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Item 1A. Risk Factors

2024-02-23 compared with 2023-02-24 · 110 added, 146 removed, 472 unchanged (35% of the section changed)

Summary of Risk Factors

The following is a summary of the significant risk factors that we believe are material to our stockholders and prospective stockholders and that should be carefully considered when evaluating our company, our properties and our business:

• Our business depends on the continued growth of online commerce, the commercial and financial activity that our users generate on our platform and the availability and reliability of the Internet in Latin America;

• We operate in a highly competitive and evolving environment;

• We rely on third-party platforms, such as Google Play and Apple app stores, to access our Mercado Libre and Mercado Pago apps;

• Our future success depends on our ability to expand and adapt our operations to meet rapidly changing industry and technology standards in a cost-effective and timely manner;

• The markets in which we operate are rapidly evolving and we may not be able to maintain our profitability;

• We may be liable for or experience reputational damage from the failure of users of our Marketplace to deliver merchandise or make required payments;

• Fraudulent activity by our users could negatively impact our operating results, brand and reputation and cause the use of services to decrease;

• We are subject to consumer trends and could lose revenue if certain items become less popular or if we fail to meet customer demand;

• Manufacturers may limit distribution of their products by dealers, prevent dealers from selling through us or encourage governments to limit e-commerce;

• Our failure or the failure of our partners to manage Mercado Pago users’ funds properly could harm our business;

• We rely on banks, investment funds which acquire Mercado Pago’s receivables and payment processors to fund transactions, and changes to card association fees, rules or practices may adversely affect our business;

• The failure of the financial institutions with which we conduct business may have a material adverse effect on our business, operating results, and financial condition;

• A rise in interest rates may negatively affect our Mercado Pago payment volume;

• Changes in Mercado Pago’s funding mix and ticket mix could adversely affect Mercado Pago’s results;

• Our Mercado Credito solution exposes us to the credit risk of our merchants and consumers, among other risks;

• We face significant risks related to the ongoing reliability of our logistics network and shipping service;

• Failure to successfully operate our fulfillment network may also negatively affect our business;

• Problems that affect our service providers could potentially adversely affect us as well;

• If we are unable to compete effectively for advertising spend, or if our merchants reduce advertising spend, our business and results of operations could be materially harmed;

• We may not realize benefits from recent or future strategic investments, acquisitions of businesses, technologies, services or products despite their costs in cash and dilution to our stockholders;

• We depend on key personnel, the loss of which could have a material adverse effect on us;

• We may have inadequate business insurance coverage, which would require us to spend significant resources in the event of a disruption of our services or other contingency;

• The continuing effects of the COVID-19 pandemic on our business remain uncertain;

• Our debt instruments contain restrictions that limit our flexibility in operating our business, and changes by any rating agency to our outlook or credit rating could negatively affect us;

• The conditional conversion feature of the 2028 Notes, if triggered, may adversely affect our financial condition and operating results;

• We hold and may acquire digital assets that may be subject to volatile market prices, impairment and unique risks of loss;

• Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks;

• There are potential risks related to our loyalty token program and our cryptocurrency buy, hold and sell feature;

• Natural disasters, climate change, geopolitical events, global health epidemics or pandemics and catastrophic events could materially adversely affect our financial performance;

• We are subject to extensive government regulation and oversight.

Failure to comply with existing and future rules and regulations in the jurisdictions in which we operate could adversely affect the operations of one or more of our businesses in those jurisdictions;

• It may be difficult to enforce judgments rendered against us in U.S.

• We could face legal and financial liability upon the sale of items that infringe intellectual property rights of third parties and for information and material disseminated through our platforms;

• We may not be able to adequately protect and enforce our intellectual property rights.

We could potentially face claims alleging that our technologies infringe the property rights of others;

• Any delay or problem with operating or upgrading our existing information technology infrastructure could cause a disruption in our business and adversely impact our financial results;

• We are subject to security breaches or other confidential data theft from our systems, which can adversely affect our reputation and business;

• We may not be able to secure licenses for technologies on which we rely;

• We face the risk of political and economic crises, instability, terrorism, civil strife, labor conflicts, expropriation, corruption and other risks of doing business in emerging markets;

• Latin American governments have exercised and continue to exercise significant influence over the economies of the countries where we operate.

This involvement, as well as political and economic conditions, could adversely affect our business;

• Local currencies used in the conduct of our business are subject to depreciation, volatility and exchange controls;

• E-commerce transactions in Latin America may be impeded by the lack of secure payment methods;

• Provisions of our certificate of incorporation and Delaware law could inhibit others from acquiring us, prevent a change of control, and may prevent efforts by our stockholders to change our management;

• We may require additional capital in the future, and this additional capital may not be available on acceptable terms or at all;

• Shares eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well;

• We cannot guarantee that any share repurchase program will be fully consummated or will enhance stockholder value, and share repurchases could increase the volatility of our stock prices and diminish our cash reserves.

Set forth below is a full description of each of the risks that we believe are material to our stockholders and prospective stockholders.

You should carefully consider the following factors in evaluating our company, our properties and our business.

Risks related to our business and operations

Our business depends on the continued growth of online commerce, the commercial and financial activity that our users generate on our platform and the availability and reliability of the Internet in Latin America.

Online commerce is still a developing market in Latin America.

Our business depends on the continued growth of online commerce and digital financial services, the commercial and financial activity that our users generate on our platforms and the availability and reliability of the Internet in Latin America

Online commerce and digital financial services are still a developing market in Latin America.

A significant portion of our business is based on an Internet platform for commercial and financial transactions in which almost all activity depends on our users and is therefore largely outside of our control.

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The infrastructure for the Internet in Latin America may not be able to support continued growth in the number of Internet users, their frequency of use or their bandwidth requirements.

Given that we operate in a business environment in Latin America that is different than the environment in which other e-commerce companies operate, the performance of such other e-commerce companies is not an indication of our future financial performance.

Given that we operate in a business environment in Latin America that is different than the environment in which other companies providing e-commerce and digital financial services operate, the performance of such other companies is not an indication of our future financial performance.

Availability, transaction speeds, acceptance, interest and use of the Internet across Latin America are all critical to our growth and services and the occurrence of any one or more of the above challenges to Internet usage could have a material adverse effect on our business.

