Seychelle Environmental (SYEV) 10-Q 13 Jul 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	May 31, 2018	Jul. 12, 2018
Document And Entity Information
Entity Registrant Name	SEYCHELLE ENVIRONMENTAL TECHNOLOGIES INC /CA
Entity Central Index Key	1,056,757
Document Type	10-Q
Document Period End Date	May 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--02-28
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		26,640,313
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,018

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	May 31, 2018	Feb. 28, 2017
Current assets:
Cash and cash equivalents	$ 2,059,498	$ 2,075,833
Accounts receivable, net of allowance for doubtful accounts and sales returns of $10,528 and $8,617, respectively	679,051	829,790
Related party receivables	33,601	35,007
Inventory, net	990,473	998,296
Prepaid expenses, deposits, and other current assets	68,921	159,980
Total current assets	3,831,544	4,098,906
Property and equipment, net	121,067	135,539
Other current assets	66,670	66,670
Total assets	4,019,281	4,301,115
Current Liabilities:
Accounts payable and accrued expenses	215,807	441,866
Customer deposits	15,883	163,184
Capital lease obligation, current portion	5,532	5,402
Total current liabilities	237,222	610,452
Long term Liabilities:
Capital lease obligation, net of current	7,687	9,082
Total liabilities	244,909	619,534
STOCKHOLDERS' EQUITY
Preferred stock, 6,000,000 shares authorized, none issued or outstanding
Common stock $0.001 par value, 50,000,000 shares authorized, 26,640,313 issued and outstanding at November 30, 2017 and February 28, 2017, respectively	26,641	26,641
Additional paid-in capital	8,944,368	8,944,368
Accumulated deficit	(5,166,957)	(5,259,748)
Less treasury stock at cost	(29,680)	(29,680)
Total Stockholders' Equity	3,774,372	3,681,581
Total liabilities and stockholders' equity	$ 4,019,281	$ 4,301,115

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	May 31, 2018	Feb. 28, 2017
CURRENT ASSETS
Net of allowance for doubtful accounts	$ 6,080	$ 47,600
STOCKHOLDERS' EQUITY
Preferred stock, authorized shares	6,000,000	6,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Preferred stock, par value	$ 0	$ 0
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized shares	50,000,000	50,000,000
Common stock, issued shares	26,640,313	26,640,313
Common stock, outstanding shares	26,640,313	26,640,313

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	May 31, 2018	May 31, 2017
Condensed Consolidated Statements Of Income
Sales	$ 1,133,901	$ 1,208,207
Cost of sales	603,440	663,782
Gross profit	530,461	544,425
OPERATING EXPENSES
Selling, General, and Administrative Expenses	424,462	361,090
Depreciation and Amortization	14,472	17,675
Total operating expenses	438,934	378,765
Income (Loss) from Operations	91,527	165,660
OTHER INCOME (EXPENSE)
Interest expense	(554)	(1,427)
Other income	1,818
Total other income (expense)	1,264	(1,427)
Income before provision for income taxes)	92,791	164,233
Income tax (expense)		(4,252)
Net income	$ 92,791	$ 159,981
BASIC INCOME (LOSS) PER SHARE	$ 0	$ 0.01
DILUTED INCOME (LOSS) PER SHARE	$ 0	$ 0.01
BASIC WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING	26,574,313	26,574,313
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING	28,910,996	26,574,313

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	May 31, 2018	May 31, 2017
OPERATING ACTIVITIES:
Net income	$ 92,791	$ 159,981
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	14,472	17,675
Provision (recovery) for doubtful accounts	1,912	(36,434)
Changes in operating assets and liabilities:
Accounts receivable	148,827	477,789
Related party receivables	1,406	150
Inventory	7,823	255,108
Prepaid expenses, deposits and other assets	91,059	(107,754)
Accounts payable and accrued expenses	(226,059)	(136,475)
Customer deposits	(147,301)	(10,139)
Net Cash Provided By (Used In) Operating Activities	(15,070)	619,901
INVESTING ACTIVITIES:
Purchase of property and equipment		(2,995)
Net Cash Used In Investing Activities		(2,995)
FINANCING ACTIVITIES:
Repayment of capital lease obligation	(1,265)	(1,768)
Net Cash Used in Financing Activities	(1,265)	(1,768)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(16,335)	615,138
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	2,075,833	732,112
CASH AND CASH EQUIVALENTS AT END OF PERIOD	2,059,498	1,347,250
Cash paid for:
Interest	$ 554	$ 1,427

