment Arrangements*(" FSP EITF 00-19-2").
      FSP EITF No. 00-19-2 specifies that the contingent obligation to make future
      payments or otherwise transfer consideration under a registration payment
      arrangement, whether issued as a separate agreement or included as a provision
      of a financial instrument or other agreement, should be separately recognized
      and measured in accordance with SFAS No. 5, "Accounting for Contingencies."
      FSP
      EITF No. 00-19-2 further clarifies that a financial instrument subject to a
      registration payment arrangement should be accounted for in accordance with
      other applicable GAAP without regard to the contingent obligation to transfer
      consideration pursuant to the registration payment arrangement. FSP EITF No.
      00-19-2 is effective for registration payment arrangements and the financial
      instruments subject to those arrangements that are entered into or modified
      subsequent to December 21, 2006. For registration payment arrangements and
      financial instruments subject to those arrangements that were entered into
      prior
      to the issuance of FSP EITF No. 00-19-2, the standard is effective for financial
      statements issued for fiscal years beginning after December 15, 2006, and
      interim periods within those fiscal years. Early adoption for interim or annual
      periods for which financial statements or interim reports have not been issued
      is permitted. The Company does not expect adoption of FSP EITF No. 00-19-2
      will
      have a material impact on our consolidated results of operations or financial
      position.





Reclassifications
 
 Certain
        amounts in the fiscal 2006 consolidated financial statements have been
        reclassified to conform to its fiscal 2007
        presentation.





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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**








NOTE
      3:                 FOOD
      FOR HEALTH





During
            August 2006, the Company signed an agreement with Food For Health, Inc.
            (Food
            For Health) a manufacturer and marketer of nutritional food and vitamin
            products, to sell certain water filtration products, using the Aqua Gear
            brand
            name, to a variety of their customers including big-box stores in the
            U.S. and
            Canada.  As of February 28, 2007, Food For Health has ordered 100,000
            bottles.  As required by the agreement, the Company has received fifty
            percent of the purchase order amount to provide the Company funds to
            purchase
            the required products from outside vendors.  As of February 28, 2007,
            the Company has prepaid inventory of approximately $97,000 to Huanghua
            Seychelle
            Plastic Co., Ltd. for manufactured bottles.  This payment is included
            in prepaid expense in the accompanying consolidated balance
            sheet.  Additionally, the deposit on the purchase orders of
            approximately $172,000 is included in customer deposits in the accompanying
            consolidated balance sheet.
 
 Separately,
              Food For Health contracted with the Company to source varied products
              (such as
              pots, utensils, thermal blankets, radios, etc.) made in China for their
              emergency preparedness packs to be sold to their customers.  These
              products will be shipped directly to Food For Health from China.  As
              of February 28, 2007, Food For Health has ordered and been delivered
              approximately $615,000 in products from China.  During the fiscal year
              ended February 28, 2007, the Company recognized approximately $110,000
              in
              distribution income from its efforts, which is included in sales in
              the
              accompanying 2007 consolidated statement of operations.
 
 On
              April
              1, 2007, the exclusivity clause in the Food For Health distribution
              agreement
              expired (Note 15).





NOTE
      4:                  PROPERTY
      AND EQUIPMENT





The
      following is a summary of property and equipment at February 28,
      2007:




Tooling
              
              $
              270,605Equipment
              
              
              26,059Vehicles
              
              
              10,000Furniture
                  and fixtures
              
              
              15,775Computer
                  equipment
              
              
              14,642Leasehold
                  equipment
              
              
              3,330340,411Less:
                  Accumulated depreciation
              
              
              209,412$
              130,999






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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**







NOTE
      4:                 PROPERTY
      AND EQUIPMENT, continued







As
                of
                February 28, 2006, the Company had recorded  $12,948 in reverse
                osmosis-based tooling to be used in China.  During the fiscal year
                ended February 28, 2007, the Company determined the tooling would
                no longer be
                utilized in future operations.  The loss on disposition of $12,948 is
                included in the accompanying 2007 consolidated statement of
                operations.
 During
              the fiscal year ended February 28, 2007, the Company wrote off approximately
              $26,000 in tooling related to the water pitcher (Note 2) molds, which
              were no
              longer being utilized in operations.  The approximate $21,200 loss on
              disposition of this tooling is included in the accompanying 2007 consolidated
              statement of operations.
 
 During
              the fiscal year ended February 28, 2007, the Company disposed of approximately
              $42,000 in equipment, which was no longer being utilized in
              operations.  The approximate $14,500 loss on disposition of this
              equipment is included in the accompanying 2007 consolidated statement
              of
              operations.
 
 During
                the fiscal year ended February 28, 2006, the Company sold for $20,000
                a pleating
                machine with an approximate cost of $25,000. Additionally, during
                fiscal 2006, a
                countertop machine with a value of $25,000 was stolen from its location
                in
                China. The combined $30,000 loss on disposition of this equipment
                is included in
                the accompanying 2006 consolidated statement of operations.
 
 Total
              depreciation expense for the fiscal years ended February 28, 2007 and
              2006 was
              approximately $41,600 and $25,100, respectively.




NOTE
      5:                  INTANGIBLE
      ASSETS





The
      following is a summary of intangible assets at February 28, 2007:




Redi
                  Chlor brand name and trademark
              
              $
              16,100Hand
                  pump
              
              
              8,000Patents
              
              
              12,64336,743Less:
                  Accumulated amortization
              
              
              6,199$
              30,544


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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**







NOTE
      5:                  INTANGIBLE
      ASSETS, continued







The
          estimated future amortization expense of intangible assets as of February
          28,
          2007 for each of the five succeeding years is approximately $1,200.
 
 During
          the fiscal year ended February 28, 2007, the Company wrote off its “bottoms up”
patent as the patent had expired and recorded an impairment loss of
          approximately $3,200 which is included in the accompanying 2007 consolidated
          statement of operations.
 
 During
          the fiscal year ended February 28, 2006, the Company determined that the
          Enviro(3)Care system was no longer economically feasible and recorded an
          impairment charge of $104,000 which is included in the accompanying 2006
          consolidated statement of operations.
  Total
          amortization expense for the fiscal years ended February 28, 2007 and 2006
          was
          approximately $1,000 and $1,200, respectively.





NOTE
      6:                 
ACCRUED EXPENSES





Accrued
      expenses consist of the following at February 28, 2007:




Accrued
                  legal fees
              
              $
              133,059Accrued
                  accounting fees
              
              
              72,140Accrued
                  claim settlements
              
              
              15,300Accrued
                  credit card purchases
              
              
              2,272Accrued
                  commissions
              
              
              13,949Accrued
                  wages and benefits
              
              
              3,617Income
                  tax payable
              
              
              1,600Other
                  accrued expenses
              
              
              21,956$
              263,893







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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**









NOTE
      7: LINES
      OF
      CREDIT / NOTE PAYBLE TO FINANCIAL INSTITUTION







As
        of
        February 28, 2007, the Company has a line of credit agreement, totaling
        $100,000.  The line of credit bears interest at the institution’s
        index rate (7.75 % at February 28, 2007) plus two percent and is due June
        1,
        2007.  As of February 28, 2007, the Company has borrowed $80,000
        against the line of credit.  During June 2007, the Company renewed the
        line of credit for an additional year at similar terms.  The line of
        credit agreement does not contain any limitations on borrowing or any
        restrictive debt covenants.
 
 During
        August 2006, the Company entered into another line of credit agreement totaling
        $150,000 to purchase an airplane.
 
 During
          October 2006, the Company terminated the line of credit used to purchase
          the
          airplane and entered into a three-year term loan.  The term loan bears
          interest at 6.5%, payable monthly, with the principal balance not repayable
          until September 2009.   As of February 28, 2007, the outstanding
          balance on the term loan was $136,413.  The term loan is secured by
          the Company’s airplane and restricted cash.  As of February 28, 2007,
          the Company committed to a plan to sell the airplane and is classified
          as an
          asset held for sale (Note 2).  As the Company expects to dispose of
          this asset within the next twelve months and pay off this term loan, it is
          classified as a current liability on the accompanying 2007 consolidated
          balance
          sheet.


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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**







NOTE
      8:                
NOTES PAYABLE TO RELATED PARTIES







As
        the
        February 28, 2007 and 2006, the Company received advances of $299,175 and
        $363,150 from the Company’s primary investor, TAM Trust. These advances bear
        interest at 10%. As of February 28, 2007, the balance of the advances is
        not
        repayable until after March 1, 2011. The repayment of these advances is
        subordinate to the Company’s line of credit and note payable to financial
        institution (Note 7).
 
 As
        of
        February 28, 2007 and 2006, accrued interest on these advances was approximately
        $251,800 and $169,300, respectively, which is included in accrued interest
        due
        to related parties in the accompanying consolidated balance sheet.
  During
        December 2004, the Company granted the TAM Trust restricted common stock
        of
        1,266,667 shares for unpaid interest during the period March 1, 2002 through
        February 28, 2005. The restricted common shares were distributed during the
        first quarter of the fiscal year ended February 28, 2006. The fair market
        value
        of the restricted shares was estimated at $228,000 (Note 12).
 
