WARRANTY RESERVE

6 Months Ended

Aug. 31, 2014

Notes to Financial Statements

WARRANTY RESERVE

The Company accrues for estimated future warranty costs by establishing a reserve of 2% of fiscal year wind turbine sales and tower sales. The reserve is reduced over the five year warranty period as follows:

Year 1	0.1%
Year 2	0.3%
Year 3	0.4%
Year 4	0.5%
Year 5	0.7%
Total Warranty Reserve as  a % of Sales	2.0%

During the August period, we elected to take an additional one-time reserve related to a quality issue. We are currently estimating the associated expense at $300,000. Warranty reserve balances were as follows at August 31, 2014 and February 28, 2014:

	August 31, 2014		February 28, 2014
FY 2011	$	9,464	$	16,223
FY 2012		41,297		55,063
FY 2013		64,947		79,343
FY 2014		72,001		38,948
FY 2015		317,430		0
Reserve balance	$	505,139	$	189,577