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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
Commission
File Number
Exact Name of Registrant as Specified in its Charter
I.R.S. Employer
Identification Number
333-179941-01
333-204880
333-225797-01
PROSPER MARKETPLACE, INC.
a Delaware corporation
221 Main Street, 3rd Floor
San Francisco, CA 94105
Telephone: (415) 593-5400
73-1733867
333-179941
333-204880-01
333-225797
PROSPER FUNDING LLC
a Delaware limited liability company
221 Main Street, 3rd Floor
San Francisco, CA 94105
Telephone: (415) 593-5479
45-4526070
Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of Each ClassName of Each Exchange on Which Registered
Prosper Marketplace, Inc.NoneNone
Prosper Funding LLCNoneNone

Securities registered pursuant to Section 12(g) of the Act:
RegistrantTitle of Each ClassName of Each Exchange on Which Registered
Prosper Marketplace, Inc.NoneNone
Prosper Funding LLCNoneNone

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Prosper Marketplace, Inc.
Yes x No ¨
Prosper Funding LLC
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Prosper Marketplace, Inc.
Yes x No
Prosper Funding LLC
Yes x No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large
Accelerated
Filer
Accelerated
Filer
Non-accelerated Filer
Smaller
Reporting
Company
Emerging Growth Company
Prosper Marketplace, Inc.
x
Prosper Funding LLC
x

1


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Prosper Marketplace, Inc.
Yes No x
Prosper Funding LLC
Yes No x
Prosper Funding LLC meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.
As of August 7, 2019, there were 70,624,754 shares of Prosper Marketplace, Inc. common stock outstanding. Prosper Funding LLC does not have any common stock outstanding.
THIS COMBINED FORM 10-Q IS SEPARATELY FILED BY PROSPER MARKETPLACE, INC. AND PROSPER FUNDING LLC. INFORMATION CONTAINED HEREIN RELATING TO ANY INDIVIDUAL REGISTRANT IS FILED BY SUCH REGISTRANT ON ITS OWN BEHALF. EACH REGISTRANT MAKES NO REPRESENTATION AS TO INFORMATION RELATING TO THE OTHER REGISTRANT.

2


TABLE OF CONTENTS
 
Page No.
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
Except as the context requires otherwise, as used herein, “Registrants” refers to Prosper Marketplace, Inc. (“PMI”), a Delaware corporation, and its wholly owned subsidiary, Prosper Funding LLC (“PFL”), a Delaware limited liability company; “we,” “us,” “our,” “Prosper,” and the “Company” refer to PMI and its wholly owned subsidiaries, PFL, BillGuard, Inc. (“BillGuard”), a Delaware corporation, Prosper Healthcare Lending LLC (“PHL”), a Delaware limited liability company, Prosper Warehouse I Trust, a Delaware statutory trust, and Prosper Warehouse II Trust, a Delaware statutory trust, on a consolidated basis; and “Prosper Funding” refers to PFL and its wholly owned subsidiaries, Prosper Asset Holdings LLC (“PAH”), a Delaware limited liability company, and Prosper Depositor LLC, a Delaware limited liability company, on a consolidated basis. PAH was dissolved on November 28, 2018. As a result, references to Prosper Funding do not include PAH for periods subsequent to the year ended December 31, 2018. In addition, the unsecured, consumer loans originated through our marketplace are referred to as “Borrower Loans,” and the borrower payment dependent notes issued through our marketplace, whether issued by PMI or PFL, are referred to as “Notes.” Investors currently invest in Borrower Loans through two channels: (i) the “Note Channel,” which allows investors to purchase Notes from PFL, the payments of which are dependent on the payments made on the corresponding Borrower Loan; and (ii) the “Whole Loan Channel,” which allows accredited and institutional investors to purchase Borrower Loans in their entirety directly from PFL. The Notes available to Note Channel investors are distinguishable from notes held by certain third party investors pursuant to Prosper’s securitization transactions, which are referred to herein as “Notes Issued by Securitization Trust.” Finally, although historically we have referred to investors as “lender members,” we call them “investors” herein to avoid confusion since WebBank is the lender for Borrower Loans originated through our marketplace.

