We are a “controlled company” within the meaning of NASDAQ rules, and, as a result, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements.

As of February 16, 2021, Glenn Sanford, Penny Sanford, Jason Gesing, and Gene Frederick beneficially owned approximately 58.4% of the total combined voting power of our outstanding common stock. Accordingly, we qualify as a “controlled company” within the meaning of NASDAQ corporate governance standards.

Under NASDAQ rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain NASDAQ corporate governance standards, including:

●

the requirement that a majority of the members of our board of directors be independent directors;

●

the requirement that our nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

●

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter for addressing the committee’s purpose and responsibilities; and

●

the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

We intend to use these exemptions. As a result, we will not have a majority of independent directors, our compensation and our nominating and corporate governance committees will not consist entirely of independent directors, and such committees may not be subject to annual performance evaluations. Consequently, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the NASDAQ corporate governance rules and requirements. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

Because we can issue additional shares of common stock, our stockholders may experience dilution in the future.

We are authorized to issue up to 220,000,000 shares of common stock, of which ~~approximately 61.0 million~~146,677,786 shares were issued, and 144,143,292 shares were outstanding as of ~~March 10, 2019.~~December 31, 2020. Our ~~board~~Board of ~~directors~~Directors has the authority to cause us to issue additional shares of common stock without consent of any of our stockholders. Consequently, ~~the~~current stockholders may experience more dilution in their ownership of our common stock in the future.

The stock price of our common stock has been and likely will continue to be volatile and may decline in value regardless of our performance.

The market price for our common stock could fluctuate significantly for various reasons, many of which are outside our control, including those described above and the following:

●

our operating and financial performance and prospects;

●

future sales of substantial amounts of our common stock in the public market, including but not limited to shares we may issue as consideration for acquisitions or investments;

●

housing and mortgage finance markets;

●

our quarterly or annual earnings or those of other companies in our industry;

●

the ~~public's~~public’s reaction to our press releases, other public announcements and filings with the SEC;

●

changes in recommendations or analysis of our prospects by securities analysts who track our common stock;

●

market and industry perception of our success, or lack thereof, in pursuing our growth strategy;

●

strategic actions by us or our competitors, such as acquisitions or restructurings;

●

actual or potential changes in laws, regulations and regulatory ~~interpretations, including as a result of the 2017 Tax Act;~~

interpretations;

●

changes in interest rates;

●

changes in demographics relating to housing such as household formation or other consumer preferences toward home ownership;

●

changes in accounting standards, policies, guidance, interpretations or principles;

●

arrival and departure of key personnel;

●

adverse resolution of new or pending litigation or regulatory proceedings against us; ~~and~~

●

government and health organization restrictions within the domestic and international locations in which we operate in response to the COVID-19 pandemic; and

●

changes in general market, economic and political conditions in the United States and global economies.

In addition, the stock markets have experienced periods of high price and volume fluctuations that have affected and continue to affect the market prices of the equity securities of many companies, including technology companies and real estate brokerages. Such price ~~fluctuated~~fluctuations can be unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and harm our business.

Because we do not intend to pay any cash dividends on our shares of common stock in the near future, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.

D~~elaware~~Delaware law and our organizational documents may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change of control would be beneficial to our existing stockholders. In addition, provisions of our amended and restated certificate of incorporation and amended and restated bylaws may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our Board of Directors. Among other things, these provisions:

●

do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;

●

delegate the sole power to a majority of the Board of Directors to fix the number of directors;

●

provide the power to our Board of Directors to fill any vacancy on our Board of Directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise;

●

eliminate the ability of stockholders to call special meetings of stockholders; and

●

establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

The foregoing factors could impede a merger, takeover or other business combination or discourage a potential investor from making a tender offer for our common stock which, under certain circumstances, could reduce the market value of our common stock and our ~~investors'~~investors’ ability to realize any potential change-in-control premium.

~~Item 1B. UNRESOLVED STAFF COMMENTS~~

Item 1B.
UNRESOLVED STAFF COMMENTS

Not applicable.

~~Item 2. PROPERTIES~~

Item 2.
PROPERTIES

Our principal corporate office is located at 2219 Rimland Drive, Suite 301, in Bellingham, ~~Washington where we lease an~~WA, and is leased office ~~space that expires on December 31, 2019.~~space. We also lease small office spaces in a number of ~~States~~regions in which we operate, in order to comply with ~~state~~ regulatory and licensing requirements within those jurisdictions and, in certain instances, to provide office space to our managing ~~state~~ brokers and drop-in space for our agents. In some of these instances, the ~~state~~ managing brokers are financially responsible for a significant portion of the rental expense associated with a leased office space. We generally do not provide office space for the agents other than for drop-in service. We do not own any real property. We believe that leased facilities are adequate to meet current needs and that additional facilities will be available for lease to meet future needs.

Item 3.

LEGAL PROCEEDINGS

Refer to Part II, Item ~~3. LEGAL P~~8. Financial Statements and Supplementary Data, Note 14 – Commitments and Contingencies to the consolidated financial statements included elsewhere within this report.

~~ROCEEDINGS~~

From time to time, we are subject to potential liability under laws and government regulations and various claims and legal actions that may be asserted against us that could have a material adverse effect on our business, reputation, results of operations or financial condition.

~~There are no matters pending or, to our knowledge, threatened that we expect to have a material adverse impact on our business, reputation, results of operations or financial condition.~~

~~Item 4. MINE SAFETY DISCLOSURES~~

Item 4.
MINE SAFETY DISCLOSURES

Not applicable.

PART II

~~Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~

Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

~~Our~~The common stock of eXp World Holdings, Inc. (“eXp”, or, collectively with its subsidiaries, the “Company”, “we”, “us”, or “our”) is ~~quoted~~traded on the NASDAQ Global Market operated by NASDAQ, Inc. under the trading symbol “EXPI”. ~~As of March 10, 2019, there are 60,978,604 issued and outstanding shares of our common stock held by a total of approximately 5,900 stockholders of record.~~

Trading in our common stock quoted on the NASDAQ ~~is often thin and~~Global Market is characterized by wide fluctuations in trading prices due to many factors, some of which may have little to do with our ~~company’s~~Company’s operations or business prospects. We cannot assure ~~you~~investors that there will be a market for our common stock in the future.

Holders of Record

~~Transfer Agent~~

~~Our transfer agent is Island Stock Transfer with an office at 15500 Roosevelt Boulevard, Suite 301, Clearwater, Florida 33760.~~

As of February 22, 2021, there were approximately 60,000 stockholders of record.

Dividends

~~We have~~The Company has not ~~declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Although there are no restrictions that limit the ability to pay~~paid cash dividends on ~~our~~its common stock ~~our intention is to retain future earnings, if any, for use~~ in ~~our operations and the expansion of our business.~~

~~Recent Sales of Securities~~

~~During~~previous periods, including during the year ended December 31, ~~2018,~~2020. Payment of cash dividends is at the ~~Company issued:~~


		~~97,371 shares of our Common Stock as partial consideration for the assets of VirBELA, LLC.;~~

~~The issuances of shares were exempt from registration in reliance upon Section 4(a)(2)~~discretion of the ~~Securities Act.~~Company’s Board of Directors in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for growth. Under Delaware law, we can only pay dividends either out of surplus or out of the current or the immediately preceding year’s earnings. Therefore, no assurance is given that we will pay any dividends to our common stockholders, or as to the amount of any such dividends.

Common Stock Split

On January 15, 2021, the Company’s Board of Directors approved a two-for-one stock split in the form of a stock dividend to shareholders of record as of January 29, 2021 (the “Stock Split”). The Stock Split was effected on February 12, 2021. All shares, restricted stock units (“RSU”), stock options, and per share information have been retroactively adjusted to reflect the stock split.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We may repurchase shares of our common stock from time to time at prevailing market prices, depending on market conditions, through open market or privately negotiated transactions. No date has been established for the completion of the share repurchase program, and we are not obligated to repurchase any shares. Subject to applicable corporate securities laws, repurchases may be made at such times and in such amounts as management deems appropriate. Repurchases under the program can be discontinued at any time management feels additional repurchases are not warranted.

~~None.~~

~~Item 6. SELECTED FINANCIAL DATA~~

Refer to Note 11 – Stockholders’ Equity to the consolidated financial statements herein for more details regarding our stock repurchase program.

The following table ~~summarizes~~provides information about repurchases of our ~~consolidated financial data. The consolidated statement of operations data for~~common stock during the ~~years~~quarter ended December 31, ~~2018 and 2017~~2020:


Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs⁽¹⁾	Approximate dollar value of shares that may yet be purchased under the plans or programs
10/1/20 - 10/31/20	60,550	$ 51.47	60,550	$ 386,636,510
11/1/20 - 11/30/20	58,859	46.36	58,859	383,914,917
12/1/20 - 12/31/20	45,333	67.43	45,333	380,914,933
Total	164,742	$ 55.09	164,742

(1)

The repurchase program began on January 2, 2019 and was set to expire on June 28, 2019. On June 12, 2019, the Company, under authorization from the Board of Directors, amended the plan. The amended plan extended the repurchase program through December 31, 2019. On November 26, 2019, the Company announced the approval to increase the authorization limits of the Company’s stock repurchase program by the Board. The Board agreed to extend the stock repurchase program through the fourth quarter of 2020 and to increase the authorization for the stock repurchase program from $25.0 million to $75.0 million of the Company’s common stock. The Company discontinued the repurchase program in March 2020 and subsequently reinstated it in June 2020 with a maximum authorization of $75.0 million. In December 2020, the Board approved an increase to the total amount of its buyback program from $75.0 million to $400.0 million. The stock repurchase program is more fully disclosed in Note 11 – Stockholders’ Equity to the consolidated financial statements. Repurchased shares were not impacted by the Stock Split; therefore, the number of shares and average price paid per share are reported on a pre-Stock Split basis.

Company Stock Performance

The following stock performance table is not deemed “soliciting material” or subject to Section 18 of the Securities Exchange Act of 1934.

The following graph compares the performance of our common stock to the Standard & Poor’s (“S&P”) 500 Index, the S&P MidCap 400 Index, the S&P Homebuilders Select Industry Index, and the ~~consolidated balance sheet data~~S&P Internet Select Industry Index by assuming $100 was invested in each investment option as of ~~December 31,~~February 28, 2018, which represents the month our common stock began trading on the NASDAQ. The S&P 500 Index is a capitalization-weighted index of domestic equities of the largest companies traded on the NYSE and ~~2017 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.~~NASDAQ. The ~~statement~~S&P MidCap 400 Index measures the performance of ~~operations data for~~ the ~~years ended December 31, 2016, 2015~~U.S. middle market capitalization (“midcap”) equities sector. The S&P Homebuilders Select Industry Index is a diversified group of holdings representing home building, building products, home furnishings and ~~2014~~home appliances. The S&P Internet Select Industry Index is comprised of U.S. equities of internet and ~~the consolidated balance sheet data as of December 31, 2016, 2015~~direct marketing retail, internet services and 2014 have been derived from our consolidated financial statements not included elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data presented below should be read in conjunction with our annual consolidated financial statementsinfrastructure, and ~~accompanying notes~~interactive media and ~~"Management’s~~services companies.


Year	Feb-18	Dec-18	Dec-19	Dec-20
EXPI	$ 100	$ 55	$ 88	$ 618
S&P 500 Index	$ 100	$ 92	$ 119	$ 136
Mid Cap 400 Index	$ 100	$ 89	$ 111	$ 123
S&P Homebuilders Index (XHB)	$ 100	$ 81	$ 114	$ 148
S&P Internet Index (XWEB)	$ 100	$ 100	$ 109	$ 213

Item 6.

SELECTED FINANCIAL DATA

Reserved.

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations" included elsewhere in this Annual Report on Form 10-K.~~

As of Year Ended December 31,

2018

2017

2016

2015

2014
Statement of Operations Data:

Revenue
$
500,147,681
$
156,104,544
$
53,555,725
$
22,464,306
$
13,368,905
Total expenses

522,532,196

178,136,198

60,927,558

24,320,560

13,335,473
Income (loss) from operations

(22,384,515)

(22,031,654)

(7,371,833)

(1,856,254)

33,432
Other Income and (expenses)

31,959

(2,077)

(355)

(1,104)

(942)
Income tax (expense) benefit

(77,800)

(97,234)

(42,528)

(103,069)

71,353
Net income (loss)

(22,430,356)

(22,130,965)

(7,414,716)

(1,960,427)

103,843
Less: Net income attributable to noncontrolling interests (a)

29,801

21,526

Net income (loss) attributable to non-controlling interest in subsidiary

(22,430,356)

(22,130,965)

(7,384,915)

(1,938,901)

103,843

Earnings (loss) per share attributable to common shareholders:

Basic earnings (loss) per share

(0.39)

(0.42)

(0.14)

(0.04)

0.00
Diluted earnings (loss) per share

(0.39)

(0.42)

(0.14)

(0.04)

0.00
Weighted average shares outstanding:

Basic

57,689,920

53,194,928

51,081,949

49,409,266

48,068,047
Diluted

57,689,920

53,194,928

51,081,949

49,409,266

51,735,865

Balance Sheet Data:

Cash and cash equivalents

20,538,057

4,672,034

1,684,608

571,814

353,374
Total assets

55,846,028
(b)
14,637,131

6,104,047

1,256,716

913,170
Total Liabilities

25,866,399
(c)
10,376,460

3,577,021

664,210

499,504
Equity

29,979,629

4,260,671

2,527,026

592,506

413,666

For the Year Ended December 31,

2018

2017

2016

2015

2014
Operating Statistics

Brokerage Services

Close homesale sides (d)

74,678

25,299

8,560

3,812

2,196
Homesales volume (e)
$
19,844,237,031
$
6,083,479,207
$
1,994,624,240
$
887,225,758
$
495,031,237
Average homesale price (f)
$
265,731
$
240,463
$
233,017
$
232,745
$
225,424

~~(a)~~ AsOperations (“MD&A”) is intended to inform the reader about matters affecting the financial condition and results of operations of eXp World Holdings, Inc. and its subsidiaries for the three-year period ended December 31, 2016, the Company acquired previously outstanding non-controlling interest in First Cloud Mortgage, Inc., resulting in a 100% interest. Upon obtaining 100% interest, the Company inactivated First Cloud Mortgage, Inc.

~~(b)~~ ~~Total assets include $10,607,800 of the acquired identifiable assets and goodwill resulting from the acquisition of substantially all of the assets of VirBELA.~~

~~(c)~~ Includes the long-term portion of future deliveries of the Company’s common stock valued at $1,654,337, calculated using a discount rate of 10% as consideration paid resulting from the acquisition of substantially all of the assets of VirBELA.

~~(d)~~ ~~Represents homesales sides on either the “buy” side or the “sell” side of a homesales transaction.~~

~~(e)~~ ~~Represents the volume of closed homesales transactions.~~

~~(f)~~ ~~Represents the average selling price of closed homesales transactions.~~

~~Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS~~

2020. The following discussion should be read together with our consolidated financial statements and related notes included elsewhere within this report. ~~The Management’s Discussion~~This discussion contains forward-looking statements that constitute our estimates, plans, and ~~Analysis of Financial Conditions and Results of Operations contain forward-looking statements.~~beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements. See “Forward-Looking Statements” and “Item 1A. – Risk Factors” included elsewhere within this Annual Report on Form 10-K for a discussion of certain risks, uncertainties, and assumptions associated with these statements.

This section generally discusses items pertaining to and comparisons of financial results between 2020 and 2019. Discussions of 2018 items and comparisons between 2019 and 2018 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 MD&A”). The 2019 MD&A is incorporated by reference herein from Part II, Item 7 of our Annual Report on Form 10-K dated March 12, 2020 (Commission File No. 001-38493).

This MD&A is divided into the following sections:

●

Overview

●

Market Conditions and Industry Trends

●

Key Business Metrics

●

Recent Business Developments

●

Results of Operations

●

Liquidity and Capital Resources

●

Critical Accounting Policies and Estimates

●

Non-U.S. GAAP Financial Measures

All dollar amounts are in USD thousands except share amounts and per share data and as otherwise noted.

OVERVIEW

~~Our Company~~

~~eXp World Holdings, Inc., (the “Company”, “eXp”, “we”, “us”, “our”), is a holding company with our main operating division being a cloud-based international residential~~We operate one of the world’s fastest growing real estate brokerage ~~(“eXp Realty”),~~businesses utilizing a cloud-based model that enables a variety of businesses to operate remotely and supported by a technology platform that allows our independent agents and brokers the ~~largest single owned residential real estate brokerage by geography in North America. We operate across the United States~~ability to provide a suite of more efficient and cost effective services to home buyers and sellers.

While we do not consider acquisitions a critical element of our ongoing business, we seek opportunities to expand and enhance our portfolio of solutions.

