Tesla 2011 Annual Report Download - page 68

Table of Contents
Additionally, as part of our on-going efforts to improve our financial accounting organization and processes, we have hired several senior
accounting personnel in the United States. We plan to continue to assess our internal controls and procedures and intend to take further action as
necessary or appropriate to address any other matters we identify.
Because of these material weaknesses, there is heightened risk that a material misstatement of our financial statements relating to the years
ended and as of December 31, 2007 was not prevented or detected. While no material weaknesses were identified during the course of our audit
for the years ended December 31, 2010, 2009 and 2008, we cannot assure you that these or other similar issues will not arise in future periods.
To date, the audit of our consolidated financial statements by our independent registered public accounting firm has included a
consideration of internal control over financial reporting as a basis of designing their audit procedures, but not for the purpose of expressing an
opinion on the effectiveness of our internal controls over financial reporting. If such an evaluation had been performed or when we are required
to perform such an evaluation, additional material weaknesses and other control deficiencies may have been or may be identified. Ensuring that
we have adequate internal financial and accounting controls and procedures in place to help produce accurate financial statements on a timely
basis is a costly and time-consuming effort that needs to be evaluated frequently. We will incur increased costs and demands upon management
as a result of complying with the laws and regulations affecting public companies relating to internal controls, which could materially adversely
affect our operating results.
If our suppliers fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be harmed
due to negative publicity.
Our core values, which include developing the highest quality electric vehicles while operating with integrity, are an important component
of our brand image, which makes our reputation particularly sensitive to allegations of unethical business practices. We do not control our
independent suppliers or their business practices. Accordingly, we cannot guarantee their compliance with ethical business practices, such as
environmental responsibility, fair wage practices, and compliance with child labor laws, among others. A lack of demonstrated compliance could
lead us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other
disruptions of our operations.
Violation of labor or other laws by our suppliers or the divergence of an independent supplier’s labor or other practices from those
generally accepted as ethical in the United States or other markets in which we do business could also attract negative publicity for us and our
brand. This could diminish the value of our brand image and reduce demand for our performance electric vehicles if, as a result of such violation,
we were to attract negative publicity. If we, or other manufacturers in our industry, encounter similar problems in the future, it could harm our
brand image, business, prospects, financial condition and operating results.
Risks Related to the Ownership of our Common Stock
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public
companies, which could adversely affect our operating results.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including
costs associated with public company reporting and corporate governance requirements. These requirements include compliance with
Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission (SEC),
and The Nasdaq Stock Market. In addition, our management team will also have to adapt to the requirements of being a public company. We
expect complying with these rules and regulations will substantially increase our legal and financial compliance costs and to make some
activities more time-consuming and costly.
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