 On
          March
          29, 2005, the Company granted the TAM Trust 500,000 warrants redeemable
          into
          restricted shares of the Company’s common stock at a purchase price of $.225 per
          share.   One-third of the warrants vested on the effective date
          of the agreement as an enticement to enter into the agreement.  The
          remaining warrants vested  in equal installments on December 1, 2005
          and 2006 and are exercisable through December 1, 2008 (Notes 9 and
          12).
 
 Additionally,
          on March 29, 2005, the Company granted the TAM Trust 1,972,133 shares of
          restricted common stock. These shares vested over a two-year period beginning
          November 1, 2004 (Notes 9 and 12).
 
 On
          July
          27, 2005, the Company granted the TAM Trust 2,000,000 warrants redeemable
          into
          restricted shares of the Company’s common stock at a purchase price of $.225 per
          share. The warrants vest in equal installments commencing on the date of
          grant
          through December 1, 2006 and are exercisable through December 1, 2008 (Notes
          9
          and 12).
 On
        January 23, 2006, the Company issued the TAM Trust 37,500 common shares for
        continued financial support. As the common stock was issued at below the
        Company’s market price at the date of grant ($nil cost per share), the Company
        recorded interest expense relating to the value of these shares of $8,437
        (Notes
        9 and 12).
 
 In
          March
          2007, the Company borrowed an additional $100,000 from TAM Trust to fund
          development of its new emergency preparedness products (Note
          15).
 During
        June 2007, the TAM Trust committed to providing up to $250,000 in additional
        funding, if required (Note 15).




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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**







NOTE
      9:                
CAPITAL STRUCTURE







Adoption
        of SFAS No. 123(R)
 
 As
        discussed in Note 2, on March 1, 2006, the Company adopted SFAS No. 123(R)
        which
        establishes standards for the accounting of transactions in which an entity
        exchanges its equity instruments for goods or services, primarily focusing
        on
        accounting for transactions where an entity obtains services in share based
        payment transactions. SFAS No. 123(R) requires a public entity to measure
        the
        cost of services received in exchange for an award of equity instruments,
        including stock warrants, based on the grant date fair value of the award
        and to
        recognize it as compensation expense over the period required to provide
        service
        in exchange for the award, usually the vesting period.
 
 Stock-based
              compensation expense recognized during the fiscal year ended February
              28, 2007
              is based on the value of the portion of share-based payment awards
              that are
              ultimately expected to vest during the period. Stock-based compensation
              expense
              recognized in the Company’s consolidated statement of operations for the fiscal
              year ended February 28, 2007 included compensation expense for share-based
              payment awards granted prior to, but not yet vested as of February
              28, 2006
              based on the grant date fair value estimated in accordance with the
              pro forma
              provisions of SFAS No. 123 and compensation expense for the share-based
              payment
              awards granted subsequent to February 28, 2006 based on the grant date
              fair
              value estimated in accordance with the provisions of SFAS No. 123(R).
              As
              stock-based compensation expense recognized in the consolidated statement
              of
              operations for fiscal 2007 has been based on awards ultimately expected
              to vest,
              it has been reduced for estimated forfeitures. SFAS No. 123(R) requires
              forfeitures to be estimated at the time of grant and revised, if necessary,
              in
              subsequent periods if actual forfeitures differ from those initially
              estimated.
              For the fiscal year ended February 28, 2007, the Company applied an
              estimated
              forfeiture rate of zero% for officer grants, as the vesting periods
              are complete
              as of December 1, 2006. As of the date of this filing, there were no
              warrants
              granted to non-officers of the Company and therefore, no forfeiture
              rate was
              utilized. The estimated vesting term of warrant grants for the fiscal
              year ended
              February 28, 2007 was 3.75 years for officer grants.
  SFAS
                  No.
                  123(R) requires the cash flows resulting from the tax benefits
                  of tax deductions
                  in excess of the compensation cost recognized for those warrants
                  to be
                  classified as financing cash flows. Due to the Company’s loss position, there
                  were no such tax benefits during the fiscal years ended February
                  28, 2007 and
                  2006.  Prior to the adoption of SFAS No. 123(R), those benefits would
                  have been reported as operating cash flows had the Company received
                  any tax
                  benefits related to stock warrant exercises.  The fair value of stock
                  based awards is calculated using the Black Scholes option-pricing
                  model.  Although this model was developed to estimate the fair value
                  of freely tradable, fully transferable options without vesting
                  restrictions, it
                  differs significantly from the Company’s stock warrants. The Black Scholes model
                  also requires subjective assumptions, including future stock price
                  volatility
                  and expected time to exercise, which greatly affect the calculated
                  values. The
                  risk free rate selected to value any particular grant is based
                  on the United
                  States Treasury’s T-bill rate (3.5%). The expected volatility is based on the
                  historical volatility of the Company’s stock price. These factors could change
                  in the future, affecting the determination of stock based compensation
                  expense
                  in future periods.





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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**






NOTE
        9:                
CAPITAL STRUCTURE, continued





The
      weighted average fair value of stock based compensation is based on the single
      option valuation approach. Forfeitures are estimated and it is assumed no
      dividends will be declared. The estimated fair value of stock based compensation
      awards is amortized using the straight line method over the vesting period
      of
      the warrants or restricted common shares, as such method is consistent with
      the
      officer's contractual obligation. The Company’s fair value calculations for
      stock based compensation awards for the fiscal year ended February 28, 2007
      were
      based on the following assumptions:





Risk
                free interest rate
            3.5%Expected
                life
            1.25
                - 3.75Expected
                volatility
            235 -
                323%Expected
                dividends
            None




The
        following table summarizes stock based compensation, consulting and interest
        costs related to stock warrants and restricted common shares under SFAS No.
        123(R) for the fiscal ended February 28, 2007, allocated as shown:
  General
                    and administrative
                
                $
                14,354Compensation
                    to executive officers
                
                
                170,580Interest
                    expense to related parties
                
                
                466,230Total
                    stock and warrant based compensation expense
                
                $
                651,164




For
          the
          fiscal year ended February 28, 2007, the amount of stock based compensation
          related to stock warrants was $142,527 and the amount related to restricted
          common shares was $42,407.
 
 For
          the
          fiscal year ended February 28, 2007, the amount of interest expense related
          to
          stock warrants was $328,245 and the amount of interest expense related
          to
          restricted common shares was $137,985.
 
 The
          Company’s net loss for the fiscal year ended February 28, 2007 was $1,464,298.
          The Company’s net loss for the fiscal year ended February 28, 2007 was $366,189
          greater than it would have been if the Company had continued to account
          for
          share based compensation under APB No. 25. The Company’s net loss per common
          share, basic and diluted, for the fiscal ended February 28, 2007 was $0.06.
          The
          Company’s net loss per common share, basic and diluted, for the fiscal year
          ended February 28, 2007 was $0.01 greater than it would have been if the
          Company
          had continued to account for share based compensation under APB No.
          25.





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**SEYCHELLE
          ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
          28, 2007**


NOTE
        9:                
CAPITAL STRUCTURE, continued





Pro
      forma
      results for the fiscal year ended February 28, 2006 are as follows:




Net
                  loss, as reported
              
              $
              (932,456
              )Add:
                  Stock based compensation and interest expense included in reported
                  net
                  loss
              
              
              473,946Deduct:
                  Total stock based compensation and interest expense determined
                  under the
                  fair value based method for all awards
              
              
              (849,080
              )Net
                  loss, pro-forma
              
              $
              (1,307,590
              )Basic
                  and diluted net loss per common share:As
                  reported
              
              $
              (0.05
              )Pro-forma
              
              $
              (0.07
              )




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 preferred
        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.


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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**






NOTE
        9:                
CAPITAL STRUCTURE, continued


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, 2007, three classes of Preferred Stock were authorized and none
      was
      outstanding.





Employment
          Agreements
 
 During
                November 2004, the Company entered into employment agreements with
                two officers
                to provide management services for the Company. As consideration
                for services to
                be rendered, the officers received 480,000 restricted shares of the
                Company’s
                common stock. The common shares were distributed in equal installments
                on
                December 1, 2004, 2005 and 2006. The first third vested on the effective
                date of
                the agreement as an enticement to enter into the agreement. The estimated
                fair
                market value of the stock as of November 30, 2004 was $225,600. The
                Company
                amortized the estimated fair market value of the unearned compensation
                over the
                two-year vesting period.  On March 1, 2006, the Company adopted SFAS
                No. 123(R)  and revalued the non-vested portion of this
                grant.     The Company has recorded compensation
                expense of approximately $4,000 and $75,200 for the fiscal years
                ended February
                28, 2007 and 2006, respectively.
 
 On
                March
                29, 2005, the Company expanded the employment agreement with one
                officer to
                provide management services for the Company. As consideration for
                services to be
                rendered, the officer received 316,312 restricted shares of the Company’s common
                stock.  The first third vested on the effective date of the agreement
                as an enticement to enter into the agreement.  The remaining common
                shares were distributed in equal installments on December 1, 2005
                and 2006. The
                fair market value of the restricted shares as of November 30, 2004
                was estimated
                at $79,100.   The Company amortized the estimated fair market value of the
                unearned compensation over the two-year vesting period.  On March 1,
                2006, the Company adopted SFAS No. 123(R) and revalued the non-vested
                portion of
                this grant.   The Company has recorded compensation expense of
                approximately $14,900 and $46,400 for the fiscal years ended February
                28, 2007
                and 2006, respectively.