Strategy

Our strategy is to grow organically in the ~~provinces of Alberta, Ontario~~North American and ~~British Columbia, Canada. Our operations are focused on the development and use of cloud-based technologies in order to grow an~~certain international ~~brokerage without the burden of physical brick and mortar offices or redundant staffing costs.~~

~~In October 2018, the Company purchased certain technology and intellectual property of the ShowMeNow application to expand~~markets by increasing our products and service offerings. ShowMeNow is an on-demand mobile application that enables home shoppers to request immediate showings of properties, giving buyers flexible, real-time access to properties.

In November 2018, eXp World Holdings, Inc. and its newly formed subsidiary, eXp World Technologies, LLC acquired substantially all the assets of VirBELA. VirBELA provides a cloud-based environment focused on educational and innovative learning technology for clients in various industries. The acquisition of VirBELA’s core group of products and services will allow eXp Realty to continue to accelerate its business in a sustainable and innovative way, which is consistent with eXp World Holdings’ vision to expand the product offering to agents, teams and others who could benefit from their own, always available environments for collaboration.

~~Continued Accelerated Growth~~

~~For the year ended December 31, 2018, we increased our net real estate brokerage~~independent agent and broker ~~base by 139.1%, from 6,511 at December 31, 2017~~network. Additionally, we intend to ~~15,570. This increase occurred in both new~~continue our advancement into more international markets. Through our cloud-based operations and ~~existing geographical markets and contributed~~technology platform, we strive to ~~our increase in revenue of 220.4% as compared~~achieve customer-focused efficiencies that allow us to ~~December 31, 2017.~~

The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general. We can provide no assurance that the Company will be able to maintain our agent growth rate or that our agent and broker base will continue to increase in future periods.

~~Agent Ownership~~

The Company maintains an equity incentive program whereby agents and brokers of eXp Realty can become eligible for awards of the Company’s common stock through the achievement of production and agent attraction benchmarks. Under our equity incentive program, agents and brokers who qualify are issued shares of the Company’s common stock.

The Company also administers a program whereby agents and brokers can establish a direct ownership interest in the Company as a shareholder. Agents and brokers can elect to receive 5% of their commission payable in the form of Company common stock which is issued at a 20% discount to market on the date of issuance. In 2018, approximately 9,500 eXp Realty agents and brokers took advantage of this program resulting in the issuance of 1,684,601 shares of common stock. This agent equity program continues to be another element in creating a culture of agent-ownership.

~~Outlook~~

~~As we continue to scale our Company in the future and~~ increase market share and attain strong returns as we ~~aspire~~scale our business within the markets in which we operate. By building partnerships and strategically deploying capital, we seek to ~~realize gross margins at or near low double digits, resulting~~grow the business and enter into attractive verticals and markets.

During 2020, we believe that we made progress towards achieving our strategic goals, including an increase in ~~Adjusted EBITDA margins in the lower single digits.~~ ~~Though we have reported decreasing gross margins over the last few fiscal years we expect~~our agent count of 63%. The expected outcome of these activities will be to ~~continue developing and offering additional services~~better position us to deliver on our ~~agents and brokers in addition~~full potential, to considering making small adjustments to existing programs in an effort to realize these types of margins. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures” for additional information andprovide a ~~reconciliation of net loss to Adjusted EBITDA.~~

~~These operating ambitions are not forecasts and do not reflect our expectations, but rather are aspirational targets~~platform for future ~~performance that may never be realized. These statements involve risks, uncertainties, assumptions~~growth opportunities, and ~~other factors that are difficult~~ to predict and that could cause actual results to vary materially from those expressed in them. Factors include, among others, (i) changes in demand for the Company’s services and changes in consumer behavior; (ii) macroeconomic conditions beyondachieve our control; (iii) the Company’s ability to effectively maintain its infrastructure to support its operations and initiatives; (iv) the impact of governmental regulations related to the Company’s operations; and other factors, as described in this Annual Report on Form 10-K in Part II, Item 1A, “Risk Factors.”long-term financial goals.

~~RECENT BUSINESS DEVELOPMENTS~~

~~Initiatives~~

~~Customer and Employee Experience~~

The Company has recently embarked on a deep initiative to better understand both its customer and employee experience. In doing so, we are adopting many of the principles of the Net Promoter Score® (“NPS”) across many aspects of our organization. Whether it be the overall question "How likely are you to recommend eXp to your colleagues, friends or family?" or more granular inquiries as to specific workflows or service offerings, we believe this will ensure we are delivering on the most important values to our customers and employees. In turn, this often leads to raving fans of eXp who will promote our Company and continue leading us to through strong organic growth.

This also ties into one of our core values, transparency. While we strive for high satisfaction, a low or trending lower NPS score is equally important to identify. As NPS scores are often leading indicators to customers and employees’ future actions, we are able to learn quickly what may be a ‘pain point’ or product that is not meeting its desired objective. We then take that information and translate that into action with an effort to remediate the specific root cause(s) driving the lower score. This fast and iterative approach has already led to improvements in such parts of our business such as agent onboarding, commission transaction processing, and employee benefits.

~~Open Platform Strategy~~

The Company continues to build out eXp Enterprise (“Enterprise”) which is our proprietary platform that manages all of eXp Realty’s critical processes and information, including onboarding new agents, transactions, commission payments and other back office processes. We recently decided to further embrace the concept of an open platform strategy as it relates to other key functionality and solutions which our agents and brokers utilize to run their businesses.

Why are we taking this approach? - First and foremost, we believe in the efficiency of choice and flexibility. We do not believe in a one size fits all when it comes to business solutions for every single eXp agent and broker. This approach validates the previous investments made by our agents and brokers as it relates to the specific solutions to run their individual businesses.

What specifically does this mean? - We will be building out Application Program Interfaces (“API”) which will allow for various third-party solutions to directly connect into Enterprise. Accordingly, this will allow our agents and brokers to choose which solution works best for them as it relates to their desired lead generation, customer relationship management, transaction management, Internet Data Exchange (“IDX”) websites, among others.

How will we deliver this concept? - In addition to building out the technological infrastructure we will also establish an eXp Partner Marketplace. This will allow for a validation process of potential third-party service providers as well as consistent utilization of APIs to ultimately seamless use of tools by our agents and brokers.

~~Equity~~

On December 27, 2018, the Company introduced its Sustainable Equity Plan for real estate agents and brokers at eXp realty once the agent count was to exceed 16,000 agents which occurred in January of 2019. The following examples correlate to stock grants our agents and brokers will receive based on certain milestones and performance metrics.

~~First completed transaction with eXp Realty: $200 worth of eXp World Holdings common stock.~~

~~When agent caps: $400 worth of eXp World Holdings common stock.~~

~~For directly attracting another agent to the company and upon the closing of that agent’s first transaction with eXp Realty: $400 worth of eXp World Holdings common stock.~~

When named an ICON agent: Up to $16,000 worth of eXp World Holdings common stock, eligible on a yearly basis. $12,000 is awarded and vests after three years, and an additional $2,000 will be issued after each company event (The eXp Shareholder Summit and EXPCON) with no vesting period, for a possible total of $4,000.

~~Also, on December 27, 2018, the Company announced that its Board of Directors authorized a stock repurchase program to offset equity issuances for up to $25 million of company common stock.~~

The repurchase program will help offset equity issuances that the Company awards to its agents for meeting certain milestones in the Sustainable Equity Plan. Purchases under the repurchase program will comply with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The timing and amount of shares repurchased will depend upon market conditions. The repurchase program does not require the company to acquire a specific number of shares. As the Company continues to grow its cash balance, the cost of the shares repurchased will be funded from available working capital. Any shares repurchased under the program will be returned to the status of authorized but unissued shares of common stock.

~~VirBELA~~

We will continue developing the core platform and its underlying infrastructure to accommodate for the ever increasing use and scale required to support our eXp Realty division. Also in development and coming to market soon is a new product centered around the concept of an open campus whereby small and independent organizations will utilize sub spaces as part of a larger campus similar to co-working environments that currently exist in the physical brick and mortar world. Lastly, we will continue to service existing and new business to business enterprise level contracts in the coming year.

~~Agile at Scale~~

The Company continues to focus and refine its efforts on our engagement strategy to build a positive employee experience to advance creativity, productivity and service quality to retain top performing talent with the overall goal of growing and improving overall profitability. We have been and will continue to form more and more smaller functional teams across the entire organization. This allows for faster identification of challenges and opportunities, autonomy and decision making, and execution affecting our customers and employees. This is tied together by ensuring all teams are aligned and working towards outcomes consistent with our vision, goals, and key results.

MARKET CONDITIONS AND INDUSTRY TRENDS

Our business is dependent on the economic conditions within the markets for which we operate. Changes in these conditions can have a positive or negative impact on our business. The economic conditions influencing the housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability and supply and demand.

~~Home Sale Transactions~~In periods of economic growth, demand typically increases resulting in increasing home sales transactions and home sales prices. Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand. Additionally, regulations imposed by local, state, and federal government agencies, and geopolitical instability, can also negatively impact the housing markets for which we operate.

For the year ended December 31, 2020, the COVID-19 pandemic materially and adversely affected businesses worldwide. The magnitude and duration of the impact from COVID-19 are not fully known and cannot be reasonably estimated. While the pandemic has been ongoing for much of the fiscal year, there is still significant volatility and uncertainty surrounding the outlook of the global economy. The impact to the Company for the year ended December 31, 2020 has been less significant than anticipated. We believe that once COVID-19 is further contained the economy will continue to rebound depending on the continued pace, rate, and effectiveness of lifting public health restrictions on businesses and individuals and how quickly people become comfortable engaging in public activities.

According to the National Association of Realtors ~~(NAR)~~(“NAR”), the housing market is past the recovery phase from the initial downturn during the beginnings of the COVID-19 pandemic. Current home sales are now at pre-pandemic level, which is due to significant increase in demand. The sizable shift to remote work, which has led to current homeowners looking for larger homes and vacation homes, and the continued historic low interest rates have accelerated housing demand. These low mortgage rates are also allowing more buyers to enter the market. According to the NAR housing statistics, existing home ~~sale transactions of single family homes decreased 10.0% during Fiscal 2018. During this same period,~~sales, adjusted for seasonality, totaled 6.8 million in 2020, up 22.2% from 2019 and the ~~average~~most annual home sales ~~price~~since the 2008 recession. However, housing inventory declined to 1.07 million and a 1.9-month supply, which are both historic lows. The NAR reported that pending home sales slipped 0.3% in December 2020, indicating a slowing in contract activity, mostly impacted by seasonally activity and inventory levels. The index measures housing

contract activity and is based on signed real estate contracts for existing single-family homes and condos. However, given the overall uncertainty of the global pandemic, we continue to monitor and assess any potential impacts of the pandemic on our business, results of operations and financial condition as well as recognize the uncertainty inherent in the NAR forecast.

The Company is positioned to continue to grow in light of a series of fluctuations in economic activity and performed better than expected throughout 2020. However, depending on the continued course of the COVID-19 pandemic, specifically in key areas of operations, it is too early to predict the full extent of the effects the COVID-19 pandemic will have on our Company moving into 2021.

Regardless of whether the housing market continues to grow or slows, we believe that we are positioned to leverage our low-cost, high-engagement model, affording agents and brokers increased ~~3.0%. Factors that may have contributed~~income and ownership opportunities while offering a scalable solution to brokerage owners looking to survive and thrive in a series of fluctuations in economic activity.

National Housing Inventory

Prior to December 31, 2020, increased demand and low mortgage rates caused inventory levels to decline to record lows. With government implemented actions in response to COVID-19, fewer individuals are listing their homes and construction of new homes has slowed. Due to these factors, year over year inventory has decreased further. According to the ~~decline in home sales transactions include mortgage rate increases, continued inventory constraints and income tax reform.~~

~~Inventory~~

~~The~~NAR, inventory of existing homes for sale in the U.S. ~~increased 4.8% (preliminary)~~was 1.1 million as of December ~~31, 2018,~~2020 (preliminary) compared to 1.4 million at the ~~same period in 2017. The inventory represents a national average supply of 4.0 (preliminary) months, as~~end of December ~~31, 2018, at~~2019. The NAR indicated the ~~current~~need for new home ~~sales pace which is up from 3.9 months as~~construction due to the high demand of ~~December 31, 2017.~~homes and the record-low inventory levels.

Mortgage Rates

According to the NAR, mortgage rates on commitments for 30-year, conventional, fixed-rate mortgages averaged 3.1% for the 2020, compared to 3.9% for 2019. Mortgage rates are forecasted to decrease to 3.0% throughout 2021 and increase minimally to 3.4% in 2022. Mortgage rates are expected to remain low through 2021. Low mortgage rates are expected to continue to contribute to overall high demand for home-buying.

Housing Affordability Index

~~Also, according~~According to the NAR, the composite housing affordability index ~~decreased~~increased to ~~147.6 (preliminary)~~171.8 for December ~~2018~~2020 (preliminary) from ~~161.2~~167.2 for December ~~2017.~~ ~~However, t~~he2019. The housing affordability index continues to be at historically favorable levels. When the index is above 100, it indicates that a family earning the median income has sufficient income to purchase a median-priced home, assuming a 20 percent down payment and ability to qualify for a mortgage. The favorable housing affordability index is due ~~in part~~ to favorable mortgage rate conditions. ~~Although mortgage rates increased approximately 90 basis points from December 31, 2017 to December 31, 2018, the rates~~However, as housing prices continue to ~~be at historically~~climb due to low ~~levels.~~inventory and high demand and in light of the higher unemployment rate and the ongoing COVID-19 pandemic, it is still too early to predict the extent to which the effects of these factors will have on unemployment and housing affordability.

~~Mortgage Rates~~Existing Home Sales Transactions and Prices

According to the ~~Federal Housing Finance Agency, mortgage rates on commitments~~NAR, seasonally adjusted existing home sale transactions for 30-year, conventional, fixed-rate first mortgages averaged 4.2% for 2017 and the rate rose to 4.7% (preliminary) in December 2018. To the extent mortgage rates increase further, consumers continue to have financing alternatives such as adjustable rate mortgages or shorter-term mortgages which can be utilized to obtain a mortgage rate that is lower than a comparable 30-year fixed-rate mortgage.

While increasing mortgage rates and higher home prices may negatively impact housing affordability, demand remains favorable by rising wages, availability of alternative mortgage arrangements and improving consumer confidence.

Factors that may negatively affect growth in the housing industry include prolonged periods of slow economic growth, increased prevalence of unemployment, increasing mortgage interest rates, increase in home sales prices, insufficient inventory levels, regulations imposed by local, state and federal government agencies, geopolitical instability, first time home buyers inability to save due to increasing rent prices and adverse shifts in consumer attitudes towards home ownership.

~~Existing Home Sales~~

~~For~~ the year ended December ~~31, 2018, NAR existing home sale transactions decreased 10.0%~~2020 (preliminary) increased to ~~5.0~~6.8 million compared to 5.5 million for the ~~same period in 2017. During this same period, eXp Realty~~year ended December 2019. The NAR anticipates transactions to continue with pace however due to low inventory level recovery may not be sustainable.

According to the NAR, nationwide existing home sales ~~units increased 195.2%~~average price for December 2020 (preliminary) was $309 compared to ~~74,678~~$275 in December 2019. Due to low supply and high demand, the average sale price is expected to increase through 2021. However, it is still too early to predict the extent of the effects of the ongoing COVID-19 pandemic will have on home sales prices.

KEY BUSINESS METRICS

Management uses our results of operations, financial condition, cash flows, and key business metrics related to our business and industry to evaluate our performance and make strategic decisions.

The following table outlines the key business metrics that we periodically review:


	Year Ended December 31,
	2020	2019	2018

	(Dollar amounts in thousands)
Performance:
Agent count	41,313	25,423	15,570
Transactions	238,981	135,322	74,678
Volume	$ 72,206,457	$ 38,215,998	$ 19,799,161
Revenue	$ 1,798,285	$ 979,937	$ 500,148
Gross margin	8.9%	8.6%	8.1%
Adjusted EBITDA	$ 57,841	$ 12,649	$ 2,410

(1)

Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-U.S. GAAP Financial Measures”.

We periodically evaluate trends in certain metrics to track the Company’s performance.

Our strength is attracting real estate agent and broker professionals that contribute to our growth. Brokerage real estate transactions are recorded when our agents and brokers represent buyer and/or sellers in the purchase or sale, respectively, of a home. The number of real estate transactions are key drivers of our revenue and profitability. Real estate transaction volume ~~increased 226.2% to $13.8 billion compared~~represents the total sales value for all homes sold by our agents and brokers and is influenced by several market factors, including, but not limited to, the ~~same period~~pricing and quality of our services and market conditions that affect home sales, such as macroeconomic factors, local inventory levels, mortgage interest rates, and seasonality. Real estate transaction revenue represents the commission revenue earned by the Company for closed brokerage real estate transactions.