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Further, discrepancies in enforcement of existing laws may enable our lesser known competitors to aggressively interpret those laws without commensurate scrutiny, thereby affording them competitive advantages.

Some of our competitors have been accused of illegal and anticompetitive conduct in markets where we actively compete, making it easier for them to replicate such conducts in Latin American countries where such commercial policies have not yet been put to test before antitrust authorities.

Similarly, some of our competitors have been accused in other jurisdictions of anticompetitive business practices, which they can replicate in jurisdictions and markets where we actively compete, particularly in Latin American countries where antitrust authorities have not yet focused on such commercial practices.

18 | MercadoLibre, Inc.

The global financial services and payments industry is continuously changing and increasingly subject to regulatory supervision and continued examination.

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Moreover, establishing a financial services and payments solution entity in Latin America has proven to be difficult and resource intensive (time and money).

Traditional banking and financial institutions still have significant influence over sectoral regulators, which makes it harder to promote innovative payment solutions and policy changes to adapt regulation to an ever changing and fast growing innovative and disrupting industry.

Traditional banking and financial institutions in Latin America still have significant influence over sectoral regulators and have been relatively successful at influencing the enactment of new regulations that may hinder or restrict the overall success of fintech businesses by imposing unnecessary and cumbersome requirements or otherwise limiting their business models.

This influence makes it harder to promote innovative payment solutions and policy changes to adapt regulation to an ever changing and fast growing innovative and disrupting industry.

We rely on third-party platforms, such as Google Play and Apple app stores, to access our Mercado Libre and Mercado Pago apps

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Apple also forbids the distribution and commercialization of third-party digital goods, thereby prohibiting the development of a digital goods marketplace in iOS in competition with Apple.

Apple and Google’s terms and conditions for in-app purchases of digital goods may cause friction with Mercado Libre’s initiatives for its loyalty program as well as other new projects involving the sale of digital goods.

These limitations may prevent the deployment of initiatives for mobile apps, thereby limiting the range of their overall impact.

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The markets in which we operate are rapidly evolving and we may not be able to maintain our profitability

As a result of the emerging nature and related volatility of the markets and economies in the countries in which we operate, the increased variety of services and products offered on our website and the rapidly evolving nature of our business, it is particularly difficult for us to forecast our revenues or earnings accurately.

As a result of the emerging nature and related volatility of the markets and economies in the countries in which we operate, the increased variety of services and products that we offer and the rapidly evolving nature of our business, it is particularly difficult for us to forecast our revenues or earnings accurately.

Our current and future expense levels are based largely on our investment plans and estimates of future revenues and are, to a large extent, fixed.

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Accordingly, any significant shortfall in revenues relative to our planned expenditures would have an immediate adverse effect on our business, results of operations and financial condition.

19 | MercadoLibre, Inc.

We may be liable for or experience reputational damage from the failure of users of our Marketplace to deliver merchandise or make required payments

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Fraudulent activity by our users could negatively impact our operating results, brand and reputation and cause the use of services to decrease

We are subject to the risk of fraudulent activity on our platforms by our users, including with respect to Mercado Pago fraudulent and illicit sales, money laundering, bank fraud, fraud from means of payment entities, employee fraud and online securities fraud.

We are subject to the risk of fraudulent activity by our users, including fraudulent and illicit sales, money laundering, bank fraud, fraud from means of payment entities, employee fraud and online securities fraud.

Measures to detect and reduce the occurrence of fraudulent activities are complex and require continuous improvement, and there can be no assurance that they will be sufficient to accurately detect, prevent or deter fraud, particularly new and continually evolving forms of fraud.

As our business grows, the cost of remediating for fraudulent activity, including customer reimbursements, may materially increase and could negatively affect our operating results.

In addition, users’ fraudulent or potential illegal activities when using any platform we operate could expose us to civil or criminal liability and could have a material adverse effect on our financial performance, our business or reputation in the future.

In addition, users’ fraudulent or potential illegal activities when using any platform we operate or payment solutions we offer could expose us to civil or criminal liability and could have a material adverse effect on our financial performance, our business or reputation in the future.

We incur losses from claims of customers who did not authorize a purchase, from buyer fraud and from erroneous transmissions.

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Our future revenues depend on continued demand for the types of goods that we sell, that users list on the Mercado Libre Marketplace or that users pay for with Mercado Pago on or off the Mercado Libre Marketplace.

Demand for our products and services can fluctuate significantly for many reasons, including due to perceived availability, consumer trends, seasonality, promotions, product launches, defective products or unforeseeable events, such as in response to natural or man-made disasters, public health crises, extreme weather (including as a result of climate change), geopolitical events, or changes in or uncertainty about macro-economic conditions, which could impact the overall volume of transactions on our platforms.

Demand for our products and services can fluctuate significantly for many reasons, including due to perceived availability, consumer trends, seasonality, promotions, product launches, defective products or unforeseeable events, such as in response to natural or man-made disasters, public health crises (including pandemics), extreme weather (including as a result of climate change), geopolitical events, or changes in or uncertainty about macro-economic conditions, which could impact the overall volume of transactions on our platforms.

A decline in the demand for or popularity of certain items sold through the Mercado Libre Marketplace without an increase in demand for different items could result in reduced revenues.

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These trends may also cause significant fluctuations in our operating results from one quarter to the next.

Although it is difficult to accurately forecast demand, we strive to predict these trends, as overstocking or understocking products we sell could lead to lower sales, missed opportunities, and excessive markdowns, any of which could have a material impact on our business and operating results or reputation.

Failure to accurately forecast demand could significantly affect our revenue and our future growth.

Although it is difficult to accurately forecast consumer trends and demand, we strive to predict these trends, as overstocking or understocking products we sell could lead to lower sales, missed opportunities, and excessive markdowns, any of which could have a material impact on our business and operating results or reputation.

Failure to accurately forecast consumer trends and demand could significantly affect our revenue and our future growth.

Manufacturers may limit distribution of their products by distributors, prevent distributors from selling through us or encourage governments to limit e-commerce

Manufacturers may attempt to enforce minimum resale price maintenance arrangements to prevent distributors from selling on our websites or on the Internet generally, or at prices that would make our site attractive relative to other alternatives.