3


Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. In particular, information appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, PFL or PMI expresses an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of their respective managements, expressed in good faith and is believed to have a reasonable basis. Nevertheless, there can be no assurance that the expectation or belief will result or be achieved or accomplished.
The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:
the performance of the Notes, which, in addition to being speculative investments, are special, limited obligations that are not guaranteed or insured;
PFL’s ability to make payments on the Notes;
our ability to attract potential borrowers and investors to our marketplace;
the reliability of the information about borrowers that is supplied by borrowers, including actions by some borrowers to defraud investors;
our ability to service the Borrower Loans, and our ability or the ability of a third party debt collector to pursue collection against any borrower, including in the event of fraud or identity theft;
credit risks posed by the credit worthiness of borrowers, including the impact of borrower delinquencies, defaults and prepayments on the returns on the Notes, and the effectiveness of our credit rating systems;
the impact of future economic conditions on the performance of the Notes and the loss rates for the Notes;
our compliance with applicable regulations and regulatory developments or court decisions affecting our business;
potential efforts by state regulators or litigants to impose liability that could affect PFL’s (or any subsequent assignee’s) ability to continue to charge to borrowers the interest rates that they agreed to pay at origination of their loans;
our compliance with applicable local, state and federal law, including the Securities Act, the Investment Advisers Act of 1940, the Investment Company Act of 1940 and other laws;
potential efforts by state regulators or litigants to characterize PFL or PMI, rather than WebBank, as the lender of the Borrower Loans originated through our marketplace;
the application of federal and state bankruptcy and insolvency laws to borrowers and to PFL and PMI;
the lack of a public trading market for the Notes and the lack of any trading platform on which investors can resell the Notes;
the federal income tax treatment of an investment in the Notes and the corresponding PMI Management Rights, each of which is an "investment contract," a concept under federal securities law that refers to an arrangement where investors invest money in a common enterprise with the expectation of profits, primarily from the efforts of others;
our ability to prevent security breaches, disruptions in service, and comparable events that could compromise the personal and confidential information held on our data systems, reduce the attractiveness of our marketplace or adversely impact our ability to service Borrower Loans.
There may be other factors that may cause actual results to differ materially from the forward-looking statements in this Quarterly Report on Form 10-Q. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does occur, what impact they will have on our results of operations and financial condition. You should carefully read the factors described in the “Risk Factors” sections of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2018 for a description of certain risks that could, among other things, cause our actual results to differ from these forward-looking statements.
4


All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.
Where You Can Find More Information
The following filings are available for download free of charge at www.prosper.com as soon as reasonably practicable after such filings are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”): Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports. Our SEC filings are also available to the public at the SEC’s website at www.sec.gov.
5