We continue to increase our agents and brokers significantly in ~~2017.~~the United States and Canada through the execution of our growth strategies. In the fourth quarter of 2019, we expanded operations to the U.K. and Australia. By the end of 2020, the Company expanded into other countries, including Mexico, South Africa, France, India, and Portugal. The rate of growth of our agent and broker base is difficult to predict and is subject to many factors outside of our control, including actions taken by our competitors and macroeconomic factors affecting the real estate industry in general. The Company’s agent base and transactions have not been significantly impacted throughout the global COVID-19 pandemic, however the full effect on these factors will continue to depend on the duration and severity of the COVID-19 pandemic.

Settled home sales transactions and volume resulted from closed real estate transactions and typically change directionally with changes in the market existing home sales transactions as reported by the NAR, as disproportionate variances are representative of company-specific improvements or shortfalls to the norm. Our home sale transactions growth was directly related to the growth of our agent ~~base.~~base over the prior comparative period.

We utilize gross margin, a financial statement measures based on generally accepted accounting principles in the U.S. (“U.S. GAAP”) to assess eXp’s financial performance from period to period.

Gross margin is calculated from U.S. GAAP reported amounts and equals the difference between revenue and cost of sales (i.e., gross profit) as a percentage of total revenue. Commissions and other agent-related costs represent the cost of sales for the Company. The cost of sales does not include depreciation or amortization expenses as the Company’s assets are not directly used in the production of revenue. Gross margin is based on the information provided in our results of operations or our consolidated statements of comprehensive income (loss), and is an important measure of our potential profitability and brokerage performance. For the years ended December 31, 2020, 2019, and 2018, gross margin was 8.9%, 8.6%, and 8.1%, respectively. Gross margin has improved each year due to efforts to improve our cost structure, including lower revenue share costs relative to total revenue and the reduction of the discount for shares issued under our agent equity program effective January 1, 2020.

Management also reviews Adjusted EBTIDA, which is a non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. Adjusted EBITDA has grown significantly for the years ended December 31. 2020, 2019, and 2018 due to our revenue growth and improvements in our cost structure.

RECENT BUSINESS DEVELOPMENTS

Real Estate Brokerage Initiatives

Global Expansion of Our Real Estate Cloud Brokerage

In the fourth quarter of 2019, the Company announced its first international expansion outside of North America into Australia and the U.K. During the fourth quarter of 2020, the Company initiated operations in France, India, Mexico, Portugal, and South Africa. The Company continues to pursue growth opportunities into new global markets. In addition to the international expansion, the Company continues to also focus on growth in the United States and in Canada.

Agent and Employee Experience

The Company has embarked on an initiative to better understand both its agents and employee experience. In doing so, we have adopted many of the principles of the Net Promoter Score® (NPS) across many aspects of our organization. NPS is a measure of customer satisfaction and is measured on a scale between -100 and 100. A NPS above 50 is considered excellent. The Company’s agent NPS was 73 in the fourth quarter of 2020. Whether it be the overall question "How likely are you to recommend eXp to your colleagues, friends, or family?" or more granular inquiries as to specific workflows or service offerings, we believe this will ensure we are delivering on the most important values to our agents and employees. In turn, this often leads to enthusiastic fans of eXp who will promote our Company and continue leading us through strong organic growth.

This also ties into one of our core values of transparency. While we strive for high satisfaction, it is equally important to investigate a low or unfavorable trending of NPS. As NPS scores are often leading indicators to agents and employees’ future actions, we are able to learn quickly what may be a ‘pain point’ or product that is not meeting its desired objective. We then take that information and translate it into action with an effort to remediate the specific root cause(s) driving the lower score. This fast and iterative approach has already led to improvements in such parts of our business such as agent onboarding, commission transaction processing, and employee benefits.

Agent Ownership

Our agent compensation plans represent a key lever in our strategy to attract and retain independent agents and brokers. The costs attributable to these plans are also a significant component of our commission structure and results of operations. Agents and brokers can elect to receive 5% of their ~~most recent releases, NAR is forecasting existing home sales~~commission payable in the form of Company common stock. Prior to ~~decrease 1.1%~~January 1, 2020, we issued share-based compensation to our agents and brokers at a 20% discount to the market price of our common stock, which changed to a 10% discount for issuances beginning in January 2020 and had a direct and positive impact on gross margin above. Our operational strategy and the importance of the agent compensation plans to our strategy have not changed; however, the financial impact of the change in the discount has had a meaningful effect on our results of operations. Our stock repurchase program and agent growth incentive program are more fully disclosed in Note 11 – Stockholders’ Equity to the consolidated financial statements.

Technology Products and Services

We continue developing the core Virbela software platform and its underlying infrastructure through our subsidiary, eXp World Technologies, LLC (“World Tech”), to accommodate for the ~~remainder~~increasing use and scale required to support our eXp Realty division. In 2019, we released a new product centered on the concept of ~~2019~~an open campus whereby small and ~~increase 4.0%~~independent organizations may utilize sub spaces as part of a larger campus similar to collaborative environments that currently exist in ~~2020.~~

~~Existing Home Sales Price~~

We ~~believe primary drivers~~the physical brick and mortar world. In the first quarter of 2020, Virbela began offering virtual events in conjunction with Event Farm. Given the current environment due to the ~~long-term~~COVID-19 pandemic, there is an acute need for virtual workplace collaboration. For the year ended December 31, 2020, Virbela has seen an increase in demand for ~~housing~~virtual events and collaborative spaces for remote teams and as a result has introduced new products and features including, an expo hall, a concert stage for virtual entertainment, VR support for Oculus Rift and HTC VIVE, and screen sharing and video chat capabilities. Lastly, we expect to continue to service existing and new business-to-business enterprise level contracts in the ~~growth of our company to support that demand are housing affordability,~~coming year.

On July 31, 2020, the ~~general economic health~~Company acquired all of the ~~U.S. economy, demographic trends such~~equity ownership interests in Showcase Web Sites, L.L.C. (“Showcase”) for cash consideration of $1.5 million and promissory notes in the aggregate principal amount of $1.5 million (the “Showcase Acquisition”). Showcase is a technology company focused on agent website and consumer real estate portal technology. With this acquisition, the Company will be able to strategically focus on creating consumer home-search technology for utilization by our independent agents and brokers, as ~~population growth, the increase in household formation, mortgage rate levels~~well as continued services offerings to third party clients of Showcase.

Affiliated Services

Recent acquisitions and ~~mortgage availability,~~ ~~job growth, the inherent benefits of owning a home versus renting~~partnerships have allowed us to begin offering to customers more products and ~~the influence of local housing dynamics of supply versus demand.~~

~~As of December 31, 2018, we believe that these factors are generally favorable.~~ ~~However, significant changes~~services complementary to ~~one or more of these drivers could cause the demand for housing to slow, negatively affecting all~~our real estate brokerage ~~firms, including~~business. These affiliated services include mortgage origination, title, escrow, and settlement services, which we can now provide as a more inclusive offering in addition to our brokerage services. We anticipate continued growth and investment in these service offerings through 2021; however, actual performance will depend directly on utilization by eXp ~~Realty.~~

~~Regardless of whether the housing market continues to grow or slows, the Company is positioned to adhere to its low-cost, high-engagement model, affording~~Realty agents and brokers ~~increased income~~ and the on-going and fluctuating government implemented restrictions due to the COVID-19 pandemic.

On December 4, 2020, the Company acquired all of the equity ownership ~~opportunities while offering a scalable solution~~interests in Success Enterprises LLC (“Success”) and its related media properties, including SUCCESS^® print magazine, SUCCESS.com, SUCCESS^® newsletters, podcasts, digital training courses and affiliated social media accounts across platforms for cash consideration of $8.0 million. With the addition of Success, eXp intends to ~~brokerage owners looking~~blend its technology and content to ~~survive~~enhance the personal development platform for entrepreneurs and ~~thrive in a series of fluctuations in economic activity.~~sales professionals.

~~Results of Operations~~

RESULTS OF OPERATIONS

Year ended December 31, ~~2018~~2020 vs. Year ended December 31, ~~2017~~2019


	Year Ended	% of	Year Ended	% of	Change 2020 vs. 2019
	December 31, 2020	Revenue	December 31, 2019	Revenue	$	%

	(In thousands, except share amounts and per share data)
Statement of Operations Data:
Revenues	$ 1,798,285	100%	$ 979,937	100%	$ 818,348	84%
Operating expenses
Commissions and other agent-related costs	1,638,674	91%	895,882	91%	742,792	83%
General and administrative expenses	122,801	7%	89,035	9%	33,766	38%
Sales and marketing expenses	5,223	-%	3,799	-%	1,424	37%
Total operating expenses	1,766,698	98%	988,716	101%	777,982	79%
Operating income (loss)	31,587	2%	(8,779)	(1)%	40,366	460%
Other expense, net	184	-%	281	-%	(97)	(35)%
Income (loss) before income tax expense	31,403	2%	(9,060)	(1)%	40,463	447%
Income tax expense	413	-%	497	-%	(84)	(17)%
Net income (loss)	30,990	2%	(9,557)	(1)%	40,547	424%
Add back: Net loss attributable to noncontrolling interest	141	-%	29	-%	112	386%
Net income (loss) attributable to eXp World Holdings, Inc.	$ 31,131	2%	($ 9,528)	(1)%	$ 40,659	427%
Adjusted EBITDA⁽¹⁾	$ 57,841	3%	$ 12,649	1%	$ 45,192	357%
Earnings (loss) per share ⁽²⁾
Basic	$ 0.22		($ 0.08)		$ 0.30	397%
Diluted	$ 0.21		($ 0.08)		$ 0.28	373%
Weighted average shares outstanding ⁽²⁾
Basic	138,572,358		126,256,407
Diluted	151,550,075		126,256,407

(1)

(2)	Earnings per share and weighted average shares outstanding have been adjusted for the impact of the two-for-one stock split in the form of a stock dividend effected on February 12, 2021 (the “Stock Split”) for all periods presented.

Revenue

~~Revenues~~

~~Revenues~~Our total revenues were ~~$500.1~~$1,798.3 million ~~for the year ended December 31, 2018~~in 2020 compared to ~~$156.1~~$979.9 million ~~for the year ended December 31, 2017,~~in 2019, an increase of ~~$344.0~~$818.3 million, or ~~220.4%~~84%. ~~The~~Total revenues increased primarily as a result of higher volume of real estate brokerage commissions, which is directly related to our increase asin agent count of 63% compared to 2019. Higher average home sales price also contributed to the ~~prior period is a direct result~~increase of ~~the 139% increase in our sales agent base to over 15,500 agents.~~revenue marginally.

~~Operating Expenses~~

Year Ended December 31,

2018

2017

$ Change

% Change

Operating expenses:

Commission and other agent-related costs

$
459,715,836

$
139,603,970

$
320,111,866

229.3
%
General and administrative

57,618,506

35,685,512

21,932,994

61.5

Professional fees

2,236,236

1,274,675

961,561

75.4

Sales and marketing

2,961,618

1,572,041

1,389,577

88.4

Total operating expenses

$
522,532,196

$
178,136,198

$
344,395,998

Commission and Other Agent Related Costs

Commission and other agent-related costs ~~includes~~were $1,638.7 million in 2020 compared to $895.9 million in 2019, an increase of $742.8 million, or 83%. Commission and other agent related costs include sales commissions paid and are reduced by agent related ~~to sales~~fees. Commission and other agent ~~commissions and revenue sharing. These~~related costs ~~are highly correlated with recognized revenues. As such, the~~increased primarily as a result of an increase in ~~cost of revenues,~~settled real estate transactions and growth in our agent base.

General and Administrative Expense

General and administrative expenses were $122.8 million in 2020 compared to ~~the comparable prior year period, was primarily attributable to the~~$89.0 million in 2019, an increase in revenues and increase in agent commissions paid. As we continue to attract agents who produce at higher than average levels, these agents typically earn high commission payout rates, resulting in a lower margin on their respective production.

of $33.8 million, or 38%. General and administrative expenses include costs related to wages, including stock compensation, ~~dues, operating leases, utilities, travel~~ and other general overhead expenses. ~~The increase in general~~General and administrative ~~costs, compared to the comparable prior year period, was driven~~expenses increased primarily ~~by the~~as a result of an increase of $22.7 million in compensation related expenses ~~of $9.2 million,~~including salaries, contract labor, employee benefits, and payroll taxes and processing. The Company had an increase in stock compensation expense of ~~$8.1~~$2.8 million. These increases are a direct result of the Company’s increase in employee and agent count. Employees increased from 634 in 2019 to 900 in 2020, representing growth in headcount of 42%. The Company’s agent base increased by 63%. Also, in support of the Company’s business operations, computer and software costs increased $3.6 million compared to prior year, mostly consisting of online subscriptions and security and virus protection. Finally, $2.3 million of the increase in general and administrative expenses is related to professional fees including accounting, legal, and other consulting. These increases are directly related to the Company’s continued revenue growth, international expansion and new business ventures.

Sales and Marketing

Sales and marketing expenses were $5.2 million in 2020 compared to $3.8 million in 2019, an increase of $1.4 million, or 37%. Sales and marketing costs include lead capture costs and promotional materials. Sales and marketing expenses increased primarily as a result of an increase in ~~awards granted and decrease in stock options~~advertising costs of $0.7 million.

Other Expense, Net

Other expense includes amortization expense of ~~$2.0~~the present value adjustment to our stock payable and start-up costs. There were no significant changes in other expense in 2020 compared to 2019.

Income Tax Benefit (Expense)

The Company’s provision for income taxes amounted to $0.4 million, ~~resulting from fewer stock options granted. Stock compensation expense and stock options expense is affected by awards granted, awards exercised and/~~a decrease of $0.1 million, or ~~awards forfeited throughout~~17%, for the ~~year. Awards granted, issued and forfeited are more fully disclosed in Note 9, Stockholders’ Equity, of the Consolidated Financial Statements.~~

~~Professional fees include costs related to legal, accounting and other consultants. The increase in professional fees,~~year ended December 31, 2020 compared to the ~~comparable prior year~~same period ~~were~~in 2019. The decrease in income tax expense was primarily ~~driven~~attributable to the geographic mix of earnings. Higher deductible share-based compensation expenses represented most of the decrease in effective tax rate, partially offset by ~~an increase of $0.5 million~~the change in ~~audit costs~~valuation allowance on deferred tax assets and ~~$0.3 million~~higher state taxes incurred in ~~legal fees.~~

~~Sales and marketing includes costs related to lead capture, digital and print media, and trade shows, in addition to other promotional materials. The increase in sales and marketing expenses,~~2020 compared to 2019. Refer to Critical Accounting Policies and Estimates within this MD&A and Note 13 – Income Taxes to the ~~comparable prior year period was primarily due to increased lead capture costs of $1.0 million~~.consolidated financial statements for further information.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are our cash and cash equivalents on hand and cash flows generated from our business operations. Our ability to generate sufficient cash flow from operations or to access certain capital markets, including banks, is necessary to fund our operations and capital expenditures, repurchase our common stock, and meet obligations as they become due. At present, our cash and cash equivalents balances and cash flows from operations have strengthened primarily due to transaction volume growth and improved cost leverage over the prior five years, especially during 2019 and 2020, attributable to the expansion of our independent agent and broker network and, to a lesser extent, increased average prices of home sales.

~~Year ended~~Currently, our primary use of cash on hand is to sustain and grow our business operations, including, but not limited to, commission and revenue share payments to agents and brokers and cash outflows for operating expenses. Our current capital deployment strategy for 2021 is to utilize excess cash on hand to support our growth initiatives into select markets and enhance our technology platforms and for repurchases of our common stock. As of December 31, ~~2018 vs. Year ended~~2020, the Company is not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. In addition, the Company has no known material cash requirements as of December 31, ~~2017~~2020 relating to capital expenditures, commitments, or human capital (except as passthrough commissions to agents and brokers concurrent with settled real estate transactions). The cash requirements for the upcoming fiscal year relate to our leases and our debt associated with acquisitions. For information regarding the Company’s expected cash requirement related to leases, see Note 10 – Leases to the consolidated financial statements. Cash requirements associated with our acquisitions include a $0.5 million cash payment related to the principal amount of promissory notes issued to the previous owners of Showcase and a $1.0 million payment of cash or common stock of the Company to the previous owners of Virbela both due in 2021. A final cash payment of $1.0 million for the settlement of the promissory notes issued to the previous owners of Showcase will be due in 2022.

We believe that our existing balances of cash and cash equivalents and cash flows expected to be generated from our operations will be sufficient to satisfy our operating requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including our level of investment in technology, our rate of growth into new markets, and cash used to repurchase shares of the Company’s common stock. Our capital requirements may be affected by factors which we cannot control such as the changes in the residential real estate market, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next twelve months.

AtWe currently do not hold any bank debt, nor have we issued any debt instruments through public offerings or private placements. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would likely suffer. As of December 31, ~~2018,~~2020, our cash and cash equivalents totaled ~~$20.5~~$100.1 million. Cash equivalents are comprised of financial instruments with an original maturity of 90 days or less from the date of purchase, primarily money market funds. AtWe currently do not possess any marketable securities.

