(949) 234-1999

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

(Registrant's telephone number, including area code)

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

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

Common Stock, $0.001 per share par value

 

 

TABLE OF CONTENTS

 

Item	Description	Page
	Part I
Item 1.	Description of Business	2
	Risk Factors	8
Item 2.	Management Discussion and Analysis	11
Item 3.	Description of Property	17
Item 4	Security Ownership of Certain Beneficial Owners and Management	18
Item 5.	Directors, Executive Officers, Promoters and Control Persons	19
Item 6.	Executive Compensation	20
Item 7.	Certain Relationships and Related Transactions	21
Item 8.	Description of Securities	23
	Part II
Item 1	Market Price and Dividends on the Registrant’s Securities	25
Item 2.	Legal Proceedings	26
Item 3.	Changes in and Disagreements with Accountants	27
Item 4.	Recent Sales of Unregistered Securities	27
Item 5.	Indemnification of Directors and Officers	32
	Part Financial Statements
	Report of Independent Registered Public Accounting Firm	33
	Consolidated Financial Statements for the Fiscal Years Ending February 28, 2005 and 2006	35
	Notes to Consolidated Financial Statements for the Fiscal Years Ending February 28, 2005 and 2006	48
	Consolidated Financial Statements for the Fiscal Quarter Ending May 31, 2006	86
	Notes to Consolidated Financial Statements for the Fiscal Quarter Ending May 31, 2006	91
	Controls and Procedures	95
	Part III
Item 1.	Index to Exhibits	97
	Signatures	99

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-SB, Amendment 1, including statements under "Item 1. Description of Business," and "Item 2. Management's Discussion and Analysis", constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "should", or "anticipates", or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Seychelle Environmental Technologies, Inc. ("Seychelle", "the Company", "we", "us" or "our") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

ITEM 1. Description of the Business.

(a) Business Development  

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.

On January 31, 1998, we entered into a Purchase Agreement to acquire all of the assets of Aqua Vision International, a private California entity. This Purchase Agreement was amended on February 26, 1999 to provide for the issuance of 8,000 shares of Series "AAA" Cumulative Convertible Preferred Voting Stock in lieu of all consideration that had remained unpaid under the original Purchase Agreement. Aqua Vision International had been in operation since 1995 to develop, manufacture, and market its own proprietary water filtration systems.

In April 2001, we repurchased all of our issued and outstanding Series A 13.5% Non-Voting, Cumulative Preferred Stock, $.01 par value per share. This repurchase was combined with a comprehensive settlement agreement, for the benefit of all parties, with the beneficial owner of the Preferred Stock. We also retired all of these Series A 13.5% Non-Voting, Cumulative Preferred.

The Company has consulting agreements with two officers. See Certain Relationships and Related Transactions.

In December 2004 all Series AAA at 12% Cumulative Convertible Preferred Shares were converted into 4,500,000 shares of restricted common stock issued to the Tam Irrevocable Trust. In addition, all dividends accrued and unpaid on the AAA Preferred were waived.

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As of February 28, 2006, the TAM Irrevocable Trust, one of our principal shareholders, have loaned the Company funds to finance the company operations, with the balance due of $363,150 at 10% simple interest, repayable after March 1, 2011. The Company believes that with the increase in sales experienced during the fiscal year ending February 28, 2006, no additional funding will be required from the TAM Irrevocable Trust or other shareholders.

As of May 31, 2006, there were 24,979,526 shares of common stock, par value $0.001, issued and outstanding.

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. 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 our 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 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 US Marine Corps, the International Red Cross, Eco-Challenge, Kenya Wild Life Service, La Cruz Roja de Mexico and the NY Institute for the Blind. In addition, the company has donated thousands of portable bottles to church groups and missionaries worldwide.

In an article in the May 15, 2000 edition of Fortune magazine, the value of the world water market was placed at $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.

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, and other elements 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 35 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 24 pounds per square inch (PSI). Further, our point of difference filtration systems remove up to 99.8% of all known pollutants and contaminants most commonalty found in fresh drinking water supplies in the four major areas of concern as follows:

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AESTHETICS: Taste, odor, 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, China, Vietnam, New Zeeland, 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 Natural Standards Institute, and National Sanitation Foundation protocol, procedures, standards and methodology. Importantly, 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 commonalty 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.

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, Bottom’s Up’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, Bottoms UP, 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 pounds per square inch (PSI) input line is needed. No water is wasted in the filtration process. Seychelle also makes a variety of shower filters.

The current home products include: Deluxe Shower, Handheld Shower, Royal Shower Wall Mount, Royal Shower Handheld, P.O.U. Countertop, P.O.E., Total Home and all replacement filters, and feature technology developed for portable products.

New Products

We are re-engineering the Flip Top bottle to eliminate parts, reduce costs, provide a more streamlined look, and add a disinfectant capability. The Counter Top has been upgraded to provide more enhanced filter media to improve the taste and quality of drinking water. Finally, the In-Line Filter is being changed to provide greater filter media, and meet field conditions that require a longer, narrower design.

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We signed a License Agreement with 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 will pay a 2% royalty on our gross income derived from the license for the technology during the term of the license, which is a patent for a pressure system. 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 purchase 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. No royalties have been paid to date under this agreement.

During April 2006, the Company issued 50,000 common shares to shareholders of Continental Technologies, Inc. with an approximate value of $26,800 for the Redi Chlor brand name, trademark and the use of the EPA Registration Number 55304-4-7126. The agreement further agrees to remit Continental a ten percent commission on net sales as defined of the existing product, or any new products sold directly by the Seychelle, and ten percent on any product sold by Continental for Seychelle to their existing or new customers at Seychelle’s OEM prices. The agreement is of 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 what could be made in the US. However, we anticipate that final assembly of our products will continue to be done in San Juan Capistrano.

In China the original manufacturing agreement with Hebei RO Environmental Technologies expired and was not renewed. Instead, the company signed an exclusive agreement with Huanghua Seychelle Plastic Co., Ltd on September 1, 2005.

