I read through the Lending Club S1 finally…  I found a few parts of the S1 interesting…  Over the next few day I will lighlight a few of my favorite sections.  I am not a lawyer nor do I claim to fully understand everything that I am reading.   I am simply copying verbatim parts of the Lending Club S1 that I found interesting…

 Liquidity and Capital Resources

The financial statements included in this registration statement have been prepared assuming that the Company will continue as a going concern; however, the conditions discussed below raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

The Company has incurred operating losses since its inception. For fiscal 2008, the Company incurred a net loss of $7.0 million and had negative cash flow from operations of $6.0 million. Additionally, the Company has an accumulated deficit of $7.8 million since inception and a stockholder deficit of $4.8 million as of March 31, 2008.

Since its inception, the Company has financed its operations through debt and equity financing from various sources. The Company is dependent upon raising additional capital or seeking additional debt financing to fund its current operating plans for the foreseeable future. Failure to obtain sufficient debt and equity financing and, ultimately, to achieve profitable operations and positive cash flows from operations could adversely affect the Company’s ability to achieve its business objectives and continue as a going concern. Further, there can be no assurance as to the availability or terms upon which the required financing and capital might be available.

Net cash used in operating activities from inception through March 31, 2008 consisted mostly of increases in headcount costs, expenses for consultants and temporary personnel and other professional service providers to the Company.

Net cash used in investing activities was $7.3 million for the fiscal year ended March 31, 2008, and $38,100 for the fiscal year ended December 31, 2007. In fiscal 2008, net cash used in investing activities consisted mainly of our $7.0 million investment in loans to borrower members. Other investment activities included opening certificates of deposits tied to our loans payable and from capital expenditures for purchases of property and equipment. Net cash provided by financing activities was $18.6 million for the fiscal year ended March 31, 2008, and $0.7 million for the fiscal year ended March 31, 2007. Cash provided by financing activities consisted primarily of proceeds from the issuance of our convertible preferred stock in our first round of venture capital funding in August 2007 and our issuance of long-term debt.

On October 29, 2007, we entered into a secured $3.0 million loan facility with Silicon Valley Bank (“SVB”). As of March 31, 2008, we had drawn down the entire amount of the facility. Interest on borrowings under the loan facility is at a per annum rate fixed as of the funding date of each advance equal to the greater of (i) SVB’s prime rate of interest plus 0.75% or (ii) 8.50%. We also paid a commitment fee of $15,000 on the effective date of the loan facility and $11,400 of SVB’s expenses in connection with the facility. The borrowings under the credit facility are secured by a blanket lien on substantially all of our assets, except for our intellectual property rights. Following the date of this prospectus, payments we receive in respect of borrower member loans on which the Notes are dependent will also be excluded from the blanket lien. In connection with this facility, we issued a fully vested warrant to purchase 98,592 shares of Series A convertible preferred stock to SVB. SVB also received the right to invest up to $500,000 in our next round of equity financing on the same terms as offered to other investors. Additionally, the SVB facility requires us to maintain a certificate of deposit with SVB of $150,000 until repayment.

On February 20, 2008, we entered into a secured $5.0 million credit facility with Gold Hill Venture Lending 03, LP (“Gold Hill”). As of March 31, 2008, we had drawn down $3.6 million under this facility. Interest on the borrowings under the credit facility is at a fixed rate of 10% per annum. Under the terms of this facility, we agreed to remit to Gold Hill, at the end of the amortization period, an amount equal to 1% of the total amount borrowed under that facility. We also paid a commitment fee of $25,000 on the effective date of the credit facility. Borrowings under the credit facility are secured by a lien on substantially all of our assets, except for our intellectual property rights. Following the date of this prospectus, payments we receive in respect of borrower member loans on which the Notes are dependent will also be excluded from the blanket lien. Gold Hill’s lien is pari passu with SVB’s lien described above. In connection with this facility, we issued fully vested warrants to purchase an aggregate of 289,201 shares of Series A convertible preferred stock and Gold Hill received the right to invest up to $500,000 in our next round of equity financing on the same terms as offered to other investors. The Gold Hill facility requires us to maintain a certificate of deposit with SVB of $250,000 until repayment.

