10-Q 1 prosper-10q_20150331.htm 10-Q

 

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 March 31, 2015

 

Commission

File Number

 

Exact Name of Registrant as Specified in its Charter

 

I.R.S. Employer

Identification Number

333-179941-01

 

PROSPER MARKETPLACE, INC.

a Delaware corporation

221 Main Street, 3rd Floor

San Francisco, CA 94105

Telephone: (415)593-5400

 

73-1733867

 

 

 

 

 

333-179941

 

PROSPER FUNDING LLC

a Delaware limited liability company

221 Main Street, 3rd Floor

San Francisco, CA 94105

Telephone: (415)593-5479

 

45-4526070

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 and (2) has been subject to such filing requirements for the past 90 days.

 

Prosper Marketplace, Inc.

Yesx No ¨

Prosper Funding LLC

Yesx No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Prosper Marketplace, Inc.

Yesx No ¨

Prosper Funding LLC

Yesx No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

Large

Accelerated

Filer

 

Accelerated

Filer

 

Non-

Accelerated

Filer

 

Smaller

Reporting

Company

Prosper Marketplace, Inc.

o

 

o

 

o

 

x

Prosper Funding LLC

o

 

o

 

o

 

x

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 May 11, 2015, there were 14,706,666 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.

 

 

 

 


TABLE OF CONTENTS

 

 

 

 

 

Page No.

 

 

Forward-Looking Statements

 

3

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Condensed Consolidated Financial Statements

 

5

 

 

Prosper Marketplace Inc.

 

5

 

 

Condensed Consolidated Balance Sheets (Unaudited)

 

5

 

 

Condensed Consolidated Statements of Operations (Unaudited)

 

6

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

7

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

8

 

 

Prosper Funding LLC

 

24

 

 

Condensed Consolidated Balance Sheets (Unaudited)

 

24

 

 

Condensed Consolidated Statements of Operations (Unaudited)

 

25

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

26

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

27

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

36

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

52

Item 4.

 

Controls and Procedures

 

52

PART II.

 

OTHER INFORMATION

 

54

Item 1.

 

Legal Proceedings

 

54

Item 1A.

 

Risk Factors

 

54

Item 2.

 

Unregistered Sale of Equity Securities and Use of Proceeds

 

54

Item 3.

 

Defaults upon Senior Securities

 

54

Item 4.

 

Mine Safety Disclosures

 

54

Item 5.

 

Other Information

 

54

Item 6.

 

Exhibits

 

54

Signatures

 

55

Exhibit Index

 

56

 

 

 

 

2


Except as the context requires otherwise, as used herein, “we,” “us,” “our,” and “Registrants” refer to Prosper Marketplace, Inc. (“PMI”), a Delaware corporation, and its wholly owned subsidiary, Prosper Funding LLC (“PFL”), a Delaware limited liability company; “Prosper” refers to PMI and its wholly owned subsidiaries, PFL and Prosper Healthcare Lending LLC (“PHL”), a Delaware limited liability company, on a consolidated basis; and “Prosper Funding” refers to PFL and its wholly owned subsidiary, Prosper Asset Holdings LLC (“PAH”), a Delaware limited liability company, on a consolidated basis.  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.” Further, investor members currently invest in Borrower Loans through two channels: (i) the “Note Channel”, which allows investor members 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. Finally, although historically we have referred to investor members as “lender members”, we call them “investor members” herein to avoid confusion since WebBank is the lender for Borrower Loans originated through our marketplace.

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, including in the event that borrowers fail to make payments on the corresponding Borrower Loans;

·

our ability to attract potential borrowers to our marketplace;

·

the reliability of the information about borrowers that is supplied by borrowers including actions by some borrowers to defraud investor members;

·

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 and the effectiveness of our credit rating systems;

·

our limited operational history and lack of significant historical performance data about borrower performance;

·

the impact of current economic conditions on the performance of the Notes and loss rates of the Notes;

·

our compliance with applicable local, state and federal law, including the Investment Advisers Act of 1940, the Investment Company Act of 1940 and other laws;

·

potential efforts by state regulators or litigants to characterize either of us, 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 each of us;

·

the impact of borrower delinquencies, defaults and prepayments on the returns on the Notes;

·

the lack of a public trading market for the Notes and any inability to resell the Notes on the Note Trader platform;

·

the federal income tax treatment of an investment in the Notes and the PMI Management Rights; and

·

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.

3


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, what impact they will have on our results of operations and financial condition. You should carefully read the factors described in the “Risk Factors” section of our Annual Report on Form 10-K for a description of certain risks that could, among other things, cause our actual results to differ from these forward-looking statements.

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. Further, a copy of this Quarterly Report on Form 10-Q is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public at the SEC’s Internet site at http://www.sec.gov.