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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**




NOTE
        9:                
CAPITAL STRUCTURE, continued





Restricted
          Stock Grants
  The
          Company granted restricted common stock to certain executive officers and
          the
          TAM Trust.   Shares are granted in the name of the receipients,
          who has all rights of a shareholder, subject to certain restrictions on
          transferability and a risk of forfeiture. The grants are subject to graded
          vesting over periods ranging from approximately two to three years. After
          the vesting period, the restrictions on transferability lapse. The Company
          recognizes the related compensation and interest expense on a straight-line
          basis over the requisite service period. A summary of restricted stock
          grant
          activity is as follows.
  **2007**
                  
                  **2006**
                  
                  **2005****Shares**
                  
                  **Weighted**
                    **Average**
                    **Grant-Date**
                    **Fair
                      Value**
                  
                  **Shares**
                  
                  **Weighted**
                    **Average**
                    **Grant-Date**
                    **Fair
                      Value**
                  
                  **Shares**
                  
                  **Weighted**
                    **Average**
                    **Grant-Date**
                    **Fair
                      Value**Outstanding,
                      at beginning of  fiscal year
                  
                  
                  915,187
                  
                  
                  $
                  0.24
                  
                  
                  
                  320,000
                  
                  
                  $
                  0.05
                  
                  
                  
                  -
                  
                  
                  $
                  -Granted
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  2,288,445
                  
                  
                  $
                  0.28
                  
                  
                  
                  480,000
                  
                  
                  $
                  0.05Forfeited
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  --Vested
                  
                  
                  (915,187
                  )
                  
                  $
                  0.24
                  
                  
                  
                  (1,693,258
                  )
                  
                  $
                  0.26
                  
                  
                  
                  (160,000
                  )
                  
                  $
                  0.05Outstanding,
                      at end of fiscal year
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  915,187
                  
                  
                  $
                  0.24
                  
                  
                  
                  320,000
                  
                  
                  $
                  0.05


Warrants





On
            March
            29, 2005, the Company expanded the employment agreements with two officers
            to
            provide management services for the Company. As further consideration
            for
            services to be rendered, the officers were granted 1,000,000 warrants
            redeemable
            into restricted shares of the Company’s common stock at a purchase price of
            $.225 per share.  The first third vested on the effective date of the
            agreement as an enticement to enter into the agreement.   The
            remaining warrants vested in equal installments on December 1, 2005 and
            2006 and
            are exercisable through December 1, 2008. The fair market value of the
            warrants
            as of November 30, 2004 was estimated at $55,300. The Company amortized
            the
            estimated fair market value of the unearned compensation over the two-year
            vesting period. On March 1, 2006, the Company adopted SFAS No. 123(R)
            and
            revalued the non-vested portion of this warrant grant.   The Company
            has recorded compensation expense of approximately $46,600 and $18,400
            for the
            fiscal years ended February 28, 2007 and 2006, respectively.
 
 On
            March
            29, 2005, the Company granted the TAM Trust 500,000 warrants redeemable
            into
            restricted shares of the Company’s common stock at $.225 per
            share.  The first third vested on the effective date of the agreement
            as an enticement to enter into the agreement.    The
            remaining warrants vested in equal installments on December 1, 2005 and
            2006 and
            are exercisable through December 1, 2008. As the warrants provide for
            the
            purchase of common stock at below the Company’s market price on the date of
            grant, the Company recorded unearned interest relating to the estimated
            value of
            these warrants of $27,200. The Company amortized the estimated fair market
            value
            of the unearned interest over the two-year vesting period.  On March
            1, 2006, the Company adopted SFAS No. 123(R) and revalued the non-vested
            portion
            of this grant.   The Company has recorded interest expense of
            approximately $35,000 and $9,100 for the fiscal years ended February
            28, 2007
            and 2006, respectively.





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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**







NOTE
      9: CAPITAL
      STRUCTURE, continued







On
            July
            27, 2005, the Company expanded the employment agreements with two officers
            to
            provide management services for the Company. As further consideration
            for
            services to be rendered, the officers were granted 500,000 warrants redeemable
            into restricted shares of the Company’s common stock at a purchase price of
            $.225 per share. The warrants are exercisable any time after December
            1, 2006
            and expire December 1, 2008. As the warrants provide for the purchase
            of common
            stock at below the Company’s market price on the date of grant, the Company
            recorded unearned compensation relating to the estimated value of these
            warrants
            of $30,000. The Company amortized the estimated fair market value of
            the
            unearned compensation over the period from date of grant through December
            1,
            2006. On March 1, 2006, the Company adopted SFAS No. 123(R) and revalued
            the
            non-vested portion of this grant.   The Company has recorded
            compensation expense of approximately $49,600 and $11,700 for the fiscal
            years
            ended February 28, 2007 and 2006, respectively.
 
 On
            July
            27, 2005, the Company granted the TAM Trust 2,000,000 warrants redeemable
            into
            restricted shares of the Company’s common stock at a purchase price of $.225 per
            share. The warrants are exercisable any time after December 1, 2006 and
            expire
            December 1, 2008. As the warrants provide for the purchase of common
            stock at
            below the Company’s market price on the date of grant, the Company recorded
            unearned interest relating to the estimated value of these warrants of
            $120,000.
            The Company amortized the estimated fair market value of the unearned
            interest
            over the period from date of grant through December 1, 2006. On March
            1, 2006,
            the Company adopted SFAS No. 123(R) and revalued the non-vested portion
            of this
            grant.     The Company has recorded interest expense of
            approximately $293,300 and $46,700 for the fiscal years ended February
            28, 2007
            and 2006, respectively.
 
 In
              conjunction with the issuance of 2,000,000 restricted common shares
              for
              $450,000, on July 27, 2005, the Company granted S. Lampman, a shareholder,
              2,000,000 warrants redeemable into restricted shares of the Company’s common
              stock at a purchase price of $.225 per share. The warrants are exercisable
              any
              time after December 1, 2006 and expire December 1, 2008.
  On
              July
              25, 2006, the Company granted Gary Hess 100,000 warrants redeemable
              into
              restricted shares of the Company’s common stock at a purchase price of $.40 per
              share. The warrants are exercisable any time after December 1, 2008
              and expire
              December 1, 2010. As the warrants provide for the purchase of common
              stock at
              below the Company’s market price on the date of grant, the Company has recorded
              consulting expense of approximately $11,500 for the fiscal year ended
              February
              28, 2007.
 
 As
            of
            February 28, 2007, total unrecognized adjusted compensation costs related
            to
            nonvested stock warrants was approximately $34,500, which is expected
            to be
            recognized as an expense over the period ending December
            2008.




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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**








NOTE
        9: CAPITAL
        STRUCTURE, continued




A
        summary
        of warrant activity for the fiscal years ended February 28, 2007 and 2006
        are as
        follows:
 Warrants
                    Outstanding
                
                
                Exercise
                    PriceBalance,
                    February 28, 2005
                
                
                -
                
                
                
                -Granted
                
                
                6,000,000
                
                
                $
                0.225Canceled
                
                
                -
                
                
                
                -Balance,
                    February 28, 2006
                
                
                6,000,000
                
                
                $
                0.225Granted
                
                
                100,000
                
                
                $
                0.40Exercised
                
                
                -
                
                
                $
                -Canceled
                
                
                -
                
                
                
                -Balance,
                    February 28, 2007
                
                
                6,100,000
                
                
                $
                0.225-0.40Vested
                    or expected to vest at February 28, 2007
                
                
                6,100,000
                
                
                $
                0.229Exercisable
                    at February 28, 2007
                
                
                6,000,000
                
                
                $
                0.225


The
      following table summarizes significant ranges of outstanding warrants as of
      February 28, 2007:




Warrants
                  Outstanding
              
              Warrants
                  ExercisableRange
                  of Exercise Prices
              
              Number
                  Outstanding
              
              Weighted
                  Average Remaining Contractual Life (in years)
              
              Weighted
                  Average Exercise Price
              
              Number
                  Outstanding
              
              Weighted
                  Average Exercise Price$0.225
              
              
              6,000,000
              
              
              1.75
              
              $
              0.225
              
              
              6,000,000
              
              $
              0.225$0.400
              
              
              100,000
              
              
              3.75
              
              $
              0.400
              
              
              -
              
              $
              0.4006,100,000
              
              
              1.80
              
              $
              0.229
              
              
              6,000,000
              
              $
              0.225







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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**






NOTE
        9: CAPITAL
        STRUCTURE, continued


As
          of
          February 28, 2007, there were no unrecognized adjusted interest costs related
          to
          nonvested stock warrants.
 
 Contributed
          Executive Services
  Effective
          December 1, 2001, the Company entered into an employment agreement with
          the
          President of the Company. The agreement is for five years and provides
          for a
          salary of $10,000 per year plus one percent of the net after tax profits
          of the
          Company as reported in the Company's Form 10-KSB. The agreement shall be
          automatically renewed for successive one-year terms unless the Company
          or
          employee provides written notice of non-renewal.
 
 As
          the
          President of the Company has decided not to accept his salary until the
          Company
          has become profitable, the Company recorded the value of these services
          as
          additional paid in capital in the accompanying consolidated statements
          of
          changes in stockholders’ deficit.