As of the date of this filing, we are in violation of certain covenants under our SVB and Gold Hill facilities because we stopped accepting lender member commitments during the SEC registration process and also because we have not maintained our primary operating account with SVB. Although the continuing existence of these covenant violations constitutes events of default under the facilities, we entered into forbearance agreements with SVB and Gold Hill in June 2008, under which they agreed to forbear from exercising their rights against us with respect to these events of default through September 15, 2008.

In January 2008, we issued subordinated convertible promissory notes to Norwest Venture Partners X, LP and Canaan VII L.P., with principal sums of $500,000 each, under the terms of a note and warrant purchase agreement. The convertible notes are subordinate to our capital loan facility and our credit facility and bear interest at a rate of 8% per annum. Principal and interest are due in full on the maturity date of January 24, 2010, unless an equity financing with total proceeds of at least $3 million occurs prior to such date. If such an equity financing occurs, the principal balance and accrued interest of the notes will automatically convert into equity securities at the same price and under the same terms as those offered to the other equity investors. In connection with the issuance of the convertible notes, we issued warrants to purchase an aggregate of 234,742 shares of Series A convertible preferred stock to the convertible note holders.

From April to June 2008, we issued a series of promissory notes to accredited investors totaling $3,632,964. Each note is repayable over three years and bears interest at the rate of 12% per annum. In addition, investors in these promissory notes will receive warrants to purchase a total of 355,197 shares of our Series A convertible preferred stock. We used the proceeds of these notes to fund loans to qualified borrower members.

We used the proceeds from borrowings under the SVB and Gold Hill facilities, the sale of our convertible notes and the sale of promissory notes primarily to participate in the lending platform as a lender in order to insure a sufficient level of funding for borrowing requests. Beginning April 7, 2008, and until the date of this prospectus, all loans funded on the platform have been and will continue to be funded and held only by Lending Club. As of June 10, 2008, we had provided approximately $8.5 million in funding to borrower members. We expect that we will continue to fund loans to borrower members ourselves for some time, although there can be no assurance that will do so or if we do so, what level of funding we will be able to provide. Furthermore, following the date of this prospectus, if we fund loans ourselves we will hold the loans directly and will not hold Notes for our own account. Following the date of this prospectus, we will reopen the lender side of our platform to accept new lender member registrations and funding commitments to purchase Notes.

We have incurred losses since our inception and we expect we will continue to incur losses for the foreseeable future. We require cash to meet our operating expenses and for capital expenditures and principal and interest payments on our debt, as well as to fund loans we will hold for investment. To date, we have funded our cash requirements with proceeds from our debt issuances and the sale of equity securities. At March 31, 2008, we had approximately $5.6 million in cash and cash equivalents. We primarily invest our cash in interest bearing money market funds.

We anticipate that we will continue to incur substantial net losses for a number of years as we grow our online platform. We do not have any committed external source of funds. To the extent our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity offerings or debt financings. Additional equity or debt financing may not be available on acceptable terms, if at all.

Since our inception, inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.

• Lending Club Forum

• SCOOP! Prosper receives Additional 20MM in Venture Capital

• Prosper vs Lending Club — The First 100 Days

• Forbes (P2P Lending) and CNBC (LendingClub)

• Blogger Obtains Loan Using Social Capital

• Club Heads Clubmaking Products Golf

• Signature Club A Blush Makeup Store

• Signature Club A Eye Shadow Makeup Store

• Signature Club A Foundation Makeup Store

• Club Monaco Lipstick Makeup Store

There was a Prosper update last night.   Nothing that was completely unexpected… The one thing that struck me as interesting was that borrower’s are now required to sign the promissory notes themselves…  Before the process had been that Prosper was authorized to sign on their behalf…  The part that struck me as interesting was the final paragraph…

Although this new process may add some additional time before loan funding, we expect that this change will reduce immediate loan payoffs and enhance the legal enforceability of Prosper promissory notes.

