##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-33647
 
 MercadoLibre, Inc.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    98-0212790(State of incorporation)
    
    (I.R.S. Employer Identification Number)
 Tronador 4890, 8 th Floor
Buenos Aires, C1430DNN, Argentina
(Address of principal executive offices)
 011-54-11-5352-8000
(Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Class
    
    Name of Exchange upon Which RegisteredCommon Stock, $0.001 par value per share
    
    Nasdaq Global Market
 Securities registered pursuant to Section 12(g) of the Act: None
 
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  Large Accelerated Filer þ
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller reporting company o(Do not check if smaller reporting company)
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   Documents Incorporated By Reference




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MERCADOLIBRE, INC.
FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2008
 TABLE OF CONTENTS
 PageSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
    
    
    3PART IITEM 1. BUSINESS
    
    
    4ITEM 1A. RISK FACTORS
    
    
    12ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    30ITEM 2. PROPERTIES
    
    
    30ITEM 3. LEGAL PROCEEDINGS
    
    
    31ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    34PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
    
    
    34ITEM 6. SELECTED FINANCIAL DATA
    
    
    37ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    38ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    60ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    62ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    62ITEM 9A. CONTROLS AND PROCEDURES
    
    
    62ITEM 9B. OTHER INFORMATION
    
    
    63PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    63ITEM 11. EXECUTIVE COMPENSATION
    
    
    63ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
    
    
    63ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE
    
    
    65ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    65PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    65INDEX TO FINANCIAL STATEMENTS
    
    
    65EXHIBIT INDEX
    
    
    66SIGNATURES
    
    
    67Exhibit 4.01Exhibit 10.03Exhibit 10.04Exhibit 10.05Exhibit 10.09Exhibit 10.10Exhibit 10.15Exhibit 21.01Exhibit 23.01Exhibit 31.01Exhibit 31.02Exhibit 32.01Exhibit 32.02
   2




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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    continued growth of online commerce and Internet usage in Latin America;
 
    
    consumer trends;
 
    
    competition;
 
    
    our ability to attract new customers, retain existing customers and increase revenues;
 
    
    seasonal fluctuations;
 
    
    our ability to expand our operations and adapt to rapidly changing technologies;
 
    
    system interruptions or failures;
 
    
    our ability to attract and retain qualified personnel;
 
    
    reliance on third-party service providers;
 
    
    government regulation;
 
    
    litigation and legal liability;
 
    
    security breaches and illegal uses of our services;
 
    
    enforcement of intellectual property rights; and
 
    
    political, social and economic conditions in Latin America, and in particular, Venezuela.
   3




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##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 www.mercadolibre.com
  
    
    The MercadoLibre marketplace: The MercadoLibre marketplace is a
fully-automated, topically-arranged and user-friendly online commerce
service. This service permits both businesses and individuals to list
items and conduct their sales and purchases online in either a
fixed-price or auction-based format. Additionally, through online
classified listings, our registered users can list and purchase motor
vehicles, vessels, aircraft, real estate and services. Users and
advertisers are also able to place, display and/or text advertisements
on our web pages in order to promote their brands and offerings. Any
Internet user can browse through the various products and services
that are listed on our web site and register with MercadoLibre to
list, bid for and purchase items and services.
 
    
    The MercadoPago online payments solution: To complement the
MercadoLibre marketplace, we developed MercadoPago, an integrated
online payments solution. MercadoPago is designed to facilitate
transactions both on and off the MercadoLibre marketplace by providing
a mechanism that allows our users to securely, easily and promptly
send and receive payments online.
  History of MercadoLibre
   MercadoLibre
    
    
    
    MercadoPagoCountry
    
    Launch date
    
    Office opening
    
    Launch date1 Argentina
    
    August 1999
    
    July 1999
    
    November 20032 Brazil
    
    October 1999
    
    September 1999
    
    January 20043 Mexico
    
    November 1999
    
    October 1999
    
    January 20044 Uruguay
    
    December 1999
    
    September 2004
    
    N/A5 Colombia
    
    February 2000
    
    January 2000
    
    December 20076 Venezuela
    
    March 2000
    
    March 2000
    
    April 20057 Chile
    
    March 2000
    
    April 2000
    
    September 20078 Ecuador
    
    December 2000
    
    N/A
    
    N/A9 Peru
    
    December 2004
    
    N/A
    
    N/A10 Costa Rica
    
    November 2006
    
    N/A
    
    N/A11 Dominican Republic
    
    December 2006
    
    N/A
    
    N/A12 Panama
    
    December 2006
    
    N/A
    
    N/A
  4




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Lokau.com Lokau.com
     Our strategy
  
    
    Continue to grow our business and maintain market leadership. We have
focused and intend to continue to focus on growing our business by
strengthening our position as the preferred online marketplace in each
of the countries in which we operate. We also intend to grow our
business and maintain our leadership by taking advantage of the
expanding potential client base that has resulted from the growth of
Internet penetration rates in Latin America. We intend to achieve
these goals through organic growth, by entering into new countries and
category segments, by launching new transactional business endeavours,
such as advertising sales on our websites and, when possible and
advantageous, through potential strategic acquisitions of key
businesses and assets.
  5




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
    
    Increase monetization of our transactions. We have focused and will
continue to focus on improving the revenue generation capacity of our
business by implementing initiatives designed to maximize the revenues
we receive from transactions on our platform. Some of these
initiatives include increasing our fee structure, and selling
advertising and Internet marketing services on our platform.
Additionally, we intend to take advantage of the natural synergies
that exist between our marketplace and payments service by promoting
increased use of MercadoPago so that it becomes the preferred online
payment method on and off our platform.
 
    
    Expand into additional transactional service offerings.Our strategic
focus is to enable on-line transactions of multiple types of goods and
services throughout Latin America. Consequently, we strive, and will
continue to strive, to launch on-line transactional offerings in new
product and service categories where we consider business
opportunities exist. These new transactional offerings include
expanded participation in, but are not limited to: (a) additional
product categories in our marketplace business, (b) greater presence
in vehicle, real estate and services classifieds, (c) off platform
payments services, and (d) on-line advertisement services. We believe
that a significant portion of our future growth will be derived from
these new launches.
 
    
    Enhance brand awareness. We believe that enhancing awareness of the
MercadoLibrebrand is important to achieve our business objectives. We
intend to continue to promote, advertise and increase recognition of
our brand through a variety of marketing and promotional campaigns.
These may include marketing agreements with companies with significant
online presence and advertising through traditional media, such as
cable television. We may also use leading web sites and other media
such as affiliate programs, banner advertisements and keyword
searches. In addition, by enhancing our e-commerce community
experience, we believe we will promote brand awareness through word of
mouth.
 
    
    Focus on user loyalty and web site enhancement. We will continue to
focus on increasing purchase frequency and transaction volumes from
our existing users. We intend to do so by maintaining an appealing and
convenient platform for e-commerce, improving the functionality of our
web site to deliver a more efficient user experience and providing our
users with the help of a dedicated customer support department. We
employ a number of programs aimed at fostering customer loyalty and
repeated purchases, such as our MercadoLider loyalty program for
high-volume sellers, our targeted and segmented direct marketing
program, and our MercadoPago special promotions.
 
    
    Increase operational efficiency. We believe we run an attractive
business model with strong potential for healthy profit margins. We
plan to maximize this potential by achieving economics of scale,
maintaining controls on overhead costs and reducing variable costs
whenever possible.
 
    
    Continue to develop innovative and creative solutions. We intend to
continually enhance our commerce platform in order to better serve
both individuals and businesses that want to buy or sell goods and
services online. We intend to continue investing to develop new tools
and technologies that facilitate e-commerce on our platform and
improve our users online experience on MercadoLibre, while addressing
the distinctive cultural, geographical and other challenges of online
commerce in Latin America.
 
    
    Serve our dynamic and active user community. We seek to operate
MercadoLibre as an open and trusted Web-based marketplace where users
can access a broad market of products. We believe in treating our
users with respect by applying a consistent set of policies that
reinforces good online and offline behavior within our user community.
We also seek to offer superior customer care in order to maintain the
loyalty and satisfaction of our active user base.
 The MercadoLibre marketplace
   6




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The MercadoPago online payments solution
    Escrow product
   Direct payments product
    
 
  MercadoPago strategy
    7




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Marketing
   
 
 
 
    MercadoLibre
  8




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Product development
         Seasonality
 i.e.
   9




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Competition
     Intellectual property
   MercadoLibre
   10




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Employees
  Number ofCountry
    
    employeesArgentina
    
    
    718Brazil
    
    
    350Colombia
    
    
    47Chile
    
    
    9Mexico
    
    
    37Panamá
    
    
    4Uruguay
    
    
    4Venezuela
    
    
    126Total
    
    
    1,295
  (Sindicato dos Trabalhadores nas Empresas e Cursos de Informática do
Estado de São Paulo)
    Government regulation
 Habeas
Data Ley Federal de Protección al Consumidor
  11




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Segment and Geographic Information
  Offices
  Available Information
  
 ITEM 1A. RISK FACTORS
 For purposes of this section, the term stockholders means the holders of shares of our
common stock. Set forth below are the risks that we believe are material to our stockholders. You
should carefully consider the following factors in evaluating our company, our properties and our
business. The occurrence of any of the following risks might cause our stockholders to lose all or
a part of their investment. The risks and uncertainties described below are not the only ones
facing us. Other risks that we do not currently anticipate or that we currently deem immaterial
also may affect our results of operations and financial condition. Some statements in this report
including statements in the following risk factors constitute forward-looking statements. Please
refer to the section entitled Special Note Regarding Forward-Looking Statements at the beginning
of this report.
 Risks related to our business
 The market for the sale of goods over the Internet is developing in Latin America, and our business
depends on the continued growth of online commerce and the availability and suitability of the
Internet in Latin America.
   12




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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, and on the
continued market acceptance of our products and services.
  Any delay or problem with upgrading our existing information technology infrastructure could cause
a disruption in our business and adversely impact our financial results.
  Internet regulation in the countries where we operate is scarce, and several legal issues related
to the Internet are uncertain. We are subject to a number of other laws and regulations, and
governments may enact laws or regulations that could adversely affect our business.
     13




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Our business is an Internet platform for commercial transactions in which all commercial activity
depends on our users and is therefore largely outside of our control.
  We could face liability for the sale of regulated and prohibited items, unpaid items or undelivered
purchases, and the sale of defective items.
      14




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We could face legal and financial liability for the sale of items that infringe on the intellectual
property and distribution rights of others and for information disseminated on the MercadoLibre
marketplace.
     If the public perception were that counterfeit items are commonplace on our site, it could damage
our reputation and our business.
   15




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We have achieved profitability in a new and rapidly evolving market, but we may not continue to be
profitable.
   If we continue to grow, we may not be able to appropriately manage the increased size of our
business.
      Our systems may fail or suffer interruptions due to human acts, technical problems, or natural
disasters.
   16




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We are subject to security breaches or other confidential data theft from our systems, which can
adversely affect our reputation and business.
  We depend on key personnel, the loss of which could have a material adverse effect on us.
    Currently our revenues depend substantially on the listing, optional feature and final value fees
we charge to sellers and may decrease if market conditions force us to lower such fees or if we
fail to diversify our sources of revenue.
  We are subject to consumer trends and could lose revenue if certain items become less popular.
  The success of other e-commerce companies such as eBay and Amazon is not an indication of our
future financial performance.
  We could be subject to liability and forced to change our MercadoPago business practices if we were
found to be subject to or in violation of any laws or regulations governing banking, money
transmission, or electronic funds transfers in any country where we operate.
   17




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MercadoPago is susceptible to illegal uses, and we could potentially face liability for any illegal
use of MercadoPago.
    Our failure to manage MercadoPago customer funds properly would harm our business.
  MercadoPago is a relatively new service that faces competition from other payment methods, and
competitors may adversely affect the success of MercadoPago.
     18




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We rely on banks or payment processors to fund transactions, and changes to credit card association
fees, rules or practices may adversely affect our business.
     Our operating results may be impacted by the current economic crisis.
  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.
  
    
    Disruptions to the capital markets or the banking system may impair the value of
investments or bank deposits we currently consider safe or liquid. We may be unable to
find suitable alternative investments that are safe, liquid, and provide a reasonable
return. This could result in lower interest income or longer investment horizons.
    
    We may be required to increase the installment and financing fees we charge to customers
for purchases made in installments or cease offering installment purchases altogether, each
of which may result in a lower volume of transactions completed.
    
    We may be unable to access financing in the credit and capital markets at reasonable
rates in the event we find it desirable to do so. Due to the nature of our MercadoPago
business we generate high account receivable balances that we typically sell to financial
institutions, and accordingly, lack of access to credit, or banks liquidations could cause us
to experience severe difficulties in paying our sellers.
 
    
    The failure of financial institution counterparties to honor their obligations to us
under credit instruments could jeopardize our ability to rely on and benefit from those
instruments. Our ability to replace those instruments on the same or similar terms may be
limited under poor market conditions.
  19




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Changes in MercadoPagos funding mix could adversely affect MercadoPagos results.
  We have no business insurance coverage, which would require us to spend significant resources in
the event of a disruption of our services or other contingency.
  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.
       20




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We may not be able to secure licenses for third-party technologies upon which we rely.
  Problems that affect our third-party service providers could potentially adversely affect us as
well.
  Complaints from customers or negative publicity about our services can diminish consumer confidence
and adversely affect our business.
   We may not be able to efficiently integrate CMGs operations with our business and may incur
unexpected liabilities in connection with our acquisition of CMG.
   21




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We may incur unexpected liabilities in connection with our acquisition of DeRemate operations.
  If
our goodwill become impaired, we may be required to record a
significant charge to earnings.
  We may not realize benefits from recent or future strategic acquisitions of businesses,
technologies, services or products despite their costs in cash and dilution to our stockholders.
   Our required contributions to the real estate trust for the construction of our headquarters in
Argentina may be materially higher than we currently estimate.
  We are subject to seasonal fluctuations in our results of operations.
  We have spent significant resources to launch and market classified advertisements on the
MercadoLibre marketplace, which may not be successful in generating sufficient revenues for us.
   We operate in a highly competitive and evolving market, and therefore face potential reductions in
the use of our service.
   22




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Risks related to doing business in Latin America
 We face the risk of political and economic crises, instability, terrorism, civil strife,
expropriation and other risks of doing business in emerging markets.
    23




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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.
 .
 Latin America has experienced adverse economic conditions.
  Local currencies used in the conduct of our business are subject to depreciation, volatility and
exchange controls.
    24




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Our reporting currency is the U.S. dollar but our revenues are paid in foreign currencies.
Therefore, if the U.S. dollar strengthens relative to these foreign currencies (i.e. the foreign
currencies devaluate against the U.S. dollar), the economic value of our revenues in U.S. dollar
terms will decline.
  Inflation and certain government measures to curb inflation may have adverse effects on the
economies of the countries where we operate, our business and our operations.
  Political and economic conditions in Venezuela may have an adverse impact on our operations.
   We may incur losses in the event we are unable to distribute dividends from our Venezuelan
subsidiaries at the official exchange rate, or as a result of changes in the political, economic or
regulatory environment changes in Venezuela.
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Developments in other markets may affect the Latin American countries where we operate, our
financial condition and results of operations.
   E-commerce transactions in Latin America may be impeded by the lack of secure payment methods.
  Argentina and other countries in Latin America have experienced adverse economic conditions.
  Internet regulation in the countries where we operate is limited, many legal issues related to
e-commerce and the Internet are unresolved and existing and new laws and regulations related to our
business could have a material adverse effect on us.
   26




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Risks related to our shares
 Our common stock has limited trading history, and the price of our shares may fluctuate
substantially, and our stockholders investment may decline in value.
    27




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We continue to be significantly influenced by a group of stockholders that control a significant
percentage of our common shares and the value of our common stock could be negatively effected by
any significant disposition of our shares by any of these stockholders.
   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.
  
    
    advance notice requirements for stockholder proposals and director nominations;
 
    
    a staggered board of directors;
 
    
    limitations on the ability of stockholders to remove directors other than for cause;
 
    
    limitations on the ability of stockholders to own and/or exercise voting power over 20% of our common stock;
 
    
    limitations on the ability of stockholders to amend, alter or repeal our by-laws;
 
    
    the inability of stockholders to act by written consent;
 
    
    the authority of the board of directors to adopt a stockholder rights plan;
 
    
    the authority of the board of directors to issue, without stockholder
approval, preferred stock with any terms that the board of directors
determines and additional shares of our common stock; and
 
    
    limitations on the ability of certain stockholders to enter into certain business combinations with us, as provided under
Section 203 of the Delaware General Corporation Law.
  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.
    28




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It is unlikely that we will declare any dividends on our capital stock.
  Our stock repurchase program may not result in a positive return of capital to our stockholders.
   Requirements associated with being a public company require significant company resources and
management attention.
  It may be difficult to enforce judgments against us in U.S. courts.
   29




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ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  City and
    
    
    
    
    
    ApproximateCountry
    
    Facility
    
    Address
    
    Square Meters
    
    
    Lease TermBogotá, Colombia
    
    Colombia operation
    
    Calle 93 B # 17-25 Ofc.406,
Bogotá, Colombia
    
    
    107
    
    
    April 2009Bogotá, Colombia
    
    TuCarro Colombia
operation
    
    Calle 93 B # 17-25 Ofc.210
and 211, Bogotá, Colombia
    
    
    132
    
    
    April and October
2009Buenos Aires, 
Argentina
    
    Corporate
headquarters,
Argentina operation
& Customer service
center
    
    Tronador 4890floors
6th,
8th
and
2nd, Buenos Aires,
1430Argentina
    
    
    2,282.5
    
    
    March 2010, March
2010 and May 2011Buenos Aires, 
Argentina
    
    Customer service
center
    
    Av. Costanera Rafael Obligado
y Geronimo Salguero, Buenos
Aires, Argentina
    
    
    1,740
    
    
    January 2012Caracas, Venezuela
    
    Venezuela operation
    
    Piso 7° Edificio Torre
Country, Francisco de
Miranda, Urbanización El
Rosal, Municipio de Chacao,
Estado de Miranda
    
    
    436
    
    
    April 2011Lithia Springs,
Georgia, U.S.A.
    
