Further, the Company is facing some uncertainty regarding the resolution of a phenomenon occurring in some of the Company’s previously installed EVSEs which causes overheating, and in certain rare cases melting, of the connector plug that connects the EVSE to the electric vehicle when charging.
The Company, along with certain automotive original equipment manufacturers (“OEMs”) and equipment suppliers, has been actively evaluating the issue in an attempt to determine the cause and to address the problem. Even though a root cause for the observed phenomenon is yet to be definitively verified, in the interim, on August 9, 2013, the Company commenced the reduction of the maximum power delivered by certain of the EVSEs, which reduction has been shown in limited laboratory test to reduce the temperature rise in the connector plug to acceptable levels.
The Company continues to discuss with the parts supplier of the connector plug a plan of action which would require the parts supplier to pay to replace either all the connector plugs in its existing EVSE units or those connector plugs identified to be problematic. At this time, the Company cannot assure you that negotiations will result in the parts supplier agreeing to incur the cost of such remediation. Accordingly, the Company may have to incur such costs and expenses in the future.
In addition, some OEMs have notified the Company that they are considering communicating to their customers and other parties to advise them not to use the Company’s EVSEs because of the connector plug issue if the Company does not replace all connector plugs on its approximately 12,000 existing EVSEs in the market. The Company believes such a communication may have a material adverse impact on the near term cash flow and prospects of the Company.