**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB/A**


**Amendment
      Number 3**





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





For
      the
      fiscal year ending February 28, 2006





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





For
      the
      transition period from _______________ to __________________





*Commission
      File No. 0-29373*




**Seychelle
      Environmental Technologies, Inc.**


(Exact
      Name of registrant as specified in its charter)







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




(949)
      234-1999


(Registrant's
      telephone number, including area code)





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





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





Common
      Stock, $0.001 per share par value





Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days. Yes: __ No: _X__





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





State
      issuer's revenues for its most recent fiscal year $751,844. The aggregate market
      value of the voting stock of the Registrant held by non-affiliates as of
      February 28, 2006 was approximately $19,030,557. The number of shares
      outstanding of the Registrant's common stock, as of the latest practicable
      date,
      February 28, 2006, was 24,715,010.












Explanatory
        Note
 
 This
        Current Report on Form 10-KSB/A is filed as an amendment (Amendment No. 3)
        to
        the Current Report on Form 10-KSB/A filed by Seychelle Environmental
        Technologies, Inc. on September 18, 2006.
 
 The
        Company became aware of certain expense reclassifications required in its
        previously filed financial statements in the course of responding to comments
        of
        the Securities and Exchange Commission resulting from their review of the
        Company’s General Form for Registration of Securities on Form 10. The Company
        also, expanded certain disclosures in the Management, Discussion & Analysis. These
        reclassifications had no effect on previously reported results of operations
        or
        retained earnings (accumulated deficit).
 
 The
        following is a summary of the effects of the reclassifications on the condensed
        consolidated balance sheets as February 28, 2006 as well as the effects of
        these changes on the condensed consolidated statements of operations for
        the
        quarter then ended.
 
 February
        28, 2006
 
 Condensed
                  Consolidated Balance SheetsAs
                  previously reported
              
              Adjustments
              
              RestatedTotal
                  assets
              
              $
              1,288,150
              
              
              -
              
              $
              1,288,150Total
                  liabilities
              
              
              941,029
              
              
              -
              
              
              941,029Common
                  stock
              
              
              22,458
              
              
              2,257
              
              
              24,715Additional
                  paid in Capital
              
              
              5,392,533
              
              
              (2,257
              )
              
              5,390,276Additional
                  paid in Capital
              
              
              5,392,533
              
              
              (2,257
              )
              
              5,390,276Total
                  stockholder’s equity
              
              
              347,121
              
              
              -
              
              
              347,121Total
                  liabilities & stockholder’s equity
              
              
              1,288,150
              
              
              -
              
              
              1,288,150
 
 Fiscal
        Year Ending February 28, 2006
 
 Condensed
                  Consolidated Statements of OperationsAs
                  previously reported
              
              Adjustments
              
              RestatedGeneral
                  & administrative expenses
              
              
              (591,557
              )
              
              (1,600
              )
              
              (593,157
              )Loss
                  on sale of  equipment/vehicle
              
              
              -
              
              
              (30,000
              )
              
              (30,000
              )Operating
                  expenses
              
              
              (956,309
              )
              
              (31,600
              )
              
              (987,909
              )Loss
                  from operations
              
              
              (634,599
              )
              
              (31,600
              )
              
              (666,199
              )Loss
                  on sale of  equipment/vehicle
              
              
              30,000
              
              
              (30,000
              )
              
              -Total
                  other income (expenses)
              
              
              (296,257
              )
              
              30,000
              
              
              (266,257
              )Net
                  loss before income taxes
              
              
              (930,856
              )
              
              (1,600
              )
              
              (932,456
              )Income
                  taxes
              
              
              (1,600
              )
              
              1,600
              
              
              -Net
                  loss
              
              
              (932,456
              )
              
              -
              
              
              (932,456
              )





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







**TABLE
      OF CONTENTS**






Item
              Description
              Page**Part
                    I**Item
                  1.
              Description
                  of Business
              1Risk
                  Factors
              6Item
                  2.
              Description
                  of Property
              8Item
                  3.
              Legal
                  Proceedings
              8Item
                  4
              Submission
                  of Matters of a Vote of Security Holders
              9**Part
                    II**Item
                  5.
              Market
                  for Common Equity and Related Stockholder Matters
              9Item
                  6.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              14Item
                  7.
              Financial
                  Statements and Supplementary Data
              20Item
                  8.
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              72Item
                  8A
              Controls
                  and Procedures
              72**Part
                    III**Item
                  9.
              Directors
                  and Executive Officers, Promoters & Control Persons; Compliance with
                  Section 16(a) of the Exchange Act
              74Item
                  10.
              Executive
                  Compensation
              76Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and Management And Related
                  Stockholder Matters
              77Item
                  12.
              Certain
                  Relationships and Related Transactions
              79**Part
                    IV**Item
                  13.
              Exhibits
              81Item
                  14.
              Principal
                  Accountant Fees and Services
              82Signatures
              84





**PART
      I**





**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.





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.





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. However, as of the date
      of
      this filing, the TAM Trust has expressed a willingness to provide additional
      funding if required; however, an amount has not been discussed.





As
      of
      February 28, 2006, there were 24,715,010 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.




*-
          1
          -*




(b) Business
      of Seychelle


**General**





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


Seychelle
      has sold over 2 million portable water filtration bottles throughout the world
      to customers such as individuals, dealers, and distributors - and to
      governments, military, agencies and emergency relief organizations such as
      the
      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 including the recent disaster in New Orleans.




According
        to an article in the May 15, 2000 edition of Fortune magazine, the value
        of the
        world water market is $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. The US household water
        filtration market was estimated by Enviroscrub Technology, in March 2004,
        to be
        $500 million in size, growing at 10 percent annually.


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





Business
      Plan





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





**AESTHETICS:** Taste,
      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 National 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 commonly found in
      fresh drinking water supplies in the four major areas of concern. The benefit
      of
      such filtration can save lives worldwide as awareness of Seychelle’s product
      line increases and is used.







*-
          2
          -*


**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
      have
      re-engineered 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, including media to reduce
      arsenic, 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.





We
      signed
      a License Agreement with Gary Hess, doing business as Aqua Gear USA on June
      6,
      2002 for a product known as the "Hand Held Pump Technology." We licensed all
      proprietary rights associated with this technology. We will pay a 2% royalty
      on
      our gross income for the technology during the term of the license. 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. The Company
      plans
      to start marketing the Hand Held Pump as part of its Aqua Gear product line
      in
      the US sports goods industry in 2007. As of the date of this filing,
      approximately $5K in royalties has been paid to date under this agreement.





During
      July 2006, the Company signed a second License Agreement with Gary Hess doing
      business as Aqua Gear USA. We will pay a 2% royalty on net income up to $120,000
      and 1% thereafter. The License Agreement shall continue indefinitely unless
      terminated due to default or breach of the agreement. This affords the Company
      additional patent protection (patent #6,136,188) and ownership of the trademark
      Aqua Gear. Products affected include all Aqua Gear trademarked filter bottles
      and flip up bottles sold in the product line.





During
      April 2006, the Company issued 50,000 common shares to shareholders of
      Continental Technologies, Inc. with an approximate value of $16,100 for the
      Redi
      Chlor brand name, trademark and the use of the EPA Registration Number
      55304-4-7126. As of the date of this filing, the Company has commenced its
      plans
      to sell the Redi Chlor brand name water chlorine tablets to consumers, dealers,
      distributors and manufactures. Each tablet disinfects five gallons of source
      water. 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 us, and ten percent on any product sold by Continental for
      us
      to their existing or new customers at our OEM prices. The agreement is for
      the
      life of Seychelle.





*-
          3
          -*


**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.
      Importantly, the filter continues to be manufactured in the US. The final
      assembly of our products is completed at our facility in San Juan
      Capistrano.





In
      China,
      the original manufacturing agreement with Hebei RO Environmental Technologies
      expired and was not renewed. Instead, we 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 their affiliated entities
      approximated $90,000. This does not include sales to AMBS Health Care, which
      we
      anticipate should commence in early 2007.





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





In
      the
      US, Food for Health, Inc. a manufacturer and marketer of nutritional food and
      vitamin products based in Orem, UT has signed an Agreement with us to sell
      certain water filtration products, using the Aqua Gear brand name, to a variety
      of their customers including big-box stores in the US and Canada. To date,
      Food
      for Health, Inc. has ordered 100,000 bottles. Separately, Food for Health has
      contracted with us to source varied products (such as pots, radios, utensils,
      blankets, etc.) made in China for their Emergency Preparedness packs to be
      sold to their customers. These products will be shipped direct to Food for
      Health from China.





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.





**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. Therefore, Seychelle’s
      portable and home filtration products compete in a limited segment of the market
      as an alternative to other sources of drinking water.





Seychelle
      is an emerging company with negligible share of the world’s pure water market.
      Our products sell in a niche category of the market - portable filtration
      bottles that use Ionic Adsorption Micron Filtration technology, which remove
      many organic and inorganic contaminants that simple activated carbon filters
      cannot. Most activated carbon filters on the market 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. This would include leading
      brands such as Brita, PUR, General Electric and Culligan, who dominate the
      market. In the portable segment of the market, there are hundreds of small
      companies selling a variety of specialized filters with no one company having
      a
      majority share and no industry data is available. We believe that our market
      share of this market would be negligible.





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





*-
          4
          -*


Currently,
      the majority of our sales are to customers in the US. However, with Distribution
      Agreements for Canada, China, Hong Kong, Japan, Singapore, Taiwan 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 25%, BK Pakistan 12% and
      Confident 12%) each account for greater than 10 percent of our total sales.
      Management believes that if the targeted revenues are not achieved within their
      current marketing and distribution agreements, the revenues can be replaced
      through the sale of filters and related products to other direct marketing
      companies. However, there can be no assurance that this will occur which could
      result in an adverse effect on the Company’s financial condition or results of
      operations in the future.





**Raw
      Materials**


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





As
      of
      February 28, 2006 and 2005, we had backorders of $8,000 in portable water
      filtration units.





**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.





*-
          5
          -*


**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.





**Employees**





As
      of
      February 28, 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.





**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.





*-
          6
          -*


**Limited
        Profitability.** To
        date,
        we have incurred significant losses. For the fiscal year ending 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, $272K
        in
        financing costs with TAM the primary lender, the amortization of $201K in
        officer stock compensation who receive 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.** 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.





*-
          7
          -*


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





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





**ITEM
      2.** **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.





**ITEM
      3.** **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 Water. As of the date
        of
        this filing, the lawsuit has been settled for 5,000 restricted shares of
        common
        stock and dismissal is pending.


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





*-
          8
          -*


**ITEM
      4** **.  
      Submission of Matters to a Vote of Security Holders** **.**





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








**PART
      II**





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





(a) Principal
      Market or Markets





Our
      Common Stock began trading in 1997. Since the consummation of the Exchange
      Agreement between our Company and SWT, market makers and other dealers have
      provided bid and ask quotations of our Common Stock under the symbol "SYEV."
      Trading was conducted in the over-the-counter market on the NASDAQ's "Electronic
      Bulletin Board" until April 20, 2000. We traded on the "Pink Sheets" until
      December 2000, when we were re-listed on the NASDAQ's "Electronic Bulletin
      Board." The table below represents the range of high and low bid quotations
      of
      our Common Stock as reported during the reporting period herein. The following
      bid price market quotations represent prices between dealers and do not include
      retail markup, markdown, or commissions; hence, they may not represent actual
      transactions. For the fiscal year ending February 28, 2006, the common stock
      was
      at a High of $.99 and a Low of $.11.


**Fiscal
                  Year 2006**
              High
                  Bid
              Low
                  Bid*Month
                  Ending:*First
                  Quarter May 2005
              $.36
              $.28Common
                  SharesSecond
                  Quarter Aug 2005
              $.36
              $.17Common
                  SharesThird
                  Quarter Nov 2005
              $.35
              $.11Common
                  SharesFourth
                  Quarter Feb 2006
              $.99
              $.27Common
                  Shares




**Fiscal
                  Year 2005**
              High
                  Bid
              Low
                  Bid*Month
                  Ending:*First
                  Quarter May 2004
              $.28
              $.11Common
                  SharesSecond
                  Quarter Aug 2004
              $.16
              $.09Common
                  SharesThird
                  Quarter Nov 2004
              $.13
              $.04Common
                  SharesFourth
                  Quarter Feb 2005
              $.65
              $.05Common
                  Shares





Source:
      Commodity Systems, Inc. through Yahoo Finance








*-
          9
          -*


(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.





**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
                valueFebruary10
                2004
            M.
                Rae
            Compensation
            100,000
            $13,000February10
                2004
            J.
                Sierra
            Compensation
            20,000
            $
                2,600





On
      February 10, 2004, the Company issued Raymond and Amy Lambert, 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.





Date
                Issued
            Issue
                to
            Service
                Performed
            Common
              Shares
            Stock
              Estimated
                valueFebruary
                16, 2005
            M.
                Rae
            Compensation
            50,000
            $17,500January
                17, 2005
            J.
                Sierra
            Compensation
            10,000
            $
                2,000January
                17, 2005
            A.
                Villafuerte
            Compensation
            10,000
            $
                1,850





During
      the fiscal year ending February 28, 2005, the Company issued three (3)
      consultants an aggregate total of 125,000 shares for services provided for
      an
      approximate value of $9,600.





Date
                Issued
            Issue
                to
            Service
                Performed
            Common
              Shares
            Stock
              Estimated
                valueFebruary
                28, 2002
            D.
                Wagner
            Legal
                services
            100,000
            $
                5,000January
                17, 2005
            H.
                Mathews
            Consultant
            15,000
            $
                2,775January
                17, 2005
            Li
                Yang
            Consultant
            10,000
            $
                1,850





During
      the fiscal year ending February 28, 2005, the Company issued to fourteen (14)
      individual investors an aggregate of 536,166 shares for cash for an approximate
      total value of $91,100.


