LC 10-Q Quarterly Report June 30, 2010

LENDINGCLUB CORP

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10-Q 1 c04125e10vq.htm FORM 10-Q Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from to

Commission File Number: 333-151827

LendingClub Corporation

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		51-0605731 (I.R.S. Employer Identification No.)

370 Convention Way Redwood City, California (Address of principal executive offices)		94063 (Zip Code)

(650) 482-5233
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of July 31, 2010, there were 8,565,011 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			2

Item 1. Financial Statements			2

Condensed Balance Sheets			2

Condensed Statements of Operations			3

Condensed Statements of Cash Flows			4

Notes to Condensed Financial Statements			5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20

Item 3. Quantitative and Qualitative Disclosures About Market Risk			35

Item 4. Controls and Procedures			35

PART II. OTHER INFORMATION			35

Item 1. Legal Proceedings			35

Item 1A. Risk Factors			35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35

Item 3. Defaults Upon Senior Securities			36

Item 5. Other Information			36

Item 6. Exhibits			36

SIGNATURES			37

EXHIBIT INDEX			38

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q regarding our borrower members, credit scoring, FICO scores, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

•

the status of borrower members, the ability of borrower members to repay member loans and the plans of borrower members;

•

our ability to attract additional investor members;

•

expected rates of return and interest rates;

•

the attractiveness of our lending platform;

•

our financial performance;

•

the availability and functionality of the trading platform;

•

our ability to retain and hire competent employees and appropriately staff our operations;

•

regulatory developments;

•

our intellectual property; and

•

our estimates regarding expenses, future revenue, capital requirements and need for additional financing.

We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We have included important factors in the “Risk Factors” section that could cause actual results or events to differ materially from these forward-looking statements. You should carefully review those factors and also the risks outlined in other documents we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2010, and the Prospectus for the Member Payment Dependent Notes dated July 30, 2010. In this Quarterly Report on Form 10-Q, we refer to the Member Payment Dependent Notes that we issue to investors as the “Notes,” and we refer to the corresponding loans made to borrower members as “CM Loans.” Forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LendingClub Corporation

Condensed Balance Sheets


	June 30,			March 31,
	2010			2010
	(unaudited)
ASSETS
Cash and cash equivalents	$	23,837,256		$	2,572,174
Restricted cash		852,000			1,352,000
Member loans held for investment, net of allowance for loan losses		6,931,527			7,545,186
CM Loans held for investment, at fair value		76,422,175			56,056,228
Other receivables		591,326			52,956
Loan servicing rights, at fair value		15,023			22,141
Prepaid expenses and other assets		112,245			242,380
Property and equipment, net		126,582			130,827
Deposits		42,792			50,134

Total assets	$	108,930,926		$	68,024,026

LIABILITIES
Accounts payable	$	634,075		$	422,690
Accrued expenses		692,121			831,244
Notes, at fair value		76,392,955			56,042,064
Deferred revenue		15,023			22,141
Loans payable, net of debt discount		7,063,228			8,507,107

Total liabilities		84,797,402			65,825,246


Commitments and contingencies (see Note 14)

PREFERRED STOCK
Preferred Stock		52,850,391			28,462,446

Total preferred stock		52,850,391			28,462,446


STOCKHOLDERS’ DEFICIT
Common stock		85,650			85,358
Additional paid-in capital		3,877,227			3,805,485
Accumulated deficit		(32,679,744	)		(30,154,509	)

Total stockholders’ deficit		(28,716,867	)		(26,263,666	)

Total liabilities, preferred stock and stockholders’ deficit	$	108,930,926		$	68,024,026

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

LendingClub Corporation

Condensed Statements of Operations

(Unaudited)


	Three Months Ended June 30,
	2010			2009
Revenues
Member loans held for investment
Interest income, net	$	233,145		$	332,709
Interest expense		(295,516	)		(336,786	)

Net interest loss, member loans held for investment		(62,371	)		(4,077	)
Provision for loan losses		(182,014	)		(463,675	)

Net interest loss after provision for loan losses		(244,385	)		(467,752	)


CM Loans and Notes held for investment at fair value
Interest income, CM Loans, net		1,365,237			160,988
Interest income, Notes, net		(116,623	)		(5,826	)

Net interest income, CM Loans and Notes, held for investment at fair value		1,248,614			155,162


Amortization of loan servicing rights		5,841			7,888
Other Revenue		95,158			7,850

Total income/(losses)		1,105,228			(296,852	)


Operating expenses
Sales, marketing and customer service		2,298,366			1,196,139
Engineering		498,370			426,071
General and administrative		833,727			941,885

Total operating expenses		3,630,463			2,564,095


Loss before provision for income taxes		(2,525,235	)		(2,860,947	)

Provision for income taxes		—			—

Net loss		(2,525,235	)		(2,860,947	)

Net loss attributable to common stockholders	$	(2,525,235	)	$	(2,860,947	)


Basic and diluted net loss per share	$	(0.30	)	$	(0.35	)

Weighted-average shares of common stock used in computing basic and diluted net loss per share		8,558,261			8,223,810

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

LendingClub Corporation

Condensed Statements of Cash Flows

(Unaudited)


	For the Three months Ended June 30,
	2010			2009
Cash flows from operating activities
Net loss	$	(2,525,235	)	$	(2,860,947	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		18,900			16,230
Amortization of debt issuance costs		—			1,760
Non-cash interest expense		1,739,927			324,967
Non-cash interest income		(1,662,808	)		(255,191	)
Stock based compensation expense		63,348			29,969
Change in fair value of loan servicing rights		7,118			10,184
Interest capitalized on loans		36,273			23,910
Provision for loan losses		182,014			463,675
Changes in operating assets and liabilities
Other receivables		(538,370	)		26,585
Deposits		7,342			93,198
Prepaid expenses and other assets		130,135			(261,476	)
Accounts payable		211,385			218,297
Accrued expenses		(139,123	)		(46,124	)
Deferred revenue		(7,118	)		(10,185	)

Net cash used in operating activities		(2,476,212	)		(2,225,148	)


Cash flows from investing activities
Member loans originated		(974,325	)		(3,897,175	)
Origination of CM Loans held at fair value		(28,619,475	)		(6,119,201	)
Repayment of member loans originated		1,369,697			1,257,177
Repayment of CM Loans held at fair value		6,589,223			904,606
Change in restricted cash		500,000			(800,000	)
Purchase of property and equipment		(14,655	)		(5,054	)

Net cash used in investing activities		(21,149,535	)		(8,659,647	)


Cash flows from financing activities:
Proceeds from issuance of notes payable		—			3,068,328
Proceeds from issuance of Notes held at fair value		28,619,475			6,119,200
Payments on notes payable		(1,518,713	)		(1,132,653	)
Payments on Notes held at fair value		(6,605,776	)		(906,116	)
Proceeds from issuance of Series A convertible preferred stock, net of issuance costs		24,387,945			—
Proceeds from issuance of common stock		7,898			3,071

Net cash provided by financing activities		44,890,829			7,151,830


Net increase (decrease) in cash and cash equivalents		21,265,082			(3,732,965	)

Cash and cash equivalents — beginning of period		2,572,174			11,998,541


Cash and cash equivalents — end of period	$	23,837,256		$	8,265,576


Supplemental disclosure of cash flow information:

Cash paid for interest	$	2,000,113		$	528,103


Supplemental disclosure of non-cash investing and financing activities:

Issuance of Series B convertible preferred stock warrants in exchange for term loan agreement	$	—		$	184,860

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

LENDINGCLUB CORPORATION

Notes to Condensed Financial Statements

(Unaudited)

1. Basis of Presentation

The condensed balance sheet as of June 30, 2010, the condensed statements of operations for the three months ended June 30, 2010 and 2009, respectively, and the condensed statements of cash flows for the three months ended June 30, 2010 and 2009, respectively, have been prepared by LendingClub Corporation, or Lending Club, and are unaudited. In the opinion of management, all necessary adjustments (which include only normal recurring adjustments) have been made for a fair presentation of interim results. Interim results are not necessarily indicative of the results for a full fiscal year. The condensed balance sheet as of March 31, 2010 has been derived from the audited financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These condensed financial statements should be read in conjunction with the audited financial statements and notes included in our Annual Report on Form 10-K for the year ended March 31, 2010.

2. Summary of Significant Accounting Policies

Liquidity

We have incurred operating losses since our inception. For the three months ended June 30, 2010 and 2009, we incurred net losses of $2,525,235 and $2,860,947, respectively. For the three months ended June 30, 2010 and 2009, we had negative cash flows from operations of $2,476,212 and $2,225,148, respectively. Additionally, we have an accumulated deficit of $32,679,744 and a stockholders’ deficit of $28,716,867 as of June 30, 2010.

Since our inception, we have financed our operations through debt and equity financing from various sources. We are dependent upon raising additional capital or seeking additional debt financing to fund our current operating plans. Failure to obtain sufficient debt and equity financing and, ultimately, to achieve profitable operations and positive cash flows from operations could adversely affect our ability to achieve our business objectives and continue as a going concern. Further, there can be no assurance as to the availability or terms upon which any required financing and capital might be available, if at all.

During the three months ended June 30, 2010, we issued 15,621,609 shares of Series C convertible preferred stock for aggregate cash consideration of $24,489,996. In connection with our private placement of Series C convertible preferred stock, we incurred transaction expenses, recorded as an offset to gross proceeds, of $102,051.

Use of estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires our management to make judgments and estimates that affect the amounts reported in our financial statements and accompanying notes. We base our estimates on historical experience and on various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.

Cash and cash equivalents

Cash and cash equivalents include various deposits with financial institutions in checking and short-term money market accounts. We consider all highly liquid investments with original maturity dates of three months or less to be cash equivalents. Such deposits periodically exceed amounts insured by the FDIC.

Restricted cash

At June 30, 2010, and March 31, 2010, restricted cash consisted primarily of funds held in escrow in certificates of deposit or money market accounts at the banks associated with the loan facilities described in Note 6 — Loans Payable , and by our operating banks as security for transactions on our platform.

Member loans held for investment

We fund member loans ourselves from time to time to ensure a sufficient level of funding for borrower members. The majority of funds for such loans were obtained through our borrowings under loan facilities with various entities (see Note 6 — Loans Payable ). As of June 30, 2010 and March 31, 2010, we had funded and retained an aggregate total of $20,663,900 and $19,689,575, respectively, of member loans to borrower members. These member loans are classified as held for investment based on management’s intent and ability to hold such member loans for the foreseeable future or to maturity. Member loans held for investment are carried at amortized cost reduced by a valuation allowance for estimated credit losses incurred as of the balance sheet date. A member loan’s cost includes its unpaid principal balance along with unearned income, comprised of fees charged to borrower members offset by incremental direct costs for loans originated by us. Unearned income is amortized ratably over the member loan’s contractual life using the effective interest method.

Allowance for loan losses

We may incur losses in connection with member loans we hold for investment if the borrower members fail to pay their monthly scheduled loan payments. We provide for incurred losses on these loans with an allowance for loan losses in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 310-10-35 guidance on the subsequent measurement of receivables and FASB ASC 450 guidance on accounting for contingencies. The allowance for loan losses is a valuation allowance established to provide for estimated incurred credit losses in the portfolio of member loans held for investment at the balance sheet date.

The allowance for loan losses is evaluated on a periodic basis by management, and represents an estimate of potential credit losses based on a variety of factors, including the composition and quality of the loan portfolio, loan specific information gathered through our collection efforts, delinquency levels, probable expected losses, current and historical charge-off and loss experience, current industry charge-off and loss experience, and general economic conditions. Determining the adequacy of the allowance for loan losses is subjective, complex and requires judgment by management about the effect of matters that are inherently uncertain, and actual losses may differ from our estimates.

A member loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the original loan agreement. Our member loan portfolio is comprised primarily of small groups of homogeneous, unsecured loans made to borrower members, which loans are evaluated for impairment at least every 120 days based on their payment status and information gathered through our collection efforts. Our estimate of the required allowance for loan losses is developed by estimating both the rate of default of the loans within each FICO band, a loan’s collection status, the borrower’s FICO score at or near the evaluation date, and the amount of probable loss in the event of a borrower member default. Loan losses are charged against the allowance when management believes the loss is confirmed. We make an initial assessment of whether a specific reserve is required on each delinquent loan no later than the 150th day of delinquency of that loan.

