Registration Statement on Form S-1 - Solari

<strong>Registration</strong> <strong>Statement</strong> on Form S-1
Table of Contents
http://www.sec.gov/Archives/edgar/data/1318605/000119312510017054/ds1.htm#toc51863_17
2/18/10 10:17 AM
the issuance of equity, equity-related or debt securities or through obtaining credit from government or financial institutions. This
capital will be necessary to fund our ongoing operations, continue research, development and design efforts, expand our network of
Tesla stores and services centers, improve infrastructure, and introduce new vehicles. We cannot be certain that additional funds will
be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our operations
and prospects could be negatively affected. For example, during the economic downturn of 2008, we had difficulty raising the
necessary funding for our operations and, as a result, in the quarter ended December 31, 2008 we had to lay off approximately 60
employees and curtail our expansion plans. Additionally, under our DOE Loan Facility, we face restrictions on our ability to incur
additional indebtedness, and in the future may need to obtain a waiver from the DOE in order to do so. We may not be able to obtain
such waiver from the DOE which may harm our business. Future issuance of equity or equity-related securities will dilute the
ownership interest of existing stockholders and our issuance of debt securities could increase the risk or perceived risk of our
company.
If our vehicles fail to perform as expected, our ability to develop, market and sell our electric vehicles could be harmed.
Our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or that may require
repair. For example, our vehicles use a substantial amount of software code to operate. Software products are inherently complex and
often contain defects and errors when first introduced. While we have performed extensive internal testing, we currently have a very
limited frame of reference by which to evaluate the performance of our Tesla Roadster in the hands of our customers and currently
have no frame of reference by which to evaluate the performance of our Tesla Roadster after several years of customer driving. We
have no frame of reference by which to evaluate our Model S upon which our business prospects depend. There can be no assurance
that we will be able to detect and fix any defects in the vehicles prior to their sale to consumers. We previously experienced a product
recall in May 2009 after we determined that a condition caused by insufficient torquing of the rear inner hub flange bolt existed in
some of our Tesla Roadsters, as a result of a missed process during the manufacture of the Tesla Roadster “glider,” which is the
partially assembled Tesla Roadster that does not contain our electric powertrain. We may experience additional recalls in the future,
which could adversely affect our brand in our target markets and could adversely affect our business, prospects and results of
operations. Our electric vehicles, including the Tesla Roadster and Model S, may not perform consistent with customers’ expectations
or consistent with other vehicles currently available. For example, our electric vehicles may not have the durability or longevity of
current vehicles, and may not be as easy to repair as other vehicles currently on the market. Any product defects or any other failure of
our performance electric vehicles to perform as expected could harm our reputation and result in adverse publicity, lost revenue,
delivery delays, product recalls, product liability claims, harm to our brand and reputation, and significant warranty and other
expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.
We have very limited experience servicing our vehicles and we are using a different service model from the one typically used in
the industry. If we are unable to address the service requirements of our existing and future customers our business will be
materially and adversely affected.
If we are unable to successfully address the service requirements of our existing and future customers our business and prospects
will be materially and adversely affected. In addition, we anticipate the level and quality of the service we provide our Tesla Roadster
customers will have a direct impact on the success of the Model S and our future vehicles. If we are unable to satisfactorily service
our Tesla Roadsters customers, our ability to generate customer loyalty, grow our business and sell additional Tesla Roadsters as well
as Model S sedans could be impaired.
We have very limited experience servicing our vehicles. As of December 31, 2009 we had sold only 937 Tesla Roadsters to
customers, primarily in the United States and Europe. We do not plan to begin production of any Model S vehicles until 2012, and do
not have any experience servicing these cars as they do not exist
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