Increased competition or anti-Internet distribution policies could result in reduced operating margins, loss of market share and diminished value of our brand.

In order to respond to changes in the competitive environment, we may, from time to time, make pricing, service or marketing decisions or acquisitions that may be controversial with and lead to dissatisfaction among some of our sellers, which could reduce activity on our websites and harm our profitability.

20 | MercadoLibre, Inc.

Our failure or the failure of our partners to manage Mercado Pago users’ funds properly could harm our business

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Any failure to maintain necessary controls or to properly manage customer funds could severely reduce customer use of Mercado Pago, and we could be found to be in violation of applicable laws and regulations, be subject to fines or other penalties or forced to cease providing this service.

Mercado Pago offers its users in Argentina and Mexico the option to use the balances stored on their Mercado Pago wallets to invest in low-risk investment funds (money market fund equivalents).

Mercado Pago offers its users in Argentina, Mexico and Chile the option to use the balances stored on their Mercado Pago wallets to invest in low-risk investment funds (money market fund equivalents).

For the purposes of offering such intermediated investment functionality, Mercado Pago entered into diverse contractual relationships with licensed third party brokers and fund managers who serve as the managers of the investment funds and the facilitators of all associated investment services, including but not limited to the execution of investment orders.

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These increased fees increase the operating costs of Mercado Pago, reduce our profit margins from Mercado Pago operations and, to a lesser degree, affect the operating margins of the Mercado Libre Marketplace.

We also offer Mercado Pago prepaid and credit cards in Brazil under the VISA brand, as well as an electronic payment funds card (equivalent to a debit card) in Mexico and Argentina issued under the MasterCard brand.

We also offer Mercado Pago prepaid cards in Brazil and Mercado Pago credit cards in Brazil and Mexico, all under the VISA brand, as well as an electronic payment funds card (equivalent to a debit card) in Mexico and Argentina issued under the MasterCard brand.

If any of these companies were to be unwilling or unable to provide these services to us, or if they are willing to provide these services but at less favorable terms, our business and results of operations would be adversely affected.

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Our ability to replace those instruments on the same or similar terms may be limited under difficult market conditions.

21 | MercadoLibre, Inc.

A rise in interest rates may negatively affect our Mercado Pago payment volume

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Our Mercado Credito solution is offered to certain merchants and consumers, and the financial success of this product depends on the effective management of the credit related risk.

We assess the credit risk of merchants and/or consumers seeking a loan based on a risk model internally developed, among other factors, which may not accurately predict their creditworthiness due to inaccurate assumptions about the particular merchant and/or consumer or the economic environment or limited product history, among other factors.

The accuracy of the risk model and our ability to manage credit risk may also be affected by legal or regulatory changes (e.g., bankruptcy laws and minimum payment regulations), competitors’ actions, changes in consumer behavior, funding resources, changes in the economic environment and other factors.

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We may in the future receive additional requests from sellers requesting reimbursement or threatening legal action against us if we do not reimburse them, the result of which could materially adversely affect our business and financial condition.

22 | MercadoLibre, Inc.

We continue to build new warehouses to manage increasing demand on our logistics solution.

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In addition, changes we make to our current and future work environments may not meet the needs or expectations of our employees or may be perceived as less favorable compared to other companies, which could adversely affect our ability to attract and retain qualified personnel.

Failure to successfully hire, train, manage, and retain sufficient personnel to meet our needs, as well as successfully transition key roles, such as the Chief Financial Officer transition we recently underwent, can be inherently difficult to manage, strain our operations, increase payroll and other costs, and harm our business and reputation.

We may have inadequate business insurance coverage, which would require us to spend significant resources in the event of a disruption of our services or other contingency

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Any business disruption, litigation, system failure or natural or man-made disaster may cause us to incur substantial costs and divert resources, which could have a material adverse effect on our business, results of operation and financial condition.

The continuing effects of the COVID-19 pandemic on our business remain uncertain.

The continuing effects of the pandemic on our business, operations, or financial results remain uncertain and will depend on numerous evolving factors that we cannot predict, including, but not limited to the ongoing duration of the pandemic and its impact on economic activity and consumer behavior.

Consumer behavior changed rapidly during the course of the COVID-19 pandemic.

Our business benefited from the shift from in-store shopping and traditional in-store payment methods (e.g., credit cards, debit cards and cash) towards e-commerce and online payments that was accelerated by the pandemic.

These results, as well as other metrics such as net income and other financial and operating data, may not be indicative of results for future periods and our future operating results may fall below expectations.

As the COVID-19 pandemic winds down in many parts of the world, the extent to which consumer preferences will revert to pre-COVID-19 behaviors is uncertain, and our business, financial condition and results of operations could be adversely impacted.

23 | MercadoLibre, Inc.

Our debt instruments contain restrictions that limit our flexibility in operating our business, and changes by any rating agency to our outlook or credit rating could negatively affect us

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Any of these factors could adversely affect our financial condition and results of operations.

The conditional conversion feature of the 2028 Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the 2028 Notes is triggered, holders of the outstanding 2028 Notes will be entitled to convert the outstanding 2028 Notes at any time during specified periods at their option.

If one or more holders elect to convert their 2028 Notes, we can decide to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

We hold and may acquire digital assets that may be subject to volatile market prices, impairment and unique risks of loss.

In February 2021, we began to use a portion of our cash reserve to purchase digital assets or certain other alternative reserve assets.

We hold and may acquire digital assets that may be subject to volatile market prices and unique risks of loss

We used a portion of our cash reserve to purchase digital assets or certain other alternative reserve assets.

During 2021, we invested an aggregate $30 million in bitcoin and ether (both, cryptocurrencies), and we may continue acquiring and holding digital assets from time to time in the future.

However, in 2022 we have not bought additional cryptocurrencies.

However, in 2023 and 2022, we have not bought additional cryptocurrencies.

The prices of digital assets have been and may continue to be highly volatile, including as a result of various associated risks and uncertainties.

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If we are found to have purchased bitcoin or other digital assets from persons that have used the digital assets to launder money or from persons subject to sanctions, we may be subject to regulatory proceedings and further transactions or dealings in bitcoin or other digital assets may be restricted or prohibited.

Most digital assets ar e currently considered indefinite-lived intangible assets under applicable accounting rules, meaning that any decrease in their fair value below our carrying value for such assets at any time will require us to recognize impairment charges.