CM Loans and Notes held for investment at fair value

Starting October 13, 2008, our investors have had the opportunity to buy Notes issued by us. These Notes are special limited recourse obligations of Lending Club. Each series of Notes corresponds to a single corresponding member loan, or CM Loan originated through our platform. In conjunction with this new operating structure effective as of October 13, 2008, for CM Loans and Notes, we adopted the provisions of FASB ASC 825-10 guidance on the fair value option for financial assets, which permits companies to choose to measure certain financial instruments and certain other items at fair value. The standard requires that estimated unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. We applied the provisions of FASB ASC 825-10 to the Notes and CM Loans.

In accordance with the provisions of FASB ASC 825-10, we report the aggregate fair value of the CM Loans and Notes as separate line items in the assets and liabilities sections of our balance sheet using the methods and disclosures related to fair value accounting that are described in FASB ASC 820.

FASB ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Changes in fair value of the CM Loans and Notes, subject to the provisions of FASB ASC 825-10, are recognized in earnings, and fees and costs associated with the origination or acquisition of CM Loans are recognized as incurred rather than deferred.

We determined the fair value of the CM Loans and Notes in accordance with the fair value hierarchy established in FASB ASC 820 which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs, which generally requires significant management judgment, when measuring fair value. FASB ASC 820 establishes the following hierarchy for categorizing these inputs:

Level 1 —

Quoted market prices in active markets for identical assets or liabilities

Level 2 —

Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs); and

Level 3 —

Significant unobservable inputs.

As observable market prices are not available for similar assets and liabilities, we believe the CM Loans and Notes should be considered Level 3 financial instruments under FASB ASC 820. For CM Loans and Notes, the fair value is estimated using discounted cash flow methodologies adjusted for our expectation of both the rate of default of the CM Loans and Notes and the amount of loss in the event of default under those CM Loans and Notes. These estimates of default are recorded as interest expense related to our CM Loan originations and a corresponding interest income against the Notes in the period of loan origination.

Our obligation to pay principal and interest on any Note is equal to the pro-rata portion of the CM Loan payments, if any, we receive on the related CM Loan, net of our 1.00% service charge. As such, the fair value of the Notes is approximately equal to the fair value of the CM Loans, adjusted for the 1.00% service charge. Any unrealized gains or losses on the CM Loans and Notes for which the fair value option has been elected are reported separately in earnings. The effective interest rate associated with a Note will be less than the interest rate earned on the related CM Loan due to the 1.00% service charge. Accordingly, as market interest rates fluctuate, the resulting change in fair value of the fixed rate CM Loans and fixed rate Notes will not be the same. For additional discussion on this topic, see Note 5 — CM Loans and Notes Held for Investment at Fair Value .

Revenue recognition

Revenues primarily result from interest income and transaction fees earned on member loans originated through our online platform. Transaction fees include origination fees (borrower member paid) and servicing fees (investor member paid). Together we classify interest and fees earned on member loans as interest income (See Note 13 — Net Interest Income ).

Revenues related to member loan origination fees are recognized in accordance with FASB ASC 310-20 guidance on nonrefundable fees and other costs. The loan origination fee charged to each borrower member is determined by the credit grade of that borrower member’s loan and as of June 30, 2010, ranged from 2.25% to 4.50% of the aggregate member loan amount. If the loan is for a small business or for a self-employed borrower, we charge an additional 1.5% loan origination fee. The member loan origination fees are included in the annual percentage rate (“APR”) calculation provided to the borrower member and are subtracted from the gross loan proceeds prior to disbursement of the loan funds to the borrower member. A member loan is considered issued when we move funds on our platform from the investor members’ accounts to the borrower member’s account, following which we initiate an Automated Clearing House (“ACH”) transaction to transfer funds from our platform accounts to the borrower member’s bank account.

Lender servicing fee revenue is recognized in accordance with FASB ASC 860 guidance on transfers and servicing of financial assets. Currently, a 1.00% service charge, based on any payments received, is charged to the investor at the time that we receive any payments from the borrower member. The service charge is deducted from any payments received on a member loan before the net amounts of those payments are allocated to the investors’ accounts.

Our treatment of interest and fee income is determined by the category that each member loan origination falls into, which are:

•

Third Party Purchased Member Loans — Member loans originated through our platform and sold to third party investor members through April 7, 2008.

•

Member Loans Originated as CM Loans — CM Loans originated on or after October 13, 2008.

•

Lending Club Funded Member Loans — Member loans we funded ourselves, irrespective of when originated.

Third Party Purchased Member Loans

These member loans are considered to have been sold to the investor members. As such, we recognize only origination fee and servicing fee revenue on these member loans and do not provide an allowance for loan losses. We recognize a servicing asset and corresponding servicing liability as a result of this sale in accordance with FASB ASC 860, and amortize the asset into income as payments are received on the member loans.

At June 30, 2010 and March 31, 2010, gross future expected servicing fees related to these member loans was estimated to be $15,024 and $22,141, respectively, net of estimated future loan losses that would impair the value of this asset, which losses were estimated using those methods described in Allowance for loan losses in this footnote above. We have insufficient history to predict prepayments. However we believe that, based on our competitive interest rates, borrower members are unlikely to prepay their member loans in any great volume. For many borrower members, the main reason for securing a member loan with us is to provide needed cash flow at more attractive interest rates than could be obtained from other sources.

Further, because the earnings process is deemed to be complete at the time these member loans were transferred to the investors, and because there is no recourse to us in the event of default by the borrower member, we recognized 100% of the origination fee as revenue at the time the member loan was transferred to the purchaser and included the fee in interest income.

Member Loans Originated as CM Loans

Investor members are no longer able to purchase member loans. Rather, as described above, each member loan, or CM Loan, is recorded as a note receivable funded by us, while Notes, which are special limited recourse obligations of Lending Club corresponding to those CM Loans, are recorded as notes payable issued by us to investors. After we receive payments of principal and interest on the CM Loans, we in turn make principal and interest payments on the Notes. These principal payments reduce the carrying value of both the CM Loans and Notes. If we do not receive a payment on the CM Loan, we are not obligated to and will not make any payments on the corresponding Notes. In light of this new structure, we adopted and account for the CM Loans and Notes under the provisions of FASB ASC 825 as described above.

We do not directly record servicing fee revenue from these CM Loans, but rather recognize interest income on our CM Loans related to these member loans based on the full amount of the loan payment at the stated interest rate to the borrower member without regard to the servicing fee. We correspondingly record interest expense on the corresponding Note based on the post-service fee payment we make to our investor members, which results in an interest rate and an interest expense on these Notes which is lower than that for the CM Loans. Origination fees on these CM Loans are recognized upon origination and included in interest income.

In accordance with FASB ASC 825, we include the estimated amount of unrealized gains or losses included in earnings during the period attributable to changes in instrument-specific credit risk and how the estimated unrealized gains or losses attributed to changes in instrument-specific credit risk were determined. As such, we do not record a specific loan loss allowance related to CM Loans and Notes in which we have elected the fair value option. Rather, we estimate the fair value of CM Loans and Notes using discounted cash flow methodologies adjusted for our expectation of both the rate of default of the CM Loans and Notes and the amount of loss in the event of default using methodologies similar to those used for member loans we have funded ourselves. At origination and at each reporting period, we recognize as interest expense an amount equal to our estimated loan losses for the CM Loans, and interest income in an amount equal to our estimated loan losses on these Notes. As the CM Loans are amortizing at slightly higher interest rates than the Notes, the amount of interest expense related to estimated loan losses on the CM Loans will always be slightly higher than the estimated interest income from loan losses on the Notes. Our net interest income related to these CM Loans and Notes is further described in

Note 13— Net Interest Income .

Lending Club Funded Member Loans

We have ourselves funded approximately $20.7 million of member loans originated through the platform. When a member loan has been funded in whole, or in part, by us, we retain the portion of the borrower member’s monthly loan payment that corresponds to the percentage of the member loan that we have funded. In these cases, we record interest income on these notes receivable.

Origination fees from member loans funded by us are offset by our direct loan origination costs. The net amount is initially deferred and subsequently amortized ratably over the term of the member loan as an adjustment to yield, and is reported in the accompanying statements of operations as interest income. As of June 30, 2010 and March 31, 2010, we had net unamortized deferred loan origination costs of $15,110 and $51,383, respectively (see

Note 4 — Member Loans Held for Investment ). These deferred loan origination costs will be amortized monthly as interest expense/(income) through the remaining life of the related, member loans.

Concentrations of credit risk

Financial instruments that potentially subject us to significant concentrations of credit risk, consist principally of cash, cash equivalents, restricted cash, member loans held for investment, and CM Loans held at fair value. We hold our cash, cash equivalents and restricted cash in accounts at high-credit quality financial institutions. We are exposed to credit risk in the event of default by these institutions to the extent the amount recorded on the balance sheet periodically exceeds the FDIC insured amounts. We perform credit evaluations of our borrower members’ financial condition and do not allow borrower members to have more than two member loans outstanding at any one time. We do not require collateral for member loans, but we maintain allowances for potential credit losses, as described above.

Stock-based compensation

We apply FASB ASC 718 guidance regarding the stock based compensation to account for equity awards made to employees. FASB ASC 718 requires all share-based payments made to employees, including grants of employee stock options, restricted stock and employee stock purchase rights, to be recognized in the financial statements based on their respective grant date fair values, and does not allow the previously permitted pro forma disclosure-only method as an alternative to financial statement recognition. FASB ASC 718 also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under previous literature.

FASB ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service periods. We have estimated the fair value of each award as of the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model considers, among other factors, the expected life of the award and the expected volatility of our stock price.

FASB ASC 718 also requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Stock-based compensation expense is recorded net of estimated forfeitures, such that expense is recorded only for those stock-based awards that are expected to vest. Share-based awards issued to non-employees are accounted for in accordance with provisions of FASB ASC 718 and FASB ASC 505-50 guidance on equity based payment to non-employees.

New accounting pronouncements

In January 2010, FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures,” that requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. The FASB also clarified existing fair-value measurement disclosure guidance about the level of disaggregation, inputs, and valuation techniques. The new and revised disclosures are required to be implemented in fiscal years beginning after December 15, 2009. We adopted this standard during the quarter ending June 30, 2010. The adoption did not have a material impact on our consolidated financial statements.

3. Net Loss Attributable to Common Stockholders

We compute net loss per share in accordance with FASB ASC 260 guidance on this subject. Under FASB ASC 260, basic net loss per share is computed by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

The following table details the computation of the net loss per share (unaudited):


	Three Months Ended June 30,
	2010			2009

Net loss	$	(2,525,235	)	$	(2,860,947	)

Weighted-average common shares outstanding, basic and diluted		8,558,261			8,223,810
Net loss per common share:

Basic and diluted	$	(0.30	)	$	(0.35	)

Due to the losses for each of the periods presented in the table below, the following potentially dilutive shares are excluded from the basic and diluted net loss per share calculation as including such shares in the calculation would be anti-dilutive.


	Three Months Ended June 30,
(Unaudited)	2010		2009
Excluded Securities:
Weighted-average Series A convertible preferred stock		15,740,285		15,740,285
Weighted-average Series B convertible preferred stock		16,036,346		16,036,346
Weighted-average Series C convertible preferred stock		13,389,951		—
Weighted-average restricted stock options issued to employees		3,863,143		2,317,135
Weighted-average warrants and contingent shares outstanding		1,744,383		1,771,912

Total common stock equivalents excluded from diluted net loss per share		50,774,108		35,865,678

4. Member Loans Held for Investment

Member loans funded by us and held for investment are as follows:


	As of June 30,
	2010			As of March 31,
	(unaudited)			2010
Unsecured member loans, net of chargeoffs	$	7,669,476		$	8,275,561
Deferred origination costs, net		15,111			51,383

		7,684,586			8,326,944
Allowance for loan losses		(753,060	)		(781,758	)

Member loans held for investment, net	$	6,931,527		$	7,545,186

As of June 30, 2010, we had identified and fully reserved $203,893 on 54 loans, and our aggregate allowance for loan losses was $753,060. As of March 31, 2010, we had identified and fully reserved $144,312 on 29 loans. For the three months ended June 30, 2010, we charged off a total of 48 loans with an aggregate principal balance of $210,712, while during the three months ended June 30, 2009, we charged off a total of 33 loans with an aggregate principal balance of $228,875.