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 China, Taiwan, Hong Kong and Singapore and with ABMS Health Care for India and are exploring opportunities in other countries. During the fiscal year ending February 28, 2006, total sales to Confident, Inc. and affiliated entities approximated $90,000. Both agreements are attached as exhibits hereto.

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In Japan, Vortex represents Seychelle as a non-exclusive distributor selling our product line to dealers, distributors and retail stores.

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.

Raw Materials

Seychelle’s filters include the finest powder activated coconut and three other media to form 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 treated water provided by means of reverse osmosis, distillation, and filtration systems. There are literally thousands of companies in the field including Culligan, Clorox, Proctor and Gamble, G.E., Pepsi-Cola, Coca-Cola, Nestle and Danone. Therefore, Seychelle’s portable and home filtration products compete in a more 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 only 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. There are other small companies in the field with no one company having a majority share.

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. 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 US. However, with Distribution Agreements for China and India, overseas sales could increase in the future as developing countries have a greater need for safe drinking water than industrialized nations. As of February 28, 2006, three customers (Wellness Enterprises, BK Pakistan and Confident, Inc.) each account for greater than 10 percent of total sales.

Backlog

As of May 31, 2006 and 2005, we had backorders of $1,418 and $2,143, respectfully, in portable water filtration units.

Employees

As of May 31, 2006, we had a President and two executive consultants managing the company with two (2) administrative consultants 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.

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Proprietary Information and Technology

We own a patent for the Portable Water Filtration System with the filter cap assembly, Patent # 5,914,045 which 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 which 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 soon in 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 10 and 11 years, the Company cannot at this time estimate the financial impact of the expiration of these patents.

Trademark registrations have been filed with the USPTO 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 new proposed 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 $14,800 and $12,500 in research and development activities for the fiscal years ending, February 28, 2006 and 2005, respectively.

Environmental Compliance

At the present time Seychelle is not subject to any material costs for compliance with any environmental laws. With respect to our new proposed 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.

Lack of History . 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 initially sold water filtration products to a number of customers then during March 2001 entered into a sales marketing agreement with Nikken Global, Inc. and Kenko World, two affiliated multi-level marketing companies (collectively “Nikken”). This agreement allowed Nikken, the exclusive rights to distribute our products and technology for a period of ten years, commencing March 1, 2001. During the period of the agreement, the Company continued to promote its 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, which do not sell to distributors or resell to customers. During the fiscal year ending February 28, 2002, the Company decided to terminate its agreement with Nikken. The Company has continued to expand its product lines, since the Nikken business ended, but have not generated enough revenue to support operations. This has required us to seek both investor capital and financing to buy the time required by new management to reverse the downward trend. Recent sales activity for the fiscal year ending February 28, 2006 has 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.

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Limited Profitability. To date, we have incurred significant losses. As of February 28, 2006, our revenue was $751,844 versus $341,106 in the prior fiscal year ending February 28, 2005. This increase was due primarily to sales with three customers. Net Losses as of February 28, 2006 of $932,456 were greater than in the prior year ending February 28, 2005 of $250,423 due to $274K in accounting and legal fees to assist in the audit and preparation of the Form 10 and other SEC filings, $272K in financing costs with TAM the primary lender, the amortization of $201K in officer stock compensation who received no salaries, the Company’s inventory reserve adjustment of $79K for the countertop product and an impairment charge of $104K for the discontinuance of the Enviro(3)Care technology were the primary reasons for the result. Going forward the company has a policy of not projecting sales and profits due to:

- significant legal and professional fees associated with regulated business activities and SEC

-	reporting requirements including continuing Sarbanes-Oxley requirements.

- lack of consistent sales to maintain profitability

Inherently Risky-Competition. Because we are a company with a limited history, our operations will be extremely competitive and subject to numerous risks. The water filtration business is highly competitive with many companies having access to the same market. Substantially all of them have greater financial resources and longer operating histories than we have and can be expected to compete within the business in which we engage and intend to engage. There can be no assurance that we will have the necessary resources to be competitive. 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.

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

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. Patents may not issue from any of our future applications. Any claims allowed from existing or future pending patents may not be of sufficient scope or strength to provide significant protection for our products. Patents may not be issued in all countries where our products can be sold so as to provide meaningful protection or any commercial advantage to us. Our competitors may also be able to design around our patents or the patents that we license.

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

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Competition. Technological competition from larger and more established companies is significant and expected to increase. Most of the companies with which we compete and expect to compete have far greater capital resources and more significant research and development staffs, marketing and distribution programs and facilities, and many of them have substantially greater experience in the production and marketing of products. Our ability to compete effectively may be adversely affected by the ability of these competitors to devote greater resources to the sale and marketing of their products than we can. In addition, one or more of our competitors may succeed or may already have succeeded in developing technologies and products that are more effective than any of those we currently offer or are developing. In addition, there can be no guarantee that we will be able to protect our technology from being copied or infringed upon. Therefore, there are no assurances that we will ever be able to obtain and to maintain a profitable position in the marketplace.

Success Dependent Upon Management . Our success is dependent upon the decision making of our directors and executive officers. These individuals 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. On December 1, 2001, we entered into an employment agreement with our President. During November 2004, the Company entered into consulting agreements with two officers to provide management consulting services.

Dependence on One or a Few Customers

As of February 28, 2006, the Company has expanded its customer base through entering into various marketing and distribution agreements. As of February 28, 2006, three customers (Wellness Enterprises, BK Pakistan and Confident, Inc.) 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 filters and related products to other direct marketing companies. However, there can no assurance that such this will occur which could result in an adverse effect on the Company’s financial condition or results of operations in the future

Reports to Security Holders

Seychelle is not at this time a reporting company required to file reports with the Securities and Exchange Commission (“SEC”) and is not required to deliver an annual report to our security holders. However, upon the effectiveness of this Form 10-SB, Seychelle will become a reporting company and will be required to file periodic reports with the SEC. Those reports will be available to our security holders (i) through the Internet web site maintained by the company, http://www.seychelle.com ; (ii) at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C 20549; and (iii) through an Internet site maintained by the SEC that contains reports, proxy and information statements and other information regarding issuers that file such documents electronically at http://www.sec.gov . Information regarding the operations of the SEC’s Public Reference Room is available by calling the SEC at 1-800-SEC-0330.