This may adversely affect our operating results in any period in which such impairment occurs, which in turn could have a material adverse effect on the market price of our shares.

We do not recognize any increases in fair value while we hold the assets.

The rapidly evolving regulatory landscape with respect to digital assets may subject us to additional costs, such as the implementation of additional and potentially costly controls or other actions.

As intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions, that may result in operational problems or the loss or destruction of private keys needed to access such assets, which may be irreversible and could adversely affect the value of our digital assets and an investment in our Company.

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Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks

We have published an integrated annual impact report, sustainability bond reports in connection with the allocation of proceeds from the sale of our 2.375% Sustainability Notes due 2026 (the “Sustainable Bond”), a Sustainability Bond Framework 2020 (the “Framework”), and a specific analysis of climate related risk factors following the guideline and recommendations of the Task Force on Climate-related Financial Disclosures.

These reports describe, among others, our policies, practices and initiatives across a variety of environmental, social and governance (“ESG”) matters, including our contribution to socio-economic development, diversity, inclusion and financial education, our sustainable development goals and manifesto, and human capital management .

The implementation of these goals and initiatives may require considerable investments, and the goals set forth in these reports are complex and ambitious and subject to contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance.

A s such, we cannot guarantee that we will achieve any of these goals, including, but not limited to, the Company’s intention to allocate the proceeds from the sale of the Sustainable Bond to eligible projects meeting the criteria and within the time frame described in our Framework.

We have published an annual integrated impact report, sustainability bond reports in connection with the allocation of proceeds from the sale of our 2.375% Sustainability Notes due 2026 (the “2026 Sustainability Notes”), a Sustainability Bond Framework 2020 (the “Framework”), and a specific analysis of climate related risk factors following the guideline and recommendations of the Task Force on Climate-related Financial Disclosures.

These reports describe, among others, our policies, practices and initiatives across a variety of environmental, social and governance (“ESG”) matters, including our contribution to socio-economic development, diversity, inclusion and financial education, human capital management and efforts to reduce our environmental impact.

The implementation of these initiatives is complex and subject to contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance, and may require considerable investments.

As such, we cannot guarantee that we will be able to execute any of these initiatives, including, but not limited to, the Company’s intention to allocate the proceeds from the sale of the 2026 Sustainability Notes to eligible projects meeting the criteria and within the time frame described in our Framework.

Further, these efforts may contribute to increased scrutiny from customers, regulators, investors and other stakeholders related to our ESG practices and disclosure.

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Increased ESG related compliance costs for us as well as among Marketplace merchants and vendors and various other parties within our supply chain could result in increases to our overall operational costs.

24 | MercadoLibre, Inc.

Failure or perceived failure to adapt to achieve our goals or commitments, or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners and our stock price.

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There are potential risks to MercadoLibre from the loyalty token program.

Because of the novelty of digital assets, there is potential regulatory uncertainty about the legal and accounting treatment of the tokens issued in connection with the loyalty program in different jurisdictions, which could limit our ability to roll out or continue the program successfully.

If the impact of the program becomes material to our operations, our reported results could be affected by variations in the market price of the token, since the tokens can be used by users as a means of payment on the Mercado Libre Marketplace at their market price at the moment of payment.

While we have taken steps to make the tokens secure, digital assets in the custody of various other custodians have in the past been hacked or lost, and any users of our tokens that in the future may have similar experiences might try to pursue claims against us, which could affect our customer’s confidence on our digital assets and therefore affect our reputation and results of operations.

Our tokens will likely fluctuate in value and, if the loyalty token program is unsuccessful or the tokens otherwise decrease in value, users may try to pursue claims against us.

Because of the novelty of digital assets, there is regulatory uncertainty about the legal and accounting treatment of the tokens issued in connection with the loyalty program in certain jurisdictions, which has and may continue to limit our ability to roll out the program in new jurisdictions or continue it successfully or at all under its current terms.

Such uncertainty could also subject us to regulatory actions or claims.

If the impact of the program becomes material to our operations, our reported results could be affected by variations in the market price of the token, since, under the current terms of the program, the tokens can be sold at the then prevailing market price and users may use the resulting fiat currency to purchase products and services on the Mercado Libre Marketplace.

In addition, while we have taken steps to make the tokens secure, digital assets in the custody of various other custodians have in the past been hacked or lost, and any users of our tokens that in the future may have similar experiences might try to pursue claims against us.

Despite our disclaimer of liability for any loss, damage, claim, cost and/or expense that may arise in connection with the loyalty token program, users may also try to pursue claims against us if the loyalty token program is unsuccessful or the tokens otherwise decrease in value.

Any such claims could affect our customers’ confidence in our digital assets, affecting our reputation and results of operations.

We cannot assure that the loyalty token program will achieve its objectives relating to customer usage and customer loyalty.

We provide our customers the ability to access through our Mercado Pago platform crypto-assets trading and custody services that are rendered by third parties, which allows users to buy, hold and sell certain global cryptocurrencies and stablecoins.

We provide our customers the ability to access through our Mercado Pago platform crypto-assets trading and custody services that are rendered by third parties, which allows users to buy, hold, sell and transfer certain global cryptocurrencies and stablecoins.

We also rely on third party service providers to perform several functions in connection with our loyalty token program.

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These computer-based services are subject to disruption, delay and/or failure, which could cause our users to lose access to our Mercado Pago platform or to the SPs’ services.

Any such technical issues could negatively affect our customers’ confidence in our token and the crypto-assets offering through the SPs and on our business.

The SPs maintain the cryptographic private keys which allow access to the digital wallets where our customers’ token and crypto-assets are held and custodied.

In the event that those private keys are lost, destroyed, unable to be accessed or anyway compromised and no back up of such private keys exists, the SPs will not be able to access the tokens or crypto-assets held by our customers in their custody.

Any such technical issues could negatively affect our customers’ confidence in our loyalty token program and the crypto-assets offering through the SPs and on our business.

The SPs maintain the cryptographic private keys which allow access to the digital wallets where our customers’ token and crypto-assets are held in custody.

The SPs’ failure to safeguard the crypto-assets owned by our customers may result in losses to our customers, which could adversely affect our customers’ confidence in our crypto-assets and on our business.