The bold part caught my attention (I added the bold for emphasis) as I am on the loans that are part of the legal test.  Related or just coincidental use of the root legal?  More info please.  Update: Ed Giedgowd Chief Compliance Officer and General Consul of Prosper provided an update on borrower sign loans.

Here the highlights from blog post:

• Portfolio Plan Bids can now be adjust as an average of all the bids in the plan
• Self employed and non verifiable income borrowers will now have DTI displayed as Not Calculated
• Income Range changed to Stated Income and now show regardless of whether it is verifiable or not
• More bankruptcy data is now being shown including chapter and filing date
• There is a messaging change for those lenders that wish to bid on negative ROI listings.

• Doug Fuller Update Legal Test

• Prosper is Going To Sue Deadbeat Borrowers

• Lending Club Files S1 with SEC

• Lending Club Liquidity and Capital Resources

• Prosper Site Update — Nationwide 36% Except Texas and South Dakota

• Night Cream Skin Care Store

Lending Club has filed an S1 with the SEC (link to S1 filing). It looks to be similar in nature to the Prosper filed an S1 reported here on 10/30/2007.

This continues the Lending Club quiet period started on 4/8/2008. Originally I had guessed 7 months to 1.5 years for the Lending Club quiet period and I stand by that guess… 2 months and counting… Good luck Lending Club, your lenders are eagerly waiting the outcome…

I thought the following portion of the Q&A was interesting…

Q: Will the Notes be listed on an exchange?

A: No. The Notes will not be listed on any securities exchange.

Q: Will I be able to sell my Notes?

A: The Notes will not be transferable unless and until we are able to establish a resale platform for Notes. Although we are working to establish a resale platform, there can be no assurance we will be able to do so, or, if we are able to do so, when a resale platform would be available. Therefore, lender members must be prepared to hold their Notes to maturity.

Here is the email announcement I received from Lending Club…

Dear Kevin,

We filed with the SEC earlier today. You can read the registration statement on the SEC Website at www.sec.gov. This is an important step in the process that we announced on April 7. Until the registration process is complete, we continue to be in a quiet period and are not at liberty to disclose more details on the process and timing. Please find below the text of our press release.

Kind Regards,

Patrick Gannon

Lending Club Files Registration Statement with the SEC

SUNNYVALE, CA - June 20, 2008 – Lending Club announced today that it has filed a registration statement with the Securities and Exchange Commission under the Securities Act of 1933 relating to its social lending platform.

The registration statement seeks to register the offer and sale of up to $600,000,000 in Member Payment Dependent Notes to be issued by Lending Club in a continuous offering following the effective date of the registration statement. The Notes will be issued in series with each series of Notes corresponding to a single consumer loan to a borrower member. Lender members will direct Lending Club to apply the proceeds Lending Club receives from the sale of each series of Notes to fund a particular consumer loan selected by the lender member originated through the Lending Club platform.

A series of Notes will be issued only if and when the corresponding member loan closes and is funded. Lending Club will have an obligation to make payments of principal and interest on the Notes only to the extent that Lending Club receives payments on the corresponding member loan. The terms of the Notes, including interest rate and initial maturity, will correspond to the terms of the corresponding member loans but will reflect a four business day lag on payment dates and maturity to allow the platform to confirm payments received on the corresponding member loan.

Lending Club will offer the Notes only through its website directly to lender members.

A registration statement relating to these securities has been filed with the Securities and Exchange Commission but it has not yet become effective. Copies of the Lending Club registration statement can be accessed on the SEC website: http://www.sec.gov/. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state.