 

 

4


Item 1. Condensed Consolidated Financial Statements

Prosper Marketplace, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except for share and per share amounts)

 

 

 

March 31,

2015

 

 

December 31,

2014

 

 

Assets

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

38,332

 

 

$

50,557

 

 

Restricted Cash

 

 

99,363

 

 

 

81,300

 

 

Short Term Investments

 

 

1,275

 

 

 

1,274

 

 

Accounts Receivable

 

 

1,268

 

 

 

3,152

 

 

Loans Held for Sale, at Fair Value

 

 

1,599

 

 

 

8,463

 

 

Borrower Loans, at Fair Value

 

 

280,404

 

 

 

273,243

 

 

Property and Equipment, Net

 

 

16,656

 

 

 

14,424

 

 

Prepaid and Other Assets

 

 

10,531

 

 

 

7,745

 

 

Goodwill and Intangibles

 

 

20,249

 

 

 

-

 

 

Total Assets

 

$

469,677

 

 

$

440,158

 

 

Liabilities, Convertible Preferred Stock and Stockholders' Deficit

 

 

 

 

 

 

 

 

 

Accounts Payable and Accrued Liabilities

 

$

21,368

 

 

$

17,239

 

 

Payable to Investors

 

 

87,706

 

 

 

64,494

 

 

Class Action Settlement Liability

 

 

5,880

 

 

 

7,861

 

 

Notes at Fair Value

 

 

280,801

 

 

 

273,783

 

 

Repurchase Liability for Unvested Restricted Stock Awards

 

 

946

 

 

 

1,010

 

 

Total Liabilities

 

 

396,701

 

 

 

364,387

 

 

Commitments and Contingencies (see Note 11)

 

 

 

 

 

 

 

 

 

Convertible Preferred Stock – $0.01 par value; 32,155,022 shares authorized;

   30,699,957 issued and outstanding as of March 31, 2015 and December 31, 2014.  Aggregate liquidation preference of $160,952 as of March 31, 2015 and December 31, 2014.

 

 

111,145

 

 

 

111,145

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

Common Stock ($0.01 par value; 48,928,883 shares authorized; 14,878,514 issued and

14,691,327 outstanding as of March 31, 2015; and 47,928,883 shares authorized;

   14,448,700 issued and 14,261,513 outstanding as of December 31, 2014)

 

 

110

 

 

 

102

 

 

Additional Paid-In Capital

 

 

90,239

 

 

 

86,340

 

 

Less: Treasury Stock

 

 

(303

)

 

 

(303

)

 

Accumulated Deficit

 

 

(128,215

)

 

 

(121,513

)

 

Total Stockholders' Deficit

 

 

(38,169

)

 

 

(35,374

)

 

Total Liabilities, Convertible Preferred Stock and Stockholders' Deficit

 

$

469,677

 

 

$

440,158

 

 

 

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

 

 

5


Prosper Marketplace, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except for share and per share amounts)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2015

 

 

2014

(As Restated)*

 

 

Revenue

 

 

 

 

 

 

 

 

 

Operating Revenue

 

 

 

 

 

 

 

 

 

Transaction Fees, Net

 

$

25,342

 

 

$

8,364

 

 

Servicing Fees, Net

 

 

2,569

 

 

 

414

 

 

Other Revenue

 

 

2,998

 

 

 

451

 

 

Total Operating Revenue

 

 

30,909

 

 

 

9,229

 

 

Interest Income

 

 

 

 

 

 

 

 

 

Interest Income on Borrower Loans

 

 

10,476

 

 

 

10,005

 

 

Interest Expense on Notes

 

 

(9,563

)

 

 

(9,422

)

 

Net Interest Income

 

 

913

 

 

 

583

 

 

Change in Fair Value of Borrower Loans, Loans Held for Sale and Notes, Net

 

 

(101

)

 

 

167

 

 

Total Net Revenue

 

 

31,721

 

 

 

9,979

 

 

Expenses

 

 

 

 

 

 

 

 

 

Origination and Servicing

 

 

6,852

 

 

 

2,291

 

 

Sales and Marketing

 

 

18,570

 

 

 

6,434

 

 

General and Administrative

 

 

13,502

 

 

 

3,972

 

 

Total Expenses

 

 

38,924

 

 

 

12,697

 

 

Net Loss Before Taxes

 

 

(7,203

)

 

 

(2,718

)

 

Income Tax Expense

 

 

73

 

 

 

-

 

 

Net Loss

 

$

(7,276

)

 

$

(2,718

)

 

Net Loss Per Share – Basic and Diluted

 

$

(0.69

)

 

$

(0.34

)

 

Weighted-Average Shares - Basic and Diluted

 

 

10,553,251

 

 

 

8,056,248

 

 

 

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

*See Note 15

 

 

6


Prosper Marketplace, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2015

 

 

2014

(As Restated)*

 

Cash flows from Operating Activities:

 

 

 

 

 

 

 

 

Net Loss

 

$

(7,276

)

 

$

(2,718

)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

 

 

 

 

 

 

 

 

Change in Fair Value of Borrower Loans, Loans Held for Sale and Notes

 

 

101

 

 

 

(167

)

Other Non-Cash Changes in Borrower Loans, Loans Held for Sale and Notes

 

 

(205

)

 

 

(133

)

Depreciation and Amortization

 

 

1,850

 

 

 

400

 

Change in Servicing Rights

 

 

(1,256

)

 

 

(283

)

Stock-Based Compensation Expense

 

 

1,439

 

