COMMITMENTS AND CONTINGENCIES

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

COMMITMENTS AND CONTINGENCIES

NOTE 10:    COMMITMENTS AND CONTINGENCIES

The Company’s office and production facility leases expire in June 2014.  All three leases are at a monthly cost of $3,622, $4,954 and $4,566, respectively. Total rent expense amounted to $106,335 and $105,506 for the fiscal years ended February 29, 2012 and February 28, 2011, respectively.  The Company also has operating leases for certain equipment at a monthly cost of approximately $285.

Future minimum base lease payments are as follows:

Fiscal Year Ending
February 28,	Amount
2013		$	165,011
2014			169,592
2015			54,850
Total		$	389,453

Legal Proceedings

In the case titled Letty Garcia v. Carl Palmer; Seychelle Environmental Technologies Inc., et, al., brought in the Superior Court for the State of California, San Diego County District, The court found against the Company in May, 2012 for approximately $157,000. This amount has been reflected in the February 29, 2012 consolidated financial statements. The Superior Court had previously garnished approximately $303,000 of the Company’s cash and deposited it in an escrow account out of control of the Company. The court finding has reduced this restricted cash amount to $146,081 as of February 29, 2012. The Company anticipates this balance being returned to it. The Company has evaluated the ruling and has appealed the verdict.

There is an additional unrelated lawsuit from a former employee of the Company regarding a claim of wrongful termination based on discrimination.  The Company is vigorously contesting the claim for $280,000.  It is too early to make an opinion as to whether the Company prevails. Accordingly, there has been no provision established under FASB ASC Topic 450, Contingencies for this matter.

Otherwise, as of February 29, 2012 we know of no other legal proceedings pending or threatened or judgments entered against the Company or any of our directors or officers in their capacity as such.

Significant Agreements

In June 2002 the Company entered into a license agreement for a product known as the “Hand Held Pump Technology.”  The Company licensed all proprietary rights associated with this technology.  The Company will pay a 2% royalty on its gross sales resulting from use of the technology during the term of the license agreement. The license agreement was for an initial term of five years, with five successive five-year renewals.  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 has commenced marketing the Hand Held Pump as part of its Aqua Gear product line to the United States sporting goods industry. During the years ended February 29, 2012 and February 28, 2011 the Company paid $-0- in license fees.

During July 2006, the Company signed a second exclusive license agreement for a patent and ownership of the trademark Aqua Gear. The Company will pay a 2% royalty on net sales resulting from use of this technology up to $120,000, and 1% thereafter. The license agreement shall continue indefinitely unless terminated due to a default or breach of the agreement. Products affected include all Aqua Gear trademarked filter bottles and flip up bottles sold in the product line.  As of the date of this document, approximately $30,300 in royalties has been paid under these license agreements. During the years ended February 29, 2012 and February 28, 2011 the Company paid $-0- in license fees.

During April 2006, the Company issued 50,000 common shares with an approximate value of $16,100 for the Redi Chlor brand name, trademark and the use of the EPA Registration Number 55304-4-7126. During the fiscal year ended February 28, 2007, the Company commenced selling the Redi Chlor brand name water chlorine tablets to consumers, dealers, distributors and manufacturers. In connection with this agreement, the Company is also obligated to remit a 10% commission on net sales, as defined, of the existing product, or any new products sold directly by the Company, and 10% on any product sold by the counterparty on behalf of Seychelle.  The agreement is for the life of the Company.  During the years ended February 29, 2012 and February 28, 2011 the Company paid $-0- in license fees.