Changes in the allowance for loan losses, the composition of the allowance for loan losses and the allowance for loan losses were as follows (unaudited except balance at March 31, 2010):


Balance at March 31, 2010	$	781,758
Chargeoffs		(210,712	)
Provision for loan losses		182,014

Balance at June 30, 2010	$	753,060

We believe that the credit and interest rate risks of our member loans held for investment are substantially similar to those of our CM Loans, which we measure at fair value (see

Note 5 — CM Loans and Notes Held for Investment at Fair Value ). In fact, both of these instruments are originated through our lending platform, and in many instances a portion of a member loan may be carried as a member loan held for investment, while another portion of that same member loan will become a CM Loan against which related Notes will be issued. Further, because of the similarity of these two instruments, our methodology for recording realized and unrealized gains on our CM Loans is substantially similar to the methodologies we use to measure our provision for loan loss allowances and chargeoffs on our member loans held for investment (see

Note 2 — Summary of Significant Accounting Policies, Revenue Recognition, Member Loans Originated as CM Loans ) . Based on these similarities, we therefore believe that the fair value of our member loans held for investment is equivalent to their carrying value.

5. CM Loans and Notes Held for Investment at Fair Value

At June 30, 2010, we had the following assets and liabilities measured at fair value on a recurring basis (unaudited):


	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Fair Value

Assets
CM Loans		—		—	$	76,422,175	$	76,422,175

Liabilities
Notes		—		—	$	76,392,955	$	76,392,955

Both observable and unobservable inputs may be used to determine the fair value of positions that we have classified within the Level 3 category. As a result, the realized and unrealized gains and losses for assets and liabilities within the Level 3 category presented in the tables below may include changes in fair value that were attributable to both observable and unobservable inputs. The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended June 30, 2010 (unaudited except balances at March 31, 2010):


	CM Loans			Notes
Fair value at March 31, 2010	$	56,056,228		$	56,042,064
Originations		28,619.475			28,619,475
Principal repayments		(6,589,223	)		(6,605,776	)

Outstanding principal		78,086,480			78,055,763
Realized and unrealized gains/(losses) included in earnings		(1,664,305	)		(1,662,808	)

Fair value at June 30, 2010	$	76,422,175		$	76,392,955

The majority of realized and unrealized gains/(losses) included in earnings are attributable to changes in instrument-specific credit risk and are reported on the “Interest income, CM Loans, net” and “Interest income, Notes, net” line items. The majority of total realized and unrealized gains/(losses) were related to Level 3 instruments held at June 30, 2010.

At June 30, 2010, we had thirty CM Loans representing $243,232 of outstanding CM Loan principal, $79,617 of CM Loan fair value, and $79,563 of Notes principal fair value which were 90 days or more delinquent. At June 30, 2010, we had fifty seven CM Loans representing $394,611 of outstanding CM Loan principal, $8,960 of CM Loan fair value and $8,948 of Notes principal fair value which were on non-accrual status.

6. Loans Payable

Loans payable consists of the following:


	As of June 30,
	2010			As of March 31,
	(unaudited)			2010
Growth capital term loan	$	2,407,018		$	2,912,421
Unamortized discount on growth capital term loan		(73,731	)		(90,260	)
Financing term loan		3,011,140			3,600,082
Unamortized discount on financing term loan		(119,729	)		(150,595	)
Private placement notes		1,941,462			2,365,830
Unamortized discount on private placement notes		(102,932	)		(130,371	)

Total loans payable	$	7,063,228		$	8,507,107

At June 30, 2010, future maturities due on all loans payable were as follows (unaudited):


Year ending March 31,
2011	$	4,388,431
2012		2,601,694
2013		369,488

		7,359,620
Less amount representing debt discount		(296,392	)

Total loans payable	$	7,063,228

Growth capital term loan

In October 2007, we entered into a loan and security agreement with a bank that allowed for borrowings of up to $3,000,000 for working capital needs. In October 2008, we amended the agreement to increase available borrowing to $4,000,000. The loan is secured by substantially all of our assets except our intellectual property rights, payments received on our CM Loans, and certain deposit accounts. Borrowings bear interest at a fixed rate of 8.5% per annum. Each advance is repayable in 36 equal monthly installments of principal and interest commencing the first day of the month following the advance. The growth capital term loan also requires us to maintain a certificate of deposit with the bank of $150,000 until repayment. This amount is included in restricted cash in the accompanying balance sheets. In December 2008, we drew down the remaining $1,000,000 of availability under this line. At June 30, 2010, no amounts were available for future financing under this agreement.

In connection with this loan agreement and its subsequent amendments, we issued fully exercisable warrants to purchase 164,320 shares of Series A convertible preferred stock at an exercise price of $1.065 per share, for which we recorded debt discounts of $135,696. Amortization of the debt discounts recorded for this loan, as amended, were $16,529 and $13,961 in the three months ended June 30, 2010 and 2009, respectively, and were recorded as interest expense.

Financing term loan

In February 2008, we entered into a loan and security agreement with a lender that provided for financing of up to $5,000,000 to be lent out to borrower members funded by us. The financing term loan was available for advances through June 30, 2008, but was subsequently amended in October 2008 to allow availability through December 31, 2008. The interest rate is fixed at 10.0% per annum. The agreement requires that proceeds received from borrower member payments on member loans funded by us be used to pay down the financing term loan. The financing term loan is secured by substantially all of our assets except our intellectual property rights, payments received on the CM Loans, and certain deposit accounts. The financing term loan requires us to maintain a certificate of deposit with a bank of $250,000 until repayment. This amount is included in restricted cash in the accompanying balance sheets. At June 30, 2010, no amounts were available for future financing under this agreement.

In connection with this loan agreement, we issued fully exercisable warrants to purchase an aggregate of 328,637 shares of Series A convertible preferred stock at a price of $1.065 per share and recorded total debt discounts of $277,962. Amortization of the debt discounts recorded for this loan were $30,866 and $28,299 in the three months ended June 30, 2010 and 2009, respectively, and were recorded as interest expense.

May 2009 term loan

In May 2009, we entered into another secured loan facility, the May 2009 term loan, with our growth capital term loan and financing term loan lenders, and amended our prior growth capital term loan and financing term loan to accommodate the new borrowing. The May 2009 term loan allows us to borrow up to $4,000,000 at an interest rate of 10.0% per annum. We also paid a commitment fee of $20,000 and $9,850 of the lenders’ expenses in connection with the facility. The borrowings were used to fund member loans. The borrowings are secured by a blanket lien on substantially all of our assets, except our intellectual property rights, certain deposit accounts and payments received on CM Loans. Additionally, the May 2009 term loan was secured with a certificate of deposit in the amount of $300,000 until repayment. This amount is included in restricted cash in the accompanying balance sheets. The lenders also received the right to invest up to $500,000 each in our next round of equity financing on the same terms offered to other investors. On a monthly basis, we also agreed to maintain a minimum collateral ratio calculated as (i) the sum of the certificate of deposit collateral and the outstanding balance of member loans funded with the borrowing which are current in their payment status to (ii) the outstanding balance under the loan facility. In the event that the minimum collateral ratio is less than the minimum allowed under the agreement, we must increase the certificate of deposit to meet the minimum collateral ratio.

Effective August 3, 2009, we consolidated the growth capital term loan, the financing term loan and the May 2009 term loan into two loan agreements by executing an amended and restated growth capital term loan and an amended and restated financing term loan, together the “Newly Restated Agreements.” The terms of the Newly Restated Agreements are substantially the same as those of the three prior agreements, including that the borrowings continue to be secured by a blanket lien on substantially all of our assets, except for our intellectual property rights, certain deposit accounts, and payments we receive on the CM Loans. Additionally, the Newly Restated Agreement continues to require that Lending Club maintain combined certificates of deposit in the amount of $700,000 as collateral until repayment. Further, we agreed in the Newly Restated Agreements to maintain the same minimum collateral ratio as established in the May 2009 term loan. As of June 30, 2010, we had fully drawn down the entire $13,000,000 of combined availability under the Newly Restated Agreements.

In connection with this loan facility, we issued fully exercisable warrants to purchase an aggregate of 187,090 shares of Series B convertible preferred stock at a price of $0.7483 per share and recorded total debt discounts of $277,962. Amortizations of those debt discounts are included in the amortizations of debt discounts presented above for the growth capital term loan and the financing term loan.

Private placement notes

During the year ended March 31, 2009, we entered into a series of loan and security agreements with accredited investors providing for loans evidenced by notes payable totaling $4,707,964. Each note is repayable over three years and bears interest at the rate of 12% per annum. In June and July 2009, we issued an additional $200,000 of notes which bear interest at the rate of 8% per annum. We are using the proceeds of these notes to fund member loans. In connection with origination of these notes payable, we issued fully exercisable warrants to purchase an aggregate of 514,817 shares of Series A convertible preferred stock (see

Note 9 — Preferred Stock ). We recorded a debt discount of $329,271, and amortization of the debt discount was recorded as interest expense of $27,439 and $27,439 for the three months ended June 30, 2010 and 2009, respectively.

8. Related Party Transactions

Of the private placement notes described in

Note 6 — Loans Payable , $450,000 of original principal was invested by related parties on terms identical to those of given to the other private placement note investors. At June 30, 2010 and 2009, the outstanding principal balance of these notes was $174,762 and $323,315, respectively.

9. Preferred Stock

Convertible preferred stock

In March 2009, we filed an Amended and Restated Certificate of Incorporation with the State of Delaware, which increased the total number of shares which we are authorized to issue from 49,500,000 shares to 83,200,000 shares, 50,000,000 of which are designated as common stock, and 33,200,000 of which are designated as preferred stock.

In July 2009, we filed an Amended and Restated Certificate of Incorporation with the State of Delaware, which increased the total number of shares which we are authorized to issue from 83,200,000 shares to 83,600,000 shares, 50,000,000 of which are designated as common stock, and 33,600,000 of which are designated as preferred stock.

In April 2010, we filed an Amended and Restated Certificate of Incorporation with the State of Delaware, which increased the total number of shares which we are authorized to issue from 83,600,000 shares to 117,116,801 shares, 68,000,000 of which are designated as common stock, 17,006,275 of which are designated as Series A Preferred Stock, 16,410,526 of which are designated as Series B Preferred Stock, and 15,700,000 of which are designated as Series C Preferred Stock.

A complete description of the rights, preferences, privileges and restrictions of our common stock and the Series A, Series B, and Series C convertible preferred stock is included in the Amended and Restated Certificate of Incorporation, as amended. The outstanding shares of convertible preferred stock are not redeemable. None of our convertible preferred stock is considered permanent equity based on the guidance of SEC Accounting Series Release No. 268, “Presentation in Financial Statements of Redeemable Preferred Stocks.” The significant terms of outstanding Series A, Series B, and Series C convertible preferred stock are as follows:

Conversion — Each share of convertible preferred stock is convertible, at the option of the holder, initially, into one share of common stock (subject to adjustments for events of dilution). Each share of convertible preferred stock will each automatically be converted upon the earlier of (i) the closing of an underwritten public offering of our common stock with aggregate gross proceeds that are at least $30,000,000 or (ii) the consent of the holders of a 65% majority of outstanding shares of convertible preferred stock, voting together as a single class, on an as-converted to common stock basis. The Company’s preferred stock agreements contain certain anti-dilution provisions, whereby if the Company issues additional shares of capital stock for an effective price lower than the conversion price for a series of preferred stock immediately prior to such issue, then the existing conversion price of such series of preferred stock will be reduced. The Company determined that while its convertible preferred stock contains certain anti-dilution features, the conversion feature embedded within its convertible preferred stock does not require bifurcation under the guidance of FASB ASC 815, Derivatives and Hedging Activities .

Liquidation preference — Upon any liquidation, winding up or dissolution of us, whether voluntary or involuntary (a “ Liquidation Event ”), before any distribution or payment shall be made to the holders of any common stock, the holders of convertible preferred stock shall, on a pari passu basis, be entitled to receive by reason of their ownership of such stock, an amount per share of Series A convertible preferred stock equal to $1.065 (as adjusted for stock splits recapitalizations and the like) plus all declared and unpaid dividends (the “ Series A Preferred Liquidation Preference ”), an amount per share of Series B convertible preferred stock equal to $0.7483 (as adjusted for stock splits recapitalizations and the like) plus all declared and unpaid dividends (the “ Series B Preferred Liquidation Preference ”) and an amount per share of Series C convertible preferred stock equal to $1.5677 (as adjusted for stock splits recapitalizations and the like). However, if upon any such Liquidation Event, the assets of ours shall be insufficient to make payment in full to all holders of convertible preferred stock of their respective liquidation preferences, then the entire assets of ours legally available for distribution shall be distributed with equal priority between the holders of based upon the amounts such series was to receive. Any excess assets, after payment in full of the liquidation preferences to the convertible preferred stockholders, are then allocated to the holders of common and preferred stockholders, pro-rata, on an as-if-converted to common stock basis.