 

 

250

 

Loss on Impairment of Property and Equipment

 

 

-

 

 

 

215

 

Accretion of Class Action Settlement Liability

 

 

19

 

 

 

30

 

Purchase of Loans Held for Sale at Fair Value

 

 

(540,924

)

 

 

(150,787

)

Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value

 

 

547,673

 

 

 

150,510

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Restricted Cash Except for those Related to Investing Activities

 

 

(19,922

)

 

 

(5,169

)

Accounts Receivable

 

 

2,031

 

 

 

(20

)

Prepaid and Other Assets

 

 

(850

)

 

 

(417

)

Accounts Payable and Accrued Liabilities

 

 

2,204

 

 

 

898

 

Class Action Settlement Liability

 

 

(2,000

)

 

 

(2,000

)

Payable to Investors

 

 

23,212

 

 

 

5,850

 

Net Cash Provided by (Used in) Operating Activities

 

 

6,096

 

 

 

(3,541

)

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchase of Borrower Loans Held at Fair Value

 

 

(47,714

)

 

 

(44,256

)

Principal Payments of Borrower Loans Held at Fair Value

 

 

36,063

 

 

 

28,245

 

Purchases of Property and Equipment

 

 

(3,537

)

 

 

(659

)

Maturities of Short Term Investments

 

 

1,274

 

 

 

1,271

 

Purchases of Short Term Investments

 

 

(1,275

)

 

 

(1,274

)

Acquisition of Business, Net of Cash Acquired

 

 

(19,000

)

 

 

-

 

Changes in Restricted Cash Related to Investing Activities

 

 

1,859

 

 

 

(771

)

Net Cash Used in Investing Activities

 

 

(32,330

)

 

 

(17,444

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from Issuance of Notes Held at Fair Value

 

 

47,796

 

 

 

43,933

 

Payment of Notes Held at Fair Value

 

 

(36,069

)

 

 

(28,326

)

Proceeds from Early Exercise of Stock Options and Issuance of Restricted Stock

 

 

1,650

 

 

 

10

 

Proceeds from Exercise of Vested Stock Options

 

 

522

 

 

 

4

 

Repurchase of Restricted Stock

 

 

(1

)

 

 

-

 

Proceeds from Exercise of Common Stock Warrants

 

 

111

 

 

 

-

 

Net Cash Provided by Financing Activities

 

 

14,009

 

 

 

15,621

 

Net Decrease in Cash and Cash Equivalents

 

 

(12,225

)

 

 

(5,364

)

Cash and Cash Equivalents at Beginning of the Period

 

 

50,557

 

 

 

18,339

 

Cash and Cash Equivalents at End of the Period

 

$

38,332

 

 

$

12,975

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash Paid for Interest

 

$

10,444

 

 

$

10,178

 

Non-Cash Investing Activity-Accrual for Property and Equipment, Net

 

$

321

 

 

$

28

 

Non-Cash Investing Activity-Amount Payable for the Acquisition of Business

 

$

840

 

 

$

 

 

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

*See Note 15

 

 

7


Prosper Marketplace, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

1. Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and disclosure requirements for interim financial information and the requirements of Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2014. The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date. Management believes these unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

Prosper did not have any items of other comprehensive income (loss) during any of the periods presented in the condensed consolidated financial statements as of and for the three months ended March 31, 2015 and 2014, respectively.

The preparation of Prosper’s condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in Prosper’s financial statements and accompanying notes. Prosper bases its estimates on historical experience and on various other factors it believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. These judgments, estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions, and the differences could be material.

The accompanying interim condensed consolidated financial statements include the accounts of PMI and its wholly-owned subsidiaries, PFL and PHL. All intercompany balances have been eliminated in consolidation.

On January 23, 2015, Prosper acquired all of the outstanding limited liability company units of American HealthCare Lending, LLC (“AHL”), a company that operates a cloud-based patient financing platform, and merged AHL with and into PHL, with PHL surviving the merger. Prosper’s condensed consolidated financial statements include PHL's results of operations and financial position from this date forward (see Note 6 – American HealthCare Lending Acquisition).

Reclassifications

During the year ended December 31, 2014, Prosper changed the presentation of its revenue in the consolidated statements of operations. A new line called “Servicing fees” was created and the servicing fees related to Borrower Loans sold through Prosper’s Whole Loan Channel that were previously included in interest income were reclassified to this new line. Furthermore, the “Rebates and Promotions” line was removed, with the amounts in that line reclassified to the “Servicing fees” or “Origination fees” lines based on the underlying transactions. Also, the “Change in Fair Value of Borrower Loans, loans held for sale and Notes, Net” was moved into the “Total revenue” subtotal. Lastly, the subtotals were realigned to reflect the new presentation.

Prosper also changed the definitions used to classify expenses.  Expenses were previously classified as cost of services, compensation and benefits, marketing and advertising, depreciation and amortization, professional services, facilities and maintenance, class action settlement, loss on impairment of fixed assets and other.   The revised classification approach replaces the previous classifications with origination and servicing, sales and marketing, and general and administration.  The changes had no impact to the total expenses or net income. Prior period amounts have been reclassified to conform to the current presentation. Lastly, the subtotals were realigned to reflect the new presentation. Management believes these changes make the income statement more useful for the readers of the financial statements and comparable with Prosper’s competitors.  