*-
          10
          -*





Date Issued
            
            Issue
                to
            
            Common
              Shares
            
            Stock
              Estimated
                valueMarch
                3, 2004
            
            
            N.
                Carreon
            
            
            12,500
            
            $
            1,000March
                19, 2004
            
            
            R.
                Chadderdon
            
            
            100,000
            
            $
            10,000January
                17, 2005
            
            
            J.
                Place
            
            
            55,000
            
            $
            11,000January
                17, 2005
            
            
            D.
                Parsons
            
            
            55,000
            
            $
            11,000January
                17, 2005
            
            
            V.
                Parsons
            
            
            20,000
            
            $
            4,000January
                17, 2005
            
            
            R.
                Sierra
            
            
            50,000
            
            $
            11,000January
                17, 2005
            
            
            S.
                Weston
            
            
            15,000
            
            $
            3,000January
                17, 2005
            
            
            M.
                Ward
            
            
            15,000
            
            $
            6,000February
                16, 2005
            
            
            R.
                Haugh
            
            
            1,666
            
            $
            500February
                16, 2005
            
            
            HC
                Consulting
            
            
            50,000
            
            $
            7,500February
                16, 2005
            
            
            S.
                Croner
            
            
            50,000
            
            $
            7,500February
                22, 2006
            
            
            J.
                McGonigle
            
            
            100,000
            
            $
            15,000February
                21, 2005
            
            
            C.
                Fiege
            
            
            5,000
            
            $
            1,500February
                16, 2005
            
            
            H.
                Bassett
            
            
            7,000
            
            $
            2,100





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.


Date
                Issued
            Issue
                to
            Service
                Performed
            Common
              Shares
            Stock
              Estimated
                valueJanuary
                17, 2005
            Wong
                Johnson & Associates, APC.
            Debt
                settlement
            50,000
            $
                40,500March
                26, 2004
            M.
                Bennett
            Debt
                settlement
            5,000
            $  
                2,100





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





On
      December 5, 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 such accrued interest due to related parties as
      of
      February 28, 2005, through the issuance of such shares of common stock.





On
      March
      16, 2005, Raymond and Amy Lambert, a consultant, surrendered to the Company
      250,000 of common stock, valued at $32,500, due to failure to perform
      contractual obligations.





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 2,355,891 common shares for cash
      for
      an approximate total value of $536,000.


*-
          11
          -*





Date Issued
            
            Issue to
            
            Common
              Shares
            
            Stock
              Estimated
                valueApril
                13, 2005
            
            
            S.
                Sparks
            
            
            5,000
            
            $
            1,500April
                13, 2005
            
            
            F.
                Duesler
            
            
            20,000
            
            $
            6,000April
                13, 2005
            
            
            S.
                Lampman
            
            
            2,000,000
            
            $
            450,000April
                19, 2005
            
            
            R.
                Kelly
            
            
            7,500
            
            $
            1,500April
                13, 2005
            
            
            C.
                Blevins
            
            
            200,000
            
            $
            50,000April
                19, 2005
            
            
            J.
                Rodriguez
            
            
            5,000
            
            $
            1,000May
                11, 2005
            
            
            G.
                Bailard Trust
            
            
            20,000
            
            $
            5,000May
                11, 2005
            
            
            K.Kahoolyzadeh
            
            
            6,000
            
            $
            1,800May
                11, 2005
            
            
            Hakimipour
            
            
            1,333
            
            $
            400May
                11, 2005
            
            
            K.Kahoolyzadeh
            
            
            4,000
            
            $
            1,200May
                11, 2005
            
            
            M.
                Kohan
            
            
            1,000
            
            $
            300May
                11, 2006
            
            
            C.
                Kackert
            
            
            23,333
            
            $
            7,000May
                1,   2005
            
            
            B.
                Kackert
            
            
            3,333
            
            $
            1,000May
                11, 2005
            
            
            J.
                Kackert
            
            
            3,333
            
            $
            1,000May
                11, 2005
            
            
            Ch.
                Kackert
            
            
            3,333
            
            $
            1,000May
                11, 2005
            
            
            A.
                Gomez
            
            
            10,000
            
            $
            3,000May
                11, 2005
            
            
            S.
                White
            
            
            3,333
            
            $
            1,000May
                11, 2005
            
            
            L.
                Inque
            
            
            3,333
            
            $
            1,000May
                11, 2005
            
            
            J.
                Kearny
            
            
            20,000
            
            $
            20May
                16, 2005
            
            
            W.
                Wright
            
            
            10,000
            
            $
            10May
                24, 2005
            
            
            B.
                McDonagh
            
            
            6,060
            
            $
            2,000





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 filings.





Date
                Issued
            Issue
                to
            Service
                Performed
            Common
                Shares
            Stock
                Estimated valueApril
                13, 2005
            Wong
                Johnson & Associates
            Accounting
                & SEC reporting
            51,500
            $15,450May
                16, 2005
            Wong
                Johnson & Associates
            Accounting
                & SEC reporting
            103,200
            $31,980





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
            CommonShares
            StockEstimated
                valueJune
                9, 2005
            F.
                Duarte
            28,600
            $10,000August
                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.





Date
                Issued
            Issue
                to
            Service
                Performed
            Common
              Shares
            Stock
              Estimated
                valueJuly
                29, 2005
            V.
                Parsons
            Compensation
            15,000
            $
                4,500July
                29, 2005
            C.
                Garcia
            Compensation
            15,000
            $
                4,500





*-
          12
          -*





During
      the three-month period ending August 31, 2005, the Company issued seven (7)
      consultants an aggregate total of 83,500 shares for services provided for an
      approximate value of $22,300.





Date
                Issued
            Issue
                to
            Service
                Performed
            Common
              Shares
            Stock
              Estimated
                valueJune
                6, 2005
            J.
                Sierra
            China
                interface
            20,000
            $
                4,800July
                22, 2005
            C
                Garcia
            Administration
            5,000
            $
                1,200July
                29, 2005
            V.
                Parsons
            Accounting
                services
            5,000
            $
                1,200August
                9, 2005
            J.
                Kearny
            Consultant
            20,000
            $
                4,500August
                17, 2005
            W.
                Qing
            Consultant
            5,000
            $
                1,200June
                27, 2005
            K.
                Lee
            Designand
                engineering services
            21,000
            $
                6,200August
                8, 2005
            K.
                Lee
            Designand
                engineering services
            7,500
            $
                3,200





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.





Date
                Issued
            Issue
                to
            Common
              Shares
            Stock
              Estimated
                valueJune
                8, 2005
            W.
                Wright
            15,000
            $   3,750June
                8, 2005
            W.
                Wright
            15,000
            $   3,750August
                8, 2005
            S.
                Lampman
            2,000,000
            $450,000August
                8, 2005
            J.
                Zurcher Trust
            30,000
            $
                10,000August
                8, 2005
            C.
                Fiege
            5,000
            $
                  1,500August
                18, 2005
            S.
                Gahl
            1,667
            $ 
                   500August
                18, 2005
            L.
                Soares
            1,667
            $
                    500August
                22, 2005
            W.
                Wright
            5,000
            $ 
                 1,000August
                22, 2005
            W.
                Wright
            5,000
            $  
                1,000August
                24, 2005
            Nickerson
                Trust
            10,000
            $  
                3,000May
                16, 2005
            W.Wright
            5,000
            $  
                1,500May
                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 $40,100, 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 valueJune
                14, 2005
            Wong
                Johnson & Associates
            Accounting
                & SEC reporting
            91,909
            $30,300August
                18, 2005
            Wong
                Johnson & Associates
            Accounting
                & SEC reporting
            39,000
            $
                9,750





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.


*-
          13
          -*


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.





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
      6.** **Management's
      Discussion and Analysis** ****





**Results
      of Operations**





**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
            
            
            120Cost
                of sales
            
            $
            155,113
            
            $
            430,134
            
            $
            275,021
            
            
            177Gross
                profit
            
            $
            185,993
            
            $
            321,710
            
            $
            135,717
            
            
            73Gross
                profit percentage
            
            
            55
            %
            
            43
            %
            
            (12
            )
            
            (22
            )General
                & administrative expenses
            
            $
            274,362
            
            $
            593,157
            
            $
            318,795
            
            
            116Consulting
                fees to related parties
            
            $
            35,292
            
            $
            201,293
            
            $
            166,001
            
            
            471Interest
                expense to related parties
            
            $
            124,629
            
            $
            272,653
            
            $
            148,024
            
            
            119Net
                cash used in operating activities
            
            
            ($64,262
            )
            
            ($205,072
            )
            $
            140,810
            
            
            219Net
                cash used in investing activities
            
            
            ($12,434
            )
            
            ($117,251
            )
            $
            104,817
            
            
            843Net
                cash provided financing activities
            
            $
            31,710
            
            $
            934,110
            
            $
            902,400
            
            
            2846




**Sales.**The
      increase in sales is primarily attributable to continued increased sales with
      two customers - approximately $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.Overall
      the number of bottles sold with or without replacement filters increased by
      approximately 23% (from 114,328 bottles during 2005 to 141,080 bottles during
      2006). In addition to the increase in the number of bottles sold, the Company
      also had one time orders of countertops for BK Pakistan and filters to
      Confident.


**Cost
        of sales and gross profit.** 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.** The
      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 $136K in new equipment
      or
      tooling during the past twelve months.





*-
          14
          -*


**Consulting
      fees to related parties.** The
      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.** The
      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 the profits for the year ending February 28, 2006 was 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
          receive 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.




**Net
      cash used in operating activities.** 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.** 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.** The
      2006
      increase in cash provided by financing activities was due to the sale of $1,014K
      in restricted common stock, combined with the 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.**





Selected
                Financial Data
            
            2004
            
            2005
            
            Year
                Over Year
              Change%Sales
            
            $
            468,420
            
            $
            341,106
            
            
            ($127,314
            )
            
            (27
            )Cost
                of sales
            
            $
            307,175
            
            $
            155,113
            
            
            ($152,062
            )
            
            (50
            )Gross
                profit
            
            $
            161,245
            
            $
            185,993
            
            $
            24,748
            
            
            15General
                & administrative expenses
            
            $
            239,897
            
            $
            274,362
            
            $
            34,465
            
            
            14Gross
                profit percentage
            
            
            34
            %
            
            55
            %
            
            21
            
            
            62Consulting
                fees to related parties
            
            $
            -0-
            
            $
            35,292
            
            $
            35,292
            
            
            -Interest
                expense to related parties
            
            $
            117,584
            
            $
            124,629
            
            $
            7,045
            
            
            6Net
                cash used in operating activities
            
            
            ($36,643
            )
            
            ($64,262
            )
            $
            27,619
            
            
            75Net
                cash used in investing activities
            
            
            ($15,956
            )
            
            ($12,434
            )
            
            ($
                3,522
            )
            
            (22
            )Net
                cash provided financing activities
            
            $
            115,670
            
            $
            31,710
            
            
            ($
                83,960
            )
            
            (73
            )




**Sales.**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). Overall, the
      number of bottles sold decreased by approximately 26%.





*-
          15
          -*




**Cost
        of sales and gross profit.** 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 higher margin product to a direct marketing
        company.
  **General
        & administrative expenses.** The
        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.** The
      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.** The
      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 the net loss for the fiscal year ending February 28, 2005 was 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** .
      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.** 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.** 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.


*-
          16
          -*




**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 PeriodConvertibleLess
                  than
              
              
              
              
              
              More
                  than
              
              to
                  commonTotal
              
              1
                  year
              
              2
                  years
              
              3
                  years
              
              3
                  years
              
              stockAccrued
                  liabilities
              
              $
              262,106
              
              $
              70,556
              
              
              
              
              
              
              
              
              
              
              $
              191,550Line
                  of credit
              
              
              50,000
              
              
              50,000Accrued
                  interest due to related party(2)
              
              
              169,315
              
              
              
              
              
              
              
              
              
              
              
              169,315Notes
                  payable to related parties(2)
              
              
              363,150
              
              
              
              
              
              
              
              
              
              
              
              363,150844,571
              
              
              120,556
              
              
              
              
              
              
              
              
              532,465
              
              
              191,550Other(1)
              
              
              146,016
              
              
              71,712
              
              
              74,304Total
                  contractual obligations(3)
              
              $
              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)As
                  of February 28, 2006, the Company and its primary debt holder (TAM
                  Trust)
                  do not anticipate remitting interest payments for current or future
                  interest cost on Notes Payable to Related Parties(3)Comprised of the following:Liabilities
                  recorded on the balance sheet
              
              $
              844,571Commitments
                  not recorded on the balance sheet
              
              
              146,016990,587




*-
          17
          -*




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.





**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 reengineered 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. Since sales for the fiscal
          year
          ending February 28, 2006 have more than doubled from the fiscal year ending
          February 28, 2005, Company mangagement believe that the business is improving
          with both new and current (international and domestic) customers purchasing
          product. Our experience is that the general market for the sales of pure
          water
          increases during the summer months. Our experience to date has not shown
          measurable increases due to our very limited retail distribution network.
          As
          previously noted, gross profit margins have decreased slightly due to the
          Company recording 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.
  **Critical
          Accounting Policies and Estimates**


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


*-
          18
          -*


Goodwill
      and Other Intangible Assets


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




EITF
      #00-19 establishes standards for the accounting for transactions in which an
      entity exchanges its equity instruments for goods or services. It also addresses
      transactions in which an entity incurs liabilities in exchange for goods or
      services that are based on the fair value of the entity’s equity instruments or
      that may be settled by the issuance of those equity instruments.




Additionally,
      the EITF #00-19 is based on the concept that contracts that require net-cash
      settlement are assets / liabilities and contracts that require settlement in
      shares are equity instruments.   These contracts may be settled in a
      variety of methods.





Contracts
      that include any provision that could require net-cash settlement cannot be
      accounted for as equity of the company.  Company management believes the
      warrants issued by the Company would be classified as a physical settlement
      as
      the buyer pay a predetermined price for a fixed number of shares, therefore,
      no
      net-cash settlement is required and classification as equity is
      appropriate.  Additionally, the Company believes that all other
      conditions required by EITF 00-19 have been met to be classified as
      equity.





Income
      Taxes





SFAS
      No. 109, *Accounting
      for Income Taxes,* establishes financial accounting and reporting standards for the effect of
      income taxes. The objectives of accounting for income taxes are to recognize
      the
      amount of taxes payable or refundable for the current year and deferred tax
      liabilities and assets for the future tax consequences of events that have
      been
      recognized in an entity’s financial statements or tax returns. Judgment is
      required in assessing the future tax consequences of events that have been
      recognized in our financial statements or tax returns. Variations in the actual
      outcome of these future tax consequences could materially impact our financial
      position, results of operations, or cash flows. Accruals for tax contingencies
      are provided for in accordance with the requirements of SFAS
      No. 5.





Share
      Based Compensation





The
      Company has elected to continue to account for employee stock-based compensation
      using the intrinsic method prescribed in Accounting Principles Board Opinion
      No.
      25, "Accounting for Stock Issued to Employees," and related interpretations,
      as
      permitted by SFAS No. 123; accordingly, compensation expense for stock options
      is measured as the excess, if any, of the quoted market price of the Company's
      stock at the date of the grant over the amount an employee must pay to acquire
      the stock.