Item 1. Condensed Consolidated Financial Statements
Prosper Marketplace, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except for share and per share amounts)
June 30, 2019December 31, 2018
Assets
Cash and Cash Equivalents$68,124 $57,945 
Restricted Cash (1)160,990 149,114 
Available for Sale Investments, at Fair Value1,499 22,173 
Accounts Receivable (1)
1,270 5,119 
Loans Held for Sale, at Fair Value (1)114,962 183,788 
Borrower Loans, at Fair Value (1)
606,799 263,522 
Property and Equipment, Net31,169 15,273 
Prepaid and Other Assets (1)7,639 4,643 
Servicing Assets13,387 14,687 
Goodwill36,368 36,368 
Intangible Assets, Net859 999 
Total Assets$1,043,066 $753,631 
Liabilities, Convertible Preferred Stock and Stockholders' Deficit
Accounts Payable and Accrued Liabilities$20,349 $19,967 
Payable to Investors114,811 127,538 
Notes, at Fair Value253,425 264,003 
Notes Issued by Securitization Trust (1)
313,111  
Certificates Issued by Securitization Trust, at Fair Value (1)
44,090  
Warehouse Lines (1)101,406 162,488 
Other Liabilities24,207 10,629 
Convertible Preferred Stock Warrant Liability166,559 143,679 
Total Liabilities1,037,958 728,304 
Commitments and Contingencies (see Note 18)
Convertible Preferred Stock – $0.01 par value; 444,760,848 shares authorized as of June 30, 2019 and December 31, 2018; 214,637,925 issued and outstanding as of June 30, 2019 and December 31, 2018. Aggregate liquidation preference of $375,952 as of June 30, 2019 and December 31, 2018.
323,793 323,793 
Stockholders' Deficit 
Common Stock – $0.01 par value; 625,000,000 shares authorized; 71,502,461 shares issued and 70,566,526 shares outstanding, as of June 30, 2019; 71,411,145 shares issued and 70,475,210 shares outstanding, as of December 31, 2018.
230 229 
Additional Paid-In Capital148,528 145,486 
Less: Treasury Stock(23,417)(23,417)
Accumulated Deficit(444,034)(420,751)
Accumulated Other Comprehensive Loss8 (13)
Total Stockholders' Deficit(318,685)(298,466)
Total Liabilities, Convertible Preferred Stock and Stockholders' Deficit$1,043,066 $753,631 
(1) Includes amounts in consolidated variable interest entities (VIEs) presented separately in the table below.
6


The following table presents the assets and liabilities of consolidated variable interest entities (VIEs), which are included in the condensed consolidated balance sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. See Note 7 - Securitizations and Note 11 - Debt, to our Notes to Condensed Consolidated Financial Statements for additional information.


June 30, 2019December 31, 2018
Assets of consolidated VIEs, included in total assets above
Restricted Cash$30,427 $ 
Accounts Receivable
249 3,902 
Loans Held for Sale, at Fair Value114,963 183,788 
Borrower Loans, at Fair Value348,898  
Prepaid and Other Assets$3,411 $1,393 
Total assets of consolidated variable interest entities$497,948 $189,083 
Liabilities of consolidated VIEs, included in total liabilities above
Notes Issued by Securitization Trust$313,111 $ 
Certificates Issued by Securitization Trust, at Fair Value44,090  
Warehouse Lines101,406 162,488 
Total liabilities of consolidated variable interest entities$458,187 $162,488 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


Prosper Marketplace, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except for share and per share amounts)
Three Months Ended June 30, Six Months Ended June 30, 
2019201820192018
Revenues
Operating Revenues
Transaction Fees, Net$33,876 $37,988 $60,171 $69,343 
Servicing Fees, Net5,172 7,487 11,375 14,671 
Gain on Sale of Borrower Loans3,559 4,163 6,256 7,512 
Fair Value of Warrants Vested on Sale of Borrower Loans(7,805)(20,633)(17,553)(35,912)
Other Revenue2,188 1,015 3,223 2,367 
Total Operating Revenues36,990 30,020 63,472 57,981 
Interest Income
Interest Income on Borrower Loans23,543 14,556 41,972 26,916 
Interest Expense on Notes, Certificates Issued by Securitization Trust, and Warehouse Lines(15,645)(11,471)(28,765)(22,200)
Net Interest Income7,898 3,085 13,207 4,716 
Change in Fair Value of Financial Instruments, Net(1,958)(1,430)(3,671)(572)
Total Net Revenue42,930 31,675 73,008 62,125 
Expenses
Origination and Servicing9,427 9,192 17,589 18,013 
Sales and Marketing21,450 20,907 37,791 39,735 
General and Administrative17,908 18,151 36,677 36,865 
Restructuring Charges, Net5 271 86 595 
Change in Fair Value of Convertible Preferred Stock Warrants(4,729)(3,998)5,327 (8,602)
Other Expenses (Income), Net(591)(258)(1,237)(500)
Total Expenses43,470 44,265 96,233 86,106 
Net Loss Before Taxes(540)(12,590)(23,225)(23,981)
Income Tax Expense29 9 58 19 
Net Loss$(569)$(12,599)$(23,283)$(24,000)
Net Loss Per Share – Basic and Diluted$(0.01)$(0.18)$(0.33)$(0.34)
Weighted-Average Shares – Basic and Diluted70,502,797 70,362,716 70,494,945 70,333,145 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8