 

 

2. Summary of Significant Accounting Policies

Prosper’s significant accounting policies are included in Note 2 – Summary of Significant Accounting Policies in Prosper’s Annual Report on Form 10-K for the year ended December 31, 2014. There have been no changes to these accounting policies during the first three months of 2015 except for Loan Servicing Assets and Liabilities.

8


Fair Value Measurements

Financial instruments consist principally of Cash and Cash Equivalents, Restricted Cash, Short Term Investments, Borrower Loans, Loans Held for Sale, Accounts Receivable, Accounts Payable and Accrued Liabilities, Payable to Investors and Notes. The estimated fair values of Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities, and Payable to Investors approximate their carrying values because of their short term nature.

 

Borrower Loans, Loans Held for Sale and Notes

Borrower Loans, loans held for sale and Notes are recorded at fair value.  Prosper has adopted the provisions of ASC Topic 825, Financial Instruments (“ASC Topic 825”). ASC Topic 825 permits companies to choose to measure certain financial instruments and certain other items at fair value on an instrument-by-instrument basis with unrealized gains and losses on items for which the fair value option has been elected reported in earnings. Management believes that the fair value option is more meaningful for the reader of the financial statements and it allows both the Borrower Loans, loans held for sale and Notes to be valued using the same methodology. The fair value election, with respect to an item, may not be revoked once an election is made. 

Loan Servicing Assets and Liabilities

On January 1, 2015, Prosper elected to adopt the fair value method to measure the servicing assets and liabilities for all classes of servicing assets and liabilities subsequent to initial recognition.  ASC 860-50, Servicing Assets and Liabilities allows the subsequent adoption of the fair value method at the beginning of any fiscal year.  The adoption of the fair value method for a particular class is irrevocable.  Prior to January 1, 2015, Prosper measured the servicing assets and liabilities using the amortized cost method. This change resulted in a $575 thousand decrease to accumulated deficit, a $546 thousand increase in net servicing assets and a $29 thousand decrease in net servicing liabilities.

Recent Accounting Pronouncements

In May 2014, as part of its ongoing efforts to assist in the convergence of U.S. GAAP and International Financial Reporting Standards (“IFRS”), the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers.” The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The standard will be effective for Prosper in the first quarter of fiscal 2017. Early adoption is not permitted. Prosper is currently assessing the potential impact on its financial statements from adopting this new guidance.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which requires management of a company to evaluate whether there is substantial doubt about the company’s ability to continue as a going concern. This ASU is effective for the annual reporting period ending after December 15, 2016, and for interim and annual reporting periods thereafter, with early adoption permitted. Prosper is currently assessing the potential impact on its financial statements from adopting this new guidance.

In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity to eliminate the use of different methods in practice and thereby reduce existing diversity in the accounting for hybrid financial instruments issued in the form of a share. For hybrid financial instruments issued in the form of a share, an entity should determine the nature of the contract by considering the economic characteristics and risks of the entire hybrid financial instrument. The existence or omission of any single term or feature does not necessarily determine the economic characteristics and risks of the host contract. This standard will be effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. Prosper is currently assessing the potential impact on its financial statements from adopting this new guidance.

In February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 is effective for periods beginning after December 15, 2015 with early adoption permitted. Prosper has decided to early adopt this guidance effective January 1, 2015, the adoption of this standard had no impact on Prosper’s financial statements.

 

 

9


3. Property and Equipment, Net

Property and equipment consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

 

2015

 

 

2014

 

 

Property and equipment:

 

 

 

 

 

 

 

 

 

Computer equipment

 

$

6,178

 

 

$

3,824

 

 

Internal-use software and website development costs

 

 

8,513

 

 

 

4,486

 

 

Office equipment and furniture

 

 

1,961

 

 

 

1,904

 

 

Leasehold improvements

 

 

5,564

 

 

 

5,274

 

 

Assets not yet placed in service

 

 

1,589

 

 

 

4,361

 

 

Property and equipment

 

 

23,805

 

 

 

19,849

 

 

Less accumulated depreciation and amortization

 

 

(7,149

)

 

 

(5,425

)

 

Total property and equipment, net

 

$

16,656

 

 

$

14,424

 

 

 

Depreciation expense for the three months ended March 31, 2015 and 2014 was $1,850 thousand and $400 thousand respectively. Prosper capitalized internal-use software and website development costs in the amount of $1,215 thousand and $368 thousand for the three months ended March 31, 2015 and 2014, respectively. Prosper recorded internal-use software and website development impairment charges of $nil and $215 thousand for the three months ended March 31, 2015 and 2014 respectively, as a result of its decision to discontinue several software and website development projects.  These charges are included in general and administration expenses on the condensed consolidated statement of operations.  