For
      stock
      options or other securities issued to non-employees, the issuance of such
      securities is accounted for based on the fair value of the consideration
      received or the fair value of the equity instruments issued, whichever is more
      reliably measurable. Compensation expense is recognized in the financial
      statements for securities granted to non-employees in the period in which the
      consideration is obtained from the non-employee


*-
          19
          -*


**Item
      7. Financial Statements and Supplementary Data**











****SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.****




**Financial
      Statements**


**Year
      Ended February 28, 2006**















*-
          20
          -*







**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











*-
          21
          -*







**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**







*-
          22
          -*







**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**CONSOLIDATED
      BALANCE SHEET**


**FEBRUARY
      28, 2006 AND 2005**





2006
            
            2005ASSETSCURRENT
                ASSETSCash
            
            $
            635,569
            
            $
            23,782Trade
                receivables, net of allowance for doubtful accounts of $-0- and $2,047as
                of February 28, 2006 and 2005, respectively
            
            
            33,602
            
            
            20,047Inventories,
                net
            
            
            391,641
            
            
            313,754Prepaid
                expenses
            
            
            45,261
            
            
            -Total
                current assets
            
            
            1,106,073
            
            
            357,583PROPERTY
                AND EQUIPMENT, NET
            
            
            157,671
            
            
            99,826INTANGIBLE
                ASSETS, NET
            
            
            17,664
            
            
            121,567OTHER
                ASSETS
            
            
            6,742
            
            
            14,670Total
                non-current assets
            
            
            182,077
            
            
            236,063TOTAL
                ASSETS
            
            $
            1,288,150
            
            $
            593,646





See
      accompanying notes to consolidated financial statements.







*-
          23
          -*











**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**CONSOLIDATED
      BALANCE SHEET (CONTINUED)**


**FEBRUARY
      28, 2006 AND 2005**





2006
            
            2005LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
                LIABILITIESAccounts
                payable
            
            $
            61,010
            
            $
            24,747Accrued
                expenses
            
            
            262,106
            
            
            188,900Line
                of credit
            
            
            50,000
            
            
            -Accrued
                interest due to related parties
            
            
            169,315
            
            
            362,518Current
                portion of notes payable to related parties
            
            
            -
            
            
            100,000Customer
                deposits
            
            
            29,048
            
            
            25,911Income
                taxes payable
            
            
            6,400
            
            
            8,397Total
                current liabilities
            
            
            577,879
            
            
            710,473NOTES
                PAYABLE TO RELATED PARTIES, less current portion
            
            
            363,150
            
            
            348,150COMMITMENTS
                AND CONTINGENCIESSTOCKHOLDERS'
                EQUITY (DEFICIT)Preferred
                stock, none authorized, issued or outstanding asof
                February 28, 2006 and 2005, respectively
            
            
            -
            
            
            -Common
                stock $.001 par value - 50,000,000 sharesauthorized;
                24,715,010 and 18,923,091 shares issued andoutstanding
                as of February 28, 2006 and 2005, respectively
            
            
            24,715
            
            
            18,923Additional
                paid-in capital
            
            
            5,390,276
            
            
            4,337,828Estimated
                value of warrants
            
            
            448,000
            
            
            -Accumulated
                deficit
            
            
            (4,957,934
            )
            
            (4,025,478
            )Unearned
                interest
            
            
            (353,523
            )
            
            (462,443
            )Unearned
                compensation
            
            
            (204,413
            )
            
            (333,807
            )Total
                stockholders' equity (deficit)
            
            
            347,121
            
            
            (464,977
            )TOTAL
                LIABILITIES ANDSTOCKHOLDERS'
                EQUITY (DEFICIT)
            
            $
            1,288,150
            
            $
            593,646





See
      accompanying notes to consolidated financial statements.




*-
          24
          -*







**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**For
      Fiscal Years Ending February 28, 2006 and 2005**





2006
            
            2005SALES
            
            $
            751,844
            
            $
            341,106COST
                OF SALES
            
            
            430,134
            
            
            155,113Gross
                profit
            
            
            321,710
            
            
            185,993OPERATING
                EXPENSESSelling
            
            
            59,459
            
            
            27,425General
                and administrative
            
            
            593,157
            
            
            274,362Consulting
                fees to related parties
            
            
            201,293
            
            
            35,292Impairment
                of intellectual property
            
            
            104,000
            
            
            -(Gain)
                loss on sale of vehicle / equipment
            
            
            30,000
            
            
            (5,100
            )Total
                expenses
            
            
            987,909
            
            
            331,979LOSS
                FROM OPERATIONS
            
            
            (666,199
            )
            
            (145,3986
            )OTHER
                INCOME (EXPENSES)Interest
                expense due to related parties
            
            
            (272,653
            )
            
            (124,629
            )Claim
                settlement
            
            
            -
            
            
            (31,360
            )Write-off
                of accrual for product return liability
            
            
            -
            
            
            61,630Miscellaneous
                income (expense)
            
            
            6,396
            
            
            (10,078
            )Total
                other income (expense)
            
            
            (266,257
            )
            
            (104,437
            )Net
                loss
            
            $
            (932,456
            )
            $
            (250,423
            )BASIC
                AND DILUTED (LOSS) PER SHARE
            
            $
            (0.05
            )
            $
            (0.02
            )WEIGHTED
                AVERAGE NUMBER OFSHARES:
                BASIC AND DILUTED
            
            
            17,969,317
            
            
            11,936,767





See
      accompanying notes to consolidated financial statements.




*-
          25
          -*





**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


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


**For
      Fiscal Years Ending February 28, 2006 and 2005**




Preferred
              
              Preferred
              
              Common
              
              Common
              
              Additional
              
              Estimated
              
              Unissued
              
              
              
              
              
              
              
              
              
              TotalStock
              
              Stock
              
              Stock
              
              Stock
              
              Paid-in
              
              Value
                  of
              
              Stock
              
              Accumulated
              
              Unearned
              
              Unearned
              
              Finders
              
              StockholdersShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Warrants
              
              Liability
              
              Deficit
              
              Interest
              
              Compensation
              
              Fees
              
              DeficitBalance,
                  February 29, 2004
              
              
              8,000
              
              $
              80
              
              
              10,513,480
              
              $
              10,513
              
              $
              3,213,469
              
              
              
              
              $
              20,000
              
              $
              (3,775,055
              )
              
              -
              
              
              -
              
              
              -
              
              $
              (530,993
              )Issuance
                  of common stock
              
              
              -
              
              
              -
              
              
              200,000
              
              
              200
              
              
              19,800
              
              
              
              
              
              -(20,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Contributed
                  executive services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              10,000
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              10,000Issuance
                  of common stock for compensation and services
              
              
              -
              
              
              -
              
              
              125,000
              
              
              125
              
              
              9,500
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              9,625Issuance
                  of common stock to employees
              
              
              -
              
              
              -
              
              
              70,000
              
              
              70
              
              
              21,280
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              21,350Issuance
                  of common stock for Cash
              
              
              -
              
              
              -
              
              
              541,166
              
              
              541
              
              
              90,561
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              91,102Issuance
                  of common stock in exchange for debt
              
              
              -
              
              
              -
              
              
              55,000
              
              
              55
              
              
              42,307
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              42,362Issuance
                  of common stock for technology
              
              
              -
              
              
              -
              
              
              32,000
              
              
              32
              
              
              5,868
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,900Issuance
                  of common stock for claim settlement
              
              
              -
              
              
              -
              
              
              84,000
              
              
              84
              
              
              29,316
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              29,400Conversion
                  of preferred to common stock
              
              
              (8,000
              )
              
              (80
              )
              
              4,500,000
              
              
              4,500
              
              
              (4,420
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -


*-
          26
          -*




**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT**
 **For
        Fiscal Years Ending February 28, 2006 and 2005**
  ***Continued***





Preferred
              
              Preferred
              
              Common
              
              Common
              
              Additional
              
              Estimated
              
              Unissued
              
              
              
              
              
              
              
              
              
              TotalStock
              
              Stock
              
              Stock
              
              Stock
              
              Paid-in
              
              Value
                  of
              
              Stock
              
              Accumulated
              
              Unearned
              
              Unearned
              
              Finders
              
              StockholdersShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Warrants
              
              Liability
              
              Deficit
              
              Interest
              
              Compensation
              
              Fees
              
              DeficitDiscount
                  factor on common stock issued to consultants at below fair value
              
              
              -
              
              
              -
              
              
              65,000
              
              
              65
              
              
              22,685
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,583
              )
              
              -
              
              
              15,167Discount
                  factor on common stock issued to officers at below fair value
              
              
              -
              
              
              -
              
              
              480,000
              
              
              480
              
              
              225,120
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (206,800
              )
              
              -
              
              
              18,800Beneficial
                  conversion feature on warrants issued to officers at below fair
                  value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              55,275
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (49,133
              )
              
              -
              
              
              6,142Beneficial
                  conversion feature on warrants issued to note holder at below fair
                  value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              27,225
              
              
              -
              
              
              -
              
              
              -
              
              
              (24,200
              )
              
              -
              
              
              -
              
              
              3,025Discount
                  factor on common stock issued to officers at below fair value
              
              
              -
              
              
              -
              
              
              316,312
              
              
              316
              
              
              78,784
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (70,291
              )
              
              (70,291
              )
              
              8,809Discount
                  factor on common stock issued to note holder at below fair value
              
              
              -
              
              
              -
              
              
              1,972,133
              
              
              1,972
              
              
              491,028
              
              
              -
              
              
              -
              
              
              -
              
              
              (438,243
              )
              
              -
              
              
              -
              
              
              54,757Net
                  loss from fiscal year ending February 28, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (250,423
              )
              
              
              
              
              -
              
              
              -
              
              
              (250,423
              )Balance,
                  February 28, 2005
              
              
              0
              
              
              0
              
              
              18,923,091
              
              
              18,923
              
              
              4,337,828
              
              
              -
              
              
              -
              
              
              (4,025,910
              )
              
              (462,443
              )
              
              -333,807
              
              
              -
              
              
              (465,409
              )


*-
          27
          -*


**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


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


**For
      Fiscal Years Ending February 28, 2006 and 2005**




***Continued***




Preferred
                
                Preferred
                
                Common
                
                Common
                
                Additional
                
                Estimated
                
                Unissued
                
                
                
                
                
                
                
                
                
                TotalStock
                
                Stock
                
                Stock
                
                Stock
                
                Paid-in
                
                Value
                    of
                
                Stock
                
                Accumulated
                
                Unearned
                
                Unearned
                
                Finders
                
                StockholdersShares
                
                Amount
                
                Shares
                
                Amount
                
                Capital
                
                Warrants
                
                Liability
                
                Deficit
                
                Interest
                
                Compensation
                
                Fees
                
                DeficitContributed
                    executive services
                
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                10,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                10,000Issuance
                    of shares for services rendered
                
                
                
                
                
                -
                
                
                -
                
                
                64,300
                
                
                64
                
                
                20,085
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                20,149Issuance
                    of shares for compensation or services
                
                
                
                
                
                -
                
                
                -
                
                
                30,000
                
                
                30
                
                
                7,170
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                7,200Issuance
                    of common stock for cash
                
                
                
                
                
                -
                
                
                -
                
                
                2,474,225
                
                
                2,474
                
                
                564,282
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                566,756Issuance
                    of common shares with detachable stock warrants with conversion
                    at below
                    market value
                
                
                
                
                
                -
                
                
                -
                
                
                2,000,000
                
                
                2,000
                
                
                -
                
                
                448,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                450,000Issuance
                    of shares to settle accrued interest to primary shareholder
                
                
                
                
                
                -
                
                
                -
                
                
                1,266,667
                
                
                1,267
                
                
                226,733
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                228,000Issuance
                    of shares to primary lender for continued financial support
                
                
                -
                
                
                
                
                
                -
                
                
                37,500
                
                
                38
                
                
                8,400
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                8,438Issuance
                    of shares for settlement of debt
                
                
                -
                
                
                
                
                
                -
                
                
                312,784
                
                
                312
                
                
                125,093
                
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                125,405Issuance
                    of shares to consultant for services performed
                
                
                -
                
                
                
                
                
                -
                
                
                37,500
                
                
                38
                
                
                8,400
                
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                8,438Payment
                    of finders fees
                
                
                -
                
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (11,800
                )
                
                (11,800
                )-Reclassification
                    of finders fees to additional paid in capital
                
                
                -
                
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                (11,800
                )
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Surrender
                    of shares due to failure to perform services
                
                
                -
                
                
                
                
                
                -
                
                
                (250,000
                )
                
                (250
                )
                
                (32,250
                )
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (32,500
                )
 
 *-
          28
          -*


**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


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


**For
      Fiscal Years Ending February 28, 2006 and 2005**




***Continued***





Preferred
              
              Preferred
              
              Common
              
              Common
              
              Additional
              
              Estimated
              
              Unissued
              
              
              
              
              
              
              
              
              
              TotalStock
              
              Stock
              
              Stock
              
              Stock
              
              Paid-in
              
              Value
                  of
              
              Stock
              
              Accumulated
              
              Unearned
              
              Unearned
              
              Finders
              
              StockholdersShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Warrants
              
              Liability
              
              Deficit
              
              Interest
              
              Compensation
              
              Fees
              
              DeficitRepurchase
                  of shares from investor
              
              
              -
              
              
              -
              
              
              (210,238
              )
              
              (210
              )
              
              (32,636
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (32,846
              )Beneficial
                  conversion feature on warrants issued to note holder at below fair
                  value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              120,000
              
              
              -
              
              
              -
              
              
              -
              
              
              (120,000
              )
              
              -
              
              
              -
              
              
              -Discount
                  factor on common stock / warrants issued to primary lender at below
                  fair
                  value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              228,920
              
              
              -
              
              
              -
              
              
              228,920Beneficial
                  conversion feature on warrants issued to consultants at below fair
                  value
              
              
              -
              
              
              -
              
              
              30,000
              
              
              30
              
              
              8,970
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (9,000
              )
              
              -
              
              
              -Discount
                  factor on common stock / warrants issued to officers at below fair
                  value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              164,877
              
              
              -
              
              
              164,877Discount
                  factor on common stock issued to consultants at below fair value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              3,517
              
              
              
              
              
              3,517Discount
                  factor on warrants issued to consultant at below fair value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              15,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (15,000
              )
              
              -
              
              
              -


*-
          29
          -*


**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


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


**For
      Fiscal Years Ending February 28, 2006 and 2005**




***Continued***





Preferred
            
            Preferred
            
            Common
            
            Common
            
            Additional
            
            Estimated
            
            Unissued
            
            
            