Dividends — If and when declared by the Board of Directors, the holders of Series A, Series B, and Series C convertible preferred stock, on a pari passu basis, will be entitled to receive non-cumulative dividends at a rate of 6% per annum in preference to any dividends on common stock (subject to adjustment for certain events). The holders of Series A, Series B, and Series C convertible preferred stock are also entitled to receive with common stockholders, on an as-if-converted basis, any additional dividends issued by us.

Voting rights — Generally, preferred stockholders have one vote for each share of common stock that would be issuable upon conversion of preferred stock. Voting as a separate class, and on an as-if-converted to common stock basis, the Series A convertible preferred stockholders are entitled to elect two members of the Board of Directors and the holders of Series B convertible preferred stockholders are entitled to elect one member of the Board of Directors. The Series C convertible preferred stockholders are not entitled to elect a member of the Board of Directors. The holders of common stock, voting as a separate class, are entitled to elect one member of the Board of Directors. The remaining directors are elected by the preferred stockholders and common stockholders voting together as a single class on an as-if-converted to common stock basis.

10. Stockholders’ Deficit

Common stock

As of June 30, 2010, we have reserved shares of common stock for future issuance as follows (unaudited):


Convertible preferred stock, Series A			15,740,285
Convertible preferred stock, Series B			16,036,346
Convertible preferred stock, Series C			15,621,609
Options to purchase common stock			5,444,250
Options available for future issuance			3,498,517
Convertible preferred Series A stock warrants			1,265,990
Convertible preferred Series B stock warrants			374,180
Common stock warrants			110,463

Total common stock reserved for future issuance			58,091,640

During the three months ended June 30, 2010 we issued 29,250 shares of common stock in exchange for proceeds of $7,898 upon the exercise of employee stock options.

In June 2010, in connection with the issuance of Notes, we issued fully exercisable warrants to purchase 6,463 shares of common stock at $1.5677 per share. The warrants may be exercised at any time on or before June 2020. The fair value of these warrants was estimated to be $788 using the Black-Scholes option pricing model with the following assumptions: a volatility of 46.31%, a contractual life of 10 years, no dividend yield and a risk-free interest rate of 3.05%. The entire warrant value of $788 was expensed as interest expense in the three months ended June 30, 2010.

11. Stock-Based Compensation

Under our 2007 Stock Incentive Plan, or the Option Plan, we may grant options to purchase shares of common stock to employees, executives, directors and consultants at exercise prices not less than the fair market value at date of grant for incentive stock options and not less than 85% of the fair market value at the date of grant for non-statutory options. An aggregate of 9,096,778 shares have been authorized for issuance under the Option Plan. These options generally expire ten years from the date of grant and generally vest 25% twelve months from the date of grant, and ratably over the next 12 quarters thereafter.

The Option Plan allows for employees to early exercise options. If an employee’s employment is terminated prior to fully vesting in options that have been early exercised, we may repurchase the common stock associated with unvested options at the original exercise price. As of June 30, 2010, none of the option holders have chosen to early exercise.

We used the Black-Scholes option pricing model for estimating the fair value of stock options granted with the following assumptions for the three months ended June 30, 2010 and 2009 (unaudited):


	Three Months Ended
	June 30,
	2010			2009
Expected dividend yield		0	%		0	%
Expected volatility		46.65	%		53.8	%
Risk-free interest rates		2.45	%		2.81	%
Expected life	6.08 years			6.05 years

We have elected to use the calculated-value method under FASB ASC 718 to calculate the volatility assumption for three months ended June 30, 2010 and 2009. The expected life assumption was determined based upon historical data gathered from public peer companies. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. We have paid no cash dividends and do not anticipate paying any cash dividends in the foreseeable future and therefore used an expected dividend yield of zero in our option-pricing models.

Options activity under the Option Plan is summarized as follows (unaudited except balances at March 31, 2010):


	Options Outstanding						Vested and Expected to Vest
									Weighted Average
	Shares Available			Number			Number		Exercise Price per
	for Grant			of Shares			of Shares		Share
Balances at March 31, 2010		3,484,739			2,938,500			1,041,062	$	0.25
Additional Shares Authorized		2,548,778
Options Granted		(2,535,000	)		2,535,000			—		0.41
Options Exercised		—			(29,250	)		—		0.27

Balances at June 30, 2010		3,498,517			5,444,250			4,922,217	$	0.32

A summary by exercise price of outstanding options, vested options, and options vested and expected to vest at June 30, 2010, is as follows (unaudited):


Exercise Price and		Weighted Average Remaining
Weighted Average	Number of Options	Contractual Life of		Number of Options Vested
Exercise Price	Outstanding	Outstanding Options (Years)	Number of Options Vested	and Expected to Vest
$0.23	1,463,000	9.04	299,000	1,317,500
$0.27	1,446,250	7.40	968,984	1,386,592
$0.41	2,535,000	9.00	—	2,218,125

A summary by outstanding options, vested options and options vested and expected to vest at June 30, 2010, is as follows (unaudited):


			Weighted Average Remaining		Weighted Average
	Number of Options		Contractual Life (Years)		Exercise Price
Options Outstanding		5,444,250		8.27	$	0.32

Vested Options		1,267,984		7.81	$	0.26

Options Vested and Expected to Vest		4,922,217		8.25	$	0.32

The following table presents details of stock-based compensation expenses by functional line item for the periods indicated (unaudited):


	Three Months Ended
	June 30,
	2010			2009
Sales, marketing and customer service	$	20,054		$	7,464
Engineering		15,154			11,347
General and administrative		28,140			11,158

		63,348			29,969

Less stock-based compensation expense for non-employees		(1,441	)		(1,416	)


Total employee stock-based compensation expense	$	61,907		$	28,553

No income tax benefit has been recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options.

During the three months ended June 30, 2010 and 2009, we granted stock options to purchase 2,535,000 and 1,624,478 shares, respectively, of common stock with a weighted average grant date fair value of $0.20 and $0.12, respectively, per share. As of June 30, 2010, total unrecognized compensation cost was $631,818. These costs are expected to be recognized through October 2014.

12. Income Taxes

As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves determining our income tax expense or benefit together with calculating the deferred income tax expense or benefit related to temporary differences resulting from differing treatment of items, such as deferred revenue or deductibility of certain intangible assets, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the accompanying balance sheet. We must then assess the likelihood that the deferred tax assets will be recovered through the generation of future taxable income.

As of June 30, 2010, we continued to have a full valuation allowance against our net deferred tax assets. We believe that our deferred tax assets will more likely than not be realized. For the three months ended June 30, 2010, we were in a loss position. We did not have any foreign operations and therefore did not record any tax provisions during the period.

We adopted the provisions of FASB ASC 740 on April 1, 2007. FASB ASC 740 clarifies the accounting for uncertainty in tax positions and requires that companies recognize in their financial statements the largest amount of a tax position that is more-likely-than-not to be sustained upon audit, based on the technical merits of the position. The adoption of FASB ASC 740 did not affect our financial condition, results of operations or cash flows for the fiscal year ended March 31, 2010.

We file income tax returns in the U.S. federal jurisdiction and California jurisdictions. Our tax years for 2006 and forward are subject to examination by the U.S. and California tax authorities as the statutes of limitation remain open.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of FASB ASC 740, we did not have any unrecognized tax benefits and associated accrued interest or penalties nor was any interest expense or penalties recognized during the fiscal year ended March 31, 2010.

13. Net Interest Income

Revenues primarily result from interest income and transaction fees. Transaction fees include origination fees (borrower member paid) and investor service charges (investor paid). Interest income is accrued and recorded in the accompanying statements of operations as collected. We classify interest and fees earned on our member loans together as interest income in these financial statements.

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The following table summarizes net interest income (expense) as follows (unaudited):


	Three Months Ended
	June 30,
	2010			2009
Interest income:
Member loans held for investment	$	226,828		$	316,119
CM Loans held for investment at fair value
Interest and fees earned on CM Loans		3,029,542			416,256
Credit risk related adjustment (interest expense)		(1,664,305	)		(255,268	)
Cash and cash equivalents		6,317			16,590

Total interest income	$	1,598,382		$	493,697


Interest expense:
Notes held for investment at fair value
Interest and fees expensed on Notes	$	1,779,431		$	261,016
Credit risk related adjustment (interest income)		(1,662,808	)		(255,190	)
Loans payable		220,682			267,087
Amortization of debt discount		74,834			69,699

Total interest expense	$	412,139		$	342,612

A reconciliation of the table above to our Condensed Statements of Operations is as follows (unaudited):


Per table above:
Total interest income	$	1,598,382		$	493,697
Total interest expense		(412,139	)		(342,612	)

	$	1,186,243		$	151,085


Per Condensed Statements of Operations:
Net interest income (loss), loans held for investment	$	(62,371	)	$	(4,077	)
Net interest income (loss), CM Loans and Notes held for investment at fair value		1,248,614			155,162

	$	1,186,243		$	151,085

14. Commitments and Contingencies

Operating leases

We lease our principal administrative office under a two year operating lease, a satellite office in Connecticut under a one year lease agreement, certain service facilities, as well as some of our office equipment. Rent expense was $43,430 and $37,093 for the three months ended June 30, 2010 and 2009, respectively.

Securities law compliance

From May 2007 through April 2008, we sold approximately $7.4 million of member loans to investor members who were unaffiliated with us through our platform whereby we assigned promissory notes directly to investor members. We did not register the offer and sale of the promissory notes offered and sold through our platform under the Securities Act of 1933 or under the registration or qualification provisions of the state securities laws. Our management believes that the question of whether or not the operation of our platform involved an offer or sale of a “security” involved a complicated factual and legal analysis that was uncertain. If the sales of promissory notes offered through our platform were viewed as a securities offering, we would have failed to comply with the registration and qualification requirements of federal and state law, and investor members who hold these promissory notes may be entitled to rescission of unpaid principal, plus statutory interest. Generally, the federal statute of limitations for noncompliance with the requirement to register securities under the Securities Act of 1933 is one year from the violation. The statute of limitations periods under state securities laws for sales of unregistered securities may extend for a longer period of time, and certain state securities laws empower state officials to seek restitution or rescission remedies for purchasers of unregistered securities. We have received inquiries from a number of states in respect of these prior sales of loans; neither the SEC nor any state, however, has taken or threatened administrative action or litigation over such loan sales.

Our decision to restructure our operations and cease sales of promissory notes offered through the platform effective April 7, 2008 limited this contingent liability so that it only relates to the period from the launch of our platform in May 2007 until April 7, 2008, the termination of sales under our prior operating structure.

We have not recorded an accrued loss contingency under FASB ASC 450 in connection with this contingent liability. Accounting for loss contingencies pursuant to FASB ASC 450 involves the existence of a condition, situation or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future event(s) occur or fail to occur. Additionally, accounting for a loss contingency requires management to assess each event as probable, reasonably possible or remote. Probable is defined as the future event or events are likely to occur. Reasonably possible is defined as the chance of the future event or events occurring is more than remote but less than probable, while remote is defined as the chance of the future event or events occurring is slight. An estimated loss in connection with a loss contingency shall be recorded by a charge to current operations if both of the following conditions are met: first, the amount can be reasonably estimated; and second, the information available prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements. We have assessed the contingent liability related to prior sales of member loans on the platform in accordance with FASB ASC 450 and have determined that the occurrence of the contingency is reasonably possible. In accordance with FASB ASC 450, we have estimated the range of loss as of June 30, 2010 as between $0 and $1.29 million, which is, as of June 30, 2010, the aggregate outstanding principal balance of member loans sold to persons unaffiliated with us from inception through April 7, 2008. In making this assessment, we considered our view, described above, that analyzing whether or not the operation of our platform involved an offer or sale of a “security” involved a complicated factual and legal analysis that was uncertain. In addition, we considered our belief that investor members have received what they expected to receive in the transactions under our prior operating structure. Generally, the performance of the outstanding member loans had, in our view, delivered to investor members the benefits they expected to receive in using our platform.