Net Working Capital

Net working capital is calculated as the Company’s total current assets less its total current liabilities. The following table presents our net working capital for the periods presented:


	December 31, 2020	December 31, 2019
Current assets	$ 212,225	$ 78,819
Current liabilities	(96,650)	(41,965)
Net working capital	$ 115,575	$ 36,854

As of December 31, ~~2018 we held no marketable securities. Our working capital was $18.1 million and $2.7 million at December 31, 2018 and December 31, 2017, respectively.~~

Year Ended

December 31,

2018

2017

$ Change

Current assets

$
42,326,727

$
13,098,918

$
29,227,809
Current liabilities

(24,212,062)

(10,376,460)

(13,835,602)
Net working capital

$
18,114,665

$
2,722,458

$
15,392,207

~~For the year ended December 31, 2018,~~2020, net working capital increased ~~$15.4~~$78.7 million, or ~~565.4%~~214%, compared to the comparable prior year period, primarily due to an increase in cash and cash equivalents of ~~$15.9~~$60.1 million and ~~commissions~~accounts receivable of ~~$6.6~~$48.8 million resulting from pending real estate transactions. In correlation to the number of pending real estate transactions, accrued expenses increased $31.7 million, which ~~includes~~included higher commissions payable ~~and salaries payable, increased $10.2~~of $20.7 million.

Cash Flows

The following table presents our cash flows for the ~~years ended December 31, 2018 and 2017:~~periods presented:

Year Ended

December 31,

2018

2017

$ Change

Cash provided by operating activities

$
24,310,719

$
4,568,353

$
19,742,366
Cash used in investment activities

(8,859,462)

(1,281,147)

(7,578,315)
Cash provided by financing activities

2,015,034

149,369

1,865,665


	Year Ended December 31,
	2020	2019	2018
Cash provided by operating activities	$ 119,659	$ 55,186	$ 24,311
Cash used in investment activities	(16,963)	(6,690)	(8,859)
Cash used in financing activities	(21,893)	(24,569)	2,015
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	47	106	(21)
Net change in cash, cash equivalents and restricted cash	$ 80,850	$ 24,033	$ 17,446

For the year ended December 31, ~~2018,~~2020, cash provided by operating activities increased ~~$19.7 million.~~$64.5 million compared to the same period in 2019. The change resulted primarily from the increased volume in our real estate sales transactions, improved cost leverage, increase in customer deposits, and higher participation by our agents and brokers in our ~~Agent Equity Program.~~agent stock compensation programs. See ~~financial~~ Note 911 – Stockholders’ Equity to the consolidated financial statements for further details related to this ~~Program.~~

program.

For the year ended December 31, ~~2018,~~2020, cash used in our investing activities ~~consisted~~increased primarily due to higher cash used for business acquisitions of ~~expenditures related to the on-going development~~approximately $9.0 million and an increase of ~~our internal use software and the acquisition of VirBELA. Refer to Note 3 of our Consolidated Financial Statements for further details on our acquisition of VirBELA.~~$1.4 million in capital expenditures. As we continue to develop and refine our cloud-based platforms and continue to accelerate our business in innovative ways, we expect to continue to use our existing cash resources on similar expenditures for the next twelve months.

For the year ended December 31, ~~2018, we generated approximately $2.0 million~~2020, the decrease in cash flows ~~from~~used in financing activities primarily related to higher proceeds received from the exercise of stock options of $4.6 million, partially offset by higher repurchases of our common stock of $2.3 million compared to the prior year period.

Outlook

As we continue to scale our Company in the future and increase market share, we expect to continue invest in the business and drive strong growth in the U.S. and international markets.

These operating ambitions are not forecasts and do not reflect our expectations, but rather are aspirational targets for future performance that may never be realized. These statements involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in them. Factors include, among others, (i) changes in demand

for the Company’s services and changes in consumer behavior; (ii) macroeconomic conditions beyond our control; (iii) the Company’s ability to effectively maintain its infrastructure to support its operations and initiatives; (iv) the impact of governmental regulations related to the ~~exercise of options to purchase 2,594,050 shares of common stock.~~

~~Our future capital requirements will depend~~Company’s operations; and (v) other factors, as described in this Annual Report on ~~many factors, including our level of investment~~Form 10-K in ~~technology, our rate of growth into new markets and capital used to repurchase shares of the Company’s common stock~~ Our capital requirements may be affected by factors which we cannot control such as the residential real estate market, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate. We anticipate that between our current cash position and cash flow from ongoing operations we have the necessary resources to continue operating our business over the next 12 months. In order to support and achieve our future growth plans, however, we may need or seek advantageously to obtain additional funding through equity or ~~debt financing.~~Part II, Item 1A, “Risk Factors.”

During the year ended December 31, 2018, we increased our line of credit from $500,000 to $1,000,000. We currently have no borrowings against the line of credit facility or any other term loan bank debt. In the event additional financing is required in the future, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business and results of operations would likely suffer.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with U.S. GAAP requires us to make certain judgments and assumptions, based on information available at the time of our preparation of the financial statements, in determining accounting estimates used in the preparation of the statements. Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to the ~~Consolidated Financial Statements.~~

consolidated financial statements.

Accounting estimates are considered critical if the estimate requires us to use judgments and/or make assumptions about matters that were uncertain at the time the accounting estimate was made and if different accounting estimates could have been used in the reporting period or changes in the accounting estimates are likely to occur that would have a material impact on our financial condition, results of operations or cash flows.

Stock-based compensation

Our stock-based compensation is comprised of agent growth incentive programs, agent equity program, and stock option awards. The Company accounts for stock-based compensation granted to employees and non-employees using a fair value method. Stock-based compensation awards are measured at the grant date fair value, and the stock-based compensation cost is recognized over the requisite service period of the awards, usually the vesting period, on a straight-line basis, net of forfeitures. The Company reduces recorded stock-based compensation for forfeitures when they occur.

Recognition of compensation cost for an award with a performance condition is based on the probable outcome of that performance condition being met. The Company estimates the share-based liability based on estimated performance probabilities based on our most recent estimates on probable achievement of the performance measures established under our agent growth incentive program. These estimates calculated based on the agent’s historical performance for each award type. Also, the requisite service period at the grant date of performance awards is estimated based on the probability of the period of time it will take an agent to meet the performance metric. The value of the stock award is amortized over this period and recognized as stock compensation expense starting on the grant date.

If factors change causing different assumptions to be made in future periods, estimated compensation expense may differ significantly from that recorded in the current period. See Note 11 – Stockholders’ Equity to the consolidated financial statements for more information regarding the assumptions used in estimating the fair value of our awards.

Revenue ~~Recognition~~recognition

The Company generates substantially all of its revenue from real estate brokerage ~~services. With the acquisition of substantially all of the assets of VirBELA, LLC, the Company~~services and generates ~~an immaterialportion~~a de minimis portion of its ~~revenue~~revenues from software subscription and professional services.

Real Estate Brokerage Services

The Company serves as a licensed broker in the areas in which it operates for the purpose of processing ~~residential~~ real estate transactions. The Company is contractually obligated to provide services for the fulfillment of transfers of ~~residential~~ real estate between buyers and sellers. The Company provides these services itself and controls the ~~service~~services necessary to legally represent the transfer of the ~~residential~~ real estate. Correspondingly, the Company is defined as the ~~Principal.~~principal. The Company, as ~~Principal,~~principal, satisfies its obligation upon the closing of a ~~residential~~ real estate transaction. As ~~Principal,~~principal, and upon satisfaction of our obligation, the Company ~~recognized~~recognizes revenue in the gross amount of consideration to which we expect to be entitled to.

Revenue is derived from assisting home buyers and sellers in listing, marketing, selling and finding ~~residential~~ real estate. Commissions earned on real estate transactions are recognized at ~~a point in time upon~~ the completion of a ~~residential~~ real estate transaction once we have satisfied our performance obligation. Agent related fees are currently recorded as a reduction to commissions and other agent related costs.

At each reporting period, we estimate revenue for closed transactions for which we have not yet received the closing documents due to timing of when a transaction settles. Additionally, provisions for anticipated differences between consideration due and amounts expected to be received are estimated and recorded to revenue. A hypothetical change of 10% in the accrual for estimated revenue would have impacted total revenue by approximately $4.3 million and pre-tax income by approximately $0.5 million for the year ended December 31, 2020. Although all differences in the historical reported amounts (including the most recent fiscal year) have been immaterial, estimated revenue could materially differ from actual results and could have an adverse impact to the Company’s results of operations and financial condition.

Technology Services and Products

The Company earns a de minimis amount of subscription revenue that is derived from fees from users to access the Company’s virtual reality software platform. The terms of our subscriptions do not provide customers the right to take possession of the software. Subscription revenue is generally recognized ratably over the contract term.

Professional services revenue is derived from implementation and consulting services. Professional services revenue is typically recognized over time as the services are rendered, using an efforts-expended (labor hours) input method.

Software subscription and professional services revenue accounts for approximately 1% of all revenue for each of the years ended December 31, 2020, 2019, and 2018.

Accounts receivable and expected credit losses

The Company’s accounts receivable includes agent non-commission based fees, agent short-term advances, and commissions receivable for real estate property settlements. The majority of the Company’s accounts receivable is derived primarily from real estate property settlements, which are in-substance guaranteed because they represent commission payments on closed transactions. The accounts receivable are typically unsecured.

The allowance for credit losses is our estimate based on identified potentially uncollectible amounts and consideration of historical experience of losses incurred. We periodically perform detailed reviews to assess the adequacy of the allowance. We exercise significant judgment in estimating the timing, frequency and severity of losses. The Company uses the aging schedule method to estimate current expected credit losses (“CECL”) based on days of delinquency, including information about past events and current economic conditions. The Company’s accounts receivable is separated into the aforementioned three categories to evaluate the allowance under the CECL impairment model. The receivables in each category share similar risk characteristics.

The Company analyzed uncollectable accounts for the three categories of receivables and concluded that only agent non-commission based fees receivables and agent short-term advances carry any risk of expected credit losses. Current economic conditions and forecasts of future economic conditions do not affect expected credit losses on uncollectable real estate property settlements, and the Company has no historical experience or expectation of losses related to these receivables. A hypothetical change of 10% in expected credit losses related to agent non-commission based fees receivables and agent short-term advances would have impacted our pre-tax income by approximately $0.2 million for the year ended December 31, 2020.

Although we experienced higher rates of delinquency on agent fees and advances receivable and recognized greater expected losses during 2020, the Company typically has not experienced material uncollectible accounts (including the most fiscal recent year). However, future experience could materially differ from historical results and could have an adverse impact to the Company’s results of operations, financial condition, and cash flows.

Business combinations and goodwill

The Company accounts for business combinations using the acquisition method of accounting, under which the consideration for the acquisition is allocated to the assets acquired and liabilities assumed. The Company recognizes identifiable assets acquired and liabilities assumed at the fair values as of the acquisition date. Acquisition-related costs, such as due diligence, legal and accounting fees, are expensed as incurred and not considered in determining the fair value of the acquired assets.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding significant changes or planned changes in the use of the assets, as well as industry and economic conditions. These assumptions and estimates include projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors. Significant assumptions used in determining the allocation of fair value include the following valuation techniques: the cost approach, the income approach, and the market approach, which are determined based on cash flow projections and related discount rates, industry indices, market prices regarding replacement cost and comparable market transactions.

At the acquisition date, the Company recognizes the identifiable acquired assets, liabilities, and contingent liabilities (identifiable net assets) of the subsidiaries on the basis of fair value. Recognized assets and liabilities may be adjusted during a maximum of one year from the acquisition date (the “measurement period”), depending on new information obtained about the facts and circumstances in existence at the acquisition date.

If current expectations of future growth rates are not met or market factors outside of our control change significantly, then our goodwill or intangible assets may become impaired. Additionally, as goodwill and intangible assets associated with recently acquired businesses are recorded on the balance sheet at their estimated acquisition date fair values, those amounts are more susceptible to impairment risk if business operating results or macroeconomic conditions deteriorate.

Goodwill impairment

We review goodwill for impairment on an annual basis in the fiscal fourth quarter or on an interim basis if an event occurs or circumstances change that would more likely than not indicate that the fair value of the goodwill is below its carrying value. An impairment loss for goodwill would be recognized based on the difference between the carrying value and its estimated fair value, which would be determined based on either discounted future cash flows or another appropriate fair value method. Due to the impacts of the COVID-19 pandemic on the general economy, we performed this assessment at each interim period during 2020 as well. However, based on the Company’s performance, we believed that an impairment was remote during the year.

The evaluation of goodwill for impairment requires management to use significant judgments and estimates in accordance with U.S. GAAP, including, but not limited to, economic, industry, and company-specific qualitative factors, projected future net sales, operating results, and cash flows. Although we currently believe the estimates used in the evaluation of goodwill are reasonable, differences between actual and expected net sales, operating results, and cash flows and/or changes in the discount rates used could cause these assets to be deemed impaired. If this were to occur, we would be required to record a non-cash charge to earnings for the write-down in the value of the goodwill, which could have a material adverse effect on our results of operations and financial position but not our cash flows from operations.

During the fourth quarter of 2020, we performed an assessment of the fair value of goodwill related to World Tech. Due to the timing of the recent acquisitions of Showcase and Success, management did not identify any new events or changes in circumstances that would more likely than not indicate that the fair value of the goodwill acquired for each business combination is below its carrying value. To perform these assessments, we identified and analyzed macroeconomic conditions, industry and market conditions, and company-specific factors. Taking into consideration these factors, we estimated the potential change in the fair value of goodwill compared with our most recent quantitative impairment test for World Tech. As a result of the analysis performed, management believes the estimated fair value of the reporting units continue to exceed their carrying values by a substantial margin and does not represent a more likely than not possibility of potential impairment. The goodwill analysis did not result in an impairment charge. Also, a reasonable hypothetical change in assumptions, such as a 1% change in the discount rate or a 10% change in the projected cash flows, would not have resulted in an impairment charge for the year ended December 31, 2020.

Income ~~Taxes~~taxes

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax ~~bases~~basis of assets and liabilities. A valuation allowance against deferred tax assets would be established if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50%) that some or all of the deferred tax assets are not expected to be realized. Our assumptions, judgments, and estimates relative to the value of our deferred tax assets take into account predictions of the amount and category of future taxable income.

~~Since inception,~~As of December 31, 2020, based on our assessment of the realizability of the net deferred tax assets, we ~~have incurred operating losses,~~continue to maintain a full valuation allowance against all of our federal and ~~accordingly, we have generally not recorded~~state net deferred tax assets. If our valuation allowance were released due to a ~~provision for income taxes. We generally do not expect any significant changes~~change in the ~~amount~~likelihood of our deferred tax assets as of December 31, 2020, our income tax ~~provision until~~benefit and net income would have increased by up to $22.1 million. Management has evaluated our recent profitability trends and believes that, if current trends persist, there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach the conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance to be released are subject to change based on the positive evidence, including, but not limited to, the level of expected profitability, that we are ~~no longer incurring operating losses.~~ able to actually achieve in future periods.

~~Stock Based Compensation~~

~~The Company issues equity~~Although management believes that the judgment and ~~equity linked instruments~~estimates involved are reasonable and that the necessary provisions related to employees and non-employees. Share-based payment awards are measured at the grant date fair value with compensation costs associated with those awards recognized over the requisite service period, which is generally the vesting period of the respective award.

~~CONTRACTUAL OBLIGATIONS AND COMMITMENTS~~

~~As a “smaller reporting company”, we are not required to provide the information required by this Item.~~

~~OFF-BALANCE SHEET ARRANGEMENTS~~

Weincome taxes have ~~no off-balance sheet arrangements that have~~been recorded, changes in circumstances or ~~are reasonably likely to have a current or future effect on~~unexpected events could adversely affect our financial ~~condition, revenues or expenses,~~position, results of operations, ~~liquidity, capital expenditures or capital resources that are material~~and cash flows.

See Note 13 – Income Taxes to the consolidated financial statements for further information related to our ~~stockholders.~~income tax positions.

Litigation

~~NON-GAAP~~We recognize expense for legal claims when payments associated with the claims become probable and can be reasonably estimated. Due to the difficulty in estimating costs of resolving legal claims, actual costs could have a material adverse impact on our results of operations and cash flow, if we were to become a party to a material legal action.

NON-U.S. GAAP FINANCIAL MEASURES

To supplement our ~~condensed~~ consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use Adjusted EBITDA, a ~~non-GAAP~~non-U.S. GAAP financial measure, to understand and evaluate our core operating performance. This non-GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall

understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with ~~GAAP.~~

U.S.GAAP.

We define the ~~non-GAAP~~non-U.S. GAAP financial measure of Adjusted EBITDA to mean net income (loss), excluding ~~interest~~other income (expense), income tax benefit (expense), depreciation, amortization, and ~~amortization;~~impairment charges, stock-based compensation expense, and stock option expense.

We believe that Adjusted EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted EBITDA. In particular, we believe the exclusion of stock and stock option expenses, provides a useful supplemental measure in evaluating the performance of our underlying operations and provides better transparency into our results of operations.