            
            
            
            
            
            
            TotalStock
            
            Stock
            
            Stock
            
            Stock
            
            Paid-in
            
            Value
                of
            
            Stock
            
            Accumulated
            
            Unearned
            
            Unearned
            
            Finders
            
            StockholdersShares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Warrants
            
            Liability
            
            Deficit
            
            Interest
            
            Compensation
            
            Fees
            
            DeficitDiscount
                factor on warrants issued to employee at below fair value
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            15,000
            
            
            
            
            
            -
            
            
            -
            
            
            -
            
            
            -15,000
            
            
            -
            
            
            -Net
                loss from fiscal year ending February 28, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -932,456
            
            
            -
            
            
            -
            
            
            -
            
            
            -932,456Balance,
                February 28, 2006
            
            
            0
            
            
            0
            
            
            22,715,010
            
            $
            24,715
            
            $
            5,390,276
            
            
            448,000
            
            
            -
            
            
            ($4,957,934
            )
            
            ($353,523
            )
            
            ($204,413
            )
            
            
            
            $
            347,121




See
      accompanying notes to consolidated financial statements




*-
          30
          -*





**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**Fiscal
      Years Ending February 28, 2006 and 2005**





2006
            
            2005CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            $
            (932,456
            )
            $
            (250,423
            )Adjustments
                to reconcile net loss to net cash used by operating activities:Depreciation
                and amortization
            
            
            26,407
            
            
            33,868Compensation
                and interest expense on stock and warrants
            
            
            422,519
            
            
            106,700Contributed
                executive services
            
            
            10,000
            
            
            10,000Stock
                issued for services
            
            
            25,350
            
            
            30,975Stock
                issued for claim settlement
            
            
            -
            
            
            29,400Allowance
                for doubtful accounts
            
            
            2,047
            
            
            9,018Impairment
                of intellectual property
            
            
            104,000
            
            
            -Provision
                for slow moving inventory
            
            
            79,789
            
            
            -Write
                off of product return liability
            
            
            -
            
            
            (61,630
            )(Gain)
                loss on disposal of vehicle / equipment
            
            
            30,000
            
            
            (5,100
            )Return
                of shares due to failure to perform services
            
            
            (32,500
            )
            
            -Changes
                in operating assets and liabilities:Trade
                receivables
            
            
            (15,602
            )
            
            7,624Inventories
            
            
            (157,676
            )
            
            (118,333
            )Prepaid
                expenses and other assets
            
            
            (37,329
            )
            
            -Accounts
                payable
            
            
            35,831
            
            
            (8,171
            )Accrued
                expenses
            
            
            198,611
            
            
            (349
            )Accrued
                interest due to related parties
            
            
            34,797
            
            
            124,559Income
                tax payable
            
            
            (1,997
            )
            
            1,600Customer
                deposits
            
            
            3,137
            
            
            26,000Net
                cash used by operating activities
            
            
            (205,072
            )
            
            (64,262
            )CASH
                FLOWS FROM INVESTING ACTIVITIESProceeds
                from sale of vehicle / equipment
            
            
            20,000
            
            
            5,800Purchase
                of equipment
            
            
            (135,811
            )
            
            (18,234
            )Increase
                in patents
            
            
            (1,440
            )
            
            -Net
                cash used by investing activities
            
            
            (117,251
            )
            
            (12,434
            )





See
      accompanying notes to consolidated financial statements.




*-
          31
          -*








**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


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


**Fiscal
      Years Ending February 28, 2006 and 2005**





2006
            
            2005CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                from sale of common stock
            
            $
            1,013,756
            
            $
            91,102Purchase
                of common stock
            
            
            (32,846
            )
            
            -Payment
                of finders fees
            
            
            (11,800
            )
            
            -Proceeds
                from line of credit
            
            
            50,000
            
            
            -Proceeds
                from related party advances
            
            
            -
            
            
            1,000Repayments
                on related party notes payable
            
            
            (85,000
            )
            
            (60,392
            )Net
                cash provided by financing activities
            
            
            934,110
            
            
            31,710NET
                INCREASE (DECREASE) IN CASH
            
            
            611,787
            
            
            (44,986
            )Cash,
                beginning of year
            
            
            23,782
            
            
            68,768Cash,
                end of year
            
            $
            635,569
            
            $
            23,782SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATIONCash
                paid during the year for:Interest
            
            $
            -
            
            $
            -Income
                taxes
            
            $
            1,997
            
            $
            -NON-CASH
                INVESTING AND FINANCING ACTIVITIESStock
                issued for services
            
            $
            25,350
            
            $
            30,975Stock
                issued for settlement of debt
            
            $
            125,405
            
            $
            -Stock
                issued for accrued interest
            
            $
            228,000
            
            $
            -Stock
                issued for settlement of claim
            
            
            -
            
            $
            29,400Return
                of shares due to non-performance of services
            
            $
            32,500
            
            $
            -Stock
                issued for purchase of technology
            
            $
            -
            
            $
            5,900


See
      accompanying notes to consolidated financial statements.




*-
          32
          -*





**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      1:  ORGANIZATION
      AND DESCRIPTION OF BUSINESS





Organization





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





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





On
      January 30, 1998, SET entered into a stock exchange agreement with SWT, whereby
      SWT shareholders emerged as the majority stockholder of SET. This reverse
      acquisition resulted in SWT becoming a wholly owned subsidiary of SET. SWT
      had
      no material operations for each of the eight fiscal years ending February 28,
      2006.





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




*-
          33
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      1:  ORGANIZATION
      AND DESCRIPTION OF BUSINESS, continued





Description
      of Business





The
      Company designs, manufactures and supplies water filtration systems to the
      general public. These systems range from portable water bottles that can be
      filled from nearly any available source to units, which provide entire water
      facilities at the point of entry for a facility. There are a number of
      established companies in the water filtration business, with no one company
      dominating the business.





Significant
      Agreements





During
      June 2002, the Company entered into an exclusive agreement with Heibei R.O.
      Environmental Technologies, whereby the Company can sell reverse osmosis-based
      products, which are currently being developed in China. Additionally, the
      agreement allows the Company to produce all portable filtration products in
      China. During the fourth quarter of fiscal 2006, the Company commenced
      production in China. As of February 28, 2006, the Company has prepaid inventory
      in China of approximately $33,000. The Company believes this agreement will
      allow the Seychelle brand to be sold at a very competitive price to US, China,
      Asia and other international markets.





Also,
      during June 2002, the Company entered into a License Agreement with Gary Hess,
      doing business as Aqua Gear USA, for a product known as the “Hand Held Pump
      Technology.” We licensed all proprietary rights associated with this technology.
      We will pay a two percent royalty on our gross income for the technology during
      the term of the license. 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 product called Pump N’ Pure which allows the
      user to draw filtered water from virtually any container or location. The
      Company continues to believe that the product will be viable in developing
      countries as an emergency preparedness product, and for families where cost
      is a
      prime consideration. The Company plans to commence marketing the Hand Held
      Pump
      as part of its Aqua Gear product line to the United States sporting goods
      industry in 2007.




*-
          34
          -*








**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of February 28, 2006**





NOTE
      1:  ORGANIZATION
      AND DESCRIPTION OF BUSINESS, continued





During
      2005, the Company attempted to enter into an agreement with Vortex, a company
      located in Japan, to market and sell the Company’s entire product line on an
      exclusive basis throughout Japan. However, they never signed the agreement
      but
      are representing us on a non-exclusive basis.





Seychelle
      has signed 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. Under the agreement, to maintain
      exclusivity, Confident, Inc. has to purchase from Seychelle a minimum of one
      million dollars ($1,000,000) of product the first year, with a minimum volume
      increase of fifty percent (50%) in each of the succeeding years over the
      previous year’s minimum purchase requirement. Upon signing the agreement on
      January 4, 2006, Confident, Inc. placed an initial product order for $50,000.
      During the fiscal year ending February 28, 2006, total sales to Confident,
      Inc.
      and affiliated entities approximated $90,000. The agreement is subject to
      cancellation as outlined in the agreement.





Seychelle
      has also signed a ten (10) year exclusive distribution/manufacturing agreement,
      subject to certain restrictions, with ABMS Health Care Pvt. Ltd. to sell its
      water filtration products on a non-exclusive basis in India.





The
      Company sells its products throughout the United States and internationally.
      Geographic information for the fiscal years ending February 28, 2006 and 2005
      is
      as follows:




2006
            
            2005Water
                filtration products sold toexternal
                customers (1) (2) in:The
                United States
            
            $
            523,077
            
            $
            317,836Pakistan
            
            
            91,700
            
            
            1,563China
            
            
            90,000
            
            
            -Asia
            
            
            35,115
            
            
            15,890United
                Kingdom
            
            
            11,952
            
            
            5,817Total
            
            $
            751,844
            
            $
            341,106




*-
          35
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





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


(2)  Long
      lived assets outside the United States included $96,500 and $50,000 in tooling
      costs located in China at February 28, 2006 and 2005, respectively.





Principles
      of Consolidation





The
      accompanying consolidated financial statements include the accounts of SET
      and
      its wholly owned subsidiary, SWT, (collectively the “Company”). All significant
      inter-company transactions and balances have been eliminated.





Basis
      of Presentation




The
        Company’s consolidated financial statements are prepared using
        accounting principles generally accepted in the United States of America
        applicable to a going concern, which contemplates the realization of assets
        and
        liquidation of liabilities in the normal course of business. The Company
        has
        experienced recurring losses from operations and has an accumulated deficit
        of
        $4,957,934 as of February 28, 2006. These factors, among others, raise
        substantial doubt as to its ability to have the necessary resources to market
        the Company’s new products.
  In
        order
        to continue as a going concern, the Company needs to develop a reliable source
        of revenues, and achieve a profitable level of operations. During the fiscal
        year ending February 28, 2006, the Company funded its operations by sale
        of
        restricted common stock. 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 believes 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. 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. The Company currently estimates monthly cash requirements
        of
        $26,000 to cover general and administrative overhead.


*-
          36
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**  NOTE
          2:   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued


Costs.
      Accordingly, the consolidated financial statements are accounted for as if the
      Company is a going concern and do not include any adjustments relating
      to the recoverability and classification of recorded asset amounts or
      the
      amount and classification of liabilities or other adjustments that might
      be
      necessary should be Company be unable to continue as a going


concern.





Revenue
      Recognition


The
        Company recognizes revenue when persuasive evidence of an arrangement exists,
        title has passed, the price to the buyer is fixed or determinable and
        collectibility is reasonably assured. These criteria are typically met when
        product is shipped. Revenue is not recognized at the time of shipment if
        these
        criteria are not met.
  Cost
        of Sales
  Cost
        of
        sales is comprised primarily of the cost of purchased product, as well as,
        labor, inbound freight costs and other material costs required to complete
        products. Overhead costs such as rent, depreciation, purchasing and inspection
        costs are capitalized in inventory and recognized as cost of sales in accordance
        with the Company’s revenue recognition policy.


Shipping
      and handling





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


*-
          37
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





General
      and Administrative Expenses





General
      and administrative expense is comprised primarily of legal and accounting fees
      incurred to assist the Company in catching up with SEC filings, consulting
      costs
      for outside accounting personal and design and engineering projects, salaries
      and related costs for an administrative assistant hired during June 2005 and
      other administrative costs (i.e. telephone, utilities, etc.) to support
      operations.





Product
      Return Reserve





The
      Company provides a reserve for returned products. Such costs are reflected
      as a
      reduction in revenues. Total costs for returned products for the fiscal years
      ending February 28, 2006 and 2005 was $nil.





Management
      reviews and estimates reserve for returned products on a regular basis. Although
      management believes its evaluations are sound, it is at least reasonably
      possible that such estimates may change in the near term. During the fiscal
      year
      ending February 28, 2005, the Company adjusted its reserve for returned products
      as no products had been returned to the Company during the three fiscal years
      ending February 28, 2005.





Seychelle
      has an unconditional return policy for the first 90 days. Customers may return
      the product for a full refund, or they may receive a replacement at no charge.
      The same policy applies to any product sold from the period 91 days after
      purchase to one year, for any defects in materials or workmanship.




*-
          38
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





Inventories





Inventories
      are stated at the lower of cost or market. Cost is determined using the average
      cost method and consist of the following as of February 28, 2006 and 2005:





2006
            
            2005Raw
                materials
            
            $
            161,066
            
            $
            169,427Work
                in progress
            
            
            105,760
            
            
            34,513Finished
                goods
            
            
            204,604
            
            
            109,814471,430
            
            
            313,754Reserve
                for obsolete orslow
                moving inventory
            
            
            (79,789
            )
            
            -Net
                inventories
            
            $
            391,641
            
            $
            313,754





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





Management
      reviews and estimates realization of inventory on a regular basis with respect
      to obsolete and slow moving inventory. During November 2005, the Company
      re-evaluated its countertop water filtration systems and determined that such
      product should be wholly reserved and recorded an inventory reserve adjustment
      of approximately $79,800. Although management believes its evaluations are
      sound, it is at least reasonably possible that such estimates may change in
      the
      near term. During the fiscal year ending February 28, 2005, the Company scrapped
      its previously identified slow moving and obsolete inventory of approximately
      $162,000.




*-
          39
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





Property
      and Equipment





Property
      and equipment are stated at cost. Depreciation is computed using the
      straight-line method over the estimated useful lives of the depreciable assets.
      The estimated useful lives used in determining depreciation are three to five
      years for tooling and five years for computers, furniture and equipment and
      vehicles. Management evaluates useful lives regularly in order to determine
      recoverability taking into consideration current technological conditions.
      Maintenance and repairs are charged to expense as incurred; additions and
      betterments are capitalized. Upon retirement or sale, the cost and related
      accumulated depreciation of the disposed assets are removed, and any resulting
      gain or loss is recorded. Fully depreciated assets are not removed from the
      accounts until physical disposition. During the fiscal year ending February
      28,
      2006, the Company disposed of certain tooling, as well as, scrapped certain
      fully depreciated assets (Note 3).





Intangible
      Assets





Intangible
      assets include patents, product rights and technology costs. All patent, product
      rights and technology costs are capitalized and amortized over ten years using
      the straight-line method. The Company assesses whether there has been a
      permanent impairment of the value of intangible assets by considering factors
      such as expected future product revenues, anticipated product demand and
      prospects and other economic factors. During the fiscal year ending February
      28,
      2006, the Company determined that the Enviro(3)Care system was no longer
      economically feasible and recorded an impairment charge.