 

 

4. Borrower Loans, Loans Held for Sale, and Notes Held at Fair Value

The fair value of the Borrower Loans and Notes funded through the Note Channel are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The primary cash flow assumptions used to value such Borrower Loans and Notes include default rates derived from historical performance and discount rates applied to each credit grade based on the perceived credit risk of each credit grade. The obligation to pay principal and interest on any series of Notes is equal to the loan payments, if any, received on the corresponding Borrower Loan, net of the servicing fee. As such, the fair value of the Notes is approximately equal to the fair value of the Borrower Loans funded through the Note Channel, adjusted for the servicing fee and the timing of borrower payments subsequently disbursed to the Note holders. The effective interest rate associated with a series of Notes will be less than the interest rate earned on the corresponding Borrower Loan due to the servicing fee.

 

The aggregate principal balances outstanding and fair values of Borrower Loans, loans held for sale and Notes as of March 31, 2015 and December 31, 2014, are presented in the following table (in thousands):

 

 

 

Borrower Loans

 

 

Notes

 

 

Loans Held for Sale

 

 

 

March 31,

2015

 

 

December 31,

2014

 

 

March 31,

2015

 

 

December 31,

2014

 

 

March 31,

2015

 

 

December 31,

2014

 

Aggregate principal balance outstanding

 

$

275,879

 

 

$

268,598

 

 

$

(279,455

)

 

$

(272,267

)

 

$

1,573

 

 

$

8,295

 

Fair value adjustments

 

 

4,525

 

 

 

4,645

 

 

 

(1,346

)

 

 

(1,516

)

 

 

26

 

 

 

168

 

Fair value

 

$

280,404

 

 

$

273,243

 

 

$

(280,801

)

 

$

(273,783

)

 

$

1,599

 

 

$

8,463

 

 

At March 31, 2015, Borrower Loans, loans held for sale and Notes had original terms to maturity of between 36 months and 60 months, had monthly payments with fixed interest rates ranging from 5.77% to 33.04% and had various maturity dates through March 2020. At December 31, 2014, Borrower Loans, Notes and loans held for sale had original maturities between 36 and 60 months, had monthly payments with fixed interest rates ranging from 5.77% to 33.04% and had various maturity dates through December 2019.

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for Prosper’s Borrower Loans, loans held for sale and Notes fair value measurements at March 31, 2015 and December 31, 2014:

 

 

 

Range

Unobservable Input

 

March 31, 2015

 

December 31, 2014

Discount rate

 

2.8%-10.1%

 

3.3%-10.6%

Default rate

 

2.6%-18.8%

 

2.5%-18.6%

 

10


Key economic assumptions and the sensitivity of the current fair value to immediate adverse changes in those assumptions at March 31, 2015 Borrower Loans, loans held for sale and Notes funded through the Note Channel are presented in the following table (in thousands):

 

 

 

Borrower Loans /

Loans Held for Sale

 

 

Notes

 

 

Discount rate assumption:

 

4.61

 

%*

4.61

 

%*

Resulting fair value from:

 

 

 

 

 

 

 

 

 

100 basis point increase

 

$

278,837

 

 

$

277,641

 

 

200 basis point increase

 

 

275,756

 

 

 

274,567

 

 

Resulting fair value from:

 

 

 

 

 

 

 

 

 

100 basis point decrease

 

$

285,261

 

 

$

284,051

 

 

200 basis point decrease

 

 

288,612

 

 

 

287,394

 

 

Default rate assumption:

 

11.95

 

%*

11.95

 

%*

Resulting fair value from:

 

 

 

 

 

 

 

 

 

200 basis point decrease

 

$

289,030

 

 

$

287,800

 

 

100 basis point decrease

 

 

285,527

 

 

 

284,310

 

 

Resulting fair value from:

 

 

 

 

 

 

 

 

 

100 basis point increase

 

$

278,513

 

 

$

277,324

 

 

200 basis point increase

 

 

275,089

 

 

 

273,914

 

 

 

*

Represents weighted average assumptions considering all credit grades.

These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

 

The changes in the Borrower Loans, loans held for sale and Notes, which are Level 3 assets measured at fair value on a recurring basis are as follows (in thousands):

 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

 

 

 

 

Borrower

Loans

 

 

Notes

 

 

Loans Held

for Sale

 

 

Total

 

 

Balance at January 1, 2014

 

$

233,105

 

 

$

(234,218

)

 

$

3,206

 

 

$

2,093

 

 

Purchase of Borrower Loans/Issuance of Notes

 

 

44,256

 

 

 

(43,933

)

 

 

150,787

 

 

 

151,110

 

 

Principal repayments

 

 

(28,245

)

 

 

28,326

 

 

 

-

 

 

 

81

 

 

Borrower Loans sold to third parties

 

 

-

 

 

 

-

 

 

 

(150,510

)

 

 

(150,510

)

 

Other changes

 

 

(39

)

 

 

173

 

 

 

(1

)

 

 

133

 

 

Change in fair value

 

 

(4,150

)

 

 

4,317

 

 

 

-

 

 

 

167

 

 

Balance at March 31, 2014

 

$

244,927

 

 

$

(245,335

)

 

$

3,482

 

 

$

3,074

 

 

 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

 

 

 

 

Borrower

Loans

 

 

Notes

 

 

Loans Held

for Sale

 