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Sales. In the three-month period ending May 31, 2006, sales were $169,875 compared to the same period in the prior year with sales of $237,987. This decrease in sales is primarily attributable to decreased sales with two customers - approximately $59K sales to Wellness Enterprises and $70K to BK Pakistan. This decrease in sales was partially offset by the Company entering 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 three-month period ending May 31, 2006, total sales to Confident, Inc. and its affiliated entities approximated $30,000. Additionally, the Company increased sales with Healthy Directions LLC (from $7K in 2005 to $21K in 2006), Vortex Ltd. (from nil in 2005 to $9K in 2006) and Blackhawk Industries (from $1K in 2005 to $13K in 2006). In the fall of 2006, the company will be launching several new products that have undergone the extensive research and development, design, tooling and production steps required for commercialization prior to introduction. This was made possible by the exclusive plastic manufacturing agreement signed with Huanghua Seychelle Plastic Co., Ltd. in China. Also, the company is preparing a disaster-preparedness order with one of the new products for a test market by a vendor of a major retailer.

Cost of sales and gross profit. In the three-month period ending May 31, 2006, cost of sales was $111,394 compared to the same period in the prior year with cost of sales of $76,975. Gross profit decreased to $58,481 compared to the same period in the prior year of $161,795. Gross profit as a percentage of sales decreased to 39% as compared to the same period in the prior year of 67%. This decrease in gross profit is primarily due to a change in sales mix, as the gross profit for sales to Wellness Enterprises and BK Pakistan approximated $105K during the three-month period ending May 31, 2005. The new products noted above have higher gross margins levels and will improve the overall gross profit as the products achieve significant sales levels.

General & administrative expenses. In the three-month period ending May 31, 2006, general and administrative expenses were $149,394 compared to the same period in the prior year of $132,295. This increase in general & administrative expenses was primarily to increased legal fees (from $8K in 2005 to $15K in 2006) and the reduction in prior year consulting expenses of $33K as a consultant surrendered to the Company 250,000 restricted common shares due to his non-performance of certain contractual obligations. This increase in general and administrative expenses was partially offset by a decrease in outside accounting assistance (from $88K in 2005 to $63K in 2006) as the Company incurred such costs to catch up on SEC filings at the beginning of the prior year.

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Consulting fees to related parties. In the three-month period ending May 31, 2006, consulting fees to related parties were $35,000 compared to the same period in the prior year of $30,000. This increase in consulting fees was due to warrants issued to Messrs. Richard Parsons and Jim Place, during 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 beneficial conversion feature over the life of the warrants. The Company has recorded compensation expense of approximately $5,000 for the three-month period ending May 31, 2006,

Interest expense to related parties. In the three-month period ending May 31, 2006, interest expense to related parties were $75,582 compared to the same period in the prior year of $53,753. This increase in interest expense was primarily due to the amortization of the beneficial conversion feature of the warrants issued to the TAM Trust during July 2005. The Company has recorded interest expense of approximately $22,500 related to amortization of the July 2005 warrants for the three-month period ending May 31, 2006.

Net loss. Even though profits for the three-month period ending May 31, 2006 were negative by $217K, $78K in accounting and legal fees to assist in the audit and preparation of the Form 10 and other SEC filings, in addition to, $76K in financing costs with TAM the primary lender, the amortization of $35K in officer stock compensation were the primary reasons for the result.

Net cash used in operating activities. Net cash used in operating activities for the three-month period ending May 31, 2006 were $145,825 compared to the same period in the prior year of $70,274. During the three-month period ending May 31, 2006, the Company funded its operations through funds previously obtained by sale of restricted common stock. During the three-month period ending May 31, 2006, the net loss from operations of $217K was offset by $111K non-cash expenditures. These non-cash expenses primarily relate to $66K in financing costs and the amortization of $35K in officer stock compensation.

Net cash used in investing activities. Net cash used in investing activities for the three-month period ending May 31, 2006 were $1,283 compared to the same period in the prior year of $25,435. The 2005 increase in cash used by investment activities was primarily due to the purchase of $25K in equipment and tooling.

Net cash used in financing activities. Net cash provided by financing activities for the three-month period ending May 31, 2006 was $13,750 compared to the same period in the prior year of $512,745. The 2005 cash provided by financing activities was due to the sale of $537K in restricted common stock, which was partially reduced by $25K repayment of related party advances.

Fiscal year ending 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	120
Cost of sales	$155,113	$430,134	$275,021	177
Gross profit	$185,993	$321,710	$135,717	73
General & administrative expenses	$272,762	$591,557	$318,795	178
Consulting fees to related parties	$ 35,292	$201,293	$166,001	127
Interest expense to related parties	$124,629	$272,653	$148,024	119
Net cash used in operating activities	($64,262)	($205,077)	$140,815	219
Net cash used in investing activities	($12,434)	($117,251)	$104,817	842
Net cash provided financing activities	$ 31,710	$934,110	$902,400	2845

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Sales. In the fiscal year ending February 28, 2006, sales were $751,844 compared to the same period in the prior year with sales of $341,106. This increase in sales is primarily attributable to continued increased sales with two customers - approximately $189K sales to Wellness Enterprises and $91K to BK Pakistan. Additionally, during the fiscal year ending 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 ending February 28, 2006, total sales to Confident, Inc. and its affiliated entities approximated $90,000.

Cost of sales and gross profit. In the fiscal year ending February 28, 2006, cost of sales was $430,134 compared to the same period in the prior year with cost of sales of $155,113. Gross profit increased to $321,710 compared to the same period in the prior year of $185,993. Gross profit as a percentage of sales decreased to 43% as compared to the same period in the prior year of 54%. As previously noted, 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 ending 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 & administrative expenses. In the fiscal year ending February 28, 2006, general and administrative expenses were $591,557 compared to the same period in the prior year of $272,762. This increase in general and administrative expenses was primarily due to the following - (1) $270K increase in legal and accounting fees as the Company incurred such costs to catch up on SEC filings; (2) $15K 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) $27K increase in salaries and related employee benefits for administrative assistant hired June 2005; and (4) and $5K increase in depreciation expense as the Company has purchased $135K in new equipment or tooling during the past twelve months.