    SAVVIS Data Center
    
    375 Riverside Parkway
Lithia Springs, Georgia 30122,
    
    
    9.7
    
    
    April 2009Mexico City, Mexico
    
    Mexico operation
    
    Ibsen 43-101, Colonia
Polanco, Miguel Hidalgo,
Código Postal 11650, Mexico
D.F. Mexico
    
    
    147
    
    
    December 2008
In process of
renewalSterling, Virginia,
U.S.A.
    
    SAVVIS Data Center
    
    45901 Nokes Blvd.
Sterling, Virginia 20166
    
    
    356
    
    
    April 2009San Luis, Argentina
    
    Technology
Development center
    
    Av. Universitaria s/n, Ciudad
de la Punta, San Luis,
Argentina
    
    
    207
    
    
    no end dateSantana do Parnaíba, 
Brazil
    
    Brazilian Customer
service center
    
    Rua Yojiro Takaoka, 4350 Cep
06541-038Santana do
Parnaíba, São Paulo, Brazil
    
    
    1,032
    
    
    October 2009 and
March 2013Santiago, Chile
    
    Chile operation
    
    Coronel Pereira 72, oficina
301, Las Condes, Santiago,
Chile
    
    
    131
    
    
    April 2009São Paulo, Brazil
    
    Brazil operation
    
    Rua Gomes de Carvalho, 1306
Vila Olimpia, Cep
04547-005São Paulo, Brazil
    
    
    598
    
    
    November 2009Zona America, Uruguay
    
    Uruguay Staff
    
    Ruta 8, km 17.5 Edificio 200,
local 108 Zona America,
Uruguay
    
    
    37
    
    
    December 2009
  30




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ITEM 3. LEGAL PROCEEDINGS
     Litigation
    31




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State of São Paulo Fraud Claim
  State of Minas Gerais Fraud Claim
  City of São Paulo Tax Claim
   33




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Brazilian National Public Treasury Tax Claim
  Trademark Claim
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market Price of and Dividends on the Registrants Common Equity
  CashdividendsClosing stock price
    
    
    declaredHigh
    
    
    Low
    
    
    per share2007:3rd quarter
    
    $
    41.06
    
    
    $
    18.00
    
    
    
    4th quarter
    
    $
    78.81
    
    
    $
    35.18
    
    
    
    2008:1st quarter
    
    $
    70.01
    
    
    $
    31.72
    
    
    
    2nd quarter
    
    $
    56.05
    
    
    $
    37.11
    
    
    
    3rd quarter
    
    $
    36.98
    
    
    $
    20.10
    
    
    
    4th quarter
    
    $
    21.58
    
    
    $
    8.28
    
    
    
    
 Recent Sales of Unregistered Securities
  Use of Proceeds from IPO
   34




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Dividend Policy
  Equity Compensation Plan Information
  Performance Graph
  
   35




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##### Table of Contents



The foregoing graph and chart shall not be deemed incorporated by reference by any general
statement incorporating by reference this Annual Report on Form 10-K into any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended,
except to the extent we specifically incorporate this information by reference, and shall not
otherwise be deemed filed under those acts.
 Issuer Purchases of Equity Securities
  Total Number of
    
    
    ApproximateShares
    
    
    Dollar Value ofTotal
    
    
    
    
    
    
    Purchased as
    
    
    Shares that MayNumber of
    
    
    Average
    
    
    Part of Publicly
    
    
    Yet BeShares
    
    
    Price Paid
    
    
    Announced
    
    
    PurchasedPeriod
    
    Purchased
    
    
    Per Share
    
    
    Plans(1)
    
    
    Under the PlansNovember 1, 2008  November 30, 2008
    
    
    249,700
    
    
    $
    10.38
    
    
    
    249,700
    
    
    $         17.4 million
    (2)December 1, 2008  December 31, 2008
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    $         17.4 million
    (2)
 
 (1)
    
    On November 14, 2008, we announced that our board of directors approved a share repurchase plan
authorizing us to repurchase, from available capital, up to $20 million of our outstanding common
stock from time to time through November 13, 2009. The timing and amount of any share repurchase
under the share repurchase plan will be determined by our management based on market conditions and
other considerations, and repurchases may be effected in the open market, through derivative,
accelerated repurchase and other privately negotiated transactions and through plans designed to
comply with Rules 10b-18 or 10b5-1(c) under the Exchange Act. The share repurchase plan does not
require us to acquire any specific number of shares and may be temporarily or permanently suspended
or discontinued by us at any time. A committee of the board of directors will reevaluate the
operation of the plan each fiscal quarter.(2)
    
    The approximate total dollar value of shares that may yet be purchased is the difference
between the total amount of repurchases authorized and the total amount spent on repurchases to
date. To enhance our share repurchase plan, we sell equity put options. These put options entitle
the holders to sell shares of our common stock to us on certain dates at specified prices. As of
December 31, 2008, options to purchase 185,000 shares of our common stock were outstanding, each
with a strike price of $10 per share. The dollar amount available for open market repurchases will
be reduced by the dollar amount paid to holders for shares upon the exercise of outstanding
options. None of these warrants has been exercised to date.  36




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
  Year ended December 31,(in millions)
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Statement of income data:Net revenues
    
    $
    12.7
    
    
    $
    28.2
    
    
    $
    52.1
    
    
    $
    85.1
    
    
    $
    137.0Cost of net revenues
    
    
    (2.5
    )
    
    
    (6.1
    )
    
    
    (12.1
    )
    
    
    (18.3
    )
    
    
    (27.5
    )Gross profit
    
    
    10.2
    
    
    
    22.1
    
    
    
    40
    
    
    
    66.9
    
    
    
    109.5Operating expenses:Product and technology development
    
    
    (1.3
    )
    
    
    (2.2
    )
    
    
    (3.1
    )
    
    
    (4.4
    )
    
    
    (7.3
    )Sales and marketing
    
    
    (9.1
    )
    
    
    (14.7
    )
    
    
    (23.4
    )
    
    
    (27.6
    )
    
    
    (40.0
    )General and administrative
    
    
    (3.1
    )
    
    
    (4.4
    )
    
    
    (8.2
    )
    
    
    (13.2
    )
    
    
    (22.8
    )Compensation Cost related to CMG acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.9
    )Total operating expenses
    
    
    (13.5
    )
    
    
    (21.3
    )
    
    
    (34.6
    )
    
    
    (45.2
    )
    
    
    (72.0
    )Income (loss) from operations
    
    
    (3.3
    )
    
    
    0.8
    
    
    
    5.4
    
    
    
    21.7
    
    
    
    37.5Other income (expenses):Interest income and other financial gains
    
    
    1.2
    
    
    
    0.4
    
    
    
    0.5
    
    
    
    1.6
    
    
    
    1.8Interest expense and other financial charges
    
    
    (0.3
    )
    
    
    (0.5
    )
    
    
    (1.7
    )
    
    
    (2.7
    )
    
    
    (8.4
    )Foreign currency (loss) gain
    
    
    0.2
    
    
    
    0.3
    
    
    
    (0.4
    )
    
    
    (3.1
    )
    
    
    (1.5
    )Other expenses, net
    
    
    
    
    
    
    (0.3
    )
    
    
    (1.5
    )
    
    
    (3.0
    )
    
    
    0.1Net income (loss) before income and asset tax and
cumulative effect of change in accounting
principle
    
    
    (2.2
    )
    
    
    0.7
    
    
    
    2.3
    
    
    
    14.4
    
    
    
    29.4Income and asset tax (expense) benefit
    
    
    
    
    
    
    1.4
    
    
    
    (1.2
    )
    
    
    (4.7
    )
    
    
    (10.6
    )Net income (loss) before cumulative effect of
change in accounting principle and gain from
discontinued operations
    
    
    (2.2
    )
    
    
    2.0
    
    
    
    1.1
    
    
    
    9.7
    
    
    
    18.8Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    (2.2
    )
    
    
    2.4
    
    
    
    1.1
    
    
    
    9.7
    
    
    
    18.8Accretion of preferred stock
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (0.3
    )
    
    
    Net income (loss) available to common stockholders
    
    $
    (2.7
    )
    
    $
    1.9
    
    
    $
    0.6
    
    
    $
    9.4
    
    
    $
    18.8
 At December 31,(in millions)
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Balance sheet data:Total assets
    
    $
    24.1
    
    
    $
    44.4
    
    
    $
    53.8
    
    
    $
    134.5
    
    
    $
    156.7Long term debt
    
    
    
    
    
    
    12.0
    
    
    
    9.0
    
    
    
    
    
    
    
    3.1Total liabilities
    
    
    5.1
    
    
    
    23.2
    
    
    
    30.5
    
    
    
    42.8
    
    
    
    63.3Net assets
    
    
    19.0
    
    
    
    21.2
    
    
    
    23.3
    
    
    
    91.7
    
    
    
    93.4Mandatorily
redeemable convertible preferred stock
    
    
    63.1
    
    
    
    63.6
    
    
    
    64.1
    
    
    
    
    
    
    
    Common stock
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Stockholders equity (deficit)
    
    $
    (44.1
    )
    
    $
    (42.4
    )
    
    $
    (40.7
    )
    
    
    91.7
    
    
    
    93.4
 Year Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Earnings (loss) per share data:Basic net income (loss) available
to common stockholders per common
share
    
    $
    (0.21
    )
    
    $
    0.05
    
    
    $
    0.01
    
    
    $
    0.22
    
    
    $
    0.43Diluted net income per common share
    
    $
    
    
    
    $
    0.05
    
    
    $
    
    
    
    $
    0.22
    
    
    $
    0.42Weighted average shares (2):Basic
    
    
    12,739,980
    
    
    
    13,065,496
    
    
    
    13,149,139
    
    
    
    25,149,405
    (1)
    
    
    44,239,443Diluted
    
    
    
    
    
    
    13,671,359
    
    
    
    
    
    
    
    25,478,336
    
    
    
    44,348,950
 
 (1)
    
    Includes the effect of the issuance of 3,000,000 shares of our common stock in connection
with our initial public offering in August 2007.(2)
    
    Shares outstanding at December 31, 2008 were 44,070,367.  37




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##### Table of Contents



Year ended December 31,(in millions)
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Other data:Number of confirmed registered users at end of period (1)
    
    
    6.5
    
    
    
    12.2
    
    
    
    18.2
    
    
    
    24.9
    
    
    
    33.7Number of confirmed new registered users during period
(2)
    
    
    2.5
    
    
    
    5.7
    
    
    
    6.0
    
    
    
    6.7
    
    
    
    8.8Gross merchandise volume (3)
    
    $
    299.3
    
    
    $
    607.7
    
    
    $
    1,075.1
    
    
    $
    1,511.5
    
    
    $
    2,078.9Number of successful items sold (4)
    
    
    5.1
    
    
    
    8.4
    
    
    
    13.8
    
    
    
    17.5
    
    
    
    21.1Total payment volume (5)
    
    $
    8.9
    
    
    $
    38.5
    
    
    $
    89.0
    
    
    $
    158.0
    
    
    $
    255.9Total payment transactions (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    
    1.9Capital expenditures
    
    $
    2.1
    
    
    $
    2.0
    
    
    $
    2.4
    
    
    $
    3.1
    
    
    $
    61.6Depreciation and amortization
    
    $
    1.1
    
    
    $
    1.6
    
    
    $
    2.0
    
    
    $
    2.3
    
    
    $
    3.3
 
 (1)
    
    Measure of the cumulative number of users who have registered on the MercadoLibre marketplace
and confirmed their registration.(2)
    
    Measure of the number of new users who have registered on the MercadoLibre marketplace and
confirmed their registration.(3)
    
    Measure of the total U.S. dollar sum of all transactions completed through the MercadoLibre
marketplace, excluding motor vehicles, vessels, aircraft and real estate.(4)
    
    Measure of the number of items that were sold/purchased through the MercadoLibre
marketplace.(5)
    
    Measure of total U.S. dollar sum of all transactions paid for using MercadoPago.(6)
    
    Measure of the number of all transactions paid for using MercadoPago. 
 ITEM 7.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 You should read the following discussion and analysis of our financial condition and results
of our operations in conjunction with our Selected Financial Data and our audited consolidated
financial statements and the notes to those statements included elsewhere in this report. This
discussion contains forward-looking statements reflecting our current expectations that involve
risks and uncertainties. Actual results and the timing of events may differ materially from those
contained in these forward-looking statements due to a number of factors, including those discussed
in the section entitled Risk Factors and elsewhere in this report.
  
    
    a brief overview of our company;
    
    a review of our financial presentation and accounting policies, including our critical accounting policies;
    
    a discussion of our principal trends and results of operations for the years ended December 31, 2006, 2007, and 2008;
    
    a discussion of the principal factors that influence our results of operations, financial condition and liquidity;
    
    a discussion of our liquidity and capital resources, a discussion of
our capital expenditures and a description of our contractual
obligations; and
    
    a discussion of the market risks that we face.
 Overview
    38




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##### Table of Contents




    
    The MercadoLibre marketplace: The MercadoLibre marketplace, which we
sometimes refer to as our Marketplace business, is a fully-automated,
topically-arranged and user-friendly online commerce service. This
service permits both businesses and individuals to list items and
conduct their sales and purchases online in either a fixed-price or
auction-based format. Additionally, through online classified
advertisements, our registered users can list and purchase motor
vehicles, vessels, aircraft, real estate and services. Any Internet
user can browse through the various products and services that are
listed on our website and register with MercadoLibre to list, bid for
and purchase items and services.
    