 

Total

 

 

Balance at January 1, 2015

 

$

273,243

 

 

$

(273,783

)

 

$

8,463

 

 

$

7,923

 

 

Purchase of Borrower Loans/Issuance of Notes

 

 

47,714

 

 

 

(47,796

)

 

 

540,924

 

 

 

540,842

 

 

Principal repayments

 

 

(36,063

)

 

 

36,069

 

 

 

(364

)

 

 

(358

)

 

Borrower Loans sold to third parties

 

 

-

 

 

 

-

 

 

 

(547,309

)

 

 

(547,309

)

 

Other changes

 

 

6

 

 

 

207

 

 

 

(8

)

 

 

205

 

 

Change in fair value

 

 

(4,496

)

 

 

4,502

 

 

 

(107

)

 

 

(101

)

 

Balance at March 31, 2015

 

$

280,404

 

 

$

(280,801

)

 

$

1,599

 

 

$

1,202

 

 

 

Approximately $4.8 million and $4.6 million represents the aggregate adverse fair value adjustments that were recorded to charge off Borrower Loans during the three months ending March 31, 2015 and March 31, 2014 respectively.

As of March 31, 2015, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $1.3 million and a fair value of $0.5 million. As of December 31, 2014, Borrower Loans that were 90 days or more delinquent, had an aggregate

11


principal amount of $1.7 million and a fair value of $0.6 million. Prosper places loans on non-accrual status when they are over 120 days past due.  As of March 31, 2015 and December 31, 2014, Borrower Loans in non-accrual status had a fair value of $0.

 

 

5. Loan Servicing Assets and Liabilities

Prosper accounts for servicing assets and liabilities at their estimated fair values with changes in fair values recorded in servicing fees.  The initial asset or liability is recognized when Prosper sells Borrower Loans to unrelated third-party buyers and the servicing rights are retained. Prior to January 1, 2015, the initial fair value of such servicing assets or liabilities was amortized in proportion to and over the servicing period. Subsequent to January 1, 2015, the servicing assets and liabilities are measured at fair value throughout the servicing period.  The total gain recognized on the sale of such Borrower Loans was $0.3 million for the three months ended March 31, 2014. The total gain recognized on the sale of Borrower Loans sold to unrelated third-party buyers was $1.9 million for the three months ended March 31, 2015.

As of March 31, 2015, Borrower Loans that were facilitated and subsequently sold but for which Prosper retained servicing rights had a total outstanding principle balance of $1,796 million, original terms between 36 and 60 months and had monthly payments with fixed interest rates ranging from 6.00% to 31.90% and maturity dates through March 2020.  At December 31, 2014, Borrower Loans that were facilitated and subsequently sold but for which Prosper retained servicing rights had a total outstanding principle balance of $1.36 billion, original terms between 36 and 60 months and had monthly payments with fixed interest rates ranging from 6.05% to 31.34% and maturity dates through December 2019.

The fair value of the loan servicing assets and liabilities is determined using a discounted cash flow model that includes the market servicing rate, the default rate and discount rate as important inputs.  For more details refer to Part IV - Item 15 – Exhibits, Financial Statement Schedules - Note 5 – Loan Servicing Assets and Liabilities Prosper’s Annual Report.    

Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for Prosper’s servicing asset/liability fair value measurements at March 31, 2015 and December 31, 2014:

 

 

 

Range

Unobservable Input

 

March 31, 2015

 

December 31, 2014

Discount rate

 

15% - 25%

 

15% - 25%

Default rate

 

2.0% - 19.8%

 

2.6% - 26.3%

Market servicing rate

 

0.625%

 

0.625% - 0.70%

 

Loan Servicing Asset and Liabilities Activity:

The following table presents additional information about Level 3 servicing assets and liabilities measured at fair value for the three months ended March 31, 2015 (in thousands).

 

 

 

Servicing

Assets

 

 

Servicing

Liabilities

 

Amortized cost at January 1, 2015

 

$

4,163

 

 

$

624

 

Adjustment to adopt fair value measurement

 

546

 

 

 

(29

)

Fair value at January 1, 2015

 

 

4,709

 

 

 

595

 

Additions

 

 

2,078

 

 

 

154

 

Less: Changes in fair value

 

 

(753

)

 

 

(81

)

Fair value at March 31, 2015

 

$

6,034

 

 

$

668

 

 

12


Servicing Asset and Liability Fair Value Input Sensitivity:

The following table presents the estimated impact on Prosper’s estimated fair value of servicing assets and liabilities, calculated using different market servicing rates and different default rates as of March 31, 2015 (in thousands, except percentages).