• Lending Club Forum

• Best of RateLadder 4th Quarter 2007

• Prosper vs Lending Club — The First 100 Days

• Lending Club Referral Program Expanded to Affiliates

• Email From Lending Club

• Club Heads Clubmaking Products Golf

• Signature Club A Blush Makeup Store

• Signature Club A Eye Shadow Makeup Store

• Signature Club A Foundation Makeup Store

• Club Monaco Lipstick Makeup Store

My Prosper Group is proud to present our 3rd listing (2nd endorsed listing)… This listing is attempting to put the social in social capital.

The Penny Saved has been a known blogroll buddy of RateLadder for sometime. He asked me about this loan strategy about 2 months ago. This is a calculated decision on his part.

He is a computer programmer, owns a rental property, and independently runs the personal finance blog The Penney Saved.

The loan will be used to raise his credit score so that he and his fiance can build a house… Reducing his revolving credit card debt by transferring the revolving debt to an installment loan will improve his credit score. Specifically, it will reduce his high revolving debt balance percentage (79% in the Prosper listing.)

His listing does a great job of laying out the financial reasoning behind the loan…

Unfortunately for him his inquires in the last 6 months are 3. This places him in an very unfavorable loan slice… This does not affect my belief that The Penny Saved will repay this debt.

I will be bid $105.66 @ 1% (all available cash at the moment… I will add another bid at the end of the listing with all additional funds available at the time.)

Here is what prosper says about that slice…

Minimum bid rate (chosen by borrower): 16.00%
Estimated loss1: -16.49%
Adjustment2: -1.26%
Servicing fee: -1.00%
Estimated return3: -2.75%

Here is the listing.

$25 Bonus For New Lenders
How to Use Prosper Listing Widget for MySpace, Blog, Website, or Other

• Programmer and Blogger Seeks Debt Consolidation Loan

• Blogger Obtains Loan Using Social Capital

• Best of RateLadder 3rd Quarter 2007

• Thank you Akismet

• New Loan Funded #6205 — $50 @ 19.1%

(This security leak was plugged in under 24 hours from reporting… Luke from Zopa confirmed fix in comments at the end of the post. This note was added after the security leak was fixed.)

I was randomly checking my stats on Zopa and noticed that a person with whom I am familiar had chosen to help my Zopa loan… Thank you!!!

There is a feature on Zopa that allows you to send a thank you note via the website… So, I decided to do just that and I sent the note…

Moments later I received an email on which I was cc’ed… Now I have this person’s email address. Seems like a security leak to me.

It is not like I couldn’t have gotten in touch with this person in another manner… But if the person was a total unknown Zopa just sent me their email address…

I am open about my email address, but I know some people (my wife for example) would be quite upset at her email address being given out…

I informed my contacts at Zopa and they insured me that this security breach would be addressed right away with utmost priority.

If you are interested in a ZOPA CD consider helping out my loan… I promise I wont send you a thank you note to obtain your email…

Click picture for a larger image….

• Zopa CD Drops to 4.5%

• Confirmed My 5.1% Zopa CD

• Fed Cuts Interest Rates — Now is the Time to Buy a Zopa CD

• Fed Cuts Rate 75 Basis Points — I bought a Zopa US CD at 5.1%

• Zopa Guarantees Returns 5.1%

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Brief Explanation: These curves show the entire set of prosper loan broken down by credit grade and lined up along the x axis on their origination date…  As a loan goes late (1 month or worse) it is counted (either by amount or by count) as late against the population…  The curves stop when the loan population falls below 250 (ie there are 249 or less loans that age or older)…

Recently a study from the University of Maryland claimed a peak default date around month 10 of a Prosper loan.  This would translate into the largest delta  in this graph over a month period.  Does this graph confirm or deny that statement?  Is it conclusive?  Please leave a comment.