1. CONDENSED FINANCIAL STATEMEN

1. CONDENSED FINANCIAL STATEMENTS	3 Months Ended
	May 31, 2018
Notes to Financial Statements
CONDENSED FINANCIAL STATEMENTS	NOTE 1: CONDENSED FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements have been prepared by Seychelle Environmental Technologies, Inc., and subsidiaries (the "Company") without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at May 31, 2018, and for all periods presented herein, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended February 28, 2018. The results of operations for the periods ended May 31, 2018 and 2017 are not necessarily indicative of the operating results for the full fiscal years. The summary of significant accounting policies of the Company is presented to assist in understanding the Company's consolidated financial statements. The consolidated financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the condensed consolidated financial statements and the February 28, 2018 consolidated financials included in the 10-K filed on June 8, 2018. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Except for the accounting policy for revenue recognition, which was updated as a result of adopting a new accounting standard related to revenue recognition, there have been no material changes to our significant accounting policies in Note 2 - Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2018. The Financial Accounting Standards Board, or FASB, issued an accounting standards update that creates a single source of revenue guidance under U.S. GAAP for all companies, in all industries. We adopted this guidance on February 1, 2018 using the modified retrospective approach. The adoption of this guidance did not have a significant impact on our consolidated financial statements. Refer to Note 5 of these Notes to Condensed Consolidated Financial Statements for additional information.

2. BASIC INCOME PER SHARE

2. BASIC INCOME PER SHARE	3 Months Ended
	May 31, 2018
Earnings Per Share [Abstract]
BASIC INCOME (LOSS) PER SHARE	NOTE 2: BASIC INCOME PER SHARE Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding during each period presented. Diluted income per share is determined using the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, assuming conversion, exercise, or issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per share. If the inclusion of common stock equivalents in the weighted average number of common shares outstanding would be anti-dilutive these items would be omitted from the calculation of net income per common share. The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method. The denominator for diluted income per share for the three months ended May 31, 2018 and 2017 included 2,336,683 and 0 warrants, respectively. For the three months ended May 31, 2018 2017 Numerator: Net income available to common shareholders $ 92,791 $ 159,981 Weighted average shares – basic 26,574,313 26,574,313 Net income per share – basic $ 0.00 $ 0.01 Dilutive effect of common stock equivalents: Warrants 2,336,683 - Weighted average shares – diluted 28,910,996 26,574,313 Net income per share – diluted $ 0.00 $ 0.01

3. COMMON STOCK

3. COMMON STOCK	3 Months Ended
	May 31, 2018
Notes to Financial Statements
COMMON STOCK	NOTE 3: COMMON STOCK Common Stock During the quarter ended May 31, 2018 and 2017, no shares of restricted stock were issued by the Company. Warrants A summary of warrant activity for the three months ended May 31, 2018 is shown below. Weighted- Average Warrants Exercise Outstanding Price Outstanding at March 1, 2018 6,407,221 0.21 Granted - - Exercised - - Forfeited - - Outstanding at May 31, 2018 6,407,221 0.21 Vested at May 31, 2018 6,407,221 0.21 Exercisable at February 28, 2018 6,407,221 0.21 The following table summarizes significant ranges of outstanding warrants as of May 31, 2018: Warrants Outstanding Warrants Exercisable Weighted Weighted Weighted Average Average Average Remaining Exercise Number Exercise Exercise Price Number Life (Years) Price Outstanding Price $0.21 6,407,221 2.54 $0.21 6,407,221 $0.21

4. INVENTORY

4. INVENTORY	3 Months Ended
	May 31, 2018
Notes to Financial Statements
INVENTORY	NOTE 4: INVENTORY The Company's inventory consisted of the following at May 31, 2018 and February 28, 2018: May 31, 2018 February 28, 2018 Raw materials $ 842,564 $ 860,424 Finished goods 147,909 137,872 Net inventory 990,473 998,296