Due to the legal uncertainty regarding the sales of promissory notes offered through our platform under our prior operating structure as described above, we decided to restructure our operations to resolve such uncertainty. We began our implementation of this decision on April 7, 2008, when we ceased offering investor members the opportunity to make purchases on our platform, ceased accepting new investor member registrations and ceased allowing new funding commitments from existing investor members. We then filed the registration statement (the “Registration Statement”) with the SEC to register the issuance and sale of Notes under our new operating structure. We resumed accepting new investor members and allowing transactions with investor members starting October 13, 2008, after the date the Registration Statement became effective.

The change in the operation of our platform, as well as our adoption of new accounting pronouncements, had a significant impact on our financial statements and results of operations for periods following the effective date of the Registration Statement. Because the Notes are a novel financing structure, we will continue to evaluate the impact the changes this shift in our operations will have on our financial condition, results of operations and cash flows.

We adopted the provisions of FASB ASC 820 and FASB ASC 825. FASB ASC 825 permits companies to choose to measure certain financial instruments and certain other items at fair value. FASB ASC 825 requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. We applied the provisions of FASB ASC 825 to the CM Loans and Notes issued under our prospectus, but did not apply the provisions of FASB ASC 825 to prior member loans which were sold to our investor members.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition to historical information, this quarterly report contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in Part II Item 1A “Risk Factors.” Actual results could differ materially. Important factors that could cause actual results to differ materially include, but are not limited to; the level of demand for our products and services; the intensity of competition; our ability to effectively expand and improve internal infrastructure; and adverse financial, customer and employee consequences that might result to us if litigation were to be initiated and resolved in an adverse manner to us. For a more detailed discussion of the risks relating to our business, readers should refer to Part II Item 1A found later in this report entitled “Risk Factors,” as well as the “Risk Factors” section of the prospectus for the Notes dated May 24, 2010, and filed with the SEC, as may be amended or supplemented from time to time. Readers are cautioned not to place undue reliance on the forward-looking statements, including statements regarding our expectations, beliefs, intentions or strategies regarding the future, which speak only as of the date of this quarterly report. We assume no obligation to update these forward-looking statements.

Overview

We are an on-line financial platform platform. We allow qualified borrower members to obtain loans (which we refer to as “member loans”) with interest rates that they find attractive. Since October 13, 2008, investors have had the opportunity to purchase Member Payment Dependent Notes (which we refer to as the “Notes”) issued by us, with each series of Notes corresponding to an individual member loan originated on our platform (which we refer to as “CM Loans”). The Notes are dependent for payment on CM Loans and offer interest rates and credit characteristics that the investors find attractive From the launch of our platform in May 2007 until April 7, 2008, we did not offer Notes on our platform. Instead, our platform allowed investor members to purchase assignments of unsecured member loans directly. Since November 2007, we have also funded member loans ourselves, which we refer to as “member loans held for investment” based on our intent and ability to hold the loans for the foreseeable future or to maturity.

All member loans are unsecured obligations of individual borrower members with fixed interest rates and three-year or five-year maturities. The member loans are posted on our website, funded by WebBank, an FDIC-insured, state-chartered industrial bank organized under the laws of the state of Utah, at closing and immediately assigned to us upon closing. As a part of operating our platform, we verify the identity of members, obtain borrower members’ credit characteristics from consumer reporting agencies such as TransUnion, Experian or Equifax and screen borrower members for eligibility to participate in the platform and facilitate the posting of member loans. We service member loans on an ongoing basis.

We were incorporated in Delaware in October 2006, and in May 2007, began operations as an application on Facebook.com. In August 2007, we conducted a venture capital financing round and expanded our operations with the launch of our public website, www.lendingclub.com. As of June 30, 2010, our platform has facilitated approximately 13,455 member loans since our launch in May 2007.

We have been operating since December 2007 pursuant to an agreement with WebBank. WebBank serves as the lender for all member loans originated through our platform. Our agreement with WebBank has enabled us to make our platform available to borrower members on a uniform basis nationwide, except that as of January 31, 2010, we do not currently offer member loans in Idaho, Iowa, Indiana, Kansas, Maine, Mississippi, Nebraska, North Carolina, North Dakota and Tennessee. We pay WebBank a monthly service fee based on the amount of loan proceeds disbursed by WebBank in each month, subject to a minimum monthly fee.

We have a limited operating history and have incurred net losses since our inception. Our net loss was $2,525,235 for the three months ended June 30, 2010. We earn revenues from processing fees charged to members, primarily a borrower member origination fee and an investor service charge. We also earn interest income on member loans that we fund ourselves. At this stage of our development, we have funded our operations primarily with proceeds from our venture capital financings, our credit facilities and debt and equity issuances, which are described below under “Liquidity and Capital Resources.” We also relied on our credit facilities and debt issuances to borrow funds, which we used to fund member loans ourselves. Our credit facilities are completely drawn down at this time. Over time, we expect that the number of borrower and investor members and the volume of member loans originated through our platform will increase, and that we will generate increased revenue from borrower origination fees and investor service charges. Our decision to temporarily stop accepting investor member commitments, effective from April 7, 2008 until October 13, 2008, slowed the ramp up of our operations and expended liquidity as we funded member loans ourselves during this period.

Our operating plan allows for a continuation of the current strategy of raising capital through debt and equity financings to finance our operations until we reach profitability and become cash-flow positive, which we do not expect to occur within the next twelve months. Our operating plan calls for significant investments in website development, security, loan scoring, loan processing and marketing before we reach profitability.

During the year ended March 31, 2010, we raised $4,200,000 through the issuance of notes payable in connection with our May 2009 term loan and our private placement notes. In April 2010, subsequent to our March 31, 2010 year end, we issued 15,621,609 shares of Series C convertible preferred stock for aggregate cash consideration of $24,489,996. In connection with our private placement of Series C convertible preferred stock, we incurred transaction expenses, recorded as an offset to gross proceeds, of $102,051.

During the year ended March 31, 2009, we raised $5,386,893, net of issuance costs, from the sale of 5,112,672 shares of our Series A convertible preferred stock, $1,054,575 from the conversion of principal and interest on our convertible notes into 990,212 shares of our Series A convertible preferred stock, and $11,897,738, net of issuance costs, from the sale of 16,036,346 shares of our Series B convertible preferred stock. From October 2007 through March 31, 2009, we also raised $13,707,964 through the issuance of notes payable in connection with our growth capital term loan, financing term loan and private placement notes.

Significant Accounting Policies and Estimates

The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in our financial statements and accompanying notes. We believe that the judgments, assumptions and estimates upon which we rely are reasonable based upon information available to us at the time that these judgments, assumptions and estimates are made. However, any differences between these judgments, assumptions and estimates and actual results could have a material impact on our statement of operations and financial condition. The accounting policies that reflect our most significant judgments, assumptions and estimates and which we believe are critical in understanding and evaluating our reported financial results include: (1) revenue recognition; (2) fair value; (3) allowance for loan losses; and (4) share-based compensation. There have been no material changes to any of our significant accounting policies and critical accounting estimates since March 31, 2010.

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Results of Operations

Revenues

Our business model consists primarily of charging transaction fees to both borrower members and investor members for the loans originated through our lending platform. During the three months ended June 30, 2010 and 2009, we originated $29,583,800 and $10,016,376 of loans, respectively, on our lending platform, an increase of 195% percent in the three months ended June 30, 2010, compared to the three months ended June 30, 2009. The borrower member pays a fee to us for providing the services of arranging the member loan and the investor member pays a fee to us for managing the payments on the member loans and maintaining account portfolios. We also generate revenue from interest earned on our member loans held for investment and our CM Loans and recognize interest expense on our Notes.


	Three Months Ended
	June 30,
	2010			2009
Interest income:
Member loans held for investment	$	226,828		$	316,119
CM Loans held for investment at fair value
Interest and fees earned on CM Loans		3,029,542			416,256
Credit risk related adjustment (interest expense)		(1,664,305	)		(255,268	)
Cash and cash equivalents		6,317			16,590

Total interest income	$	1,598,382		$	493,697


Interest expense:
Notes held for investment at fair value
Interest and fees expensed on Notes	$	1,779,431		$	261,016
Credit risk related adjustment (interest income)		(1,662,808	)		(255,190	)
Loans payable		220,682			267,087
Amortization of debt discount		74,834			69,699

Total interest expense	$	412,139		$	342,612

Interest Income

The following table presents our quarterly interest income sources in both absolute dollars and as a percentage of interest income (in thousands):


	For the Quarter Ended
Interest	September 30,				December 31,					March 31,				June 30,
Income	2008				2008					2009				2009
Source	$		%		$			%		$		%		$		%

Borrower origination fees earned on third party purchased member loans		0		0		0			0		0		0		0		0

Borrower origination fees and interest earned on member loans held for investment		240		96		326			115		284		62		316		65

Borrower origination fees and interest earned on CM Loans held for investment, net of interest expense on the related Notes		0		0		(57	)		-20		166		36		155		32

Interest earned on cash and investments		10		4		13			5		8		2		17		3


Total Interest Income		250		100		282			100		458		100		488		100


	For the Quarter Ended
Interest	September 30,				December 31,				March 31,				June 30,
Income	2009				2009				2010				2010
Source	$		%		$		%		$		%		$		%

Borrower origination fees earned on third party purchased member loans		0		0		0		0		0		0		0		0

Borrower origination fees and interest earned on member loans held for investment		371		49		329		31		272		22		227		15

Borrower origination fees and interest earned on CM Loans held for investment, net of interest expense on the related Notes		374		50		743		69		991		78		1,249		85

Interest earned on cash and investments		4		1		3		0		4		0		6		0


Total Interest Income		749		100		1,075		100		1,267		100		1,482		100

Borrower Origination Fees

Our borrower members pay a one-time fee to us for arranging a member loan. This fee is determined by the loan grade of the member loan.

From June 17, 2008 to November 24, 2008, our origination fees ranged from 0.75% to 3.00% of the aggregate principal amount of the member loan, as set forth below:


Loan
Grade	A			B			C			D			E			F			G
Fee		0.75	%		1.50	%		2.00	%		2.50	%		2.75	%		3.00	%		3.00	%

Beginning November 25, 2008, our origination fees increased ranging from 0.75% to 3.50% of the aggregate principal amount of the member loan, as set forth below:


Loan
Grade	A			B			C			D			E			F			G
Fee		0.75	%		2.50	%		3.00	%		3.50	%		3.50	%		3.50	%		3.50	%

Beginning July 30, 2009, our origination fees increased, ranging from 1.25% to 3.75% of the aggregate principal amount of the member loan, as set forth below:


Loan
Grade	A			B			C			D			E			F			G
Fee		1.25	%		3.25	%		3.75	%		3.75	%		3.75	%		3.75	%		3.75	%

Beginning November 5, 2009, our origination fees increased, ranging from 1.25% to 4.50% of the aggregate principal amount of the member loan, as set forth below:


Loan
Grade	A			B			C			D			E			F			G
Fee		1.25% - 2.25	%		3.75	%		4.50	%		4.50	%		4.50	%		4.50	%		4.50	%

Beginning January 20, 2010, our origination fees increased, ranging from 2.25% to 4.50% of the aggregate principal amount of the member loan, as set forth below:


Loan
Grade	A			B			C			D			E			F			G
Fee		2.25	%		3.75	%		4.50	%		4.50	%		4.50	%		4.50	%		4.50	%

Beginning May 24, 2010, our origination fees increased, ranging from 2.25% to 4.50% of the aggregate principal amount of the member loan, as set forth below:


Loan
Grade	A			B			C			D			E			F			G
Fee		2.25	%		4.25	%		4.50	%		4.50	%		4.50	%		4.50	%		4.50	%

Beginning August 2, 2010, our origination fees for five year loans increased, ranging from 2.75% to 5.00% of the aggregate principal amount of the member loan, as set forth below:


Loan
Grade	A			B			C			D			E			F			G
Fee		2.75	%		4.75	%		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%

Also, since January 20, 2010, if the loan is for a small business or for a self-employed borrower, we charge an additional 1.5% origination fee.

