<str<strong>on</strong>g>Registrati<strong>on</strong></str<strong>on</strong>g> <str<strong>on</strong>g>Statement</str<strong>on</strong>g> <strong>on</strong> <strong>Form</strong> S-1 http://www.sec.gov/Archives/edgar/data/1318605/000119312510017054/ds1.htm#toc51863_17 12 2/18/10 10:17 AM Page 30 of 300
<str<strong>on</strong>g>Registrati<strong>on</strong></str<strong>on</strong>g> <str<strong>on</strong>g>Statement</str<strong>on</strong>g> <strong>on</strong> <strong>Form</strong> S-1 Table of C<strong>on</strong>tents RISK FACTORS http://www.sec.gov/Archives/edgar/data/1318605/000119312510017054/ds1.htm#toc51863_17 2/18/10 10:17 AM Investing in our comm<strong>on</strong> stock involves a high degree of risk. You should carefully c<strong>on</strong>sider the following risks and all other informati<strong>on</strong> c<strong>on</strong>tained in this prospectus, including our c<strong>on</strong>solidated financial statements and the related notes, before investing in our comm<strong>on</strong> stock. The risks and uncertainties described below are not the <strong>on</strong>ly <strong>on</strong>es we face. Additi<strong>on</strong>al risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that may adversely affect us and our prospects materially. If any of the following risks materialize, our business, prospects, financial c<strong>on</strong>diti<strong>on</strong> and operating results could be materially harmed. In such case, the price of our comm<strong>on</strong> stock could decline, and you may lose some or all of your investment. Risks Related to Our Business and Industry Our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of your investment. You must c<strong>on</strong>sider the risks and difficulties we face as an early stage company with limited operating history. If we do not successfully address these risks, our business, prospects, operating results and financial c<strong>on</strong>diti<strong>on</strong> will be materially and adversely harmed. We were formed in July 2003. We began delivering our first performance electric vehicle, the Tesla Roadster, in early 2008, and as of December 31, 2009 we had <strong>on</strong>ly sold 937 producti<strong>on</strong> vehicles to customers, almost all of which were sold in the United States and Europe. Our revenues were approximately $14.7 milli<strong>on</strong> for the year ended December 31, 2008 and approximately $93.4 milli<strong>on</strong> for the nine m<strong>on</strong>ths ended September 30, 2009. We have a very limited operating history <strong>on</strong> which investors can base an evaluati<strong>on</strong> of our business, operating results and prospects. To date we have derived our revenues principally from sales of the Tesla Roadster and related sales of zero emissi<strong>on</strong> vehicle credits, and to a lesser extent <strong>on</strong> products and services related to electric powertrain sales. We intend in the l<strong>on</strong>ger term to derive substantial revenues from the sales of our planned Model S sedan electric vehicle which is at an early stage of development and which we do not expect to be in producti<strong>on</strong> until 2012. We have no operating history with respect to the Model S electric vehicle and have <strong>on</strong>ly recently begun the comp<strong>on</strong>ent procurement process for the Model S, which limits our ability to accurately forecast the cost of the vehicle. In additi<strong>on</strong>, we have not yet completed the site selecti<strong>on</strong> process for the locati<strong>on</strong> of our manufacturing facility to produce such vehicles, finalized the design or completed our engineering, manufacturing or comp<strong>on</strong>ent supply plans for the Model S. In additi<strong>on</strong>, to date our powertrain sales and powertrain research and development compensati<strong>on</strong> have been exclusively generated under arrangements with Daimler AG, or Daimler, for the development and sale of a battery pack and a charger for Daimler’s Smart fortwo electric vehicle. Blackstar Investco LLC, or Blackstar, an affiliate of Daimler, holds more than 5% of our outstanding capital stock. Other than our arrangement with Daimler, we have not entered into a development or sales agreement for our electric powertrain business. There are no assurances that we will be able to secure future business with Daimler. It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial positi<strong>on</strong> could be materially affected. In additi<strong>on</strong>, our revenues to date have included amounts we receive from selling zero emissi<strong>on</strong> vehicle, or ZEV, credits to other automobile manufacturers, pursuant to certain state regulati<strong>on</strong>s. We have entered into an agreement with an automobile manufacturer for the sale of the ZEV credits that we earn from the sale of vehicles that we manufactured between January 1, 2009 and December 31, 2009, and we have until June 30, 2010 to sell these ZEV credits under the agreement. We are currently negotiating to extend this agreement for vehicles manufactured in 2010 and 2011. As of December 31, 2009, we had sold credits for 340 vehicles under this agreement and for the year ended December 31, 2008 and the nine m<strong>on</strong>ths ended September 30, 2009, we recognized revenue from the sale of ZEV credits of $3.5 milli<strong>on</strong> and $7.6 milli<strong>on</strong>, respectively. We may not be 13 Page 31 of 300
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