5. REVENUE RECOGNITION AND CONC

5. REVENUE RECOGNITION AND CONCENTRATIONS	3 Months Ended
	May 31, 2018
Notes to Financial Statements
REVENUE RECOGNITION AND CONCENTRATIONS	NOTE 5: REVENUE RECOGNITION AND CONCENTRATIONS We derive our revenue primarily from product sales. We determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; (5) recognition of revenue when, or as, we satisfy a performance obligation. Revenue from product sales is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for these products. Revenue is recognized net of returns and any taxes collected from customers. Sales to one customer accounted for 37% sales for the three month period ended May 31, 2018. Accounts receivable from this customer accounted to approximately $467,000 or 69% of accounts receivable as of May 31, 2018. Sales to one customer accounted for 33% of sales for the three month period ended May 31, 2017. Accounts receivable from this customer accounted to approximately $533,000 or 84% of accounts receivable as of May 31, 2017.

6. RELATED PARTY TRANSACTIONS

6. RELATED PARTY TRANSACTIONS	3 Months Ended
	May 31, 2018
Notes to Financial Statements
RELATED PARTY TRANSACTIONS	NOTE 6: RELATED PARTY TRANSACTIONS During the three months ended May 31, 2018 and 2017, TAM purchased on behalf of the Company, approximately $1,000 and $0 respectively of raw materials from a vendor with which it already had a business relations. All amounts due to TAM had been paid in full as of May 31, 2018. The Company utilizes the services of an individual, who is a related party, to source materials and provide the manufacturing of component parts with third-party vendors in China. For the three months ended May 31, 2018, purchases facilitated through the related party accounted for approximately 20% and 13%, respectively, of total raw material purchases. The Company paid approximately $16,000 and $14,000 in direct commissions to the related party consultant during the three months ended May 31, 2018 and 2017, respectively.. The Company had advanced amounts to employee of approximately $27,000 and $27,000 as of May 31, 2018 and 2017, respectively. These amounts are being repaid through direct payroll withdrawals. The Company had receivable from stockholders of approximately $7,000 and $0 as of May 31, 2018 and 2017 respectively. The Company had sales to two companies related to a member of the Board of Directors. Specifically, sales to Sovereign Earth, LLC (dba Revolve) totaled approximately $271,000 and $63,000 for the three months ended May 31, 2018 and 2017, respectively and sales to Amazon Seychelle totaled approximately $34,000 and $0 for the three months ended May 31, 2018 and 2017, respectively. Sovereign Earth, LLC (dba Revolve) is the sole and exclusive seller of the following products in worldwide markets, including Amazon World Marketplaces: amazon.com, amazon.co uk, amazon.de, amazon.fr, amazon.jp, amazon, it, amazon.ca, amazon.cn, amazon.in, and amazon.com.mx for the duration of the agreement: Generation#1 Filter Pitcher: All filter iterations (regular, standard, advanced, radiological, extreme, supreme, etc.)

7. COMMITMENTS AND CONTINGENCIE

7. COMMITMENTS AND CONTINGENCIES	3 Months Ended
	May 31, 2018
Notes to Financial Statements
COMMITMENTS AND CONTINGENCIES	NOTE 7: COMMITMENTS AND CONTINGENCIES The Company entered into a lease agreement on one facility for its corporate offices, inventory and production at 22 Journey in Aliso Viejo, CA for a term of 5 years at a monthly rental of approximately $19,000. Legal Proceedings The Company was involved in litigation or legal proceedings as of February 28, 2018. On March 27, 2017, the Company received a Notice of Filing of Discrimination complaint in the Superior Court of the State of California, County of Orange by a former employee. The Company also received on June 5, 2017, a Request for Entry of Default filed to Superior Court of California, County of Orange by the same employee. Trial was set for June 25, 2018. However this matter was resolved. Another pending action is Rolling Tides, LLC vs. Carl Palmer, Seychelle Environmental Technologies, Inc., and other defendants. The case was brought in the Superior Court of the State of California, County of Orange. The action alleges certain fraudulent transfers occurred from Seychelle to the various defendants. The plaintiffs have refused to identify any such transfers by date or amount. The matter is in early discovery and no trial date is set. All the defendants have denied the allegations of the complaint , and are vigorously defending the matter. It is not likely that the case will be settled without trial. The Company believes that the case has no merit. Licenses The Company has historically entered into licensing agreements with third-parties for product proprietary rights, patent and trademark ownership, and use of product name. In return, the Company agrees to pay licensing fees and/or royalties on sales of those products. During the three months ended May 31, 2018 and 2017, the Company paid $1,037 and $0, respectively, in royalties and licensing fees related under these agreements.