Prosper Marketplace, Inc.
Condensed Consolidated Statements of Other Comprehensive Loss (Unaudited)
(in thousands)
Three Months Ended June 30, Six Months Ended June 30, 
2019201820192018
Net Loss$(569)$(12,599)$(23,283)$(24,000)
Other Comprehensive Income (Loss), Before Tax
Change in Net Unrealized Gain on Available for Sale Investments, at Fair Value
11 27 21 12 
Realized (Gain) Loss on Sale of Available for Sale Investments, at Fair Value
    
Other Comprehensive Income (Loss), Before Tax11 27 21 12 
Income Tax Effect
    
Other Comprehensive Income (Loss), Net of Tax11 27 21 12 
Comprehensive Loss(558)(12,572)(23,262)(23,988)

The accompanying notes are an integral part of these condensed consolidated financial statements.
9


Prosper Marketplace, Inc.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except for share amounts)
 Convertible Preferred Stock Common StockTreasury Stock    
 Shares AmountSharesAmountSharesAmount
Additional
Paid-In
Capital
Accumulated Other Comprehensive Income
Accumulated
Deficit
Total
Balance as of January 1, 2018214,637,925 323,793 75,468,234 228 (5,177,235)(23,417)136,653 (73)(380,806)(267,415)
Exercise of Vested Stock Options— — 43,746 — — — 8 — — 8 
Restricted Stock Vested— — — — — — 5 — — 5 
Exercise of Warrants— — 8,200 — — — — — — — 
Stock-based Compensation Expense— — — — — — 2,425 — — 2,425 
Change in Net Unrealized Loss on Available for Sale Investments, at Fair Value— — — — — — — (16)— (16)
Net Loss— — — — — — — — (11,401)(11,401)
Balance as of March 31, 2018214,637,925 323,793 75,520,180 228 (5,177,235)(23,417)139,091 (89)(392,207)(276,394)
Exercise of Vested Stock Options— — 39,046 — — — 8 — — 8 
Restricted Stock Vested— — — — — — 6 — — 6 
Stock-based Compensation Expense— — — — — — 2,356 — — 2,356 
Change in Net Unrealized Loss on Available for Sale Investments, at Fair Value— — — — — — — 27 — 27 
Net Loss— — — — — — — — (12,599)(12,599)
Balance as of June 30, 2018214,637,925 323,793 75,559,226 228 (5,177,235)(23,417)141,463 (62)(404,806)(286,594)
Convertible Preferred Stock Common StockTreasury Stock
Shares AmountSharesAmountSharesAmount
Additional
Paid-In
Capital
Accumulated Other Comprehensive Income
Accumulated
Deficit
Total
Balance as of January 1, 2019214,637,925 323,793 75,652,445 229 (5,177,235)(23,417)145,486 (13)(420,751)(298,466)
Exercise of Vested Stock Options— — 16,085 — — — 4 — — 4 
Stock-based Compensation Expense— — — — — — 1,714 — — 1,714 
Change in Net Unrealized Loss on Available for Sale Investments, at Fair Value— — — — — — — 10 — 10 
Net Loss— — — — — — — — (22,714)(22,714)
Balance as of March 31, 2019214,637,925 323,793 75,668,530 229 (5,177,235)(23,417)147,204 (3)(443,465)(319,452)
Exercise of vested stock options— — 75,231 1 — — 8 — — 9 
10


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Stock-based compensation expense— — — —