    The MercadoPago online payments solution: To complement the
MercadoLibre marketplace, we developed MercadoPago, an integrated
online payments solution, which we sometimes refer to as our Payments
business, an integrated online payments solution. MercadoPago is
designed to facilitate transactions on the MercadoLibre marketplace
and off our marketplace in certain markets, by providing a mechanism
that allows our users to securely, easily and promptly send and
receive payments online
    39




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##### Table of Contents



Description of line items
 Net revenues
   
    
    listing fees;
 
    
    optional feature fees;
 
    
    final value fees; and
 
    
    online advertising fees.
   Year ended December 31,(% of total MercadoLibre marketplace net revenues)
    
    2006
    
    
    2007
    
    
    2008Brazil
    
    
    57.2
    %
    
    
    54.0
    %
    
    
    46.1
    %Argentina
    
    
    15.7
    
    
    
    16.3
    
    
    
    16.7Mexico
    
    
    13.9
    
    
    
    13.8
    
    
    
    11.4Venezuela
    
    
    7.4
    
    
    
    10.2
    
    
    
    20.1Other countries
    
    
    5.8
    
    
    
    5.7
    
    
    
    5.7
     40




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##### Table of Contents



Year ended December 31,(% of total consolidated net revenues)
    
    2006
    
    
    2007
    
    
    2008Brazil
    
    
    59.1
    %
    
    
    59.0
    %
    
    
    53.8
    %Argentina
    
    
    15.1
    
    
    
    14.8
    
    
    
    14.5Mexico
    
    
    13.8
    
    
    
    12.6
    
    
    
    10.1Venezuela
    
    
    7.0
    
    
    
    9.0
    
    
    
    16.9Other countries
    
    
    5.0
    
    
    
    4.6
    
    
    
    4.7
  Cost of net revenues
  Product and technology development
  Sales and marketing
    General and administrative
  Compensation Cost related to acquisitions
  Other income (expenses)
   41




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##### Table of Contents



Income and asset tax
   Year ended December 31,(in millions)
    
    2006
    
    
    2007
    
    
    2008Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    1.9
    
    
    
    5.0
    
    
    
    8.11.9
    
    
    
    5.0
    
    
    
    8.1Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    (0.7
    )
    
    
    (0.1
    )
    
    
    1.6(0.7
    )
    
    
    (0.1
    )
    
    
    1.61.2
    
    
    
    4.9
    
    
    
    9.8Asset Tax:Federal
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    0.1
    
    
    
    (0.2
    )
    
    
    0.80.1
    
    
    
    (0.2
    )
    
    
    0.8Income / asset tax expense
    
    $
    1.2
    
    
    $
    4.7
    
    
    $
    10.6
  42




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##### Table of Contents



Seasonality
  Quarter endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2008Net Revenues
    
    
    28,840,730
    
    
    
    34,471,508
    
    
    
    40,260,643
    
    
    
    33,449,739Gross profit
    
    
    22,822,449
    
    
    
    27,570,005
    
    
    
    32,106,781
    
    
    
    26,986,812Net Income
    
    
    2,067,677
    
    
    
    2,947,095
    
    
    
    5,875,792
    
    
    
    7,921,097Net Income per share-basic
    
    
    0.05
    
    
    
    0.07
    
    
    
    0.13
    
    
    
    0.18Net Income per share-diluted
    
    
    0.05
    
    
    
    0.07
    
    
    
    0.13
    
    
    
    0.17Weighted average sharesBasic
    
    
    44,227,460
    
    
    
    44,238,166
    
    
    
    44,290,540
    
    
    
    44,264,906Diluted
    
    
    44,368,011
    
    
    
    44,369,317
    
    
    
    44,379,682
    
    
    
    44,369,6352007Net Revenues
    
    
    16,459,337
    
    
    
    18,973,288
    
    
    
    22,800,130
    
    
    
    26,893,586Gross profit
    
    
    12,971,998
    
    
    
    14,973,366
    
    
    
    17,918,082
    
    
    
    20,989,955Net Income
    
    
    994,187
    
    
    
    590,886
    
    
    
    2,785,474
    
    
    
    5,322,393Net Income per share-basic
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.07
    
    
    
    0.13Net Income per share-diluted
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.07
    
    
    
    0.13Weighted average sharesBasic
    
    
    13,375,482
    
    
    
    13,575,158
    
    
    
    27,538,652
    
    
    
    41,226,563Diluted
    
    
    13,375,482
    
    
    
    13,987,128
    
    
    
    27,685,028
    
    
    
    41,375,9072006Net Revenues
    
    
    10,989,133
    
    
    
    12,382,750
    
    
    
    13,224,610
    
    
    
    15,462,397Gross profit
    
    
    8,472,837
    
    
    
    9,633,122
    
    
    
    10,058,051
    
    
    
    11,809,232Net Income / (Loss)
    
    
    110,342
    
    
    
    (920,886
    )
    
    
    37,541
    
    
    
    1,845,086Net Income per share-basic
    
    
    
    
    
    
    (0.08
    )
    
    
    (0.01
    )
    
    
    0.04Net Income per share-diluted
    
    
    (*
    )
    
    
    (*
    )
    
    
    (*
    )
    
    
    0.04Weighted average sharesBasic
    
    
    13,114,575
    
    
    
    13,140,100
    
    
    
    13,141,676
    
    
    
    13,141,728Diluted
    
    
    13,114,575
    
    
    
    13,140,100
    
    
    
    13,141,676
    
    
    
    13,141,728
 (*)
    
    For the Quarters ended March 31, June 30, and September 30, 2006 the diluted EPS is equal to the Basic EPS.   43




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Critical accounting policies and estimates
   Impairment of long-lived assets and goodwill
    Provision for doubtful accounts
   Year ended December 31,(in millions, except percentages)
    
    2006
    
    
    2007
    
    
    2008Net revenues
    
    $
    52.1
    
    
    $
    85.1
    
    
    $
    137.0Bad debt charges
    
    
    6.2
    
    
    
    6.2
    
    
    
    8.7Bad debt charges as a percentage of net revenues
    
    
    11.9
    %
    
    
    7.3
    %
    
    
    6.3
    %
    44




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Legal Contingencies
   Income taxes
     45




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##### Table of Contents



Year ended December 31,(in millions, except percentages)
    
    2006
    
    
    2007
    
    
    2008Income and asset tax expense
    
    $
    (1.2
    )
    
    $
    (4.7
    )
    
    $
    (10.6
    )As a percentage of income before
income and asset tax
    
    
    (53.7
    )%
    
    
    (32.8
    )%
    
    
    (36.1
    )%
  Stock-based compensation
  Number of restrictedGrant date
    
    sharesSeptember 17, 2007
    
    
    2,000January 24, 2008
    
    
    600June 9, 2008
    
    
    1,348
   
    
    Year One  Paid on or before March 31, 2009: 17% (8.5% in cash and 8.5% in common stock);
    
    Year Two  Paid on or before March 31, 2010: 22% (11% in cash and 11% in common stock);
    
    Year Three  Paid on or before March 31, 2011: 27% (13.5% in cash and
13.5% in common stock); and
    
    Year Four  Paid on or before March 31, 2012: 34% (17% in cash and 17% in common stock).
    46




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Fair
    
    
    Estimatedvalue of
    
    
    fair valueGrant
    
    Options
    
    
    Exercise
    
    
    common
    
    
    of stockdate
    
    granted
    
    
    price
    
    
    stock
    
    
    optionsJanuary 1, 2006
    
    
    17,000
    
    
    $
    1.50
    
    
    $
    2.93
    
    
    $
    2.04July 1, 2006
    
    
    2,000
    
    
    $
    6.00
    
    
    $
    8.34
    
    
    $
    5.03October 1, 2006
    
    
    4,500
    
    
    $
    6.00
    
    
    $
    9.64
    
    
    $
    6.21
   Risk-free interest rates
    
    
    6
    %Expected term
    
    7 yearsDividend yield
    
    
    0
    %Expected volatility
    
    
    36
    %
     47




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##### Table of Contents



Recent accounting pronouncements
 Business Combinations
   Noncontrolling Interests in Consolidated Financial Statements
  Determination of the useful life of intangible assets
   48




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##### Table of Contents



Determination of the fair value of financial assets
  Hierarchy of Generally Accepted Accounting Principles
  Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities
  Recent acquisitions
     49




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##### Table of Contents



Results of operations
  Year Ended December 31,2006
    
    
    2007
    
    
    2008Net revenues
    
    $
    52.1
    
    
    $
    85.1
    
    
    $
    137.0Cost of net revenues
    
    
    (12.1
    )
    
    
    (18.3
    )
    
    
    (27.5
    )Gross profit
    
    
    40.0
    
    
    
    66.9
    
    
    
    109.5Operating expenses:Product and technology development
    
    
    (3.1
    )
    
    
    (4.4
    )
    
    
    (7.3
    )Sales and marketing
    
    
    (23.4
    )
    
    
    (27.6
    )
    
    
    (40.0
    )General and administrative
    
    
    (8.2
    )
    
    
    (13.2
    )
    
    
    (22.8
    )Compensation Cost related to acquisitions
    
    
    
    
    
    
    
    
    
    
    (1.9
    )Total operating expenses
    
    
    (34.6
    )
    
    
    (45.2
    )
    
    
    (72.0
    )Income from operations
    
    
    5.4
    
    
    
    21.7
    
    
    
    37.5Other income (expenses):Interest income and other financial gains
    
    
    0.5
    
    
    
    1.6
    
    
    
    1.8Interest expense and other financial charges
    
    
    (1.7
    )
    
    
    (2.7
    )
    
    
    (8.5
    )Foreign currency loss
    
    
    (0.4
    )
    
    
    (3.1
    )
    
    
    (1.5
    )Other expenses, net
    
    
    (1.5
    )
    
    
    (3.0
    )
    
    
    0.1Net income before income / asset tax expense
    
    
    2.3
    
    
    
    14.4
    
    
    
    29.4Income / asset tax expense
    
    
    (1.2
    )
    
    
    (4.7
    )
    
    
    (10.6
    )Net income
    
    $
    1.1
    
    
    $
    9.7
    
    
    $
    18.8Accretion of preferred stock
    
    
    (0.5
    )
    
    
    (0.3
    )
    
    
    Net income available to common shareholders
    
    $
    0.6
    
    
    $
    9.4
    
    
    $
    18.8
  50




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Year Ended December 31,(% of net revenues)
    
    2006
    
    
    2007
    
    
    2008Net revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Cost of net revenues
    
    
    (23.2
    )
    
    
    (21.7
    )
    
    
    (20.1
    )Gross profit
    
    
    76.8
    
    
    
    78.3
    
    
    
    79.9Operating expenses:Product and technology development
    
    
    (5.9
    )
    
    
    (5.1
    )
    
    
    (5.3
    )Sales and marketing
    
    
    (44.9
    )
    
    
    (32.4
    )
    
    
    (29.2
    )General and administrative
    
    
    (15.7
    )
    
    
    (15.5
    )
    
    
    (16.6
    )Compensation Cost related to acquisitions
    
    
    
    
    
    
    
    
    
    
    (1.4
    )Total operating expenses
    
    
    (66.4
    )
    
    
    (53.1
    )
    
    
    (52.5
    )Income from operations
    
    
    10.4
    
    
    
    25.4
    
    
    
    27.4Other income (expenses):Interest income and other financial gains
    
    
    1.0
    
    
    
    1.9
    
    
    
    1.3Interest expense and other financial charges
    
    
    (3.3
    )
    
    
    (3.2
    )
    
    
    (6.2
    )Foreign currency loss
    
    
    (0.8
    )
    
    
    (3.6
    )
    
    
    (1.1
    )Other expenses, net
    
    
    (2.8
    )
    
    
    (3.5
    )
    
    
    Net income before income / asset tax expense
    
    
    4.4
    
    
    
    16.9
    
    
    
    21.5Income / asset tax expense
    
    
    (2.4
    )
    
    
    (5.6
    )
    
    
    (7.8
    )Net income
    
    
    2.1
    
    
    
    11.4
    
    
    
    13.7Accretion of preferred stock
    
    
    (1.0
    )
    
    
    (0.4
    )
    
    
    Net income available to common shareholders
    
    
    1.1
    %
    
    
    11.0
    %
    
    
    13.7
    %
 Principal trends in results of operations
 Growth in net revenues from year to year
  Diversification of revenues from year to year
  Gross profit margins
   51




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Improving Operating income margins
  Growth in Net Income
  Year ended December 31, 2008 compared to year ended December 31, 2007
 Net revenues
      Cost of net revenues
    52




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##### Table of Contents



Product and technology development
    Sales and marketing
   General and administrative
   Compensation Cost related to acquisitions
  Other income (expenses)
   53




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##### Table of Contents



We may
incur losses in the event we are unable to distribute dividends from our Venezuelan subsidiaries at
the official exchange rate, or as a result of changes in the political, economic or regulatory
environment in Venezuela Political and economic conditions in Venezuela may have an
adverse impact on our operations
  Income and asset tax
   Year ended December 31, 2007 compared to year ended December 31, 2006
 Net revenues
   54




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##### Table of Contents



Cost of net revenues
   Product and technology development
   Sales and marketing
   General and administrative
  Other income (expenses)
   Income and asset tax
   55




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##### Table of Contents



Factors affecting results of operations and financial condition
    
    
    continued growth of online commerce and Internet usage in Latin America;
    
    our ability to expand our operations and adapt to rapidly changing technologies;
    
    governmental regulation in the countries where we operate, including exchange controls;
    
    litigation, legal liability and intellectual property rights enforcement;
    
    system interruptions or failures;
    
    our ability to attract and retain qualified personnel;
    
    the announcement or introduction of new sites, services and products by us or our competitors, and price competition;
    
    Reliance on third-party service providers;
    
    increasing consumer confidence in and acceptance of the Internet and
other online services for commerce and, in particular, the trading of
products such as those listed on our web site;
    
    Security breaches and consumer confidence in the security of transactions over the Internet;
    
    consumer trends and popularity of certain categories of items;
    
    our ability to attract new customers, retain existing customers and increase revenues;
    
    seasonal fluctuations; and
    
    political, social and economic conditions in Latin America,
particularly Venezuela, including foreign exchange rate fluctuations.
  Liquidity and capital resources
    56




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##### Table of Contents



Year Ended December 31,(In millions)
    
    2006
    
    
    2007
    
    
    2008Net cash provided by operating activities
    
    $
    6.2
    
    
    $
    6.8
    
    
    $
    54.5Net cash (used in) investing activities
    
    
    (5.2
    )
    
    
    (48.6
    )
    
    
    (37.6
    )Net cash (used in) provided by financing activities
    
    
    (3.0
    )
    
    
    50.2
    
    
    
    (11.6
    )Effect of exchange rates on cash and cash equivalents
    
    
    0.2
    
    
    
    0.1
    
    
    
    (3.5
    )Total (decrease) increase in cash and cash equivalents
    
    $
    (1.8
    )
    
    $
    8.5
    
    
    $
    1.8
 Net cash provided by operating activities
      57




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##### Table of Contents



Net cash used in investing activities
    Net cash provided by (used in) financing activities
     Debt
   58




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##### Table of Contents



Capital expenditures
  Off-balance sheet arrangements
  Contractual obligations
  Payment due by periodLess than
    
    
    1 to 3
    
    
    3 to 5
    
    
    More than(in millions)
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsOperating lease obligations (1)
    
    $
    3.2
    
    
    $
    1.5
    
    
    $
    1.5
    
    
    $
    0.2
    
    
    $
    Purchase obligations (2)
    
    
    8.2
    
    
    
    6.5
    
    
    
    1.7
    
    
    
    
    
    
    
    Long Term Obligations - Principal (3)
    
    
    18.0
    
    
    
    15.0
    
    
    
    3.0
    
    
    
    
    
    
    
    Long Term Obligations - Interest (3)
    
    
    1.0
    
    
    
    0.8
    
    
    
    0.2
    
    
    
    
    
    
    
    Total
    
    $
    30.4
    
    
    $
    23.9
    
    
    $
    6.3
    
    
    $
    0.2
    
    
    $
    
 
 (1)
    
    Includes leases of office space.(2)
    
    On June 19, 2008, our Argentine subsidiary offered to participate in a
real estate trust, which investment represents a beneficial ownership
interest in 5,340 square meters divided in five floors of an office
building and 70 parking spots under construction in the City of Buenos
Aires, Argentina. We expect to relocate our office headquarters to
this newly acquired office space upon completion of the building,
which we expect to occur in the second quarter of 2010. Under the
terms of our commitments, the total estimated contractual obligation
with the Trust is $10.1 million which shall be paid within 20 months.
As of December 31, 2008, the Argentine subsidiary has invested $3.3
million in the aforementioned trust. Due to the impact of the
Argentine inflation, future payments could differ significantly from
our estimates. Certain of our officers and former officers also
entered into an investment in a portion of the trust, which investment
represents a beneficial ownership interest in a separate floor of the
same building. We do not intend to occupy the space to be owned by
this group.(3)
    
    Due to DeRemate acquisition, on September 5, 2008, the Company issued
to the Sellers ten unsecured promissory notes having an aggregate
principal amount of $18,000,000. These promissory notes mature as
follows: (i) 3,000,000 on June 5, 2009 (ii) 9,000,000 on September 5,
2009, (iii) 3,000,000 on December 5, 2009 and, (iv) 3,000,000 on March
5, 2010. The promissory notes bear interest at 3.17875% plus 1.5% for
the first four months, 2.0% for the second four months and 2.5% for
the remaining period up to its maturity and can be prepaid by the
Company without penalty.  59




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##### Table of Contents



Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign currencies Risk
      60




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##### Table of Contents



Year Ended December 31,(In millions)
    
    2006
    
    
    2007
    
    
    2008Brazil
    
    
    30.8
    
    
    
    50.3
    
    
    
    73.7Argentina
    
    
    7.8
    
    
    
    12.6
    
    
    
    19.9Mexico
    
    
    7.2
    
    
    
    10.7
    
    
    
    13.9Venezuela
    
    
    3.6
    
    
    
    7.7
    
    
    
    23.1Other countries
    
    
    2.6
    
    
    
    3.9
    
    
    
    6.4Total
    
    
    52.1
    
    
    
    85.1
    
    
    
    137.0
  Interest Rate Risk
    Credit Risk
  Equity Price Risk
   61




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   Managements Report on Internal Control Over Financial Reporting
  Internal Control Integrated Framework Internal Control  Integrated Framework
   62