Consulting fees to related parties. In the fiscal year ending February 28, 2006, consulting fees to related parties were $201,293 compared to the same period in the prior year of $35,292. This increase in consulting fees was due to the engagement of two officers / consultants, Messrs. Richard Parsons and Jim 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 consulting expense relates to the amortization of the discount on the restricted common stock. As further consideration for services to be rendered, the consultants 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 beneficial conversion feature over the life of the warrants.

Interest expense to related parties. In the fiscal year ending February 28, 2006, interest expense to related parties were $272,653 compared to the same period in the prior year of $124,629. This increase in interest expense was due to the amortization of the beneficial conversion feature of the warrants issued to the TAM Trust during March and July 2005.

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

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Net cash used in operating activities. Net cash used in operating activities for the year ending February 28, 2006 were $205,072 compared to the same period in the prior year of $64,262. During the fiscal year ending February 28, 2006, the Company funded its operations by sale of restricted common stock. During the fiscal year ending February 28, 2006, the net loss from operations of $932K was offset by $660K non-cash expenditures. These non-cash expenses primarily relate to $272K in financing costs, the amortization of $201K in officer stock compensation, the Company’s inventory reserve adjustment of $79K for the countertop product, the Company’s impairment charge of $104K for the Enviro(3)Care technology and the issuance of $25K in restricted common stock for services rendered.

Net cash used in investing activities. Net cash used in investing activities for the fiscal year ending February 28, 2006 were $117,251 compared to the same period in the prior year of $12,434. The 2006 increase in cash used by investment activities was primarily due to the purchase of $135K in equipment and tooling.

Net cash used in financing activities. Net cash provided by financing activities for the fiscal year ending February 28, 2006 was $934,110 compared to the same period in the prior year of $31,710. The 2006 increase in cash provided by financing activities was due to the sale of $1,014K in restricted common stock, combined withthe borrowing of $50K under one of the Company’s lines of credit. This increase in cash provided was partially reduced by the following - (1) $85K repayment of related party advances; (2) $33K purchase of treasury shares; and (3) payment of $12K in finders fees relating to the sale of certain restricted stock.

Fiscal year ending February 28, 2005 compared to the corresponding period in 2004.

Sales. In the fiscal year ending February 28, 2005, sales were $341,106 compared to the same period in the prior year with sales of $468,420. The decrease in sales is primarily attributable to the reduction in sales to Wellness Enterprises, a direct marketing company, with current year sales of $32,559 compared to the same period in the prior year of $223,935. This reduction in sales was partially offset by increased sales to Team in Focus (from $nil to $54K) and Phillips Publishing (from $19K to $48K).

Cost of sales and gross profit. In the fiscal year ending February 28, 2005, cost of sales was $155,113 compared to the same period in the prior year with sales of $307,175. Gross profit increased to $185,993 compared to the same period in the prior year of $161,245. The gross profit percentage for the fiscal year ending February 28, 2005 was 54 percent compared to 34 percent to the same period in the prior year. This increase in gross profit percentage is attributable to decreased cost for outside assembly labor combined with change in product mix, as previously noted the Company decreased selling product to a direct marketing company.

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General & administrative expenses. In the fiscal year ending February 28, 2005, general and administrative expenses were $272,762 compared to the same period in the prior year of $239,897. This increase in general and administrative expenses was primarily due to $38K in consulting fees paid to two contractors who assisted with the company’s accounting department. This increase in expenses was partially offset by decreases in other administrative costs (i.e. telephone, utilities, etc.) due to decreased sales and production efforts.

Consulting fees to related parties. In the fiscal year ending February 28, 2005, consulting fees to related parties were $35,292 compared to the same period in the prior year of $nil. This increase in consulting fees was due to the engagement of two officers / consultants, Messrs. Richard Parsons and Jim 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 consulting expense relates to the amortization of the discount on the restricted common stock.

Interest expense to related parties. In the fiscal year ending February 28, 2005, interest expense to related parties were $124,629 compared to the same period in the prior year of $117,584. The slight increase in interest expense was due to the amortization of the beneficial conversion feature of the warrants issued to the TAM Trust during March 2004 for its continued financial support.

Net loss. Even though net loss for the fiscal year ending February 28, 2005 were negative by $250K, $125K in financing costs with TAM the primary lender, the amortization of $89K in officer stock compensation who received no salaries and a claim settlement of $31K were the primary reasons for the result.

Net cash operating activities . Net cash used in operating activities for the fiscal year ending February 28, 2005 were $64,262 compared to the same period in the prior year of $36,643. During the fiscal year ending February 28, 2005, the Company funded its operations by sale of restricted common stock. During the fiscal year ending February 28, 2005, the net loss from operations of $250K was offset by $ 211K of non-cash expenditures. These non-cash expenses primarily relate to the amortization of $89K in officer stock compensation, depreciation and amortization expense of $34K, the issuance of $31K in restricted common stock for services rendered and the issuance of stock to settle a claim, valued at $29K.

Net cash investing activities. Net cash used in investing activities for the fiscal year ending February 28, 2005 were $12,434 compared to the same period in the prior year of $15,956. The 2005 decrease in cash used by investment activities was primarily due to the proceeds from a sale of a vehicle.

Net cash financing activities. Net cash provided by financing activities for the fiscal year ending February 28, 2005 was $31,710 compared to the same period in the prior year of $115,670. The 2005 decrease in cash provided by financing activities was due to the prior year advances from related parties of $115,226 compared to $1,000 in the current fiscal year combined with the repayment of $60K in advances from related parties. This decrease in cash provided was partially offset by $91K in proceeds from sale of restricted common stock.

Liquidity and capital resources .