*-
          40
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





Accounting
      For Long-Lived Assets





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





Customer
      Deposits





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





Research
      and Development Expenses





Research
      and development costs are expensed as incurred and amounted to approximately
      $14,800 and $12,500 for the fiscal years ending February 28, 2006 and 2005,
      respectively, and are included in general and administrative expenses in the
      accompanying consolidated statements of operations.





Advertising
      Expenses





Advertising
      expenses are expensed as incurred. Total advertising expenses amounted to
      approximately $19,400 and $1,000 for the fiscal years ending February 28, 2006
      and 2005, respectively, and are included in selling expenses in the accompanying
      consolidated statements of operations.





Concentration
      of Credit Risks





*Cash*





The
      Company maintains its cash in various accounts at several financial
      institutions. At various times during the year, the amount on deposit with
      a
      single financial institution may exceed federal depository insurance




*-
          41
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





limits.
      At February 28, 2006, the Company had balances on deposit approximating $478,000
      in excess of such limits. Management does not believe this represents a
      significant risk to the Company.





*Trade
      Receivables*





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





For
      the
      fiscal years ending February 28, 2006 and 2005, SET had several customers,
      which
      individually accounted for at least 10% of total sales. The following table
      summarizes total sales and accounts receivable for the fiscal years then ended
      for these customers:





2006
            
            2006
            
            2005
            
            2005Sales
            
            Accounts
            
            Sales
            
            AccountsPercentage
            
            Receivable
            
            Percentage
            
            ReceivableCustomer
                1
            
            
            25%
            
            $
            6,100
            
            
            10%
            
            $
            -Customer
                2
            
            
            4%
            
            
            673
            
            
            16%
            
            
            2,041Customer
                3
            
            
            12%
            
            
            -
            
            
            - 
                %
            
            
            -Customer
                4
            
            
            12%
            
            
            -
            
            $
            - 
%
            
            
            10





During
      the fiscal year ending February 28, 2006, the Company has entered into several
      marketing and distribution agreements to sell its products internationally
      on
      both an exclusive and non-exclusive basis. Management believes that if the
      targeted revenues are not achieved, the revenues can be replaced through the
      sale of filters and related products to other direct marketing companies.
      However, there can be no assurance that this will occur which could result
      in an
      adverse effect on the Company’s financial condition or results of operations in
      the future.




*-
          42
          -*








**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
                2:
            SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES, continued





*Accounts
      Payable*





For
      the
      fiscal years ending February 28, 2006 and 2005, SET had several vendors, which
      individually supplied at least 10% of total purchases. The following table
      summarizes total raw material purchases and accounts payable for the fiscal
      years then ended.





2006
            
            2006
            
            2005
            
            2005Purchase
            
            Accounts
            
            Purchase
            
            AccountsPercentage
            
            Payable
            
            Percentage
            
            PayableVendor
                1
            
            
            24%
            
            $
            7,407
            
            
            - 
                %
            
            $
            -Vendor
                2
            
            
            15%
            
            
            -
            
            
            18%
            
            
            -Vendor
                3
            
            
            - 
                %
            
            
            -
            
            
            11%
            
            
            -





As
      previously noted, 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.





Income
      Taxes





The
      Company utilizes Statement of Financial Accounting Standards ("SFAS") No. 109,
      "Accounting for Income Taxes," which requires the recognition of deferred tax
      assets and liabilities for the expected future tax consequences of events that
      have been included in the financial statements or tax returns. Under this
      method, deferred tax assets and liabilities are determined based on temporary
      differences between the amount of taxable income and pretax financial income
      and
      between the tax bases of assets and liabilities and their reported amounts
      in
      the financial statements. Deferred tax assets and liabilities are included
      in
      the financial statements at currently enacted income tax rates applicable to
      the
      period in which the deferred tax assets and liabilities are expected to be
      realized or settled. Valuation allowances are established, when necessary,
      to
      reduce deferred tax assets to the amount expected to be realized.




*-
          43
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





Issuance
      of Stock for Services





SFAS
      No.
      123, "Accounting for Stock-Based Compensation," encourages, but does not
      require, companies to record compensation cost for stock-based employee
      compensation plans at fair value. The Company has elected to continue to account
      for employee stock-based compensation using the intrinsic method prescribed
      in
      Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
      Employees," and related interpretations, as permitted by SFAS No. 123;
      accordingly, compensation expense for stock options is measured as the excess,
      if any, of the quoted market price of the Company's stock at the date of the
      grant over the amount an employee must pay to acquire the stock.





For stock options or other securities issued to non-employees, the issuance
      of
      such securities is accounted for based on the fair value of the consideration
      received or the fair value of the equity instruments issued, whichever is more
      reliably measurable. Compensation expense is recognized in the financial
      statements for securities granted to non-employees in the period in which the
      consideration is obtained from the non-employee.





Loss
      Per Common Share





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





Fair
      Value of Financial Instruments








Statement
      of Financial Accounting Standards (“SFAS”) No. 107, *Disclosures
      About Fair Value of Financial Instruments,* requires
      disclosure of fair value information about financial instruments when it is
      practicable to estimate that value. The carrying amounts of the




*-
          44
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





Company’s
      financial instruments as of February 28, 2006 and 2005 approximate their
      respective fair values because of the nature of these instruments. Such
      instruments consist of accounts receivable and payable, inventory and certain
      accrued expenses. The fair value of the related party accrued liabilities and
      notes payable are not determinable.





Management’s
      Estimates





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





Segment
      Disclosures





SFAS
      No.
      131, “Disclosures About Segments of an Enterprise and Related Information”
requires public enterprises to report financial and descriptive information
      about reportable operating segments and establishes standards for related
      disclosures about product and services, geographic areas, and major customers.
      The Company evaluated SFAS No. 131 and determined that the Company operates
      in
      multiple segments (Note 12).





Reclassifications


Certain
        amounts in the fiscal 2005 financial statements have been reclassified to
        conform to the fiscal 2006 presentations. These reclassifications had no
        effect
        on previously reported results of operations or retained earnings (accumulated
        deficit).


*-
          45
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





Recent
      Accounting Pronouncements





In
      November 2004, the Financial Accounting Standards Board Statement issued SFAS
      No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4”, which
      clarifies the accounting for abnormal amounts of idle facility expense, freight,
      handling costs, and charges regardless of whether they meet the criterion of
“so
      abnormal” that was originally stated in Accounting Research Bulletin No. 43,
      chapter 4. In addition, SFAS No. 151 requires that the allocation of fixed
      production overheads to conversion costs be based on the normal capacity of
      the
      production facilities. SFAS No. 151 is effective for inventory costs incurred
      during   fiscal years beginning after June 15, 2005. Management does not
      expect the implementation of this new standard to have a material impact on
      its
      financial position, results of operations and cash flows





In
      December 2004, the FASB published SFAS 123R, “Share Based Payments” (“SFAS
      123R). SFAS 123R required that compensation cost related to share-based payment
      transactions be recognized in the financial statements. Share-based payment
      transactions within the scope of SFAS 123R include stock options, restricted
      stock plans, performance-based awards, stock appreciation rights and employee
      share purchase plans. The provisions of SFAS 123R are effective as of the first
      interim period that begins after June 15, 2005. In March 2005, the SEC released
      Staff Accounting Bulletin No. 107, “Share-Based Payment” (“SAB 107”), which
      provides interpretive guidance related to the interaction between SFAS 123(R)
      and certain SEC rules and regulations. It also provides the SEC staff’s views
      regarding valuation of share-based payment arrangements. In April 2005, the
      SEC
      amended the compliance dates for SFAS 123(R), to allow companies to implement
      the standard at the beginning of their next fiscal year, instead of the next
      reporting period beginning after June 15, 2005. The Company is currently
      assessing the potential effect of SFAS 123R on its financial statements.


*-
          46
          -*











**SEYCHELLE
      ENVIRONMENTAL TECHNOLOGIES, INC.**


**NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





On
      December 16, 2004, FASB issued Statement of Financial Accounting Standards
      No.
      153, “Exchanges of Nonmonetary Assets” (“SFAS 153”), an amendment of APB Opinion
      No. 29, “Accounting for Nonmonetary Transactions” (“APB 29”). This statement
      amends APB 29 to eliminate the exception for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception of exchanges of
      nonmonetary assets that do not have commercial substance. Under SFAS 153, if
      a
      nonmonetary exchange of similar productive assets meets a commercial-substance
      criterion and fair value is determinable, the transaction must be accounted
      for
      at fair value resulting in recognition of any gain or loss. SFAS 153 is
      effective for nonmonetary transactions in fiscal periods that begin after June
      15, 2005. The Company does not anticipate that the implementation of this
      standard will have a material impact on its financial statements.





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.”
This statement applies to all voluntary changes in accounting principle and
      requires retrospective application to prior periods’ financial statements of
      changes in accounting principle, unless this would be impracticable. This
      statement also makes a distinction between “retrospective application” of an
      accounting principle and the “restatement” of financial statements to reflect
      the correction of an error. This statement is effective for accounting changes
      and corrections of errors made in fiscal years beginning after December 15,
      2005. The Company is currently assessing the potential effect of SFAS 154 on
      its
      financial statements.





In
      June
      2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization
      Period for Leasehold Improvements (“EITF 05-6.”) EITF 05-6 provides guidance on
      determining the amortization period for leasehold improvements acquired in
      a
      business combination or acquired subsequent to lease inception. The guidance
      in
      EITF 05-6 will be applied prospectively and is effective for periods beginning
      after June 29, 2005.  EITF 05-6 is not expected to have a material effect
      on its consolidated financial position or results of operations.




*-
          47
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      2:  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES, continued





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAS No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”.  SFAS No. 155, permits fair value remeasurement for any
      hybrid financial instrument that contains an embedded derivative that otherwise
      would require bifurcation, clarifies which interest-only strips and
      principal-only strips are not subject to the requirements of SFAS No. 133,
      establishes a requirement to evaluate interest in securitized financial assets
      to identify interests that are freestanding derivatives or that are hybrid
      financial instruments that contain an embedded derivative requiring bifurcation,
      clarifies that concentrations of credit risk in the form of subordination are
      not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
      on the qualifying special-purpose entity from holding a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument.  This statement is effective for all financial
      instruments acquired or issued after the beginning of the Company’s first fiscal
      year that begins after September 15, 2006.. The Company is currently assessing
      the potential effect of SFAS 155 on its financial statements.





NOTE
      3:  PROPERTY
      AND EQUIPMENT





The
      following is a summary of property and equipment at February 28, 2006 and 2005:





2006
            
            2005Tooling
            
            $
            271,510
            
            $
            231,256Equipment
            
            
            36,602
            
            
            21,392Vehicles
            
            
            10,000
            
            
            31,433Furniture
                and fixtures
            
            
            15,465
            
            
            15,465Computer
                equipment
            
            
            16,956
            
            
            15,726Leasehold
                equipment
            
            
            1,000
            
            
            1,000351,533
            
            
            316,272Less:
                Accumulated depreciation
            
            
            206,810
            
            
            288,931Book
                Value
            
            
            144,723
            
            
            27,341Tooling
                not in service
            
            
            12,948
            
            
            72,485$
            157,671
            
            $
            99,826




*-
          48
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      3:  PROPERTY
      AND EQUIPMENT, continued





As
      of
      February 28, 2006 and 2005, the Company had recorded $12,985 and $72,485,
      respectively, in reverse osmosis-based tooling to be used in China. Depreciation
      will be computed using the straight-line method over a period of 5 years.





During
      the fiscal year ending February 28, 2006, the Company sold for $20,000 a
      pleating machine with an approximate cost of $25,000. Additionally, during
      2006,
      a countertop machine with a value of $25,000 was stolen from its location in
      China. The combined $30,000 loss on disposition of this equipment is included
      in
      other expenses in the accompanying consolidated statement of operations. Both
      of
      these items had previously been included in equipment not in service in the
      accompanying consolidated balance sheet.





The
      carrying amount of all property and equipment is evaluated periodically to
      determine if adjustment to the useful life or to the un-depreciated balance
      is
      warranted. As of February 28, 2006, no event has been identified that would
      indicate an impairment of the value of property and equipment recorded in the
      accompanying consolidated financial statements.





Total
      depreciation expense for the fiscal years ending February 28, 2006 and February
      29, 2005 was approximately $25,100 and $24,800, respectively.





NOTE
      4:  INTANGIBLE
      ASSETS





The
      following is a summary of intangible assets at February 28, 2006 and 2005:





2006
            
            2005Enviro
                Care technologies
            
            $
            -
            
            $
            104,000Hand
                pump
            
            
            8,000
            
            
            8,000Patents
            
            
            17,623
            
            
            16,18225,623
            
            
            128,182Less:
                Accumulated amortization
            
            
            7,959
            
            
            6,615$
            17,664
            
            $
            121,567




*-
          49
          -*


**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**










NOTE
      4:  INTANGIBLE
      ASSETS, continued





The
      estimated future amortization expense of intangible assets as of February 28,
      2006 for each of the five succeeding years is approximately $1,200.





The
      Company has a License Agreement with Gary Hess, doing business as Aqua Gear
      USA
      for a product known as the “Hand Held Pump Technology.” The Company licensed all
      proprietary rights associated with this technology and the trademark Aqua Gear
      TM. The Company will pay a two percent royalty on our gross income for the
      technology during the term of the license. The Company intends to market this
      technology in the United States and internationally. In connection with the
      license agreement, the Company granted the licensor 50,000 shares of common
      stock valued at $0.16 per share, or $8,000. The shares were issued during March
      2002. The License Agreement is for an initial term of five years, with five
      successive five years renewals. 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
      carrying amount of all intangibles is evaluated periodically to determine if
      adjustment to the useful life or to the un-amortized balance is warranted.
      As of
      February 28, 2006, except for the impairment relating to the Enviro(3)Care
      system, no event has been identified that would indicate an impairment of the
      value of intangibles recorded in the accompanying consolidated financial
      statements.





NOTE
      5:  ACCRUED
      EXPENSES





Accrued
      expenses consist of the following at February 28, 2006 and 2005:





2006
            
            2005Accrued
                legal expenses
            
            $
            124,296
            
            $
            114,985Accrued
                accounting expenses
            
            
            95,346
            
            
            6,076Accrued
                rent
            
            
            -
            
            
            14,889Accrued
                claim settlement
            
            
            12,750
            
            
            12,750Accrued
                credit card purchases
            
            
            11,926
            
            
            19,134Accrued
                wages and benefits
            
            
            2,647
            
            
            1,932Other
                accrued expenses
            
            
            15,141
            
            
            19,134$
            262,106
            
            $
            188,900




*-
          50
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      5:  ACCRUED
      EXPENSES, continued





During
      March 2006, the Company settled approximately $90,300 of its accrued accounting
      expenses as of February 28, 2006 through the payment of $25,000 cash and the
      issuance of 25,000 shares of the Company’s restricted common stock.