In addition, the SPs’ failure to maintain necessary controls or safeguard against improper transactions due to process or control oversight could lead to sanctions and reputational harm for the Company.

The regulatory environment concerning digital assets is uncertain and evolving.

Changes in laws and regulations regarding crypto-assets, services that involve a partnership with a custodian and blockchain infrastructure providers, as well as the perception of the market regarding this type of asset, may negatively impact our ability to enable our customers to buy, hold and sell crypto-assets in the future and may adversely affect our business.

The regulatory environment concerning digital assets, including cryptocurrencies and stablecoins, is uncertain and evolving.

Changes in laws and regulations regarding such assets, services that involve a partnership with a custodian and blockchain infrastructure providers, as well as the perception of the market regarding this type of asset, may negatively impact our ability to enable our customers to buy, hold and sell crypto-assets in the future and may adversely affect our business.

Natural disasters, climate change, geopolitical events, global health epidemics or pandemics and catastrophic events could materially adversely affect our financial performance

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weather conditions such as major or extended winter storms, droughts and tornadoes, whether as a result of climate change or otherwise;

geopolitical events;

global health epidemics or pandemics or other contagious outbreaks;

and catastrophic events, such as war, civil unrest, terrorist attacks or other acts of violence, including active shooter situations, acts of vandalism or terrorism, labor or trade disputes, and similar events in countries in which we operate, in which our users are located, or in other areas of the world (such as in Ukraine where armed hostilities currently exist between Ukraine and Russia) could adversely affect our operations and financial performance.

geopolitical events (such as international trade disputes and the ongoing conflicts in Ukraine and the Middle East);

global health epidemics or pandemics or other contagious outbreaks (such as COVID-19 and its variants);

and catastrophic events, such as war, civil unrest, terrorist attacks or other acts of violence, including active shooter situations, acts of vandalism or terrorism, labor or trade disputes, and similar events in countries in which we operate, in which our users are located, or in other areas of the world could adversely affect our operations and financial performance.

Such events could result (whether directly or indirectly) in physical damage to, or the complete loss of, one or more of our facilities, loss or spoilage of inventory, limits on our ability to receive the inventories of third parties efficiently and ship orders to customers, business interruption, the lack of an adequate work force in a market, the unavailability of our platforms to our users, changes in the purchasing patterns of consumers and in consumers’ disposable income, the temporary or long-term supply chain and logistics disruption, the disruption of critical infrastructure and communication systems, banking systems, utility services or energy availability.

25 | MercadoLibre, Inc.

Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable.

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Internet Services Regulation

There is uncertainty in many of the countries where we operate with respect to the liability of Internet service providers, the application of existing regulations to our business as they relate to, or the enactment of new regulations relating to, issues such as e-commerce, electronic or mobile payments, information requirements for Internet providers, data collection, data protection, on line privacy, cryptocurrencies, artificial intelligence and machine learning (e.g.

There is uncertainty in many of the countries where we operate with respect to the liability of Internet service providers, the application of existing regulations to our business as they relate to, or the enactment of new regulations relating to, issues such as e-commerce, electronic or mobile payments, information requirements for Internet providers, data collection, data protection, data security, data localization, online privacy, cryptocurrencies, artificial intelligence and machine learning (e.g.

in relation to risk analysis) governing anti-money laundering, taxation, reporting obligations, consumer protection and businesses.

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These complaints are small as a percentage of our total transactions, but they could become large in aggregate (absolute) numbers over time.

As far as taxation and the digital economy is concerned, many taxing jurisdictions and international organizations are considering changes to tax laws and policies in order to address so-called base erosion and profit shifting.

As far as taxation and the digital economy is concerned, many taxing jurisdictions and international organizations are moving towards the implementation of changes to tax laws and policies in order to address so-called base erosion, profit shifting and other tax challenges arising from the digitalization of the economy.

These discussions aim to support and guide tax reforms that may impact e-commerce and internet based companies, including reforms related to corporate income taxation and also to value added taxes.

In addition, we have a complex corporate structure, with entities that are subject to taxation in multiple jurisdictions, and the management of that structure and the transactions among our entities creates potential tax exposures for us in multiple jurisdictions, including the United States as well as the jurisdictions where our subsidiaries operate.

Further, any changes to, suspension or revocation of, any tax incentive regimes or other tax benefits that we may receive (including tax benefits under the Argentina knowledge-based economy promotional regime), could have a material adverse effect in our business, results of operation and financial position.

Further, any changes to, suspension or revocation of, any tax incentive regimes or other tax benefits that we may receive, including tax benefits under the Argentina knowledge-based economy promotional regime and under the Brazilian social security contribution regime and ICMS (Imposto sobre Circulação de Mercadorias, Serviços de Transporte Interestadual, Intermunicipal e Comunicação) tax incentive benefits, could have a material adverse effect in our business, results of operation and financial position.

26 | MercadoLibre, Inc.

We may receive scrutiny from various governmental agencies under competition laws in the countries where we operate.

Some jurisdictions also provide private rights of action for competitors or consumers to assert claims of anti-competitive conduct.

Some jurisdictions also provide private enforcement actions for competitors or consumers to assert claims of anti-competitive conduct.

Other companies or governmental agencies may allege that our actions violate antitrust or competition laws, or otherwise constitute unfair competition.

Contractual agreements with buyers, sellers, or other companies could give rise to regulatory action, antitrust investigations or litigation.

Also, our business practices could give rise to regulatory action, antitrust investigations or litigation.

For instance, COFECE launched a market study on barriers to competition on the Mexican e-commerce market and issued preliminary findings, conclusions and recommendations regarding different business practices deployed by marketplace operators in Mexico, including MercadoLibre.

For more information, see “Item 1.

Business—Government Regulation—Mexico”.

Contractual agreements and/or our business practices with buyers, sellers, or other companies could give rise to regulatory action, antitrust investigations or litigation.

Such claims and investigations, even if without foundation, typically are very expensive to defend, involve negative publicity and substantial diversion of Management time and effort, and could result in significant judgments against us.

Banking, Money Transmission and Domestic or Cross-Border Electronic Funds Transfer

A number of jurisdictions where we operate have enacted legislation regulating money deposits, transmitters and/or electronic payments or funds transfers.