We are presenting the ~~non-GAAP~~non-U.S. GAAP measure of Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe this measure provides an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of Adjusted EBITDA compared to Net Income (Loss), the closest comparable U.S. GAAP measure. Some of these limitations are that:

●

Adjusted EBITDA excludes stock-based compensation expense ~~(and~~ related ~~payroll tax expense)~~to our agent growth incentive program and stock option expense, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; ~~and;~~

and

●

Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets, ~~and~~ amortization of ~~acquired~~ intangible assets, and impairment charges related to these long-lived assets, and, although these are non-cash charges, the assets being depreciated, ~~and~~ amortized, or impaired may have to be replaced in the future.

The following tables present a reconciliation of Adjusted EBITDA to net loss, the most comparable U.S. GAAP financial measure, for each of the periods presented:


	Year Ended December 31,
	2020	2019	2018
Net income (loss)	$ 30,990	($ 9,557)	($ 22,430)
Other expense (income), net	184	281	(32)
Income tax expense	413	497	78
Depreciation, amortization, and impairment expenses ⁽¹⁾	4,214	2,384	894
Stock compensation expense ⁽²⁾	15,239	13,959	19,053
Stock option expense	6,801	5,085	4,847
Adjusted EBITDA	$ 57,841	$ 12,649	$ 2,410

(1)	Stock payable amortization is included in other expense (income). Impairment expense relates to 2020 write off of an intangible asset related to a discontinued internally developed software project. There were no impairment charges recognized during 2019 or 2018.

(2)	This includes agent growth incentive stock compensation expense and stock compensation expense related to non-controlling interest.

For the Year Ended

December 31, 2018

December 31, 2017
Net income / (loss)

$
(22,430,356)

$
(22,130,965)
Other (income) / expense

(31,959)

2,077
Taxes

77,800

97,234
Depreciation & Amortization

893,988

353,229
Stock compensation expense

19,053,478

10,961,631
Stock option expense

4,846,906

6,856,029
Adjusted EBITDA

$
2,409,857

$
(3,860,765)

The primary ~~impact on~~driver for the changes in Adjusted EBITDA ~~is stock compensation expense. Stock compensation expense increased $8.1 million and $6.0 million for~~was improved net income attributable to the increase in revenue from the higher volume of real estate sales transactions. During the years ended December 31, ~~2018~~2020 and 2019, net income increased by $40.5 million and net losses decreased by $12.9 million, respectively.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk relates to the risk of the loss of fair value resulting from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. Sensitivity analysis measures the impact of hypothetical changes in interest rates, foreign exchange rates, and other market rates or prices on the profitability of market-sensitive financial instruments and our results of operations.

Foreign Currency Risk

The majority of our net sales, expense, and capital purchases were transacted in U.S. dollars. However, exposure with respect to foreign exchange rate fluctuation existed due to our operations in Canada, Europe, Australia, Mexico, India, and South Africa, albeit each individually and in the aggregate to a small extent. As of December 31, ~~2017, respectively. Stock compensation expense is affected by awards granted and/or awards forfeited throughout~~2020, our largest international operations were in Canada. Based

on fiscal 2020 performance, a hypothetical decline in the ~~year. Awards granted, issued and forfeited are more fully disclosed in Note 9, Stockholders’ Equity,~~value of the ~~Consolidated Financial Statements. Also impacting stock compensation expense was~~Canadian dollar in relation to the ~~adoption~~U.S. dollar of ~~ASU 2018-07 disclosed~~10% would negatively impact operating income by approximately $135, while a hypothetical appreciation of 10% in ~~Note 2, Summary of Significant Accounting Principles and~~ the ~~increase in shares granted for our equity incentive program whereby agents and brokers of eXp Realty become eligible for awards~~value of the Canadian dollar in relation to the U.S. dollar would favorably impact operating income by approximately $70. The individual impacts to the operating income of hypothetical currency fluctuations in the Canadian dollar have been calculated in isolation from any potential responses to address such exchange rate changes in our other foreign markets. Our exposures to foreign currency risk related to our other operations in our other international locations were immaterial and have been excluded from this analysis.

Our investments in the net assets of our international operations were also subject to currency risk. As of December 31, 2020, the impacts of translations of foreign-denominated net assets of our international operations were immaterial to the Company’s ~~common stock through~~consolidated financial statements. The translation impacts related to the ~~achievement~~net assets of ~~production and agent attraction benchmarks.~~our international operations are recorded within accumulated other comprehensive income. Historically, we have not hedged this exposure, although we may elect to do so in future periods.

~~Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~As a “smaller reporting company”, we are not required to provide the information required by this Item.~~

~~Item 8. FINA~~

~~NCIAL STATEMENTS AND SUPPLEMENTARY DATA~~

Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

			Page
	~~Page~~
~~Report~~Reports of Independent Registered Public Accounting ~~Firm~~Firms		28	35
Consolidated Balance Sheets		29	38
~~Consolidated Statements of Operations~~		30
Consolidated Statements of Comprehensive Income (Loss)		31	39
Consolidated Statements of Stockholders’ Equity		32	40
Consolidated Statements of Cash Flows		33	41
Notes to Consolidated Financial Statements		34	42

2734

REPORT OF ~~INDEPENDENT~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~Shareholders~~To the Stockholders and the Board of Directors

of eXp World Holdings, Inc.

~~Bellingham, Washington~~

Opinion on the ~~Consolidated~~ Financial Statements

We have audited the accompanying consolidated balance sheets of eXp World Holdings, Inc. ~~(the “Company”)~~ and subsidiaries (the "Company") as of December 31, ~~2018~~2020 and ~~2017,~~2019, the related consolidated statements of ~~operations and~~ comprehensive income (loss), ~~stockholders’~~ equity, and cash flows, for each of the two years ~~then~~in the period ended December 31, 2020, and the related notes (collectively referred to as the ~~“consolidated financial statements”~~"financial statements"). In our opinion, the ~~consolidated~~ financial statements present fairly, in all material respects, the financial position of the Company ~~and subsidiaries at~~as of December 31, ~~2018~~2020 and ~~2017,~~2019, and the results of ~~their~~its operations and ~~their~~its cash flows for each of the two years ~~then~~in the period ended, December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Company for the year ended December 31, 2018, before the effects of the adjustments to retrospectively apply the common stock split presentation discussed in Note 1 to the financial statements, were audited by other auditors whose report, dated March 18, 2019, expressed an unqualified opinion on those statements. We have also audited the adjustments to the 2018 financial statements to retrospectively apply the change in presentation for common stock split, as discussed in Note 1 to the financial statements. In our opinion, such retrospective adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2018 financial statements of the Company other than with respect to the retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2018 financial statements taken as a whole.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ~~(“PCAOB”)~~(PCAOB), the Company's internal control over financial reporting as of December 31, ~~2018,~~2020, based on criteria established in Internal Control –— Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~(“COSO”)~~ and our report dated March ~~18, 2019~~11, 2021, expressed an ~~adverse~~unqualified opinion ~~thereon.~~on the Company's internal control over financial reporting.

Basis for Opinion

These ~~consolidated~~ financial statements are the responsibility of the ~~Company’s~~Company's management. Our responsibility is to express an opinion on the ~~Company’s consolidated~~Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Commissions and Other Agent-Related Costs – Revenue Share expenses – Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company has a revenue sharing plan where its agents and brokers can receive commission income from real estate transactions consummated by agents and brokers they have attracted to the Company. Agents and brokers are eligible for revenue share based on the number of Front-Line Qualifying Active agents they have attracted to the Company. A Front-Line Qualifying Active agent is an agent or broker that an agent or broker has personally attracted to the Company who has met specific sales transaction volume requirements. For the year ended December 31, 2020, the Company incurred $1.6 billion of commissions and other agent-related costs, which includes commissions paid to agents and brokers under the revenue sharing plan.

We identified the revenue sharing plan as a critical audit matter because the plan has a complex multi-tiered compensation structure involving highly automated system calculations to determine the commissions paid to agents and brokers. This required an increased extent of audit effort to audit and evaluate the accuracy of commissions paid under the revenue share plan.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures performed related to the testing of the accuracy of expenses under the revenue sharing plan included the following, among others:

●

We tested the effectiveness of controls over the revenue share expenses, including management’s controls over the calculation of commissions costs under the revenue sharing plan.

●

With the assistance of our IT specialists, we:

Identified the significant system used to process revenue share transactions and tested the general IT controls over the system, including testing of user access controls, change management controls, and IT operations controls.

Performed testing of automated controls, as well as the controls designed to ensure the accuracy of revenue share expenses.

●

We selected samples of commissions costs incurred for agents and brokers under the revenue sharing plan and recalculated the commissions based on the terms of the respective independent contractor agreements.

●

For the samples selected:

We tested the mathematical accuracy of the recorded commission by recalculating the revenue sharing allocation in accordance with the independent contractor agreements and traced the underlying transactions to third party documents including settlement statements, purchase agreements and bank statements.

We tested the accuracy of the Front-Line Qualifying Agent count for agents and brokers by reading independent contractor agreements and obtained evidence of agents and brokers reaching the required sales transaction volume, including settlement statements.

/s/ Deloitte & Touche LLP

San Francisco, California

March 11, 2021

We have served as the Company's auditor since 2019.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

eXp World Holdings, Inc.

Bellingham, Washington

Opinion on the Consolidated Financial Statements

We have audited the consolidated statements of operations and comprehensive income (loss), equity, and cash flows of eXp World Holdings, Inc. and subsidiaries (the “Company”) for the year ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”), before the effects of the adjustments to retrospectively apply the change in presentation for the common stock split described in Note 1. In our opinion, the consolidated financial statements for the year ended December 31, 2018, before the effects of the adjustments to retrospectively apply the change in presentation for the common stock split described in Note 1, present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America (the 2018 consolidated financial statements before the effects of the adjustments discussed in Note 1 are not presented herein).

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in presentation for the common stock split described in Note 1 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by Deloitte & Touche LLP.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our ~~audits~~audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our ~~audits~~audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our ~~audits provide~~audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

We ~~have~~ served as the Company’s auditor ~~since 2017.~~from 2017 to 2019.

Salt Lake City, Utah

March 18, 2019

2837

EXP WORLD HOLDINGS, INC.

~~CONSOLIDATED~~
CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	December 31, 2020	December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$ 100,143	$ 40,087
Restricted cash	27,781	6,987
Accounts receivable, net of allowance for credit losses of $1,879 and allowance for bad debt of $137, respectively	76,951	28,196
Prepaids and other assets	7,350	3,549
TOTAL CURRENT ASSETS	212,225	78,819
Property, plant, and equipment, net	7,848	5,428
Operating lease right-of-use assets	819	1,264
Other noncurrent assets	-	16
Intangible assets, net	8,350	2,677
Goodwill	12,945	8,248
TOTAL ASSETS	$ 242,187	$ 96,452

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$ 3,957	$ 2,593
Customer deposits	27,781	6,987
Accrued expenses	62,750	31,034
Current portion of long-term payable	1,416	916
Current portion of lease obligation - operating lease	746	435
TOTAL CURRENT LIABILITIES	96,650	41,965
Long-term payable, net of current portion	2,876	1,530
Long-term lease obligation - operating lease, net of current portion	74	829
TOTAL LIABILITIES	99,600	44,324
Commitments and Contingencies (Note 14)

EQUITY
Common Stock, $0.00001 par value 220,000,000 shares authorized; 146,677,786 issued and 144,143,292 outstanding in 2020; 132,398,616 issued and 131,473,252 outstanding in 2019 ⁽¹⁾	1	1
Additional paid-in capital	218,492	130,682
Treasury stock, at cost: 2,534,494 and 925,364 shares held, respectively	(37,994)	(8,623)
Accumulated deficit	(39,162)	(70,293)
Accumulated other comprehensive income	247	200
Total eXp World Holdings, Inc. stockholders' equity	141,584	51,967
Equity attributable to noncontrolling interest	1,003	161
TOTAL EQUITY	142,587	52,128
TOTAL LIABILITIES AND EQUITY	$ 242,187	$ 96,452

(1)	All applicable period amounts have been adjusted to reflect the 2-for-one stock split effected in the form of a stock dividend in February 2021. See Note 1 – Description of Business and Basis of Presentation for details.

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

EXP WORLD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except share amounts and per share data)


	Year Ended December 31,
	2020	2019	2018
Revenues	$ 1,798,285	$ 979,937	$ 500,148
Operating expenses
Commissions and other agent-related costs	1,638,674	895,882	459,716
General and administrative expenses	122,801	89,035	59,855
Sales and marketing expenses	5,223	3,799	2,961
Total operating expenses	1,766,698	988,716	522,532
Operating income (loss)	31,587	(8,779)	(22,384)
Other expense
Other expense (income), net	133	247	(32)
Equity in losses of unconsolidated affiliates	51	34	-
Total other expense (income), net	184	281	(32)
Income (loss) before income tax expense	31,403	(9,060)	(22,352)
Income tax expense	413	497	78
Net income (loss)	30,990	(9,557)	(22,430)
Net loss attributable to noncontrolling interest	141	29	-
Net income (loss) attributable to eXp World Holdings, Inc.	$ 31,131	($ 9,528)	($ 22,430)

Earnings (loss) per share ⁽¹⁾
Basic	$ 0.22	($ 0.08)	($ 0.19)
Diluted	$ 0.21	($ 0.08)	($ 0.19)
Weighted average shares outstanding⁽¹⁾
Basic	138,572,358	126,256,407	115,379,840
Diluted	151,550,075	126,256,407	115,379,840

Comprehensive income (loss):
Net income (loss)	$ 30,990	($ 9,557)	($ 22,430)
Comprehensive loss attributable to noncontrolling interests	141	29	-
Net income (loss) attributable to eXp World Holdings, Inc.	31,131	(9,528)	(22,430)
Other comprehensive income (loss):
Foreign currency translation (loss) gain, net of tax	47	211	(20)
Comprehensive income (loss) attributable to eXp World Holdings, Inc.	$ 31,178	($ 9,317)	($ 22,450)

(1)	All applicable period amounts have been adjusted to reflect the 2-for-one stock split effected in the form of a stock dividend in February 2021. See Note 1 – Description of Business and Basis of Presentation for details.

December 31, 2018

December 31, 2017
ASSETS

CURRENT ASSETS

Cash and cash equivalents

$
20,538,057

$
4,672,034
Restricted cash

2,502,591

923,193
Accounts receivable, net of allowance $484,441 and $179,759, respectively

17,428,091

6,912,657
Prepaids and other assets

1,857,988

591,034
TOTAL CURRENT ASSETS

42,326,727

13,098,918
FIXED ASSETS, NET

2,739,525

1,538,213
INTANGIBLES ASSETS, NET

2,531,669

-
GOODWILL

8,248,107

-
TOTAL ASSETS

$
55,846,028

$
14,637,131

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$
1,758,377

$
635,087
Customer deposits

2,502,591

923,193
Accrued expenses

18,976,435

8,818,180
Current portion of long-term payable

974,659

-
TOTAL CURRENT LIABILITIES

24,212,062

10,376,460

LONG-TERM PAYABLE, net of current portion

1,654,337

-
TOTAL LIABILITIES

25,866,399

10,376,460

Commitments and Contingencies (Note 11)

STOCKHOLDERS' EQUITY

Common Stock, $0.00001 par value 220,000,000 shares authorized; 60,609,102 and 54,962,535 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively

606

550
Additional paid-in capital

90,755,616

36,848,041
Accumulated deficit

(60,765,266)

(32,596,374)
Accumulated other comprehensive income (loss)

(11,327)

8,454

TOTAL STOCKHOLDERS' EQUITY

29,979,629

4,260,671
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
55,846,028

$
14,637,131

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

EXP WORLD HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share amounts)


	Year Ended December 31,
	2020	2019	2018
Common stock:
Balance, beginning of year	$ 1	$ 1	$ 1
Balance, end of year	1	1	1
Treasury stock:
Balance, beginning of year	(8,623)	-	-
Repurchases of common stock	(29,371)	(27,056)	-
Retirement of treasury stock	-	18,433	-
Balance, end of year	(37,994)	(8,623)	-
Additional paid-in capital:
Balance, beginning of year	130,683	90,756	36,848
Cumulative effect from the adoption of new accounting standards	-	-	5,739
Shares issued for acquisition	-	-	1,000
Shares issued for stock options exercised	6,946	2,298	2,015
Agent growth incentive stock compensation	13,094	13,209	19,053
Agent equity stock compensation	60,968	37,768	21,254
Stock option compensation	6,801	5,085	4,847
Retirement of treasury stock	-	(18,433)	-
Balance, end of year	218,492	130,683	90,756
Accumulated deficit:
Balance, beginning of year	(70,293)	(60,765)	(32,596)
Cumulative effect from the adoption of new accounting standards	-	-	(5,739)
Net income (loss)	31,131	(9,528)	(22,430)
Balance, end of year	(39,162)	(70,293)	(60,765)
Accumulated other comprehensive income (loss):
Balance, beginning of year	200	(12)	8
Foreign currency translation gain (loss)	47	212	(20)
Balance, end of year	247	200	(12)
Noncontrolling interest:
Balance, beginning of year	160	-	-
Net loss	(141)	(29)	-
Stock compensation	451	-	-
Contributions by noncontrolling interests	533	189	-
Balance, end of year	1,003	160	-
Total equity	$ 142,587	$ 52,128	$ 29,980

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

2940

EXP WORLD HOLDINGS, INC.