Here is the vintage curves by count (click graph for larger version)…

Here is the vintage curves by amount (larger loan go late at a higher rate and therefore on a percentage basis you would expect an increase), (click graph for larger version)…

Here is the SQL that I used to pull the underlying data out of the public and private data downloads…

DECLARE @DTD int
SET @DTD=30
SELECT
cast(aday-originationdate as int) as 'PIT',
l.creditgrade,
sum(PrincipalBalance+NetDefaults) as 'Amount',
count(l.[key]) as 'Count',
sum(case WHEN (mld.DPD!=0 and
       (mld.DPD+(aday-observationdate))>@DTD) THEN
            PrincipalBalance+NetDefaults ELSE 0 END) as 'AmountLate',
sum(case WHEN (mld.DPD!=0 and
       (mld.DPD+(aday-observationdate))>@DTD) THEN
           PrincipalBalance+NetDefaults ELSE 0 END)/
           sum(PrincipalBalance+NetDefaults) as AmountLatePercentage,
sum(case WHEN (mld.DPD!=0 and
     (mld.DPD+(aday-observationdate))>@DTD) THEN
        1 ELSE 0 END) as 'CountLate',
sum(case WHEN (mld.DPD!=0 and
       (mld.DPD+(aday-observationdate))>@DTD) THEN
       1.0 ELSE 0.0 END)/count(l.[key]) as 'CountLatePercentage'
FROM
loan l
inner join creditprofile cp on cp.listingkey=l.listingkey
inner join LoanPerformance mld on l.[key]=mld.loankey cross join alldays
where
mld.observationdate = ( select top 1 observationdate
from LoanPerformance sub
where sub.observationdate < aday
and sub.loankey=mld.loankey order by sub.observationdate DESC )
and aday < getDate()
and aday >= '02/01/2006'
and l.creditgrade!='NC'
group by
cast(aday-originationdate as int),
l.creditgrade
having
count(l.[key])>250 and
sum(PrincipalBalance+NetDefaults)>0
order by
'PIT'

• February 2008 Vintage Curve Update

• Prosper Vintage Curve Update 3/1/2008

• Prosper Vintage Curve Update — 1/1/2008

• Prosper Vintage Curves From Private Data

• Daily Late 0 DQ Vintage Curves

• Vintage Handbags

• Vintage Womens Shoes

• Vintage Fishing Fishing

• Balls Vintage Golf

• Vintage Perfume Store

One of the biggest challenges facing blog owners is keeping their site looking fresh without losing their appeal. Currently, there are thousands of free themes out there that can be used by anyone, but there are few designs that are not already in use. For blog owners that want to stand out from the crowd, these templates usually will not work. Unless they have the capability to do their own special designs, this often means hiring a professional.  Anyone, that has followed my blog over the last 1.5 years knows that I lack a certain… Je ne sais quoi… artistic flair.  I have been considering hiring a design firm to help…

Stylish Web Design offers some very unique services for websites as well as blogs. They specialize in assisting site owners with completely new looks for their blog designs, as well as logo design and search engine optimization. Since there are many entrants in this particular field, this is a competitive industry. Does Stylish Web Design and their design blog have what it takes to stand out from the crowd? Let’s take a look.

We liked the fact that they are very open about their past clients. This shows two major things. First, they are proud of their completed designs and second, their clients are happy with the finished results and more than pleased to allow the finished results to be seen. In looking through Stylish Web Design’s profile we also noted something that was quite interesting.

Often, when you are designing multiple web sites, it is all too easy to fall back on the same overall design. The colors may be different, but we have found in the past that many design firms simply turn out the same old look, time after time. Stylish Web Design’s portfolio was quite varied and each site they listed looked remarkably different. The layouts used for text were new and visually exciting and we appreciated their attention to little design details that really make a site stand out. 

We also appreciated the fact that they do offer a custom web design free quote. This is very helpful for website and blog owners that aren’t quite sure if they are ready to switch to a new design and offers them an opportunity to see what a third party would do if given the freedom to overhaul their site. This is an important part of the design process and can only benefit site owners.  (I have requested just such a quote for redesigning this blog… as soon as I have a response I will add that to this post.)

Overall, we found that Stylish Web Design provided a nice, broad range of services for custom web design and blog design. They are up to date with all of the latest techniques, which can only benefit a site owner in the end. Their own site was a very good billboard for their service, and showed that they do know how to do complex layouts very well, and still make sure that they display correctly in numerous different browsers.

If you’ve been thinking about changing up your blog design, we highly recommend taking advantage of their free quote service and reading their web design blog . This may get you started on the road to a completely fresh and new web design that will keep your readers engaged with your content.

So what do you think?  Without guidance as to my budget or to the costs of Stylish Web Design.  Do you think Rate Ladder could benefit from a design over haul?  Please leave a comment…

• Should I use reddit instead of digg?

• New Design and Fewer Ads (no interstitials)

• RateLadder’s 1st Lending Club Payments Ontime

• Performance Award’s Reader’s Choice… Vote for Prosper and LazyMan

• P2P No Bank — Aggregating P2P Lending Blogs — Covering Kiva, Lending Club, Prosper, Zopa, and more.

• Stand Bags Carry Bags Golf Bags Golf

Welcome to the 9th addition of the Carnival of Peer to Peer Lending…

Editor’s Picks:
P2P-Loans.com presents P2P Lending Grows in Popularity as Banks Slow Lending (Are Individual Lenders Suckers or Savvy?) posted at P2P-Loans.com.

Pinyo presents Why Borrowers With Bad Credit Pay A Higher Interest Rates posted at Moolanomy.

LazyMan presents I Borrowed Money On Zopa. Here’s Why… posted at Lazy Man and Money.

Good Information:
Doug Fuller presents Prosper Debt Sale Update posted at Official Prosper Blog.

Wiseclerk presents MyC4 with new look - currency risk now to be covered by lender posted at P2P-Banking.com.

Rate Ladder presents How Lending Club Deals With 121+ Days Late posted at P2P Lending.

• Calling for Articles for Next Carnival of Peer to Peer Lending

• RateLadder.com in First Carnival — Carnival of Investing Super Bowl Edition

• Carnival of Personal Finance #87

• The Carnival of P2P Lending #4

• 74th Carnival of Debt Reduction

• Investments Opportunities to Make Money

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(sql to produce statistics at the end of post) 

In May, Prosper originated more loan volume than in any previous month roughly 9.6M loans the vast majority were credit grades AA-C.  This is great news for Prosper on 2 fronts: total volume and loan quality. Here is the breakdown…

All in all it looks like a very positive step… Can Prosper keep the momentum… stay tuned for next month?

Sql:

Select creditgrade, count([key]), sum(amountborrowed)
from loan
where originationdate>=’5/1/2008′ and originationdate<’6/1/2008′
group by creditgrade


• Loan Origination Up in August 07

• Vintage Curves 04 2008 — Amount Late By Credit Grade from Origination

• The Marketplace Survey for April — More and Better Listing Volume

• Why My Emergency Fund is Not in Prosper.com Loans

• Checked in on My Prosper Account… another $50 to bid on a loan

• Total Gym Home Gyms Strength Training Gym, Workout Yoga Exercise Fitness

• Total Trainer Gyms Home Gyms Strength Training Gym, Workout Yoga Exercise Fitness

• Scar Stretch Mark Reducers Bath Body Store

• Water Womens Shoes

• Real Estate Opportunities

My account update for the month shows some general improvement…

One thing to note is that with the loans in the debt sale not sold my IRR calculation is a little out of whack… Hopefully Prosper will create the loan status of “Charged Off” and remove those accounts from my balance which will them cause my IRR to be a clearly representation.

Lending stats changed their ROI algorithm which had a severe effect on my LS ROI… I am not sure the new number is comparable to any previous reading, but I will continue to track it anyway…

Anyway, here is a chart of my updated IRR and ROI values…

• RateLadder IRR/ROI Update April 2008 — (2.6%) to 14.37%

• RateLadder IRR/ROI 5/08 Update — (1.35%) to 15.3%

• Update of IRR/ROI Values July 2008

• RateLadder IRR/ROI 3/08 Update — (2.11%) to 13.06%

• RateLadder IRR/ROI Update — (1.07%) to 14.18%

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