A number of jurisdictions where we operate have enacted legislation regulating money deposits, transmitters, lending activity and/or electronic payments or funds transfers.

We are subject to regulation in Brazil, Argentina, Mexico, Chile, Peru, Colombia and Uruguay, that require or would require us to obtain licenses or regulatory authorizations to operate certain services provided by Mercado Pago and that would subject us to additional regulatory requirements.

As an authorized or licensed payment services provider, electronic money institution and/or money transmitter in certain jurisdictions where we operate, we are subject to, among other requirements, restrictions with respect to the investment of customer funds, reporting requirements and inspection by regulatory agencies.

As an authorized or licensed payment services provider, electronic money institution, lender and/or money transmitter in certain jurisdictions where we operate, we are subject to, among other requirements, restrictions with respect to the investment of customer funds, reporting requirements and inspection by regulatory agencies.

Any changes to, or failure to comply with, money services laws or regulations or any tax regulations, or if we engage in an unauthorized banking or financial business, could result in liability, inability to continue doing business with residents of certain countries, changes to our business or regulatory status.

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MercadoLibre’s non-U.S.

subsidiaries are required to comply with U.S.

subsidiaries are required to comply not only with local, but also with U.S.

sanctions in the same way that MercadoLibre is required to comply with such sanctions.

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Laws specifying the scope of liability of providers of online services for the activities of their users through their online service are currently unsettled in most of the Latin American countries where we operate.

For instance, we may be liable for fraud committed by sellers and losses incurred by buyers when purchasing items through our platform.

Our policies prohibit the sale, storage and/or transport of certain items (both on our platform and/or in our fulfillment centers and/or through third party carriers providing services to Mercado Libre) and we have implemented various actions to monitor and exclude unlawful goods and services from our marketplaces, which we continually work to improve.

This regulatory uncertainty may lead us to engage in administrative and judicial proceedings to dispute claims for fraudulent activities committed by sellers, vendors or third-party carriers and losses incurred by buyers when purchasing items through our platform, which may give rise to high litigation or settlement costs and other liabilities, including reputational harm.

Our policies prohibit the sale, storage and/or transport of certain items (both on our platform and/or in our fulfillment centers and/or through third party carriers providing services to Mercado Libre) and we have implemented various actions to monitor and remove unlawful goods and services from our marketplaces, which we continually work to improve.

27 | MercadoLibre, Inc.

However, we are aware that certain goods, such as alcohol, tobacco, firearms, animals, adult material and other goods that may be subject to regulation by local or national authorities of various jurisdictions have been traded by users on the Mercado Libre Marketplace in complete infringement to our policies, bypassing our various security efforts and measures to go undetected.

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Although we are a Delaware corporation, our subsidiaries and most of our assets are located outside of the U.S.

Furthermore, most of our directors, officers and some experts named in this report reside outside the U.S.

Furthermore, most of our directors, officers, and some advisors and experts named in this report reside outside the U.S.

As a result, it may not be possible to effect service of process within the U.S.

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We could face legal and financial liability upon the sale of items that infringe intellectual property rights of third parties and for information and material disseminated through our platforms

We have received in the past, and anticipate that we will receive in the future, complaints alleging that certain items listed or sold through the Mercado Libre Marketplace or Mercado Shops or using Mercado Pago, or delivered by Mercado Envios infringe third-party copyrights, trademarks and/or other IP rights.

Content owners and other IP rights owners have been active in defending their rights against online companies, including us.

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Despite these measures and our efforts to prevent IP infringements, we are not able to prevent all IP rights infringements and some IP rights owners may consider our efforts insufficient.

Mercado Libre was included on the United States Trade Representative’s (USTR) Notorious Markets List for 2020 and the European Commission’s 2020 Counterfeit and Piracy Watch List and was nominated for both lists for the 2021 report.

In February 2022, the Office of the USTR released the 2021 Notorious Markets List Report and removed Mercado Libre from that list, and in December 2022 the European Commission released the 2022 Counterfeit and Piracy Watch List and also removed Mercado Libre from that list.

In October 2022, we were nominated again for the USTR Notorious Markets List 2022 report, but when it was published in February 2023, Mercado Libre was not included.

We anticipate that we may continue to be nominated or included in these and/or any other similar lists, and receive legal claims from content and IP owners alleging violations of their IP rights, which could result in substantial monetary awards, penalties or costly injunctions against us, as well as adversely affect our reputation.

Mercado Libre was included on the United States Trade Representative’s (“USTR”) Notorious Markets List for 2020 and also on the European Commission’s 2020 Counterfeit and Piracy Watch List.

Although we were removed from both watchlists in 2022, we anticipate that we may continue to be nominated or included in these and/or any other similar watchlists.

We have also received, and anticipate that we may continue to receive, legal claims from content and IP owners alleging violations of their IP rights and also from users affected by listing takedowns and account restrictions, which could result in substantial monetary awards, penalties or costly injunctions against us, as well as adversely affect our reputation.

It is also possible that new laws and regulations may be adopted with respect to intermediaries’ liability or mandatory out-of-court procedures to solve any disputes related to intermediaries’ liability that could have a material adverse effect on our operations.

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We could potentially face claims alleging that our technologies infringe the property rights of others

Our IP rights are critical to our future success and rely on a combination of copyright, trademark, patent designs, trade secret laws and contractual restrictions.

The exponential growth of our business in recent years has been accompanied by a corresponding increase in infringement of our IP rights, particularly on social media, such as the registration of infringing domains, fraudulent apps and websites.

We cannot assure you that the steps that we have taken or will take in the future to protect our IP rights will be sufficient to prevent misappropriation of our technology, prevent counterfeit sale of our products, or deter independent third-parties from developing similar or competing technologies.

Our IP rights are pivotal to our continued growth and success.

These rights are safeguarded through a combination of copyright, trademark, patent designs, trade secret laws, and contractual measures.

With the rapid expansion of our business in recent years, we’ve witnessed a concurrent rise in infringements on our IP rights, notably on social media platforms.

This includes issues such as unauthorized domain registrations, deceptive apps, and counterfeit or fraudulent websites.

While we have undertaken measures to defend our IP rights, there’s no guarantee that these actions, or any future efforts, will effectively deter technology misappropriation, safeguard against the dilution of our trademarks, or prevent third parties from creating similar or competing technologies.