~~CONSOLIDATED~~
CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~CASH FLOWS

(In thousands, except share amounts)

Year Ended

Year Ended

December 31,

December 31,

2018

2017

Revenues

$
500,147,681

$
156,104,544

Operating expenses

Commission and other agent-related costs

459,715,836

139,603,970

General and administrative

57,618,506

35,685,512

Professional fees

2,236,236

1,274,675

Sales and marketing

2,961,618

1,572,041

Total expenses

522,532,196

178,136,198

Net loss from operations

(22,384,515)

(22,031,654)

Other income and (expenses)

Interest income (expense)

53,155

(2,077)

Other income (expense)

(21,196)

-

Total other income and (expenses)

31,959

(2,077)

Loss before income tax expense

(22,352,556)

(22,033,731)

Income tax expense

(77,800)

(97,234)

Net loss

$
(22,430,356)

$
(22,130,965)

Net loss per share attributable to common shareholders

Basic from continuing operations

$
(0.39)

$
(0.42)

Diluted from continuing operations

$
(0.39)

$
(0.42)

Weighted average shares outstanding

Basic

57,689,920

53,194,928

Diluted

57,689,920

53,194,928


	Year Ended December 31,
	2020	2019	2018
OPERATING ACTIVITIES
Net income (loss)	$ 30,990	($ 9,557)	($ 22,430)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation expense	3,360	2,057	870
Amortization expense - intangible assets	629	327	24
Amortization expense - long-term payable	157	140	21
Asset impairments	225	-	-
Allowance for credit losses on receivables/bad debt on receivables	1,742	(137)	(484)
Equity in loss of unconsolidated affiliates	51	34	-
Agent growth incentive stock compensation expense	15,239	13,959	19,053
Stock option compensation	6,801	5,085	4,847
Agent equity stock compensation expense	60,968	37,768	21,254
Changes in operating assets and liabilities:
Accounts receivable	(50,193)	(10,626)	(10,037)
Prepaids and other assets	(3,534)	(1,696)	(1,179)
Customer deposits	20,794	4,421	1,597
Accounts payable	1,364	1,413	609
Accrued expenses	30,017	11,302	10,166
Long term payable	1,048	697	-
Other operating activities	1	(1)	-
NET CASH PROVIDED BY OPERATING ACTIVITIES	119,659	55,186	24,311
INVESTING ACTIVITIES
Purchases of property, plant and equipment	(6,436)	(5,000)	(2,134)
Acquisition of businesses, net of cash acquired	(10,502)	(1,500)	(6,725)
Intangible assets acquired	-	(140)	-
Other investing activities	(25)	(50)	-
NET CASH USED IN INVESTING ACTIVITIES	(16,963)	(6,690)	(8,859)
FINANCING ACTIVITIES
Repurchase of common stock	(29,371)	(27,056)	-
Proceeds from exercise of options	6,946	2,298	2,015
Transactions with noncontrolling interests	532	189	-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(21,893)	(24,569)	2,015
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	47	106	(21)
Net change in cash, cash equivalents and restricted cash	80,850	24,033	17,446
Cash, cash equivalents and restricted cash, beginning balance	47,074	23,041	5,595
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE	$ 127,924	$ 47,074	$ 23,041

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes	$ 754	$ 130	$ 73
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Retirement of treasury stock	$ -	$ 18,433	$ -
Lease liabilities arising from obtaining right-of-use assets	138	1,524	-
Intangible assets in accounts payable	-	70	-
Termination of lease liabilities	204	-	-
Liabilities incurred associated with business acquisition	1,500	-	4,108
Property, plant and equipment purchases in accounts payable	117	93	87
Liabilities assumed in business acquisition	140	-	-
Common stock issued for business acquisition	-	-	1,000

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

~~EXP WORLD HOLDINGS, INC.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

Year Ended

Year Ended

December 31,

December 31,

2018

2017

Net loss

$
(22,430,356)

$
(22,130,965)
Other comprehensive loss:

Foreign currency translation adjustments, net of tax

(19,781)

4,249
Comprehensive loss

$
(22,450,137)

$
(22,126,716)

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

3141

~~EXP WORLD HOLDINGS, INC.~~

~~CONSO~~

~~LIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~

Accumulated

Common Stock

Additional

Accumulated

Other Comprehensive

Total

Shares

Amount

Paid-In Capital

Deficit

Income (Loss)

Equity
Balance, December 31, 2016

52,316,679

$
523

$
12,987,707

$
(10,465,409)

$
4,205

$
2,527,026

Stock issued for cash at $3.25 per share, net of issuance costs

-

-

142,158

-

-

142,158
Exercise of options

181,572

2

46,594

-

-

46,596
Repurchase and retirement of common stock

(1,307)

-

(3,607)

-

-

(3,607)
Stock compensation expense

1,000,594

10

10,961,621

-

-

10,961,631
Stock option expense

-

-

6,856,029

-

-

6,856,029
Agent equity program

1,464,997

15

5,857,539

-

-

5,857,554
Foreign currency translation adjustment

-

-

-

-

4,249

4,249
Net loss

-

-

-

(22,130,965)

-

(22,130,965)

Balance, December 31, 2017

54,962,535

$
550

$
36,848,041

$
(32,596,374)

$
8,454

$
4,260,671

Cumulative effect adjustment upon the adoption of Accounting Standards Update 2018-07

-

-

5,738,536

(5,738,536)

-

-
Shares issued for acquisition

97,371

1

999,999

-

-

1,000,000
Exercise of options

2,594,050

25

2,015,009

-

-

2,015,034
Stock compensation expense

1,270,545

13

19,053,465

-

-

19,053,478
Stock option expense

-

-

4,846,906

-

-

4,846,906
Agent equity program

1,684,601

17

21,253,660

-

-

21,253,677
Foreign currency translation adjustment

-

-

-

-

(19,781)

(19,781)
Net loss

-

-

-

(22,430,356)

-

(22,430,356)

Balance, December 31, 2018

60,609,102

$
606

$
90,755,616

$
(60,765,266)

$
(11,327)

$
29,979,629

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

~~EXP WORLD HOLDINGS, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Year Ended

Year Ended

December 31,

December 31,

2018

2017

OPERATING ACTIVITIES

Net loss

$
(22,430,356)

$
(22,130,965)

Adjustments to reconcile net loss

to cash provided by operating activities:

Depreciation and amortization

893,988

353,229

Stock compensation expense

19,053,478

10,961,631

Stock option expense

4,846,906

6,856,029

Agent equity program

21,253,677

5,857,554

Amortization of debt discount

21,196

-

Changes in operating assets and liabilities:

Accounts receivable

(10,520,725)

(3,884,982)

Prepaids and other assets

(1,179,040)

(279,361)

Customer deposits

1,597,017

441,489

Accounts payable

608,935

317,667

Accrued expenses

10,165,643

6,076,062

CASH PROVIDED BY OPERATING ACTIVITIES

24,310,719

4,568,353

INVESTING ACTIVITIES

Purchase of fixed assets

(2,134,462)

(1,281,147)

Payment for business acquisition and intangibles

(6,725,000)

-

CASH USED IN INVESTING ACTIVITIES

(8,859,462)

(1,281,147)

FINANCING ACTIVITIES

Proceeds from issuance of common stock

-

142,158

Repurchase and retirement of subsidiary common stock

-

(3,607)

Proceeds from exercise of options

2,015,034

46,596

Principal payments of notes payable

-

(35,778)

CASH PROVIDED BY FINANCING ACTIVITIES

2,015,034

149,369

Effect of changes in exchange rates on cash, cash equivalents and restricted cash

(20,870)

(7,660)

Net change in cash, cash equivalents and restricted cash

17,445,421

3,428,915

Cash, cash equivalents and restricted cash, beginning of period

5,595,227

2,166,312

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

$
23,040,648

$
5,595,227

–

–

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

Cash paid for interest

$
-

$
2,077

Cash paid for income taxes

$
72,682

$
97,234

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for business acquisition

$
1,000,000

$
-

Liabilities incurred associated with business acquisition

$
4,107,800

$
-

Fixed asset purchases in accounts payable

$
86,946

$
71,890

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

eXp World Holdings, Inc.

Notes to ~~the~~ Consolidated Financial Statements

~~December 31, 2018~~

(~~Expressed~~Amounts in ~~U.S. dollars)~~thousands, except share and per share amounts, unless otherwise noted)

~~1. BASIS OF~~ ~~PRESENTATION~~

1.	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

eXp World Holdings, Inc. ~~(the~~(collectively with its subsidiaries, the “Company” ~~or “we”~~ or “eXp”) was incorporated in the State of Delaware on July 30, 2008. Through various operating subsidiaries, the Company primarily operates a cloud-based real estate brokerage operating throughout the United States, and most of the Canadian provinces. During the previous five fiscal quarters, the Company began operations in ~~all U.S. States,~~ the ~~District of Columbia~~United Kingdom (U.K.), Australia, South Africa, Portugal, France, India, and ~~the provinces of Alberta, British Columbia and Ontario, Canada.~~Mexico. The Company focuses on a number of cloud-based technologies in order to grow an international brokerage without the burden of physical bricks and mortar or redundant staffing costs.

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles ~~in the United States of America (“GAAP”)~~ and are expressed in U.S. dollars. The Company’s fiscal year end is December 31. We

Common stock split

On January 19, 2021, the Company declared a 2-for-one stock split of the Company’s common stock effected in the form of a stock dividend (the “Stock Split”) on each share of the Company’s outstanding Common Stock. The stock dividend was issued on February 12, 2021 to holders of record of the Company’s Common Stock at the close of business on January 29, 2021. All share and per share amounts presented herein have ~~reclassified certain amounts in prior-period financial statements~~been retroactively adjusted to ~~conform to~~reflect the ~~current period’s presentation.~~impact of the Stock Split.

Impact of the Stock Split

The ~~Company has evaluated events~~impacts of the Stock Split were applied retroactively for all periods presented in accordance with applicable guidance. Therefore, prior period amounts are different from those previously reported. Certain amounts within the following tables may not foot due to rounding.

The following table illustrates changes in earnings (loss) per share and ~~transactions~~weighted average shares outstanding as previously reported prior to, and as adjusted subsequent to, the ~~balance sheet date~~impact of the Stock Split retroactively adjusted for the years ended December 31, 2019 and ~~has disclosed all events or transactions that occurred~~2018:


	Year ended December 31,
	2019			2018
	As Previously Reported	Impact of Stock Split	Revised	As Previously Reported	Impact of Stock Split	Revised
Weighted average shares outstanding
Basic	62,585,555	63,670,852	126,256,407	57,689,920	57,689,920	115,379,840
Diluted	62,585,555	63,670,852	126,256,407	57,689,920	57,689,920	115,379,840
Earnings (loss) per share
Basic	(0.15)	0.07	(0.08)	(0.39)	0.20	(0.19)
Diluted	(0.15)	0.07	(0.08)	(0.39)	0.20	(0.19)

The following table illustrates changes in equity as previously reported prior to, and as adjusted subsequent to, the ~~balance sheet date but prior~~impact of the Stock Split retroactively adjusted for the years ended December 31, 2019 and 2018:


	Year ended December 31,
	2019			2018
	As Previously Reported	Impact of Stock Split	Revised	As Previously Reported	Impact of Stock Split	Revised
Common stock:
Balance, beginning of year	60,609,102	60,609,102	121,218,204	54,962,535	54,962,535	109,925,070
Retirement of common stock	(1,818,273)	(1,818,273)	(3,636,546)	-	-	-
Shares issued for acquisition	-	-	-	97,371	97,371	194,742
Shares issued for stock options exercised	2,261,122	2,261,122	4,522,244	2,594,050	2,629,524	5,223,574
Agent growth incentive stock compensation	1,345,754	1,345,754	2,691,508	1,270,545	1,271,379	2,541,924
Agent equity stock compensation	3,801,603	3,801,603	7,603,206	1,684,601	1,648,293	3,332,894
Balance, end of year	66,199,308	66,199,308	132,398,616	60,609,102	60,609,102	121,218,204
Common stock, par value ⁽¹⁾	$ 1	$ -	$ 1	$ 1	$ -	$ 1

(1)	The par value of common stock changed by less than one thousand dollars and shows no impact due to rounding.

Stock awards under the Company’s equity incentive program for agents, where the performance metric had been achieved, were adjusted retroactively to ~~filing this Annual Report on Form 10-K that would require recognition or disclosure in~~give effect to the ~~Consolidated Financial Statements.~~Stock Split retroactively adjusted for the following periods:


	Shares			Weighted Average Grant Date Fair Value
	As Previously Reported	Impact of Stock Split	Revised	As Previously Reported	Impact of Stock Split	Revised
Balance, December 31, 2018	3,872,877	3,872,877	7,745,754	$ 11.63	($ 5.82)	$ 5.82
Granted	1,687,457	1,687,457	3,374,914	9.23	(4.62)	4.62
Vested and issued	(1,494,633)	(1,494,633)	(2,989,266)	11.21	(5.60)	5.61
Forfeited	(677,592)	(677,592)	(1,355,184)	3.39	(1.70)	1.70
Balance, December 31, 2019	3,388,109	3,388,109	6,776,218	$ 11.04	($ 5.52)	$ 5.52

The Company’s stock options were adjusted retroactively to give effect to the Stock Split for the following periods:

~~2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES~~


	Options			Weighted Average Exercise Price
	As Previously Reported	Impact of Stock Split	Revised	As Previously Reported	Impact of Stock Split	Revised
Balance, December 31, 2018	8,697,613	8,697,613	17,395,226	$ 2.08	($ 1.04)	$ 1.04
Granted	776,746	776,746	1,553,492	9.44	(4.72)	4.72
Exercised	(2,261,122)	(2,261,122)	(4,522,244)	1.02	(0.51)	0.51
Forfeited	(437,881)	(437,881)	(875,762)	7.94	(3.97)	3.97
Balance, December 31, 2019	6,775,356	6,775,356	13,550,712	$ 2.90	($ 1.45)	$ 1.45

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The accompanying ~~audited condensed~~ consolidated financial statements include the accounts of eXp World Holdings, Inc., its wholly-owned subsidiaries, and ~~its subsidiaries. All inter-company accounts~~including those entities in which we have a variable interest of which we are the primary beneficiary. If the Company has a variable interest in an entity but it is not the primary beneficiary of the entity or exercises control over the operations and has less than 50% ownership, it will use the equity method or the cost method of accounting for investments. Entities in which the Company has less than a 20% investment and where the Company does not exercise significant influence are accounted for under the cost method. Intercompany transactions ~~have been~~and balances are eliminated upon consolidation.

Variable interest entities and noncontrolling interests

A company is deemed to be the primary beneficiary of a VIE and must consolidate the entity if the company has both: (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

In 2019, the Company made capital contributions in consideration for an ownership interest in First Cloud Investment Group, LLC (“First Cloud”), a Nevada limited liability company providing mortgage origination for end-consumers, with the remaining ownership interests held by certain independent agents and brokers. Under the terms of the operating agreement, the Company maintains at least a 50% equity ownership interest in First Cloud.

The Company determined that First Cloud is a VIE, as the Company is the primary beneficiary that has both the power to direct the activities that most significantly impact the VIE and a variable interest that potentially could be significant to the VIE. The Company treats the interest in First Cloud that it does not own as a noncontrolling interest. The noncontrolling interest balance is adjusted each period to reflect the allocation of net income (loss) and other comprehensive income (loss) attributable to the noncontrolling interest, as shown in the consolidated statements of comprehensive income (loss). The noncontrolling interest balance in the consolidated balance sheets represents the proportional share of the equity of the joint venture entity, which is attributable to the noncontrolling shareholders.

As of December 31, 2020, First Cloud’s operations are not material to the Company’s financial position or results of operations.

Joint ventures

A joint venture is a contractual arrangement whereby the Company and other parties undertake an economic activity through a jointly controlled entity. Joint control exists when strategic, financial, and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. Joint ventures are accounted for using the equity method and are recognized initially at cost.

The Company has investments in a joint venture, Silverline Title & Escrow, LLC (“Silverline”), which operates and manages a title agency that performs, among other functions, core title agent services (for which liabilities arises), including the evaluation of searches to determine the insurability of title, the clearance of underwriting objections, the actual issuance of policies on behalf of insurance companies, and, where customary, the issuance of title commitments and the conducting of title searchers. The Company owns a 50% ownership interest in Silverline with the remaining ownership interest held by a third-party investment company. The Company recognizes its share of income and expenses and equity movement in the venture in proportion to its percentage of ownership.