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##### Table of Contents



Inherent Limitations on Effectiveness of Controls
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12.
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDERS MATTERS
   63




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##### Table of Contents



Equity Compensation Plan InformationNumber of securitiesremaining available forNumber of securities
    
    
    Weighted-average
    
    
    future issuance underto be issued upon exercise
    
    
    exercise price of
    
    
    equity compensation plansPlan
    
    of outstanding options,
    
    
    outstanding options,
    
    
    (excluding securitiesCategory
    
    warrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Equity compensation
plans not approved
by security
holders(1)
    
    
    53,919
    
    
    
    1.23
    
    
    
    298,129Total
    
    
    53,919
    
    
    
    1.23
    
    
    
    298,129
 
 (1)
    
    Our Amended and Restated 1999 Stock Option and Restricted Stock Plan was entered into prior to our IPO. Amended and Restated 1999 Stock Option and Restricted Stock Plan
  Number of shares of common stock available under the stock option plan
 Administration of the stock option plan
 Price, exercise and termination of awards
     64




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##### Table of Contents



Adjustments upon the occurrence of material transactions
 Transferability
 Restricted stock
 Amendment
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Financial Statements and Schedules
 PageConsolidated Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated balance sheets as of December 31, 2008 and 2007
    
    
    F-3Consolidated statements of income for the three years ended December 31, 2008
    
    
    F-4Consolidated statements of changes in shareholders equity (deficit) for the
three years ended December 31, 2008
    
    
    F-5Consolidated statements of cash flows for the three years ended December 31, 2008
    
    
    F-7Notes to consolidated financial statements
    
    
    F-9
  65




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##### Table of Contents



Exhibits
 ExhibitNumber
    
    Exhibit Title2.01
    
    
    Stock Purchase Agreement, or the Agreement, with 2050 Capital Group
Inc., Abax Group Inc., Gabinete De Diseño Industrial Inc., Stamford
One Group Ltd., EO Financial Group Inc., Meck Investments Ltd., CG
Interventures Inc., Luis Carlos Uzcategui, Luis Miguel Molina,
Roberto Rivas, Jorge Caldas, and CMG Classified Media Group, Inc. (3)2.02
    
    
    Stock Purchase Agreement, dated August 25, 2008, by and among
Hammer.com, LLC, MercadoLibre, Inc., Hispanoamerican Educational
Investments BV, S.A. La Nación, DeRemate.com de Argentina S.A.,
DeRemate.com Chile S.A., Interactivos y Digitales México S.A. de C.V.
and Compañía de Negocios Interactiva de Colombia E.U. (4)2.03
    
    
    Asset Purchase Agreement, dated August 25, 2008, by and among
Hispanoamerican Educational Investments BV, S.A. La Nación,
Intangible Assets LLC, Emprendimientos Veta, S.A., DeRemate.com USA,
Inc., MercadoLibre, Inc. and Hammer.com, LLC. (4)3.01
    
    
    Registrants Amended and Restated Certificate of Incorporation. (1)3.02
    
    
    Registrants Amended and Restated Bylaws. (1)4.01
    
    
    Form of Specimen Certificate for Registrants Common Stock*4.02
    
    
    Second Amended and Restated Registration Rights Agreement, dated
September 24, 2001, by and among the Registrant and the investors
named therein. (1)10.01
    
    
    Form of Indemnity Agreement entered into by Registrant with each of
its directors and executive officers. (2)10.02
    
    
    Lease Agreement, dated as of March 31, 2007, between Curtidos San
Luis S.A. and MercadoLibre S.A. (2) (translated from Spanish)10.03
    
    
    Amendment Agreement, dated as of November 13, 2008, to the Lease
Agreement, dated March 31, 2007, between Curtidos San Luis S.A. and
MercadoLibre S.A.* (translated from Spanish)10.04
    
    
    Lease Agreement, dated as of April 1, 2008, between Curtidos San Luis
S.A. and MercadoLibre S.A. (translated from Spanish)*10.05
    
    
    Lease Agreement, dated as of May 5, 2008, between Curtidos San Luis
S.A. and MercadoLibre S.A. (translated from Spanish)*10.06
    
    
    Concession Contract, dated as February 7, 2007, between Borders
Parking S.R.L. and MercadoLibre S.A. (1)10.07
    
    
    Property Lease Agreement, dated June 28, 2005, between
MercadoLivre.com Atividades de Internet Ltda. and KW Radar
Construtora e Incorporadora Ltda. (1)10.08
    
    
    Property Lease Agreement, dated as of November 1, 2004, between
MercadoLivre.com Atividades de Internet Ltda. and Barros e Spitaletti
Empreendimentos Ltda. (1)10.09
    
    
    Property Lease Agreement, dated of April, 1, 2008, between
MercadoLivre.com Atividades de Internet Ltda. And CNA Spitaletti
Construtora e Incorporadora Ltda.*10.10
    
    
    Arias Trust Contract, dated as of June 5, 2006 and amended as of May
29, 2008 (translated from Spanish)*10.11
    
    
    Management Incentive Bonus Plan of the Registrant. (2)10.12
    
    
    Amended and Restated 1999 Stock Option and Restricted Stock Plan (2)10.13
    
    
    Employment Agreements with Officers.(2)10.14
    
    
    Form of Restricted Stock Award for Outside directors. (3)10.15
    
    
    Employment Agreement with Osvaldo Gimenez, dated as of March 26, 2008*21.01
    
    
    List of Subsidiaries*23.01
    
    
    Consent of Price Watherhouse & Co. S.R.L., Independent Registered
Public Accounting Firm*
  66




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##### Table of Contents



ExhibitNumber
    
    Exhibit Title31.01
    
    
    CEO Certification pursuant to Securities Exchange Act Rule 13a-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.02
    
    
    CFO Certification pursuant to Securities Exchange Act Rule 13a-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*32.01
    
    
    CEO Certification required by 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**32.02
    
    
    CFO Certification required by 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
 
 *
    
    Filed Herewith**
    
    Furnished Herewith(1)
    
    Incorporated by reference to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed
on May 11, 2007;(2)
    
    Incorporate by reference to Amendment No. 1 to the Registration Statement on Form S-1 of
MercadoLibre, Inc. filed on July 13, 2007.(3)
    
    Incorporated by reference to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed
on January 25, 2008(4)
    
    Incorporated by reference to the Current Report on Form 8-K filed on August 26, 2008. 
 SIGNATURES
  MERCADOLIBRE, INC.By:
    /s/ Marcos GalperínMarcos GalperínChief Executive Officer

Date: February 27, 2009  67




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ Marcos Galperín

Marcos Galperín
    
    Chief Executive Officer and Director
(Principal Executive Officer)
    
    February 27, 2009/s/ Nicolás Szekasy

Nicolás Szekasy
    
    Chief Financial Officer
(Principal Financial Officer and 
Principal Accounting Officer)
    
    February 27, 2009/s/ Mario Vazquez

Mario Vazquez
    
    Director
    
    February 27, 2009/s/ Anton Levy

Anton Levy
    
    Director
    
    February 27, 2009/s/ Michael Spence

Michael Spence
    
    Director
    
    February 27, 2009/s/ Verónica Allende Serra

Veronica Allende Serra
    
    Director
    
    February 27, 2009/s/ Nicolás Galperín

Nicolás Galperín
    
    Director
    
    February 27, 2009/s/ Emiliano Calemzuk

Emiliano Calemzuk
    
    Director
    
    February 27, 2009/s/ Martin de los Santos

Martin de los Santos
    
    Director
    
    February 27, 2009
  68




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##### Table of Contents



MercadoLibre Inc.
Consolidated Financial Statements
as of December 31, 2008 and 2007
and for the three years in the period
ended December 31, 2008
  69




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework
   F-1




---



##### Table of Contents



Price Waterhouse &
Co. S.R.L.By:
    
    /s/ Juan Carlos Grassi

Juan C. Grassi
 
  F-2




---



##### Table of Contents



MercadoLibre Inc.
Consolidated Balance Sheets
As of December 31, 2008 and 2007
 December 31,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    17,474,112
    
    
    $
    15,677,407Short-term investments
    
    
    31,639,400
    
    
    
    52,300,007Accounts receivable, net
    
    
    3,856,392
    
    
    
    3,211,252Funds receivable from customers
    
    
    2,322,416
    
    
    
    29,162,763Prepaid expenses
    
    
    426,869
    
    
    
    283,477Deferred tax assets
    
    
    1,628,871
    
    
    
    3,445,101Other assets
    
    
    2,953,164
    
    
    
    894,163Total current assets
    
    
    60,301,224
    
    
    
    104,974,170Non-current assets:Long-term investments
    
    
    9,218,153
    
    
    
    1,323,789Property and equipment, net
    
    
    5,940,160
    
    
    
    4,143,204Goodwill and intangible assets, net
    
    
    72,911,546
    
    
    
    23,428,646Deferred tax assets
    
    
    14,270
    
    
    
    269,596Other assets
    
    
    8,353,396
    
    
    
    353,395Total non-current assets
    
    
    96,437,525
    
    
    
    29,518,630Total assets
    
    $
    156,738,749
    
    
    $
    134,492,800Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    16,941,173
    
    
    $
    9,278,138Funds payable to customers
    
    
    14,727,891
    
    
    
    16,418,177Social security payable
    
    
    4,387,943
    
    
    
    3,778,236Taxes payable
    
    
    4,989,704
    
    
    
    2,493,749Loans payable and other financial liabilities
    
    
    14,963,421
    
    
    
    9,713,227Provisions
    
    
    299,753
    
    
    
    69,979Total current liabilities
    
    
    56,309,885
    
    
    
    41,751,506Non-current liabilities:Social security payable
    
    
    339,854
    
    
    
    Loans payable
    
    
    3,050,061
    
    
    
    Deferred tax liabilities
    
    
    2,556,120
    
    
    
    Other liabilities
    
    
    1,058,848
    
    
    
    1,068,155Total non-current liabilities
    
    
    7,004,883
    
    
    
    1,068,155Total liabilities
    
    $
    63,314,768
    
    
    $
    42,819,661Commitments and contingencies (Note 16)Shareholders equity:Common stock, $0.001 par value, 110,000,000 shares authorized,
44,070,367 and 44,226,563 shares issued and outstanding at December 31,
2008 and December 31, 2007, respectively (Note 9)
    
    
    44,071
    
    
    
    44,227Additional paid-in capital
    
    
    119,807,007
    
    
    
    121,890,138Accumulated deficit
    
    
    (15,552,256
    )
    
    
    (34,363,917
    )Accumulated other comprehensive (loss) income
    
    
    (10,874,841
    )
    
    
    4,102,691Total shareholders equity
    
    
    93,423,981
    
    
    
    91,673,139Total liabilities and shareholders equity
    
    $
    156,738,749
    
    
    $
    134,492,800
   F-3




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##### Table of Contents



MercadoLibre Inc.
Consolidated Statements of Income
For the three years ended December 31, 2008
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Net revenues
    
    $
    137,022,620
    
    
    $
    85,126,341
    
    
    $
    52,058,890Cost of net revenues
    
    
    (27,536,573
    )
    
    
    (18,272,940
    )
    
    
    (12,085,648
    )Gross profit
    
    
    109,486,047
    
    
    
    66,853,401
    
    
    
    39,973,242Operating expenses:Product and technology development
    
    
    (7,307,008
    )
    
    
    (4,369,376
    )
    
    
    (3,066,304
    )Sales and marketing
    
    
    (39,975,307
    )
    
    
    (27,598,683
    )
    
    
    (23,358,510
    )General and administrative
    
    
    (22,759,931
    )
    
    
    (13,223,522
    )
    
    
    (8,150,499
    )Compensation Cost related to acquisitions (Note 6)
    
    
    (1,919,870
    )
    
    
    
    
    
    
    Total operating expenses
    
    
    (71,962,116
    )
    
    
    (45,191,581
    )
    
    
    (34,575,313
    )Income from operations
    
    
    37,523,931
    
    
    
    21,661,820
    
    
    
    5,397,929Other income (expenses):Interest income and other
financial gains
    
    
    1,822,385
    
    
    
    1,609,403
    
    
    
    520,508Interest expense and other financial charges
    
    
    (8,442,427
    )
    
    
    (2,737,901
    )
    
    
    (1,743,315
    )Foreign currency loss
    
    
    (1,531,144
    )
    
    
    (3,106,515
    )
    
    
    (391,981
    )Other income (expenses), net
    
    
    73,159
    
    
    
    (3,006,416
    )
    
    
    (1,468,220
    )Net income before income / asset tax expense
    
    
    29,445,904
    
    
    
    14,420,391
    
    
    
    2,314,921Income / asset tax expense
    
    
    (10,634,243
    )
    
    
    (4,727,451
    )
    
    
    (1,242,838
    )Net income
    
    $
    18,811,661
    
    
    $
    9,692,940
    
    
    $
    1,072,083Accretion of preferred stock
    
    
    
    
    
    
    (309,299
    )
    
    
    (494,878
    )Net income available to common shareholders
    
    $
    18,811,661
    
    
    $
    9,383,641
    
    
    $
    577,205
 Year Ended December 31,2008
    
    
    2007
    
    
    2006 (1)Basic EPSBasic net income per share
    
    $
    0.43
    
    
    $
    0.22
    
    
    $
    0.01Weighted average shares
    
    
    44,239,443
    
    
    
    25,149,405
    
    
    
    13,149,139Diluted EPSDiluted net income per common share
    
    $
    0.42
    
    
    $
    0.22Weighted average shares
    
    
    44,348,950
    
    
    
    25,478,336
 (1)
    
    For the year ended December 31, 2006 the diluted EPS is equal to the Basic EPS   F-4




---



##### Table of Contents



MercadoLibre Inc.
Consolidated Statements of Changes in Shareholders Equity (Deficit)
For the three years ended December 31, 2008
 AccumulatedAdditional
    
    
    
    
    
    
    Preferred
    
    
    
    
    
    
    otherComprehensive
    
    
    Common stock
    
    
    paid-in
    
    
    Treasury
    
    
    stock
    
    
    Accumulated
    
    
    comprehensiveincome
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    Stock
    
    
    warrants
    
    
    deficit
    
    
    income (loss)
    
    
    TotalBalance as of December 31, 2005
    
    
    
    
    
    
    13,095,863
    
    
    $
    130,959
    
    
    $
    3,149,663
    
    
    $
    
    
    
    $
    
    
    
    $
    (45,126,900
    )
    
    $
    (560,542
    )
    
    $
    (42,406,820
    )Stock options exercised
    
    
    
    
    
    
    71,119
    
    
    
    711
    
    
    
    6,396
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,107Stock-based compensation  stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,223Accretion of mandatorily redeemable convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (494,878
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (494,878
    )Net income
    
    
    1,072,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,072,083
    
    
    
    
    
    
    
    1,072,083Currency translation adjustment
    
    
    1,142,842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,142,842
    
    
    
    1,142,842Unrealized net gains on investments
    
    
    102,330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,330
    
    
    
    102,330Realized net gain on investments
    
    
    (184,094
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184,094
    )
    
    
    (184,094
    )Comprehensive income
    
    
    2,133,161Balance as of December 31, 2006
    
    
    
    
    
    
    13,166,982
    
    
    $
    131,670
    
    
    $
    2,694,404
    
    
    $
    
    
    
    $
    
    
    
    $
    (44,054,817
    )
    
    $
    500,536
    
    
    $
    (40,728,207
    )Shares issued in 2000 and 2001 (1)
    
    
    
    
    
    
    204,000
    
    
    
    2,040
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,040
    )
    
    
    
    
    
    
    Stock options exercised
    
    
    
    
    
    
    483,470
    
    
    
    4,835
    
    
    
    33,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,577Stock-based compensation  stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,477
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,477Stock-based compensation  restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,966Accretion of mandatorily redeemable
convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (309,299
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (309,299
    )Change in par value of common stock
    
    
    
    
    
    
    
    
    
    
    (124,690
    )
    
    
    124,690
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    3,000,000
    
    
    
    3,000
    
    
    
    49,570,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,573,239Conversion of mandatorily redeemable convertible preferred stock
into common stock preferred stock
    
    
    
    
    
    
    27,187,838
    
    
    
    27,188
    
    
    
    64,358,656
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,385,844Reclassification of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,636,456
    
    
    
    
    
    
    
    
    
    
    
    4,636,456Exercise of warrants
    
    
    
    
    
    
    184,273
    
    
    
    184
    
    
    
    5,386,263
    
    
    
    
    
    
    
    (4,636,456
    )
    
    
    
    
    
    
    
    
    
    
    749,991Net income
    
    
    9,692,940
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,692,940
    
    
    