8. SUBSEQUENT EVENTS

8. SUBSEQUENT EVENTS	3 Months Ended
	May 31, 2018
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE 8: SUBSEQUENT EVENTS Management has evaluated subsequent events from May 31, 2018 through the date the condensed consolidated financial statements were issued, and has concluded that no subsequent events have occurred that would require recognition or disclosure in these condensed consolidated financial statements.

9. INCOME TAX

9. INCOME TAX	3 Months Ended
	May 31, 2018
Income Tax Disclosure [Abstract]
INCOME TAX	NOTE 9: INCOME TAX Tax Cuts and Jobs Act On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. statutory corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. U.S. GAAP requires that deferred income tax assets and liabilities be remeasured at the income tax rate expected to apply when those temporary differences reverse, and that the effects of any change to such income tax rate be recognized in the period when the change was enacted. In connection with the Company's initial analysis of the impact of the TCJA, the Company recorded a discrete net tax expense of $282,408 in the year ended February 28, 2018. This net expense is primarily due to the remeasurement of the Company's existing deferred tax assets and liabilities. Due to the Company having a full valuation allowance related to their deferred taxes, the $282,408 discrete tax expense associated with the remeasurement is equally offset by the valuation allowance causing an overall net zero impact on the Company's current tax rate. The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. To the extent that a company's accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. The valuation allowance for deferred tax assets as of February 28, 2018 and February 28, 2017 totaled $611,182 and $1,222,653, respectively. The net change in the total valuation allowance was an increase of $558,002 and $1,081,998 for the years ended February 28, 2018 and February 28, 2017, respectively. In assessing the realization of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. It was determined that it was more likely than not that a full valuation allowance was necessary as of February 28, 2018. At February 28, 2018, the Company had unused net operating loss carryovers of approximately $496,000 and $927,000 for federal and state tax purposes, respectively, which expire beginning in 2037. The Company includes interest and penalties, if any, arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of February 28, 2018, the Company had no accrued interest or penalties related to uncertain tax positions. The tax years that remain subject to examination by major taxing jurisdictions are fiscal years 2014 through 2017 for federal purposes and fiscal years 2013 through 2017 for state purposes. The Company expects its effective tax rate for the 2019 fiscal year to be different from the federal statutory rate due primarily to a change in valuation allowance. We recorded a provision for income taxes of $0 and $4,252 for the quarter ended May 31, 2018 and 2017 respectively, related to federal and state taxes, based on the Company's expected annual effective tax rate.

2. BASIC INCOME PER SHARE (Tabl

2. BASIC INCOME PER SHARE (Tables)	3 Months Ended
	May 31, 2018
Earnings Per Share [Abstract]
Basic and Diluted income per share	For the three months ended May 31, 2018 2017 Numerator: Net income available to common shareholders $ 92,791 $ 159,981 Weighted average shares – basic 26,574,313 26,574,313 Net income per share – basic $ 0.00 $ 0.01 Dilutive effect of common stock equivalents: Warrants 2,336,683 - Weighted average shares – diluted 28,910,996 26,574,313 Net income per share – diluted $ 0.00 $ 0.01