As of December 31, 2020, Silverline’s operations are not material to the Company’s financial position or results of operations.

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to ~~provisions~~allowance for ~~doubtful accounts,~~credit losses, legal contingencies, income taxes, revenue recognition, stock-based compensation, ~~expense accruals,~~goodwill, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Reclassifications

The Company has reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation. These reclassifications had no impact on net income (loss) or total stockholders’ equity.

Cash and cash equivalents

~~The Company considers~~Cash and cash equivalents include cash on hand, money market instruments, and all other highly liquid ~~instruments~~investments purchased with an original or remaining maturity of three months or less at the ~~time~~date of ~~issuance to be cash equivalents. From time to time, the Company’s cash deposits exceed federally insured limits. The Company has not experienced any losses resulting from these excess deposits.~~

acquisition.

Restricted cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheet that sums to the total of the same such amounts shown in the statement of cash flows.

December 31, 2018

December 31, 2017
Cash and cash equivalents

$
20,538,057

$
4,672,034
Restricted cash

2,502,591

923,193
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

$
23,040,648

$
5,595,227

In November 2016, the FASB issued ASU No. 2016-18 – Statement of Cash Flows (Topic 240) which changed the classification and presentation of restricted cash on the statement of cash flows. The Company adopted the new standard on January 1, 2018. As a result, restricted cash was reclassified from cash provided from operating activities to cash, cash equivalents and restricted cash on the condensed consolidated statement of cash flows.

~~For the year ended December 31, 2017, the change in restricted cash of $441,489 was reclassified from operating activities to cash, cash equivalents and restricted cash on the statement of cash flows.~~

Restricted cash consists of cash held in escrow by the Company’s brokers and agents on behalf of real estate buyers. The Company recognizes a corresponding customer deposit liability until the funds are released. Once the cash is transferred from escrow, the Company reduces the respective customers’ deposit liability.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown on the statement of cash flows.


	December 31, 2019	December 31, 2018
Cash and cash equivalents	$ 40,087	$ 20,538
Restricted cash	6,987	2,503
Total cash, cash equivalents, and restricted cash, beginning balance	$ 47,074	$ 23,041

	December 31, 2020	December 31, 2019
Cash and cash equivalents	$ 100,143	$ 40,087
Restricted cash	27,781	6,987
Total cash, cash equivalents, and restricted cash, ending balance	$ 127,924	$ 47,074

Fair value measurements

~~ASC 820 defines~~The fair value asof a financial instrument is the ~~price~~amount that ~~would~~could be received ~~to sell~~upon the sale of an asset or paid to transfer a liability ~~(an exit price)~~ in an orderly transaction between market participants at the ~~reporting~~measurement date. ~~The methodology establishes consistency~~Financial assets are marked to bid prices and ~~comparability by providing a three-tiered~~financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy ~~that~~ prioritizes the ~~inputs~~quality and reliability of the information used to ~~valuation techniques~~determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three ~~broad levels, which are described below:~~categories:

Input Level		Definitions
Level 1	•	~~Level 1 inputs~~Inputs are quoted market prices in active markets for identical assets or liabilities (these are observable market inputs).

•

Level 2 ~~inputs~~

Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability (includes quoted market prices for similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or prices that vary substantially).

•

Level 3 ~~inputs~~

Inputs are unobservable inputs that reflect the entity's own assumptions in pricing the asset or liability (used when little or no market data is available).

The Company holds funds in a money market account. The Company values its money market funds at fair value on a recurring basis.

2018

Adjusted Cost

Unrealized Gains

Unrealized Losses

Fair Value

Cash and Cash Equivalents
Cash

$
12,486,395

$
-

$
-

$
12,486,395

$
12,486,395

Level 1

Money market funds

8,051,662

-

-

8,051,662

8,051,662
Subtotal

20,538,057

-

-

20,538,057

20,538,057

Level 2

-

-

-

-

-

Level 3

-

-

-

-

-

Total

$
20,538,057

$
-

$
-

$
20,538,057

$
20,538,057

~~The Company did not have investments in money market funds~~Accounts receivable and allowance for ~~the year ended December 31, 2017.~~

~~There have been no transfers between Levels 1 and 2 in the period presented. We did not have any Level 2 or Level 3 financial assets or liabilities in the period presented.~~

~~Allowance for doubtful accounts~~

expected credit losses

The majority of the Company’s accounts receivable consists of commissions receivable on real estate property settlements, which are in-substance guaranteed because they represent commission payments on closed transactions. The remaining accounts receivable is derived from non-commission based technology ~~fees.~~fees and short-term advances to agents and brokers. These accounts receivable are typically unsecured.

The allowance for ~~doubtful accounts~~expected credit losses is our estimate based on historical experience. WeThe Company periodically ~~perform~~performs detailed reviews to assess the adequacy of the allowance. ~~We exercise~~The Company exercises significant judgment in estimating the timing, frequency and severity of losses.

The Company uses the aging schedule method to estimate current expected credit losses (“CECL”) based on days of delinquency, including information about past events and current economic conditions. The Company’s accounts receivable is separated into the three categories above to evaluate allowance under the CECL impairment model. The receivables in each category share similar risk characteristics. The Company analyzes uncollectable accounts for the three categories of receivables. Based on historical information and future expectations, only agent non-commission based fees receivables and agent short-term advances carry any risk of expected credit losses. Current economic conditions and forecasts of future economic conditions do not affect expected credit losses on uncollectable real estate property settlements. The collection of these payments is in-substance guaranteed because they represent commission payments on closed transactions, and the Company has no historical experience or expectation of losses related to these receivables.

The Company ~~typically does not experience material uncollectible accounts.~~increases the allowance for expected credits losses when the Company determines all or a portion of a receivable is uncollectable. The Company recognizes recoveries as a decrease to the allowance for expected credit losses.

As of December 31, 2020 and 2019, receivables from real estate property settlements totaled $73,838 and $24,924, respectively. As of December 31, 2020, agent non-commission based fees receivable and short-term advances totaled $4,992, of which the Company recognized expected credit losses of $1,879. As of December 31, 2019, agent non-commission based fees receivable and short-term advances totaled $3,409, of which the Company recognized allowance for doubtful accounts of $137.

Foreign currency translation

The Company’s functional and reporting currency is the United States dollar and the functional currency of the Company’s foreign subsidiaries is the local currency of their country of domicile. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the ~~determination~~consolidated statements of ~~income.~~operations in other (income) expense, net. The Company does not employ ~~any derivative or~~a hedging strategy to ~~offset~~manage the impact of foreign currency fluctuations.

Fixed assets

Fixed assets are stated at historical cost and are depreciated on the straight-line method over the estimated useful lives. Useful lives are:

Computer hardware and software:3 to 5 years

Furniture, fixtures and equipment:5 to 7 years

Maintenance and repairs are expensed as incurred. Expenditures that substantially increase an asset’s useful life or improve an asset’s functionality are capitalized.

The Company capitalizes the costs associated with developing its internal-use cloud-based residential real-estate transaction system. Capitalized costs are primarily related to costs incurred in relation to internally created software during the application development stage including costs for upgrades and enhancements that result in additional functionality.

Leases

Leases are agreements, or terms within agreements, that convey the right to control the use of and receive substantially all of the economic benefit from an identified asset for a period of time in exchange for consideration. The Company currently only possesses office space leases.

Right-of-use assets

The Company recognizes right-of-use (“ROU”) assets at the commencement date of the lease. ROU assets are measured at cost, less accumulated depreciation and impairment losses, and are adjusted concurrent with the remeasurement of corresponding lease liabilities resulting from a change in future lease payments or a change in the assessment of whether any purchase, extension, or termination options will be exercised.

The cost of ROU assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received, if any. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the ROU assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

Lease liabilities

At the commencement date of a lease, the Company recognizes a lease liability measured at the present value of the lease payments to be made over the lease term. Variable lease payments are recognized as expense in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the implicit interest rate in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced by the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition exemption to leases that have a lease term of 12 months or less from the commencement date and which do not contain a purchase option. The Company does not capitalize leases with a present value of below its minimum capitalization threshold as it would not materially affect the Company’s financial position or results of operations. Lease payments on short-term leases and low-value leases are recognized as expense on a straight-line basis over the lease term.

Refer to Note 10 – Leases for more information.

Goodwill

Goodwill represents the excess of the consideration paid over the estimated fair value of assets acquired and ~~Intangible Assets~~

~~We test~~liabilities assumed in a business combination. The Company evaluates goodwill for impairment ~~at least annually~~on an annual basis in the fiscal fourth quarter or ~~when a triggering~~on an interim basis if an event ~~occurs. The first step~~occurs or circumstances change that would more likely than not indicate that the fair value of the goodwill ~~impairment test compares the reporting unit’s estimated fair value with~~is below its carrying value. IfGenerally, this evaluation begins with a qualitative assessment to determine if the fair value of the reporting unit is more likely than not less than its carrying value. The test for impairment requires management to make judgments relating to future cash flows, growth rates and economic and market conditions. In addition to the annual impairment evaluation, the Company evaluates at least quarterly whether events or circumstances have occurred in the period subsequent to the annual impairment testing which indicate that it is more likely than not an impairment loss has occurred.

The Company did 0t recognize an impairment for either of the years ended December 31, 2020 and 2019.

Intangible assets

The Company’s intangible assets are finite lived and consist primarily of trade name, technology and customer relationships. Each intangible asset is amortized on a straight-line basis over its useful life, ranging from three to 10 years. The Company evaluates its intangible assets for recoverability and potential impairment, or as events or changes in circumstances indicate the carrying value may be impaired.

The Company recognized an impairment of ~~a reporting unit’s net~~$225 for the year ended December 31, 2020. NaN impairment was recognized for the year ended December 31, 2019.

Software development costs

The Company capitalizes software development costs related to products to be sold, leased, or marketed to external users and internal-use software.

Business combinations

The Company accounts for business combinations using the acquisition method of accounting, under which the consideration for the acquisition is allocated to the assets ~~exceeds its~~acquired and liabilities assumed. The Company recognizes identifiable assets acquired and liabilities assumed at the acquisition date fair ~~value,~~values as determined by management as of the second step would be applied to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill would be considered impaired and would be reduced to its implied fair value.

acquisition date. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating the fair value of individual reporting units requires usthe Company to make assumptions and estimates regarding ~~our future plans,~~significant changes or planned changes in the use of the assets, as well as industry and economic conditions. These assumptions and estimates include projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors. If current expectations of future growth rates are not met or market factors outside of ~~our~~the Company’s control ~~such as discount rates,~~ change significantly, then ~~our~~ goodwill or intangible assets ~~might~~may become ~~impaired in the future.~~impaired. Additionally, as goodwill and intangible assets associated with recently acquired businesses are recorded on the balance sheet at their estimated acquisition date fair values, those amounts are more susceptible to an impairment risk if business operating results or macroeconomic conditions deteriorate.

~~Definite-lived intangible assets~~Acquisition-related costs, such as due diligence, legal and accounting fees, are ~~amortized on a straight-line basis over~~expensed as incurred and not considered in determining the ~~estimated periods benefited and are reviewed when appropriate for possible impairment.~~

fair value of the acquired assets.

Impairment of long-lived assets

The Company periodically evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is less than its carrying value. When assets are considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.

~~Stock based~~Stock-based compensation

Our stock-based compensation is comprised of agent growth incentive programs, agent equity program, and stock option awards. Stock-based compensation is more fully disclosed in Note 11 – Stockholders’ Equity. The Company accounts for ~~all stock‑based~~stock-based compensation granted to employees and ~~non‑employees~~non-employees using a fair value method. ~~Stock‑based~~Stock-based compensation ~~awarded to employees is~~awards are measured at the grant date fair value and isare recognized over the requisite service period of the awards, usually the vesting period, on a ~~straight‑line~~straight-line basis, net of forfeitures. ~~Accruals~~The Company reduces stock-based compensation for forfeitures when they occur.

Recognition of compensation cost for an award with a performance condition ~~are~~is based on the probable outcome of that performance ~~condition. Compensation cost is accrued if it is probable that the performance~~ condition will be achieved and is not accrued if it is not probable that the performance condition will be achieved. Prior to the adoption of ASU 2018-07 on July 1, 2018 described below in "Recently Adopted Accounting Pronouncements", stock‑based compensation awarded to non‑employees under our Real Estate Agent Growth Program and Stock Option Awards Plan was subject to revaluation over its vesting term. Subsequent to the adoption of ASU 2018-07, non-employee share-based payment awards are measured on the date of grant, similar to share-based payment awards granted to employees. The Company reduces recorded stock‑based compensation for forfeitures when they occur.

The Company early adopted ASU 2018-07 on July 1, 2018, using the modified retrospective method. The reported results for 2018 reflect the application of ASC 718 guidance for non-employee share-based awards while the reported results for 2017 were prepared under the guidance of ASC 505 for non-employee stock-based compensation. The adoption of ASU 2018-07 for non-employee stock-based compensation represents a change in accounting principle that more closely aligns the accounting for stock-based compensation for employee and non-employee share-based payment awards.

The cumulative effect of applying the new guidance to all non-employee share-based payment awards was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method upon the adoption of the new stock-based compensation guidance, an adjustment of $5.7 million was made to the opening balance of accumulated deficit and additional paid-in capital as of January 1, 2018.

being met.

Revenue recognition

~~Effective January 1, 2018,~~The Company generates substantially all of its revenue from real estate brokerage services and generates a de minimis portion of its revenues from software subscription and professional services. The Company estimates revenue in instances where there is sufficient evidence that a real estate transaction has closed but all of the necessary documentation has not been received. The recognition of any estimated revenue is verified through the passage of time. As such, the Company ~~adopted~~ ~~ASU No. 2014-09 -~~ ~~Revenue from Contracts~~does not have contracts with ~~Customers~~ ~~(Topic 606)~~ using the modified retrospective application in which the cumulative effect of initially applying the revenue standard is recognized as an adjustment to the opening balance of retained earnings. Adoption of the new standard did not require the Company to make an adjustment to the opening balance. customers that provide variable consideration.

Real Estate Brokerage Services

The Company serves as a licensed broker in the areas in which it operates for the purpose of processing residential real estate transactions. The Company is contractually obligated to provide services for the fulfillment of transfers of residential real estate between buyers and sellers. The Company provides these services itself and controls the ~~service~~services necessary to legally transfer the residential real estate. Correspondingly, the Company is defined as the ~~Principal.~~principal. The Company, as ~~Principal,~~principal, satisfies its obligation upon the closing of a residential real estate transaction. As ~~Principal,~~principal, and upon satisfaction of ~~our~~the performance obligation, the Company ~~recognized~~recognizes revenue in the gross amount of consideration to which ~~we expect~~the Company expects to be ~~entitled to.~~entitled.

Revenue is derived from assisting home buyers and sellers in listing, marketing, selling, and finding residential real estate. Commissions earned on real estate transactions are recognized at ~~a point in time upon~~ the completion of a residential real estate transaction once wethe Company has satisfied the performance obligation. Agent related fees are currently recorded as a reduction to commissions and other agent related costs.

Software Subscription and Professional Services

Subscription revenue is derived from fees from customers to access the Company’s virtual reality software platform. The terms of subscriptions do not provide customers the right to take possession of the software. Subscription revenue is generally recognized ratably over the contract term.

The Company does not currently collect sales and use taxes on fees from agents and brokers and assumes responsibility to pay these costs to the appropriate taxing authorities.

Disaggregated revenue

The Company primarily operates as a real estate brokerage firm. The vast majority of the Company’s revenue is derived from providing a single service, real estate brokerage services, to purchasers and sellers of homes in the U.S. See Note 15 – Segment information for details regarding segment and geographic information.

Management believes that no disaggregation of revenue from services to customers currently exists that would provide additional insight into the future recognition of revenue and cash flows.

Revenue share expenses

The Company has a revenue sharing plan where its agents and brokers can receive additional commission income from real estate transactions consummated by agents and brokers they have ~~satisfied our performance obligation.~~

attracted to the Company. Agents and brokers are eligible for revenue share based on the number of frontline qualifying active (“FLQA”) agents they have attracted to the Company. An FLQA agent is an agent or broker that an agent has personally attracted to the Company who has met specific real estate transaction volume requirements. These additional commissions are earned on a multitiered basis by FLQA agents and brokers for real estate transactions within their downstream brokerage network. Commissions to agents and brokers under the revenue sharing plan are included as part of commissions and other agent-related costs in the consolidated statements of comprehensive income (loss).

Advertising and marketing costs

Advertising and marketing costs are generally expensed in the period incurred. Advertising and marketing expenses are included in the sales and marketing expense line item on the accompanying consolidated statements of ~~operations.~~comprehensive income (loss). For the years ended December 31, ~~2018~~2020, 2019, and ~~2017,~~2018, the Company incurred advertising and marketing expenses of ~~$2,403,941~~$5,223, $3,799, and ~~$1,258,334.~~

$2,961, respectively.