The
      accrued legal expenses represent the attorney fees the Company incurred in
      connection with the SWT stock exchange agreement and purchase of Aqua Vision
      (Note 1), of which approximately $113,500 will be paid in stock. Management
      does
      not believe however, that the stock will be issued during the foreseeable
      future.





The
      accrued settlement represents an estimate of the settlement of an
      employment-related claim, of which $12,750 will be paid in stock. Management
      does not believe however, that the stock will be issued during the foreseeable
      future.





NOTE
      6:  LINES
      OF
      CREDIT





During
      March 2005, the Company entered into two unsecured lines of credit agreements,
      totaling $150,000. The lines of credit bear interest at the institutions index
      rate (7.5% at February 28, 2006) plus two percent and are not repayable until
      March 31, 2006. The Company utilized proceeds of $50,000 from one line of credit
      to pay down the Note Payable to Related Parties (see Note 7). Both agreements
      do
      not contain any limitations on borrowing or any restrictive debt covenants.
      During April 2006, the Company decided not to renew one of its lines of credit.





NOTE
      7  NOTES
      PAYABLE TO RELATED PARTIES





As
      the
      February 28, 2006 and 2005, the Company received advances of $363,200 and
      $448,200 from the Company’s primary investor, TAM Irrevocable Trust (“TAM
      Trust”). These advances bear interest at 10 percent. As of February 28, 2006,
      the balance of the advances is not repayable until after March 1, 2011. The
      repayment of these advances is subordinate to the Company’s lines of credit (see
      Note 6).





As
      of
      February 28, 2006 and 2005, accrued interest on these advances was approximately
      $169,300 and $134,500, respectively, which is included in accrued interest
      due
      to related parties.




*-
          51
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      7:  NOTES
      PAYABLE TO RELATED PARTIES, continued





During
      December 2004, the Company granted the TAM Irrevocable Trust restricted common
      stock of 1,266,667 shares, for interest from the period March 1, 2002 through
      February 28, 2005. The restricted common shares were 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.





On
      March
      29, 2005, the Company granted the TAM Trust 500,000 warrants redeemable on
      restricted shares of the Company’s stock at a purchase price of $.225 per share.
      The warrants are to be distributed in equal installments commencing on December
      1, 2004, 2005 and 2006 and are exercisable through December 1, 2008. As the
      warrants provide for the purchase of common stock at below the Company’s market
      price on the date of grant, the Company recorded unearned interest relating
      to
      the estimated value of these warrants of $27,200. The Company is amortizing
      the
      estimated fair market value of the unearned interest over the two-year vesting
      period. The Company has recorded amortization of approximately $9,100 and $3,000
      for the fiscal years ending February 28, 2006 and 2005, respectively.





Additionally,
      on March 29, 2005, the Company granted the TAM Trust 1,972,133 restricted shares
      of the Company’s common stock. These shares vest over a two-year period,
      beginning November 1, 2004. As the TAM Trust was granted the 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 shares of $493,000.
      The Company is amortizing the estimated fair market value of the unearned
      interest over the two-year vesting period. The Company has recorded interest
      expense of approximately $164,300 and $54,800 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 into
      restricted shares of the Company’s stock at a purchase price of $.225 per share.
      The warrants are exercisable any time after December 1, 2006 and expire December
      1, 2008. As the warrants provide for the purchase of common stock at below
      the
      Company’s market price on the date of grant, the Company recorded unearned
      interest relating to the estimated value of these warrants of $120,000. The
      Company 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 as of February 28, 2006.




*-
          52
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      7:  NOTES
      PAYABLE TO RELATED PARTIES, continued





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.





NOTE
      8:  CAPITAL
      STRUCTURE





Common
      Stock





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





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





On
      February 28, 2004, the Company received $20,000 in proceeds for the issuance
      of
      200,000 shares of common stock. The stock was delivered to the investor during
      March 2004. As of February 29, 2004, the Company recorded the proceeds as an
      un-issued stock liability in the accompanying consolidated financial statements.





During
      December 2004, the Company granted the TAM Irrevocable Trust restricted common
      stock of 1,266,667 shares, for interest from the period March 1, 2002 through
      February 28, 2005. The restricted common shares were 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.




*-
          53
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      8:  CAPITAL
      STRUCTURE, continued





During
      the fiscal year ending February 28, 2005, the Company issued 125,000 shares
      for
      compensation; and 70,000 shares for services provided.





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





During
      the fiscal year ending February 28, 2005, the Company issued an aggregate of
      55,000 shares to various debt holders with an approximate total value of
      $42,400.





During
      the fiscal year ending February 28, 2005, the Company issued 32,000 shares
      to
      purchase tooling with an approximate value of $5,900.





During
      the fiscal year ending February 28, 2005, the Company issued 84,000 shares
      to
      settle a claim with an approximate total value of $29,400.





During
      November 2004, the Company entered into a six-month consulting agreement with
      an
      individual to provide accounting services for the Company. As consideration
      for
      services to be rendered, the consultant received 65,000 restricted shares of
      the
      Company’s common stock. The common shares were distributed on November 1, 2004.
      The Company recorded unearned compensation relating to the estimated value
      of
      the shares of $22,750. The Company has recorded amortization of approximately
      $7,600 and $15,100 for the fiscal years ending February 28, 2006 and 2005,
      respectively.





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.





Additionally,
      on March 29, 2005, the Company granted the TAM Trust 1,972,133 restricted shares
      of the Company’s common stock. These shares vest over a two-year period,
      beginning November 1, 2004. As the TAM Trust was granted the 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 shares of $493,000.
      The Company is amortizing the estimated fair market value of the unearned
      interest over the two-year vesting period. The Company has recorded interest
      expense of approximately $164,300 and $54,800 for the fiscal years ending
      February 28, 2006 and 2005, respectively.




*-
          54
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**







During
      the fiscal year ending February 28, 2006, the Company issued an aggregate of
      2,248,334 common shares to various investors for cash for an approximate total
      value of $513,000. During the fiscal year ending February 28, 2006, the Company
      issued an aggregate of 2,000,000 common shares with detachable warrants to
      an
      individual investor for cash for an approximate total value of $450,000. The
      estimated fair value of the warrants was recorded by the Company as an equity
      transaction.





During
      the fiscal year ending February 28, 2006, the Company issued 295,766 in
      restricted shares, estimated value $119,400, for accounting services provided
      in
      connection with Form 10 and other SEC filings.





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





During
      the fiscal year ending February 28, 2006, the Company issued 30,000 shares
      for
      compensation; and 94,300 shares for services provided.





During
      the fiscal year ending February 28, 2006, a shareholder presented an opportunity
      to the Company to repurchase approximately 210,238 common shares, at prices
      under the market ranging from $0.15 to $0.17 that the Company accepted for
      an
      approximate total value of $32,800.





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





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





Preferred
      Stock





The
      Board
      of Directors has the authority to issue Preferred Stock and to fix and determine
      its series, relative rights and preferences to the fullest extent permitted
      by
      the laws of the State of Nevada and its articles of incorporation. As of
      February 28, 2006, three classes of Preferred Stock were authorized and none
      was
      outstanding.




*-
          55
          -*




**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


Series
      “A” 13.5% Non Voting, Cumulative, Convertible Preferred Stock





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





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





Series
      “AA” Non Voting, Cumulative, Convertible Preferred Stock





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





Series
      “AAA” 12 % Cumulative, Convertible Preferred Shares





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




*-
          56
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      8:  CAPITAL
      STRUCTURE, continued





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.





Consulting
      Agreements





During
      November 2004, the Company entered into consulting agreements with two officers
      to provide management consulting services for the Company. As consideration
      for
      services to be rendered, the consultants received 480,000 restricted shares
      of
      the Company’s common stock. The common shares are to be distributed in equal
      installments commencing on December 1, 2004, 2005 and 2006. The first third
      vested on the effective date of the agreement as an enticement to enter into
      the
      agreement. The estimated fair market value of the stock as of November 30,
      2004
      was $225,600 and recorded to unearned compensation. The Company is amortizing
      the estimated fair market value of the unearned compensation over the two-year
      vesting period. The Company has recorded compensation expense of approximately
      $75,200 and $18,800 for the fiscal years ending February 28, 2006 and 2005,
      respectively.





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.




*-
          57
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      8:  CAPITAL
      STRUCTURE, continued





On
      March
      29, 2005, the Company expanded the consulting agreement with one officer to
      provide management-consulting services for the Company. As consideration for
      services to be rendered, the consultant received 316,312 restricted shares
      of
      the Company’s common stock. The common shares are to be distributed in equal
      installments commencing   on December 1, 2004, 2005 and 2006.





The
      fair
      market value of the restricted shares as of 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 two-year
      vesting period. The Company has recorded compensation expense of approximately
      $26,400 and $8,800 for the fiscal years ending February 28, 2006 and 2005,
      respectively.





Warrants





On
      March
      29, 2005, the Company expanded the consulting agreements with two officers
      to
      provide management-consulting services for the Company. As further consideration
      for services to be rendered, the consultants were granted 1,000,000 warrants
      redeemable into restricted shares of the Company’s stock at a purchase price of
      $.225 per share. The warrants vest in equal installments commencing on December
      1, 2004, 2005 and 2006 but are exercisable through December 1, 2008. The fair
      market value of the warrants as of November 30, 2004 was estimated at $55,300
      and recorded to unearned compensation. The Company is amortizing the estimated
      fair market value of the unearned compensation over the two-year vesting period.
      The Company has recorded compensation expense of approximately $18,400 and
      $6,100 for the fiscal years ending February 28, 2006 and 2005, respectively.





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. The warrants vest
      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 the two-year vesting period. The Company has
      recorded interest expense of approximately $9,100 and $3,000 for the fiscal
      year
      ending February 28, 2006 and 2005, respectively.


*-
          58
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      8:  CAPITAL
      STRUCTURE, continued





On
      July
      27, 2005, the Company expanded the consulting agreements with two officers
      to
      provide management-consulting services for the Company. As further consideration
      for services to be rendered, the consultants were granted 500,000 warrants
      redeemable into restricted shares of the Company’s stock at a purchase price of
      $.225 per share. The warrants are exercisable any time after December 1, 2006
      and expire December 1, 2008. As the warrants provide for the purchase of commons
      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 compensation expense of approximately $11,700
      for
      the fiscal year ending February 28, 2006.


On
        July
        27, 2005, the Company granted the TAM Trust 2,000,000 warrants redeemable
        into
        restricted shares of the Company’s stock at a purchase price of $.225 per share.
        The warrants are exercisable any time after December 1, 2006 and expire December
        1, 2008. As the warrants provide for the purchase of common stock at below
        the
        Company’s market price on the date of grant, the Company recorded unearned
        interest relating to the estimated value of these warrants of $120,000. The
        Company 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 as of February 28,
        2006.
 
 On
        July
        27, 2005, the Company granted S. Lampman, a shareholder, 2,000,000 warrants
        redeemable into restricted shares of the Company’s stock at a purchase price of
        $.225 per share. The warrants are exercisable any time after December 1,
        2006
        and expire December 1, 2008. As the warrants provide for the purchase of
        common
        stock at below the Company’s market price on the date of grant, the Company
        estimated the fair market value of the warrants over the period from date
        of
        grant through December 1, 2006. The estimated value is reflected in “Estimated
        value of warrants” in the consolidated balance sheet.
  A
        summary
        of warrant activity is as follows:





Warrants
                Outstanding
            
            Exercise
                PriceBalance,
                February 29, 2004
            
            -
            
            -Granted
            
            
            1,500,000
            
            $
            0.225Exercised
            
            
            -
            
            
            -Canceled
            
            
            -
            
            
            -Balance,
                February 28, 2005
            
            
            1,500,000
            
            $
            0.225Granted
            
            
            4,500,000
            
            $
            0.225Exercised
            
            
            -
            
            
            -Canceled
            
            
            -
            
            
            -Balance,
                February 28, 2006
            
            
            6,000,000
            
            $
            0.225




*-
          59
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      8:  CAPITAL
      STRUCTURE, continued





Stock
      Compensation Plan





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







During
      February 2002, the Company adopted an additional stock compensation plan to
      be
      administered by the Board of Directors or a Compensation Committee to be
      appointed by the Board. The Plan provides for the issuance of 300,000 shares
      of
      common stock to be issued as stock grants, or under stock option agreements.
      During February 2002, the Company issued 10,000 shares for compensation and
      232,000 shares for services provided.





During
      the fiscal year ending February 28, 2005, the Company terminated these stock
      compensation plans.





A
      summary
      of stock option activity is as follows:





Outstanding
                options
            
            Stock
                Options Outstanding
            
            Exercise
                PriceBalance,
                February 29, 2004
            
            
            248,861
            
            
            MarketGranted
            
            
            -Exercised
            
            
            -Canceled
            
            
            248,861Balance,
                February 28, 2005
            
            
            -Granted
            
            
            -Exercised
            
            
            -Canceled
            
            
            -Balance,
                February 28, 2006
            
            
            -




*-
          60
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      8:  CAPITAL
      STRUCTURE, continued





Contributed
      Executive Services





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





As
      the
      President of the Company has decided not to accept his salary until the Company
      has become profitable, the Company recorded additional paid in capital in the
      accompanying consolidated statements of changes in stockholders’ deficit.





NOTE
      9:  INCOME
      TAXES





The
      components of the provision for income taxes for the fiscal years ending
      February 28, 2006 and 2005 are as follows:





2006
            
            2005Current:State
            
            $
            1,600
            
            $
            1,600Federal
            
            
            -
            
            
            -Deferred:State
            
            
            97,503
            
            
            (16,797
            )Federal
            
            
            308,761
            
            
            (70,591
            )Valuation
                allowance
            
            
            (406,264
            )
            
            87,388Provision
                for income taxes
            
            $
            1,600
            
            $
            1,600




*-
          61
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





The
      reconciliation of the effective tax rates and U.S. statutory tax rates for
      the
      fiscal years ending February 28, 2006 and 2005 are as follows:





2006
            
            2005Tax
                (benefit) of statutory rate
            (34)%
            
            (34)%Deferred
                tax effect of goodwillrelating
                to Aqua Vision Acquisition
            (6)%
            
            (12)%Contributed
                executive services
            1%
            
            3%Interest
                due to related parties
            29%
            
            49%Consulting
                fees due to related parties
            21%
            
            35%Impairment
                and inventory reserves
            19%
            
            (64)%Effect
                of state tax benefit
            (3)%
            
            (3)%Other
            13%
            
            4%Change
                in valuation allowance
            (40)%
            
            22%Effective
                tax Rate
            0%
            
            0%





At
      February 28, 2006, the Company has net operating loss carry forwards, for income
      tax reporting purposes, of approximately $3,411,000 and $1,865,000 available
      to
      offset future federal and California taxable income, respectively. Based on
      current tax law, the Company’s federal net operating loss carry forwards will
      expire as follows: $801,500 during the fiscal year ending 2018; $1,084,900
      during the fiscal year ending 2019; $110,600 during the fiscal year ending
      2020;
      $625,100 during the fiscal year ending 2021; $249,900 during the fiscal year
      ending 2023; $170,000 during the fiscal year ending 2024; $38,000 during the
      fiscal year ending 2025; and $331,000 during the fiscal year ending 2026. The
      Company’s state net operating loss carry forwards begin to expire in 2010
      through 2026.