    
    
    
    
    9,692,940Currency translation adjustment
    
    
    3,755,601
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,755,601
    
    
    
    3,755,601Unrealized net gains on investments
    
    
    153,876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153,876
    
    
    
    153,876Realized net gain on investments
    
    
    (307,322
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (307,322
    )
    
    
    (307,322
    )Comprehensive income
    
    
    13,295,095Balance as of December 31, 2007
    
    
    
    
    
    
    44,226,563
    
    
    $
    44,227
    
    
    $
    121,890,138
    
    
    $
    
    
    
    $
    
    
    
    $
    (34,363,917
    )
    
    $
    4,102,691
    
    
    $
    91,673,139
 (1)
    
    These shares were issued in 2000 and 2001, but were not recorded until 2007. The amounts are immaterial to revise prior years financial statements.   F-5




---



##### Table of Contents



MercadoLibre Inc.
Consolidated Statements of Changes in Shareholders Equity (Deficit)
For the three years ended December 31, 2008
 AccumulatedAdditional
    
    
    
    
    
    
    Preferred
    
    
    
    
    
    
    otherComprehensive
    
    
    Common stock
    
    
    paid-in
    
    
    Treasury
    
    
    stock
    
    
    Accumulated
    
    
    comprehensiveincome
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    Stock
    
    
    warrants
    
    
    deficit
    
    
    income (loss)
    
    
    TotalBalance as of December 31, 2007
    
    
    
    
    
    $
    44,226,563
    
    
    $
    44,227
    
    
    $
    121,890,138
    
    
    $
    
    
    
    $
    
    
    
    $
    (34,363,917
    )
    
    $
    4,102,691
    
    
    $
    91,673,139Stock options exercised and restricted shares issued
    
    
    
    
    
    
    93,504
    
    
    
    94
    
    
    
    82,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,089Stock-based compensation  stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,719
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,719Stock-based compensation  restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,560Stock -based compensation LTRP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    321,568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    321,568Repurchase of Treasury Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,598,223
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,598,223
    )Retirement of Treasury Stock
    
    
    
    
    
    
    (249,700
    )
    
    
    (250
    )
    
    
    (2,597,973
    )
    
    
    2,598,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    18,811,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,811,661
    
    
    
    
    
    
    
    18,811,661Currency translation adjustment
    
    
    (14,923,284
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,923,284
    )
    
    
    (14,923,284
    )Unrealized net gains on investments
    
    
    3,642
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,642
    
    
    
    3,642Realized net gain on investments
    
    
    (57,890
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,890
    )
    
    
    (57,890
    )Comprehensive income
    
    
    3,834,129Balance as of December 31, 2008
    
    
    
    
    
    $
    44,070,367
    
    
    $
    44,071
    
    
    $
    119,807,007
    
    
    $
    
    
    
    $
    
    
    
    $
    (15,552,256
    )
    
    $
    (10,874,841
    )
    
    $
    93,423,981
   F-6




---



##### Table of Contents



MercadoLibre Inc.
Consolidated Statements of Cash Flows
For the three years ended December 31, 2008
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Cash flows from operations:Net income
    
    $
    18,811,661
    
    
    $
    9,692,940
    
    
    $
    1,072,083Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    3,335,673
    
    
    
    2,307,649
    
    
    
    2,016,939Foreign currency gains
    
    
    (7,827,112
    )
    
    
    
    
    
    
    Interest expense
    
    
    300,368
    
    
    
    
    
    
    
    96,833Realized gains on investments
    
    
    (1,232,036
    )
    
    
    (845,398
    )
    
    
    (184,094
    )Unrealized losses (gains) on investments
    
    
    57,293
    
    
    
    (228,877
    )
    
    
    (46,926
    )Stock-based compensation expense  stock options
    
    
    4,719
    
    
    
    15,477
    
    
    
    33,223Stock-based compensation expense  restricted shares
    
    
    105,560
    
    
    
    15,966
    
    
    
    Stock-based compensation LTRP
    
    
    839,303
    
    
    
    
    
    
    
    Change in fair value of warrants
    
    
    
    
    
    
    3,045,992
    
    
    
    1,269,377Deferred income taxes
    
    
    446,287
    
    
    
    (198,368
    )
    
    
    (1,291,549
    )Changes in assets and liabilities, excluding the effect of acquisitions:Accounts receivable
    
    
    4,026,218
    
    
    
    (736,431
    )
    
    
    403,075Funds receivable from customers
    
    
    26,573,209
    
    
    
    (15,517,486
    )
    
    
    (6,026,226
    )Prepaid expenses
    
    
    (153,582
    )
    
    
    56,399
    
    
    
    (207,130
    )Other assets
    
    
    (1,415,575
    )
    
    
    (967,264
    )
    
    
    167,593Accounts payable and accrued expenses
    
    
    10,610,141
    
    
    
    4,282,955
    
    
    
    4,651,264Funds payable to customers
    
    
    2,294,847
    
    
    
    5,423,976
    
    
    
    4,704,108Provisions
    
    
    (1,277,664
    )
    
    
    (274,101
    )
    
    
    (559,734
    )Other liabilities
    
    
    (952,169
    )
    
    
    689,154
    
    
    
    59,518Net cash provided by operating activities
    
    
    54,547,141
    
    
    
    6,762,583
    
    
    
    6,158,354Cash flows from investing activities:Purchase of investments
    
    
    (110,056,368
    )
    
    
    (75,267,070
    )
    
    
    (4,944,956
    )Proceeds from sale and maturity of investments
    
    
    116,574,567
    
    
    
    29,765,780
    
    
    
    2,184,822Payment for businesses acquired, net of cash acquired
    
    
    (39,181,473
    )
    
    
    
    
    
    
    Purchase of intangible assets
    
    
    (58,238
    )
    
    
    (28,748
    )
    
    
    (346,365
    )Purchases of property and equipment
    
    
    (4,904,991
    )
    
    
    (3,058,813
    )
    
    
    (2,097,555
    )Net cash used in investing activities
    
    
    (37,626,503
    )
    
    
    (48,588,851
    )
    
    
    (5,204,054
    )Cash flows
from financing activities:Increase in short term debt
    
    
    
    
    
    
    8,883,104
    
    
    
    Decrease in short term debt
    
    
    (9,137,223
    )
    
    
    
    
    
    
    (2,058
    )Loans paid
    
    
    
    
    
    
    (9,000,000
    )
    
    
    (3,000,000
    )Repurchase of
Treasury Stock
    
    
    (2,598,223
    )
    
    
    
    
    
    
    Stock options exercised
    
    
    83,089
    
    
    
    38,576
    
    
    
    7,107Exercise of warrants
    
    
    
    
    
    
    749,991
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    49,573,239
    
    
    
    Net cash (used in ) provided by financing activities
    
    
    (11,652,357
    )
    
    
    50,244,910
    
    
    
    (2,994,951
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (3,471,576
    )
    
    
    115,738
    
    
    
    203,840Net (decrease) increase in cash and cash equivalents
    
    
    1,796,705
    
    
    
    8,534,380
    
    
    
    (1,836,811
    )Cash and cash equivalents, beginning of the year
    
    
    15,677,407
    
    
    
    7,143,027
    
    
    
    8,979,838Cash and cash equivalents, end of the year
    
    $
    17,474,112
    
    
    $
    15,677,407
    
    
    $
    7,143,027
   F-7




---



##### Table of Contents



MercadoLibre Inc.
Consolidated Statements of Cash Flows
For the three years ended December 31, 2008
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Supplemental cash flow information:Cash paid for interest
    
    $
    7,138,402
    
    
    $
    1,572,909
    
    
    $
    851,667Cash paid for income taxes
    
    $
    7,921,206
    
    
    $
    3,864,908
    
    
    $
    1,916,975Non-cash financing activities:Accretion of preferred stock
    
    $
    
    
    
    $
    309,299
    
    
    $
    494,878Conversion of mandatorily redeemable convertible preferred stock
into common stock
    
    $
    
    
    
    $
    64,385,844
    
    
    $
    Reclassifications of warrants
    
    $
    
    
    
    $
    4,636,456
    
    
    $
    Acquisition of DeRemate and Classified Media Group:Cash and cash equivalents
    
    $
    691,632
    
    
    $
    
    
    
    $
    Funds receivable from customers
    
    $
    117,473
    
    
    $
    
    
    
    $
    Accounts receivable
    
    
    6,569,098
    
    
    
    
    
    
    
    Tax credits
    
    
    604,419
    
    
    
    
    
    
    
    Other current assets
    
    
    918,856
    
    
    
    
    
    
    
    Non current assets
    
    
    504,927
    
    
    
    
    
    
    
    Total assets acquired
    
    
    9,406,405
    
    
    
    
    
    
    
    Accounts payable and accrued expenses
    
    
    4,578,830
    
    
    
    
    
    
    
    Funds payable to customers
    
    
    146,191
    
    
    
    
    
    
    
    Taxes payable
    
    
    1,204,479
    
    
    
    
    
    
    
    Social security payable
    
    
    395,112
    
    
    
    
    
    
    
    Other liabilities
    
    
    1,590,371
    
    
    
    
    
    
    
    Non current liabilities
    
    
    14,000
    
    
    
    
    
    
    
    Provisions
    
    
    1,548,391
    
    
    
    
    
    
    
    Total liabilities assumed
    
    
    9,477,374
    
    
    
    
    
    
    
    Net assets acquired
    
    
    (70,969
    )
    
    
    
    
    
    
    Goodwill
    
    
    52,638,036
    
    
    
    
    
    
    
    Trademarks
    
    
    5,622,188
    
    
    
    
    
    
    
    Customer lists
    
    
    1,227,600
    
    
    
    
    
    
    
    Non compete agreement
    
    
    573,484
    
    
    
    
    
    
    
    Deferred income tax on intangible assets
    
    
    (2,598,145
    )
    
    
    
    
    
    
    Total purchase price
    
    
    57,392,193
    
    
    
    
    
    
    
    Cash and cash equivalents acquired
    
    
    (691,632
    )
    
    
    
    
    
    
    Payment for businesses acquired, net of
cash acquired
    
    $
    39,181,473
    
    
    $
    
    
    
    $
    Seller financing for DeRemate business acquisition (1)
    
    $
    17,519,088
    
    
    $
    
    
    
    $
    
 (1)
    
    The Seller financing for DeRemate business acquisition is presented net of working capital
adjustment (See note 6 for more details)   F-8




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 1.
    
    Nature of Business
       F-9




---



##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 1.
    
    Nature of Business (Continued)
         F-10




---



##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 1.
    
    Nature of Business (Continued)
   2.
    
    Summary of Significant Accounting Policies
 Principles of consolidation
   Use of estimates
   F-11




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
 Cash and cash equivalents
  Investments
  Fair Value Measurements
  Concentration of credit risk
   F-12




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
 Concentration of credit risk (Continued)
  Allowance for doubtful accounts
  Funds receivable and funds payable to customers
   Transfer of Financial Assets
 Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities a replacement of FASB Statement 125
 Property and equipment, net
    F-13




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
 Goodwill and intangible assets, net
   Impairment of Long-Lived Assets
    F-14




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
  Revenue Recognition
      Derivative Financial Instruments
   F-15




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
 Share-based payments
 Stock options, restricted and additional shares and shares granted under the long term
retention plan (LTRP) are accounted for at their grant date fair value.
    Taxes on revenues
  Advertising Costs
  Comprehensive Income
  Mandatorily Redeemable Convertible Preferred Stock
   F-16




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
 Foreign Currency Translation
  Income and Asset Taxes
     F-17




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
 Uncertainty in Income Taxes
    Recent Accounting Pronouncements
       F-18




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
 Recent Accounting Pronouncements (Continued)
      F-19




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 2.
    
    Summary of Significant Accounting Policies (Continued)
 Recent Accounting Pronouncements (Continued)
     3.
    
    Net income per share
   F-20




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 3.
    
    Net income per share (Continued)
     Year Ended December 31,2008
    
    
    2007
    
    
    2006Basic andBasic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted
    
    
    DilutedNet income
    
    $
    18,811,661
    
    
    $
    18,811,661
    
    
    $
    9,692,940
    
    
    $
    9,692,940
    
    
    $
    1,072,083Accretion of preferred stock
    
    
    
    
    
    
    
    
    
    
    (309,299
    )
    
    
    (309,299
    )
    
    
    (494,878
    )Net income available to common shareholders
    
    $
    18,811,661
    
    
    $
    18,811,661
    
    
    $
    9,383,641
    
    
    $
    9,383,641
    
    
    $
    577,205Net income available to common
shareholders
attributable to
preferred stock
    
    
    
    
    
    
    
    
    
    
    (3,772,510
    )
    
    
    (3,734,758
    )
    
    
    (389,047
    )Net income available to common
shareholders
attributable to
common stock
    
    $
    18,811,661
    
    
    $
    18,811,661
    
    
    $
    5,611,131
    
    
    $
    5,648,883
    
    
    $
    188,158
  F-21




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 3.
    
    Net income per share (Continued)
  Three Months Ended December 31,2008
    
    
    2007
    
    
    2006Basic
    
    
    Diluted
    
    
    Basic
    
    
    Diluted
    
    
    DilutedNet income available to common shareholders per common share
    
    $
    0.43
    
    
    $
    0.42
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.01Numerator:Net income available to common shareholders
    
    $
    18,811,661
    
    
    $
    18,811,661
    
    
    $
    5,611,131
    
    
    $
    5,648,883
    
    
    $
    188,158Denominator:Weighted average of common stock outstanding for Basic earnings per share
    
    
    44,239,443
    
    
    
    44,239,443
    
    
    
    25,149,405
    
    
    
    25,149,405
    
    
    
    13,149,139Adjustment for stock options
    
    
    
    
    
    
    98,507
    
    
    
    
    
    
    
    328,931
    
    
    
    Adjustment for restricted shares
    
    
    
    
    
    
    498
    
    
    
    
    
    
    
    
    
    
    
    Adjustment for additional shares
    
    
    
    
    
    
    10,502
    
    
    
    
    
    
    
    
    
    
    
    Adjusted weighted average of common stock outstanding for Diluted earnings per share
    
    
    44,239,443
    
    
    
    44,348,950
    
    
    
    25,149,405
    
    
    
    25,478,336
    
    
    
    13,149,139
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Anti-dilutive sharesWarrants
    
    
    
    
    
    
    114,603
    
    
    
    184,272Restricted shares
    
    
    3,082
    
    
    
    3,895
    
    
    
    Stock Options
    
    
    
    
    
    
    
    
    
    
    652,457Shares granted under LTRP
    
    
    21,591
    
    
    
    
    
    
    
    24,673
    
    
    
    118,498
    
    
    
    836,729
 4.
    
    Short-term and long-term investments
  December 31,
    
    
    December 31,2008
    
    
    2007Short-term investmentsTime Deposits
    
    $
    21,365,613
    
    
    $
    14,554,229Commercial Papers
    
    
    
    
    
    
    12,996,502Money Market Funds
    
    
    2,408,294
    
    
    
    24,749,276Bond Mutual Funds
    
    
    1,530,034
    
    
    
    Treasury Bills
    
    
    6,335,459
    
    
    
    Total
    
    $
    31,639,400
    
    
    $
    52,300,007Long-term investmentsArias Trust (1)
    
    
    3,287,823
    
    
    
    Time Deposits
    
    
    2,559,465
    
    
    
    Corporate Debt Securities
    
    
    3,370,865
    
    
    
    1,323,789Total
    
    $
    9,218,153
    
    
    $
    1,323,789
 (1)
    
    As this investment represents an undivided interest for more than 20% of the total
amount of the real estate trust, it is accounted for under the equity method and it is
classified as Long-Term Investments in the balance sheet (See note 16  Other Commitments).  F-22




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 4.
    
    Short-term and long-term investments (Continued)
      5.
    
    Balance sheet components
 December 31,
    
    
    December 31,2008
    
    
    2007Accounts receivable, net:Users
    
    $
    9,664,598
    
    
    $
    7,975,231Credit cards and other means of payments
    
    
    1,471,203
    
    
    
    1,294,136Advertising
    
    
    1,203,710
    
    
    
    489,146Others debtors
    
    
    27,008
    
    
    
    65,16412,366,519
    
    
    
    9,823,677Allowance for doubtful accounts
    
    
    (8,510,127
    )
    
    
    (6,612,425
    )$
    3,856,392
    
    
    $
    3,211,252
  F-23




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 5.
    