Our trademark portfolio is owned by MercadoLibre Inc.

and its subsidiaries, there are no material intellectual property assets jointly owned with any third party.

The most valuable intellectual property owned by us are the “Mercado” trademark family portfolio, namely, Mercado Libre, Mercado Pago, Mercado Crédito, Mercado Fondo, Mercado Envíos, Mercado Puntos, Mercado Ads, Mercado Shops, Mercado Coin, among others, its related domain names (TLDs and ccTLDs) and software developments.

and its subsidiaries.

There are no material intellectual property assets jointly owned with any third party.

The most valuable intellectual property owned by us are the “Mercado” trademark family portfolio, namely, Mercado Libre and Mercado Pago, among others, its related domain names (TLDs and ccTLDs) and software developments.

28 | MercadoLibre, Inc.

We pursue the registration of our intangible assets in each country where we operate.

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If any of these claims against us are successful we may also have to modify our brand name in certain countries.

Any of these circumstances could adversely affect our business, results of operations and financial condition.

In addition, we have filed in the main countries worldwide new trademark applications for Mercado Libre and Mercado Pago to cover digital goods and services related to the metaverse and we have also sought to register decentralized domains matching our most relevant trademarks.

Some of the decentralized domains that we sought to register are already owned by third parties.

We have been carrying out a strategy to obtain registration of such decentralized names associated with third-party wallets, but have not been successful so far due to the difficulties to enforce trademark rights in the blockchain domain space.

Any of these circumstances could adversely affect our business, results of operations and financial situation.

We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights, such as trademarks or copyrighted material, to third parties.

Our licensees may take actions that could affect the value of our proprietary rights or reputation, which could have a material adverse effect on our business, results of operations and financial condition.

To date, we have not been notified that our technology or products infringes third-party rights, but third parties’ claims may arise if our employees use third parties’ software without authorization or in breach of the applicable licenses.

We expect to have an increasing number of claims as our business grows.

Any of these claims could be expensive and time consuming to litigate or settle and could have a material adverse effect upon our business, results of operations and financial condition.

In the past we have been, and we may in the future be, exposed to unauthorized access to our source code, including as a result of human error.

Our company extensively utilizes open source software (“OSS”), presenting significant intellectual property challenges.

In 2022, we established the OSPO (Open Source Program Office) to oversee OSS compliance, contribute to open source project development, and implement company-wide policies.

Despite the implementation of OSPO, we cannot guarantee that all of our employees accurately use and integrate OSS tools.

As a result, given the high level of OSS consumption in our company, we cannot guarantee that our use of OSS software will not inadvertently infringe upon third-party intellectual property rights or fully comply with pertinent OSS licenses.

The integration of Artificial Intelligence (“AI”) tools into our operations presents significant IP challenges.

Determining IP ownership for AI-generated content remains ambiguous, which may potentially lead to infringement claims.

Using third-party AI tools raises concerns about the origin of data and algorithms, which may lead to IP infringements that could inadvertently implicate us.

AI tools might also unintentionally access or use copyrighted materials, heightening our exposure to IP disputes.

As AI tools continue to evolve, ensuring protection against IP infringements becomes progressively more challenging.

As our Company’s business grows and our reliance on OSS and AI tools increases, the potential risk of facing IP claims becomes more pronounced.

Addressing these infringement claims can be costly, time-consuming, and could significantly impact our business, operational results, financial health and reputation.

Cybersecurity and Technology Risks

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Our ability to operate our business on a day-to-day basis largely depends on the efficient operation of our information technology infrastructure and our cloud providers, the largest of which is Amazon Web Services.

We have been and are susceptible to hacks into our systems or other security breaches by unauthorized third parties.

We have been and continue to be susceptible to hacks into our systems or other security breaches by unauthorized third parties.

We are also susceptible to errors in connection with any systems upgrade or migration to a different hardware or software system, errors or incidents of our cloud providers, bugs or other problems for any of the software we use, either developed in-house or provided by third parties.

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We have experienced and will likely continue to experience defects or disruptions in our technology infrastructure, including system interruptions and delays that make our site and services unavailable or slow to respond for periods of time, which could adversely impact our ability to process transactions on our site or fulfill shipments, which could reduce our revenue, adversely affect our reputation with or result in the loss of users and negatively impact our financial results.

In January 2024, we implemented a new version of our enterprise resource planning (“ERP”) software, SAP, as part of a plan to integrate and upgrade our systems and processes.

While we expect this new version to strengthen our internal financial controls, there are inherent risks in implementing any new system, including loss of information and potential disruption to our normal operations.

Any material deficiencies in the design and implementation of this new software could also result in material costs, adversely affect our ability to operate our business and negatively impact our financial reporting and internal controls.

Any of these consequences could have a material adverse effect on our business, results of operations and financial condition.

We are subject to security breaches or other confidential data theft from our systems, which can adversely affect our reputation and business

A significant risk associated with e-commerce our business is the secure transmission of confidential information over public networks.

A significant risk associated with our business is the secure transmission of confidential information over public networks.

Our business involves the collection, storage, processing and transmission of customers’ personal data, including financial information.

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Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the technology that we use to protect customer transaction data.

29 | MercadoLibre, Inc.

The techniques used to obtain unauthorized, improper or illegal access to our systems, our data or our customers’ data, to disable or degrade service, or to sabotage systems are constantly evolving, have become increasingly complex and sophisticated, may be difficult to detect quickly, and often are not recognized until launched against a target.

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Our users have been and will continue to be targeted by parties using fraudulent “spoof” and “phishing” emails that appear to be legitimate emails sent by Mercado Libre or Mercado Pago or by a user of one of our businesses, but direct recipients to fake websites operated by the sender of the email or misstates that certain payment was credited in Mercado Pago and request that the recipient send the product sold or send a password or other confidential information.

Our information technology and infrastructure, including our source code, and those of third parties with whom we partner have been and may continue to be vulnerable to cyberattacks, security breaches, and third parties may be able to access our customers’ personal or proprietary information and card data that are stored on or accessible through those systems.