At
      February 28, 2006, the Company had available tax credit carry forwards comprised
      of federal and state research and experimentation credits of approximately
      $8,700 and $5,100, respectively. The research and experimentation credit carry
      forwards expire through 2023 for federal purposes and do not expire for
      California purposes.





The
      provision for income taxes is reflected as a component of general &
administrative expenses in the consolidated statement of operations.




*-
          62
          -*











**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      9:  INCOME
      TAXES, continued





The
      components of the net deferred tax asset for the fiscal years ending February
      28, 2006 and 2005 are as follows:





2006
            
            2005Net
                operating loss carry forward
            
            $
            1,111,651
            
            $
            922,372Interest
                to related parties
            
            
            144,610
            
            
            45,365Consulting
                fees to related parties
            
            
            105,486
            
            
            32,216Impairment
                charge
            
            
            37,856
            
            
            -Inventory
                & bad debt reserves
            
            
            29,043
            
            
            14,275Other
            
            
            6,003
            
            
            14,157Less:
                Valuation allowance
            
            
            (1,434,649
            )
            
            (1,028,385
            )Net
                deferred tax asset
            
            $
            0
            
            $
            0





NOTE
      10:  COMMITMENTS
      AND CONTINGENCIES





The
      Company leases an office and production facility under an operating lease that
      expires in February 2008. As of February 28, 2006, the Company paid $5,544
      per
      month in base rent. The Company must also pay approximately $1,300 per month
      to
      cover taxes, maintenance, insurance and certain other operating expenses
      applicable to the premises.





Total
      rent expense amounted to approximately $98,700 and $82,900 for the fiscal years
      ending February 28, 2006 and 2005, respectively.





Future
      minimum base lease payments are as follows:





Fiscal
      Year Ending February 28


2007
            
            
            $   
                71,7122008
            
            
            74,304$ 
                146,016





*-
          63
          -*




**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      10:  COMMITMENTS
      AND CONTINGENCIES, continued





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 Water. A demurrer to the
      re-filed complaint was filed and in response a first amended complaint was
      filed
      and served. Currently a second demurrer to the First Amended Complaint has
      been
      filed and sustained by the Court, and plaintiff has been granted fourteen days
      to 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
      February 28, 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




*-
          64
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      11:  RELATED
      PARTY TRANSACTIONS





Effective
      December 1, 2001, the Company entered into an employment agreement with the
      President of the Company. The agreement is for five years and provides for
      a
      salary of $10,000 per year plus one percent of the net after tax profits of
      the
      Company. The agreement shall be automatically renew 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 two officers
      to provide management consulting services for the Company. As consideration
      for
      services to be rendered, the consultants received 480,000 restricted shares
      of
      the Company’s common stock . The common shares are to be distributed in equal
      installments commencing on December 1, 2004, 2005 and 2006. The fair market
      value of the restricted share 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
      two-year vesting period. The Company has recorded compensation expense of
      approximately $75,200 and $18,800 for the fiscal years ending February 28,
      2006
      and 2005, respectively.




During
      December 2004, the Company granted the TAM Irrevocable Trust restricted common
      stock of 1,266,667 shares for interest on prior year advances. The fair market
      value of the restricted shares was estimated at $228,000. The Company has
      recorded accrued interest of $228,000 as of February 28, 2005. During April
      2005, the Company issued the 1,266,667 shares to the TAM Irrevocable Trust.




*-
          65
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      11:  RELATED
      PARTY TRANSACTIONS, continued





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.


On
        March
        29, 2005, the Company expanded the consulting agreement with one officer
        to
        provide management-consulting services for the Company. As consideration
        for
        services to be rendered, the consultant received 316,312 restricted shares
        of
        the Company’s common stock. The common shares are to be distributed in equal
        installments commencing  on December 1, 2004, 2005 and 2006. As the
        restricted shares were granted at below the Company’s market price at the date
        of grant, the Company recorded compensation expense relating to the estimated
        fair market value of the restricted shares of $79,100 and recorded it to
        unearned compensation.   The Company is amortizing the estimated fair
        market value of the unearned compensation over the two-year vesting period.
        The
        Company has recorded compensation expense of approximately $26,400 and $8,800
        for the fiscal years ending February 28, 2006 and 2005, respectively.
 
 Additionally,
        on March 29, 2005, the Company granted the TAM Trust 1,972,133 restricted
        shares
        of the Company’s common stock. These shares vest over a two-year period,
        beginning November 1, 2004. As the TAM Trust was granted the 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 shares of $493,000.
        The Company is amortizing the estimated fair market value of the unearned
        interest over the two-year vesting period. The Company has recorded interest
        expense of approximately $164,300 and $54,800 for the fiscal years ending
        February 28, 2006 and 2005, respectively.





On
      March
      29, 2005, the Company expanded the consulting agreements with two officers
      to
      provide management-consulting services for the Company. 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 a purchase price of
      $.225 per share. The


*-
          66
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**





NOTE
      11:  RELATED
      PARTY TRANSACTIONS, continued




warrants
      vest in equal installments commencing on December 1, 2004, 2005 and 2006 but
      are
      exercisable through December 1, 2008. The fair market value of the warrants
      at
      date of grant 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 two-year vesting period. The Company has recorded
      compensation expense of approximately $18,400 and $6,100 for the fiscal years
      ending February 28, 2006 and 2005, respectively.


On
        March
        29, 2005, the Company granted the TAM Trust 500,000 warrants redeemable on
        restricted shares of the Company’s stock at $.225 per share. The warrants vest
        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 the two-year vesting period. The Company has
        recorded interest expense of approximately $9,100 and $3,000 for the fiscal
        years ending February 28, 2006 and 2005, respectively.
  On
        July
        27, 2005, the Company expanded the consulting agreements with two officers
        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 a purchase price of
        $.225 per share. The warrants are exercisable any time after December 1,
        2006
        and expire December 1, 2008. As the warrants provide for the purchase of
        commons
        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 compensation expense of approximately $11,700
        for
        the fiscal year ending February 28, 2006




*-
          67
          -*










**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
      11:  RELATED
      PARTY TRANSACTIONS, continued





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








NOTE
      12 -  SEGMENT
      INFORMATION





During
      the fiscal years ending February 28, 2006 and 2005, the Company had foreign
      assets in China. The following geographic area data for trade revenues is based
      on product or service delivery location, and property, plant, and equipment
      is
      based on physical location.





Net
      revenue from external sources at February 28:





2006
            
            2005United
                States
            
            $
            751,844
            
            $
            341,106China
            
            
            -
            
            
            -$
            751,844
            
            $
            341,106Segment
                assets:2006
            
            
            2005United
                States
            
            $
            1,184,065
            
            $
            543,646China
            
            $
            104,085
            
            $
            50,000$
            1,288,150
            
            $
            593,646




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          68
          -*








**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**








NOTE
      13:  LOSS
      PER
      SHARE





February
                28, 2006
            
            February
                28, 2005Numerator:Net
                loss
            
            $
            (932,456
            )
            $
            (250,423
            )Loss
                available to common stockholders
            
            $
            (932,456
            )
            $
            (250,423
            )Denominator:Weighted
                average shares outstanding (includes both restricted and free trading
                shares)
            
            
            17,969,317
            
            
            11,936,767Basic
                and diluted loss per share
            
            $
            (0.05
            )
            $
            (0.02
            )





Warrants
      to purchase common stock were outstanding during the 2006 fiscal year (see
      Note
      8) but were excluded in the computation of the diluted loss per share because
      their inclusion would have an anti-dilutive effect.




*-
          69
          -*




**SEYCHELLE
        ENVIRONMENTAL TECHNOLOGIES, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of February 28, 2006**


NOTE
            14:  SUBSEQUENT
            EVENTS / RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
  Unaudited
              Subsequent Events
  The
            Company has now signed a product distribution/manufacturing agreement
            that
            incorporates an earlier distribution arrangement with ABMS Health Care
            for India
            with a copy of this agreement attached as an exhibit hereto.
 
 The
            Company purchased certain assets, rights, contracts, EPA registration
            number and
            the Redi-Chlor trademark from Continental Technologies. The terms of
            the
            agreement are attached as an exhibit hereto.
 Restatement
              of Previously Issued Financial Statements
  The
            Company became aware of certain expense reclassifications required in
            its
            previously filed financial statements in the course of responding to
            comments of
            the Securities and Exchange Commission resulting from their review of
            the
            Company’s General Form for Registration of Securities on Form 10. The Company
            also, expanded certain disclosures in the Management, Discussion & Analysis.
            These reclassifications had no effect on previously reported results
            of
            operations or retained earnings (accumulated deficit).
  The
            following is a summary of the effects of the reclassifications on the
            condensed
            consolidated balance sheets as February 28, 2006 as well as the effects of
            these changes on the condensed consolidated statements of operations
            for the
            quarter then ended.
  February
            28, 2006
 
 Condensed
                      Consolidated Balance SheetsAs
                      previously reported
                  
                  Adjustments
                  
                  RestatedTotal
                      assets
                  
                  $
                  1,288,150
                  
                  
                  -
                  
                  $
                  1,288,150Total
                      liabilities
                  
                  
                  941,029
                  
                  
                  -
                  
                  
                  941,029Common
                      stock
                  
                  
                  22,458
                  
                  
                  2,257
                  
                  
                  24,715Additional
                      paid in Capital
                  
                  
                  5,392,533
                  
                  
                  (2,257
                  )
                  
                  5,390,276Additional
                      paid in Capital
                  
                  
                  5,392,533
                  
                  
                  (2,257
                  )
                  
                  5,390,276Total
                      stockholder’s equity
                  
                  
                  347,121
                  
                  
                  -
                  
                  
                  347,121Total
                      liabilities & stockholder’s equity
                  
                  
                  1,288,150
                  
                  
                  -
                  
                  
                  1,288,150
 
    *-
                70
                -*
 
 Fiscal Year Ending February 28, 2006
 
 Condensed
                      Consolidated Statements of OperationsAs
                      previously reported
                  
                  Adjustments
                  
                  RestatedGeneral
                      & administrative expenses
                  
                  
                  (591,557
                  )
                  
                  (1,600
                  )
                  
                  (593,157
                  )Loss
                      on sale of  equipment/vehicle
                  
                  
                  -
                  
                  
                  (30,000
                  )
                  
                  (30,000
                  )Operating
                      expenses
                  
                  
                  (956,309
                  )
                  
                  (31,600
                  )
                  
                  (987,909
                  )Loss
                      from operations
                  
                  
                  (634,599
                  )
                  
                  (31,600
                  )
                  
                  (666,199
                  )Loss
                      on sale of  equipment/vehicle
                  
                  
                  30,000
                  
                  
                  (30,000
                  )
                  
                  -Total
                      other income (expenses)
                  
                  
                  (296,257
                  )
                  
                  30,000
                  
                  
                  (266,257
                  )Net
                      loss before income taxes
                  
                  
                  (930,856
                  )
                  
                  (1,600
                  )
                  
                  (932,456
                  )Income
                      taxes
                  
                  
                  (1,600
                  )
                  
                  1,600
                  
                  
                  -Net
                      loss
                  
                  
                  (932,456
                  )
                  
                  -
                  
                  
                  (932,456
                  )
  *-
            71
            -*





**ITEM
      8.** **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 Company’s audit committee dismissed 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
      dismissal 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
      8A.**  **Controls
      and Procedures**





(a) Evaluation
      of
      Disclosure Controls and Procedures. Our Chief Executive Officer and Chief
      Financial Officer have evaluated the effectiveness of our disclosure controls
      and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end
      of the period covered by this annual report (the “Evaluation Date”). During
      the fiscal year ended February 28, 2006, the Company attempted to establish
      disclosure controls and procedures to ensure that material information relating
      to the Company, including its consolidated subsidiaries, is made known to the
      officers who certify the Company’s financial reports and to other members of
      senior management and the Board of Directors. As the Company has not hired
      a
      full time internal accountant, the Company has concluded, as of the Evaluation
      Date, that our disclosure controls and procedures were not effective in ensuring
      that all information required to be disclosed in reports that we file or
      submit


under
      the
      Exchange Act was available within the time periods specified in the Securities
      and Exchange
      Commission rules and forms.





(b) Management’s
      Report on Internal Control Over Financial Reporting **.** Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as such term is defined in Exchange Act
      Rules 13a-15(f). Under the supervision and with the participation of our
      management, including our principal executive officer and principal financial
      officer, we conducted an evaluation of the effectiveness of our internal control
      over financial reporting based on the framework in *Internal
      Control - Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission. Based
      on
      our evaluation under the framework in *Internal
      Control - Integrated Framework,* our
      management concluded that our internal control over financial reporting was
      not
      effective in ensuring that all information required to be disclosed in reports
      that we file or submit under the Exchange Act was available within the time
      periods specified in the Securities and Exchange Commission rules and forms in
      our
      financial statements as of February 28, 2006.





(c) Material
      Weakness in Internal Control over Financial Reporting. A material weakness
      is a
      control deficiency, or combination of control deficiencies, that results in
      more
      than a remote likelihood that a material misstatement of the annual or interim
      financial statements will not be prevented or detected. Management has concluded
      that as of February 28, 2006, the Company did not maintain effective controls
      over the preparation, review, presentation and disclosure of amounts included
      in
      our Consolidated Balance Sheet, Consolidated Statements of Operations and
      Consolidated Statement of Cash Flows and the related footnotes. Specifically
      the
      Company did not timely reconcile various accounts including inventory, fixed
      assets and other accounts, and were required to make adjustments during the
      audit process. In addition, the Company was not applying appropriate accounting
      principles with respect to impaired assets and was required to make adjustments
      during the audit process for both valuation and presentation. As a result,
      the
      Company was not able to timely report its regulatory filings. These control
      deficiencies could result in a misstatement of the Company’s accounts that would
      result in a material misstatement to the Company’s presentation and disclosure
      that would not be prevented or detected. Accordingly, management has concluded
      that these control deficiencies constitute a material weakness.