    Balance sheet components (Continued)
 December 31,
    
    
    December 31,2008
    
    
    2007Funds receivable from customersCredit cards and other means of payments
    
    $
    2,489,436
    
    
    $
    29,751,867Allowance for chargebacks
    
    
    (167,020
    )
    
    
    (589,104
    )$
    2,322,416
    
    
    $
    29,162,763
 December 31,
    
    
    December 31,2008
    
    
    2007Other current assets:VAT credits
    
    $
    681,660
    
    
    $
    315,167Restricted assets
    
    
    358,900
    
    
    
    Other taxes
    
    
    931,348
    
    
    
    317,731Other
    
    
    981,256
    
    
    
    261,265$
    2,953,164
    
    
    $
    894,163
 December 31,
    
    
    December 31,2008
    
    
    2007Other non current assets:Foreign currency effect on assets (1)
    
    $
    7,827,112
    
    
    $
    Other
    
    
    526,284
    
    
    
    353,395$
    8,353,396
    
    
    $
    353,395
 (1)
    
    For the year ended December 31, 2008, the Venezuelan subsidiaries maintained a foreign
currency denominated asset in the form of US dollar denominated cash and cash equivalents. In
accordance with the Companys stated accounting policy, this investment should first be
re-measured into its functional currency Bolivares Fuertes. Upon re-measurement into its
functional currency, the investment will then be translated into the reporting currency of the
Company (US Dollar). In accordance with paragraph 27a of FAS 52 Foreign Currency Translation,
the asset was re-measured at the December 31, 2008 parallel exchange rate of 5.4 Bolivares
Fuertes per US dollar. Further, in accordance with paragraph 27b of FAS 52, the Venezuelan
subsidiaries assets, liabilities, income and expense accounts were translated at the rate
applicable for dividend remittances, which at December 31, 2008 is the official rate of 2.15
Bolivares Fuertes per US dollar. According to the International Practices Task Force Joint
Meeting with SEC Staff of June 2, 2008, the existence of a parallel market does not constitute
unusual circumstances potentially justifying the use of an exchange rate other than the official
rate for purposes of foreign currency translation. Accordingly, the asset is the result of
applying the Companys accounting policy for the related asset.  F-24




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 5.
    
    Balance sheet components (Continued)
 Estimateduseful life
    
    December 31,
    
    
    December 31,(years)
    
    2008
    
    
    2007Property and equipment, net:Equipment
    
    3-5
    
    $
    10,636,641
    
    
    $
    8,182,697Furniture and fixtures
    
    3-5
    
    
    2,413,000
    
    
    
    1,646,746Software
    
    3
    
    
    1,693,951
    
    
    
    1,380,44014,743,592
    
    
    
    11,209,883Accumulated depreciation
    
    
    
    
    (8,803,432
    )
    
    
    (7,066,679
    )$
    5,940,160
    
    
    $
    4,143,204
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Depreciation and amortization:Cost of net revenues
    
    $
    333,029
    
    
    $
    103,772
    
    
    $
    37,760Product and technology development
    
    
    2,205,369
    
    
    
    1,854,345
    
    
    
    1,649,865Sales and marketing
    
    
    154,130
    
    
    
    22,772
    
    
    
    14,525General and administrative
    
    
    643,145
    
    
    
    326,760
    
    
    
    314,789$
    3,335,673
    
    
    $
    2,307,649
    
    
    $
    2,016,939
 December 31,
    
    
    December 31,2008
    
    
    2007Accounts payable and accrued expenses: (1)Accounts payable
    
    $
    7,980,983
    
    
    $
    4,022,469Accrued expensesAdvertising
    
    
    2,205,954
    
    
    
    3,132,771Professional fees
    
    
    807,577
    
    
    
    930,331Other expense
provisions
    
    
    5,941,831
    
    
    
    1,180,740Other current liabilities
    
    
    4,828
    
    
    
    11,827$
    16,941,173
    
    
    $
    9,278,138
  (1)
    
    Includes $4,204,441 million related to the re-measurement of the Venezuelan subsidiaries liabilities denominated
in U.S. dollars. See footnote (1) in Other non-current assets for more detail. December 31,
    
    
    December 31,2008
    
    
    2007Loans payable and other financial liabilities:Credit Card receivable-backed Loans (1)
    
    $
    
    
    
    $
    9,710,818Loans related to DR operations
acquisition (2)
    
    
    14,769,395
    
    
    
    Written Puts Options
    
    
    185,000
    
    
    
    Other Loans
    
    
    9,026
    
    
    
    2,409$
    14,963,421
    
    
    $
    9,713,227
  F-25




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 5.
    
    Balance sheet components (Continued)
 December 31,
    
    
    December 31,2008
    
    
    2007Non current loans payable:
    
    $
    3,050,061
    
    
    $
    Loans related to DR
operations acquisition
(2)
    
    $
    3,050,061
    
    
    $
    
 (1)
    
    Certain working capital requirements of the Companys Payments operations in Brazil were
financed through bank advancements backed by credit card receivables. The weighted average
interest rate of these loans was 0.95% per month.(2)
    
    Due to the acquisition of DeRemate, on September 5, 2008, the Company issued to the Sellers
ten (10) unsecured promissory notes having an aggregate principal amount of $18,000,000. According to the modification of terms
dated February 12, 2009, these promissory notes mature as follows: (i) 3,000,000 on June 5, 2009 (ii) 9,000,000 on September
5, 2009, (iii) 3,000,000 on December 5, 2009 and, (iv) 3,000,000 on March 5, 2010. The
promissory notes bear interest at 3.17875% plus 1.5% for the first four months, 2.0% for the
second four months and 2.5% for the remaining period up to its maturity and can be prepaid by
the Company without penalty. The Seller financing for the DeRemate acquisition is presented
net of working capital adjustment (See note 6 for more detail). The figures shown above
include accrued interest of $250,306 and $50,061 related to the current and non-current
related liabilities, respectively. December 31,
    
    
    December 31,2008
    
    
    2007Accumulated other comprehensive
income:Foreign currency translation
    
    $
    (10,878,483
    )
    
    $
    4,044,801Unrealized gains on investments
    
    
    5,603
    
    
    
    89,061Estimated tax loss on unrealized gains on investments
    
    
    (1,961
    )
    
    
    (31,171
    )$
    (10,874,841
    )
    
    $
    4,102,691
 6.
    
    Business Combinations, Goodwill and Intangible Assets
 Business Combinations
     F-26




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 6.
    
    Business Combinations, Goodwill and Intangible Assets
 Business Combinations (Continued)
       Purchase Price
    
    $
    17,024,380Post-closing working capital adjustments
    
    
    150,000Direct cost of the business combination
    
    
    204,424Total aggregate purchase price
    
    $
    17,378,804Compensation Cost
    
    
    1,919,870Total Cash paid
    
    $
    19,298,674
   F-27




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 6.
    
    Business Combinations, Goodwill and Intangible Assets
 Business Combinations (Continued)
  Post
    
    
    Net Tangible
    
    
    Identifiable
    
    
    Deferred
    
    
    
    
    
    
    AggregateAcquisition
    
    
    Assets /
    
    
    Intangible
    
    
    Tax
    
    
    
    
    
    
    PurchaseCompany Name
    
    Country
    
    Ownership
    
    
    (Liabilities)
    
    
    Assets
    
    
    Liabilities
    
    
    Goodwill
    
    
    PriceCMG Classified Media Group
Inc.
    
    Panama
    
    
    100
    %
    
    $
    846.3
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    846.3Venecapital Group Inc.
    
    Panama
    
    
    100
    %
    
    
    (26.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26.8
    )Grupo Veneclasificados C.A.
    
    Venezuela
    
    
    100
    %
    
    
    (125.4
    )
    
    
    4,934.2
    
    
    
    (1,727.0
    )
    
    
    11,442.0
    
    
    
    14,523.8Clasificados
Internacionales S.A.
    
    Panama
    
    
    100
    %
    
    
    (44.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44.8
    )ColClasificados S.A.
    
    Colombia
    
    
    100
    %
    
    
    36.4
    
    
    
    688.0
    
    
    
    (240.8
    )
    
    
    1,595.5
    
    
    
    2,079.1Clasificados Florida LLC
    
    USA
    
    
    100
    %
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2Total
    
    
    
    
    
    
    
    $
    686.9
    
    
    $
    5,622.2
    
    
    $
    (1,967.8
    )
    
    $
    13,037.5
    
    
    $
    17,378.8
       F-28




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 6.
    
    Business Combinations, Goodwill and Intangible Assets (Continued)Business Combinations (Continued)The aggregate purchase price paid by the Company to the Sellers for the shares of capital stock
of the Acquired Entities and the related assets was $40,000,000. The Company paid the Sellers
$22,000,000 in cash. In addition, on September 5, 2008, the Company issued to the Sellers ten
(10) unsecured promissory notes having an aggregate principal amount of $18,000,000, $8,000,000
of which are subject to set-off rights in favor of the Company for working capital adjustments
and liabilities relating to the assumption of certain contracts by the Company, $4,000,000 of
which are subject to set-off rights in favor of the Company for indemnification obligations of
the Sellers and the remaining $6,000,000 are not subject to set-off rights. Each of the
promissory notes have a one-year term, bear interest at 3.17875% plus 1.5% for the first four
months, 2.0% for the second four months and 2.5% for the third four months and can be prepaid
by the Company without penalty. Pursuant to the terms of each promissory note, until the
principal amount plus interest is repaid, the Company may not incur indebtedness in excess of
$55,000,000 in the aggregate.On February 12, 2009 we agreed to modify the maturity conditions of the
promissory note as follows: (i) 3,000,000 on June 5, 2009 (ii) 9,000,000 on September 5, 2009 (iii) 3,000,000 on December 5, 2009 and (iv) 3,000,000 on
March 5, 2010. The promissory notes bear interest at 3.17875% plus 1.5% for the first four months, 2.0% for the second four months and 2.5% for the
remaining period up to its maturity. In addition, on that date we finished the purchase price allocation period and the Company agreed with the Sellers a working
capital adjustment for $480,912 to be paid by the Sellers to the Company.The Sellers and certain of their affiliates have also agreed to enter into certain non-compete
agreements with the Company for 5 years.The Companys statement of income includes the results of operations of the acquired companies
from as September 1, 2008.
  Cash paid
    
    
    22,000,000Seller financing (1)
    
    
    18,000,000Working Capital adjustment
    
    
    (480,912
    )Direct cost of the business combination
    
    
    494,301Total aggregate purchase price
    
    $
    40,013,389
 (1)
    
    See Note 5  Loans
payable and other financial liabilities, for more detail.  F-29




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 6.
    
    Business Combinations, Goodwill and Intangible Assets (Continued)Business Combinations (Continued)The following table summarizes the purchase price allocation of the Acquired Entities in the
transaction (in thousands):
 Post
    
    
    Net Tangible
    
    
    Identifiable
    
    
    Deferred
    
    
    
    
    
    
    AggregateAcquisition
    
    
    Assets /
    
    
    Intangible
    
    
    Tax
    
    
    
    
    
    
    PurchaseCompany Name
    
    Country
    
    
    Ownership
    
    
    (Liabilities)
    
    
    Assets
    
    
    Liabilities
    
    
    Goodwill
    
    
    PriceDeRemate.com de
Argentina S.A.
    
    Argentina
    
    
    100
    %
    
    
    2,555.2
    
    
    
    1,444.1
    
    
    
    (505.4
    )
    
    
    30,658.9
    
    
    
    34,152.8DeRemate.com Chile S.A.
    
    Chile
    
    
    100
    %
    
    
    (1,978.9
    )
    
    
    302.2
    
    
    
    (105.8
    )
    
    
    6,659.4
    
    
    
    4,876.9Compañía de Negocios
Interactiva de
Colombia E.U.
    
    Colombia
    
    
    100
    %
    
    
    (753.4
    )
    
    
    25.6
    
    
    
    (9.0
    )
    
    
    1,417.2
    
    
    
    680.4Interactivos y
Digitales México S.A.
de C.V.
    
    Mexico
    
    
    100
    %
    
    
    (580.7
    )
    
    
    29.2
    
    
    
    (10.2
    )
    
    
    864.9
    
    
    
    303.2Total
    
    
    
    
    
    
    
    
    
    
    (757.8
    )
    
    
    1,801.1
    
    
    
    (630.4
    )
    
    
    39,600.4
    
    
    
    40,013.3
      F-30




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 6.
    
    Business Combinations, Goodwill and Intangible Assets (Continued)Business Combinations (Continued)The following table summarizes the net tangible assets acquired in the abovementioned business
combinations:
 CMG
    
    
    DeRemate
    
    
    TotalCash and cash equivalents
    
    
    554,739
    
    
    
    136,893
    
    
    
    691,632Funds receivable from customers
    
    
    
    
    
    
    117,473
    
    
    
    117,473Accounts receivable
    
    
    56,613
    
    
    
    6,512,485
    
    
    
    6,569,098Tax Credits
    
    
    
    
    
    
    604,419
    
    
    
    604,419Other current assets
    
    
    904,791
    
    
    
    14,065
    
    
    
    918,856Non current assets
    
    
    365,190
    
    
    
    139,737
    
    
    
    504,927Total assets acquired
    
    
    1,881,333
    
    
    
    7,525,072
    
    
    
    9,406,405Accounts payable and accrued
expenses
    
    
    69,516
    
    
    
    4,509,314
    
    
    
    4,578,830Funds payable to customers
    
    
    
    
    
    
    146,191
    
    
    
    146,191Taxes payable
    
    
    459,462
    
    
    
    745,017
    
    
    
    1,204,479Social security payable
    
    
    243,141
    
    
    
    151,971
    
    
    
    395,112Other liabilities
    
    
    
    
    
    
    1,590,371
    
    
    
    1,590,371Non current liabilities
    
    
    14,000
    
    
    
    
    
    
    
    14,000Provisions
    
    
    408,335
    
    
    
    1,140,056
    
    
    
    1,548,391Total liabilities assumed
    
    
    1,194,454
    
    
    
    8,282,920
    
    
    
    9,477,374Net tangible assets (liabilities)
    
    
    686,879
    
    
    
    (757,848
    )
    
    
    (70,969
    )
 Goodwill and Intangible Assets
  December 31,
    
    
    December 31,2008
    
    
    2007Indefinite lived assets- Goodwill
    
    $
    65,652,774
    
    
    $
    23,000,467- Trademarks
    
    
    5,537,715
    
    
    
    Amortizable intangible assets- Licenses and others
    
    
    1,313,901
    
    
    
    1,352,945- Non-compete agreement
    
    
    1,051,531
    
    
    
    731,101- Customer list
    
    
    1,534,969
    
    
    
    597,257Total intangible assets
    
    $
    75,090,890
    
    
    $
    25,681,770Accumulated amortization
    
    
    (2,179,344
    )
    
    
    (2,253,124
    )$
    72,911,546
    
    
    $
    23,428,646
  F-31




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 6.
    
    Business Combinations, Goodwill and Intangible Assets (Continued)Goodwill and Intangible
Assets (Continued)GoodwillThe changes in the carrying amount of goodwill for the years ended December 31, 2008 and 2007,
are as follows:
 Year Ended December 31, 2008MarketplacesBrazil
    
    
    Argentina
    
    
    Chile
    
    
    Mexico
    
    
    Venezuela
    
    
    Colombia
    
    
    Other Countries
    
    
    TotalBalance, beginning of year
    
    $
    12,351,542
    
    
    $
    
    
    
    $
    
    
    
    $
    4,898,867
    
    
    $
    2,194,480
    
    
    $
    2,257,830
    
    
    $
    1,297,748
    
    
    $
    23,000,467-Purchase of CMG
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    11,442,022
    
    
    
    1,595,482
    
    
    
    
    
    
    $
    13,037,504-Purchase of DR Operations
    
    
    
    
    
    $
    30,658,930
    
    
    $
    6,659,419
    
    
    
    864,945
    
    
    
    
    
    
    
    1,417,239
    
    
    
    
    
    
    $
    39,600,533- Effect of exchange rates changes
    
    
    (2,989,845
    )
    
    $
    (3,755,785
    )
    
    $
    (1,293,692
    )
    
    
    (1,246,122
    )
    
    
    
    
    
    
    (622,870
    )
    
    
    (77,416
    )
    
    $
    (9,985,730
    )Balance, end of the year
    
    $
    9,361,697
    
    
    $
    26,903,145
    
    
    $
    5,365,727
    
    
    $
    4,517,690
    
    
    $
    13,636,502
    
    
    $
    4,647,681
    
    
    $
    1,220,332
    
    
    $
    65,652,774
 Year Ended December 31, 2007MarketplacesBrazil
    
    
    Argentina
    
    
    Chile
    
    
    Mexico
    
    
    Venezuela
    
    
    Colombia
    
    
    Other Countries
    
    
    TotalBalance, beginning of year
    
    
    10,233,062
    
    
    
    
    
    
    
    
    
    
    
    4,911,840
    
    
    
    2,194,480
    
    
    
    2,031,895
    
    
    
    1,201,515
    
    
    $
    20,572,792- Effect of exchange rates changes
    
    
    2,118,480
    
    
    
    
    
    
    
    
    
    
    
    (12,973
    )
    
    
    
    
    
    
    225,935
    
    
    
    96,233
    
    
    
    2,427,675Balance, end of the year
    
    $
    12,351,542
    
    
    $
    
    
    
    $
    
    
    
    $
    4,898,867
    
    
    $
    2,194,480
    
    
    $
    2,257,830
    
    
    $
    1,297,748
    
    
    $
    23,000,467
 Amortizable intangible assets
   For year ended 12/31/2008
    
    $
    228,157For year ended 12/31/2009
    
    $
    414,376For year ended 12/31/2010
    
    $
    339,984For year ended 12/31/2011
    
    $
    324,059Thereafter
    
    $
    414,481$
    1,721,057
 7.
    