The borrower origination fee is included in the APR calculation provided to the borrower member and is deducted from the gross loan proceeds prior to disbursement of funds to the borrower member. We do not receive a borrower origination fee if a member loan request does not close and fund.

Borrower Origination Fees Earned on Member Loans Held for Investment

We compute borrower origination fees for member loans that we fund ourselves by subtracting the average costs of originating a member loan from the aggregate fee charged to the borrower member for the member loan. We initially defer this net amount and subsequently amortize the balance over the servicing period of the member loan, which is currently 36 months for each funded member loan.

Interest Earned on Member Loans Held for Investment

Between April 7, 2008 and October 13, 2008, while we sought to register the offering of the Notes, we funded the platform ourselves and generated interest income through investment in member loans held for investment. Subsequent to the effectiveness of our Registration Statement, we have continued to fund some of these member loans. But, as we increased our marketing and awareness efforts, we expect that the ratio of member loans held for investment to CM Loans that we originate each quarter will diminish over time. As such, during the three months ended June 30, 2010, we funded $974,325 of member loans while our investor members funded $28,619,475 of member loans, while during the three months ended June 30, 2009, we funded $3,987,175 of member loans while our investor members funded $6,119,209 of member loans.

When payments are received on member loans held for investment, the interest portion paid by our borrower members and the amortization of the origination fees, net of costs of origination, are recorded as interest income. Interest rates on these member loans, excluding amortization of net origination fees, range from 6.00% to 21.64% per annum as of June 30, 2010. During the three months ended June 30, 2010 and 2009, we recorded interest income on the member loans we funded of $226,828 and $316,119, respectively.

Borrower Origination Fees and Interest Earned on CM Loans Held for Investment Net of Interest Expense on the Related Notes

Beginning October 13, 2008, we began recording interest income, including borrower origination fees, from CM Loans and corresponding interest expense from the Notes. Interest income from the CM Loans includes origination fees on these member loans which are recognized in the period originated. During the three months ended June 30, 2010, we recorded interest income from CM Loans of $3,029,542, including $1,144,957 of origination fees. Under FASB ASC 825 guidance regarding the fair value option for accounting for financial assets, for the three months ended June 30, 2010, this interest income was offset by credit risk related adjustments on CM Loans of $1,664,305, a non-cash interest expense. Conversely, for the Notes, we recorded interest expense of $1,779,431 for the year ended March 31, 2010, and offset this interest expense by credit risk related adjustments (non-cash interest income) on Notes of $1,662,808 during that same period.

During the three months ended June 30, 2009, we recorded interest income from CM Loans of $416,256, including $139,905 related to origination fees. This interest income was offset by credit risk related adjustments on CM Loans of $255,268, a non-cash interest expense. Conversely, for the Notes, we recorded interest expense of $261,016 during the three months ended June 30, 2009 and offset this interest expense by credit risk related adjustments (non-cash interest income) on Notes of $255,190 during that same period. Over time, we expect that revenues and expenses related to CM Loans and Notes will increase as we grow our platform.

Interest Earned on Cash and Investments

Interest income from cash and cash equivalents is recorded as it is earned. For the three months ended June 30, 2010, we recorded $6,317 of interest income earned on cash and cash equivalents. Comparatively, for three months ended June 30, 2009, we recorded $16,590 in interest income earned on cash and cash equivalents. The differences in interest income are a function of the cash on hand and the declining interest rate climate during the relevant periods. We do not expect interest income from cash and cash equivalents to be a significant part of our business model.

Interest Expense on Notes Payable

Interest expense, other than that described above with regard to CM Loans and Notes, consists primarily of cash and non-cash interest on notes payable. For the three months ended June 30, 2010 and 2009, we paid cash interest of $220,682 and $267,087, respectively, for interest due on our notes payable. For the three months ended June 30, 2010 and 2009, we also recorded $74,843 and $69,699, respectively, for non-cash interest expense related to debt discounts due to warrants on our notes payable.

As we have no additional availability under our various notes payable agreements, we expect interest expense on our notes payable to decrease over the next year as we repay these loans.

Provision for Loan Losses

The allowance for loan losses, which management evaluates on a periodic basis, represents an estimate of potential credit losses inherent in our portfolio of member loans that we funded ourselves, in whole or in part, and hold for investment and is based on a variety of factors, including the composition and quality of the loan portfolio, loan specific information gathered through our collection efforts, delinquency levels, probable expected losses, current and historical charge-off and loss experience, current industry charge-off and loss experience, and general economic conditions. Determining the adequacy of the allowance for loan losses is subjective, complex, and requires judgment by management about the effect of matters that are inherently uncertain (see Note 2 — Significant Accounting Policies, Allowance for loan losses ). Moreover, in light of our limited operating history, we do not yet have significant historical experience unique to our own base of borrowers and underwriting criteria with which to help estimate expected losses on our portfolio. In the three months ended June 30, 2010, we recorded a provision for loan losses of $182,014 against our member loans held for investment. Comparatively, for the three months ended June 30, 2009, we recorded a provision for loan losses of $463,675 against our member loans held for investment.

Amortization of loan servicing rights

We charge investor members an ongoing service charge in respect of member loans and Notes that they have purchased through our platform. The service charge offsets the costs we incur in servicing member loans, including managing payments from borrower members, payments to investor members and maintaining account portfolios. This service charge is equal to 1.00% of all amounts paid by us to an investor member in respect of a member loan. The service charge is deducted from any payments on a member loan before the net amounts of those payments are allocated to the investor members’ Lending Club accounts.

While the servicing fee is recognized as a component of interest income with respect to our member loans held for investment and as reduction in interest expense with respect to our Notes held at fair value, for member loans purchased by third parties prior to the registration of our Notes, we recognized a servicing asset and corresponding servicing liability in accordance with FASB ASC 860. We then amortize the servicing fee asset into income as payments are received on these member loans (see

Note 2 — Summary of Significant Accounting Policies, Revenue recognition, Third party purchased member loans). During the three months ended June 30, 2010, we recognized $5,841 of such income. Comparatively, during the three months ended June 30, 2009, we recognized $7,888 of such income. Because following the registration of the Notes, investor members no longer directly purchase member loans, the amount of income from amortization of loan servicing rights will continue to diminish until the underlying member loans are fully discharged.

Operating Expenses:


	Three Months Ended
	June 30,
	2010		2009		% change
Sales, marketing, and customer service	$	2,298,366	$	1,196,139		92	%
Engineering		498,370		426,071		17	%
General and administrative		833,727		941,885		-11	%

Total operating expenses	$	3,630,463	$	2,564,095

Sales, Marketing and Customer Service Expense

Sales, marketing and customer service expense consists primarily of salaries, benefits and stock-based compensation expense related to sales, marketing, customer service and credit personnel, costs of marketing campaigns and costs of borrower underwriting such as credit scoring and screening. Sales, marketing and customer service expenses for the three months ended June 30, 2010 and 2009, were $2,298,366 and $1,196,139, respectively, an increase of approximately 92%. The relative increase in expenses in this category during the three months ended June 30, 2010 in comparison to the three months ended June 30, 2009 was primarily due to increased personnel expenses which grew by $555,278, increases marketing programs aimed at acquiring new investors and borrowers which grew by $471,038, and increased costs for borrower underwriting for services such as credit reporting related to our platform growth, which grew by $74,986.

Engineering Expense

Engineering expense consists primarily of salaries, benefits and stock-based compensation expense of personnel, and the cost of subcontractors who work on the development and maintenance of our platform and software enhancements that run our platform. Engineering expense for the three months June 30, 2010 and 2009, was $498,370 and $426,071, respectively, an increase of 17%. The increase for the three months ended June 30, 2010 versus the same three months ended June 30, 2009, was primarily due to increased staffing costs, including contract labor, and to a lesser extent increased equipment expenses and facilities costs.

General and Administrative Expense

General and administrative expense consists primarily of salaries, benefits and stock-based compensation expense related to general and administrative personnel, professional fees primarily related to legal and accounting fees, facilities expenses and the related overhead, and expenses related to platform fraud prevention and remediation. General and administrative expense for the three months ended June 30, 2010 and 2009, was $833,727 and $941,885, respectively, a decrease of approximately 11%. The decrease was primarily the result of a decrease of $209,653 of legal and accounting expenses in the period ending June 30, 2010 in comparison to the three months ended June 30, 2009. Offsetting this savings were higher expenses for personnel, facilities costs and other expenses during the three months ended June 30, 2010 in comparison to the three months ended June 30, 2009. We expect that general and administrative expenses will decrease as a percentage of overall operating expenses as we grow our marketing and sales efforts in greater proportion than our general and administrative expenses.

Liquidity and Capital Resources


	Three Months Ended June 30,
Cash flows from:	2010			2009			Change
Operating Activities	$	(2,476,212	)	$	(2,225,148	)	$	251,064

Investing Activities		(21,149,535	)		(8,659,647	)		(12,489,888	)
Add back/(subtract):
Origination of CM Loans held at fair value		28,619,475			6,119,201			22,500,274
Repayment of CM Loans held at fair value		(6,589,223	)		(904,606	)		(5,684,617	)


Investing Activities after removing activity related to CM Loans held at fair value		880,717			(3,445,052	)		4,325,769

Financing Activities		44,890,829			7,151,830			37,738,999
Add back/(subtract):
Origination of Notes held at fair value		(28,619,475	)		(6,119,200	)		(22,500,275	)
Repayment of Notes held at fair value		6,605,776			906,116			5,699,660


Financing Activities after removing activity related to Notes held at fair value	$	22,877,130		$	1,938,746		$	20,938,384

Net cash used in operating activities increased to $2,476,212 for the three months ended June 30, 2010, from $2,225,148 in the three months ended June 30, 2009. Non-cash charges that most significantly offset our net loss of $2,525,235 in the three months ended June 30, 2010 were: $182,014 of allowances for loan losses on member loans held for investment, $1,662,808 of non-cash interest income due to credit risk related adjustments on our Notes, and $1,739,927 of non-cash interest expense related to our CM Loans and debt discounts due to warrants issued for our notes payable, and the $335,749 net negative effect of changes in operating assets and liabilities. Similarly, non-cash charges that most significantly offset our net loss of $2,860,947 in the three months ended June 30, 2009 were: $463,675 of provisions for loan losses on member loans held for investment, non-cash interest expense of $324,967, non-cash interest income due to credit risk related adjustments on our Notes of $255,191.

Net cash used in investing activities for the three months ended June 30, 2010 and 2009, was $21,149,535 and $8,659,647, respectively. However, after removing activity related to the Notes, which activity was mostly offset by corresponding activity related to the CM Loans reflected in our cash flow from financing activities, the remaining amounts for the three months ended June 30, 2010 and 2009, were $880,717 of cash generated and $3,445,052 of cash used, respectively. These remaining amounts in both periods were primarily activities related to our member loans held for investment and changes in restricted cash. During the three months ended June 30, 2010, repayments of member loans held for investment exceeded our originations of these same loans, while in the three months ended June 30, 2009, our originations of member loans held for investment exceeded the repayments from those loans as we invested the proceeds of the May 2009 term loan. As to changes in restricted cash, during the three months ended June 30, 2010, one of our platform service providers released $500,000 of restricted cash that we had previously provided as security for certain ACH services they provide to us, while during the three months ended June 30, 2009, restricted cash increased by $500,000 in relation to those same ACH services, and an increase of $300,000 in relation to our May 2009 term loan.

Net cash used in financing activities for the three months ended June 30, 2010 and 2009, were $44,890,829 and $7,151,830 respectively. However, after removing activity related to the Notes, which activity was mostly offset by corresponding activity related to our CM Loans reflected in our cash flows from investing activities, the remaining amounts for the three months ended June 30, 2010 and 2009, were $22,877,130 and $1,938,746, respectively. Cash provided by financing activities, after removing activity related to the Notes, consisted primarily of proceeds from the issuance of our Series C Preferred Stock in the three months ended June 30, 2010, and, in the three months ended June 30, 2009, the excess of the proceeds from our May 2009 term loan over repayments of our notes payable.

