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[Xenon481]

Nominating to The Lobby.

[Xenon481]

At December 31, 2009, we had approximately $0.6 million in unrestricted cash and cash equivalents.

Dang, they were less than 1 month away from being out of money on December 31, 2009.

On March 15, 2010, we entered into a Note Option Agreement (the “Option Agreement”) with Christian A. Larsen, its Chairman and Chief Executive Officer, pursuant to which, Mr. Larsen granted the Company an option (the “Option”) to sell him an aggregate principal amount of up to $300,000 of Convertible Promissory Notes, in $100,000 increments.  We may exercise the Option, in whole or in part, in a single or multiple closings, at any time on or before March 31, 2010.  Interest on the notes accrues at a per annum rate of 15.0%.  All principal and accrued interest under the notes are due in a single payment on April 30, 2010.

In other words, they were so very close to going under that they absolutely had to have a $300,000 bridge loan for 1 month until their letters of intent are supposed to close just so they could stay open.

[Xenon481]

When people like this come to Prosper looking for a loan, don't we usually tell them that another loan is the last thing they need?

(see enclosed)

What in the world are the $14k worth of assets listed as Receivables?

[God-Father]

Nominating to The Lobby.

Second

[baeventures]

Seconded as well (thirded?)

BAEVentures

[alexpkeaton]

So, $5M in compensation for 34 employees means the average salary is $147k. Subtract a bit for benefits and they're still grossly overpaying somebody. Isn't a startup supposed to be run cheaply until it becomes sustainable?

[NewHorizon]

Isn't a startup supposed to be run cheaply until it becomes sustainable?

That's SOOO 20th century.
 

[mothandrust]

Cash and Equivalents were $616,089 on 12/31/09 compared with $9.8M on 12/31/08...

The Company has assessed the contingent liability related to prior sales of loans on the platform and has determined that the occurrence of the contingency is reasonably possible but not probable and that contingent liability ranges from $0 in the event the company prevails to a maximum of $70.5 million which represents the remaining outstanding principal amount of $28.9 million and loans charged off of $41.6 million as of December 31, 2009.

...if they had only bought that couch, they could look under the cushions for coins.

[cowdog]

Cash and Equivalents were $616,089 on 12/31/09 compared with $9.8M on 12/31/08...

The Company has assessed the contingent liability related to prior sales of loans on the platform and has determined that the occurrence of the contingency is reasonably possible but not probable and that contingent liability ranges from $0 in the event the company prevails to a maximum of $70.5 million which represents the remaining outstanding principal amount of $28.9 million and loans charged off of $41.6 million as of December 31, 2009.

...if they had only bought that couch, they could look under the cushions for coins.

Actually, there would be so many people waiting to sit on the couch that they would pay for the privilege.

They would also be pumping coins into the vending machines, buying food and drinks at the concession stand, and spending a few bucks at the gift shop.

More importantly, they would be telling their friends about this great station with all the neat things to do while waiting for the bus.

Instead they are saying: friends don't let friends lend on Prosper.

 

[Investar]

I parsed two lines from quarterly Consolidated Statements of Operations to see what the main source of income looked like in the 4th quarter. Now I can better predict a burn rate going forward. I came up with:

REVENUE ITEM	Qtr 1	Qtr 2	Qtr 3	Qtr 4	2009
–––––––––––––––––––––––––––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Agency fees (loan origination fees)	0	1,375	67,348	167,122	235,845
Loan servicing fees (lender fees)	181,142	143,737	121,875	109,948	556,702
–––––––––––––––––––––––––––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Total from borrowers and lenders	181,142	145,112	189,223	277,070	792,547

It is interesting to note, loan origination fees are a 'one shot' while lender fees are taken pro-rata across 36 months. Thus, lenders provided the largess of revenue in 2009. Notice lender contributions are shrinking because 10s of millions of loans are maturing and only 1s of millions of loans are replacing the basis for the 1% coming from lenders (lenders are charged 1% APR of borrower's outstanding principal).

ETA: Qtr 1 extrapolated

[Flying Missle]

Are we sure they're taking origination fees as a one time shot?

FASB 91 (Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases) requires that you take loan origination fees to income over the life of the loan as an adjustment of yield.

[bamalucky]

Are we sure they're taking origination fees as a one time shot?

FASB 91 (Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases) requires that you take loan origination fees to income over the life of the loan as an adjustment of yield.

They took my wifes origination fee of $50 right off the top

[ira01]

Are we sure they're taking origination fees as a one time shot?

FASB 91 (Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases) requires that you take loan origination fees to income over the life of the loan as an adjustment of yield.

They took my wifes origination fee of $50 right off the top

They take the cash right off the top.  That doesn't mean that's necessarily how they account for the money, however.

[ira01]

I parsed two lines from quarterly Consolidated Statements of Operations to see what the main source of income looked like in the 4th quarter. Now I can better predict a burn rate going forward. I came up with:

REVENUE ITEM	Qtr 1	Qtr 2	Qtr 3	Qtr 4	2009
–––––––––––––––––––––––––––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Agency fees (loan origination fees)	0	1,375	67,348	167,122	235,845
Loan servicing fees (lender fees)	181,142	143,737	121,875	109,948	556,702
–––––––––––––––––––––––––––––––	–––––––	–––––––	–––––––	–––––––	–––––––
Total from borrowers and lenders	181,142	145,112	189,223	277,070	792,547

It is interesting to note, loan origination fees are a 'one shot' while lender fees are taken pro-rata across 36 months. Thus, lenders provided the largess of revenue in 2009. Notice lender contributions are shrinking because 10s of millions of loans are maturing and only 1s of millions of loans are replacing the basis for the 1% coming from lenders (lenders are charged 1% APR of borrower's outstanding principal).

ETA: Qtr 1 extrapolated

So $60K a month total operating income in 2009 -- what a pittance (and, as you note, that number is shrinking because Prosper isn't coming close to replacing maturing (or charged-off) loans with new ones). 

Does the 10-K state how much Prosper pays WebBank for originating the loans?

[Flying Missle]

Are we sure they're taking origination fees as a one time shot?

FASB 91 (Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases) requires that you take loan origination fees to income over the life of the loan as an adjustment of yield.

They took my wifes origination fee of $50 right off the top

They take the cash right off the top.  That doesn't mean that's necessarily how they account for the money, however.

If I was unclear, that's what I was talking about (how it's accounted for).