    SegmentsReporting segments are based upon the Companys internal organizational structure, the manner
in which the Companys operations are managed, the criteria used by management to evaluate the
Companys performance, the availability of separate financial information, and overall
materiality considerations.The Marketplace segments include Brazil, Argentina, Venezuela, Mexico and Other countries
(Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Panama, Peru, and Uruguay) on line market places commerce platforms. The Payments segment is
the Companys regional payments platform consisting of its MercadoPago business in Brazil,
Argentina, Mexico, Chile, Colombia, and Venezuela.
  F-32




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 7.
    
    Segments (Continued)Direct contribution consists of revenues less direct costs. Direct costs include specific costs
of net revenues, sales and marketing expenses, and general and administrative expenses over
which segment managers have direct discretionary control, such as advertising and marketing
programs, customer support expenses, allowances for doubtful accounts, headcount compensation,
third party fees.Expenses over which segment managers do not currently have discretionary control, such as
certain technology and general and administrative costs, are monitored by management through
shared cost centers and are not evaluated in the measurement of segment performance.The following tables summarize the financial performance of our reporting segments:
 Year Ended December 31, 2008MarketplacesBrazil
    
    
    Argentina
    
    
    Mexico
    
    
    Venezuela
    
    
    Other Countries
    
    
    Total
    
    
    Payments
    
    
    ConsolidatedNet revenues
    
    $
    50,509,927
    
    
    $
    18,254,621
    
    
    $
    12,473,883
    
    
    $
    21,972,235
    
    
    $
    6,369,111
    
    
    $
    109,579,777
    
    
    $
    27,442,843
    
    
    $
    137,022,620Direct costs
    
    
    (32,367,688
    )
    
    
    (8,710,260
    )
    
    
    (7,909,615
    )
    
    
    (11,455,690
    )
    
    
    (4,184,088
    )
    
    
    (64,627,341
    )
    
    
    (16,125,593
    )
    
    
    (80,752,934
    )Direct contribution
    
    
    18,142,239
    
    
    
    9,544,361
    
    
    
    4,564,268
    
    
    
    10,516,545
    
    
    
    2,185,023
    
    
    
    44,952,436
    
    
    
    11,317,250
    
    
    
    56,269,686Operating expenses and indirect costs of net revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,745,755
    )Income from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,523,931Other income (expenses):Interest income and other financial gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,822,385Interest expense and other financial charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,442,427
    )Foreign exchange
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,531,144
    )Other income (expenses), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,159Net income before income / asset tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    29,445,904
 Year Ended December 31, 2007MarketplacesBrazil
    
    
    Argentina
    
    
    Mexico
    
    
    Venezuela
    
    
    Other Countries
    
    
    Total
    
    
    Payments
    
    
    ConsolidatedNet revenues
    
    $
    37,560,419
    
    
    $
    11,342,792
    
    
    $
    9,628,121
    
    
    $
    7,084,995
    
    
    $
    3,901,190
    
    
    $
    69,517,517
    
    
    $
    15,608,824
    
    
    $
    85,126,341Direct costs
    
    
    (24,079,798
    )
    
    
    (5,657,006
    )
    
    
    (6,339,762
    )
    
    
    (2,713,470
    )
    
    
    (3,434,102
    )
    
    
    (42,224,138
    )
    
    $
    (10,509,002
    )
    
    
    (52,733,140
    )Direct contribution
    
    
    13,480,621
    
    
    
    5,685,786
    
    
    
    3,288,359
    
    
    
    4,371,525
    
    
    
    467,088
    
    
    
    27,293,379
    
    
    
    5,099,822
    
    
    
    32,393,201Operating expenses and indirect costs
of net revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,731,381
    )Income from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,661,820Other income (expenses):Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,609,403Interest expense and other financial results
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,737,901
    )Foreign exchange
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,106,515
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,006,416
    )Net income before income / asset tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,420,391
  F-33




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 7.
    
    Segments (Continued)
 Year Ended December 31, 2006MarketplacesBrazil
    
    
    Argentina
    
    
    Mexico
    
    
    Venezuela
    
    
    Other Countries
    
    
    Total
    
    
    Payments
    
    
    ConsolidatedNet revenues
    
    $
    25,571,405
    
    
    $
    7,027,681
    
    
    $
    6,199,110
    
    
    $
    3,292,901
    
    
    $
    2,637,972
    
    
    $
    44,729,069
    
    
    $
    7,329,821
    
    
    $
    52,058,890Direct costs
    
    
    (18,193,271
    )
    
    
    (4,553,777
    )
    
    
    (5,040,322
    )
    
    
    (1,704,145
    )
    
    
    (2,744,733
    )
    
    
    (32,236,248
    )
    
    
    (6,561,532
    )
    
    
    (38,797,780
    )Direct contribution
    
    
    7,378,134
    
    
    
    2,473,904
    
    
    
    1,158,788
    
    
    
    1,588,756
    
    
    
    (106,761
    )
    
    
    12,492,821
    
    
    
    768,289
    
    
    
    13,261,110Operating expenses and indirect costs of
net revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,863,181
    )Income from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,397,929Other income (expenses):Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    520,508Interest expense and other financial results
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,743,315
    )Foreign exchange
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391,981
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,468,220
    )Net income before income / asset tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,314,921
  December 31,
    
    
    December 31,2008
    
    
    2007US long-lived tangible assets
    
    $
    2,881,210
    
    
    $
    2,091,307Other countries long-lived tangible assetsArgentina
    
    
    1,573,708
    
    
    
    1,232,998Brazil
    
    
    596,940
    
    
    
    699,599Mexico
    
    
    81,873
    
    
    
    30,275Venezuela
    
    
    749,605
    
    
    
    67,418Other countries
    
    
    56,824
    
    
    
    21,607$
    3,058,950
    
    
    $
    2,051,897Total long-lived tangible assets
    
    $
    5,940,160
    
    
    $
    4,143,204
  December 31,
    
    
    December 31,2008
    
    
    2007US intangible assets
    
    $
    35,058
    
    
    $
    30,017Other countries goodwill and intangible assetsArgentina
    
    
    28,196,325
    
    
    
    198,886Brazil
    
    
    9,397,304
    
    
    
    12,423,659Mexico
    
    
    4,585,212
    
    
    
    4,957,400Venezuela
    
    
    18,585,234
    
    
    
    2,216,994Other countries
    
    
    12,112,413
    
    
    
    3,601,690$
    72,876,488
    
    
    $
    23,398,629Total goodwill and intangible assets
    
    $
    72,911,546
    
    
    $
    23,428,646
  F-34




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 7.
    
    Segments (Continued)
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Brazil
    
    $
    73,692,604
    
    
    $
    50,260,134
    
    
    $
    30,776,669Argentina
    
    $
    19,862,790
    
    
    $
    12,580,873
    
    
    $
    7,836,707Mexico
    
    $
    13,894,730
    
    
    $
    10,700,597
    
    
    $
    7,169,955Venezuela
    
    $
    23,123,837
    
    
    $
    7,679,857
    
    
    $
    3,637,587Other countries
    
    $
    6,448,659
    
    
    $
    3,904,880
    
    
    $
    2,637,972Total net revenues
    
    $
    137,022,620
    
    
    $
    85,126,341
    
    
    $
    52,058,890
 8.
    
    Fair Value Measurement of Assets and Liabilities
  Quoted Prices inBalances as of
    
    
    active markets forDecember 31,
    
    
    identical AssetsDescription
    
    2008
    
    
    (Level 1)AssetsShort-Term InvestmentsMoney Market Funds
    
    $
    2,408,294
    
    
    $
    2,408,294LiabilitiesLoans payable and other financial
liabilities:Put Options
    
    $
    185,000
    
    
    $
    185,000Total Financial Assets, Net
    
    $
    2,223,294
    
    
    $
    2,223,294
   F-35




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 8.
    
    Fair Value Measurement of
Assets and Liabilities (Continued)
    9.
    
    Common Stock
 Authorized, issued and outstanding shares
  Number ofClass of Common Stock
    
    SharesClass A
    
    
    65,000,000Class B-1
    
    
    6,400,000Class B-2
    
    
    6,400,000Class C
    
    
    8,600,000Class D-1
    
    
    3,000,000Class D-2
    
    
    3,000,000Class E-1
    
    
    8,200,000Class E-2
    
    
    8,200,000Total number of shares
    
    
    108,800,000
   F-36




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 9.
    
    Common Stock (Continued)
 Common
Stock
  Voting rights
   10.
    
    Mandatorily Redeemable Convertible Preferred Stock
       F-37




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 10.
    
    Mandatorily Redeemable Convertible Preferred Stock (Continued)
    SeriesA
    
    
    B-1
    
    
    B-2
    
    
    C
    
    
    D-1
    
    
    D-2
    
    
    E-1
    
    
    E-2
    
    
    TotalBalances at December 31, 2005
    
    $
    1,661,200
    
    
    $
    1,924,163
    
    
    $
    4,305,336
    
    
    $
    35,854,001
    
    
    $
    1,860,152
    
    
    $
    10,556,823
    
    
    $
    6,377,054
    
    
    $
    1,042,938
    
    
    $
    63,581,667Accretion
    
    
    9,400
    
    
    
    10,888
    
    
    
    24,363
    
    
    
    264,250
    
    
    
    13,710
    
    
    
    77,805
    
    
    
    81,185
    
    
    
    13,277
    
    
    
    494,878Balances at December 31, 2006
    
    $
    1,670,600
    
    
    $
    1,935,051
    
    
    $
    4,329,699
    
    
    $
    36,118,251
    
    
    $
    1,873,862
    
    
    $
    10,634,628
    
    
    $
    6,458,239
    
    
    $
    1,056,215
    
    
    $
    64,076,545Accretion
    
    
    5,875
    
    
    
    6,805
    
    
    
    15,227
    
    
    
    165,156
    
    
    
    8,569
    
    
    
    48,628
    
    
    
    50,741
    
    
    
    8,298
    
    
    
    309,299Conversión of Preferred stock
    
    
    (1,676,475
    )
    
    
    (1,941,856
    )
    
    
    (4,344,926
    )
    
    
    (36,283,407
    )
    
    
    (1,882,431
    )
    
    
    (10,683,256
    )
    
    
    (6,508,980
    )
    
    
    (1,064,513
    )
    
    
    (64,385,844
    )Balances at December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  11.
    
    Warrants
      F-38




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 11.
    
    Warrants (Continued)
    12.
    
    Compensation Plan for Outside Directors
       F-39




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 12.
    
    Compensation Plan for Outside Directors (Continued)
  13.
    
    Stock Option Plan and Restricted Shares
  Stock Options
   Year Ended December 31,2008
    
    
    2007
    
    
    2006Product and technology development
    
    $
    768
    
    
    $
    1,927
    
    
    $
    8,935Sales and marketing
    
    
    1,510
    
    
    
    4,297
    
    
    
    19,924General and administrative
    
    
    2,441
    
    
    
    9,253
    
    
    
    4,364Total
    
    $
    4,719
    
    
    $
    15,477
    
    
    $
    33,223
    F-40




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 13.
    
    Stock Option Plan and Restricted Shares (Continued)
 Stock Options (Continued)
   Stock price volatility
    
    
    36
    %Expected term
    
    7 yearsRisk-free interest rate
    
    
    6
    %
    F-41




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 13.
    
    Stock Option Plan and Restricted Shares (Continued)
 Stock Options (Continued)
  2008
    
    
    2007Weighted-
    
    
    
    
    
    
    Weighted-Number of
    
    
    average
    
    
    Number of
    
    
    averageoptions
    
    
    exercise price
    
    
    options
    
    
    exercise priceOutstanding, beginning of year
    
    
    144,174
    
    
    $
    1.04
    
    
    
    633,331
    
    
    $
    0.33Forfeited or expired
    
    
    (703
    )
    
    $
    1.29
    
    
    
    (4,937
    )
    
    $
    3.95Lapsed
    
    
    
    
    
    
    
    
    
    
    (750
    )
    
    
    0.01Exercised
    
    
    (89,552
    )
    
    
    0.93
    
    
    
    (483,470
    )
    
    
    0.08Outstanding, end of the year
    
    
    53,919
    
    
    
    1.23
    
    
    
    144,174
    
    
    
    1.04Exercisable, end of the year
    
    
    47,217
    
    
    $
    1.06
    
    
    
    122,775
    
    
    $
    0.93
  December 31, 2008
    
    
    December 31, 2007Outstanding
    
    
    Exercisable
    
    
    Outstanding
    
    
    ExercisableWeighted-average
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-averageremaining
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    remainingExercise
    
    Number of
    
    
    contractual
    
    
    Number of
    
    
    Exercise
    
    
    Number of
    
    
    contractual
    
    
    Number ofprice
    
    options
    
    
    life (years)
    
    
    options
    
    
    price
    
    
    options
    
    
    life (years)
    
    
    options$   0.01
    
    
    11,531
    
    
    
    4.22
    
    
    
    11,531
    
    
    $
    0.01
    
    
    
    25,299
    
    
    
    5.51
    
    
    
    21,713$   0.75
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.75
    
    
    
    48,000
    
    
    
    2.00
    
    
    
    48,000$   1.00
    
    
    20,000
    
    
    
    1.07
    
    
    
    20,000
    
    
    $
    1.00
    
    
    
    30,000
    
    
    
    2.06
    
    
    
    30,000$   1.50
    
    
    18,888
    
    
    
    6.37
    
    
    
    13,561
    
    
    $
    1.50
    
    
    
    33,125
    
    
    
    7.29
    
    
    
    17,438$   3.00
    
    
    1,000
    
    
    
    1.41
    
    
    
    1,000
    
    
    $
    3.00
    
    
    
    4,000
    
    
    
    2.42
    
    
    
    4,000$   6.00
    
    
    2,500
    
    
    
    7.55
    
    
    
    1,125
    
    
    $
    6.00
    
    
    
    3,750
    
    
    
    8.59
    
    
    
    1,62453,919
    
    
    
    3.91
    
    
    
    47,217
    
    
    
    
    
    
    
    144,174
    
    
    
    4.03
    
    
    
    122,775Weighted average Exercise Price
    
    
    
    
    
    Weighted average Exercise Price- Options outstanding
    
    $
    1.23
    
    
    - Options outstanding
    
    $
    1.04- Options exercisable
    
    $
    1.06
    
    
    - Options exercisable
    
    $
    0.93
 December 31,
    
    
    December 31,2008
    
    
    2007Aggregate intrinsic value- Options outstanding
    
    $
    818,363
    
    
    $
    2,215,455- Options exercisable
    
    $
    724,626
    
    
    $
    1,900,613
   F-42




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##### Table of Contents



MercadoLibre Inc.
Notes to Consolidated Financial Statements
 13.
    
    Stock Option Plan and Restricted Shares (Continued)
 Restricted Shares
    14.
    
    Management incentive bonus plan
   
    
    If the purchase price is equal or greater than $20,000,000, then Participants shall
be entitled to receive i) a sale bonus equal to 5.5% of the purchase price and ii) a stay
bonus equal to 7.1% of the purchase price; provided, however, that in no event shall the
amount paid or payable by the purchaser considered for the Incentive Plan calculation
exceed
$78,335,000. Each Participant shall participate on these bonuses based on its Participation
Percentage.
    
    If the purchase price is less than $20,000,000, then Participants shall be entitled
to receive a stay bonus equal to 7.1% of the purchase price. Each Participant shall
participate on this stay bonus based on its Participation Percentage.
   F-43




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 15.
    