NOTE
      10:               
INCOME TAXES





The
          components of the provision for income taxes for the fiscal years ended
          February
          28, 2007 and 2006 are as follows:
  2007
                  
                  
                  2006Current:State
                  
                  $
                  -
                  
                  
                  $
                  -Federal
                  
                  
                  -
                  
                  
                  
                  -Deferred:State
                  
                  
                  136,173
                  
                  
                  
                  97,503Federal
                  
                  
                  456,335
                  
                  
                  
                  308,761Valuation
                      allowance
                  
                  
                  (592,508
                  )
                  
                  
                  (406,264
                  )Provision
                      for income taxes
                  
                  $
                  -
                  
                  
                  $
                  -




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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**






NOTE
        10:                 INCOME
        TAXES ,
        continued


The
        reconciliation of the effective tax rate and U.S. statutory tax rate for
        the
        fiscal years ended February 28, 2007 and 2006 are as follows:


2007
                  
                  
                  2006Tax
                      (benefit) of statutory rate
                  
                  
                  (34.0
                  )%
                  
                  
                  (34.0
                  )%Effect
                      of state tax benefit
                  
                  
                  (5.8
                  )%
                  
                  
                  (5.8
                  )%Meals
                      and entertainment
                  
                  
                  0.4
                  %
                  
                  
                  0.4
                  %Change
                      in valuation allowance
                  
                  
                  (39.4
                  )%
                  
                  
                  (39.4
                  )%Effective
                      tax rate
                  
                  
                  0.0
                  %
                  
                  
                  0.0
                  %


At
          February 28, 2007, the Company has net operating loss carry forwards for
          income
          tax reporting purposes of approximately $4,449,000 and $2,498,000 available
          to
          offset future federal and California taxable income, respectively. Based
          on
          current tax law, the Company’s federal and state net operating loss carry
          forwards will expire at various years through 2027.
 
 At
          February 28, 2007, the Company had available tax credit carry forwards
          comprised
          of federal and state research and experimentation credits of approximately
          $6,200 and $8,700, respectively. The research and experimentation credit
          carry
          forwards expire through 2023 for federal purposes and do not expire for
          California purposes.
  The
            provision for income taxes is reflected as a component of general and
            administrative expenses in the accompanying consolidated statements of
            operations.





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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**







NOTE
      10:                INCOME
      TAXES, continued





The
        components of the net deferred tax assets as of February 28, 2007 is as
        follows:
  Net
                    operating loss carry forwards
                
                $
                1,575,430Interest
                    to related parties
                
                
                274,594Consulting
                    fees to related parties
                
                
                101,562Inventory
                    reserves
                
                
                88,609Other
                
                
                2,361Less:
                    Valuation allowance
                
                
                (2,042,556
                )Net
                    deferred tax assets
                
                $
                0




NOTE
      11:               
COMMITMENTS AND CONTINGENCIES





The
        Company leases an office and production facility under an operating lease
        that
        expires in February 2008. As of February 28, 2007, the Company paid $6,192
        per
        month in base rent. The Company must also pay $1,659 per month to cover taxes,
        maintenance, insurance and certain other operating expenses applicable to
        the
        premises.





Total
      rent expense amounted to approximately $91,500 and $98,700 for the fiscal years
      ended February 28, 2007 and 2006, respectively.





Future
      minimum base lease payments are is as follows:





Fiscal
      Year Ending February 28





2008
            
            
            $   
                94,000








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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**




NOTE
      11:              
COMMITMENTS AND CONTINGENCIES, continued





Legal
      Proceedings





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




NOTE
      12: RELATED
      PARTY TRANSACTIONS





Effective
            December 1, 2001, the Company entered into an employment agreement with
            the
            President of the Company. The agreement is for five years and provides
            for a
            salary of $10,000 per year plus 1% of the net after tax profits of the
            Company.
            The agreement shall be automatically renewed for successive one-year
            terms
            unless the Company or employee provides written notice of
            non-renewal.   As the President of the Company has decided not to
            accept his salary until the Company has become profitable, the Company
            recorded
            the value of these services as additional paid in capital in the accompanying
            consolidated statements of changes in stockholders’ deficit.
 
 During
              November 2004, the Company entered into employment agreements with
              two officers
              to provide management services for the Company. As consideration for
              services to
              be rendered, the officers received 480,000 restricted shares of the
              Company’s
              common stock. The common shares were distributed in equal installments
              on
              December 1, 2004, 2005 and 2006 (Note 9).  The Company has recorded
              compensation expense for these services in the accompanying consolidated
              statements of operations.
  During
              December 2004, the Company granted the TAM Trust restricted common
              stock of
              1,266,667 shares in lieu of payment of accrued interest on prior year
              advances. The fair market value of the restricted shares was estimated
              at
              $228,000. The Company has recorded accrued interest of $228,000 as
              of February
              28, 2005. During April 2005, the Company issued the 1,266,667 shares
              to the TAM
              Trust.


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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**







NOTE
      12:               
RELATED PARTY TRANSACTIONS, continued








On
            March
            29, 2005, the Company expanded the employment agreement with one officer
            to
            provide management services for the Company. As consideration for services
            to be
            rendered, the officer received 316,312 restricted shares of the Company’s common
            stock.  The first third vested on the effective date of the agreement
            as an enticement to enter into the agreement.   The remaining
            common shares were distributed in equal installments on December 1, 2005
            and
            2006.  The Company has recorded compensation expense for these
            services in the accompanying consolidated statements of operations.
 
 On
            March
            29, 2005, the Company granted the TAM Trust 1,972,133 restricted shares
            of the
            Company’s common stock.   The first third vested on the effective
            date of the agreement as an enticement to enter into the
            agreement.   The remaining common shares were distributed in
            equal installments on December 1, 2005 and 2006.   The Company
            has recorded interest expense in the accompanying consolidated statements
            of
            operations.
 
 On
            March
            29, 2005, the Company expanded the employment agreements with two officers
            to
            provide management services for the Company. As further consideration
            for
            services to be rendered, the officers were granted 1,000,000 warrants
            redeemable
            into restricted shares of the Company’s stock at a purchase price of $.225 per
            share.  The first third vested on the effective date of the agreement
            as an enticement to enter into the agreement.  The remaining warrants
            vested in equal installments on December 1, 2005 and 2006 and are exercisable
            through December 1, 2008.  The Company has recorded compensation
            expense for these services in the accompanying consolidated statements
            of
            operations.
 
 On
            March
            29, 2005, the Company granted the TAM Trust 500,000 warrants redeemable
            into
            restricted shares of the Company’s common stock at $.225 per
            share.  The first third vested on the effective date of the agreement
            as an enticement to enter into the agreement.   The remaining
            warrants vested in equal installments on December 1, 2005 and 2006 and
            are
            exercisable through December 1, 2008.  The Company has recorded
            interest expense in the accompanying consolidated statements of
            operations.
  On
            July
            27, 2005, the Company expanded the employment agreements with two officers
            to
            provide management services for the Company. As further consideration
            for
            services to be rendered, the officers were granted 500,000 warrants redeemable
            into restricted shares of the Company’s common stock at a purchase price of
            $.225 per share. The warrants are exercisable any time after December
            1, 2006
            and expire December 1, 2008. The Company has recorded compensation expense
            for
            these services in the accompanying consolidated statements of
            operations.





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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**


NOTE
      12:              
RELATED PARTY TRANSACTIONS, continued







On
              July
              27, 2005, the Company granted the TAM Trust 2,000,000 warrants redeemable
              into
              restricted shares of the Company’s common stock at a purchase price of $.225 per
              share. The first third vested on the effective date of the agreement
              as an
              enticement to enter into the agreement.   The remaining warrants
              vested in equal installments on December 1, 2005 and 2006 and are exercisable
              through December 1, 2008.  The Company has recorded interest expense in the
              accompanying consolidated statements of operations.
  During
              January 2006, the Company issued 37,500 common shares to the TAM Trust
              for
              continued financial support.  The Company has recorded interest
              expense in the accompanying consolidated statements of
              operations.
  During
              January 2006, the Company issued to one of its officers 37,500 common
              shares for
              services rendered.  The Company has recorded compensation expense for
              these services in the accompanying consolidated statements of
              operations.
 
 During
              October 2006, the Company commenced paying a monthly stipend of $2,500
              to J.
              Place and D. Parsons, executive officers of the Company, through December
              2007.  The Company has recorded compensation expense for these
              services in the accompanying consolidated statements of operations.
 
 During
              October 2006, the Company commenced paying a monthly monitoring fee
              of $5,000
              payable to Pacific Financial, a related party, through December
              2007.  The Company has recorded interest expense in the accompanying
              consolidated statements of operations.