*-
          72
          -*








(d) Remediation
      Plan. The remediation plan the Company has implemented provides for enhanced
      procedures which include improved training and review processes to ensure proper
      preparation, review, presentation, and disclosure of amounts included in its
      balance sheet, operations statement and statement of cash flows. Accordingly,
      management believes it has improved the design and effectiveness of its internal
      control over financial reporting; however, not all of the newly designed
      controls have operated for a sufficient period of time to demonstrate operating
      effectiveness. Therefore, management will continue to monitor and assess these
      control procedures to ascertain if the material weakness discussed above has
      been remediated. To fully implement these control procedures, the Company is
      currently in the process of locating an internal accountant.


.


(e) Changes
      in
      Internal Controls over Financial Reporting. During the most recent fiscal year,
      there have been several significant changes in our internal controls over
      financial reporting or in other factors that have materially affected, or are
      reasonably likely to material affect our internal controls over financial
      reporting.





During
      July 2006, the Company hired an internal accountant with the goal of
      strengthening its disclosure controls and procedures.





In
      connection with hiring an internal accountant, the Company began to enhance
      procedures, which included improved training and review processes to ensure
      proper preparation, review, presentation, and disclosure of amounts included
      in
      its financial statements. Accordingly, the Company’s management believed it had
      improved the design and effectiveness of its internal control over financial
      reporting; however, not all of the newly designed controls have operated for
      a
      sufficient period of time to demonstrate operating effectiveness.




The
      Company continues to aggressively address the aforementioned
      problems.


*-
          73
          -*


**PART
      III**





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





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





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





Our
      directors have served and will serve in such capacity until the next annual
      meeting of our shareholders
      and until there successors have been elected and qualified. The officers serve
      at the discretion of our directors. The Board of Directors as a whole serves
      as
      the audit committee and Mr. Place is the financial expert. There are no family
      relationships among the Directors or Officers of the Company. None of the
      Directors have been involved in the types of litigation specified in Item 401d
      of Regulation S-B.





**Biographies
      of Our Executive Officers and Directors**





Carl
      Palmer .
      Mr.
      Palmer has been the President, CEO and a director of the Company since January
      1998. He is the founder of our Company, innovator of the complete line of
      Seychelle water filtration products and primary spokesperson worldwide. He
      is an
      internationally recognized expert in the field for over 35 years and pioneered
      the development of the reverse osmosis (RO) home and office pure water business
      in the 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.








*-
          74
          -*





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 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.





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





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





To
      the
      Company’s knowledge, based solely on its review of the copies of such reports
      furnished to the company and written representations that no other reports
      were
      required during the fiscal year ended February 28, 2006, all Section 16(a)
      filing requirements applicable to its officers, directors and greater than
      10%
      beneficial owners were complied with.




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





On
      May
      20, 2006, the Board of Directors of the Company adopted the Code of Ethics
      for
      Chief Executive Officer and Senior Financial Officers.





**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.


*-
            75
            -*








**ITEM
      9B. Other Information**




None.







**ITEM
      10.** **Executive
      Compensation.** ****





The
      following table sets forth the Summary Compensation Table for the Chief
      Executive Officer and the compensated executive officers with salaries in excess
      of $100,000 per annum who were serving as executive officers at the end of
      the
      last three completed fiscal years. Compensation does not include minor
      business-related and other expenses paid by us. Such amounts in the aggregate
      do
      not exceed $10,000.





**Summary
      Compensation Table**





Annual
                Compensation
            Long
                Term CompensationAwards
            PayoutsRestricted
            AllName and
            
            Salary
            Annual
            Other
                Stock
            
            LTIP
            OtherPrincipal/
              Positions
            Fiscal
                Year
              Ending
            Compensation
                ($)(2)
            Bonus
                ($)
            Compensation
                ($)(1)(3)
            
            Award(s)
            SecuritiesCarl
                Palmer
            2006
            $10,000
                (2)President
                & CEO
            2005
            $10,000
                (2)Director
            2004
            $10,000
                (2)Richard
                Parsons
            2006
            
            
            $44,203
            (3)(5)(7)
            
            $77,595
            (4)(6)Executive
                VP*
            2005
            
            
            $9,400
            (3)
            
            $11,908
            (4)Director
                (1)
            2004James
                Place
            2006
            
            
            $9,400
            (3)
            
            $70,944
            (4)(6)COO*
            2005
            
            
            $9,400
            (3)
            
            $4,584
            (4)Director
                (1)
            2004






(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, which are scheduled to be 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 two-year vesting period.




(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. Warrants vest equally
      over the period 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 two-year vesting period.


*-
          76
          -*








(6)
During
      March 2005, Mr. Parsons was granted 316,312 shares of restricted common stock,
      which are scheduled to be 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 two-year vesting period.




(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 into 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
      11.** **Security
      Ownership of Certain Beneficial Owners and Management** **.**





The
      following sets forth the number of shares of our $0.001 par value Common Stock
      beneficially owned, including instruments stock warrants, etc. that are issuable
      within sixty days from the filing of this document, by (i) each person who,
      as
      of November 30, 2006, was known by us to own beneficially more than five percent
      (5%) of our Common Stock; (ii) our individual directors and (iii) our officers
      and directors as a group. As of December 10, 2006 there were a total of
      25,103,211 shares of Common Stock issued and outstanding and 6,000,000 vested
      warrants.


*-
          77
          -*








NAME
                AND ADDRESS
            AMOUNT
                AND NATURE OF
            PERCENT
                OFOF
                BENEFICIAL OWNER
            BENEFICIAL
                OWNERSHIP (1)(2)(4)
            CLASSThe
                TAM Irrevocable Trust
            12,725,578
                (3)
            40.9%4012
                S. Rainbow #K111Las
                Vegas, NV 80103-2012Shawn
                Lampman
            3,200,000
            10.3%2345
                Calico CreekLas
                Vegas, NV 89135FTS
                Worldwide Corp.
            1,320,009
            4.2%24
                Route De Malagnou1208
                Geneva SwitzerlandBruce
                Deifik
            1,080,000
            3.5%1660
                Lincoln AvenueDenver,
                CO 80264Lincoln
                Meadows Associates LLP
            360,000
            1.2%410
                17thStreet, 22ndFloorDenver,
                CO 80202Carl
                Palmer
            -0-
            -0-251
                Jeanell Dr., Ste 3Carson
                City, NV 89703Richard
                Parsons
            1,483,711
            4.8%251
                Jeanell Dr., Ste 3Carson
                City, NV 89703James
                Place251
                Jeanell Dr., Ste 3Carson
                City, NV 89703
            955,000
            3.1%All
                officers and directorsAs
                a Group (three persons)
            2,438,711
            7.8%








(1)





(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.


*-
          78
          -*








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





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








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





Effective
      December 1, 2001, the Company entered into an employment agreement with Carl
      Palmer, the President of the Company. The agreement is for five years and
      provides for a salary of $10,000 per year plus one percent of the net after
      tax
      profits of the Company. The agreement shall be automatically renew 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. These individuals are
      considered employees. As consideration for services to be rendered, the Messrs.
      Parsons and Place received 480,000 restricted shares of the Company’s common
      stock. The common shares are to be distributed in equal installments commencing
      on December 1, 2004, 2005 and 2006. 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 two-year
      vesting period. The Company has recorded amortization of approximately $75,000
      and $18,800 for the fiscal years ending February 28, 2006 and 2005
      respectively.





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 and $504,800 from the TAM Irrevocable Trust in which Cari Beck,
      is
      the trustee as well as a daughter of Carl Palmer an officer and Board member.
      These advances bear interest at 10 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, for interest during the period March 1, 2002 through
        February 28, 2005. The restricted common shares were distributed during the
        first quarter of the fiscal year ending February 28, 2006. The fair market
        value
        of the restricted shares was estimated at $228,000.


On
      March
      29, 2005, the Company expanded the consulting agreement with Mr. Parsons to
      provide management-consulting services for the Company. As consideration for
      services to be rendered, the consultant received 316,312 restricted shares
      of
      the Company’s common stock. The common shares are to be distributed in equal
      installments commencing on December 1, 2004, 2005 and 2006. The fair market
      value of the restricted shares 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
      two-year vesting period. The Company has recorded amortization of approximately
      $26,400 and $8,800 for the fiscal years ending February 28, 2006 and 2005,
      respectively.




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          -*


On
      March
      29, 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
      1,000,000 warrants redeemable into restricted shares of the Company’s stock. The
      warrants vest 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 two-year
      vesting period. The Company has recorded amortization of approximately $18,400
      and $6,100 for the fiscal years ending February 28, 2006 and 2005,
      respectively.





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 vest 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 the
      two-year vesting period. 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 into
      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. As further
      consideration for services to be rendered, the consultants were granted 500,000
      warrants redeemable into 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 Messr. 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.





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          -*


**ITEM
      13.**  **EXHIBITS,
      LIST**




**(a)
      Exhibits**





Exhibit
                No.
            Description2A*
            Plan
                of Exchange between Seychelle Environmental Technologies, Inc. and
                Seychelle Water Technologies, Inc. dated January 30, 1998 as filed
                with
                Form 10-SB 12 G on February 8, 2000.3A*
            Articles
                of Incorporation dated January 23, 1998 as filed with Form 10-SB
                12 G on
                February 8, 2000.3B*
            Articles
                of Merger of Royal Net, Inc. into Seychelle Environmental Technologies,
                Inc as filed with Form 10-SB 12 G on February 8, 2000.3C*
            Amendment
                to Articles of Incorporation re: Series "A" Preferred Stock as of
                January
                31, 1998 as filed with Form 10-SB 12 G on February 8,
                2000.3D*
            Amendment
                to Articles of Incorporation re: Series "AA" Preferred Stock as of
                June 5,
                1998 as filed with Form 10-SB 12 G on February 8, 2000.3E*
            Amendment
                to Articles of Incorporation re: Series "AAA" Preferred Stock as
                of
                February 18, 1999 as filed with Form 10-SB 12 G on February 8,
                2000.3F*
            Bylaws
                as filed with Form 10-SB 12 G on February 8, 2000.10A*
            Purchase
                Agreement with Aqua Vision as filed with Form 10-SB 12 G on February
                8,
                2000.10B*
            Amended
                Purchase Agreement with Aqua Vision as filed with Form 10-SB 12 G
                on
                February 8, 2000.10C*
            2000
                Stock Compensation Plan I, dated July 1, 2000 as filed with Registration
                Statement on Form S-8 on August 31, 2000.10D*
            2002
                Stock Compensation Plan I, dated February 12, 2002 as filed with
                Registration Statement on Form S-8 on February 27,
                2002.10E*
            Purchase
                Agreement with Aqua Gear as filed with Annual Report on Form 10-KSB
                on
                June 14, 2002.10F*
            Employment
                Contract with Carl Palmer as filed with Annual Report on Form 10-KSB
                on
                June 14, 2002.10G*
            Management
                Consulting Contract with Richard Parsons10H*
            Management
                Consulting Contract with James Place10I*
            Joint
                Venture Agreement with Huanghua Plastic Co. Ltd. dated September
                1,
                200510J*
            ABMS
                Health Care Pvt. Ltd. Distribution Rights Agreement dated April 1,
                200610K*
            Confident,
                Inc. Exclusive Distribution Rights Agreement dated January 1,
                200610L*
            Continental
                Technologies. Inc., Purchase Agreement dated April 26,
                2006


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          81
          -*





23.1**
            Auditor’s
                Consent23.2**
            Auditor’s Consent31.1**
            Certification
                of the Chief Executive Officer pursuant to Rule 13a-14(a)(Section
                302 of the Sarbanes-Oxley Act of 2002)31.1**
            Certification
                of the Chief Financial Officer pursuant to Rule 13a-14(a)(Section
                302 of the Sarbanes-Oxley Act of 2002)32.1**
            Certification
                of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350(Section
                906 of the Sarbanes-Oxley Act of 2002)32.2**
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C.ss.1350(Section
                906 of the Sarbanes-Oxley Act of 2002)99*
            Code
                of Ethics for Chief Executive Officer and Senior Financial
                Officers





___________________




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





**
      Attached hereto





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





**1)
      Audit Fees & Audit-Related Fees**





During
      fiscal year ending February 29, 2004, there were no fees billed associated
      with
      the examination of financial statements.





During
      fiscal year ending February 28, 2005, there were no fees billed associated
      with
      the


examination
      of financial statements.





During
      fiscal year ending February 28, 2006, there were no fees billed associated
      with
      the


examination
      of financial statements.





**2)
      Tax Fees**





During
      fiscal year ending February 29, 2004, there were no fees billed associated
      with
      the preparation of tax filings.





During
      fiscal year ending February 28, 2005, there were no fees billed associated
      with
      the preparation of tax filings.





During
      fiscal year ending February 28, 2006, there were no fees billed associated
      with
      the preparation of tax filings.








**3)
      All Other Fees**





During
      fiscal year ending February 29, 2004, there were no other fees billed by the
      Company’s principal accountant for services.





During
      fiscal year ending February 28, 2005, there were no other fees billed by the
      Company’s principal accountant for services.





During
      fiscal year ending February 28, 2006, there were no other fees billed by the
      Company’s principal accountant for services.


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          82
          -*







**Audit
      committee’s pre-approval policies and procedures**





Currently
      the full Board of Directors acts as an audit committee .





**Percentage
      of hours expended**





The
      amount of hours expended on the principal accountant’s engagement to audit the
      registrant’s financial statements for the most recent fiscal year that were
      attributed to work performed by persons other than the principal accountant’s
      full-time, permanent employees was less than 50%.








*-
          83
          -*


**SIGNATURES**





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




**SEYCHELLE
                ENVIRONMENTAL TECHNOLOGIES, INC.**Date: February
              23, 2007
            By:
            /s/ Carl
              PalmerCarl Palmer
              Director, Chief Executive Officer and President






Date: February
              23, 2007
            By:
            /s/ Jim
              PlaceJim Place
              Director and Chief Financial Officer











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




/s/ Carl
              PalmerDirector, Chief Executive Officer and
                President
              
              February 23, 2007/s/  Jim PlaceDirector and Chief Financial
                Officer
              
              February 23, 2007


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          84
          -*