As of February 28, 2006 the Company had $635,569 in cash and $100,000 available borrowing under its two lines of credit. Both lines of credit do not contain any limitations on borrowing or any restrictive debt covenants. Over the next twelve months, management is confident that sufficient working capital will be obtained from a combination of revenues and external financing to meet the Company’s liabilities and commitments as they become payable. During May 2006, the Company did not renew one of its lines of credit totaling $50,000.

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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,
2006 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 to the
consolidated financial statements, as referenced in the table:
							Payments Due by Period
																	Convertible
			Less than												More than		to common
	Total		1 year				2 years				3 years				3 years		stock
Accrued liabilities	$ 262,106		$ 70,556														$ 191,550
Line of credit	50,000		50,000
Accrued interest due to related party	169,315														169,315
Notes payable to related parties	363,150														363,150
	844,571		120,556												532,465		191,550
Other (1)	146,016		71,712				74,304
Total contractual obligations (2)	$ 990,587		$ 192,268				$ 74,304				$ -				$ 532,465		$ 191,550

(1)	Other commitments comprise of operating lease agreement with Turner San Juan LLC through February 2008

(2)	Comprised of the following:

Liabilities recorded on the balance sheet       $844,571

Commitments not recorded on the balance sheet     146,016

Total             $990,587

The Company currently estimates monthly cash requirements of $26,000 to cover general and administrative overhead costs. Consequently, we do not foresee the need for additional funding at least for the period ending February 28, 2007. As of the date of this filing, the TAM Irrevocable Trust has expressed a willingness to provide additional funding if required; however, an amount has not been discussed. Moreover, in the foreseeable future the Company does not believe additional funding is required.

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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.

The flip top container is being re-engineered in design for greater ease of use and now includes disinfectant capabilities. The countertop is also been upgraded with more advanced filtration media for removal of contaminants and pollutants. The in-line filter is also being redesigned as well 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 ending February 28, 2006, sales were $751,844 compared to the same period in the prior year with sales of $341,106. Therefore, sales for the fiscal year ending February 28, 2006 have more than doubled sales from the fiscal year ending February 28, 2005. Consequently, the business is improving with both new and current (international and domestic) customers purchasing product. Even though water consumption increases in the summer months, the impact on our sales is slight as our overall distribution is still relatively low. As previously noted, gross profit margins have decreased slightly due to the Company recorded an inventory reserve for its countertop product combined with higher outside assembly labor and raw material costs. 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

Except for heavier consumption of water in the summer months, water is something everyone drinks year round and should not be considered seasonal.

Off-Balance Sheet Arrangements : none

ITEM 3. Description of Properties.  

As of February 28, 2006, 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 $7,200 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.

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

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

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

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

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

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

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ITEM 5. Directors, Executive officers, Promoters and Control Persons; Compliance with Section 16 (A) of the Exchange Act

Our Directors and Executive Officers, their ages and positions held in the Company as of February 28, 2006 are as follows:

NAME	AGE	POSITION HELD
Carl Palmer	72	President, Chief Executive Officer and Director
Richard Parsons	71	Executive Vice President, Secretary and Director
James Place	67	Chief Operating Officer, Treasurer and Director

Our directors have served and will serve in such capacity until the next annual meeting of our shareholders and until their successors have been elected and qualified. The officers serve at the discretion of our directors. The Board of Directors as a whole serves as the audit committee and Mr. Place is the financial expert. 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 401 d. 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 US in the late 1970’s. That company, Aq-Ro-Matic, was later sold to Coca-Cola in 1973. He developed cellouse 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 US 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 Seychelle as Executive Vice President. Mr. Parsons ran his own successful consulting business in water and related beverages with clients such as General Foods, Coke-USA, The Beverage Group, Coke-Japan and Mitsubishi Industries for many years. He also has over 20 years experience in direct sales and multilevel marketing with companies such as Avon, Holiday Magic, Arrowhead and National Education. Mr. Parsons has a Bachelors Degree from Principia College.

James Place . Mr. Place has been Treasurer, COO and a director of our Company since November 2004. In March 2005, he assumed additional responsibilities for Manufacturing, Operations and became the Chief Financial Officer (CFO). He has over 30 years experience in food, beverages and bottled water. While at Arrowhead, he took the liter still and sparkling 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

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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 & 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.

(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 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 valued at $.03 per share and are distributed over three years beginning December 1, 2004, 2005 and 2006. The fair market value of the restricted shares was estimated to be $225,600 and the Company is amortizing this value over the three-year term of the consulting agreements.

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(4) In November 2004 Mr. Parsons and Mr. Place joined the Company as Executive Vice President and Chief Operating Officer respectively. In March 2005 Mr. Parsons assumed additional responsibilities for International sales activities in Asia including China and India; and Mr. Place assumed additional responsibilities for Manufacturing, Operations and became acting Chief Financial Officer.

(5) During March 2005, Messrs. Parsons and Place were granted warrants to purchase 500,000 shares of restricted common stock at $0.225 per share and are distributed over the same three years and are exercisable from December 1, 2004 until December 1, 2008. The fair value of the warrants was estimated to be $55,300 and the Company is amortizing this value over the three-year term of the consulting agreements.

(6) During March 2005, Mr. Parsons was granted 316,312 shares of restricted common stock valued at $0.03 per share and are distributed in equal installments commencing on December 1, 2004, 2005 and 2006. The fair market value of the restricted shares was estimated to be $79,100 and the Company is amortizing the estimated value over the three-year term of the consulting agreement.

(7) During July 2005, the Company expanded the consulting agreements with Messrs. Parsons and Place to provide management-consulting services for the Company. As   further consideration for services to be rendered, the consultants 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. 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 these warrants of $30,000. The Company is amortizing the estimated fair market value of the unearned compensation over the period from the date of grant through December 1, 2006.

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

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 pay members of our Board of Directors any fees for attendance or similar remuneration, but reimburse them for any out-of- pocket expenses incurred by them in connection with their activities.