NOTE
      13:               
SEGMENT INFORMATION





During
        the fiscal years ended February 28, 2007 and 2006, the Company had foreign
        assets in China. The following geographic area data for trade revenues is
        based
        on product or service delivery location, and property, plant, and equipment
        is
        based on physical location.
  Net
        revenue from external sources for the fiscal years ended February 28, 2007
        and
        2006 are as follows:
  2007
                
                
                2006United
                    States
                
                $
                870,772
                
                
                $
                523,077Pakistan
                
                
                -
                
                
                
                91,700China
                
                
                36,564
                
                
                
                90,000Asia
                
                
                35,917
                
                
                
                35,115Other
                    countries
                
                
                9,393
                
                
                
                11,952$
                952,646
                
                
                $
                751,844Segment
                    assets at February 28, 2007 are as follows:United
                    States
                
                $
                1,004,895China
                
                
                63,413$
                1,068,308




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**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **February
        28, 2007**





NOTE
      14:               
LOSS PER SHARE






For
                  The fiscal years Ended February 28,2007
              
              
              2006Numerator:Net
                  loss
              
              $
              (1,464,298
              )
              
              $
              (932,456
              )Loss
                  available to common stockholders
              
              $
              (1,464,298
              )
              
              $
              (932,456
              )Denominator:Weighted
                  average shares outstanding
              
              
              25,013,807
              
              
              
              17,969,317Basic
                  and diluted loss per share
              
              $
              (0.06
              )
              
              $
              (0.05
              )




Warrants
            to purchase common stock were outstanding during the 2006 and 2007 but were
            excluded in the computation of the diluted loss per share because their
            inclusion would have an anti-dilutive effect.





NOTE
      15:                SUBSEQUENT
      EVENTS




In
          March
          2007, the Company borrowed an additional $100,000 from TAM Trust to fund
          development of its new emergency preparedness products.
 
 On
          April
          1, 2007, the exclusivity clause in the Food For Health distribution agreement
          expired.
 
 In
          May
          2007, the Company received a one-time payment to resolve a business dispute
          for
          $168,000.  In accordance with SFAS No. 5 a gain has not been
          recognized for the fiscal year ended February 28, 2007 since doing so would
          result in recognizing income before its realization.  The Company
          received the settlement and recorded the gain during the first quarter
          of fiscal
          year ending February 28, 2008.
 
 On
              June
              14, 2007, the Company entered into a joint venture agreement with H2O
              Age, Inc.,
              a Nevada corporation.  The joint venture provides for certain
              synergies for the two companies and includes the exclusive rights to
              market and
              sell under the H2O Age brand with "Seychelle Inside".  H2O Age will
              market and sell on an exclusive basis to certain market channels in
              the U.S. and
              worldwide.  Seychelle and H2O Age are working on a market strategy to
              promote safe and affordable drinking water to meet the needs of the
              consumer.


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**ITEM
      8.                 
Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure.**





None







**ITEM
      8A.                Controls
      and Procedures**





(a) 
          Evaluation of Disclosure Controls and Procedures. As of the end of the
          fiscal
          year covered by this report, the Company carried out an evaluation under
          the
          supervision and with the participation of our Chief Executive Officer and
          Chief
          Financial Officer, of the effectiveness of our disclosure controls
          and  procedures (as such term is defined in Rules 13a-15 and 15d-15
          under the Securities Exchange Act of 1934, as amended (the Exchange Act)).
          Disclosure controls and procedures are designed to ensure that information
          required to be disclosed in the periodic reports filed or submitted under
          the
          Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
          and reported within the time periods specified in the Securities and Exchange
          Commission’s rules and forms.  Based upon that evaluation, the Chief
          Executive Officer and Chief Financial Officer concluded that during the
          fiscal
          year ended February 28, 2007, the Company continued to establish and modify
          disclosure controls and procedures to ensure that material information
          relating
          to the Company is made known to the officers who certify the Company’s financial
          reports and to other members of senior management and the Board of Directors.
          Although the Company hired a full time internal accountant during the third
          quarter of the fiscal year ended February 28, 2007, the Company has concluded,
          as of the Evaluation Date, that our disclosure controls and procedures
          were not
          effective.
 
 (b)
          Management’s Report on Internal Control Over Financial Reporting. Our management
          is responsible for establishing and maintaining adequate internal control
          over
          financial reporting, as such term is defined in Exchange Act
          Rules 13a-15(f). Under the supervision and with the participation of our
          management, including our principal executive officer and principal financial
          officer, we conducted an evaluation of the effectiveness of our internal
          control
          over financial reporting based on the framework in *Internal Control -
          Integrated Framework*issued by the Committee of Sponsoring Organizations of
          the Treadway Commission. Based on our evaluation under the framework in
          *Internal Control - Integrated Framework,*our management concluded
          that our internal control over financial reporting was not effective in
          ensuring
          that all information required to be disclosed in reports that we file or
          submit
          under the Exchange Act was available within the time periods specified
          in the
          Securities and Exchange Commission rules and forms in our financial statements
          as of February 28, 2007, as previously noted
          above.





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(c)
        Material Weakness in Internal Control over Financial Reporting. A material
        weakness is a control deficiency, or combination of control deficiencies,
        that
        results in more than a remote likelihood that a material misstatement of
        the
        annual or interim financial statements will not be prevented or detected.
        Management has concluded that as of February 28, 2007, the Company did not
        maintain effective controls over the preparation, review, presentation and
        disclosure of amounts included in our consolidated balance sheet, consolidated
        statements of operations, consolidated statements of stockholders’ deficit and
        consolidated statements of cash flows and the related footnotes.
  On
          March
          1, 2006, the Company adopted Statement of Financial Accounting Standards
          (SFAS)
          No. 123 (revised 2004), *Share**-**Based Payment*, (SFAS
          123(R)) which establishes standards for the accounting of transactions
          in which
          an entity exchanges its equity instruments for goods or services, primarily
          focusing on accounting for transactions where an entity obtains services
          in
          share-based payment transactions.  SFAS 123(R) requires a public
          entity to measure the cost of services received in exchange for an award
          of
          equity instruments, including stock warrants, based on the grant date fair
          value
          of the award and to recognize it as compensation expense over the period
          required to provide service in exchange for the award, usually the vesting
          period.   SFAS 123(R) supersedes the Company’s previous
          accounting under Accounting Principles Board Opinion No. 25, *Accounting for
          Stock**Issued**to Employees* (APB 25).
 
 Historically,
          the Company accounted for stock based awards using the intrinsic value
          method in
          accordance with APB 25 as allowed under SFAS No. 123, *Accounting for
          Stock**-**Based Compensation* (SFAS 123).  Under the
          intrinsic value method, no stock-based compensation expense had been recognized
          in the Company’s consolidated statements of operations, other than as related to
          warrants or restricted common shares granted to employees and consultants
          below
          the fair market value of the underlying stock at the date of grant.
 
 The
            Company became aware of certain errors in its implementation and application
            of
            SFAS No. 123(R) which were not detected and corrected by the Company
            in a timely
            manner.
  During
            the Company’s yearend closing procedures it was noted that not all production
            costs were properly and accurately reported.  As a result, the Company
            recorded an unfavorable book-to-physical adjustment of approximately
            $51,000.  Additionally, when investigating differences between
            book-to-physical amounts it was discovered that the Company had not monitored
            the whereabouts of all inventory and therefore, was unable to determine
            the
            nature of such differences.
 
 We
          do not
          have sufficient segregation of duties within accounting functions, which
          is a
          basic internal control.  Due to our size and nature, segregation of
          all conflicting duties may not always be possible and may not be economically
          feasible.  However, to the extent possible, the initiation of
          transactions, the custody of assets and the recording of transactions should
          be
          performed by separate individuals.  Management evaluated the impact of
          our failure to have segregation of duties on our assessment of our disclosure
          controls and procedures and has concluded that the control deficiency that
          resulted represented a material weakness.
 
 We
          have
          had, and continue to have, a significant number of audit
          adjustments.  Audit adjustments are the result of a failure of the
          internal controls to prevent or detect misstatements of accounting
          information.  The failure could be due to inadequate design of the
          internal controls or to a misapplication or override of
          controls.  Management evaluated the impact of our significant number
          of audit adjustments and has concluded that the control deficiency that
          resulted
          represented a material weakness.
 
 Finally,
          the Company did not timely evaluate the recoverability of certain financial
          statement balances including reserves for slow moving inventory, fixed
          assets,
          intangible assets and various other accounts, and were required to make
          adjustments during the audit process.
 These
        control deficiencies could result in a misstatement of the Company’s accounts
        that would result in a material misstatement to the Company’s presentation and
        disclosure that would not be prevented or detected. Accordingly, management
        has
        concluded that these control deficiencies constitute material
        weaknesses.
 
 (d)
            Remediation Plan. The remediation plan the Company has implemented provides
            for
            enhanced procedures that include improved training and review processes
            to
            ensure proper preparation, review, presentation, and disclosure of amounts
            included in its balance sheet,  statements of operations and
            statements of cash flows. Accordingly, management believes it has improved
            the
            design and effectiveness of its internal control over financial reporting;
            however, not all of the newly designed controls have operated for a sufficient
            period of time to demonstrate operating effectiveness. Therefore, management
            will continue to monitor and assess these control procedures to ascertain
            if the
            material weakness discussed above has been remedied.
 (e)
        Changes in Internal Controls over Financial Reporting. We previously reported
        in
        Item 8A- "Controls and Procedures" in our annual report on Form 10-KSB for
        the
        year ended February 28, 2006, material weaknesses in internal controls. However,
        the Company hired an accountant in July 2006 with the goal of strengthening
        its
        disclosure controls and procedures.   After seven months, we feel
        that we have made progress with greater accuracy of reporting the financial
        results.  However, the strengthening of checks and balances still
        needs work.  We are supplementing this with additional reviews by
        senior management and an outside accounting firm.





