4.	Business combinations, Goodwill and Intangible assets

Business combinations

On March 22, 2013, the Company completed, through its subsidiaries Meli Participaciones S.L. (ETVE) and MercadoLibre S.R.L. (MercadoLibre Argentina) (together referred to as the “Buyer”), the acquisition of the 100% of equity interest in a software development company located and organized under the laws of the Province of Cordoba, Argentina. The objective of the acquisition was to enhance the capabilities of the Company in terms of software development.

The aggregate purchase price for the acquisition of the 100% of the acquired business was $3,454,497 (settled in Argentine pesos 17,652,480). On such same date, the Buyer paid and agreed to pay the purchase price as follows: i) $2,191,781 in cash; ii) set an escrow amounting to $489,237 for a 24-months period, aiming to cover unexpected liabilities and negative working capital; iii) set an escrow amounting to $547,945 for a 36-months period, aiming to continue the employment relationship of certain key employees; and iv) on June 24, 2013 the Company paid the remaining $225,534 net of certain negative working capital adjustments.

In addition, the Company incurred in certain direct costs of the business combination which were expensed as incurred.

The above mentioned escrow for the continuing employment relationship of $547,945 will be expensed over the 36-months period or a lesser period of time if certain other conditions determined in the Selling and Purchase Agreement (SPA) occur. The escrow will be released at the end of such period, together with the accrued interest.

The purchase price for the acquisition has been measured at its fair value at the acquisition date, and the portion corresponding to the contingent consideration will be subsequently re-measured at fair value with changes through the statement of income.

The Company’s interim condensed consolidated statement of income includes the results of operations of the acquired business as from March 22, 2013. The net revenues and net loss of the acquiree included in the Company’s condensed consolidated statement of income since the acquisition amounted to $ 500,255 and $50,792, respectively.

The following table summarizes the definitive purchase price allocation for the acquisition:


Net assets acquired	$	237,891
Goodwill		2,668,661

Purchase price		2,906,552

Escrow for employment relationship		547,945

Aggregate price paid	$	3,454,497

Supplemental pro-forma information required by U.S. GAAP, is impracticable after making every reasonable effort to do so, however, amounts involved are deemed to be immaterial.

Arising goodwill has been allocated proportionally to each of the segments identified by the Company’s management, considering the synergies expected from this acquisition and it is expected that the acquiree will contribute to the earnings generation process of such segments.

The Company recognized goodwill for this acquisition based on management expectation that the acquired business will improve the Company’s business.

Goodwill is not deductible for tax purposes.

Goodwill and Intangible assets

The composition of Goodwill and Intangible assets, as of June 30, 2013 and December 31, 2012 was as follows:


	June 30,			December 31,
	2013			2012
	(Unaudited)			(Audited)
Goodwill	$	59,558,023		$	60,366,063
Intangible assets with indefinite lives
- Trademarks		5,251,046			5,326,057
Amortizable intangible assets
- Licenses and others		3,563,361			3,829,668
- Non-compete agreement		1,105,573			1,195,509
- Customer list		1,600,514			1,708,770

Total intangible assets	$	11,520,494		$	12,060,004
Accumulated amortization		(4,802,728	)		(4,780,139	)

Total intangible assets, net	$	6,717,766		$	7,279,865

Goodwill

The changes in the carrying amount of goodwill for the six-month period ended June 30, 2013 and the year ended December 31, 2012, are as follows:


	Period ended June 30, 2013 (Unaudited)
	Brazil			Argentina			Chile			Mexico			Venezuela			Colombia			Other Countries			Total
Balance, beginning of period	$	10,706,281		$	18,889,094		$	7,115,211		$	11,404,780		$	4,846,030		$	5,897,136		$	1,507,531		$	60,366,063
- Business acquisition		1,307,644			659,159			—			186,806			405,637			69,385			40,030			2,668,661
- Effect of exchange rates change		(896,673	)		(1,561,458	)		(337,502	)		(63,521	)		(20,178	)		(477,030	)		(120,339	)		(3,476,701	)

Balance, end of the period	$	11,117,252		$	17,986,795		$	6,777,709		$	11,528,065		$	5,231,489		$	5,489,491		$	1,427,222		$	59,558,023


	Year ended December 31, 2012 (Audited)
	Brazil			Argentina			Chile			Mexico			Venezuela			Colombia			Other Countries			Total
Balance, beginning of year	$	11,663,443		$	21,583,774		$	6,577,459		$	10,621,839		$	4,846,030		$	5,367,526		$	1,433,877		$	62,093,948
- Effect of exchange rates change		(957,162	)		(2,694,680	)		537,752			782,941			—			529,610			73,654			(1,727,885	)

Balance, end of the year	$	10,706,281		$	18,889,094		$	7,115,211		$	11,404,780		$	4,846,030		$	5,897,136		$	1,507,531		$	60,366,063

Intangible assets subject to amortization

Intangible assets subject to amortization are comprised of customer lists and user base, trademarks and trade names, non-compete agreements, acquired software licenses and other acquired intangible assets including developed technologies. Aggregate amortization expense for intangible assets totaled $216,587 and $194,313 for the three-month periods ended June 30, 2013 and 2012, respectively, while for the six-month periods ended at such dates amounted to $437,446 and $462,476, respectively.

The estimated aggregate amortization expense for each of the four succeeding fiscal years, as of June 30, 2013 is as follows:


For year ended 12/31/2013	$	348,840
For year ended 12/31/2014		582,226
For year ended 12/31/2015		472,090
For year ended 12/31/2016		63,564

	$	1,466,720