ITEM 7. 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 consulting agreements with Messrs. Parsons and Place to provide management consulting 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 at $0.03 per share (below market) with agreements attached as exhibits hereto. The common shares are to be distributed in equal installments commencing on December 1, 2004, 2005 and 2006. The fair market value of the restricted shares earned during the period ending November 30, 2004 was estimated at $225,600 and recorded to unearned compensation. The Company is amortizing the estimated fair market value of the unearned compensation over the three-year term of the

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consulting agreement. The Company has recorded amortization of approximately $75,000 and $18,800 for the fiscal year ending February 28, 2006 and 2005 respectively. In March 2005 Mr. Parsons assumed additional responsibilities for International sales activities in Asia including China and India; and Mr. Place assumed additional responsibilities for Manufacturing, Operations and became acting Chief Financial Officer. No other services are performed by either of them.

During December 2004, all Series AAA at 12% Cumulative Convertible Preferred Shares were converted into 4,500,000 shares of restricted common stock issued to the TAM Irrevocable Trust. In addition, all dividends accrued and unpaid on the AAA Preferred were waived.

As the February 28, 2006 and 2005, the Company had received advances of $363,150 and $448,200 from the TAM Irrevocable Trust in which Cari Beck, is a trustee as well as a daughter of Carl Palmer an officer and Board member. These advances bear interest at 10 percent. As of February 28, 2006, $363,150 of these advances is not repayable until after March 1, 2011.

As of February 28, 2006 and 2005, accrued interest on these advances was approximately $169,300 and $134,500, 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 Irrevocable Trust restricted common stock of 1,266,667 shares, effective March 1, 2002, for interest on prior advances of funds. The restricted common shares are to be distributed during the first quarter of the fiscal year ending February 28, 2006. The fair market value of the restricted shares was estimated at $228,000. The Company is amortizing the estimated fair market value of the interest over the three-year term commencing March 1, 2002. During April 2005, the Company settled this liability through the issuance of common stock to the company’s primary investor.

On March 29, 2005, the Company expanded the consulting agreement with Mr. Parsons to provide management-consulting services for the Company with agreements attached as an exhibit hereto. As consideration for services to be rendered, the consultant received 316,312 restricted shares of the Company’s common stock at $0.03 per share (below market). The common shares are to be distributed in equal installments commencing on December 1, 2004, 2005 and 2006. The fair market value of the restricted share earned during the period ending November 30, 2004 was estimated at $79,100 and recorded to unearned compensation. The Company is amortizing the estimated fair market value of the unearned compensation over the three-year term of the consulting agreement. The Company has recorded amortization of approximately $26,400 and $8,800 for the fiscal years ending February 28, 2006 and 2005, respectively.

On March 29, 2005, the Company expanded the consulting agreements with Messrs. Parsons and Place to provide management-consulting services for the Company with agreements attached as an exhibit hereto. As further consideration for services to be rendered, the consultants were granted 1,000,000 warrants redeemable on restricted shares of the Company’s stock at $.225 per share. The warrants are distributed in equal installments commencing on December 1, 2004, 2005 and 2006 and are exercisable through December 1, 2008. The fair market value of the warrants earned during the period ending November 30, 2004 was estimated at $55,300 and recorded to unearned compensation. The Company is amortizing the estimated fair market value of the unearned compensation over the three-year term of the consulting agreement. The Company has recorded amortization of approximately $18,400 and $6,100 for the fiscal years ending February 28, 2006 and 2005, respectively.

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On March 29, 2005, the Company granted the TAM Trust 500,000 warrants redeemable into restricted shares of the Company’s stock at $.225 per share for additional interest charged to the Company for previous unpaid notes and continued financial support. The warrants are distributed in equal installments commencing on December 1,

2004, 2005 and 2006 but 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 is amortizing the estimated fair market value of the unearned interest over a three-year term. The Company has recorded amortization of approximately $9,100 and $3,000 for the fiscal years ending February 28, 2006 and 2005, respectively.

On July 27, 2005, the Company granted the TAM Trust 2,000,000 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. 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 is amortizing the estimated fair market value of the unearned interest over the period from date of grant through December 1, 2006. The Company has recorded interest expense of approximately $46,700 for the fiscal year ending February 28, 2006.

On July 27, 2005, the Company expanded the consulting agreements with Messrs. Parsons and Place to provide management-consulting services for the Company with agreements attached as an exhibit hereto. As further consideration for services to be rendered, the consultants 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. 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 is amortizing the estimated fair market value of the unearned compensation over the period from date of grant through December 1, 2006. The Company has recorded consulting fees of approximately $11,700 for the fiscal year ending February 28, 2006.

On January 23, 2006, the Company issued to 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 estimated value of these shares of $8,437.

On January 23, 2006, the Company issued to the Messrs. Parsons 37,500 common shares for services rendered. 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 compensation expense relating to the estimated value of these shares of $8,437.

ITEM 8. Description of Securities

Common Stock

As of May 31, 2006, the Company is retaining several common stock certificates for its primary lender (TAM) and certain management consultants (Messrs. Place and Parsons). As noted (Notes 7 and 8), these share certificates were granted to TAM during March 2005 and to Messrs. Place and Parsons during November 2004 and are to be distributed equally over a three-year period commencing November 2004. The transfer agent issued the share certificates to the Company upon execution of the respective agreement. A reconciliation of common shares outstanding as of May 31, 2006 is as follows:

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Number of shares issued by transfer agent   24,979,526

Shares held by company for future distribution to   (2,256,626 )

TAM and certain management consultants

Shares issued and outstanding per financial statements   22,722,900

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

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 May 31, 2006, three classes of Preferred Stock were authorized and none was outstanding.

Series “A” 13.5% Non Voting, Convertible Preferred Stock $0.01 par value

Series “A” Preferred Stock has rights which are superior to all other securities of the Company, including upon liquidation and as to payment of dividends, if any, carries a cumulative dividend of 13.5% per annum, is non-voting, and is redeemable by the Company at any time at face value

and is convertible into common shares of the Company at the lesser of $10 per share or 85% of the last five closing bid prices.

During April 2001, the Company repurchased for $350,000 all issued and outstanding Series A Preferred Stock, and settled all liability for dividends. This repurchase was done in conjunction with a comprehensive settlement agreement with the beneficial owner of the preferred stock.