**ITEM
      8B.               
OTHER INFORMATION**





Form
      8-K
      dated December 12, 2006





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**PART
      III**





**ITEM
      9.                 
**Directors,
      Executive Officers, Promoters, Control Persons; Corporate Governance; 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, 2007 are as follows:





NAME
            AGE
            POSITION HELDCarl
                  Palmer
            72
            President,
                  Chief Executive Officer and DirectorRichard
                  Parsons
            72
            Executive
                  Vice President, Secretary and DirectorJames
                  Place
            68
            Chief
                  Operating Officer, Chief Financial   Officer,
                  Treasurer and Director





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


**Biographies
      of Our Executive Officers and Directors**





Carl
          Palmer.  Mr. Palmer has been the President, CEO and a Director of the
          Company since January 1998. He is the founder of our Company, innovator
          of the
          complete line of Seychelle water filtration products and primary spokesperson
          worldwide. He is an internationally recognized expert in the field for
          over 35
          years and pioneered the development of the reverse osmosis (RO) home and
          office
          pure water business in the U.S. in the late 1970’s. That company, Aq-Ro-Matic,
          was later sold to Coca-Cola in 1973. He developed the cellulose triacetate
          membrane, a breakthrough technological development in the industry and
          subsequently, created and sold pure water companies to Coca Cola Los Angeles
          as
          noted previously, AMF/Cuno in 1985 and Shaklee in 1989. Also, in the late
          1980’s
          Mr. Palmer developed the Best Water reverse osmosis business for Shaklee
          and
          sold over $53 million in above-the-counter systems. Carl’s 30 years of direct
          sales experience has led to many significant business relationships, many
          of
          which continue today. He is the inventor of thirteen patented products
          related
          to water purification. Mr. Palmer received a Bachelors Degree from Whittier
          College.
 Richard
        Parsons. Mr. Parsons has been Secretary, Executive Vice President and a
        Director of the Company since November 2004. In March 2005, he assumed
        additional responsibilities for international sales activities in Asia,
        including China and India. He has over 30 years experience in bottled water,
        reverse osmosis and water filtration with major companies such as Coca-Cola,
        Arrowhead, Shaklee, and Canadian Glacier. Mr. Parsons was a General Manager
        at
        Coca-Cola in 1974, a Vice President at Arrowhead from 1975 to 1985, a consultant
        with Shaklee in 1988, and Vice President of U.S. Operations for Canadian
        Glacier
        from 1989 to 1990.
 
 For
        the
        past five years, Mr. Parsons acted as a consultant, and then became chairman
        of
        The Beverage Group, Inc. in 2002. In November 2004, he joined the Company
        as
        Executive Vice President. Mr. Parsons ran his own successful consulting business
        in water and related beverages with clients such as General Foods, Coke-USA,
        The
        Beverage Group, Coke-Japan and Mitsubishi Industries for many years. He also
        has
        over 20 years experience in direct sales and multilevel marketing with companies
        such as Avon, Holiday Magic, Arrowhead and National Education. Mr. Parsons
        has a
        Bachelors Degree from Principia College.







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James
        Place. Mr. Place has been Treasurer, COO and a Director of our Company since
        November 2004. In March 2005, he assumed additional responsibilities for
        manufacturing, operations and became the Chief Financial Officer (CFO). In
        November 2004, he joined the Company as Chief Operating
        Officer.   He has over 30 years experience in food, beverages and
        bottled water. While at Arrowhead, he took the liter, still and sparkling
        water
        business from $10 to $75 million in 5 years. Mr. Place also had extensive
        marketing, new product development and operating experience with Fortune
        100
        companies such as Carnation, Kerr Glass and Hunt-Wesson. Mr. Place was Vice
        President and General Manager of the Grocery Products Division at Arrowhead
        from
        1981 to 1988, a Vice President of Sales/Marketing - New Products at Kerr
        Glass
        from 1988 to 1990, Manager, New Products at Carnation from 1979 to 1981 and
        Sales/Marketing Manager at Hunt-Wesson Foods from 1970 to 1976.
 
 Mr.
        Place
        also has substantial experience in business development, mergers and
        acquisitions and with the investment community. Mr. Place ran his own consulting
        business in consumer products including water and other beverages with small
        to
        medium sized companies from 1990 to 2004. This included working successfully
        with these companies on financing plans for both new products and expansion
        programs. Mr. Place has an MBA from Michigan State University and a Bachelors
        degree from Albion College.
 
 **Compliance
        with Section 16(a) of the Securities Exchange Act of 1934**
 
 Section
        16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
        directors and executive officers, and persons who own more than 10% of a
        registered class of the Company’s outstanding equity securities to file with the
        Securities and Exchange Commission initial reports of ownership and reports
        of
        changes in ownership of common stock and other equity securities of the Company.
        Officers, directors and greater than 10% shareholders are required by SEC
        regulations to furnish the Company with copies of all Section 16(a) forms
        they
        file.
 
 To
          the
          Company’s knowledge, based solely on its review of the copies of such reports
          furnished to the Company and written representations that no other reports
          were
          required during the fiscal year ended February 28, 2007, all Section 16(a)
          filing requirements applicable to its officers, directors and greater than
          10%
          beneficial owners were complied with.
 **Code
        of Ethics for Chief Executive Officer and Senior Financial
        Officers**
 
 On
        May
        20, 2006, the Board of Directors of the Company adopted the Code of Ethics
        for
        the Chief Executive Officer and Senior Financial Officers.  The Code
        is designed to deter wrong-doing and promote honest and ethical behavior,
        full,
        fair, timely, accurate and understandable disclosure and compliance with
        applicable governmental laws, rules and regulations.  It is also
        designed to encourage prompt internal reporting of violations of the Code
        to an
        appropriate person and provides for accountability for adherence to the
        Code.  We will provide to any person without charge, upon written
        request to our principal executive offices, a copy of our Code.  Any
        waiver of the Code pertaining to one of our executive officers will be disclosed
        in a report on Form 8-K filed with the SEC.
 
 **Indemnification
        of Directors and Officers.**
  The
        Company's Bylaws provide that it will indemnify its officers and directors
        to
        the full extent permitted by Nevada state law. The Company's bylaws likewise
        provide that it will indemnify and hold harmless its officers and directors
        for
        any liability including reasonable costs of defense arising out of any act
        or
        omission taken on behalf of the Company, to the full extent allowed by Nevada
        law, if the officer or director acted in good faith and in a manner the officer
        or director reasonably believed to be in, or not opposed to, the best interests
        of the corporation.
  In
        so far
        as indemnification for liabilities arising under the Securities Act of 1933
        may
        be permitted to directors, officers and controlling persons of the registrant
        pursuant to the foregoing provisions, or otherwise, the registrant has been
        advised that in the opinion of the Securities and Exchange Commission such
        indemnification is against public policy as expressed in the Act and is,
        therefore, unenforceable. In the event that a claim for indemnification against
        such liabilities (other than the payment by the registrant of expenses incurred
        or paid by a director, officer or controlling person of the registrant in
        the
        successful defense of any action, suit or proceeding) is asserted by such
        director, officer or controlling person in connection with the securities
        being
        registered, the registrant will, unless in the opinion of its counsel the
        matter
        has been settled by controlling precedent, submit to a court of appropriate
        jurisdiction the question whether such indemnification by it is against public
        policy as expressed in the Act and will be governed by the final adjudication
        of
        such issue.


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**ITEM
      9B.              
Other Information**




None.







**ITEM
      10.              
Executive Compensation.**





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




**SUMMARY
                  COMPENSATION TABLE**Long
                  Term CompensationAnnual
                  Compensation
              
              Awards
              
              Payouts(a)
              (b)
              (c)
              (d)
              (e)
              
              (f)
              (g)
              
              (h)
              
              (i)Name
                  and Principle Position
              Fiscal
                Year
              Salary
                ($)
              Bonus
                ($)
              Other
                Annual
                  Compensation
                ($)
              
              Restricted
                Stock
                Award(s)
                ($)(9)
              Securities
                Underlying
                Option/SARs
                (#)
              
              LTIP
                Payouts
                ($)
              
              All
                Other
                Compensation
                ($)Carl
                  Palmer
                President
                  & CEO
                Director
              2007
                2006
                2005
              $10,000(2)
                $10,000(2)
                $10,000(2)
              $0.00
                $0.00
                $0.00
              $0.00
                $0.00
                $0.00
              
              $0.00
                $0.00
                $0.00
              0
                0
                0
              
              $0.00
                $0.00
                $0.00
              
              $0.00
                $0.00
                $0.00Richard
                  Parsons (1)
                Executive
                  VP
                Director
              2007
                2006
                2005
              $0.00
                $0.00
                $0.00
              $0.00
                $0.00
                $0.00
              $0.00
                $0.00
                $
                  0.00
              
              (3)(5)
                (3)(5)(7)
                (3)
              (4)(6)
                (4)(6)
                (4)(6)
              
              $0.00
                $0.00
                $0.00
              
              $12,500(8)
                $0.00
                $0.00James
                  Place (1)
                COO
                Director
              2007
                2006
                2005
              $0.00
                $0.00
                $0.00
              $0.00
                $0.00
                $0.00
              $
                  0.00
                $  0.00
                $  0.00
              
              (3)
                (3)
                (3)
              (4)(6)
                (4)(6)
                (4)
              
