Tesla 2012 Annual Report Download - page 64

Table of Contents
damaged, or we may have to stop or delay production and shipment of our products. In addition, our lease for our Palo Alto facility permits the
landlord to terminate the lease following a casualty event if the needed repairs are in excess of certain thresholds and we do not agree to pay for
any uninsured amounts. We may incur expenses relating to such damages, which could have a material adverse impact on our business,
operating results and financial condition.
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, appropriate sourcing of raw materials, 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.
We are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis
of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which
may adversely affect investor confidence in our company and, as a result, the value of our common stock.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the
effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our
management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has
issued an attestation report on the effectiveness of our internal control over financial reporting.
Complying with Section 404 requires a rigorous compliance program as well as adequate time and resources. We may not be able to
complete our evaluation, testing and any required remediation in a timely fashion. Additionally, if we identify one or more material weaknesses
in our internal control over financial reporting, we may be unable to assert that our internal controls are effective. If we are unable to assert that
our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion
on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which
would have a material adverse effect on the price of our common stock.
Risks Related to the Ownership of our Common Stock
Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from
influencing significant corporate decisions.
As of December 31, 2011, our executive officers, directors and their affiliates beneficially own, in the aggregate, approximately 41.7% of
our outstanding shares of common stock. In particular, Elon Musk, our Chief Executive Officer, Product Architect and Chairman of our Board of
Directors, beneficially owned approximately
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