In May 2009, we entered into a new secured loan facility, or the May 2009 term loan, with Silicon Valley Bank, or SVB, and Gold Hill Venture Lending 03, LP, or Gold Hill, and amended, respectively, their prior growth capital term loan and financing term loan to accommodate new borrowing. The May 2009 term loan allows us to borrow up to $4,000,000 at an interest rate of 10.0% per annum. The borrowings are to be used to fund member loans. The borrowings are secured by a blanket lien on substantially all of our assets, except our intellectual property rights, certain deposit accounts, and payments received on CM Loans. Additionally, the May 2009 term loan was secured with a certificate of deposit in the amount of $300,000 until repayment. This amount is included in restricted cash in the accompanying balance sheets. On a monthly basis, we also agreed to maintain a minimum collateral ratio calculated as (i) the sum of the certificate of deposit collateral and the outstanding balance of member loans funded with the borrowing which are current in their payment status to (ii) the outstanding balance under the loan facility. In the event that the minimum collateral ratio is less than the minimum allowed under the agreement, we must increase the certificate of deposit to meet the minimum collateral ratio. In connection with this loan facility, we issued a fully exercisable warrant to purchase 187,090 shares of Series B convertible preferred stock with an exercise price of $0.7483 per share to SVB, and we issued a fully exercisable warrant to purchase 187,090 shares of Series B convertible preferred stock with an exercise price of $0.7483 per share to Gold Hill.

During the year ended March 31, 2010, we issued an additional $200,000 of private placement notes, repayable over three years and bearing interest at the rate of 8% per annum. We are used the proceeds of the private placement notes to fund member loans on the platform.

We used the proceeds from borrowings under the Newly Restated Agreements and the private placement notes primarily to fund member loans ourselves to ensure a sufficient level of funding for borrowing requests. From April 7, 2008 until October 13, 2008 all member loans funded on the platform were funded and held us and held for investment. Through our participation in funding loans ourselves on the platform, as of June 30, 2010, we had funded approximately $20.7 million in member loans.

In April 2010, we issued 15,621,609 shares of Series C convertible preferred stock for aggregate cash consideration of $24,489,996. In connection with our private placement of Series C convertible preferred stock, we incurred transaction expenses, recorded as an offset to gross proceeds, of $102,051. The shares are convertible into shares of our common stock, par value $0.01 per share, on a one-for-one basis, as adjusted from time to time pursuant to the anti-dilution provisions of our certificate of incorporation.

We have incurred losses since our inception and we expect we will continue to incur losses for the foreseeable future as we grow our platform. We require cash to meet our operating expenses and for capital expenditures and principal and interest payments on our debt, as well as to continue to fund member loans on the platform we will hold for investment. To date, we have funded our cash requirements with proceeds from our debt issuances and the sale of equity securities. At June 30, 2010, we had $23,837,256 in unrestricted cash and cash equivalents. We primarily invest our cash in interest bearing money market funds.

We do not have any committed external source of funds. To the extent our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity offerings or debt financings. Additional equity or debt financing may not be available on acceptable terms, if at all.

Income Taxes

We incurred no tax provision for the three months ended June 30, 2010. Given our history of operating losses and inability to achieve profitable operations, it is difficult to accurately forecast how results will be affected by the realization of net operating loss carry forwards.

Financial Accounting Standards Board Accounting Standards Codification Topic 740, “ Income Taxes ,” provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in all prior years, we have provided a full valuation allowance against our net deferred tax assets. We will continue to evaluate the realizability of the deferred tax assets on a quarterly basis.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing activities. We do not have any interest in entities referred to as variable interest entities, which include special purpose entities and other structured finance entities.

Additional Information about the Lending Club Platform

Historical Information about Our Borrower Members and Outstanding Loans

In regards to the following historical information, prior performance is no guarantee of future results or outcomes.

As of June 30, 2010, LendingClub had facilitated 13,456 member loans with an average original principal amount of $9,638 and an aggregate original principal amount of $129,682,800, out of which 1,180 member loans with an aggregate original principal amount of which $10,539,475, or 8.13% had prepaid and 10,956 loans representing $107,339,450 of original principal amount had been through at least one billing cycle as of June 30, 2010.

Of the $107,339,450 of original principal balance at June 30, 2010 that had been through at least one billing cycle, $5,221,052 of outstanding principal balance, or 4.86%, was either in default or has charged off; a member loan is considered defaulted when at least one payment is more than 120 days late. Of remaining loans that had been through at least one billing cycle as of June 30, 2010, $77,430,042 million of principal remained outstanding of which 96.70% was current, 0.46% was 16 to 30 days late, and 2.84% was between 31 and 120 days late.

The defaulted loans and charged off loans as of June 30, 2010 were comprised of 668 member loans, equaling a total defaulted or charged off amount of $5,221,052. Of these loans, 491 loans representing $3,733,794 in defaulted amount were defaults due to delinquency, while the remaining 177 loans were loans in which the borrower member filed for a Chapter 7 bankruptcy seeking liquidation.

During the three months ended June 30, 2010, of the 9,588 member loans which were not delinquent prior to the start of the quarter, 226 member loans became delinquent for some amount of time during the quarter, excluding those that entered the 0 — 15 day grace period. Of those loans which became delinquent for more than 15 days during the quarter, we charged late fees totaling $3,633 on 138 loans and received late fees of $872 on 40 of those same 138 loans.

The following table presents aggregated information about borrower members and their loans for the period from May 24, 2007 to June 30, 2010, grouped by the loan grade assigned by us:


									Average Total
	Number of		Average Interest			Average Annual			Funded
Loan Grade	Borrowers		Rate			Percentage Rate			Commitment
A1		90		6.98	%		7.89	%		4,476
A2		280		7.31	%		8.21	%		4,350
A3		572		7.63	%		8.59	%		6,196
A4		722		8.37	%		9.33	%		7,155
A5		996		8.65	%		9.68	%		8,786
B1		610		10.37	%		12.56	%		8,984
B2		699		10.67	%		12.82	%		10,725
B3		772		11.08	%		13.26	%		11,416
B4		825		11.43	%		13.58	%		10,551
B5		868		11.75	%		13.89	%		10,306
C1		788		12.41	%		14.89	%		9,671
C2		695		12.77	%		15.27	%		9,721
C3		670		13.10	%		15.57	%		9,637
C4		595		13.35	%		15.81	%		9,820
C5		537		13.72	%		16.20	%		9,047
D1		486		14.07	%		16.74	%		10,088
D2		492		14.47	%		17.13	%		10,071
D3		465		14.77	%		17.37	%		10,754
D4		398		14.95	%		17.46	%		10,184
D5		317		15.32	%		17.85	%		10,349
E1		254		15.59	%		18.01	%		10,433
E2		253		15.70	%		18.01	%		10,184
E3		190		16.01	%		18.25	%		10,244
E4		164		16.15	%		18.31	%		10,628
E5		148		16.74	%		19.06	%		10,933
F1		96		16.80	%		18.97	%		11,894
F2		93		17.30	%		19.57	%		12,729
F3		63		17.44	%		19.64	%		13,100
F4		62		17.91	%		20.29	%		11,892
F5		45		18.09	%		20.42	%		12,473
G1		44		18.50	%		20.73	%		11,661
G2		34		18.81	%		20.94	%		9,929
G3		31		18.98	%		21.15	%		12,213
G4		47		18.87	%		20.79	%		13,739
G5		54		19.26	%		21.29	%		10,656

The following table presents aggregated information for the period from May 24, 2007 to June 30, 2010, self-reported by borrower members at the time of their loan applications, grouped by the loan grade assigned by us. We do not independently verify this information:


	Percentage of
	Borrowers
	Stating They			Average Job				Average Debt
	Own Their Own			Tenure in		Average Annual		to Income
Loan Grade	Homes			Months		Gross Income		Ratio (1)
A1		65.56	%		73		62,140		7.54	%
A2		66.20	%		67		68,487		8.34	%
A3		61.53	%		71		68,616		9.79	%
A4		56.22	%		65		64,408		10.74	%
A5		55.09	%		63		70,082		11.55	%
B1		48.61	%		58		72,036		11.51	%
B2		50.21	%		63		75,540		11.75	%
B3		50.70	%		68		79,808		12.37	%
B4		48.93	%		58		69,984		13.01	%
B5		45.55	%		55		68,847		12.57	%
C1		47.18	%		58		75,027		12.89	%
C2		41.99	%		58		63,841		12.67	%
C3		43.42	%		53		64,494		13.23	%
C4		45.06	%		62		68,634		13.86	%
C5		38.78	%		58		70,580		13.08	%
D1		41.22	%		58		68,900		13.26	%
D2		42.54	%		65		73,246		13.49	%
D3		48.31	%		63		70,794		13.59	%
D4		40.54	%		55		67,504		13.08	%
D5		47.22	%		55		70,625		13.41	%
E1		42.69	%		52		70,245		13.64	%
E2		41.63	%		52		63,789		14.10	%
E3		45.50	%		57		70,939		12.85	%
E4		52.33	%		63		70,946		14.31	%
E5		42.95	%		57		76,809		14.05	%
F1		48.00	%		55		72,149		15.00	%
F2		45.26	%		69		84,214		14.59	%
F3		46.88	%		75		79,731		17.33	%
F4		50.79	%		62		74,335		15.10	%
F5		47.83	%		63		105,052		13.22	%
G1		51.11	%		41		58,429		17.61	%
G2		52.94	%		66		86,265		17.03	%
G3		56.25	%		55		79,541		17.14	%
G4		59.57	%		59		101,860		16.16	%
G5		61.11	%		63		102,744		17.95	%


(1)		Average debt to income ratio, excluding mortgage debt, calculated by us based on (i) the debt reported by a consumer reporting agency, and (ii) the income reported by the borrower member.

The following table presents aggregated information for the period from May 24, 2007 to June 30, 2010, reported by a consumer reporting agency about our borrower members at the time of their loan applications, grouped by the loan grade assigned by us. As used in this table, “Delinquencies in Last Two Years” means the number of 30+ days past-due incidences of delinquency in the borrower member’s credit file for the past two years. We do not independently verify this information. All figures other than loan grade are agency reported:


												Average
												Number of
			Average		Average		Average		Average			Inquiries		Average		Average
			Open		Total		Revolving		Revolving			in the Last		Delinquencies		Time Since
	Average		Credit		Credit		Credit		Line			Twelve		in Last		Last
Loan Grade	FICO		Lines		Lines		Balances		Utilization			Months		Two Years		Delinquency
A1		777		9		23		11,867		17.22	%		1		0		12
A2		774		10		24		10,788		15.48	%		1		0		22
A3		768		9		23		10,028		19.13	%		1		0		28
A4		757		9		23		11,649		24.46	%		1		0		34
A5		748		10		23		14,286		29.76	%		1		0		35
B1		738		9		22		13,162		35.73	%		1		0		30
B2		735		9		21		15,519		36.98	%		1		0		34
B3		730		9		21		17,713		40.55	%		1		0		33
B4		719		9		22		16,927		43.87	%		1		0		34
B5		712		9		21		16,041		47.71	%		1		0		33
C1		704		9		21		16,675		52.76	%		1		0		34
C2		702		9		20		15,272		52.70	%		1		0		34
C3		695		9		21		17,210		54.53	%		1		0		34
C4		692		10		21		16,906		57.12	%		2		0		31
C5		687		9		19		14,468		57.80	%		2		0		30
D1		686		9		20		18,336		58.14	%		2		0		31
D2		685		9		20		18,438		59.44	%		2		0		32
D3		683		10		21		18,592		60.93	%		2		0		33
D4		679		9		19		15,717		62.56	%		2		0		31
D5		680		10		21		18,816		60.75	%		2		0		30
E1		677		10		21		15,622		65.60	%		2		0		30
E2		674		10		20		17,702		65.57	%		2		0		29
E3		670		9		20		17,628		67.77	%		2		1		27
E4		669		10		20		17,845		66.63	%		3		0		29
E5		670		10		21		17,285		64.67	%		3		0		23
F1		672		10		23		21,604		65.26	%		3		0		27
F2		672		10		21		22,379		65.86	%		3		0		23
F3		669		11		24		22,635		65.62	%		3		0		28
F4		669		10		23		21,574		68.65	%		3		0		24
F5		666		11		24		24,921		70.00	%		3		0		23
G1		672		10		21		15,618		65.58	%		3		0		26
G2		664		12		23		22,817		66.31	%		3		0		28
G3		664		12		25		17,216		63.94	%		4		0		24
G4		657		13		28		36,181		67.36	%		3		0		25
G5		658		13		30		55,731		66.79	%		4		1		21

The following table presents additional aggregated information for the period from May 24, 2007 to June 30, 2010, about delinquencies, default and borrower prepayments, grouped by the loan grade assigned by us. The interest rate, default and delinquency information presented in the table includes data only for member loans that had been issued for more than 45 days as of June 30, 2010, and therefore have been through at least one billing cycle. With respect to late member loans, the following table shows the entire amount of the principal remaining due, not just that particular payment. The third and fifth columns show the late member loan amounts as a percentage of member loans issued for more than 45 days. Member loans are placed on nonaccrual status and considered as defaulted when they become 120 days late. The data presented in the table below comes from a set of member loans that have been outstanding, on average, for approximately twelve months.