    Income Taxes
  Year ended December 31,2008
    
    
    2007
    
    
    2006United States
    
    $
    (2,280,498
    )
    
    $
    (4,702,517
    )
    
    $
    (3,105,021
    )Brazil
    
    
    11,684,179
    
    
    
    11,414,462
    
    
    
    4,332,451Argentina
    
    
    9,903,988
    
    
    
    3,807,411
    
    
    
    425,235Venezuela
    
    
    7,998,791
    
    
    
    1,765,927
    
    
    
    1,026,325Mexico
    
    
    2,568,619
    
    
    
    1,748,510
    
    
    
    512,948Other Countries
    
    
    (429,175
    )
    
    
    386,598
    
    
    
    (877,017
    )$
    29,445,904
    
    
    $
    14,420,391
    
    
    $
    2,314,921
  Year ended December 31,2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    8,149,523
    
    
    
    5,023,182
    
    
    
    1,916,9768,149,523
    
    
    
    5,023,182
    
    
    
    1,916,976Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    1,645,474
    
    
    
    (114,964
    )
    
    
    (745,196
    )1,645,474
    
    
    
    (114,964
    )
    
    
    (745,196
    )9,794,997
    
    
    
    4,908,218
    
    
    
    1,171,780Asset Tax:Federal
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    839,246
    
    
    
    (180,767
    )
    
    
    71,058839,246
    
    
    
    (180,767
    )
    
    
    71,058Income / asset tax expense
    
    $
    10,634,243
    
    
    $
    4,727,451
    
    
    $
    1,242,838
   F-44




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 15.
    
    Income Taxes (Continued)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Net income before income tax
    
    $
    29,445,904
    
    
    $
    14,420,391
    
    
    $
    2,314,921Blended income tax rate
    
    
    35
    %
    
    
    33
    %
    
    
    38
    %Provision at blended tax rate
    
    $
    10,192,881
    
    
    $
    4,749,688
    
    
    $
    888,848Permanent differences:Non-deductible expenses
    
    
    1,560,262
    
    
    
    409,453
    
    
    
    705,571Dividends paid by
subsidiaries
    
    
    3,172,495
    
    
    
    
    
    
    
    Prescription of NOLs
    
    
    
    
    
    
    
    
    
    
    236,821Non-taxable income
    
    
    (2,774,711
    )
    
    
    (145,945
    )
    
    
    (83,625
    )Currency translation
    
    
    (214,950
    )
    
    
    (293,740
    )
    
    
    294,081Change in valuation allowance
    
    
    (1,827,217
    )
    
    
    557,759
    
    
    
    (869,916
    )Business Combination
    
    
    (362,381
    )
    
    
    
    
    
    
    True up
    
    
    48,618
    
    
    
    (368,997
    )
    
    
    Income tax expense
    
    $
    9,794,997
    
    
    $
    4,908,218
    
    
    $
    1,171,780
  F-45




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 15.
    
    Income Taxes (Continued)
  December 31,
    
    
    December 31,2008
    
    
    2007Deferred tax assetsAllowance for doubtful accounts
    
    $
    1,571,322
    
    
    $
    1,536,360Property and equipment, net
    
    
    401,402
    
    
    
    269,596Accounts payable and accrued expenses
    
    
    36,975
    
    
    
    68,354Social Security Payable
    
    
    270,224
    
    
    
    257,755Other liabilities
    
    
    1,474,360
    
    
    
    Customer lists
    
    
    44,422
    
    
    
    30,395Taxes payable
    
    
    196,093
    
    
    
    24,271Provisions
    
    
    1,310,009
    
    
    
    587,676Tax loss carryforwards
    
    
    10,771,859
    
    
    
    16,000,797Total Deferred Tax assets
    
    
    16,076,666
    
    
    
    18,775,204Valuation allowance
    
    
    (11,652,192
    )
    
    
    (14,997,188
    )Net deferred tax assets
    
    
    4,424,474
    
    
    
    3,778,016Deferred tax liabilitiesProperty and equipment, net
    
    
    (75,265
    )
    
    
    (32,148
    )Unrealized net gains on investments
    
    
    
    
    
    
    (31,171
    )Customer lists
    
    
    (401,016
    )
    
    
    Non Compete Agreement
    
    
    (187,338
    )
    
    
    CMG Trademarks
    
    
    (1,967,766
    )
    
    
    Foreign Exchange Effect
    
    
    (2,706,068
    )
    
    
    Total Deferred Tax liabilities
    
    
    (5,337,453
    )
    
    
    (63,319
    )$
    (912,979
    )
    
    $
    3,714,697
    F-46




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 15.
    
    Income Taxes (Continued)
  2009
    
    $
    966,9062010
    
    $
    3,396,9872011
    
    $
    615,8952012
    
    $
    199,731Thereafter
    
    $
    30,146,957Total
    
    $
    35,326,476
  16.
    
    Commitments and Contingencies
 Litigation and Other Legal Matters
     F-47




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 16.
    
    Commitments and Contingencies (Continued)
 Litigation and Other Legal Matters (Continued)
     Litigation
after December 31, 2008
  Other contingencies
   F-48




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 16.
    
    Commitments and Contingencies (Continued)
 Other Commitments
  Operating Leases
   For the year ended December 31, 2009
    
    
    1,520,306For the year ended December 31, 2010
    
    
    915,870For the year ended December 31, 2011
    
    
    547,714For the year ended December 31, 2012
    
    
    143,376Thereafter
    
    
    29,623$
    3,156,889
 Employment Contracts
    F-49




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 17.
    
    Long Term Retention Plan
  
    
    Year 1 (2008): 17%
    
    Year 2 (2009): 22%
    
    Year 3 (2010): 27%
    
    Year 4 (2011): 34%
  Paid-in
 18.
    
    Share Repurchase Plan
      F-50




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 18.
    
    Share Repurchase Plan (Continued)
   TotalNumber of Shares
    
    
    185,000Premium
    
    
    341,508Average Price
    
    
    1.85Commissions and other fees
    
    
    (5,552
    )Cash received
    
    
    335,956
      19.
    
    Related Party Transactions
 Indemnification agreements
   51




---



##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 19.   Related Party Transactions (Continued)
 Curtidos San Luis S.A.
   eBay Inc.
  
    
    Principal amount: $12,000,000
    
    Interest Rate: 7%
    
    Maturity: 5 years, or upon an issuance of securities, such as an initial public offering
   F-52




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 20.
    
    Valuation and qualifying accounts
  Charged /Balance at
    
    
    credited to
    
    
    
    
    
    
    Charges
    
    
    Balancebeginning of
    
    
    Net income /
    
    
    DeRemate
    
    
    Utilized /
    
    
    at end ofyear
    
    
    (loss)
    
    
    acquisition
    
    
    Write-offs
    
    
    yearAllowance for doubtful accountsYear ended December 31, 2006
    
    
    2,839,706
    
    
    
    5,054,643
    
    
    
    
    
    
    
    (3,466,078
    )
    
    
    4,428,271Year ended December 31, 2007
    
    
    4,428,271
    
    
    
    5,306,423
    
    
    
    
    
    
    
    (3,122,269
    )
    
    
    6,612,425Year ended December 31, 2008
    
    
    6,612,425
    
    
    
    8,369,652
    
    
    
    
    
    
    
    (6,471,950
    )
    
    
    8,510,127Funds receivable from customers
allowance for chargebacksYear ended December 31, 2006
    
    
    36,061
    
    
    
    1,160,264
    
    
    
    
    
    
    
    (1,005,090
    )
    
    
    191,235Year ended December 31, 2007
    
    
    191,235
    
    
    
    928,409
    
    
    
    
    
    
    
    (530,541
    )
    
    
    589,104Year ended December 31, 2008
    
    
    589,104
    
    
    
    64,839
    
    
    
    
    
    
    
    (486,923
    )
    
    
    167,020Tax valuation allowanceYear ended December 31, 2006
    
    
    14,010,011
    
    
    
    460,986
    
    
    
    
    
    
    
    (1,330,902
    )
    
    
    13,140,096Year ended December 31, 2007
    
    
    13,140,096
    
    
    
    3,880,190
    
    
    
    
    
    
    
    (2,023,098
    )
    
    
    14,997,188Year ended December 31, 2008
    
    
    14,997,188
    
    
    
    (1,507,873
    )
    
    
    (1,837,123
    )
    
    
    
    
    
    
    11,652,192ContingenciesYear ended December 31, 2006
    
    
    211,713
    
    
    
    525,789
    
    
    
    
    
    
    
    (244,337
    )
    
    
    493,165Year ended December 31, 2007
    
    
    493,165
    
    
    
    2,024,946
    
    
    
    
    
    
    
    (1,499,580
    )
    
    
    1,018,531Year ended December 31, 2008
    
    
    1,018,531
    
    
    
    
    
    
    
    
    
    
    
    31,785
    
    
    
    1,050,316
 21.
    
    Initial Public Offering
     F-53




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##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 21.
    
    Initial Public Offering (Continued)
  
    
    sale of 3,000,000 shares of common stock, net of underwriting discount and offering expenses,
    
    conversion of all of the Companys outstanding shares of Preferred Stock and
different classes of common stock into shares of one class of common stock,
    
    final adjustment to fair value and reclassification from liability to equity of all
of the Companys outstanding warrants,
    
    issuance of 184,273 shares upon the exercise of the Companys outstanding warrants.
  F-54




---



##### Table of Contents



MercadoLibre Inc.  Notes to Consolidated Financial Statements
 22.
    
    Quarterly Financial Data (Unaudited)
  Quarter endedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2008Net Revenues
    
    
    28,840,730
    
    
    
    34,471,508
    
    
    
    40,260,643
    
    
    
    33,449,739Gross profit
    
    
    22,822,449
    
    
    
    27,570,005
    
    
    
    32,106,781
    
    
    
    26,986,812Net Income
    
    
    2,067,677
    
    
    
    2,947,095
    
    
    
    5,875,792
    
    
    
    7,921,097Net Income per share-basic
    
    
    0.05
    
    
    
    0.07
    
    
    
    0.13
    
    
    
    0.18Net Income per share-diluted
    
    
    0.05
    
    
    
    0.07
    
    
    
    0.13
    
    
    
    0.17Weighted average sharesBasic
    
    
    44,227,460
    
    
    
    44,238,166
    
    
    
    44,290,540
    
    
    
    44,264,906Diluted
    
    
    44,368,011
    
    
    
    44,369,317
    
    
    
    44,379,682
    
    
    
    44,369,6352007Net Revenues
    
    
    16,459,337
    
    
    
    18,973,288
    
    
    
    22,800,130
    
    
    
    26,893,586Gross profit
    
    
    12,971,998
    
    
    
    14,973,366
    
    
    
    17,918,082
    
    
    
    20,989,955Net Income
    
    
    994,187
    
    
    
    590,886
    
    
    
    2,785,474
    
    
    
    5,322,393Net Income per share-basic
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.07
    
    
    
    0.13Net Income per share-diluted
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.07
    
    
    
    0.13Weighted average sharesBasic
    
    
    13,375,482
    
    
    
    13,575,158
    
    
    
    27,538,652
    
    
    
    41,226,563Diluted
    
    
    13,375,482
    
    
    
    13,987,128
    
    
    
    27,685,028
    
    
    
    41,375,9072006Net Revenues
    
    
    10,989,133
    
    
    
    12,382,750
    
    
    
    13,224,610
    
    
    
    15,462,397Gross profit
    
    
    8,472,837
    
    
    
    9,633,122
    
    
    
    10,058,051
    
    
    
    11,809,232Net Income / (Loss)
    
    
    110,342
    
    
    
    (920,886
    )
    
    
    37,541
    
    
    
    1,845,086Net Income per share-basic
    
    
    
    
    
    
    (0.08
    )
    
    
    (0.01
    )
    
    
    0.04Net Income per share-diluted
    
    
    (*
    )
    
    
    (*
    )
    
    
    (*
    )
    
    
    0.04Weighted average sharesBasic
    
    
    13,114,575
    
    
    
    13,140,100
    
    
    
    13,141,676
    
    
    
    13,141,728Diluted
    
    
    13,114,575
    
    
    
    13,140,100
    
    
    
    13,141,676
    
    
    
    13,141,728
 (*)
    
    For the Quarters ended March 31, June 30, and September 30, 2006 the Diluted EPS is equal to
the Basic EPS.   F-55




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit Title2.01
    
    
    Stock Purchase Agreement, or the Agreement, with 2050 Capital Group
Inc., Abax Group Inc., Gabinete De Diseño Industrial Inc., Stamford
One Group Ltd., EO Financial Group Inc., Meck Investments Ltd., CG
Interventures Inc., Luis Carlos Uzcategui, Luis Miguel Molina,
Roberto Rivas, Jorge Caldas, and CMG Classified Media Group, Inc. (3)2.02
    
    
    Stock Purchase Agreement, dated August 25, 2008, by and among
Hammer.com, LLC, MercadoLibre, Inc., Hispanoamerican Educational
Investments BV, S.A. La Nación, DeRemate.com de Argentina S.A.,
DeRemate.com Chile S.A., Interactivos y Digitales México S.A. de C.V.
and Compañía de Negocios Interactiva de Colombia E.U. (4)2.03
    
    
    Asset Purchase Agreement, dated August 25, 2008, by and among
Hispanoamerican Educational Investments BV, S.A. La Nación,
Intangible Assets LLC, Emprendimientos Veta, S.A., DeRemate.com USA,
Inc., MercadoLibre, Inc. and Hammer.com, LLC. (4)3.01
    
    
    Registrants Amended and Restated Certificate of Incorporation. (1)3.02
    
    
    Registrants Amended and Restated Bylaws. (1)4.01
    
    
    Form of Specimen Certificate for Registrants Common Stock*4.02
    
    
    Second Amended and Restated Registration Rights Agreement, dated
September 24, 2001, by and among the Registrant and the investors
named therein. (1)10.01
    
    
    Form of Indemnity Agreement entered into by Registrant with each of
its directors and executive officers. (2)10.02
    
    
    Lease Agreement, dated as of March 31, 2007, between Curtidos San
Luis S.A. and MercadoLibre S.A. (2) (translated from Spanish)10.03
    
    
    Amendment Agreement, dated as of November 13, 2008, to the Lease
Agreement, dated March 31, 2007, between Curtidos San Luis S.A. and
MercadoLibre S.A.* (translated from Spanish)10.04
    
    
    Lease Agreement, dated as of April 1, 2008, between Curtidos San Luis
S.A. and MercadoLibre S.A. (translated from Spanish)*10.05
    
    
    Lease Agreement, dated as of May 5, 2008, between Curtidos San Luis
S.A. and MercadoLibre S.A. (translated from Spanish)*10.06
    
    
    Concession Contract, dated as February 7, 2007, between Borders
Parking S.R.L. and MercadoLibre S.A. (1)10.07
    
    
    Property Lease Agreement, dated June 28, 2005, between
MercadoLivre.com Atividades de Internet Ltda. and KW Radar
Construtora e Incorporadora Ltda. (1)10.08
    
    
    Property Lease Agreement, dated as of November 1, 2004, between
MercadoLivre.com Atividades de Internet Ltda. and Barros e Spitaletti
Empreendimentos Ltda. (1)10.09
    
    
    Property Lease Agreement, dated of April, 1, 2008, between
MercadoLivre.com Atividades de Internet Ltda. And CNA Spitaletti
Construtora e Incorporadora Ltda.*10.10
    
    
    Arias Trust Contract, dated as of June 5, 2006 and amended as of May
29, 2008 (translated from Spanish)*10.11
    
    
    Management Incentive Bonus Plan of the Registrant. (2)10.12
    
    
    Amended and Restated 1999 Stock Option and Restricted Stock Plan (2)




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##### Table of Contents



ExhibitNumber
    
    Exhibit Title10.13
    
    
    Employment Agreements with Officers.(2)10.14
    
    
    Form of Restricted Stock Award for Outside directors. (3)10.15
    
    
    Employment Agreement with Osvaldo Gimenez, dated as of March 26, 2008*21.01
    
    
    List of Subsidiaries*23.01
    
    
    Consent of Price Watherhouse & Co. S.R.L., Independent Registered
Public Accounting Firm*31.01
    
    
    CEO Certification pursuant to Securities Exchange Act Rule 13a-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.02
    
    
    CFO Certification pursuant to Securities Exchange Act Rule 13a-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*32.01
    
    
    CEO Certification required by 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**32.02
    
    
    CFO Certification required by 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
 
 *
    
    Filed Herewith**
    
    Furnished Herewith(1)
    
    Incorporated by reference to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed
on May 11, 2007;(2)
    
    Incorporate by reference to Amendment No. 1 to the Registration Statement on Form S-1 of
MercadoLibre, Inc. filed on July 13, 2007.(3)
    
    Incorporated by reference to the Registration Statement on Form S-1 of MercadoLibre, Inc. filed
on January 25, 2008(4)
    
    Incorporated by reference to the Current Report on Form 8-K filed on August 26, 2008.