 

 

 

Servicing

Assets

 

 

Servicing

Liabilities

 

 

Weighted average market servicing rate assumptions

 

 

0.625

%

 

 

0.625

%

 

Resulting fair value from:

 

 

 

 

 

 

 

 

 

Market servicing rate increase to 0.65%

 

$

5,594

 

 

$

(734

)

 

Market servicing rate decrease to 0.60%

 

$

6,487

 

 

$

(601

)

 

Weighted average default assumptions

 

 

13

%

 

 

13

%

 

Resulting fair value from:

 

 

 

 

 

 

 

 

 

100 basis point increase

 

$

5,930

 

 

$

(667

)

 

100 basis point decrease

 

$

6,152

 

 

$

(669

)

 

 

These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

 

 

6. American HealthCare Lending Acquisition

On January 23, 2015, Prosper acquired all of the outstanding limited liability company interests of AHL, and merged AHL with and into PHL, with PHL surviving the merger (the “Merger”). Under the terms of the purchase agreement, the sellers of AHL received an aggregate of $20.2 million in cash on the closing date and will receive $0.8M in cash one year after the closing date subject to general representations.

PHL is a patient financing company for healthcare providers in the cosmetic, dentistry, bariatric surgery, fertility, plastic surgery and other markets. Prosper has included the financial results of PHL in the condensed consolidated financial statements from the date of acquisition. The amounts of net revenue and loss of PHL included in Prosper’s condensed consolidated statement of operations from the merger date of January 23, 2015 to March 31, 2015 were $0.6 million and $0.3 million, respectively. Prosper recorded acquisition-related expenses of $0.2 million for the three months ended March 31, 2015, which is included in general and administrative expense.  

The preliminary purchase price allocation as of the merger date is as follows (in thousands):

 

 

 

Fair Value

 

Assets:

 

 

 

 

Cash

 

$

1,219

 

Accounts Receivable

 

 

147

 

Property, equipment and software

 

 

6

 

Other assets

 

 

63

 

Identified intangible assets

 

 

3,520

 

Goodwill

 

 

16,825

 

Liabilities:

 

 

 

 

 

 

 

 

 

Accrued expenses and other liabilities

 

 

708

 

Total purchase consideration

 

$

21,072

 

 

The allocation of the purchase price is preliminary and subject to further adjustment as information relative to closing date balances and related tax balances are finalized.

The goodwill balance is primarily attributed to expected operational synergies and the combined workforce. Goodwill is expected to be deductible for U.S. income tax purposes.

13


Intangible assets as of March 31, 2015 are as follows (in thousands):

 

 

 

March 31, 2015

 

 

 

Gross

Carrying Value

 

 

Accumulated

Amortization

 

 

Net

Carrying Value

 

 

Remaining

Useful Life

(In Years)

 

Customer relationships

 

$

2,650

 

 

$

(41

)

 

$

2,609

 

 

 

10.0

 

Technology

 

 

810

 

 

 

(45

)

 

 

765

 

 

 

3.0

 

Brand name

 

 

60

 

 

 

(10

)

 

 

50

 

 

 

1.0

 

Total intangible assets subject to amortization

 

$

3,520

 

 

$

(96

)

 

$

3,424

 

 

 

 

 

 

The customer relationship intangible assets are being amortized on an accelerated basis over a 10 year period. The technology and brand name intangible assets are being amortized on a straight line basis over three and one years, respectively. Amortization expense associated with intangible assets for the three months ended March 31, 2015 was $96 thousand.

Prosper valued customer relationships, technology and brand name using the income approach.  Significant assumptions include forecasts of revenues, costs of revenues, operating expenses and customer attrition rates for customers.  

 

 

7. Net Loss Per Share

The weighted average shares used in calculating basic and diluted net loss per share excludes certain shares that are disclosed as outstanding shares in the condensed consolidated balance sheets because such shares are restricted as they were associated with options that were early exercised and continue to remain unvested.

Basic and diluted net loss per share was calculated as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

 

2014

 

Numerator:

 

 

 

 

 

 

 

 

Net loss available to common stockholders for basic

   and diluted EPS

 

$

(7,276

)

 

$

(2,718

)

Denominator:

 

 

 

 

 

 

 

 

Weighted average shares used in computing basic and

   diluted net loss per share

 

 

10,553,251

 

 

 

8,056,248

 

Basic and diluted net loss per share

 

$

(0.69

)

 

$

(0.34

)

 

Due to losses attributable to Prosper’s common shareholders for each of the periods below, the following potentially dilutive shares are excluded from the diluted net loss per share calculation because they were anti-dilutive under the treasury stock method, in accordance with ASC Topic 260:

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

 

2014

 

 

 

(shares)

 

 

(shares)

 

Excluded securities:

 

 

 

 

 

 

 

 

Convertible preferred stock issued and outstanding

 

 

30,699,957

 

 

 

27,274,068

 

Stock options issued and outstanding

 

 

7,038,728

 

 

 

4,359,556

 

Unvested stock options exercised

 

 

3,727,042

 

 

 

5,054,772

 

Warrants issued and outstanding

 

 

125,293

 

 

 

218,810

 

Total common stock equivalents excluded from

   diluted net loss per common share computation

 

 

41,591,020

 

 

 

36,907,206

 

 

 

8. Convertible Preferred Stock and Stockholders’ Deficit

Convertible Preferred Stock

Under Prosper’s amended and restated certificate of incorporation, preferred stock is issuable in series, and the board of directors is authorized to determine the rights, preferences, and terms of each series.