3. COMMON STOCK (Tables)

3. COMMON STOCK (Tables)	3 Months Ended
	May 31, 2018
Common Stock
Warrant activity	Weighted- Average Warrants Exercise Outstanding Price Outstanding at March 1, 2018 6,407,221 0.21 Granted - - Exercised - - Forfeited - - Outstanding at May 31, 2018 6,407,221 0.21 Vested at May 31, 2018 6,407,221 0.21 Exercisable at February 28, 2018 6,407,221 0.21
Warrant Ranges	Warrants Outstanding Warrants Exercisable Weighted Weighted Weighted Average Average Average Remaining Exercise Number Exercise Exercise Price Number Life (Years) Price Outstanding Price $0.21 6,407,221 2.54 $0.21 6,407,221 $0.21

4. INVENTORY (Tables)

4. INVENTORY (Tables)	3 Months Ended
	May 31, 2018
Inventory Tables
Inventory	May 31, 2018 February 28, 2018 Raw materials $ 842,564 $ 860,424 Finished goods 147,909 137,872 Net inventory 990,473 998,296

2. BASIC INCOME PER SHARE (Deta

2. BASIC INCOME PER SHARE (Details) - USD ($)	3 Months Ended
	May 31, 2018	May 31, 2017
Numerator:
Net (loss) income available to common shareholders	$ 92,791	$ 159,981
Weighted average shares, basic	26,574,313	(0.03)
Net income (loss) per share - basic	$ 0	$ 0.01
Dilutive effect of common stock equivalents:
Warrants	2,336,683
Weighted average shares, diluted	28,910,996	26,574,313
Net income (loss) per share - diluted	$ 0	$ 0.01

3. COMMON STOCK (Details)

3. COMMON STOCK (Details)	3 Months Ended
	May 31, 2018USD ($)$ / sharesshares
Common Stock Purchase Warrants Details
Number of restricted common shares issued to employee	0
Value/expense of restricted common shares issued to employee | $	$ 0
Warrants, Outstanding	6,407,221
Vested	6,407,221
Exercisable	6,407,221
Warrants Weighted Average Exercise Price per Share, Outstanding | $ / shares	$ 0.21

4. INVENTORY (Details)

4. INVENTORY (Details) - USD ($)	May 31, 2018	Feb. 28, 2017
Inventory Details
Raw materials	$ 842,564	$ 860,424
Finished goods	147,909	137,872
Inventory, Net	$ 990,473	$ 998,296

7. COMMITMENTS AND CONTINGENC21

7. COMMITMENTS AND CONTINGENCIES (Details)	3 Months Ended
	May 31, 2018USD ($)
Commitments And Contingencies
Aproximate lease payments per month	$ 19,000
Lease term	5 years
Third-party licensing fees and/or royalties	$ 1,037

5. REVENUE RECOGNITION AND CO22

5. REVENUE RECOGNITION AND CONCENTRATIONS (Details Narrative) - USD ($)	3 Months Ended
	May 31, 2018	May 31, 2017
Concentrations Details Narrative
Percentage of sales attributable to one customer	37.00%	37.00%
Accounts receivable from one customer	$ 467,000	$ 533,000
Percentage of accounts receivable attributable to one customer	69.00%	84.00%

6. RELATED PARTY TRANSACTIONS (

6. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended
	May 31, 2018	May 31, 2017
Related Party Transactions Details Narrative
Payments to Irrevocable Trust for consulting services in which Cari Beck is a trustee as well as the daughter of the Company's President	$ 0	$ 49,090
Raw materials purchased by TAM on behalf of the company	1,000	0
Direct commissions paid to related party consultant	$ 27,000	$ 27,000
Percent source matierials purchased manufacturing	2.00%	13.00%
Receivables due from stockholders	$ 7,000
Sales to Sovereign Earth (related party)	271,000	$ 63,000
Sales to Amazon Seychelle (related party)	$ 34,000

9 INCOME TAXES (Details Narrati

9 INCOME TAXES (Details Narrative) - USD ($)	12 Months Ended
	Feb. 28, 2018	Feb. 28, 2017	May 31, 2017
Income Tax Disclosure [Abstract]
Net change in the total valuation allowance	$ (558,002)	$ (1,081,998)
Valuation allowance for deferred tax assets	611,182	$ 1,222,653
Net operating loss carryovers federal	496,000
Net operating loss carryovers state	927,000
Discrete net tax expense	$ 282,408
Provision for income taxes			$ 4,252