              $0.00
                $0.00
                $0.00
              
              $12,500(8)
                $0.00
                $0.00








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(1)
              Elected
                  to Board of Directors
                  during November 2004.
  (2)
              Effective
                  December 1, 2001, the
                  Company entered into an employment agreement with the President
                  of the
                  Company.  The President of the Company has decided not to accept
                  his salary until the Company becomes
                  profitable.
  (3)
              During
                    November 2004, Messrs. Parsons and Place were granted 240,000
                    shares of
                    restricted common stock, which vest over two years beginning
                    December 1,
                    2004, 2005 and 2006.  The estimated fair market value of the
                    stock as of November 30, 2004 was $225,600. The Company is amortizing
                    the
                    estimated fair market value of the unearned compensation over
                    the two-year
                    vesting period.  On March 1, 2006, the Company adopted SFAS No.
                    123(R), which required the Company to revalue the non-vested
                    portion of
                    this grant.  As of March 1, 2006, the unearned compensation
                    relating to this grant was decreased by approximately
                    $50,500.   The Company has recorded compensation expense of
                    approximately $4,000 and $75,200 for the fiscal years ended February
                    28,
                    2007 and 2006, respectively.
  (4)
              During
                    March 2005, Messrs. Parsons and Place were granted warrants to
                    purchase
                    250,000 shares of restricted common stock at $0.225 per share.
                    The first
                    third vested on the effective date of the agreement as an enticement
                    to
                    enter into the agreement.  The remaining warrants vest in equal
                    installments on December 1, 2005 and 2006 but are exercisable
                    through
                    December 1, 2008.  The fair market value of the warrants as of
                    November 30, 2004 was estimated at
                    $55,300.
  (5)
              During
                    March 2005, Mr. Parsons was granted 316,312 shares of restricted
                    common
                    stock.  The first third vested on the effective date of the
                    agreement as an enticement to enter into the agreement.  The
                    remaining common stock vests in equal installments on December
                    1, 2005 and
                    2006.  The fair market value of the restricted shares as of
                    November 30, 2004 was estimated at
                    $79,100.
  (6)
              During
                      July 2005, the Company expanded the employment agreements with
                      Messrs.
                      Parsons and Place to provide management services for the
                      Company.  As further consideration for services to be rendered,
                      the officers were granted 500,000 warrants redeemable into
                      restricted
                      shares of the Company’s common stock at $0.225 per share.  The
                      warrants are exercisable any time after December 1, 2006 and
                      expire
                      December 1, 2008.  The fair market value of the warrants as of
                      July 27, 2005 was estimated at
                      $30,000.
  (7)
              During
                    January 2006, the Company issued Mr. Parsons 37,500 shares of
                    common stock
                    for services rendered.  As the common stock was issued below the
                    Company’s market price at date of grant ($nil cost per share), the Company
                    recorded compensation expense relating to the estimated value
                    of these
                    shares of $8,437.
  (8)
              During
                  October 2006, the Company
                  commenced paying a monthly stipend of $2,500 to J. Place and D.
                  Parsons
                  through December 2007.  The Company recorded compensation
                  expense of $25,000 for the fiscal year ended February 28,
                  2007.
  (9)
              Restricted
                  Stock (RS)– Awards of
                  restricted stock are valued by multiplying the number of shares
                  granted by
                  the closing price on the date of grant, minus any consideration
                  paid by
                  the named executives.  Holders of restricted stock have voting
                  and dividend rights with respect to their restricted shares.  To
                  date, the Company has not declared or paid any
                  dividends.
  Restricted
        Stock – Year End Holdings and Value.  At February 28, 2007, the named
        executive officers held the total number of shares of restricted stock indicated
        in the following chart.  The year-end value of the total number of
        restricted shares, as indicated below, is based on the closing price of the
        Company’s stock on February 28, 2007 ($0.41).






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Name
            Grant
                date
            Type
            Vesting
              Schedule
            Restricted
                Shares Awarded
            Grant
                Date
              Price
            Grant
                Date
              Value
            Total
                Restricted Shares at February 28, 2007
            Year
                End
              ValueRichard
                Parsons
            11/30/2004
            RS
            33.3%
                on 12/1/04;
              33.3%
                on 12/01/05;
              33.3%
                on 12/1/06
            240,000
            $0.03
            $112,800
            240,000
            $
                46,248Richard
                Parsons
            03/29/2005
            RS
            33.3%
                on 12/1/04;
              33.3%
                on 12/01/05;
              33.3%
                on 12/1/06
            316,312
            $0.03
            $
                79,100
            316,312
            $129,688James
                Place
            11/30/2004
            RS
            33.3%
                on 12/1/04;
              33.3%
                on 12/01/05;
              33.3%
                on 12/1/06
            240,000
            $0.03
            $112,800
            240,000
            $
                46,248




OPTION/SAR
        GRANTS IN LAST FISCAL YEAR. The Company granted no options during the fiscal
        years ended February 28, 2007 and 2006. The Company had no options outstanding
        as of the fiscal year ended February 28, 2007.


AGGREGATED
      OPTIONS/SARS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR
      VALUES. There were no outstanding options as of the fiscal year ended February
      28, 2007.




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




DIRECTOR
        COMPENSATION. The Company did not pay any compensation to any of its directors
        in fiscal 2007, 2006 or 2005.


The
        Board
        of Directors as a whole acts as a compensation committee. We have no retirement,
        pension, sharing, stock option, insurance or other similar
        programs.
 
 
 We
        do not
        have a separately designated audit, compensation or nominating committee
        of our
        Board of Directors.  Although we are not a “listed company” under SEC
        rules and are therefore not required to have separate committees comprised
        of
        independent directors, we have, however, determined that James Place is
“independent” as that term is defined in Section 4200 of the Marketplace Rules
        required by the NASDAQ Stock Market.
  **Warrant
        exercises in last fiscal year**
 
 The
        following table provides information concerning stock warrants exercised
        during
        the fiscal year 2007 and exercisable and unexercisable stock warrants held
        by
        the executive officers named in the Summary Compensation Table:


Name
              
              Shares
                  Acquired on Exercise
              
              
              Value
                  Realized
              
              
              Number
                  of Securities Underlying Unexercised Warrants at Fiscal Year End
–
                  Exercisable / Unexercisable (1)
              
              
              Value
                  of Unexercised In-the-Money Warrants at Fiscal Year End – Exercisable /
                  Unexercisable (1)Carl
                  Palmer
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Richard
                  Parsons
              
              
              -
              
              
              
              -
              
              
              
              750,000
                  / -0-
              
              
              $
              143,375
                  / -0-James
                  Place
              
              
              -
              
              
              
              -
              
              
              
              750,000
                  / -0-
              
              
              $
              143,375
                  / -0-





(1)
              Based
                  on a fair value of $0.41 per share on February 28, 2007, the closing
                  price
                  per share of SYEV’s common stock on that date as reported on
                  nasdaq.com




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**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, 2007, was known
        by
        us to own beneficially more than five percent (5%) of its common stock; (ii)
        our
        individual Directors and (iii) our Officers and Directors as a group. As
        of
        February 28, 2007 there were total of 25,150,896 common shares were issued
        and
        outstanding and 6,000,000 vested warrants.




NAME
                AND ADDRESS
            AMOUNT
                AND NATURE OF
            
            PERCENT
                OFOF
                BENEFICIAL OWNER
            BENEFICIAL
                OWNERSHIP (1)(2)(4)
            
            CLASSThe
                TAM Irrevocable Trust
            12,725,578
            (3)
            40.9%4012
                S. Rainbow #K111Las
                Vegas, NV 80103-2012Carl
                Palmer
            -0-
            
            -0-251
                Jeanell Dr., Ste 3Carson
                City, NV 89703Richard
                Parsons
            1,483,711
            
            4.8%251
                Jeanell Dr., Ste 3Carson
                City, NV 89703James
                Place
            955,000
            
            3.1%251
                Jeanell Dr., Ste 3Carson
                City, NV 89703All
                officers and directors as a Group (three persons)
            2,438,711
            
            7.8%





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




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




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







**ITEM
      12.               
Certain Relationships and Related
      Transactions**





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





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





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As
        the
        February 28, 2007 and 2006, the Company had received advances of $299,175
        and
        $363,150 from the TAM Trust in which Cari Beck, is the trustee as well as
        a
        daughter of Carl Palmer an officer and Board member. These advances bear
        interest at 10%. As of February 28, 2007, $299,175 of these advances is not
        repayable until after March 1, 2011. During the fiscal year  ended
        February 28,  2007, the Company decided to pay down approximately
        $64,000 in notes payable from excess cash.
 
 As
        of
        February 28, 2007 and 2006, accrued interest on these advances was approximately
        $251,800 and $169,300, respectively, and is included in accrued interest
        due to
        related parties in the accompanying consolidated balance sheet.
 
 During
          December 2004, the Company granted the TAM Trust restricted common stock
          of
          1,266,667 shares for interest on prior advances of funds. The fair market
          value
          of the restricted shares was estimated at $228,000. During April 2005,
          the
          Company settled this liability through the issuance of common
          stock.
 On
          March
          29, 2005, the Company expanded the employment agreement with Mr. Parsons
          to
          provide management services for the Company. As consideration for services
          to be
          rendered, the employee received 316,312 restricted shares of the Company’s
          common stock.  The first third vested on the effective date of the
          agreement as an enticement to enter into the agreement.  The remaining
          common stock vested in equal installments on December 1, 2005 and
          2006.
 