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

Series “AA” 10% Non Voting, Convertible Preferred Stock

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

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Series “AAA” 12 % Voting Convertible Preferred Stock

Series “AAA” Preferred Stock has rights which are superior to all other securities of the

Company except Series “A” and the Series “AA” Preferred Stock, including upon liquidation and as to payment of dividends, if any carries a 12% per annum dividend payable in stock or cash, is voting, with each share equal to 100 shares of Common Stock, and is redeemable, at the Company’s option, according to the following procedure: upon written notice of conversion from the holders, the Company shall have 45 days from receipt of such notice to repurchase for cash shares of the Series “AAA” Preferred Stock at $1,000 per share.

As a result of the settlement of the litigation involving the Company and its former Chairman, in which the Company was seeking to rescind the issuance of all common shares previously issued to the former Chairman, the number of common shares issuable to the holders pursuant to the

conversion provisions of the Series “AAA Preferred Stock was reduced from 8,000,000 shares to 4,500,000.

In December 2004 all Series “AAA” Preferred Shares were converted into 4,500,000 shares of restricted common stock issued to the TAM Irrevocable Trust. In addition, all dividends accrued and unpaid on the “AAA” Preferred Stock were waived.

PART II

ITEM 1. 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." Trading was conducted in the over-the-counter market on the NASD's "Electronic Bulletin Board" until April 20, 2000. We traded on the "Pink Sheets" until December, 2000, when we were re-listed on the NASD's "Electronic Bulletin Board." On November 26, 2002, the Company filed a Form 15 with the SEC, making the Company no longer a reporting company and moving trading of its stock back to the “Pink Sheets.” 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 ending February 28, 2006, the common stock was at a High of $.99 and a Low of $.11.

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        Source: Commodity Systems, Inc. through Yahoo Finance

(b) Approximate Number of Holders of Common Stock

As of February 28, 2006, there were approximately 339 shareholders of record of our common stock.

(c) Dividends

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

ITEM 2. Legal Proceedings

During May 2001, Seychelle Water Technologies, Inc. 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 Seychelle Water Technologies, Inc. and Carl Palmer, and again alleges breach of fiduciary duty, constructive fraud, promissory fraud, rescission, constructive trust, unfair trade practices, and conversion, and seeks unspecified damages and injunctive relief. Plaintiff essentially alleges that defendants Seychelle Water Technologies, Inc. (hereafter “Seychelle Water”) and Carl Palmer fraudulently induced plaintiff to enter into an agreement to relinquish 4,000,000 shares of the stock of defendant Seychelle Water. Plaintiff alleges 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 Seychelle Water. Plaintiff alleges that when he discovered certain improprieties by Berkich, he became concerned, and ultimately agreed to the (re)purchase by Berkich of his interest in the Seychelle Water stock. Plaintiff is now suing to recover damages he allegedly suffered as a result of the (re)purchase by Berkich of his interest in Seychelle

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Water. A demurrer to the re-filed complaint was filed and in response a first amended complaint was filed and served. A second demurrer to the First Amended Complaint has been filed and sustained by the Court, and plaintiff has been granted fourteen days leave to amend. A second amended complaint has now been filed and answered. We continue to believe that this matter is without merit and intend to vigorously defend against plaintiff’s claims.

As of May 31, 2006, 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 3. Changes in and Disagreements with Accountants on Accounting and Financing Disclosure.

On February 21, 2005, the Board of Directors approved the engagement of Armando C. Ibarra, Certified Public Accountants (A Professional Corporation) as independent auditors for the Company.

Effective February 28, 2006, the independent auditors for Seychelle Environmental Technologies, Inc. (the “Company”), terminated its relationship with Armando C. Ibarra as principal auditor for the Company. At no time were there any disagreements between the Company and Armando C. Ibarra on any matter of accounting principles or practices, financial statement disclosures or auditing scopes or procedures. Armando C. Ibarra performed the audit of the Company’s financial statements for the fiscal years-ending February 29, 2004 and February 28, 2005. The audit report of Armando C. Ibarra, Certified Public Accountants did not contain either an adverse opinion or disclaimer of opinion, and was not modified as to uncertainty, audit scope or accounting principles.

The Board of Directors of the Company, at a meeting held on March 26, 2006, approved the resignation of Armando C. Ibarra and appointed Windes & McClaughry Accountancy Corporation as independent auditors for the Company beginning with the fiscal year ending February 28, 2006.

ITEM 4. Recent Sales of Unregistered Securities

During the fiscal year ending February 29, 2004, the Company issued two (2) employees an aggregate total of 120,000 shares for compensation for an approximate value of $15,600.

Date Issued	Issue to	Service Performed	Common Shares	Stock Estimated value
February 10, 2004	M. Rae	Compensation	100,000	$13,000
February, 10 2004	J. Sierra	Compensation	20,000	$ 2,600

On February 10, 2004, the Company issued T. Lampert, a consultant, 250,000 shares for design and engineering services for an approximate value of $32,500.

On February 10, 2004, the Company settled approximately $13,500 of its accrued legal expenses with David Wagner & Associates as of February 28, 2003 through the issuance of 15,000 shares of common stock.

On February 23, 2004, the Company received payment of $20,000 from Maha Bakhaya for 200,000 shares of its common stock, which were issued on March 3, 2004.

During the fiscal year ending February 28, 2005, the Company issued three (3) employees an aggregate total of 70,000 shares for compensation for an approximate value of $21,350.

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During the fiscal year ending February 28, 2005, the Company issued to fourteen (14) individual investors an aggregate of 541,166 shares for cash for an approximate total value of $91,100.

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During the fiscal year ending February 28, 2005, the Company issued two (2) debt holders an aggregate of 55,000 shares with an approximate total value of $42,600.

On February 12, 2005, the Company issued 84,000 shares to settle a claim with an approximate total value of $29,400.

On March 6, 2005, T. Lampert, a consultant, surrendered to the Company 250,000 of common stock, valued at $32,500, due to failure to perform contractual obligations.

During December 2004, the Company granted the TAM Irrevocable Trust restricted common stock of 1,266,667 shares, valued at $228,000 for unpaid interest. On March 16, 2005, the Company settled such accrued interest due to related parties as of February 28, 2005, through the issuance of such shares of common stock.