Because of our limited operating history, the data in the following table regarding loss experience may not be representative of the loss experience that will develop over time as additional member loans are originated through our platform and the member loans already originated through our platform have longer payment histories. In addition, because of our limited operating history, the data in the following table regarding prepayments may not be representative of the prepayments we expect over time as additional member loans are originated through our platform and the member loans already originated through our platform have longer payment histories.


	15-30		15-30			30+		30+								Total		Number
	Days Late		Days Late			Days Late		Days Late			Default		Default			Number		Of Loans		Prepaid		Prepaid
Loan Grade	($)		(%)			($)		(%)			($)		(%)			Of Loans		Prepaid		($)		(%)
A1		—		0.00	%		—		0.00	%		8,000		2.26	%		71		10		20,700		5.14	%
A2		—		0.00	%		3,174		0.50	%		17,500		1.91	%		210		44		157,400		12.92	%
A3		6,654		0.32	%		28,635		1.39	%		14,750		0.53	%		449		65		348,775		9.84	%
A4		1,753		0.06	%		37,017		1.19	%		29,800		0.73	%		571		77		506,800		9.81	%
A5		—		0.00	%		74,381		1.34	%		94,625		1.33	%		790		84		648,825		7.41	%
B1		—		0.00	%		80,613		2.31	%		136,625		3.01	%		501		56		464,500		8.48	%
B2		—		0.00	%		140,196		2.94	%		246,700		3.92	%		580		62		686,225		9.15	%
B3		16,091		0.28	%		148,587		2.61	%		209,125		2.86	%		633		72		893,200		10.13	%
B4		6,703		0.12	%		92,517		1.64	%		266,700		3.62	%		682		58		616,775		7.09	%
B5		4,058		0.07	%		59,015		1.04	%		370,000		5.00	%		707		67		615,625		6.88	%
C1		42,801		0.94	%		112,349		2.46	%		324,025		5.24	%		640		65		599,500		7.87	%
C2		28,791		0.69	%		113,502		2.74	%		276,250		4.87	%		575		53		524,550		7.76	%
C3		17,649		0.46	%		110,645		2.90	%		349,025		6.52	%		545		56		495,000		7.67	%
C4		3,840		0.10	%		80,028		2.16	%		333,300		6.42	%		519		45		416,350		7.13	%
C5		63,725		2.15	%		80,389		2.72	%		360,975		8.46	%		469		40		385,550		7.94	%
D1		—		0.00	%		119,239		3.92	%		348,100		8.14	%		411		44		403,000		8.22	%
D2		868		0.03	%		101,376		3.37	%		248,850		6.10	%		403		39		422,100		8.52	%
D3		57,780		1.95	%		134,626		4.54	%		280,400		6.78	%		382		28		268,050		5.36	%
D4		29,059		1.25	%		122,918		5.27	%		316,825		9.32	%		331		26		238,950		5.90	%
D5		16,825		0.87	%		73,940		3.80	%		189,675		6.92	%		258		22		150,050		4.57	%
E1		24,429		1.70	%		47,552		3.31	%		197,750		9.28	%		198		26		254,875		9.62	%
E2		—		0.00	%		68,712		5.62	%		274,275		13.75	%		196		23		232,200		9.01	%
E3		—		0.00	%		36,677		4.06	%		139,550		9.37	%		149		14		160,250		8.23	%
E4		5,530		0.74	%		30,797		4.11	%		269,450		19.35	%		124		16		143,850		8.25	%
E5		—		0.00	%		46,416		5.69	%		100,975		8.33	%		110		21		226,675		14.01	%
F1		—		0.00	%		46,974		10.00	%		169,400		19.79	%		71		12		131,000		11.47	%
F2		6,578		1.23	%		62,027		11.56	%		194,250		20.11	%		71		11		112,325		9.49	%
F3		—		0.00	%		24,036		6.81	%		144,975		22.63	%		47		10		106,525		12.91	%
F4		1,946		0.56	%		2,349		0.67	%		186,800		27.69	%		55		4		20,775		2.82	%
F5		—		0.00	%		39,617		14.45	%		109,175		23.07	%		38		6		72,975		13.00	%
G1		—		0.00	%		6,124		3.00	%		63,400		15.59	%		32		7		77,300		15.07	%
G2		—		0.00	%		32,057		24.78	%		70,900		28.69	%		25		4		13,000		3.85	%
G3		3,522		2.49	%		2,464		1.74	%		77,475		27.40	%		23		5		54,800		14.47	%
G4		4,457		2.00	%		18,990		8.52	%		146,700		26.06	%		40		4		47,925		7.42	%
G5		13,916		5.78	%		19,254		7.99	%		132,775		24.04	%		50		4		23,075		4.01	%

The following table presents aggregated information for the period from May 24, 2007 to June 30, 2010 on the results of our collection efforts for all corresponding member loans that became more than 30 days past due at any time, grouped by credit grade. For purposes of this analysis, we have excluded the 20 loans that we repurchased due to identity fraud.


							Gross				Aggregate
							Amount				Principal		Gross
							Collected		Number of		Balance of		Amount
	Number				Aggregate		on		Loans		Loans		Recovered
	of Loans				Amount Sent		Accounts		Charged-Off		Charged-Off		on Loans
	in		Origination		to		Sent to		Due to		Due to		Charged-
Grade	Collection (1)		Amount (1)		Collections (1)		Collections (2)		Delinquency (3)		Delinquency (3)		Off (4)
A		68		483,250		75,221		31,621		15		82,473		—
B		224		2,206,200		351,310		102,050		70		525,709		7,497
C		310		2,897,825		500,470		178,177		106		801,350		3,415
D		240		2,327,625		427,470		132,816		86		681,702		3,015
E		172		1,588,500		293,485		106,008		66		526,806		15,877
F		93		1,157,850		218,443		72,125		37		366,104		3,007
G		71		811,275		157,574		62,554		22		218,444		350

Total		1,178		11,472,525		2,023,973		685,351		402		3,202,588		33,161


1)		Represents accounts 31 to 120 days past due.

2)		Represents the gross amounts collected on corresponding member loans while such accounts were in collection during the 31-120 days past-due period. This amount does not represent payments received after an account has been sent to collection, cured and returned to current status. Of this amount, investors received $678,497 (99%). The remainder was fees to us of $6,854 (1%). The amounts retained by us are reflected as loan servicing fees in our consolidated financial statements.

3)		Represents accounts that have been delinquent for 120 days at which time the account is charged-off. Any money recovered after 120 days is no longer included as amounts collected on accounts sent to collection.

4)		Represents the gross amounts we received on charged-off accounts after the accounts were charged-off—e.g., a dollar received on an account 121 days past due.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for smaller reporting companies.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Vice President, Finance and Administration, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Exchange Act Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Vice President, Finance and Administration, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Vice President, Finance and Administration, have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There were no material changes to report.

Item 1A. Risk Factors

The discussion in this Quarterly Report on Form 10-Q should be read together with the risk factors contained in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2010 and the prospectus for the Notes dated May 24, 2010. These risk factors describe various risks and uncertainties. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. In addition, these risks could have a material adverse effect on the value of the Notes you purchase and could cause you to lose all or part of your initial purchase price or future principal and interest payments you expect to receive.

In addition, you should consider the following:

We have incurred net losses in the past and expect to incur net losses in the future. If we become insolvent or bankrupt, you may lose your investment.

We have incurred net losses in the past and we expect to incur net losses in the future. As of June 30, 2010, our accumulated deficit was $32.7 million and our total stockholders’ deficit was $28.7 million. Our net loss for the three months ended June 30, 2010 and 2009, was $2.5 million and $2.9 million, respectively. We have not been profitable since our inception, and we may not become profitable. In addition, we expect our operating expenses to increase in the future as we expand our operations. If our operating expenses exceed our expectations, our financial performance could be adversely affected. If our revenue does not grow to offset these increased expenses, we may never become profitable. In future periods, we may not have any revenue growth, or our revenue could decline. Our failure to become profitable could impair the operations of our platform by limiting our access to working capital to operate the platform. If we were to become insolvent or bankrupt, an event of default would occur under the terms of the Notes, and you may lose your investment.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On October 13, 2008, we commenced a public offering of up to $600,000,000 in principal amount of the Notes pursuant to the Registration Statement (Registration Statement No. 333-151827). The offering is a continuous offering and remains ongoing. The Registration Statement was declared effective by the SEC on October 10, 2008. From October 13, 2008 to June 30, 2010, we sold $129,682,800 in principal amount of Notes at 100% of their principal amount. The Notes were offered only through our website, and there were no underwriters or underwriting discounts. In connection with the offering, we incurred estimated expenses of approximately $3,964,402, none of which were paid by us to our directors, officers, persons owning 10% or more of any class of our equity securities or affiliates. As set forth in the prospectus for the offering, we are using the proceeds of each series of Notes to fund a corresponding member loan through the Lending Club platform designated by the lender members purchasing such series of Notes. None of the proceeds from the Notes are paid by us to our directors, officers, persons owning 10% or more of any class of our equity securities or affiliates.

On April 14, 2010, we issued 15,621,609 shares of Series C convertible preferred stock for aggregate cash consideration of $24,489,996. All sales were to accredited investors and were exempt from registration pursuant to Rule 506 of the Securities Act of 1933 (the “Act”). There were no underwriters or underwriting discounts or commissions. The Series C convertible preferred is convertible into shares of common stock of the company, currently on a one to one basis, which may be adjusted pursuant to the anti-dilution rights of the Series C convertible preferred.

During the quarter ended June 30, 2010, Lending Club sold 29,250 shares of common stock pursuant to the exercise of stock options, for an aggregate consideration of $7,898. The options and the underlying common stock were exempt from registration under the Act pursuant to Rule 701. There were no underwriters or underwriting discounts or commissions.

Item 3. Defaults Upon Senior Securities

None.

Item 5. Other Information

On July 15, 2010, Lending Club entered into an offer letter with Carrie Dolan for Ms. Dolan to become our Chief Financial Officer. The letter provides for the following: a base salary of $275,000 per year; annual bonus of up to $150,000; an option grant for 1% of the company’s fully diluted capitalization as of the date of grant; and a change of control provision (i.e. the sale or disposition of all or substantially all of the assets of the company or a change in at least 50% of the equity ownership of the company (excluding any subsequent financings) which provides that upon the termination of Ms. Dolan’s employment without cause within a year following the change of control event for (i) the acceleration of 50% of any unvested options and (ii) the payment of an amount equal to 6 months of Ms. Dolan’s then current base salary and applicable COBRA payments for same period.

Item 6. Exhibits

See Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


LendingClub Corporation
By:	/s/ Renaud Laplanche
	Name:	Renaud Laplanche
	Title:	Chief Executive Officer (principal executive officer)

By:	/s/ Howard Solovei
	Name:	Howard Solovei
	Title:	Vice President, Finance and Administration (principal financial officer and principal accounting officer)

Dated: August 6, 2010

EXHIBIT INDEX


Exhibit No.		Description
	31.1	Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

	31.2	Certification of Vice President, Finance and Administration, Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

	32.1	Certification of Chief Executive Officer and Vice President, Finance and Administration, Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

TABLE OF CONTENTS

Part I. Financial Information Item 1. Financial Statements Note 6 Loans Payable Note 5 CM Loans and Notes Held For Investment At Fair Value Note 13 Net Interest Income Note 4 Member Loans Held For Investment Note 2 Summary Of Significant Accounting Policies, Revenue Recognition, Member Loans Originated As CM Loans Note 9 Preferred Stock Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Note 2 Summary Of Significant Accounting Policies, Revenue Recognition, Third Party Purchased Member Loans)Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 5. Other Information Item 6. Exhibits

Exhibits

Exhibit 31.1 Exhibit 31.2 Exhibit 32.1

LC 10-Q Quarter ended June 30, 2010

Exhibits