14


The number of authorized, issued and outstanding shares, their par value and liquidation preference for each series of convertible preferred stock as of March 31, 2015 are disclosed in the table below (amounts in thousands except share and per share amounts):

 

Convertible Preferred Stock

 

Par Value

 

 

Authorized

shares

 

 

Outstanding

and Issued

shares

 

 

Liquidation

Preference

 

New Series A

 

$

0.01

 

 

 

13,868,152

 

 

 

13,711,644

 

 

$

19,774

 

Series A-1

 

 

0.01

 

 

 

5,117,182

 

 

 

4,952,183

 

 

 

49,522

 

New Series B

 

 

0.01

 

 

 

8,288,734

 

 

 

7,155,176

 

 

 

21,581

 

New Series C

 

 

0.01

 

 

 

4,880,954

 

 

 

4,880,954

 

 

 

70,075

 

 

 

 

 

 

 

 

32,155,022

 

 

 

30,699,957

 

 

$

160,952

 

 

Common Stock

Prosper, through its amended and restated certificate of incorporation, is the sole issuer of common stock and related options and warrants. In May 2014, Prosper amended and restated its certificate of incorporation to effect an increase in the number of authorized shares of stock. The total number of shares of stock which Prosper has the authority to issue is 81,083,905, consisting of 48,928,883 shares of common stock, $0.01 par value per share, and 32,155,022 shares of preferred stock, $0.01 par value per share. As of March 31, 2015, 14,878,514 shares of common stock were issued and 14,691,237 shares of common stock were outstanding. As of December 31, 2014, 14,448,700 shares of common stock were issued and 14,261,513 shares of common stock were outstanding. Each holder of common stock is entitled to one vote for each share of common stock held.

Common Stock Issued upon Exercise of Stock Options

During the three months ended March 31, 2015 Prosper issued 308,750 shares of common stock, upon the exercise of options for cash proceeds of $0.54 million, of which 9,459 shares were unvested. With the approval of Prosper’s board of directors, Prosper allows certain employees and directors to exercise stock options granted under the 2005 Plan prior to vesting. The unvested shares are subject to Prosper’s repurchase right at the original exercise price. Early exercises of options are not deemed to be substantive exercises for accounting purposes and therefore, amounts received for early exercises are initially recorded in repurchase liability for unvested restricted stock awards.  Such amounts are reclassified to common stock and additional paid-in capital as the underlying shares vest. At March 31, 2015 and December 31, 2014, there were 3,637,042 and 4,114,269 shares respectively of restricted stock outstanding that remain unvested and subject to Prosper’s right of repurchase.

For the three months ended March 31, 2015, Prosper repurchased 1,875 shares of restricted stock for $1 thousand upon termination of employment of various employees.

Common Stock Issued upon Exercise of Warrants

For the three months ended March 31, 2015, Prosper issued 32,939 shares of common stock upon the exercise of warrants for aggregate proceeds of $111 thousand.

 

 

9. Stock Option Plan and Compensation

In 2005, Prosper’s stockholders approved the adoption of the 2005 Stock Plan. In December 2010, Prosper’s stockholders approved the adoption of the Amended and Restated 2005 Stock Plan (the “2005 Plan”). As of March 31, 2015 under the 2005 Plan, options to purchase up to 15,195,255 shares of common stock are reserved and may be granted to employees, directors, and consultants by Prosper’s board of directors and stockholders to promote the success of its business. Options generally vest 25% one year from the vesting commencement date and 1/48th per month thereafter.  In no event are options exercisable more than ten years after the date of grant.

At March 31, 2015, there were 138,289 stock options available for grant under the 2005 Plan.

15


Early Exercised Stock Options

The activity of options that were early exercised under the 2005 Plan for the three months ended March 31, 2015 is below:

 

 

 

Early exercised

options, unvested

 

 

Weighted average

exercise price

 

 

Balance as of January 1, 2015

 

 

4,112,269

 

 

$

0.25

 

 

Exercise of non-vested stock options

 

 

9,459

 

 

 

2.18

 

 

Repurchase of restricted stock

 

 

(1,875

)

 

 

0.57

 

 

Restricted stock vested

 

 

(482,811

)

 

 

0.17

 

 

Balance as of March 31, 2015

 

 

3,637,042

 

 

$

0.26

 

 

 

Additional information regarding the unvested early exercised stock options outstanding as of March 31, 2015 is as follows:

 

 

 

Options Outstanding

 

Range of

 

 

 

 

 

 

 

 

 

 

 

 

Exercise

 

Number

 

 

Weighted –Avg.

 

 

Weighted –Avg.

 

Prices

 

Outstanding

 

 

Remaining Life

 

 

Exercise Price

 

$0.10 - $0.10

 

 

3,111,922

 

 

 

1.89

 

 

$

0.10

 

0.57 - 0.57

 

 

458,981

 

 

 

2.97

 

 

 

0.57

 

5.65-5.65

 

 

66,139

 

 

 

3.33

 

 

 

5.65

 

$0.10 - $5.65

 

 

3,637,042

 

 

 

2.06

 

 

$

0.26

 

 

Stock Option Activity

Stock option activity under the 2005 Plan is summarized for the three months ended March 31, 2015 below:

 

 

 

Options

Issued and