On April 13, 2005, the Company settled approximately $6,000 of its accrued accounting expenses with Wong Johnson & Associates, APC as of February 28, 2005 through the issuance of 17,500 shares of common stock.

During the three-month period ending May 31, 2005, the Company issued to twenty-one (21) individual investors an aggregate of 2,150,000 common shares for cash for an approximate total value of $535,000.

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During the three-month period ending May 31, 2005, the Company issued 154,700 in restricted shares, estimated value $47,400, for accounting services provided by Wong Johnson & Associates, APC, in connection with the preparation of Form 10 and other SEC filings.

Date Issued	Issue to	Service Performed	Common Shares	Stock Estimated value
April 13, 2005	Wong Johnson & Associates	Accounting & SEC reporting	51,500	$
May 16, 2005	Wong Johnson & Associates	Accounting & SEC reporting	103,200	$

During the period ending July 31 2005, the Company repurchased approximately 103,600 common shares, at prices ranging from $0.15 to $0.17, from F. Duarte, former owner of Enviro(3)Care, for an approximate total value of $22,800.

Date Repurchased	Repurchased from	Common Shares	Stock Estimated value
June 9, 2005	F. Duarte	28,600	$10,000
August 1, 2005	F. Duarte	75,000	$12,800

During the three-month period ending August 31, 2005, the Company issued two (2) employees an aggregate of 30,000 shares for compensation for an approximate value of $9,000.

During the three-month period ending August 31, 2005, the Company issued to twelve (12) individual investors an aggregate of 2,098,334 common shares for cash for an approximate total value of $478,000.

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Date Issued	Issue to	Common Shares	Stock Estimated value
June 8, 2005	W. Wright	15,000	$ 3,750
June 8, 2005	W. Wright	15,000	$ 3,750
August 8, 2005	S. Lampman	2,000,000	$450,000
August 8, 2005	J. Zurcher Trust	30,000	$ 10,000
August 8, 2005	C. Fiege	5,000	$ 1,500
August 18, 2005	S. Gahl	1,667	$ 500
August 18, 2005	L. Soares	1,667	$ 500
August 22, 2005	W. Wright	5,000	$ 1,000
August 22, 2005	W. Wright	5,000	$ 1,000
August 24, 2005	Nickerson Trust	10,000	$ 3,000
May 16, 2005	W.Wright	5,000	$ 1,500
May 16, 2005	W.Wright	5,000	$ 1,500

During the three-month period ending August 31, 2005, the Company issued 130,909 in restricted shares, estimated value $68,500, for accounting services provided by Wong Johnson & Associates, APC. in connection with Form 10 and other SEC filings.

Date Issued	Issue to	Service Performed	Common Shares	Stock Estimated value
June 14, 2005	Wong Johnson & Associates	Accounting & SEC reporting	91,909	$30,300
August 18, 2005	Wong Johnson & Associates	Accounting & SEC reporting	39,000	$38,200

On October 28, 2005, the Company issued 10,157 in restricted shares, estimated value $3,500, for accounting services provided by Wong Johnson & Associates, APC in connection with various SEC filings.

On November 15, 2005, the Company issued K. Lee 10,800 shares for additional design and engineering services provided for an approximate value of $3,000.

On January 23, 2006, the Company issued to D. Parsons, one of its officers, 37,500 common shares, estimated value of $8,400, for services rendered.

On January 23, 2006, the Company issued to the TAM Trust, its primary lender, 37,500 common shares, estimated value of $8,400, for continued financial support.

During the three-month period ended May 31, 2006, the Company issued an aggregate of 50,000 common shares to various investors for cash for an approximate total value of $11,250.

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On May 2, 2006, the Company issued 50,000 common shares to shareholders of Continental Technologies, Inc. (“Continental’) with an approximate value of $26,800 for intellectual property.

During the three-month period ended May 31, 2006, the Company issued an aggregate of 164,516 restricted shares to three debt holders with an approximate total value of $108,000.

In each if these issuances, the Company relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended. The Company made these offerings based on the following factors: (1) the issuance was an isolated private transaction by the Company which did not involve a public offering; (2) there was only one offeree in each issuance; (3) the offerees did not resell the stock but continue to hold it until the present; (4) there were no subsequent or contemporaneous public offerings of the stock; (5) the stock was not broken down into smaller denominations; and (6) the negotiations for the sale of the stock took place directly between the offerees and the Company.

ITEM 5. Indemnification of Directors and Officers.

 

Seychelle's Bylaws provide that it will indemnify its officers and directors to the full extent permitted by Nevada state law. Seychelle's bylaws likewise provide that Seychelle 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 Seychelle, 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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  Financial Statements  

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. as of February 28, 2006, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

 

We conducted our 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 audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Seychelle Environmental Technologies, Inc. as of February 28, 2006, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

/S/WINDES & McCLAUGHRY ACCOUNTANCY CORPORATION

 

Windes & McCLaughry Accountancy

 

Corporation

 

April 12, 2006

 

18201 Von Karman Ave. Suite 1060, Irvine, CA 92612

Tele: (949) 271-2600                 Fax: (949) 660-5681

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Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheets of Seychelle Environmental Technologies, Inc. and subsidiaries as of February 28, 2005, and February 29, 2004 and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the years then ended. 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 audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Seychelle Environmental Technologies, Inc., and subsidiaries as of February, 28, 2005, and February 29, 2004 and the results of their operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

 

_ /s/ Armando C. Ibarra _________________________________

ARMANDO C. IBARRA, CPA

August 16, 2005

Chula Vista, Ca. 91910

371 “E” Street, Chula Vista, CA 91910

Tel: (619) 422-1348

Fax: (619) 422-1465

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See accompanying notes to consolidated financial statements.

35

See accompanying notes to consolidated financial statements.

36

See accompanying notes to consolidated financial statements.

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. SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

For Fiscal Years Ending February 28, 2006 and 2005

38

See accompanying notes to consolidated financial statements.

39

40

See accompanying notes to consolidated financial statements.

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