 On
          March
          29, 2005, the Company expanded the employment agreements with Messrs. Parsons
          and Place to provide management services for the Company. As further
          consideration for services to be rendered, the employees were granted 1,000,000
          warrants redeemable into restricted shares of the Company’s common stock at
          $.225 per share.  The first third vested on the effective date of the
          agreement as an enticement to enter into the agreement.  The remaining
          warrants vested in equal installments on December 1, 2005 and 2006 and
          are
          exercisable through December 1, 2008.
 
 On
          March
          29, 2005, the Company granted the TAM Trust 500,000 warrants redeemable
          into
          restricted shares of the Company’s common stock at $.225 per share for
          additional interest charged to the Company for previous unpaid notes and
          continued financial support.  The first third vested on the effective
          date of the agreement as an enticement to enter into the
          agreement.  The remaining warrants vested in equal installments on
          December 1, 2005 and 2006 and are exercisable through December 1,
          2008
 
 On
          July
          27, 2005, the Company granted the TAM Trust 2,000,000 warrants redeemable
          on
          restricted shares of the Company’s common stock at $.225 per share. The warrants
          are exercisable any time after December 1, 2006 and expire December 1,
          2008.
 
 On
        July
        27, 2005, the Company expanded the employment agreements with Messrs. Parsons
        and Place to provide management services for the Company. As further
        consideration for services to be rendered, the employees were granted
        500,000 warrants redeemable on restricted shares of the Company’s stock at $.225
        per share. The warrants are exercisable any time after December 1, 2006 and
        expire December 1, 2008.
 
 On
        January 23, 2006, the Company issued to the TAM Trust 37,500 common shares
        for
        continued financial support.
 
 On
        January 23, 2006, the Company issued to the Mr. Parsons 37,500 common shares
        for
        services rendered.
 
 During
        October 2006, the Company commenced paying a monthly stipend of $2,500 to
        J.
        Place and D. Parsons through December 2007.
 
 During
        October 2006, the Company commenced paying a monthly monitoring fee of $5,000
        payable to Pacific Financial through December 2007.





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**PART
      IV**





**ITEM
      13.                **Exhibits
      List****




**(a)
      Exhibits**





Exhibit
                No.
            Description2A*
            Plan
                  of Exchange between Seychelle Environmental Technologies, Inc.
                  and
                  Seychelle Water Technologies, Inc. dated January 30, 1998 as filed
                  with
                  Form 10-SB 12 G on February 8, 2000.3A*
            Articles
                  of Incorporation dated January 23, 1998 as filed with Form 10-SB
                  12 G on
                  February 8, 2000.3B*
            Articles
                  of Merger of Royal Net, Inc. into Seychelle Environmental Technologies,
                  Inc as filed with Form 10-SB 12 G on February 8,
                  2000.3C*
            Amendment
                  to Articles of Incorporation re: Series "A" Preferred Stock as
                  of January
                  31, 1998 as filed with Form 10-SB 12 G on February 8,
                  2000.3D*
            Amendment
                  to Articles of Incorporation re: Series "AA" Preferred Stock as
                  of June 5,
                  1998 as filed with Form 10-SB 12 G on February 8,
                  2000.3E*
            Amendment
                  to Articles of Incorporation re: Series "AAA" Preferred Stock as
                  of
                  February 18, 1999 as filed with Form 10-SB 12 G on February 8,
                  2000.3F*
            Bylaws
                  as filed with Form 10-SB 12 G on February 8,
                  2000.10A*
            Purchase
                  Agreement with Aqua Vision as filed with Form 10-SB 12 G on February
                  8,
                  2000.10B*
            Amended
                  Purchase Agreement with Aqua Vision as filed with Form 10-SB 12
                  G on
                  February 8, 2000.10C*
            2000
                  Stock Compensation Plan I, dated July 1, 2000 as filed with Registration
                  Statement on Form S-8 on August 31, 2000.10D*
            2002
                  Stock Compensation Plan I, dated February 12, 2002 as filed with
                  Registration Statement on Form S-8 on February 27,
                  2002.10E*
            Purchase
                  Agreement with Aqua Gear as filed with Annual Report on Form 10-KSB
                  on
                  June 14, 2002.10F*
            Employment
                  Contract with Carl Palmer as filed with Annual Report on Form 10-KSB
                  on
                  June 14, 2002.10G*
            Management
                  Consulting Contract with Richard Parsons10H*
            Management
                  Consulting Contract with James Place10I*
            Joint
                  Venture Agreement with Huanghua Plastic Co. Ltd. dated September
                  1,
                  200510J*
            ABMS
                  Health Care Pvt. Ltd. Distribution Rights Agreement dated April
                  1,
                  200610K*
            Confident,
                  Inc. Exclusive Distribution Rights Agreement dated January 1,
                  200610L*
            Continental
                  Technologies. Inc., Purchase Agreement dated April 26,
                  200610M*
            Promissory
                  Note to TAM Irrevocable Trust dated May 1, 200110N*
            Promissory
                  Note to TAM Irrevocable Trust dated February 28,
                  2002





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10O*
            Promissory
                  Note to TAM Irrevocable Trust dated February 28,
                  200310P*
            Promissory
                  Note to TAM Irrevocable Trust dated November 1,
                  200310Q*
            Promissory
                  Note to TAM Irrevocable Trust dated February 28,
                  200410R*
            Food
                  For Health Purchase Agreement10S*
            Food
                  For Health Distribution Agreement10T*
            Seychelle
                  Environmental Technologies, Inc. License Agreement with Mr. Gary
                  Hess23.1**
            Auditor’s
                  Consent31.1**
            Certification
                  of the Chief Executive Officer pursuant to Rule 13a-14(a) (Section
                  302 of
                  the Sarbanes-Oxley Act of 2002)31.1**
            Certification
                  of the Chief Financial Officer pursuant to Rule 13a-14(a) (Section
                  302 of
                  the Sarbanes-Oxley Act of 2002)32.1**
            Certification
                  of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350 (Section
                  906
                  of the Sarbanes-Oxley Act of 2002)32.2**
            Certification
                  of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350 (Section
                  906
                  of the Sarbanes-Oxley Act of 2002)99*
            Code
                  of Ethics for Chief Executive Officer and Senior Financial
                  Officers





___________________




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





**
      Attached hereto







**ITEM
      14.                                PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**








Effective
        February 28, 2006, Windes & McClaughry Accountancy Corporation (Windes &
McClaughry) became our principal independent accounting firm.  All
        audit work was performed by the full time employees of Windes &
McClaughry.  Our Board of Directors does not have an audit
        committee.  The functions customarily delegated to an audit committee
        are performed by our full Board of Directors.  Our Board of Directors
        approves in advance, all services performed by Windes &
McClaughry.  Our Board of Directors has considered whether the
        provision of non-audit services is compatible with maintaining the principal
        accountant’s independence, and has approved such services.  Prior to
        February 28, 2006, the principal auditors of the Company were Armando C.
        Ibarra,
        Certified Public Accountants APC.
 
 The
        following table sets forth fees billed by our auditors during the last two
        fiscal years for services rendered for the audit of our annual consolidated
        financial statements and the review of our quarterly financial statements,
        services by our auditors that are reasonably related to the performance of
        the
        audit or review of our financial statements and that are not reported as
        audit
        fees, services rendered in connection with tax compliance, tax advice and
        tax
        planning, and all other fees for services rendered.


February
                28,2007
            
            
            2006Audit
                fees
            
            $
            72,464
            
            
            $
            3,880Audit
                  related fees
            
            
            23,161
            
            
            $
            23,560Tax
                fees
            
            
            -0-
            
            
            
            -0-All
                  other fees
            
            
            -0-
            
            
            
            -0-







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The
          audit
          fees in 2007 include $72,464 of fees billed by Windes & McClaughry and
          related to the audit of our consolidated  financial statements for the
          fiscal year ended February 28, 2007 and to the review of  our
          quarterly financial statements.  Audit related fees include
          $23,161 of fees billed by Windes & McClaughry for accounting services
          related to the review of other SEC filings.
 
 The
          audit
          fees in 2006 include $3,880 of fees billed by Windes & McClaughry and
          related to the audit of our consolidated  financial statements for the
          fiscal year ended February 28, 2006.  Audit related fees include
          $23,560 of fees billed by our former auditors Armando C. Ibarra, Certified
          Public Accountants APC for accounting services related to the review of
          our
          quarterly financial statements.
 
 No
          tax
          fees were billed in 2007 or 2006 as another certified public accounting
          firm
          prepares the Company’s federal and state income tax
          returns.








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**SIGNATURES**





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




**SEYCHELLE
                  ENVIRONMENTAL TECHNOLOGIES, INC.**Date: August
                  22, 2007
            By:
            /s/ Carl
                  Palmer
                Carl
                  PalmerChief
                  Executive Officer






Date:
                  August 22, 2007
            By:
            /s/ Jim
                  PlaceJim
                    Place
                  Chief Financial
                    Officer











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




/s/ Carl
                  Palmer
                Carl
                    Palmer
            August
                  22, 2007/s/
                   Jim PlaceJim
                  Place
            August
                  22, 2007










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