Our information technology and infrastructure, including our source code, and those of third parties with whom we partner have been and may continue to be vulnerable to cyberattacks, security breaches, and third parties may be able to access our customers’ personal or proprietary information and, credit and debit card data that are stored on or accessible through those systems.

Our security measures may also be breached due to human error, malfeasance, system errors or vulnerabilities, or other irregularities.

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Further, to the extent corruption, bribery and similar practices continue to exist in the region, international investor perception of the region could be negatively affected, which could in turn negatively affect our business, financial condition and results of operations.

Our employees in Brazil and some of our employees in Argentina and Uruguay are currently represented by a labor union and employees in other Latin American countries may eventually become unionized.

Our employees in Brazil and some of our employees in Argentina, Mexico and Uruguay are currently represented by a labor union and employees in other Latin American countries may eventually become unionized.

We may incur increased payroll costs and reduced flexibility under labor regulations if unionization in other countries were to occur, any of which may negatively impact our business.

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Although economic and political conditions may differ from one country to another, we cannot assure you that events in one country alone will not adversely affect our business, financial condition or the market value of our common stock.

30 | MercadoLibre, Inc.

Latin American governments have exercised and continue to exercise significant influence over the economies of the countries where we operate.

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Governments in Latin America frequently intervene in the economies of their respective countries and occasionally make significant changes in policy and regulations.

Governmental actions to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, capital controls and limits on imports.

Governmental actions to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, export duties, capital controls and limits on imports.

Our business, financial condition, results of operations and prospects may be adversely affected by changes in government policies or regulations, including such factors as:

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dollar as the functional currency of our Argentine subsidiaries for purposes of reporting our financial statements.

Argentina’s annual inflation rate for the years ended December 31, 2022, 2021 and 2020 was 94.8%, 50.9% and 36.1%, respectively, and Argentina’s annual depreciation of its local currency against the U.S.

dollar was 72.5%, 22.1% and 40.5%, respectively.

Argentina’s annual inflation rate for the years ended December 31, 2023, 2022 and 2021 was 211.4%, 94.8% and 50.9%, respectively, and Argentina’s official exchange rate against the U.S.

dollar increased 356.3%, 72.5% and 22.1%, respectively.

The depreciation of local currencies creates inflationary pressures that may have an adverse effect on our results of operations, including affecting our ability to adjust the price of our services sufficiently to offset the effects of inflation on our cost structures and generally restricting access to the international capital markets.

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dollar strengthens against the foreign currencies of countries in which we operate.

For the year ended December 31, 2022, 53.8% of our net revenues were denominated in Brazilian Reais, 23.7% in Argentine Pesos and 17.7% in Mexican Pesos.

For the year ended December 31, 2023, 52.5% of our net revenues were denominated in Brazilian Real, 22.4% in Argentine Pesos and 20.6% in Mexican Pesos.

Certain of our subsidiaries may be subject to exchange control regulations that might restrict their ability to convert local currencies into U.S.

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dollar denominated securities in Argentina (e.g.

shares, sovereign debt) using Argentine peso, and subsequently sells the securities for U.S.

shares, sovereign debt) using Argentine Pesos, and subsequently sells the securities for U.S.

dollars, in Argentina, to access U.S.

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In recent years, the Blue Chip Swap Rate has been higher than Argentina’s official exchange rate.

As of December 31, 2022, 2021 and 2020, the spread of the Blue Chip Swap was 94.2%, 96.8% and 66.7%, respectively (See Notes 2 “Summary of significant accounting policies – Argentine currency status” and 25 “Share repurchase program” of our audited consolidated financial statements).

As of December 31, 2023, 2022 and 2021, the spread of the Blue Chip Swap was 20.4%, 94.2% and 96.8%, respectively (See Note 2 – Summary of significant accounting policies – Argentine currency status and macroeconomic outlook and Note 25 – Share repurchase program of our audited consolidated financial statements).

The spread decrease was due to the devaluation of the Argentine Peso from 366.45 to 799.95 on December 13, 2023.

As of the issuance date of the audited consolidated financial statements the spread of the Blue Chip Swap was 30.9%.

There can be no assurance that the CBA or other government agencies will not increase such controls or restrictions, make modifications to these regulations or establish more severe restrictions on currency exchange, which could affect the ability to make payments to foreign creditors or providers and dividend payments to foreign shareholders.

These exchange controls and restrictions could materially adversely affect the business, financial condition and results of operations of our Argentine subsidiaries and their ability to comply with their foreign currency obligations, and could significantly impact our ability to receive cash from our Argentine subsidiaries and our ability to meet our obligations, each of which could have a material adverse effect on our Company.

E-commerce transactions in Latin America may be impeded by the lack of secure payment methods.

31 | MercadoLibre, Inc.

Our e-commerce transactions in Latin America may be impacted by the weaknesses of secure payment methods

Unlike in the United States, consumers and merchants in Latin America can be held fully liable for credit card and other losses due to third-party fraud.

As secure methods of payment for e-commerce transactions have not been widely adopted in Latin America, both consumers and merchants generally have a relatively low confidence level in the integrity of e-commerce transactions.

In addition, many banks and other financial institutions have generally been reluctant to give merchants the right to process online transactions due to these concerns about credit card fraud.

Unless consumer fraud laws in Latin American countries are modified to protect e-commerce merchants and consumers, and until secure, integrated online payment processing methods are fully implemented across the region, our ability to generate revenues from e-commerce may be limited, which could have a material adverse effect on our Company.

In addition, while banks and other financial institutions in Latin America have generally granted e-commerce merchants the right to process online transactions, adjustments to the fraud and risk management processes of these banks and financial institutions, including due to concerns about credit card fraud, may negatively impact our payments approval rates.

Risks related to our shares

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These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Certain stockholders or entities controlled by them or their permitted transferees beneficially own shares of our common stock that have not been registered for resale with the SEC.

The holders of these restricted shares may sell their shares in the public market from time to time without registering them, subject in the case of our affiliates, to certain limitations on the timing, amount and method of those sales imposed by regulations promulgated by the SEC.

Holders of restricted stock will also have the right to cause us to register the resale of shares of common stock beneficially owned by them.

In the future, we may issue securities in connection with investments and acquisitions.

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Further, our repurchases could affect our share trading prices, increase their volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in the trading of our stock.

UNRESOLVED STAFF COMMENTS

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors