SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 4, 2016,~~May 5, 2017, there were ~~69,744,201~~69,718,933 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.

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, and Prosper Capital Management LLC, a Delaware limited liability company, on a consolidated basis; and “Prosper Funding” refers to PFL and its wholly owned ~~subsidiary,~~subsidiaries, Prosper Asset Holdings LLC (“PAH”), a Delaware limited liability company, and Prosper Depositor LLC, 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, 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. 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. All share and per share numbers presented in this Form 10-Q have been adjusted to reflect a 5-for-1 forward stock split effected by PMI on February 16, 2016.

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;~~

the performance of the Notes, which, in addition to being speculative investments, are special, limited obligations that are not guaranteed or insured;

~~our ability to attract potential borrowers and investors to our marketplace;~~

PFL’s ability to make payments on the Notes;

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

our ability to attract potential borrowers and investors to our marketplace;

~~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;~~

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

~~credit risks posed by the credit worthiness of borrowers and the effectiveness of our credit rating systems;~~

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;

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

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;

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;

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

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

our compliance with applicable regulations and regulatory developments or court decisions affecting our business;

~~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;~~

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

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

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

the application of federal and state bankruptcy and insolvency laws to borrowers and to PFL and PMI;

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

the lack of a public trading market for the Notes and the lack of any trading platform on which investors can resell the Notes;

~~our ability to prevent security breaches, disruptions in service,~~the federal income tax treatment of an investment in the Notes and the PMI Management Rights; 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.

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, 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.

Item 1. Condensed ~~Consolidated~~Consolidated Financial Statements

Prosper Marketplace, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

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

June 30, 2016

December 31, 2015

Assets

Cash and Cash Equivalents

$
28,824

$
66,295

Restricted Cash

133,216

151,223

Available for Sale Investments, at Fair Value

55,713

73,187

Accounts Receivable

870

2,434

Loans Held for Sale, at Fair Value

4,705

32

Borrower Loans, at Fair Value

310,034

297,273

Property and Equipment, Net

28,178

24,965

Prepaid and Other Assets

6,747

6,433

Servicing Assets

14,297

14,363

Goodwill

36,368

36,368

Intangibles Assets, Net

11,076

13,051

Total Assets

$
630,028

$
685,624

Liabilities, Convertible Preferred Stock and Stockholders' Deficit

Accounts Payable and Accrued Liabilities

$
13,104

$
22,409

Payable to Investors

114,876

136,507

Notes at Fair Value

309,530

297,405

Other Liabilities

24,416

20,735

Total Liabilities

461,926

477,056

Commitments and Contingencies (see Note 16)

Convertible Preferred Stock – $0.01 par value; 177,388,425 shares authorized, issued and outstanding as of June 30, 2016 and December 31, 2015. Aggregate liquidation preference of $325,952 as of June 30, 2016 and December 31, 2015.

275,938

275,938

Stockholders' Deficit

Common Stock ($0.01 par value; 298,222,103 shares authorized, 70,893,225 issued and
69,957,290 outstanding as of June 30, 2016; and 270,326,075 shares authorized, 70,367,425 shares issued and 69,431,490 outstanding as of December 31, 2015)

174

127

Additional Paid-In Capital

115,325

102,971

Less: Treasury Stock (5,177,235 common shares at cost, June 30, 2016 and December 31, 2015)

(23,417
)

(23,417
)
Accumulated Deficit

(199,996
)

(146,907
)
Accumulated Other Comprehensive Income/(Loss)

78

(144
)
Total Stockholders' Deficit

(107,836
)

(67,370
)
Total Liabilities, Convertible Preferred Stock and Stockholders' Deficit

$
630,028

$
685,624



	March 31, 2017			December 31, 2016
Assets
Cash and Cash Equivalents	$	28,535		$	22,337
Restricted Cash	133,321			163,907
Available for Sale Investments, at Fair Value	8,004			32,769
Accounts Receivable	882			757
Loans Held for Sale, at Fair Value	109			624
Borrower Loans, at Fair Value	317,536			315,627
Property and Equipment, Net	23,672			24,853
Prepaid and Other Assets	8,874			4,606
Servicing Assets	12,436			12,786
Goodwill	36,368			36,368
Intangible Assets, Net	4,039			9,212
Total Assets	$	573,776		$	623,846
Liabilities, Convertible Preferred Stock and Stockholders' Deficit
Accounts Payable and Accrued Liabilities	$	8,575		$	15,017
Payable to Investors	115,051			142,644
Notes at Fair Value	316,944			316,236
Other Liabilities	11,704			17,173
Convertible Preferred Stock Warrant Liability	30,811			21,711
Total Liabilities	483,085			512,781
Commitments and Contingencies (see Note 17)
Convertible Preferred Stock – $0.01 par value; 407,511,351 shares authorized; 177,388,428 issued and outstanding as of March 31, 2017; and 217,388,425 shares authorized, 177,388,425 issued and outstanding as of December 31, 2016. Aggregate liquidation preference of $325,952 as of March 31, 2017 and December 31, 2016.	275,938			275,938
Stockholders' Deficit
Common Stock ($0.01 par value; 550,000,000 shares authorized, 70,615,559 issued and 69,679,624 outstanding as of March 31, 2017; and 338,222,103 shares authorized, 70,843,044 shares issued and 69,907,109 outstanding as of December 31, 2016)	220			212
Additional Paid-In Capital	127,618			123,988
Less: Treasury Stock	(23,417		)	(23,417		)
Accumulated Deficit	(289,665		)	(265,648		)
Accumulated Other Comprehensive Loss	(3		)	(8		)
Total Stockholders' Deficit	(185,247		)	(164,873		)
Total Liabilities, Convertible Preferred Stock and Stockholders' Deficit	$	573,776		$	623,846

All share numbers reflect a 5-for-1 forward stock split effected by PMI on February 16, 2016.

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

Prosper Marketplace, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2016

2015

2016

2015

Revenues

Operating Revenues

Transaction Fees, Net

$
19,276

$
39,800

$
61,100

$
65,142

Servicing Fees, Net

7,676

3,575

14,819

6,144

Gain (Loss) on Sale of Borrower Loans

(687
)

3,696

3,104

5,618

Other Revenue

816

1,630

3,589

2,685

Total Operating Revenues

27,081

48,701

82,612

79,589

Interest Income

Interest Income on Borrower Loans

11,192

10,165

21,975

20,634

Interest Expense on Notes

(10,098
)

(9,448
)

(19,819
)

(19,011
)
Net Interest Income

1,094

717

2,156

1,623

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

(2
)

95

(79
)

21

Total Net Revenue

28,173

49,513

84,689

81,233

Expenses

Origination and Servicing

8,833

7,126

19,282

13,982

Sales and Marketing

12,303

26,580

45,023

45,150

General and Administrative

28,499

21,832

59,145

35,329

Restructuring Charges

14,061

-

14,061

-

Total Expenses

63,696

55,538

137,511

94,461

Net Loss Before Taxes

(35,523
)

(6,025
)

(52,822
)

(13,228
)
Income Tax Expense

105

176

270

249

Net Loss Applicable to Common Stockholders

$
(35,628
)

$
(6,201
)

$
(53,092
)

$
(13,477
)
Net Loss Per Share – Basic and Diluted

$
(0.56
)

$
(0.11
)

$
(0.86
)

$
(0.25
)
Weighted-Average Shares - Basic and Diluted

63,270,058

55,612,485

61,813,773

54,168,175



	Three Months Ended March 31,
	2017			2016
Revenues
Operating Revenues
Transaction Fees, Net	$	26,869		$	41,824
Servicing Fees, Net	6,154			7,144
Gain (Loss) on Sale of Borrower Loans	(318		)	3,791
Fair Value of Warrants Vested on Sale of Borrower Loans	(3,307		)	—
Other Revenue	720			2,773
Total Operating Revenues	30,118			55,532
Interest Income
Interest Income on Borrower Loans	11,499			10,783
Interest Expense on Notes	(10,678		)	(9,722		)
Net Interest Income	821			1,061
Change in Fair Value of Borrower Loans, Loans Held for Sale and Notes, Net	(94		)	(78		)
Total Net Revenue	30,845			56,515
Expenses
Origination and Servicing	8,404			10,449
Sales and Marketing	19,555			32,720
General and Administrative	20,717			30,645
Restructuring Charges, Net	(75		)	—
Other Expenses, Net	6,101			—
Total Expenses	54,702			73,814
Net Loss Before Taxes	(23,857		)	(17,299		)
Income Tax Expense	164			165
Net Loss Applicable to Common Stockholders	$	(24,021	)	$	(17,464	)
Net Loss Per Share – Basic and Diluted	$	(0.35	)	$	(0.29	)
Weighted-Average Shares - Basic and Diluted	69,178,049			60,357,488

All share numbers reflect a 5-for-1 forward stock split effected by PMI on February 16, 2016.

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

Prosper Marketplace, Inc.

Condensed Consolidated Statements of Other Comprehensive ~~Income (Loss)~~Loss (Unaudited)

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2016

2015

2016

2015

Net Loss

$
(35,628
)

$
(6,201
)

$
(53,092
)

$
(13,477
)
Other Comprehensive Income (Loss), Before Tax

   Change in Net Unrealized Gain (Loss) on Available for Sale Investments, at Fair Value

25

-

215

-

   Realized Gain (Loss) on Sale of Available for Sale Investments, at Fair Value

6

-

6

-

Other Comprehensive Income (Loss), Before Tax

31

-

221

-

   Income tax effect

-

-

-

-

Other Comprehensive Income (Loss), Net of Tax

31

-

221

-

Comprehensive Income (Loss)

(35,597
)

(6,201
)

(52,871
)

(13,477
)



	Three Months Ended March 31,
	2017			2016
Net Loss	$	(24,021	)	$	(17,464	)
Other Comprehensive Income, Before Tax
Change in Net Unrealized Gain on Available for Sale Investments, at Fair Value	17			191
Realized (Gain) Loss on Sale of Available for Sale Investments, at Fair Value	(12		)	—
Other Comprehensive Income, Before Tax	5			191
Income tax effect	—			—
Other Comprehensive Income, Net of Tax	5			191
Comprehensive Loss	(24,016		)	(17,273		)

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

Prosper Marketplace, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Six Months Ended June 30,

2016

2015

Cash flows from Operating Activities:

Net Loss

$
(53,092
)

$
(13,477
)
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities:

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

79

(21
)
Depreciation and Amortization

6,430

3,455

Gain on Sales of Borrower Loans

(5,690
)

(5,857
)
Change in Fair Value of Servicing Rights

5,647

1,895

Stock-Based Compensation Expense

11,510

4,192

Restructuring Liability

8,492

-

Other, Net

227

45

Changes in Operating Assets and Liabilities:

Purchase of Loans Held for Sale at Fair Value

(1,358,011
)

(1,402,499
)
Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value

1,353,338

1,409,426

Restricted Cash Except for those Related to Investing Activities

20,621

(63,254
)
Accounts Receivable

1,564

1,956

Prepaid and Other Assets

(84
)

(2,235
)
Accounts Payable and Accrued Liabilities

(4,995
)

2,754

Payable to Investors

(21,631
)

70,551

Other Liabilities

(7,690
)

(2,000
)
Net cash (Used in) provided by Operating Activities

(43,285
)

4,931

Cash Flows from Investing Activities:

Purchase of Borrower Loans Held at Fair Value

(109,215
)

(94,512
)
Principal Payments of Borrower Loans Held at Fair Value

83,514

73,457

Purchases of Property and Equipment

(8,600
)

(6,412
)
Maturities of Short Term Investments

1,278

1,274

Purchases of Short Term Investments

(1,277
)

(1,275
)
Purchases of Available for Sale Investments, at Fair Value

(11,725
)

-

Proceeds from Sale of Available for Sale Investments

9,193

-

Maturities of Available for Sale Investments

20,064

-

Acquisition of Businesses, Net of Cash Acquired

-

(19,000
)
Changes in Restricted Cash Related to Investing Activities

(2,614
)

(2,729
)
Net Cash Used in Investing Activities

(19,382
)

(49,197
)
Cash Flows from Financing Activities:

Proceeds from Issuance of Notes Held at Fair Value

109,147

94,575

Payments of Notes Held at Fair Value

(84,200
)

(73,509
)
Proceeds from Issuance of Convertible Preferred Stock, Net

-

164,793

Proceeds from Exercise of Warrants and Stock Options including Early Exercise, and Issuance of Restricted Stock

464

4,609

Repurchase of Common Stock and Restricted Stock

(46
)

(21,250
)
Taxes Paid for Awards Vested Under Equity Incentive Plans

(169
)

(2,206
)
Net Cash Provided by Financing Activities

25,196

167,012

Net (Decrease) Increase in Cash and Cash Equivalents

(37,471
)

122,746

Cash and Cash Equivalents at Beginning of the Period

66,295

50,557

Cash and Cash Equivalents at End of the Period

$
28,824

$
173,303

Supplemental Disclosure of Cash Flow Information:

Cash Paid for Interest

$
19,787

$
19,147

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

$
346

$
26

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

$
-

$
840



	Three Months Ended March 31,
	2017			2016
Cash flows from Operating Activities:
Net Loss	$	(24,021	)	$	(17,464	)
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	94			78
Depreciation and Amortization	3,443			2,971
Gain on Sales of Borrower Loans	(2,764		)	(3,971		)
Change in Fair Value of Servicing Rights	3,063			2,741
Stock-Based Compensation Expense	3,500			5,107
Restructuring Liability	(73		)	—
Fair Value of Warrants Vested	4,790			—
Impairment Losses on Assets Held for Sale	4,321			—
Other, Net	416			(30		)
Changes in Operating Assets and Liabilities:
Purchase of Loans Held for Sale at Fair Value	(523,997		)	(931,420		)
Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value	524,515			931,422
Restricted Cash Except for those Related to Investing Activities	26,440			2,118
Accounts Receivable	(125		)	(218		)
Prepaid and Other Assets	(4,270		)	(677		)
Accounts Payable and Accrued Liabilities	(5,670		)	(7,414		)
Payable to Investors	(27,593		)	(3,882		)
Other Liabilities	(2,246		)	(4,305		)
Net Cash Used in Operating Activities	(20,177		)	(24,944		)
Cash Flows from Investing Activities:
Purchase of Borrower Loans Held at Fair Value	(56,680		)	(55,171		)
Principal Payments of Borrower Loans Held at Fair Value	50,565			41,599
Purchases of Property and Equipment	(1,596		)	(5,976		)
Maturities of Short Term Investments	1,282			1,278
Purchases of Short Term Investments	(1,280		)	(1,277		)
Purchases of Available for Sale Investments, at Fair Value	—			(11,725		)
Proceeds from Sale of Available for Sale Investments	16,163			—
Maturities of Available for Sale Investments	8,600			17,034
Changes in Restricted Cash Related to Investing Activities	4,146			1,014
Net Cash Provided by Investing Activities	21,200			(13,224		)
Cash Flows from Financing Activities:
Proceeds from Issuance of Notes Held at Fair Value	56,814			55,273
Payments of Notes Held at Fair Value	(51,579		)	(42,644		)
Proceeds from Exercise of Warrants and Stock Options including Early Exercise, and Issuance of Restricted Stock	4			251
Repurchase of Common Stock and Restricted Stock	(64		)	(46		)
Net Cash Provided by Financing Activities	5,175			12,834
Net (Decrease) Increase in Cash and Cash Equivalents	6,198			(25,334		)
Cash and Cash Equivalents at Beginning of the Period	22,337			66,295
Cash and Cash Equivalents at End of the Period	$	28,535		$	40,961
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest	$	11,100		$	9,879
Non-Cash Investing Activity- Accrual for Property and Equipment, Net	$	88		$	478

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

Prosper Marketplace, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

Prosper Marketplace, Inc. (“PMI”) was incorporated in the state of Delaware on March 22, 2005. Except as the context requires otherwise, as used in these notes to the condensed consolidated financial statements of Prosper Marketplace, Inc., “Prosper,” “we,” “us,” and “our” refer to PMI and its wholly-owned subsidiaries, on a consolidated basis.

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 Article 10 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, ~~2015.~~2016. The balance sheet at December 31, ~~2015~~2016 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.

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. Management bases its estimates on historical experience and on various other factors it believes 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.~~

assumptions.

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

On January 23, 2015, PMI acquired all of the outstanding limited liability company units of American HealthCare Lending, LLC (“American HealthCare Lending”), a company that operated a patient financing platform, and merged American HealthCare Lending with and into Prosper Healthcare Lending LLC (“PHL”), a newly established entity surviving the merger. Prosper’s condensed consolidated financial statements include PHL’s results of operations and financial position from the date of acquisition forward.

On October 9, 2015, PMI acquired all of the outstanding stock of BillGuard, Inc. (“BillGuard”), a company incorporated in Delaware in 2010 that developed applications that help consumers manage their identity, finances and credit. PMI merged BillGuard with and into Beach Merger Sub, Inc., a newly established entity wholly owned by PMI, with BillGuard surviving the merger. Prosper’s condensed consolidated financial statements include BillGuard’s results of operations and financial position from the date of acquisition forward.

~~Reclassifications~~

During the period ended June 30, 2016, Prosper changed the presentation of its revenue in the condensed consolidated statements of operations. A new line called “Gain on Sales of Borrower Loans” was created with the amounts included in this line previously classified as “Other Revenue”. ~~Prior period amounts have been reclassified to conform to the current presentation.~~

Additionally, due to the early adoption of ASU 2016-09 on January 1, 2016, reclassifications were made to the financing section of the condensed consolidated statements of cash flows to reflect taxes paid for awards vested under equity incentive plans. ~~Prior period amounts have been reclassified to conform to the current presentation.~~

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, ~~2015.~~2016. There have been no changes to these accounting policies during the first ~~six~~three months of ~~2016.~~

2017.

Fair Value Measurements

Financial instruments consist principally of Cash and Cash Equivalents, Restricted Cash, Available for Sale Investments at Fair Value, Borrower Loans, Loans Held for Sale, Accounts Receivable, Accounts Payable and Accrued Liabilities, Payable to Investors, Convertible Preferred Stock Warrant Liability 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.

~~Restructuring Charges~~

Restructuring charges consist of severance and contract termination related costs. A liability for severance costs is typically recognized when the plan of termination has been communicated to the affected employees and is measured at its fair value at the communication date. Contract termination costs consist primarily of costs that will continue to be incurred under operating leases for their remaining terms without economic benefit to the Company. A liability for contract termination costs is recognized at the date the Company ceases using the rights conveyed by the lease contract and is measured at its fair value, which is determined based on the remaining contractual lease rentals reduced by estimated sublease rentals.

Borrower Loans, Loans Held for Sale and Notes

Through the Note Channel, Prosper purchases Borrower Loans from WebBank then issues Notes, and holds the Borrower Loans until maturity. The obligation to repay a series of Notes issued through the Note Channel is dependent upon the repayment of the associated Borrower Loan. Borrower Loans funded and Notes issued through the Note Channel are carried on Prosper’s condensed consolidated balance sheets as assets and liabilities, respectively. We 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 readers of the financial statements and it allows both the Borrower Loans 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. Prosper estimates the fair value of such Borrower Loans and Notes using discounted cash flow methodologies that take into account expected prepayments, losses, recoveries and default rates. The Borrower Loans are not derecognized when a corresponding Note is issued as Prosper maintains the ability to sell the Borrower Loans without the approval of the holders of the corresponding Notes.

Assets Held for Sale:

Prosper classifies assets as held for sale when management approves and commits to a formal plan of sale with the expectation the sale will be completed within one year. The net assets held for sale are then recorded at the lower of their current carrying value or the fair market value, less costs to sell.

Recent Accounting Pronouncements

In May 2014, as part of its ongoing efforts to assist in the convergence of US 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 2018. In August 2015, the FASB issued ASU No. 2015-14, which amended the standard to provide a one-year deferral of the effective date, as well as providing the option to early adopt the standard on the original effective date. Accordingly, Prosper may adopt the standard in either Prosper’s fiscal year ending December 31, 2017 or 2018. Prosper intends to adopt the guidance for Prosper's fiscal year ending December 31, 2018. The guidance can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. ~~In March 2016, April 2016~~Prosper expects to adopt this ASU on a modified retrospective basis in the first quarter of fiscal 2018. Our evaluation of this ASU is ongoing and ~~May 2016,~~not complete. The FASB has issued and may issue in the ~~FASB further amended~~future, interpretative guidance, which may cause our evaluation to change. Our preliminary results indicate that transaction fees are included in the scope of the new guidance, ~~to clarify the implementation on principal versus agent considerations, the identification of performance obligation~~while servicing fees and the licensing implementation guidance, and to provide narrow-scope improvements and practical expedients. Prosper has not yet selected a transition method and is evaluating the impact of adopting this new accounting standard updategain or loss on the ~~consolidated financial statements~~sale of loans remain within the scope of ASC topic 860, Transfers and ~~related disclosures.~~

Servicing. While we anticipate some changes to revenue recognition for certain customer contracts, Prosper does not currently believe that this ASU will have a material effect on our Consolidated Financial Statements.

In ~~November 2014,~~January 2016, the FASB issued ASU ~~2014-16,~~2016-1, "Financial Instruments - Overall (Subtopic 825-10): ~~Derivatives~~Recognition and ~~Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid~~Measurement of Financial ~~Instrument Issued in the Form~~Assets and Financial Liabilities", which addresses certain aspects of ~~a Share Is More Akin to Debt or to Equity~~ ~~to eliminate the use~~recognition, measurement, presentation, and disclosure 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.~~instruments. This ~~standard~~guidance will be effective for us in the first quarter of our fiscal ~~years~~year 2019, and ~~interim periods within those fiscal years, beginning after December 15, 2015.~~ early adoption is not permitted. Prosper ~~adopted~~is currently evaluating the impact that this guidance will have on ~~January 1, 2016, and the adoption of this standard did not have a material impact on Prosper’s condensed~~its consolidated financial statements.

~~In April 2015, the FASB issued ASU 2015-05 “Customers’ Accounting for Fees Paid in Cloud Computing Arrangement”, which became effective for the~~ ~~annual reporting period beginning after December 15, 2015~~. The guidance changes what a customer must consider in determining whether a cloud computing arrangement contains a software license. If the arrangement contains a software license, the customer would account for the fees related to the software license element in accordance with guidance related to internal use software; if the arrangement does not contain a software license, the customer would account for the arrangement as a service contract. ~~Prosper adopted this guidance on January 1, 2016, and the adoption of this standard did not have a material impact on Prosper’s condensed consolidated financial statements.~~

~~In September 2015, the FASB issued ASU 2015-16,~~ ~~Simplifying the Accounting for Measurement-Period Adjustments.~~ ~~The new guidance simplifies the accounting for measurement period adjustments in connection with businesscombinations by requiring that an acquirer recognize adjustments to provisional amounts that are identified during themeasurement period in the reporting period in which the adjustment amounts are determined. This guidance is effective forfinancial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015.~~ ~~Prosper adopted this guidance on January 1, 2016, and the adoption of this standard did not have a material impact on Prosper’s condensed consolidated financial statements.~~

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. This guidance will be effective for us in the first quarter of our fiscal year 2019, and early adoption is permitted. Prosper ~~will be required to recognize and measure leases at~~is currently evaluating the ~~beginning off the earliest period presented using a modified retrospective approach. Prosper anticipates~~impact that this ~~standard~~guidance will have on its consolidated financial statements, however we do expect that this guidance will have a material impact on ~~our~~Prosper's consolidated financial statements. ~~While~~As of March 31, 2017 Prosper ~~is continuing to assess all potential impacts~~has a total of ~~the standard, Prosper currently believes the most significant impact relates to our accounting for office~~$42.6 million in non-cancelable operating ~~leases.~~

lease commitments.

In ~~March~~August 2016, the FASB issued ASU ~~2016-09,~~ 2016-15, ~~Improvements~~“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The standard provides guidance for eight targeted changes with respect to ~~Employee Share-Based Payment Accounting (Topic 718).~~ ~~This guidance makes several modifications to Topic 718 related to~~how cash receipts and cash payments are classified in the ~~accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies.~~ ~~ASU 2016-09 also clarifies the statement~~statements of cash flows, ~~presentation~~with the objective of reducing diversity in practice. This guidance will be effective for ~~certain components~~Prosper in the first quarter of ~~share-based awards.~~our fiscal year 2018, and early adoption is permitted. Prosper is currently evaluating the impacts the adoption of this accounting standard will have on Prosper's consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers Other than Inventory (ASU 2016-16)", which requires companies to recognize the income-tax consequences of an intra-entity transfer

of an asset other than inventory. This guidance will be effective for us in the first quarter of 2018, with the option to adopt it in

the first quarter of 2017. Prosper is currently evaluating the impact that this guidance will have on its consolidated financial statements, however we do not believe the standard to have a material impact on our ~~fiscal year 2017,~~consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash (ASU2016-18)", which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance will be effective for us in the first quarter of 2018 and early adoption is permitted. Prosper ~~has decided to early adopt~~is currently evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". The standard eliminates Step 2 from the goodwill impairment test, which requires a hypothetical

purchase price allocation. Prosper will continue to have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The standard is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, ~~2016,~~2017. The standard should be applied on a prospective basis. Prosper is currently evaluating the ~~adoption~~impact of this accounting standard ~~did not have a material impact~~update on ~~Prosper’s condensed~~its consolidated financial statements.

3. Property and Equipment, Net

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

June 30,

December 31,

2016

2015

Property and equipment:

Computer equipment

$
14,153

$
10,522

Internal-use software and website development costs

14,289

10,990

Office equipment and furniture

3,087

2,442

Leasehold improvements

7,220

5,719

Assets not yet placed in service

1,994

3,242

Property and equipment

40,743

32,915

Less accumulated depreciation and amortization

(12,565
)

(7,950
)
Total property and equipment, net

$
28,178

$
24,965



	March 31, 2017			December 31, 2016
Property and equipment:
Computer equipment	$	14,164		$	14,107
Internal-use software and website development costs	17,821			16,750
Office equipment and furniture	3,010			3,010
Leasehold improvements	7,038			7,038
Assets not yet placed in service	1,396			1,222
Property and equipment	43,429			42,127
Less accumulated depreciation and amortization	(19,757		)	(17,274		)
Total property and equipment, net	$	23,672		$	24,853

Depreciation and amortization expense for property and equipment for the three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ was ~~$2.5~~$2.6 million and ~~$1.4 million, respectively. Depreciation and amortization expense for property and equipment for the six months ended June 30, 2016 and 2015 was $4.5 million and $3.1~~$2.0 million, respectively. Prosper capitalized internal-use software and website development costs in the amount of ~~$1.8~~$1.1 million and ~~$2.1~~$2.2 million for the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ respectively. Prosper capitalized internal-use software and website development costs in the amount of $3.6 million and $3.9 million for the six months ended June 30, 2016 and 2015, respectively. Prosper recorded internal-use software and website development impairment charges of $240 thousand and $0 for the six months ended June 30, 2016 and 2015, 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 aggregate principal balances outstanding and fair values of Borrower Loans, Loans Held for Sale and Notes as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, are presented in the following table (in thousands):

Borrower Loans

Notes

Loans Held for Sale

June 30, 2016

December 31, 2015

June 30, 2016

December 31, 2015

June 30, 2016

December 31, 2015

Aggregate principal balance outstanding

$
312,725

$
296,945

$
(315,671
)

$
(294,331
)

$
4,715

$
42

Fair value adjustments

(2,691
)

328

6,141

(3,074
)

(10
)

(10
)
Fair value

$
310,034

$
297,273

$
(309,530
)

$
(297,405
)

$
4,705

$
32



	Borrower Loans						Notes						Loans Held for Sale
	March 31, 2017			December 31, 2016			March 31, 2017			December 31, 2016			March 31, 2017			December 31, 2016
Aggregate principal balance outstanding	$	320,670		$	319,143		$	(323,672	)	$	(323,358	)	$	120		$	641
Fair value adjustments	(3,134		)	(3,516		)	6,728			7,122			(11		)	(17		)
Fair value	$	317,536		$	315,627		$	(316,944	)	$	(316,236	)	$	109		$	624

At ~~June 30, 2016,~~March 31, 2017, outstanding Borrower Loans had original terms to maturity of either 36 or 60 months; had monthly payments with fixed interest rates ranging from 5.32% to 33.04% and had various maturity dates through ~~June 2021.~~March 2022. At December 31, ~~2015,~~2016, outstanding Borrower Loans had original maturities of either 36 or 60 months; had monthly payments with fixed interest rates ranging from 5.32% to 33.04% and had various maturity dates through December ~~2020.~~

2021.

Approximately ~~$0.3~~$1.8 million and ~~$2.0~~$2.3 million represents the ~~gain and~~ loss ~~respectively,~~ that is attributable to changes in the instrument specific credit risks related to Borrower Loans that were recorded in the change in fair value during the three ~~and six~~ months ending ~~June 30, 2016.~~

March 31, 2017 and March 31, 2016, respectively.

As of ~~June 30,~~March 31, 2017, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $2.4 million and a fair value of $0.7 million. As of December 31, 2016, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of ~~$2.0~~$3.2 million and a fair value of ~~$0.7 million. As of December 31, 2015, Borrower Loans that were 90 days or more delinquent had an aggregate principal amount of $2.3 million and a fair value of $0.9~~$1.0 million. Prosper places loans on non-accrual status when they are over 120 days past due. As of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, Borrower Loans in non-accrual status had a fair value of ~~$0.2~~$0.3 million and ~~$0.1~~$0.5 million, respectively.

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 through the Whole Loan Channel and the servicing rights are retained. The servicing assets and liabilities are measured at fair value throughout the servicing period. The total ~~gains and~~ losses recognized on the sale of such Borrower Loans ~~was $0.7~~were $3.6 million ~~of losses and $3.7 million of gains~~ for the three months ended ~~June 30, 2016~~March 31, 2017, which included rebates provided to members of the Consortium prior to the closing of the Consortium transaction and ~~2015, respectively. The total gain~~a loss of $3.3 million from the Fair Value of Warrants Vested on the Sale of Borrower Loans to the Consortium after the closing of the Consortium transaction. Total gains recognized on the sale of such Borrower Loans ~~was $3.1~~were $3.8 million ~~and $5.6 million for~~during the ~~six~~three months ended ~~June 30, 2016 and 2015, respectively.~~

March 31, 2016.

As of ~~June 30, 2016,~~March 31, 2017, Borrower Loans that were sold but for which Prosper retained servicing rights had a total outstanding principal balance of ~~$4.1~~$3.5 billion, original terms of either 36 or 60 months and had monthly payments with fixed interest rates ranging from 5.32% to 35.52% and various maturity dates through ~~June 2021.~~March 2022. At December 31, ~~2015,~~2016, Borrower Loans that were sold but for which Prosper retained servicing rights had a total outstanding principal balance of ~~$3.8~~$3.5 billion, original terms of either 36 or 60 months and had monthly payments with fixed interest rates ranging from 5.32% to ~~31.90%~~35.52% and various maturity dates through December ~~2020.~~

2021.

$~~10.4~~9.7 million and ~~$4.6~~$9.6 million of contractually specified servicing fees and ancillary fees are included on our condensed consolidated ~~statement~~statements of operations in Servicing Fees, Net for the three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ respectively. $20.0 million and $7.8 million of contractually specified servicing fees and ancillary fees are included on our condensed statement of operations in Servicing Fees, Net for the six months ended June 30, 2016 and 2015 respectively.

Fair value

Valuation method – Prosper uses a discounted cash flow valuation methodology generally consisting of developing an estimate of future cash flows that are expected to occur over the life of a financial instrument and then discounting those cash flows at a rate of return that results in the fair value amount.

Significant unobservable inputs presented in the table within Note 7 below are those that Prosper considers significant to the estimated fair values of the Level 3 servicing assets and liabilities. The following is a description of the significant unobservable inputs provided in the table.

Market servicing rate – Prosper estimates adequate market servicing rates that would fairly compensate a substitute servicer should one be required, which includes the profit that would be demanded in the marketplace. This rate is stated as a fixed percentage of outstanding principal balance on a per annum basis. Prosper estimated these market servicing rates based on observable market rates for other loan types in the industry and bids from subservicing providers, adjusted for the unique loan attributes that are present in the specific loans that Prosper sells and services and information from a backup service provider.

Discount rate – The discount rate is a rate of return used to discount future expected cash flows to arrive at a present value, which represents the fair value of the loan servicing rights. We used a range of discount rates for the servicing assets and liabilities based on comparable observed valuations of similar assets and publicly available disclosures related to servicing valuations, with comparability adjustments made to account for differences with Prosper’s servicing assets.

Default Rate – The default rate presented in Note 7 is an annualized, average estimate considering all Borrower Loan categories (i.e. risk ratings and duration), and represents an aggregate of conditional default rate curves for each credit grade or Borrower Loan category. Each point on a particular Borrower Loan category’s curve represents the percentage of principal expected to default per period based on the term and age of the underlying Borrower Loans. The assumption regarding defaults directly reduces servicing revenues because the amount of servicing revenues received is based on the amount collected each period.

Prepayment Rate – The prepayment rate presented in Note 7 is an annualized, average estimate considering all Borrower Loan categories (i.e. risk ratings and duration), and represents an aggregate of conditional prepayment rate curves for each credit grade or Borrower Loan category. Each point on a particular Borrower Loan category’s curve represents the percentage of principal expected to prepay per period based on the term and age of the underlying Borrower Loans. Prepayments reduce servicing revenues as they shorten the period over which we expect to collect fees on the Borrower Loans, which is used to project future servicing revenues.

6. Available for Sale Investments, at Fair Value

Available for sale investments are recorded at fair value and unrealized gains and losses are reported, net of taxes, in accumulated other comprehensive income (loss) included in stockholders' equity unless management determines that an investment is other-than-temporarily impaired (OTTI).

The amortized cost, gross unrealized gains and losses, and fair value of available for sale investments as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, are as ~~follows:~~

follows (in thousands):

June 30, 2016

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Fair Value

Fixed maturity securities:

   Corporate debt securities

$
37,453

$
49

$
(9
)

$
37,493

   Commercial paper

3,899

-

-

3,899

   US Treasury securities

10,533

28

-

10,561

   Agency bonds

2,499

11

-

2,510

Total fixed maturity securities

54,384

88

(9
)

54,463

   Short term bond funds

1,250

-

-

1,250

Total Available for Sale Investments

$
55,634

$
88

$
(9
)

$
55,713



March 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed maturity securities:
US Treasury securities	5,508		—		(3		)	5,505
Agency bonds	2,500		—		(1		)	2,499
Total Available for Sale Investments	$	8,008	$	—	$	(4	)	$	8,004

December 31, 2015

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Fair Value

Fixed maturity securities:

   Corporate debt securities

$
50,327

$
1

$
(94
)

$
50,234

   Commercial paper

9,493

-

-

9,493

   US Treasury securities

8,512

-

(41
)

8,471

   Agency bonds

2,499

-

(8
)

2,491

Total fixed maturity securities

70,831

1

(143
)

70,689

   Short term bond funds

2,500

-

(2
)

2,498

Total Available for Sale Investments

$
73,331

$
1

$
(145
)

$
73,187



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed maturity securities:
Corporate debt securities	$	21,762	$	1	$	(10	)	$	21,753
US Treasury securities	8,516		3		(3		)	8,516
Agency bonds	2,499		1		—			2,500
Total Available for Sale Investments	$	32,777	$	5	$	(13	)	$	32,769

A summary of available for sale investments with unrealized losses as of ~~June 30, 2016,~~March 31, 2017, and December 31, ~~2015,~~2016, aggregated by category and period of continuous unrealized loss, is as ~~follows:~~

follows (in thousands):

	Less than 12 months					12 months or longer				Total
June 30, 2016	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

															Less than 12 months					12 months or longer					Total
March 31, 2017															Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturity securities:
Corporate debt securities	$	9,753	$	(9	)	$	-	$	-	$	9,753	$	(9	)
U.S. treasury securities		-		-			-		-		-		-		$	5,505	$	(3	)	$	—	$	—		$	5,505	$	(3	)
Agency bonds		-		-			-		-		-		-		—		—			2,499		(1		)	2,499		(1		)
Total fixed maturity securities		9,753		(9	)		-		-		9,753		(9	)
Short term bond funds		-		-			-		-		-		-
Total Investments with Unrealized Losses	$	9,753	$	(9	)	$	-	$	-	$	9,753	$	(9	)	$	5,505	$	(3	)	$	2,499	$	(1	)	$	8,004	$	(4	)

Less than 12 months

12 months or longer

Total

December 31, 2015

Fair Value

Unrealized Losses

Fair Value

Unrealized Losses

Fair Value

Unrealized Losses

Fixed maturity securities:

   Corporate debt securities

$
45,375

$
(94
)

$
-

$
-

$
45,375

$
(94
)
   U.S. treasury securities

8,471

(41
)

-

-

8,471

(41
)
   Agency bonds

2,491

(8
)

-

-

2,491

(8
)
Total fixed maturity securities

56,337

(143
)

-

-

56,337

(143
)
   Short term bond funds

2,498

(2
)

-

-

2,498

(2
)
Total Investments with Unrealized Losses

$
58,835

$
(145
)

$
-

$
-

$
58,835

$
(145
)



	Less than 12 months				12 months or longer					Total
December 31, 2016	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturity securities:
Corporate debt securities	$	—	$	—	$	14,651	$	(10	)	$	14,651	$	(10	)
U.S. treasury securities	$	—	$	—	$	4,499	$	(3	)	$	4,499	$	(3	)
Total Investments with Unrealized Losses	$	—	$	—	$	19,150	$	(13	)	$	19,150	$	(13	)

There were no impairment charges recognized during the ~~six~~three months ended ~~June 30, 2016.~~

March 31, 2017.

The maturities of available for sale investments at ~~June 30, 2016,~~March 31, 2017 and December 31, ~~2015,~~2016 are as ~~follows:~~

follows (in thousands):

June 30, 2016

Within 1 year

After 1 year through 5 years

After 5 years to 10 years

After 10 years

Total

Corporate debt securities

$
28,677

$
8,816

$
-

$
-

$
37,493

Commercial paper

3,899

-

-

-

3,899

US Treasury securities

3,006

7,555

-

-

10,561

Agency bonds

-

2,510

-

-

2,510

Total Fair Value

$
35,582

$
18,881

$
-

$
-

$
54,463

Total Amortized Cost

$
35,560

$
18,824

$
-

$
-

$
54,384



March 31, 2017	Within 1 year		After 1 year through 5 years		After 5 years to 10 years		After 10 years		Total
US Treasury securities	5,505		—		—		—		5,505
Agency bonds	2,499		—		—		—		2,499
Total Fair Value	$	8,004	$	—	$	—	$	—	$	8,004
Total Amortized Cost	$	8,008	$	—	$	—	$	—	$	8,008

December 31, 2015

Within 1 year

After 1 year through 5 years

After 5 years to 10 years

After 10 years

Total

Corporate debt securities

$
26,289

$
23,945

$
-

$
-

$
50,234

Commercial paper

9,493

-

-

-

9,493

US Treasury securities

-

8,471

-

-

8,471

Agency bonds

-

2,491

-

-

2,491

Total Fair Value

$
35,782

$
34,907

$
-

$
-

$
70,689

Total Amortized Cost

$
35,831

$
35,000

$
-

$
-

$
70,831



December 31, 2016	Within 1 year		After 1 year through 5 years		After 5 years to 10 years		After 10 years		Total
Corporate debt securities	21,753		—		—		—		21,753
US Treasury securities	8,516		—		—		—		8,516
Agency bonds	2,500		—		—		—		2,500
Total Fair Value	$	32,769	$	—	$	—	$	—	$	32,769
Total Amortized Cost	$	32,777	$	—	$	—	$	—	$	32,777

During the three ~~and six~~ months ended ~~June 30, 2016,~~March 31, 2017, Prosper sold ~~$9.2~~$16.2 million of investments which resulted in a realized gain of $6$12 thousand.

7. Fair Value of Assets and Liabilities

Prosper measures the fair value of assets and liabilities in accordance with its fair value hierarchy which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level within the hierarchy of information used in the valuation. We apply this framework whenever other standards require (or permit) assets or liabilities to be measured at fair value.

Assets and liabilities carried at fair value on the balance sheets are classified among three levels based on the observability of the inputs used to determine fair value:

Level 1 — The valuation is based on quoted prices in active markets for identical instruments.

Level 2 — The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation methodologies for which all significant assumptions are observable in the market.

Level 3 — The valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the instrument. Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar methodologies, which incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument or valuations that require significant management judgment or estimation.

Fair values of assets or liabilities are determined based on the fair value hierarchy, which requires an entity to maximize the use of quoted prices and observable inputs and to minimize the use of unobservable inputs when measuring fair value. Various valuation methodologies are utilized, depending on the nature of the financial instrument, including the use of market prices for identical or similar instruments, or discounted cash flow models. When possible, active and observable market data for identical or similar financial instruments are utilized. Alternatively, fair value is determined using assumptions that management believes a market participant would use in pricing the asset or liability.

Financial instruments consist principally of Cash and Cash Equivalents, Restricted Cash, Available for Sale Investments, Borrower Loans, Loans Held for Sale, Accounts Receivable, Accounts Payable and Accrued Liabilities, Payable to Investors, Convertible Preferred Stock Warrant and Notes. Servicing Assets and Liabilities are also subject to fair value measurement within the financial statements of Prosper. 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.

Financial Instruments Recorded at Fair Value

The fair value of the Borrower Loans, Loans Held for Sale and Notes 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, Loans Held for Sale 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.

Investments held at fair value consist of available for sale investments. The available for sale investments consist of corporate debt securities, commercial paper, U.S. treasury securities, agency bonds and short term bond funds. When available, Prosper uses quoted prices in active markets to measure the fair value of securities available for sale. When utilizing market data and bid-ask spreads, Prosper uses the price within the bid-ask spread that best represents fair value. When quoted prices do not exist, Prosper uses prices obtained from independent third-party pricing services to measure the fair value of investment assets. Prosper

generally obtains prices from at least two independent pricing sources for assets recorded at fair value. Prosper's

primary independent pricing service provides prices based on observable trades and discounted cash flows that incorporate observable information, such as yields for similar types of securities (a benchmark interest rate plus observable spreads) and weighted-average maturity for the same or similar securities. Prosper compares the prices obtained from its primary independent pricing service to the prices obtained from the additional independent pricing services to determine if the price obtained from the primary independent pricing service is reasonable. Prosper does not adjust the prices received from independent third-party pricing services unless such prices are inconsistent with the definition of fair value and result in a material difference in the recorded amounts.

The Convertible Preferred Stock Warrant Liability is valued using a Black Scholes-Option pricing model. Refer to Note 12 for further details.

The following tables present the fair value hierarchy for assets and liabilities measured at fair value (in thousands):


June 30, 2016	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total

March 31, 2017									Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total
Assets:
Borrower Loans	$	-	$	-	$	310,034	$	310,034	$	—	$	—	$	317,536	$	317,536
Loans Held for Sale		-		-		4,705		4,705	—		—		109		109
Available for Sale Investments, at Fair Value		-		55,713		-		55,713	—		8,004		—		8,004
Servicing Assets		-		-		14,297		14,297	—		—		12,436		12,436
Total Assets		-		55,713		329,036		384,749	—		8,004		330,081		338,085

Liabilities:
Notes	$	-	$	-	$	309,530	$	309,530	$	—	$	—	$	316,944	$	316,944
Servicing Liabilities		-		-		324		324	—		—		147		147
Contingent Consideration		-		-		4,929		4,929
Convertible Preferred Stock Warrant Liability									—		—		123,431		123,431
Loan Trailing Fee Liability									—		—		1,104		1,104
Total Liabilities	$	-	$	-	$	314,783	$	314,783	$	—	$	—	$	441,626	$	441,626

December 31, 2015

Level 1 Inputs

Level 2 Inputs

Level 3 Inputs

Total

Assets:

Borrower Loans

$
-

$
-

$
297,273

$
297,273

Loans Held for Sale

-

-

32

32

Available for Sale Investments, at Fair Value

-

73,187

-

73,187

Servicing Assets

-

-

14,363

14,363

Total Assets

-

73,187

311,668

384,855

Liabilities:

Notes

$
-

$
-

$
297,405

$
297,405

Servicing Liabilities

-

-

484

484

Contingent Consideration

-

-

4,801

4,801

Total Liabilities

$
-

$
-

$
302,690

$
302,690



December 31, 2016	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total
Assets:
Borrower Loans	$	—	$	—	$	315,627	$	315,627
Loans Held for Sale	—		—		624		624
Available for Sale Investments, at Fair Value	—		32,769		—		32,769
Servicing Assets	—		—		12,786		12,786
Total Assets	—		32,769		329,037		361,806
Liabilities:
Notes	$	—	$	—	$	316,236	$	316,236
Servicing Liabilities	—		—		198		198
Convertible Preferred Stock Warrant Liability	—		—		21,711		21,711
Loan Trailing Fee Liability	—		—		665		665
Total Liabilities	$	—	$	—	$	338,810	$	338,810

As Prosper’s Borrower Loans, Loans Held for Sale, Notes and loan servicing rights do not trade in an active market with readily observable prices, Prosper uses significant unobservable inputs to measure the fair value of these assets and liabilities. Financial instruments are categorized in the level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement. These fair value estimates may also include observable, actively quoted components derived from external sources. As a result, the realized and unrealized gains and losses for assets and liabilities within the level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs.

Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs used for Prosper’s level 3 fair value measurements at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015:~~

2016:

Borrower Loans, Loans Held for Sale and Notes:

			~~Range~~

	Range
Unobservable Input	~~June 30, 2016~~ March 31, 2017	December 31, ~~2015~~ 2016
Discount rate	~~4.4%~~3.8% - ~~15.0%~~ 14.4%	~~4.3%~~4.0% - ~~14.5%~~ 15.9%
Default rate	~~1.6%~~1.9% - ~~14.8%~~ 15.6%	~~1.4%~~1.7% - ~~14.4%~~ 14.9%

Range

Unobservable Input

June 30, 2016

December 31, 2015

Discount rate

15% - 25%

15% - 25%

Default rate

1.1% - 15.0%

1.2% - 14.7%

Prepayment rate

14.8% - 27.6%

14.3% - 25.6%

Market servicing rate

0.625
%

0.625
%



	Range
Unobservable Input	March 31, 2017		December 31, 2016
Discount rate	15% - 25%		15% - 25%
Default rate	1.5% - 16.0%		1.5% - 15.2%
Prepayment rate	14.9% - 27.3%		13.6% - 26.6%
Market servicing rate	0.625	%	0.625	%

At ~~June 30, 2016,~~March 31, 2017, the discounted cash flow methodology used to estimate the Note fair values used the same projected cash flows as the related Borrower Loans. As demonstrated in the following table, the fair value adjustments for Borrower Loans were largely offset by the fair value adjustments of the Notes due to the borrower payment dependent design of the Notes and because the principal balances of the Borrower Loans approximated the principal balances of the Notes.

The following tables present additional information about level 3 Borrower Loans, Loans Held for Sale and Notes measured at fair value on a recurring basis (in thousands):

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Borrower
Loans

Notes

Loans Held
for Sale

Total

Balance at January 1, 2016

$
297,273

$
(297,405
)

$
32

$
(100
)

Purchase of Borrower Loans/Issuance of Notes

109,215

(109,147
)

1,358,011

1,358,079

Principal repayments

(82,376
)

83,119

(136
)

607

Borrower Loans sold to third parties

(1,138
)

1,081

(1,353,202
)

(1,353,259
)

Other changes

(6
)

(33
)

-

(39
)

Change in fair value

(12,934
)

12,855

-

(79
)

Balance at June 30, 2016

$
310,034

$
(309,530
)

$
4,705

$
5,209



Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Borrower Loans			Notes			Loans Held for Sale			Total
Balance at January 1, 2016	$	297,273		$	(297,405	)	$	32		$	(100	)
Purchase of Borrower Loans/Issuance of Notes	55,171			(55,273		)	931,420			931,318
Principal repayments	(40,986		)	42,062			(4		)	1,072
Borrower Loans sold to third parties	(613		)	582			(931,418		)	(931,449		)
Other changes	(4		)	157			—			153
Change in fair value	(7,598		)	7,520			—			(78		)
Balance at March 31, 2016	$	303,243		$	(302,357	)	$	30		$	916

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Borrower
Loans

Notes

Loans Held
for Sale

Total

Balance at April 1, 2015

$
280,404

$
(280,801
)

$
1,599

$
1,202

Purchase of Borrower Loans/Issuance of Notes

46,805

(46,779
)

861,574

861,600

Principal repayments

(37,395
)

37,440

(157
)

(112
)

Borrower Loans sold to third parties

-

-

(861,574
)

(861,574
)

Other changes

(136
)

(71
)

(1
)

(208
)

Change in fair value

(5,478
)

5,583

(10
)

95

Balance at June 30, 2015

$
284,200

$
(284,628
)

$
1,431

$
1,003

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Borrower
Loans

Notes

Loans Held
for Sale

Total

Balance at April 1, 2016

$
303,243

$
(302,357
)

$
30

$
916

Purchase of Borrower Loans/Issuance of Notes

54,044

(53,873
)

426,591

426,762

Principal repayments

(41,390
)

41,057

(131
)

(464
)

Borrower Loans sold to third parties

(525
)

499

(421,784
)

(421,810
)

Other changes

(2
)

(191
)

-

(193
)

Change in fair value

(5,336
)

5,335

(1
)

(2
)

Balance at June 30, 2016

$
310,034

$
(309,530
)

$
4,705

$
5,209

The following tables present additional information about level 3 servicing assets and liabilities measured at fair value on a recurring basis (in thousands):

Servicing
Assets

Servicing
Liabilities

Fair Value at January 1, 2016

14,363

484

Additions

5,750

9

Less: Changes in fair value

(5,816
)

(169
)
Fair Value at June 30, 2016

14,297

324

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

5,837

193

Less: Changes in fair value

(1,864
)

(182
)
Fair Value at June 30, 2015

8,682

606



	Servicing Assets		Servicing Liabilities
Fair Value at January 1, 2017	12,786		198
Additions	2,764		—
Less: Changes in fair value	(3,114	)	(51	)
Fair Value at March 31, 2017	12,436		147

Servicing
Assets

Servicing
Liabilities

Fair Value at April 1, 2016

15,548

398

Additions

1,729

-

Less: Changes in fair value

(2,980
)

(74
)
Fair Value at June 30, 2016

14,297

324

The contingent consideration was primarily performance-based and will be determined over a one-year period from the date of purchase. Total contingent consideration due in October 2016 is based on revenues generated and other criteria. Wefollowing table presents additional information about level 3 Loan Trailing Fee Liability measured ~~the~~at fair value ~~of the contingent consideration using~~on a probability-weighted discounted cash flow approach. Some of the significant inputs used for the valuation are not observable in the market and are thus Level 3 inputs. Contingent consideration is recorded in the condensed consolidated balance sheet under "Other Liabilities." Significant increases or decreases in certain underlying assumptions used to value the contingent consideration could significantly increase or decrease the fair value estimates recorded in the condensed consolidated balance sheets. During the three and six month periods ended June 30, 2016, there were fair value changes of $63 thousand and $128 thousand, respectively, resulting in a fair value of $4.9 million at June 30, 2016 from the opening fair value at January 1, 2016 of $4.8 million.

recurring basis (in thousands):



Balance at January 1, 2017	665
Issuances	552
Cash payment of Loan Trailing Fee	(144	)
Change in fair value	31
Balance at March 31, 2017	1,104

Significant Recurring Level 3 Fair Value Asset and Liability Input Sensitivity

Key economic assumptions and the sensitivity of the current fair value to immediate changes in those assumptions at ~~June 30, 2016~~March 31, 2017 for Borrower Loans, Loans Held for Sale and Notes funded through the Note Channel are presented in the following table (in thousands, except percentages):

Borrower Loans and
Loans Held for Sale

Notes

Discount rate assumption:

7.25

%*

7.25

%*
Resulting fair value from:

100 basis point increase

$
306,868

$
306,363

200 basis point increase

303,781

303,277

Resulting fair value from:

100 basis point decrease

$
313,283

$
312,780

200 basis point decrease

316,619

316,116

Default rate assumption:

11.02

%*
11.02

%*
Resulting fair value from:

100 basis point increase

$
306,882

$
306,370

200 basis point increase

303,823

303,303

Resulting fair value from:

100 basis point decrease

$
313,200

$
312,704

200 basis point decrease

316,399

315,913

* Represents weighted average assumptions considering all credit grades.



	Borrower Loans and Loans Held for Sale				Notes
Discount rate assumption:	6.91		%	*	6.91		%	*
Resulting fair value from:
100 basis point increase	$	314,431			$	313,731
200 basis point increase	311,299				310,600
Resulting fair value from:
100 basis point decrease	$	320,943			$	320,241
200 basis point decrease	324,329				323,626
Default rate assumption:	12.55		%	*	12.55		%	*
Resulting fair value from:
100 basis point increase	$	313,899			$	313,189
200 basis point increase	310,262				309,544
Resulting fair value from:
100 basis point decrease	$	321,406			$	320,715
200 basis point decrease	325,206				324,525

* Represents weighted average assumptions considering all credit grades.

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 ~~June 30, 2016~~March 31, 2017 (in thousands, except percentages).

Servicing
Assets

Servicing
Liabilities

Market servicing rate assumptions

0.625

%

0.625

%
Resulting fair value from:

Market servicing rate increase to 0.65%

13,252

$
356

Market servicing rate decrease to 0.60%

15,342

$
291

Weighted average prepayment assumptions

20.44

%

20.44

%
Resulting fair value from:

Applying a 1.1 multiplier to prepayment rate

13,918

$
303

Applying a 0.9 multiplier to prepayment rate

14,451

$
314

Weighted average default assumptions

11.39

%

11.39

%
Resulting fair value from:

Applying a 1.1 multiplier to default rate

$
14,067

$
323

Applying a 0.9 multiplier to default rate

$
14,530

$
323



	Servicing Assets			Servicing Liabilities
Market servicing rate assumptions	0.625		%	0.625		%
Resulting fair value from:
Market servicing rate increase to 0.65%	$	11,606		$	162
Market servicing rate decrease to 0.60%	$	13,265		$	132
Weighted average prepayment assumptions	21.13		%	21.13		%
Resulting fair value from:
Applying a 1.1 multiplier to prepayment rate	$	12,240		$	144
Applying a 0.9 multiplier to prepayment rate	$	12,633		$	150
Weighted average default assumptions	12.05		%	12.05		%
Resulting fair value from:
Applying a 1.1 multiplier to default rate	$	12,247		$	147
Applying a 0.9 multiplier to default rate	$	12,628		$	147

These sensitivities are hypothetical and should be evaluated with care. The effect on fair value of a 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.

8. ~~Acquisitions~~

On ~~January 23, 201~~5, PMI acquired all of the outstanding limited liability company interests of American HealthCare Lending, and merged American HealthCare Lending with and into PHL, with PHL surviving the merger. In January 2015, PMI completed the allocation of the purchase price of the acquisition of American HealthCare Lending to acquired assets and liabilities.

On October 9, 2015, PMI acquired all of the outstanding shares of BillGuard. PMI merged BillGuard with and into Beach Merger Sub, Inc., a newly established entity wholly owned by PMI, with BillGuard surviving the merger. ~~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.~~

9. Goodwill and Other Intangible Assets

~~Goodwill~~

Goodwill

Prosper’s goodwill balance of $36.4 million at ~~June 30, 2016~~March 31, 2017 did not change during the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017. We did not record any goodwill impairment expense for the ~~six~~three months ended ~~June 30, 2016.~~

March 31, 2017. A portion of the goodwill balance is considered held for sale, refer to Note 9 for more detail.

Other Intangible Assets

The following table presents the detail of other intangible assets for the period presented (dollars in thousands):

June 30, 2016

Gross
Carrying Value

Accumulated
Amortization

Net
Carrying Value

Remaining
Useful Life
(In Years)

User base and customer relationships

$
6,250

$
(1,976
)

$
4,274

8.6

Developed technology

8,310

(1,508
)

$
6,802

4.3

Brand name

60

(60
)

-

-

Total intangible assets subject to amortization

$
14,620

$
(3,544
)

$
11,076



	March 31, 2017
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Remaining Useful Life (In Years)
User base and customer relationships	$	5,446	$	(3,365	)	$	2,081	8.1
Developed technology	4,793		(2,835		)	$	1,958	1.1
Brand name	60		(60		)	—		—
Total intangible assets subject to amortization	$	10,299	$	(6,260	)	$	4,039

Prosper’sintangible asset balance was ~~$11.1~~$4.0 million and ~~$13.1~~$9.2 million at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively. During the three months ended March 31, 2017, certain intangible assets were made available for sale and as a result they were written down to fair value. This resulted in a $4.3 million impairment loss. Refer to Note 9 for more detail.

The user base and customer relationship intangible assets are being amortized on an accelerated basis over a three to ten year period. The technology and brand name intangible assets are being amortized on a straight line basis over three to five years and one year, respectively.

Amortization expense for the three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ was ~~$1.0~~$0.9 million and ~~$0.3 million, respectively. Amortization expense for the six months ended June 30, 2016 and 2015 was $2.0 million and $0.3~~$1.0 million, respectively. Estimated amortization of purchased intangible assets for future periods (excluding those held for sale) is as follows (in thousands):

9. Assets Held for Sale

As of March 31, 2017, the Company was actively marketing certain assets related to the Prosper Daily application. Through this process, the Company identified the specific assets to be sold and allocated goodwill based on the relative fair values of the assets held for sale and the assets that will be retained by the Company. This resulted in an impairment loss of $4.3 million during the three months ended March 31, 2017, which is recorded in Other Expenses on the Condensed Consolidated Statement of Operations. The Company currently expects to close the sale of the assets during the three months ending June 30, 2017.

Amounts classified as assets held for sale on March 31, 2017, are presented on the Company’s Condensed Consolidated Balance Sheet within their respective accounts, and include the following (in thousands):



Intangible Assets	$	2,129
Goodwill	171
Total Assets Held for Sale	$	2,300

10. Other Liabilities

Other Liabilities includes the following:

June 30, 2016

December 31, 2015

Class action settlement liability

$
2,973

$
5,949

Repurchase liability for unvested restricted stock awards

267

473

Contingent consideration

4,929

4,801

Deferred revenue

420

1,591

Servicing liabilities

324

484

Deferred rent

4,647

5,240

Restructuring liability

8,492

-

Other

2,364

2,197

Total Other Liabilities

$
24,416

$
20,735



	March 31, 2017		December 31, 2016
Class action settlement liability	$	—	$	2,996
Repurchase liability for unvested restricted stock awards	28		118
Deferred revenue	196		226
Servicing liabilities	147		198
Deferred rent	4,358		4,469
Restructuring liability	3,143		6,052
Other	3,832		3,114
Total Other Liabilities	$	11,704	$	17,173

11. 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 June 30,

Six Months Ended June 30,

2016

2015

2016

2015

Numerator:

Net loss available to common stockholders for basic
and diluted EPS

$
(35,628
)

$
(6,201
)

$
(53,092
)

$
(13,477
)
Denominator:

Weighted average shares used in computing basic and diluted net loss per share

63,270,058

55,612,485

61,813,773

54,168,175

Basic and diluted net loss per share

$
(0.56
)

$
(0.11
)

$
(0.86
)

$
(0.25
)



	Three Months Ended March 31,
	2017			2016
Numerator:
Net loss available to common stockholders for basic and diluted EPS	$	(24,021	)	$	(17,464	)
Denominator:
Weighted average shares used in computing basic and diluted net loss per share	69,178,049			60,357,488
Basic and diluted net loss per share	$	(0.35	)	$	(0.29	)

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:

Three Months Ended June 30,

Six Months Ended June 30,

2016

2015

2016

2015

(shares)

(shares)

(shares)

(shares)

Excluded securities:

Convertible preferred stock issued and outstanding

177,388,425

35,477,685

177,388,425

35,477,685

Stock options issued and outstanding

43,719,604

6,982,320

41,694,271

6,478,422

Unvested stock options exercised

5,345,950

3,084,604

5,345,950

3,084,604

Warrants issued and outstanding

962,113

123,467

792,449

123,467

Total common stock equivalents excluded from diluted
net loss per common share computation

227,416,092

45,668,076

225,221,095

45,164,178



	Three Months Ended March 31,
	2017	2016
	(shares)	(shares)
Excluded securities:
Convertible preferred stock issued and outstanding	177,388,428	177,388,425
Stock options issued and outstanding	41,234,189	39,088,308
Unvested stock options exercised	30,835	7,694,370
Restricted stock units	351,721	2,380,956
Warrants issued and outstanding	988,513	536,685
Series E convertible preferred stock warrants	35,544,141	—
Series F convertible preferred stock warrants	177,720,704	—
Total common stock equivalents excluded from diluted net loss per common share computation	433,258,531	227,088,744

The number of shares issued and outstanding reflect a 5-for-1 forward stock split effected by PMI on February 16, 2016.

12. Convertible Preferred Stock, Warrant Liability and Stockholders’ Deficit

Convertible Preferred Stock

and Warrants

On December 16, 2016, PMI issued a warrant to purchase 20,267,135 shares of Series E-1 convertible preferred stock of PMI ("Series E-1") at an exercise price of $0.01 per share (the “First Series E-1 Warrant”) to Pinecone Investments LLC (“Pinecone”), an affiliate of Colchis Capital Management, L.P. (“Colchis”).

On February 27, 2017, PMI issued to Pinecone a second warrant (the “Second Series E-1 Warrant,” and together with the First Series E-1 Warrant, the “Series E-1 Warrants”) to purchase 15,277,006 shares of Series E-1 at an exercise price of $0.01 per share. The Series E-1 Warrants are immediately exercisable, in whole or in part, by paying in cash the full purchase price payable in respect of the number of shares purchased. The Series E-1 Warrants were issued pursuant to the Warrant Agreement, dated December 16, 2016, between PMI and Colchis, as previously described in PMI’s Current Report on Form 8-K as filed with the Commission on December 22, 2016.

In connection with a loan purchase agreement (“Consortium Purchase Agreement”) with affiliates of the Consortium ("Warrant Holders'") a warrant agreement was signed (the "Warrant Agreement"). Pursuant to the Warrant Agreement, PMI issued to the Consortium, three warrants (together, the “Series F Warrant”) to purchase up to in aggregate 177,720,706 shares of PMI’s Series F Preferred Stock at an exercise price of $0.01 per share (the “Warrant Shares”).

The Warrant Holders' right to exercise the Series F Warrant is subject to monthly vesting during the term of the Consortium Purchase Agreement based upon the volume of loans the Consortium elects to purchase (if any) in each month, subject to certain cure rights such as offering additional loans for sale in subsequent periods (except that a certain portion of the Series F Warrant will be immediately exercisable as a result of loans purchased before the signing of the agreement). Under the

terms of the Warrant Agreement, the Warrant Shares may also vest in full upon a change of control of PMI, insolvency of PMI or PFL certain breaches of contract by PMI or PFL that are not cured within a defined cure period and upon the occurrence of certain events set forth in the Warrant Agreement.

The Series F Warrant will be exercisable with respect to vested Warrant Shares, in whole or in part, at any time prior to the tenth anniversary of its date of issuance. The number of shares underlying the Series F Warrant may be adjusted following certain events such as stock splits, dividends, reclassifications, and certain other issuances by PMI.

The number of authorized, issued and outstanding shares, their par value and liquidation preference for each series of convertible preferred stock as of ~~June 30, 2016~~March 31, 2017 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
��

68,558,220

68,558,220

$
19,774

Series A-1

0.01

24,760,915

24,760,915

49,522

New Series B

0.01

35,775,880

35,775,880

21,581

New Series C

0.01

24,404,770

24,404,770

70,075

New Series D

0.01

23,888,640

23,888,640

165,000

177,388,425

177,388,425

$
325,952



Convertible Preferred Stock	Par Value		Authorized shares		Outstanding and Issued shares	Liquidation Preference (outstanding shares)
Series A	$	0.01	68,558,220	��	68,558,220	$	19,774
Series A-1	0.01		24,760,915		24,760,915	49,522
Series B	0.01		35,775,880		35,775,880	21,581
Series C	0.01		24,404,770		24,404,770	70,075
Series D	0.01		23,888,640		23,888,640	165,000
Series E-1	0.01		35,544,141		—	—
Series E-2	0.01		16,858,078		—	—
Series F	0.01		177,720,707		3	—
			407,511,351		177,388,428	$	325,952

The number of shares issued and outstanding reflect a 5-for-1 forward stock split effected by PMI on February 16, 2016.

Dividends on shares of the Series A, Series B, Series C, Series D, Series E-1, Series E-2 and Series F convertible preferred stock are payable only when, as, and if declared by the Board of Directors. No dividends will be paid with respect to the common stock until any declared dividends on the Series A, Series B, Series C, Series D, Series E-1, Series E-2 and Series F convertible preferred stock have been paid or set aside for payment to the Series A, Series B, Series C, Series D, Series E-1, Series E-2 and Series F convertible preferred stockholders. After payment of any such dividends, any additional dividends or distributions will be distributed among all holders of common stock and preferred stock in proportion to the number of shares of common stock that would be held by each such holder if all shares of preferred stock were converted to common stock at the then effective conversion rate. The Series A-1 convertible preferred shares have no dividend rights. To date, no dividends have been declared on any of the PMI’s preferred stock or common stock.

Under the terms of PMI’s amended and restated certificate of incorporation, the holders of preferred stock have the right to convert such preferred stock into common stock at any time. In addition, all preferred stock automatically converts into common stock (i) immediately prior to the closing of an Initial Public Offering (“IPO”) that values Prosper at least at $2 billion and that results in aggregate proceeds to Prosper of at least $100 million or (ii) upon a written request from the holders of at least 60% of the voting power of the outstanding preferred stock (on an as-converted basis), provided that (i) the Series A-1 convertible preferred stock shall not be converted without at least 14% of the voting power of the outstanding Series A-1 convertible preferred stock; (ii) the Series D shall not be converted without at least 60% of the voting power of the outstanding Series D; (iii) the Series E-1 and Series E-2 shall not be converted without at least 60% of the voting power of the outstanding Series E-1 and Series E-2, voting together as a single class; and (iv) the Series F shall not be converted without at least 60% of the voting power of the outstanding Series F. In addition, if a holder of the Series A convertible preferred stock has converted any of the Series A convertible preferred stock, then all of such holder’s shares of Series A-1 convertible preferred stock also will be converted upon a liquidation event. In lieu of any fractional shares of common stock to which a holder would otherwise be entitled, PMI shall pay such holder cash in an amount equal to the fair market value of such fractional shares, as determined by its Board of Directors. At present, the Series A, Series B, Series C, Series D, Series E-1, Series E-2 and the Series F convertible preferred stock converts into PMI common stock at a 1:1 ratio while the Series A-1 convertible preferred stock converts into common stock at a 1,000,000:1 ratio

PMI’s convertible preferred stock has been classified as temporary equity on the Consolidated Balance Sheets. The preferred stock is not redeemable; however, upon in the event of a voluntary or involuntary liquidation, dissolution, change in control or winding up of PMI, holders of the convertible preferred stock may have the right to receive its liquidation preference under the terms of PMI’s certificate of incorporation.

Each holder of Series E-1, Series E-2 and Series F convertible preferred stock is entitled to receive prior and in preference to any distribution of proceeds from a liquidation event to the holders of Series A, Series B, Series C, Series D and Series A-1 preferred stock or common stock, an amount per share for (i) each share of Series E-1 convertible preferred stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, (ii) each share of Series E-2 convertible preferred stock equal to the sum of two-thirds the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, and (iii) each share of Series F convertible preferred stock equal to the sum of two-thirds of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.

After the payment or setting aside for payment to the holders of Series E-1, Series E-2, and Series F convertible preferred stock, each holder of Series A, Series B, Series C and Series D, Series E-2 and Series F convertible preferred stock is entitled to receive, on a pari passu basis, prior to and in preference to any distribution of proceeds from a liquidation event to the holders of Series A-1 preferred stock or common stock, (i) an amount per share for each share of Series E-2 and Series F convertible preferred stock equal to the sum of one-third of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, and (ii) an amount per share for each share of Series A, Series B, Series C and Series D convertible preferred stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.

After the payment or setting aside for payment to the holders of Series A, Series B, Series C, Series D, Series E-1, Series E-2 and Series F convertible preferred stock, the holders of Series A-1 convertible preferred stock are entitled to receive, prior and in preference to any distribution of proceeds to the holders of common stock an amount per share for each such share of Series A-1 convertible preferred stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.

After the payment or setting aside for payment to the holders of Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F convertible preferred stock and Series A-1 preferred stock, the entire remaining proceeds legally available for distribution will be distributed pro rata to the holders of Series A preferred stock and common stock in proportion to the number of shares of common stock held by them assuming the Series A preferred stock has been converted into shares of common stock at the then effective conversion rate, provided that the maximum aggregate amount per share of Series A convertible preferred stock which the holders of Series A convertible preferred stock shall be entitled to receive is three times the original issue price for the Series A convertible preferred stock.

At present, the liquidation preferences are equal to $0.29 per share for the Series A convertible preferred stock, $2.00 per share for the Series A-1 convertible preferred stock, $0.60 per share for the Series B convertible preferred stock, $2.87 per share for the Series C convertible preferred stock, $6.91 for the Series D convertible preferred stock, $0.84 for the Series E-1 convertible preferred stock, $0.84 for the Series E-2 convertible preferred stock, and $0.84 for the Series F convertible preferred stock.

Each holder of shares of convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of convertible preferred stock could be converted and has voting rights and powers equal to the voting rights and powers of the common stock. The holders of convertible preferred stock and the holders of common stock vote together as a single class (except with respect to certain matters that require separate votes or as required by law), and are entitled to notice of any stockholders’ meeting in accordance with the bylaws of PMI.

Convertible Preferred Stock Warrant Liability

In connection with the Settlement and Release Agreement dated November 17, 2016 among PMI, PFL and Colchis, on December 16, 2016, PMI issued the First Series E-1 Warrant. The Second Series E-1 Warrant for an additional 15,277,006 shares of Series E-1 convertible preferred stock were granted on the signing of the Consortium Purchase Agreement on February 27, 2017. The warrants expire ten years from the date of issuance. For the three months ended March 31, 2017,

Prosper recognized $401 thousand of expense from the re-measurement of the fair value of the warrants. The expense is recorded through other expenses in the statement of operations.

To determine the fair value of the Series E-1 Convertible Preferred Stock Warrants, the Company first determined the value of a share of a Series E-1 convertible preferred stock. To determine the fair value of the convertible preferred stock, the Company first derived the business enterprise value (“BEV”) of the Company using valuation methods, including a combination of methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the Company determined an estimated BEV, the probability weighted expected return method (“PWERM”) was used to allocate the BEV to the various classes of the Company’s equity, including the Company’s preferred stock. The concluded per share value for the Series E-1 convertible preferred stock was utilized as an input to the Black-Scholes option pricing model.

The Company determined the fair value of the outstanding convertible Series E-1 preferred stock warrants utilizing the following assumptions as of the following dates:



	March 31, 2017		December 31, 2016
Volatility	40	%	40%
Risk-free interest rate	2.40	%	2.45%
Remaining contractual term	9.79 years		9.96 years
Dividend yield	—	%	—%

The above assumptions were determined as follows:

Volatility: The volatility is derived from historical volatilities of several unrelated publicly listed peer companies over a period approximately equal to the term of the warrant because the Company has limited information on the volatility of the preferred stock since there is currently no trading history. When making the selections of industry peer companies to be used in the volatility calculation, the Company considered the size, operational, and economic similarities to the Company’s principal business operations.

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. Treasury yield in effect as of the period end date and for zero coupon U.S. Treasury notes with maturities approximately equal to the term of the warrant.

Remaining Contractual Term: The remaining contractual term represents the time from the date of the valuation to the expiration of the warrant.

Dividend Yield: The expected dividend assumption is based on the Company’s current expectations about the Company’s anticipated dividend policy.

In connection with the Consortium Purchase Agreement (as described in Note 16), PMI issued warrants to purchase up to 177,720,706 of PMI's Series F convertible preferred stock at $0.01 per share. For the three months ended March 31, 2017, Prosper recognized $0 of expense from the remeasurement of the fair value of the warrants. The expense is recorded through other expenses in the condensed consolidated statement of operations.

To determine the fair value of the Series F Convertible Preferred Stock Warrants, the Company first determined the value of a share of a Series F convertible preferred stock. To determine the fair value of the convertible preferred stock, the Company first derived the business enterprise value (“BEV”) of the Company using valuation methods, including a combination of methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the Company determined an estimated BEV, the probability weighted expected return method (“PWERM”) was used to allocate the BEV to the various classes of the Company’s equity, including the Company’s preferred stock. The concluded per share value for the Series F convertible preferred stock warrants utilized the Black-Scholes option pricing model.

The Company determined the fair value of the outstanding convertible Series F preferred stock warrants utilizing the following assumptions as of March 31, 2017:



	March 31, 2017
Volatility	40	%
Risk-free interest rate	2.40	%
Remaining contractual term (in years)	9.91
Dividend yield	—	%

The above assumptions were determined as follows:

Remaining Contractual Term: The remaining contractual term represents the time from the date of the valuation to the expiration of the warrant.

Dividend Yield: The expected dividend assumption is based on the Company’s current expectations about the Company’s anticipated dividend policy.

The combined activity of the Convertible Preferred Stock Warrant Liability for the three months ended March 31, 2017 is as follows (in thousands):



Balance at January 1, 2017	$	21,711
Warrants Vested	8,699
Change in Fair Value	401
Balance at March 31, 2017	$	30,811

PMI, through its amended and restated certificate of incorporation, as amended, is the sole issuer of common stock and related options, RSUs and warrants. On February 16, 2016, PMI amended and restated its certificate of incorporation to, among other things, effect a 5-for-1 forward stock split. On May 31, 2016, PMI further amended its amended and restated certificate of incorporation to increase the number of shares of common stock authorized for issuance. The total number of shares of stock which PMI has the authority to issue is ~~475,610,528,~~957,511,351, consisting of ~~298,222,103~~550,000,000 shares of common stock, $0.01 par value per share, and ~~177,388,425~~407,511,351 shares of preferred stock, $0.01 par value per share. As of ~~June 30, 2016, 70,893,225~~March 31, 2017, 70,615,559 shares of common stock were issued and ~~69,957,290~~69,679,624 shares of common stock were outstanding. As of December 31, ~~2015, 70,367,425~~2016, 70,843,044 shares of common stock were issued and ~~69,431,490~~69,907,109 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 ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, PMI issued ~~334,475~~34,475 shares of common stock upon the exercise of vested options for cash proceeds of ~~$0.3 million.~~$4 thousand. Certain options are eligible for exercise prior to vesting. These unvested options may be exercised for restricted shares of common stock that have the same vesting schedule as the options. Prosper records a liability for the exercise price paid upon the exercise of unvested options, which is reclassified to common stock and additional paid-in capital as the shares vest. Should the holder’s employment be terminated, the unvested restricted shares are subject to repurchase by PMI at an amount equal to the exercise price paid for such shares. At ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, there were ~~5,345,950~~30,835 and ~~9,806,170~~1,126,210 shares, respectively, of restricted stock outstanding that remain unvested and subject to Prosper’s right of repurchase.

For the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, PMI repurchased ~~51,105~~261,960 shares of restricted stock for ~~$46~~$64 thousand upon termination of employment of various ~~employees.~~

~~Common Stock Issued upon Exercise of Warrants~~

~~For the six months ended June 30, 2016, PMI issued 51,915 shares of common stock upon the exercise of warrants for aggregate proceeds of $11 thousand.~~

employees

13. Share Based Incentive Plan and Compensation

In 2005, PMI’s stockholders approved the adoption of the 2005 Stock Plan. On December 1, 2010, PMI’s stockholders approved the adoption of the Amended and Restated 2005 Stock Plan (the “2005 Plan”). The 2005 Plan expired during the year ending December 31, 2015 and PMI’s stockholders approved the adoption of the 2015 Equity Incentive Plan. On February 15, 2016, PMI’s stockholders approved the adoption of an Amendment No. 1 to the 2015 Equity Incentive Plan, and on May 31, 2016, PMI’s

stockholders approved the adoption of an Amendment No. 2 to the 2015 Equity Incentive Plan (as amended to date, the “2015 Plan”). ~~As of June 30, 2016~~In March 2015, the 2005 Plan expired, except that any awards granted under the 2005 Plan upprior to ~~59,388,480 shares of common stock are reserved and may be issued~~its expiration remain in effect pursuant to ~~employees, directors, and consultants by PMI’s board of directors and stockholders to promote the success of Prosper’s business.~~their terms. As of ~~June 30, 2016~~March 31, 2017 under the 2015 Plan, up to ~~51,850,918~~60,241,343 shares of common stock are reserved and may be granted to employees, directors, and consultants by PMI’s board of directors and

stockholders to promote the success of Prosper’s business. Options generally vest 25% one year from the vesting commencement date and 1/4848t^thh per month thereafter or vest 50% one year from the vesting date and 1/48 per month thereafter or vest 50% two years from the vesting commencement date and 1/4848t^thh per month thereafter or vest 1/3636t^t^h per month from the vesting commencement date. In no event are options exercisable more than ten years after the date of grant.

At ~~June 30, 2016,~~March 31, 2017, there were ~~11,402,606~~858,395 shares available for grant under the 2015 Plan and zero shares available for grant under the 2005 Plan.

The number of options, restricted stock units and amounts per share reflects a 5-for-1 forward stock split effected by PMI on February 16, 2016.

Stock Option Reprice

On May 3, 2016, the Compensation Committee of the Board of Directors of PMI approved a stock option repricing program, (the ~~“Reprice”~~“2016 Reprice”) authorizing PMI’s officers to reprice certain outstanding stock options held by employees and directors that have exercise prices above the current fair market value of PMI’s common stock. The repricing was effected on May 16, 2016 for eligible directors and employees located in the United States and on May 19, 2016 for eligible employees located in Israel.

On March 17, 2017, the Compensation Committee of the Board of Directors of PMI approved a stock option repricing program, (the “2017 Reprice” and together with the 2016 Reprice, the "Repricings") authorizing PMI’s officers to reprice certain outstanding stock options held by employees and directors that have exercise prices above the current fair market value of PMI’s common stock. The repricing was effected on March 17, 2017 for eligible directors and employees.

Prosper believes that the ~~repricing~~Repricings of such stock options will encourage the continued service of valued employees and directors, and motivate such service providers to perform at high levels, both of which are critical to Prosper’s continued success. Prosper expects to incur additional stock based compensation charges as a result of ~~this repricing.~~ the Repricings.

The financial statement impact of ~~this repricing~~the above Repricings is ~~$1.2~~$0.8 million in the 3three months ended ~~June 30, 2016~~March 31, 2017 and ~~$4.2~~$1.1 million (net of forfeitures) that will be recognized over the remaining weighted average vesting period of ~~2.8~~2.1 years.

Early Exercised Stock Options

The ~~activity~~balance of stock options that were early exercised under the 2005 Plan ~~for the six months ended June 30, 2016 is below:~~

Early exercised
options, unvested

Weighted average
exercise price

Balance as of January 1, 2016

9,806,170

$
0.05

Repurchase of restricted stock

(51,105
)

0.90

Restricted stock vested

(4,409,115
)

0.04

Balance as of June 30, 2016

5,345,950

$
0.05

~~Additional information regarding the unvested early exercised stock options outstanding~~ as of ~~June 30, 2016~~March 31, 2017 is ~~as follows:~~

not material.

Options Outstanding

Range of

Exercise

Number

Weighted –Avg.

Weighted –Avg.

Prices

Outstanding

Remaining Life

Exercise Price

0.02

4,847,590

0.7

$
0.02

0.11

387,010

1.6

0.11

1.13

111,350

2.1

1.13

$0.02 - $1.13

5,345,950

0.8

$
0.05

Stock option activity under the 2005 Plan and 2015 Plan is summarized for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 below:

Options
Issued and
Outstanding

Weighted-
Average
Exercise
Price

Balance as of January 1, 2016

40,425,605

$
2.64

Options issued

19,655,338

$
2.14

Options exercised – vested

(334,475
)

0.85

Options forfeited

(4,725,406
)

1.38

Balance as of June 30, 2016

55,021,062

1.54

Options vested and/or exercisable at June 30, 2016

26,856,397

1.15



	Options Issued and Outstanding		Weighted- Average Exercise Price
Balance as of January 1, 2017	41,395,719		$	1.48
Options issued	30,388,611		0.22
Options exercised – vested	(34,475	)	0.11
Options forfeited	(7,744,759	)	1.25
Balance as of March 31, 2017	64,005,096		$	0.25
Options vested and expected to vest as of March 31, 2017	50,420,436		0.25
Options vested and exercisable at March 31, 2017	22,463,217		0.25

Due to the timing of the 2017 Reprice, the ending weighted average exercise price shown above reflects repriced options while the opening weighted average exercise price does not.

Other Information Regarding Stock Options

Additional information regarding common stock options outstanding as of ~~June 30, 2016~~March 31, 2017 is as follows:

Options Outstanding

Options Vested and Exercisable

Weighted –

Weighted –

Weighted -

Range of

Avg.

Avg.

Avg.

Exercise

Number

Remaining

Exercise

Number

Exercise

Prices

Outstanding

Life

Price

Vested

Price

$
0.02 - 0.99

13,462,825

7.41

$
0.12

13,462,110

$
0.12

1.00 - 2.99

38,325,717

9.34

2.04

11,565,657

1.91

3.00 - 4.99

1,586,875

8.63

3.62

1,586,875

3.62

5.00 - 5.52

1,645,645

9.14

5.49

241,755

5.46

$
0.02 - 5.52

55,021,062

8.84

$
1.72

26,856,397

$
1.15



		Options Outstanding				Options Vested and Exercisable
	Range of Exercise Prices	Number Outstanding	Weighted – Avg. Remaining Life	Weighted –Avg. Exercise Price		Number Vested	Weighted – Avg. Exercise Price
$	0.02 - 0.20	8,379,510	6.81	$	0.11	8,373,336	$	0.11
	0.20 - 0.50	53,457,105	9.50	0.22		11,921,400	0.22
	0.50 - 2.14	2,168,481	8.41	1.65		2,168,481	1.64
$	0.02 - 2.14	64,005,096	9.11	$	0.25	22,463,217	$	0.25

The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires Prosper to make assumptions and judgments about the variables used in the calculation, including the fair value of PMI’s common stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of PMI’s common stock, a risk-free interest rate, and expected dividends. Given the absence of a publicly traded market, Prosper considered numerous objective and subjective factors to determine the fair value of PMI’s common stock at each grant date. These factors included, but were not limited to: (i) contemporaneous valuations of common stock performed by unrelated third-party specialists; (ii) the prices for PMI’s preferred stock sold to outside investors; (iii) the rights, preferences and privileges of PMI’s preferred stock relative to PMI’s common stock; (iv) the lack of marketability of PMI’s common stock; (v) developments in the business; (vi) secondary transactions of PMI’s common and preferred shares and (vii) the likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of Prosper, given prevailing market conditions. As PMI’s stock is not ~~publically~~publicly traded volatility for stock options is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of Prosper. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options using the simplified method. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. Prosper uses an expected dividend yield of zero as it does not anticipate paying any dividends in the foreseeable future.

Prosper also estimates forfeitures of unvested stock options. Expected forfeitures are based on Prosper’s historical experience. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest.

The fair value of PMI’s stock option awards granted during the three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ was estimated at the date of grant using the Black-Scholes model with the following average assumptions:

Three Months Ended

Six Months Ended

June 30,

June 30,

2016

2015

2016

2015

Volatility of common stock

50.88
%

52.75
%

50.88
%

57.26
%
Risk-free interest rate

1.29
%

1.80
%

1.29
%

1.72
%
Expected life

5.8 years

6.0 years

5.8 years

6.1 years

Dividend yield

0
%

0
%

0
%

0
%



	Three Months Ended March 31,
	2017		2016
Volatility of common stock	50.28	%	N/A
Risk-free interest rate	2.12	%	N/A
Expected life	5.7 years		N/A
Dividend yield	0	%	N/A

Restricted Stock Unit Activity

During the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, PMI granted restricted stock units (“RSUs”) to certain employees that are subject to three-year vesting terms or four year vesting terms and the occurrence of a liquidity event.

The aggregate fair value of the RSUs granted was ~~$10.7 million.~~$3 thousand. The following table summarizes the activities for PMI’s RSUs during the ~~six~~three months ~~ending June 30, 2016:~~

ended March 31, 2017:

Number of Shares

Weighted-Average Grant Date Fair Value

Unvested - December 31, 2015

1,835,510

$
5.52

Granted

3,580,220

2.14

Vested

-

-

Forfeited

(1,274,920
)

2.14

Unvested - June 30, 2016

4,140,810

$
2.59



	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested - December 31, 2016	1,995,159		$	2.16
Granted	12,000		0.22
Vested	—		—
Forfeited	(434,750	)	2.18
Unvested - March 31, 2017	1,572,409		$	2.14

The following table presents the amount of stock-based compensation related to stock-based awards granted to employees recognized in Prosper’s condensed consolidated statements of operations during the three months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2016

2015

2016

2015

Origination and servicing

$
579

$
292

$
1,018

$
436

Sales and marketing

896

676

1,632

1,065

General and administrative

4,884

1,784

8,815

2,691

Restructuring

45

-

45

-

Total stock based compensation

$
6,404

$
2,752

$
11,510

$
4,192



	Three Months Ended March 31,
	2017		2016
Origination and servicing	$	217	$	439
Sales and marketing	171		736
General and administrative	3,112		3,932
Total stock based compensation	$	3,500	$	5,107

During the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ Prosper capitalized ~~$225~~$108 thousand and $175 thousand respectively, of stock-based compensation as internal use software and website development costs. During the six months ended June 30, 2016 and 2015, Prosper capitalized $436 thousand and $297$210 thousand respectively, of stock-based compensation as internal use software and website development costs. As of ~~June 30, 2016,~~March 31, 2017, the unamortized stock-based compensation expense adjusted for forfeiture estimates related to Prosper’s employees’ unvested stock-based awards was approximately ~~$58.6~~$26.9 million, which will be recognized over the remaining weighted-average vesting period of approximately ~~2.77~~2.26 years.

Management modified or accelerated the vesting terms for certain employee options, which resulted in an additional $0.7 million and $0.1 million of stock-based compensation expense for the three months ended June 30, 2016 and 2015, respectively.

Summary of Restructuring Plan

On May 3, 2016, Prosper adopted a strategic restructuring of its business. This restructuring is intended to streamline our operations and support future growth efforts. Under this restructuring, Prosper closed its Salt Lake City, Utah location. As a result of this restructuring, Prosper ~~will terminate~~terminated 167 employees across all locations. In ~~connection with the restructuring,~~December 2016, Prosper ~~has recognized employee severance and benefits charges of approximately $5.4 million~~shut down its Tel Aviv location, resulting in the ~~second quarter which were included in “Restructuring Charges” within the condensed consolidated statement~~termination of ~~operations, and expects to incur $0.2~~ ~~million in the third quarter of 2016 related to these charges. The actions associated with this restructuring are expected to be fully completed by the third quarter of 2016.~~

31 employees.

In addition to the employment costs associated with the restructuring, Prosper is also ~~engaged in~~ marketing for sublease ~~space in~~ our existing office space that is no longer needed due to the reduction in headcount. ~~In total, the losses incurred on the leases~~Other than accretion and changes in ~~San Francisco, Salt Lake City and Phoenix totaled $8.7 million which has been included in “Restructuring Charges” within the condensed consolidated statement of operations.~~sublease loss estimates, Prosper ~~expects to incur an~~does not expect any additional $~~0.2~~ ~~million in the third quarter of 2016~~restructuring charges related to ~~the facilities related charges.~~

this restructuring.

The following table summarizes the activities related to Prosper's restructuring plan (in thousands):

Severance Related *

Facilities Related

Total

Balance April 1, 2016

$
-

$
-

$
-

Additions to expense

5,400

8,661

14,061

Transfer from deferred rent

-

764

764

Less: Cash paid

(3,362
)

(933
)

(4,295
)
Balance June 30, 2016

$
2,038

$
8,492

$
10,530



	Severance Related			Facilities Related			Total
Balance January 1, 2017	$	597		$	6,052		$	6,649
Adjustments to expense	(1		)	(73		)	(74		)
Less: Cash paid	(474		)	(2,836		)	(3,310		)
Balance March 31, 2017	$	122		$	3,143		$	3,265

* Severance related restructuring costs excludes non-cash charges related to vesting of equity incentives for fully-vested employees terminated as part of the Restructuring of $45 thousand

For the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ Prosper recognized ~~$105~~$164 thousand and ~~$176 thousand of income tax expense, respectively. For the six months ended June 30, 2016 and 2015, Prosper recognized $270 thousand and $249~~$165 thousand of income tax expense, respectively. The income tax expense relates to state income tax expense and the amortization of tax deductible goodwill which gives rise to an indefinite-lived deferred tax liability. No other income tax expense or benefit was recorded for the ~~six~~three month periods ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ due to a full valuation allowance recorded against our deferred tax assets.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize our existing deferred tax assets. On the basis of this evaluation, it is not more likely than not that our deferred tax assets will be realized and therefore a full valuation allowance has been recorded.

16. Consortium Purchase Agreement

On February 27, 2017, Prosper entered into series of agreements (the "Consortium Purchase Agreement") with a consortium of investors (the "Consortium"). Under the Consortium Purchase Agreement the Consortium has agreed to purchase borrower loans in an aggregate principal amount of up to $5.0 billion (including certain loans purchased by one of the investors prior to the date of the Consortium Agreement). PFL will be obligated to offer for purchase minimum monthly volumes of eligible loans to the Consortium, for the Consortium to elect to purchase.

In connection with the above agreement to purchase PMI issued to the Consortium, three warrants (together, the “Series F Warrant”) to purchase up to in aggregate 177,720,706 shares of PMI’s Series F Preferred Stock at an exercise price of $0.01 per share (the “Warrant Shares”).

The Consortium’s right to exercise the Series F Warrant is subject to monthly vesting during the term of the Consortium Purchase Agreement based upon the volume of loans Purchaser elects to purchase (if any) in each month, subject to certain cure rights such as offering additional loans for sale in subsequent periods (except that a certain portion of the Series F Warrant will be immediately exercisable as a result of loans purchased before the signing of the agreement). Under the terms of the Warrant Agreement, the Warrant Shares may also vest in full upon a change of control of PMI, insolvency of PMI or PFL, certain breaches of contract by PMI or PFL that are not cured within a defined cure period and upon the occurrence of certain other events set forth in the Warrant Agreement.

On vesting of the Series F warrants, Prosper records a liability as Convertible Preferred Stock Warrant Liability on the Condensed Consolidated Balance Sheet at fair value and a corresponding amount as "Fair Value of Warrants Vested on Sale of Borrower Loans" on the Condensed Consolidated Statement of Operations. Subsequent changes in the fair value of the vested warrants are recorded in "Other Expenses" on the Condensed Consolidated Statement of Operations. Additionally as part of the Consortium Purchase Agreement certain rebates previously issued were settled by the issuance of vested Series F Convertible Preferred Stock Warrants. The difference in fair value of these warrants over the cash settlement price is recorded in "Other Expense" on the Condensed Consolidated Statement of Operations.

17. Commitments and Contingencies

Future Minimum Lease Payments

Prosper has entered into various non-cancelable operating leases for certain offices with contractual lease periods expiring between 2022 and 2027.

Future minimum rental payments under these leases as of ~~June 30, 2016~~March 31, 2017 are as follows (in thousands):

Remaining six months of 2016

3,674

2017

8,888

2018

9,524

2019

9,732

2020

10,225

2021

10,313

Thereafter

26,102

Total future operating lease obligations

$
78,458



Remaining nine months of 2017	3,977
2018	5,690
2019	6,026
2020	6,193
2021	6,170
2022	6,076
Thereafter	8,480
Total future operating lease obligations	$	42,612

The payments in the above table include amounts that have been accrued for as part of the restructuring liability in Note 14. Restructuring accrual balances related to operating facility leases were $3.1 million at March 31, 2017.

Rental expense under operating lease arrangements was ~~$1.9~~$1.3 million and ~~$0.9~~$1.8 million for the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ respectively. ~~Rental expense under operating lease arrangements was $3.7 million and $1.7 million for the six months ended June 30, 2016 and 2015, respectively.~~

Operating Commitments

Prosper has entered into an agreement with WebBank, under which all Borrower Loans originated through the marketplace are made by WebBank under its bank charter. ~~The arrangement allows~~Pursuant to the agreement, the marketing fee that Prosper receives in connection with the origination of each loan is partially reduced by an amount (the “Designated Amount”) calculated as a percentage of the principal amount of such loan based on the aggregate principal amount of loans originated for ~~Borrower Loans to be offered to borrowers at uniform nationwide terms.~~the applicable month. To the extent the aggregate Designated Amount for all loans originated during any month is less than $143,500, Prosper is required to pay ~~the greater of a monthly minimum fee or a fee calculated based on a certain percentage of monthly Borrower Loan origination volume. The~~WebBank an amount equal to such deficiency. Accordingly, the minimum fee for the remaining ~~six~~nine months ended December 31, ~~2016~~2017 is ~~$0.8~~$1.3 million. The minimum fee is $1.7 million ~~$1.7~~and $0.9 million ~~and $1.0 million for~~in each of the years ~~2017,~~ 2018 and 2019, respectively.

Additionally, under the agreement with WebBank, Prosper is required to maintain a minimum net liquidity of $15 million at all times during the term of the agreement. Net liquidity is defined as the sum of Cash, Cash Equivalents and Available for Sale Investments. Violation of this covenant can result in termination of the contract with WebBank. At March 31, 2017, Prosper was in compliance with the covenant.

Loan Purchase Commitments

Prosper has entered into an agreement with WebBank to purchase ~~$7.8~~$26.6 million of Borrower Loans that WebBank originated during the last two business ~~day~~days of the quarter ended ~~June 30, 2016~~March 31, 2017 and the first business day of the quarter ending ~~September~~June 30, ~~2016.~~ 2017. Prosper will purchase these Borrower Loans within the first ~~two~~three business days of the quarter ~~ended~~ending June 30, ~~2016.~~

2017.

Repurchase and Indemnification Contingency

Under the terms of the loan purchase agreements between Prosper and investors that participate in the Whole Loan Channel, Prosper may, in certain circumstances, become obligated to repurchase a Borrower Loan from an investor. Generally, these circumstances include the occurrence of verifiable identity theft, the failure to properly follow loan listing or bidding protocols, or a violation of the applicable federal, state, or local lending laws. The fair value of the indemnification and repurchase obligation is estimated based on historical experience and the initial fair value is insignificant. Prosper recognizes a liability for the repurchase and indemnification obligation when the Borrower Loans are issued. Indemnified or repurchased Borrower Loans associated with violations of federal, state, or local lending laws or verifiable identity theft are written off at the time of repurchase or at the time an indemnification payment is made. The maximum potential amount of future payments associated under this obligation is the outstanding balances of the Borrower Loans issued through the Whole Loan Channel, which at ~~June 30, 2016~~March 31, 2017 is ~~$4,063~~$3,453 million. Prosper has accrued ~~$489 thousand~~$1.0 million and ~~$510 thousand~~$0.6 million as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively, in regard to this obligation.

Securities Law Compliance

From inception through October 16, 2008, Prosper sold approximately $178.0 million of Borrower Loans to investors through its old platform structure, whereby Prosper assigned promissory notes directly to investors. Prosper did not register the offer and sale of the promissory notes corresponding to these Borrower Loans under the Securities Act or under the registration or qualification provisions of any state securities laws. Prosper believes that the question of whether or not the operation of the platform during this period constituted an offer or sale of “securities” involved a complicated factual and legal analysis and was uncertain. If the sales of promissory notes offered through the platform during this period were viewed as a securities offering, Prosper would have failed to comply with the registration and qualification requirements of federal and state laws.

In 2008, plaintiffs filed a class action lawsuit against Prosper and certain of its executive officers and directors in the Superior Court of California, County of San Francisco, California. The suit was brought on behalf of all promissory note purchasers on the platform from January 1, 2006 through October 14, 2008. The lawsuit alleged that Prosper offered and sold unqualified and unregistered securities in violation of the California and federal securities laws. On July 19, 2013 solely to avoid the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, the parties to the class action litigation agreed to enter into a settlement to resolve all claims related thereto (the “Settlement”). In connection with the Settlement, Prosper agreed to pay an aggregate amount of $10 million into a settlement fund, split into four annual installments of $2 million in 2014, $2 million in 2015, $3 million in 2016 and $3 million in 2017. The Settlement received final approval in a final order and judgment entered by the Superior Court on April 16, 2014. Pursuant to the final order and judgment, the claims in the class action were dismissed, and the defendants were released by the plaintiffs from all claims that were or could have been asserted concerning the issues alleged in the class action lawsuit. ~~The first three~~All annual installments have been made prior to ~~June 30, 2016 and the reserve for the class action settlement liability is $3.0 million in the condensed consolidated balance sheet as of June 30, 2016.~~

~~17.~~March 31, 2017.

Since Prosper’s inception, it has engaged in various transactions with its directors, executive officers and holders of more than 10% of its voting securities, and immediate family members and other affiliates of its directors, executive officers and 10%

stockholders. Prosper believes that all of the transactions described below were made on terms no less favorable to Prosper than could have been obtained from unaffiliated third parties.

Prosper’s executive officers, directors who are not executive officers, and certain affiliates participate in its marketplace by placing bids and purchasing Notes and Borrower Loans. The aggregate amount of the Notes and Borrower Loans purchased and the income earned by parties deemed to be affiliates and related parties of Prosper for the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ as well as the Notes and Borrower Loans outstanding as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 are summarized below (in thousands):

Aggregate Amount of
Notes and Borrower Loans Purchased

Interest Earned on Notes and Borrower Loans

Six Months Ended June 30,

Six Months Ended June 30,

Related Party

2016

2015

2016

2015

Executive officers and management

$
801

$
846

$
110

$
98

Directors (excluding executive officers and management)

350

20

15

4

Total

$
1,151

$
866

$
125

$
102

Aggregate Amount of
Notes and Borrower Loans Purchased

Interest Earned on Notes and Borrower Loans

Three Months Ended June 30,

Three Months Ended June 30,

Related Party

2016

2015

2016

2015

Executive officers and management

$
396

$
365

$
61

$
51

Directors (excluding executive officers and management)

114

-

9

2

Total

$
510

$
365

$
70

$
53

Notes and Borrower Loans Balance as of

Related Party

June 30, 2016

December 31, 2015

Executive officers and management

$
1,822

$
1,912

Directors (excluding executive officers and management)

528

325

$
2,350

$
2,237

~~18. Subsequent Events~~

~~On July 1,~~



	Aggregate Amount of Notes and Borrower Loans Purchased Three Months Ended March 31,				Interest Earned on Notes and Borrower Loans Three Months Ended March 31,
Related Party	2017		2016		2017		2016
Executive officers and management	$	5	$	405	$	93	$	49
Directors (excluding executive officers and management)	88		236		10		6
Total	$	93	$	641	$	103	$	55



	Notes and Borrower Loans Balance as of
Related Party	March 31, 2017		December 31, 2016
Executive officers and management	$	1,277	$	1,620
Directors (excluding executive officers and management)	561		537
	$	1,838	$	2,157

19. Significant Concentrations

Prosper is dependent on third party funding sources such as banks and investment funds to provide the funds to allow WebBank to originate Borrower Loans that the third party funding sources will later purchase. Of all Borrower Loans originated in the period ended March 31, 2017, 33%, 24% and 12% were purchased by three different parties. This compares to 36%, 20% and 8% for the period ended March 31, 2016. Further, a significant portion of our business is dependent on funding through the Whole Loan Channel, for which 90% and 94% of Borrower Loans were originated through the Whole Loan Channel in the periods ended March 31, 2017 and 2016, respectively.

Prosper ~~and~~receives all of its transaction fee revenue from WebBank. Prosper earns a transaction fee from WebBank an FDIC-insured, Utah-chartered industrial bank (“WebBank”), entered into (i) an Asset Sale Agreement between Prosper Funding and WebBank (the “Sale Agreement”), (ii) a Marketing Agreement between PMI and WebBank (the “Marketing Agreement”), and (iii) a Stand By Purchase Agreement between PMI and WebBank (the “Purchase Agreement,” and collectively, the “Origination and Sale Agreements”). Asfor our services in facilitating originations of Borrower Loans issued by WebBank. The rate of the ~~effective date of August 1, 2016 these agreements replace~~transaction fee for each individual Borrower Loan is based on the ~~existing agreements with WebBank.~~

~~The Origination~~term and ~~Sale Agreements set forth the respective obligations~~credit grade of the ~~Registrants and WebBank with respect to the origination and sales activities~~Borrower Loan. No individual borrower or investor accounted for 10% or more of ~~consumer loans originated on or after August 1, 2016. Under the Sale Agreement, WebBank sells and assigns certain consumer loans or related participation rights to Prosper Funding. As consideration~~consolidated net revenue for WebBank’s agreement to sell and assign such consumer loans or related participation rights, Prosper Funding agrees to pay WebBank certain fees in addition to the purchase price of such consumer loans or participation rights. Under the Marketing Agreement, PMI identifies customers who qualify for WebBank’s consumer loans, markets such loan programs and provides an online interface and other operational services in support of such consumer loan program. WebBank pays PMI a marketing fee in consideration for PMI’s marketing and other activities under the consumer loan program. Under the Purchase Agreement, PMI has agreed to purchase consumer loans or related participation rights from WebBank in the event that Prosper Funding fails to purchase loans or participation rights that it is obligated to purchase under the Sale Agreement. The initial term of eachany of the ~~Origination and Sale Agreements is three years.~~

~~As a result of entering into these agreements, on August 1~~^st, 2016 Prosper deposited an additional $5 million into a collateral account. This will reduce Cash and Cash Equivalents while increasing Restricted Cash. Additionally, under this agreement Prosper is required to maintain a minimum liquidity covenant of $15 million.

periods presented.

Condensed Consolidated Balance Sheets (Unaudited)

(amounts in thousands)

June 30, 2016

December 31, 2015

Assets

Cash and Cash Equivalents

$
6,911

$
15,026

Restricted Cash

121,933

139,937

Short Term Investments

1,279

1,277

Loans Held for Sale at Fair Value

4,705

32

Borrower Loans Receivable at Fair Value

310,034

297,273

Property and Equipment, Net

9,854

8,419

Servicing Assets

13,798

13,605

Other Assets

111

122

Total Assets

$
468,625

$
475,691

Liabilities and Member’s Equity

Accounts Payable and Accrued Liabilities

$
1,371

$
2,122

Payable to Related Party

4,202

2,989

Payable to Investors

113,610

135,661

Notes at Fair Value

309,530

297,405

Other Liabilities

1,283

1,209

Total Liabilities

429,996

439,386

Member's Equity

Retained Earnings

38,629

36,305

Total Member's Equity

$
38,629

$
36,305

Total Liabilities and Member's Equity

$
468,625

$
475,691



	March 31, 2017		December 31, 2016
Assets
Cash and Cash Equivalents	$	8,365	$	6,929
Restricted Cash	119,535		147,983
Short Term Investments	1,282		1,280
Loans Held for Sale at Fair Value	109		624
Borrower Loans Receivable at Fair Value	317,536		315,627
Property and Equipment, Net	9,887		10,095
Servicing Assets	12,190		12,461
Other Assets	233		186
Total Assets	$	469,137	$	495,185
Liabilities and Member’s Equity
Accounts Payable and Accrued Liabilities	$	746	$	2,223
Payable to Related Party	2,790		1,899
Payable to Investors	114,339		141,625
Notes at Fair Value	316,944		316,236
Other Liabilities	2,545		1,877
Total Liabilities	437,364		463,860
Member's Equity
Member's Equity	30,704		30,704
Retained Earnings	1,069		621
Total Member's Equity	$	31,773	$	31,325
Total Liabilities and Member's Equity	$	469,137	$	495,185

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

Condensed Consolidated Statements of Operations (Unaudited)

(amounts in thousands)

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

Condensed Consolidated Statements of Cash Flows (Unaudited)

(amounts in thousands)

Six Months Ended June 30,

2016

2015

Cash flows from operating activities:

Net Income

$
2,328

$
10,554

Adjustments to Reconcile Net Income to Net Cash (Used in) Provided by Operating Activities:

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

79

2

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

39

(21
)
Gain on Sale of Borrower Loans

(5,690
)

(5,648
)
Change in Fair Value of Servicing Rights

5,387

1,291

Depreciation and Amortization

1,864

1,896

Changes in Operating Assets and Liabilities:

Purchase of Loans Held for Sale at Fair Value

(1,358,011
)

(1,402,499
)
Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value

1,353,338

1,409,426

Restricted Cash Except for those Related to Investing Activities

21,080

(62,390
)
Other Assets

11

(14
)
Accounts Payable and Accrued Liabilities

(755
)

402

Payable to Investors

(22,051
)

69,686

Net Related Party Receivable/Payable

2,077

1,387

Other Liabilities

184

Net Cash (Used in) Provided by Operating Activities

(120
)

24,072

Cash Flows From Investing Activities:

Purchase of Borrower Loans Held at Fair Value

(109,215
)

(94,512
)
Principal Payment of Borrower Loans Held at Fair Value

83,514

73,457

Maturities of Short Term Investments

1,277

1,274

Purchases of Short Term Investments

(1,279
)

(1,275
)
Purchases of Property and Equipment

(4,163
)

(6,567
)
Changes in Restricted Cash Related to Investing Activities

(3,076
)

(2,725
)
Net Cash Used in Investing Activities

(32,942
)

(30,348
)
Cash Flows from Financing Activities:

Proceeds from Issuance of Notes Held at Fair Value

109,147

94,576

Payments of Notes Held at Fair Value

(84,200
)

(73,509
)
Cash Distributions to Parent

-

(27,000
)
Net Cash Provided by/(Used in) Financing Activities

24,947

(5,933
)
Net Decrease in Cash and Cash Equivalents

(8,115
)

(12,209
)
Cash and Cash Equivalents at Beginning of the Year

15,026

23,777

Cash and Cash Equivalents at End of the Year

$
6,911

$
11,568

Supplemental Disclosure of Cash Flow Information:

Cash Paid for Interest

$
19,787

$
19,147

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

$
572

-

Non-Cash Financing Activity, Distribution to Parent

-

$
249



	Three Months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net Income	$	448		$	5,150
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Change in Fair Value of Borrower Loans, Loans Held for Sale and Notes	94			78
Other Non-Cash Changes in Borrower Loans, Loans Held for Sale and Notes	(418		)	(153		)
Gain on Sale of Borrower Loans	(2,764		)	(3,971		)
Change in Fair Value of Servicing Rights	2,984			2,602
Depreciation and Amortization	1,280			883
Changes in Operating Assets and Liabilities:
Purchase of Loans Held for Sale at Fair Value	(523,997		)	(931,420		)
Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value	524,515			931,422
Restricted Cash Except for those Related to Investing Activities	26,166			2,511
Other Assets	(47		)	(387		)
Accounts Payable and Accrued Liabilities	(1,477		)	(610		)
Payable to Investors	(27,286		)	(4,225		)
Net Related Party Receivable/Payable	850			2,111
Other Liabilities	719			82
Net Cash Provided by Operating Activities	1,067			4,073
Cash Flows From Investing Activities:
Purchase of Borrower Loans Held at Fair Value	(56,680		)	(55,171		)
Principal Payment of Borrower Loans Held at Fair Value	50,565			41,599
Maturities of Short Term Investments	1,280			1,277
Purchases of Short Term Investments	(1,282		)	(1,278		)
Purchases of Property and Equipment	(1,031		)	(1,804		)
Changes in Restricted Cash Related to Investing Activities	2,282			550
Net Cash Used in Investing Activities	(4,866		)	(14,827		)
Cash Flows from Financing Activities:
Proceeds from Issuance of Notes Held at Fair Value	56,814			55,273
Payments of Notes Held at Fair Value	(51,579		)	(42,644		)
Net Cash Provided by (Used in) Financing Activities	5,235			12,629
Net Increase in Cash and Cash Equivalents	1,436			1,875
Cash and Cash Equivalents at Beginning of the Year	6,929			15,026
Cash and Cash Equivalents at End of the Period	$	8,365		$	16,901
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest	$	11,100		$	9,879
Non-Cash Investing Activity - Accrual for Property and Equipment, Net	$	1,647		495

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



Commission File Number	Exact Name of Registrant as Specified in its Charter	I.R.S. Employer Identification Number
333-147019 333-179941-01 333-204880	PROSPER MARKETPLACE, INC. a Delaware corporation 221 Main Street, 3^rd3rd Floor San Francisco, CA 94105 Telephone: (415)593-5400	73-1733867

333-179941 333-204880-01	PROSPER FUNDING LLC a Delaware limited liability company 221 Main Street, 3^rd3rd Floor San Francisco, CA 94105 Telephone: (415)593-5479	45-4526070

			~~Page No.~~

		Page No.
	Forward-Looking Statements	2 4
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	4 6
	Prosper Marketplace Inc.	4 6
	Condensed Consolidated Balance Sheets (Unaudited)	4 6
	Condensed Consolidated Statements of Operations (Unaudited)	5 7
	Condensed Consolidated Statements of Other Comprehensive Income (Loss) (Unaudited)	6 8
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7 9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8 10
	Prosper Funding LLC	29 32
	Condensed Consolidated Balance Sheets (Unaudited)	29 32
	Condensed Consolidated Statements of Operations (Unaudited)	30 33
	Condensed Consolidated Statements of Cash Flows (Unaudited)	31 34
	Notes to Condensed Consolidated Financial Statements (Unaudited)	32 35
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41 44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53 54
Item 4.	Controls and Procedures	54 55
PART II.	OTHER INFORMATION	55 57
Item 1.	Legal Proceedings	55 57
Item 1A.	Risk Factors	55 57
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	55 57
Item 3.	Defaults upon Senior Securities	55 57
Item 4.	Mine Safety Disclosures	55 57
Item 5.	Other Information	55 57
Item 6.	Exhibits	55 58
Signatures		56 59
Exhibit Index		57 60



Prosper Marketplace, Inc.	Yesx No ¨
Prosper Funding LLC	Yesx No ¨



Prosper Marketplace, Inc.	Yes¨ No x
Prosper Funding LLC	Yes¨ No x

	June 30, 2016			December 31, 2015
Assets
Cash and Cash Equivalents	$	28,824		$	66,295
Restricted Cash		133,216			151,223
Available for Sale Investments, at Fair Value		55,713			73,187
Accounts Receivable		870			2,434
Loans Held for Sale, at Fair Value		4,705			32
Borrower Loans, at Fair Value		310,034			297,273
Property and Equipment, Net		28,178			24,965
Prepaid and Other Assets		6,747			6,433
Servicing Assets		14,297			14,363
Goodwill		36,368			36,368
Intangibles Assets, Net		11,076			13,051
Total Assets	$	630,028		$	685,624
Liabilities, Convertible Preferred Stock and Stockholders' Deficit
Accounts Payable and Accrued Liabilities	$	13,104		$	22,409
Payable to Investors		114,876			136,507
Notes at Fair Value		309,530			297,405
Other Liabilities		24,416			20,735
Total Liabilities		461,926			477,056
Commitments and Contingencies (see Note 16)
Convertible Preferred Stock – $0.01 par value; 177,388,425 shares authorized, issued and outstanding as of June 30, 2016 and December 31, 2015. Aggregate liquidation preference of $325,952 as of June 30, 2016 and December 31, 2015.		275,938			275,938
Stockholders' Deficit
Common Stock ($0.01 par value; 298,222,103 shares authorized, 70,893,225 issued and 69,957,290 outstanding as of June 30, 2016; and 270,326,075 shares authorized, 70,367,425 shares issued and 69,431,490 outstanding as of December 31, 2015)		174			127
Additional Paid-In Capital		115,325			102,971
Less: Treasury Stock (5,177,235 common shares at cost, June 30, 2016 and December 31, 2015)		(23,417	)		(23,417	)
Accumulated Deficit		(199,996	)		(146,907	)
Accumulated Other Comprehensive Income/(Loss)		78			(144	)
Total Stockholders' Deficit		(107,836	)		(67,370	)
Total Liabilities, Convertible Preferred Stock and Stockholders' Deficit	$	630,028		$	685,624

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Revenues
Operating Revenues
Transaction Fees, Net	$	19,276		$	39,800		$	61,100		$	65,142
Servicing Fees, Net		7,676			3,575			14,819			6,144
Gain (Loss) on Sale of Borrower Loans		(687	)		3,696			3,104			5,618
Other Revenue		816			1,630			3,589			2,685
Total Operating Revenues		27,081			48,701			82,612			79,589
Interest Income
Interest Income on Borrower Loans		11,192			10,165			21,975			20,634
Interest Expense on Notes		(10,098	)		(9,448	)		(19,819	)		(19,011	)
Net Interest Income		1,094			717			2,156			1,623
Change in Fair Value of Borrower Loans, Loans Held for Sale and Notes, Net		(2	)		95			(79	)		21
Total Net Revenue		28,173			49,513			84,689			81,233
Expenses
Origination and Servicing		8,833			7,126			19,282			13,982
Sales and Marketing		12,303			26,580			45,023			45,150
General and Administrative		28,499			21,832			59,145			35,329
Restructuring Charges		14,061			-			14,061			-
Total Expenses		63,696			55,538			137,511			94,461
Net Loss Before Taxes		(35,523	)		(6,025	)		(52,822	)		(13,228	)
Income Tax Expense		105			176			270			249
Net Loss Applicable to Common Stockholders	$	(35,628	)	$	(6,201	)	$	(53,092	)	$	(13,477	)
Net Loss Per Share – Basic and Diluted	$	(0.56	)	$	(0.11	)	$	(0.86	)	$	(0.25	)
Weighted-Average Shares - Basic and Diluted		63,270,058			55,612,485			61,813,773			54,168,175

	Six Months Ended June 30,
	2016			2015
Cash flows from Operating Activities:
Net Loss	$	(53,092	)	$	(13,477	)
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities:
Change in Fair Value of Borrower Loans, Loans Held for Sale and Notes		79			(21	)
Depreciation and Amortization		6,430			3,455
Gain on Sales of Borrower Loans		(5,690	)		(5,857	)
Change in Fair Value of Servicing Rights		5,647			1,895
Stock-Based Compensation Expense		11,510			4,192
Restructuring Liability		8,492			-
Other, Net		227			45
Changes in Operating Assets and Liabilities:
Purchase of Loans Held for Sale at Fair Value		(1,358,011	)		(1,402,499	)
Proceeds from Sales and Principal Payments of Loans Held for Sale at Fair Value		1,353,338			1,409,426
Restricted Cash Except for those Related to Investing Activities		20,621			(63,254	)
Accounts Receivable		1,564			1,956
Prepaid and Other Assets		(84	)		(2,235	)
Accounts Payable and Accrued Liabilities		(4,995	)		2,754
Payable to Investors		(21,631	)		70,551
Other Liabilities		(7,690	)		(2,000	)
Net cash (Used in) provided by Operating Activities		(43,285	)		4,931
Cash Flows from Investing Activities:
Purchase of Borrower Loans Held at Fair Value		(109,215	)		(94,512	)
Principal Payments of Borrower Loans Held at Fair Value		83,514			73,457
Purchases of Property and Equipment		(8,600	)		(6,412	)
Maturities of Short Term Investments		1,278			1,274
Purchases of Short Term Investments		(1,277	)		(1,275	)
Purchases of Available for Sale Investments, at Fair Value		(11,725	)		-
Proceeds from Sale of Available for Sale Investments		9,193			-
Maturities of Available for Sale Investments		20,064			-
Acquisition of Businesses, Net of Cash Acquired		-			(19,000	)
Changes in Restricted Cash Related to Investing Activities		(2,614	)		(2,729	)
Net Cash Used in Investing Activities		(19,382	)		(49,197	)
Cash Flows from Financing Activities:
Proceeds from Issuance of Notes Held at Fair Value		109,147			94,575
Payments of Notes Held at Fair Value		(84,200	)		(73,509	)
Proceeds from Issuance of Convertible Preferred Stock, Net		-			164,793
Proceeds from Exercise of Warrants and Stock Options including Early Exercise, and Issuance of Restricted Stock		464			4,609
Repurchase of Common Stock and Restricted Stock		(46	)		(21,250	)
Taxes Paid for Awards Vested Under Equity Incentive Plans		(169	)		(2,206	)
Net Cash Provided by Financing Activities		25,196			167,012
Net (Decrease) Increase in Cash and Cash Equivalents		(37,471	)		122,746
Cash and Cash Equivalents at Beginning of the Period		66,295			50,557
Cash and Cash Equivalents at End of the Period	$	28,824		$	173,303
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest	$	19,787		$	19,147
Non-Cash Investing Activity- Accrual for Property and Equipment, Net	$	346		$	26
Non-Cash Investing Activity- Amount Payable for the Acquisition of Business	$	-		$	840

	June 30,			December 31,
		2016		2015
Property and equipment:
Computer equipment	$	14,153		$	10,522
Internal-use software and website development costs		14,289			10,990
Office equipment and furniture		3,087			2,442
Leasehold improvements		7,220			5,719
Assets not yet placed in service		1,994			3,242
Property and equipment		40,743			32,915
Less accumulated depreciation and amortization		(12,565	)		(7,950	)
Total property and equipment, net	$	28,178		$	24,965

	Servicing Assets			Servicing Liabilities
Fair Value at January 1, 2016		14,363			484
Additions		5,750			9
Less: Changes in fair value		(5,816	)		(169	)
Fair Value at June 30, 2016		14,297			324

	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		5,837			193
Less: Changes in fair value		(1,864	)		(182	)
Fair Value at June 30, 2015		8,682			606

	Servicing Assets			Servicing Liabilities
Fair Value at April 1, 2016		15,548			398
Additions		1,729			-
Less: Changes in fair value		(2,980	)		(74	)
Fair Value at June 30, 2016		14,297			324

	Servicing Assets			Servicing Liabilities
Fair Value at April 1, 2015		6,034			668

							Servicing Assets		Servicing Liabilities
Fair Value at January 1, 2016							14,363		484
Additions		3,759			39		4,021		9
Less: Changes in fair value		(1,111	)		(101	)	(2,836	)	(95	)
Fair Value at June 30, 2015		8,682			606
Fair Value at March 31, 2016							15,548		398



Year Ending December 31,
2016	$	1,862
2017		3,260	$	533
2018		2,329	379
2019		1,779	279
2020		1,344	219
Thereafter		502
2021			500
Total	$	11,076	$	1,910

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Numerator:
Net loss available to common stockholders for basic and diluted EPS	$	(35,628	)	$	(6,201	)	$	(53,092	)	$	(13,477	)
Denominator:
Weighted average shares used in computing basic and diluted net loss per share		63,270,058			55,612,485			61,813,773			54,168,175
Basic and diluted net loss per share	$	(0.56	)	$	(0.11	)	$	(0.86	)	$	(0.25	)

	Early exercised options, unvested			Weighted average exercise price
Balance as of January 1, 2016		9,806,170		$	0.05
Repurchase of restricted stock		(51,105	)		0.90
Restricted stock vested		(4,409,115	)		0.04
Balance as of June 30, 2016		5,345,950		$	0.05

		Options Outstanding
Range of
Exercise		Number		Weighted –Avg.		Weighted –Avg.
Prices		Outstanding		Remaining Life		Exercise Price
	0.02		4,847,590		0.7	$	0.02
	0.11		387,010		1.6		0.11
	1.13		111,350		2.1		1.13
$0.02 - $1.13			5,345,950		0.8	$	0.05

		Options Outstanding						Options Vested and Exercisable
				Weighted –		Weighted –				Weighted -
	Range of			Avg.		Avg.				Avg.
	Exercise	Number		Remaining		Exercise		Number		Exercise
	Prices	Outstanding		Life		Price		Vested		Price
$	0.02 - 0.99		13,462,825		7.41	$	0.12		13,462,110	$	0.12
	1.00 - 2.99		38,325,717		9.34		2.04		11,565,657		1.91
	3.00 - 4.99		1,586,875		8.63		3.62		1,586,875		3.62
	5.00 - 5.52		1,645,645		9.14		5.49		241,755		5.46
$	0.02 - 5.52		55,021,062		8.84	$	1.72		26,856,397	$	1.15


	Number of Shares			Weighted-Average Grant Date Fair Value
Unvested - December 31, 2015		1,835,510		$	5.52
Granted		3,580,220			2.14
Vested		-			-
Forfeited		(1,274,920	)		2.14
Unvested - June 30, 2016		4,140,810		$	2.59

	Severance Related *			Facilities Related			Total
Balance April 1, 2016	$	-		$	-		$	-
Additions to expense		5,400			8,661			14,061
Transfer from deferred rent		-			764			764
Less: Cash paid		(3,362	)		(933	)		(4,295	)
Balance June 30, 2016	$	2,038		$	8,492		$	10,530

Remaining six months of 2016		3,674
2017		8,888
2018		9,524
2019		9,732
2020		10,225
2021		10,313
Thereafter		26,102
Total future operating lease obligations	$	78,458

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
							Loans
							Held for
	Borrower Loans			Notes			Sale			Total
Balance at January 1, 2016	$	297,273		$	(297,405	)	$	32		$	(100	)
Originations		109,215			(109,147	)		1,358,011			1,358,079
Principal repayments		(82,376	)		83,119			(136	)		607
Borrower Loans sold to third parties		(1,138	)		1,081			(1,353,202	)		(1,353,259	)
Other changes		(6	)		(33	)		-			(39	)
Change in fair value		(12,934	)		12,855			-			(79	)
Balance at June 30, 2016	$	310,034		$	(309,530	)	$	4,705		$	5,209

	Servicing			Servicing
	Assets			Liabilities
Fair Value at January 1, 2016		13,605			484
Additions		5,750			9
Less: Changes in fair value		(5,557	)		(169	)
Fair Value at June 30, 2016		13,798			324


	Borrower Loans and Loans Held for Sale			Notes			Borrower Loans and Loans Held for Sale				Notes
Discount rate assumption:		7.25	%*		7.25	%*	6.91		%	*	6.91		%	*
Resulting fair value from:
100 basis point increase	$	306,868		$	306,363		$	314,431			$	313,731
200 basis point increase		303,781			303,277		311,299				310,600
Resulting fair value from:
100 basis point decrease	$	313,283		$	312,780		$	320,943			$	320,241
200 basis point decrease		316,619			316,116		324,329				323,626
Default rate assumption:	11.02		%*	11.02		%*	12.55		%	*	12.55		%	*
Resulting fair value from:
100 basis point increase	$	306,882		$	306,370		$	313,899			$	313,189
200 basis point increase		303,823			303,303		310,262				309,544
Resulting fair value from:
100 basis point decrease	$	313,200		$	312,704		$	321,406			$	320,715
200 basis point decrease		316,399			315,913		325,206				324,525

	Note and Borrower Loan Balance as of
Related Party	June 30, 2016		December 31, 2015
Executive officers and management	$	1,822	$	1,912
Directors (excluding executive officers and management)		-		-
	$	1,822	$	1,912



	PROSPER MARKETPLACE, INC.
	PROSPER FUNDING LLC

Date: ~~August 15, 2016~~ May 12, 2017	/s/ ~~Aaron Vermut~~ David Kimball
	~~Aaron Vermut~~ David Kimball
	Chief Executive Officer of Prosper Marketplace, Inc.
	Chief Executive Officer of Prosper Funding LLC
	(Principal Executive Officer)
	Director; Treasurer of Prosper Funding LLC
~~Date: August 15, 2016~~	~~/s/ David Kimball~~
Date: May 12, 2017	~~David Kimball~~ /s/ Usama Ashraf
	Usama Ashraf
	Chief Financial Officer of Prosper Marketplace, Inc.
	~~Treasurer of Prosper Funding LLC~~ (Principal Financial ~~Officer~~ and ~~Principal~~ Accounting Officer)

~~Exhibit~~ ~~Number~~		~~Exhibit Description~~

~~3.1~~ Exhibit Number	Exhibit Description

3.1	Fifth Amended and Restated Limited Liability Company Agreement of PFL, dated October 21, 2013 (incorporated by reference to Exhibit 3.1 of the Post-Effective Amendment No. 3 to the Registration Statement on Form S-1, filed October 23, 2013 by PFL and PMI)

3.2	Amended and Restated Certificate of Incorporation of PMI ~~as further amended~~(incorporated by reference to Exhibit 3.2 of PMI's and PFL's Annual Report on ~~May 31, 2016~~ Form 10-K, filed on March 17, 2017)

3.3	PFL Certificate of Formation (incorporated by reference to Exhibit 3.2 of the Registration Statement on Form S-1/A, filed April 23, 2012 by PFL and PMI)

3.4	Bylaws of PMI, as amended by an Amendment No. 1 dated February 15, 2016 (incorporated by reference to Exhibit 3.2 of PMI's and PFL's Form 10-Q, filed on August 15, 2016)

4.1	Form of PFL Borrower Payment Dependent Note (included as Exhibit A in Exhibit 4.5)

4.2	Form of PMI Borrower Payment Dependent Note (included as Exhibit A in Exhibit 4.4)

4.3	Supplemental Indenture, dated January 22, 2013, between PMI, PFL and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013)

4.4	Indenture, dated June 15, 2009, between PMI and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 of Pre-Effective Amendment No. 5 to PMI’s Registration Statement on Form S-1 (File No. 333-147019), filed June 26, 2009)

4.5	Amended and Restated Indenture, dated January 22, 2013, between PFL and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 of PMI and PFL’s Current Report on Form 8-K, filed on January 28, 2013)

10.1	Form of PFL Borrower Registration Agreement (2)

10.2	Form of PFL Investor Registration Agreement (incorporated by reference to Exhibit 10.2 of PMI's and PFL's Annual Report on Form 10-K, filed on March 17, 2017)

10.3	Amendment No. 2 to Prosper Marketplace, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of PMI and PFL’s Form 10-Q, filed on August 15, 2016) (3)

10.4	Asset Sale Agreement, dated July 1, 2016, between PFL and WebBank (incorporated by reference to Exhibit 10.1 of PMI and PFL’s Current Report on Form ~~8-K~~8-K/A, filed on ~~July 8, 2016)~~ March 7, 2017) (1)

10.5	Marketing Agreement, dated July 1, 2016, between PMI and WebBank (incorporated by reference to Exhibit 10.2 of PMI and PFL’s Current Report on Form ~~8-K~~8-K/A, filed on ~~July 8, 2016)~~ March 7, 2017) (1)

10.6	Stand By Purchase Agreement, dated July 1, 2016, between PMI and WebBank (incorporated by reference to Exhibit 10.3 of PMI and PFL’s Current Report on Form 8-K filed on July 8, 2016) (1)

~~31.1~~ 10.7	Amendment No. 3 to Administration Agreement between PFL and PMI, dated as of November 8, 2016 and made effective as of July 1, 2016 (incorporated by reference to Exhibit 10.8 of PMI's and PFL's Annual Report on Form 10-K, filed on March 17, 2017)

10.8	Loan Purchase Agreement, dated as of February 27, 2017, among PFL, PF LoanCo Funding LLC, and Wilmington Savings Fund Society, FSB, not in its individual capacity but solely in its capacity as trustee of PF LoanCo Trust (1) (2)

10.9	Warrant Agreement, dated as of February 27, 2017, among PMI, PF WarrantCo Holdings, LP, and, for certain limited purposes, New Residential Investment Corp (1)(2)



10.10		Back-Up Servicing Agreement (Note Channel), dated as of February 24, 2017, among PFL, PMI, and First Associates Loan Servicing, LLC (1)(2)

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to PMI’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2016.~~ March 31, 2017. (2)

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to PMI’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2016.~~ March 31, 2017. (2)

31.3		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to PFL’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2016.~~ March 31, 2017. (2)

~~31.4~~ 32.1		~~Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to PFL’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.~~

~~32.1~~		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to PMI’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2016.~~ March 31, 2017. (2)

32.2		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to PFL’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2016.~~ March 31, 2017. (2)

101.INS		XBRL Instance Documents

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		Taxonomy Extension Calculation Linkbase Document

101.LAB		Taxonomy Extension Label Linkbase Document

101.PRE		Taxonomy Extension Presentation Linkbase Document

101.DEF		Taxonomy Extension Definition Linkbase Document



(1)		Certain portions of this exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 406 of the Securities Act.

(2)		Filed herewith.

(3)		Management contract or compensatory plan or arrangement.