Income taxes

~~Deferred~~The Company records income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities ~~arise from~~are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of ~~an asset or liability~~existing assets and ~~its reported amount~~liabilities. These differences are measured using the enacted statutory tax rates that are expected to apply to taxable income for the years in which differences are expected to reverse. The Company recognizes the effect on deferred income taxes of a change in tax rates in income in the ~~financial statements as well as from net operating loss and tax credit carry forwards.~~ period that includes the enactment date.

The measurement of current and deferred tax assets and liabilities is based on provisions of enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Valuation allowances are established when necessary to reduceCompany recognizes deferred tax assets to the ~~amount expected~~extent that it believes that these assets are more likely than not to be realized. ~~Income tax expense or benefit is~~In making such a determination, the ~~tax payable or refundable, respectively, for~~Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the ~~period adjusted for the change during the period in~~Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby: (i) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and ~~liabilities.~~ (ii) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

For U.S. income tax returns, the open taxation years subject to examination range from ~~2012~~2011 to ~~2018.~~

2020.

Comprehensive income (loss)

The Company’s only ~~component~~components of comprehensive income (loss) isare net income (losses) and foreign currency translation adjustments.

~~Net income~~Earnings (loss) per share

Basic ~~net income~~earnings (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of shares of common stock outstanding during the period. Diluted ~~income~~earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock outstanding plus, if potentially dilutive ~~potential~~ common shares outstanding during the period.

~~Recently issued accounting pronouncements~~

~~In January 2017,~~ The Company does not pay dividends or have participating shares outstanding. Prior period results have been adjusted to reflect the ~~FASB issued ASU 2017-04~~effect of the Stock Split. Refer to Note 12 – ~~Intangibles – Goodwill and Oher~~ (Topic 350). This ASU eliminates Step 2 from the goodwill impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, the entity will record an impairment charge based on that difference. The impairment charge will be limitedEarnings (Loss) Per Share for details related to the ~~amount~~calculations of ~~goodwill allocated~~basic and diluted earnings per share.

Recently adopted accounting principles

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to ~~that reporting unit. Previously, if~~estimate an expected lifetime credit loss on financial assets. The ASU amends the ~~fair value of a reporting unit was lower than its carrying amount (Step 1),~~impairment model to utilize an ~~entity was required~~expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables. The amendment requires entities to calculate any impairment charge by comparing the implied fair value of goodwill with its carrying amount (Step 2). Additionally, under the new standard, entities that have reporting units with zero or negative carrying amounts will no longer be required to perform the qualitative assessment to determine whether to perform Step 2 of the goodwill impairment test. As a result, reporting units with zero or negative carrying amounts will generally be expected to pass the simplified impairment test; however, additional disclosure will be required of those entities. Thisconsider other factors, such as economic conditions and future economic conditions. The Company adopted ASU ~~will be~~2016-13 effective ~~beginning in the first quarter of our fiscal year 2020. Early adoption is permitted for annual and interim goodwill impairment testing dates after~~ January 1, ~~2017. The new guidance must be adopted on a prospective basis. The Company is evaluating the timing of adoption. We currently do~~2020 and concluded it did not ~~expect this ASU to~~ have a material impact on ~~our~~either the financial ~~statements and~~position, results of operations, cash flows, or related ~~disclosures.~~disclosures of the Company. There was no impact on beginning balance retained earnings upon adoption of this ASU.

In ~~February 2016, the FASB issued ASU No. 2016-02 -~~ ~~Leases~~ (Topic 842). Under the new guidance, a lessee is required to recognize lease liabilities and corresponding right-of-use assets, initially measured at the present value of lease payments, on the balance sheet for operating leases with terms greater than one year. Lessor accounting remains largely unchanged from existing lease accounting. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. If the lessee makes the election, the lessee would recognize lease expense on a straight-line basis over the lease term. This ASU is effective in annual reporting periods beginning after December 15, 2018 and the interim periods within that fiscal year.

~~In July~~August 2018, the FASB issued ASU ~~No. 2018-11~~2018-13, Fair Value Measurement (Topic 820) – ~~Leases~~ ~~(Topic 842)~~Disclosure Framework – ~~Targeted Improvements~~. The amendments in this Update provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustmentChanges to the ~~opening balance~~Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which removes certain disclosure requirements related to the fair value hierarchy, such as removing the requirement to disclose the amount of ~~retained earnings in the period of adoption. Consequently, an entity’s reporting~~and reasons for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (Topic 840, Leases). An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change thetransfers between Level 1 and Level 2, modifies existing disclosure requirements ~~in Topic 840 (for example, they do not create interim~~related to measurement uncertainty and adds new disclosure requirements, ~~that entities previously were not required~~such as disclosing the range and weighted average of significant unobservable inputs used to ~~provide).~~

~~ASU No. 2016-02 –~~ ~~Leases~~ ~~(Topic) 842 will be adopted under the transition method effective January 1, 2019.~~ We currently do not expect this ASU to have a material impact on our financial statements and related disclosures. The most significant impact will be the recognition of right-of-use assets and lease obligations for operating leases.

~~Recently adopted accounting pronouncements~~

~~In June 2018, the FASB issued ASU No. 2018-07 –~~ ~~Compensation – Stock Compensation~~ (Topic 718). The ASU was issued as part of its Simplification Initiative to reduce costs and complexities of financial reporting. ASU No. 2018-07 simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. Currently, share-based payments transactions to nonemployees are measured atdevelop Level 3 fair value and remeasured at each reporting date through the date of final vesting. This ASU changes the guidance related to the determination of the measurement date. Under the new guidance, equity-classified awards would be measured at the grant date. This ASU is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. Early adoption is permitted if financial statements have not yet been issued. The Company elected to early-adopt ASU No. 2018-07 effective July 1, 2018 using the modified retrospective application with a cumulative-effect adjustment to the opening balance of accumulated deficit and additional paid-in-capital as of the beginning of the fiscal year.

~~In May 2017, the FASB issued ASU No. 2017-09 -~~ ~~Compensation~~ ~~(Topic 718):~~ ~~Scope of Modification Accounting~~. The FASB issued guidance to clarify when to account for a change in the terms or conditions of share-based payments awards as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The general model for modifications of share-based payment awards is to record the incremental value arising from the change as additional compensation costs. Previously, judgments about whether certain changes to an award were substantive may have impacted whether or not modification accounting was applied in these situations.measurement. The Company adopted ~~the new standard~~ASU 2018-13 on January 1, ~~2018. The standard~~2020 and concluded it did not have an impact on the Company’s consolidated financial ~~position, operational results or cash flows.~~ statements and related disclosures.

In ~~November 2016,~~August 2018, the FASB issued ASU ~~No. 2016-18~~2018-15 – ~~Statement of Cash Flows~~ ~~(Topic 240). The FASB issued guidance to address the diversity~~Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in ~~the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230,~~ ~~Statement of Cash Flows~~a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”).The amendments ~~require that~~in this update apply to an entity who is a ~~statement~~customer in a hosting arrangement accounted for as a service contract. ASU 2018-15 requires a customer in a hosting arrangement to capitalize certain implementation costs. Costs associated with the application development stage of ~~cash flows explain~~ the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalentsimplementation should be ~~included~~capitalized and costs with ~~cash and cash equivalents when reconciling~~ the ~~beginning-of-period and end-of-period total amounts shown on the statement of cashflows.~~other stages should be expensed. The Company adopted ~~the new standard~~ASU 2018-15 on January 1, ~~2018. The standard~~2020 and concluded it did not have ~~a material~~an impact on the Company’s consolidated financial ~~position, operational results or cash flows.~~statements and related disclosures.

Recently issued accounting pronouncements

In ~~May 2014,~~December 2019, the FASB issued ASU ~~No. 2014-09 -~~ ~~Revenue from Contracts with Customers~~2019-12 – Income Taxes (Topic ~~606)~~740). ~~The objective of the revenue standard is~~ASU 2019-12 removes certain exceptions for investments, intraperiod allocations and interim calculations and adds guidance to ~~provide a single, comprehensive revenue recognition model~~reduce complexity in accounting for all contracts with customers to remove inconsistencies in requirements, provide a robust framework, improve comparability across entities and industries, provide more useful information to users and simplify the preparation of financial statements. The core principle of the revenue standard is that revenue be recognized upon the transfer of goods or services to customers in an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. Subsequent to the issuance ofincome taxes. ASU ~~2014-09, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU No. 2016-08,~~ ~~Revenue from Contacts with Customers: Principal Versus Agent Considerations, ASU No. 2016-10,~~ ~~Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, and ASU No. 2016-12,~~ ~~Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients. The additional ASU’s clarified certain provisions of ASU 2014-09 in response to recommendations from the Transition Resources Group established by the FASB.~~

The new standard permits for two alternative implementation methods, the use of either (1) full retrospective application to each prior reporting presented or (2) modified retrospective application in which the cumulative effect of initially applying the revenue standard is recognized as an adjustment to the opting balance of retained earnings in the period of adoption. This ASU2019-12 is effective ~~in annual reporting~~for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2017 and the interim periods within that year.~~2020; early adoption is permitted. The Company adopted ~~the new standard effective~~this amendment on January 1, ~~2018 using~~2021. The Company has assessed the ~~modified retrospective method. Since~~amendments of ASU 2019-12 and determined the Company currently recognizes revenue on a gross basis acting as a principal, upon completion of its performance obligations in the form of a completed residential real estate sale, adoption of the standard did notamendments to have ~~a material effect~~an immaterial impact on the Company’s consolidated financial ~~position, operational~~statements and related disclosures.

3.	ACQUISITIONS

The following discussion relates to acquisitions completed during the year ended December 31, 2020. Neither of these business combinations were deemed material to the Company’s financial condition, results of operations, or cash flows. NaN business combinations were executed during the year ended December 31, 2019.

Showcase Web Sites, L.L.C.

~~3. ACQUISITIONS~~

~~VirBELA~~

On ~~November 29, 2018, (the “Acquisition Date”),~~July 31, 2020, the Company and its newly formed subsidiary, eXp World Technologies, LLC (“Purchaser) acquired substantially all the assets of VirBELA, LLC, a California limited liability company. VirBELA provides a cloud-based environment focused on educational and innovative learning technologies to enhance global education experiences that empower individuals, teams, and organizations for clients in various industries. Its model allows for a level of engagement and participation that can typically only be achieved with face-to-face instruction. Its proprietary immersive 3D campus, which supports blended learning and big data assessment, is highly customizable to meet the branding and educational needs of clients. VirBELA developed the Company’s current cloud campus called eXp World, which provides 24/7 access to collaborative tools, training and socialization for the Company’s real estate agents and employees. The acquisition of VirBELA’s core group of products and services will allow eXp Realty to continue to accelerate its business in a sustainable and innovative way, which is consistent with eXp World Holdings’ vision to expand the product offering to agents, teams and others who could benefit from their own, always available environments for collaboration.

~~The~~ Company acquired the ~~assets~~equity ownership interests in Showcase Web Sites, L.L.C. (“Showcase”) for cash consideration of ~~VirBELA for~~$1.5 million using cash on hand and two-year promissory notes totaling $1.5 million (the “Showcase Acquisition”). Showcase is a ~~total purchase price of $10,607,800,~~ ~~consisting of cash to be paid of $7,000,000~~technology company focused on agent website and ~~shares of the Company’s common stock valued at $3,607,800.~~ ~~A cash payment of $6,500,000 was paid at closing with $500,000 included in accounts payable being held by~~consumer real estate portal technology. With this acquisition, the Company to secure the Seller’s performance of certain post-close obligations and 97,371 shares of the Company restricted common stock having a value of $1,000,000 was issued at closing. The remaining shares of the Company’s common stock will be ~~issued having a value~~able to strategically focus on creating consumer home-search technology for utilization by independent agents and brokers, as well as continued services offerings to third party clients of $1,000,000 on each of the first, second and third anniversaries of the Closing Date. The present value of future deliveries of eXp World Holdings, Inc. stock, calculated using a discount rate of 10%, is $2,607,800, which represents fair value as of the Acquisition Date. The discount of $392,200 will be amortized over the reporting periods using the effective interest method during Fiscal years 2019, 2020 and 2021.Showcase.

4049

The following table ~~shows~~outlines the ~~preliminary allocation~~fair value of the ~~purchase price of VirBELA, LLC to the~~ acquired ~~identifiable~~ assets and ~~goodwill:~~liabilities from the Showcase Acquisition:


Identifiable assets acquired and goodwill
Cash		$ 138
Accounts receivable, net	3	$	~~4,273~~
~~Inventory~~Prepaid & other current assets	20		~~968~~
Fixed assets, net	17		~~23,452~~
~~Intangible assets~~Showcase tradename	277
Existing technology	135
Customer relationships	~~2,331,000~~ 240
Goodwill	2,310
Liabilities assumed
Deferred liabilities & other current liabilities	~~8,248,107~~ 140
Total purchase price	$ 3,000

Success Enterprises, LLC

On December 4, 2020, the Company acquired the equity ownership interests in Success Enterprises LLC (“Success”) and its related media properties, including SUCCESS^® print magazine, SUCCESS.com, SUCCESS^® newsletters, podcasts, digital training courses and affiliated social media accounts across platforms (the “Success Acquisition”).

On November 4, 2020, Sanford Enterprises, LLC (“Sanford Enterprises”), a wholly-owned entity of Mr. Glenn Sanford, Chief Executive Officer and Chairman of the Board of the Company, purchased all of the membership equity interests in Success from Success Partners Holding Co, a third party media vendor to the Company, for $8.0 million in cash. On December 4, 2020, the Company completed the acquisition of Success from Sanford Enterprises, LLC for cash consideration of $8.0 million using cash on hand. Refer to Note 16 – Related Party Transactions.

The following table outlines the fair value of the acquired assets and liabilities from the Success Acquisition:


Identifiable assets acquired and goodwill
Accounts receivable, net	$ 165
Inventory	~~10,607,800~~ 236
Prepaid & other current assets	36
Fixed assets, net	3
Success tradename	1,422
Content	2,720
Domains and social media	116
Customer relationships	915
Goodwill	2,387
Total purchase price	$ 8,000

4.	FAIR VALUE MEASUREMENT

The Company holds funds in a money market account, which are considered Level 1 assets. The Company values its money market funds at fair value on a recurring basis.

As of December 31, 2020 and 2019, the fair value of the Company’s money market funds was $53,380 and $18,281, respectively.

There have been no transfers between Level 1, Level 2, and Level 3 in the periods presented. The ~~Acquisition has been~~Company did not have any Level 2 or Level 3 financial assets or liabilities in the periods presented.

5.	PREPAIDS AND OTHER ASSETS

Prepaids and other assets consisted of the following:


	December 31, 2020	December 31, 2019
Prepaid expenses	$ 2,489	$ 1,730
Prepaid insurance	2,318	954
Rent deposits	123	73
Other assets (includes inventory)	2,420	792
Total prepaid expenses	$ 7,350	$ 3,549

6.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:


	December 31, 2020	December 31, 2019
Computer hardware and software	$ 13,828	$ 8,431
Furniture, fixture, and equipment	20	21
Total depreciable property and equipment	13,848	8,452
Less: accumulated depreciation	(6,738)	(3,378)
Depreciable property, net	7,110	5,074
Assets under development	738	354
Property, plant, and equipment, net	$ 7,848	$ 5,428

For the years ended December 31, 2020, 2019, and 2018, depreciation expense was $3,360, $2,057, and $870, respectively.

7.	GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill were:


	December 31, 2020	December 31, 2019
Goodwill	$ 8,248	$ 8,248
Acquisitions	4,697	-
Total goodwill	$ 12,945	$ 8,248

Goodwill was recorded in connection with the acquisitions of Showcase in July 2020 and Success in December 2020 and represents fair value as of the acquisition dates. Each acquisition was accounted for ~~in accordance with ASC 805,~~ ~~Business Combinations~~, using the acquisition method of accounting. Under the acquisition method of accounting, the Company allocated the total purchase price to the tangible and identifiable intangible assets acquired, and assumed liabilities based on their estimated fair values as of the acquisition date, as determined by management. The excess of the purchase price over the aggregate fair values of the identifiable assets was recorded as goodwill. ~~Goodwill generated from the Acquisition is primarily attributable to an assembled workforce and planned expansion of VirBELA into new markets.~~

~~The preliminary purchase price allocation to identifiable intangible assets acquired in the VirBELA acquisition was:~~



~~Tradename~~	$	~~1,169,000~~
~~Existing Technology~~		~~297,000~~
~~Non-competition agreements~~		~~125,000~~
~~Customer contracts~~		~~740,000~~
~~Total intangible assets purchased~~	$	~~2,331,000~~

The allocation of the fair value of the acquired business was based on preliminary valuations of the estimated net fair value of the assets acquired. The fair value estimates of the assets acquired are subject to adjustment during the measurement period (up to one year from the Acquisition Date). The primary areas of accounting for the Acquisition that are not yet finalized relate to the fair value of certain intangible assets acquired and residual goodwill. For tax purposes, goodwill is amortized over 15 years and this amortization is tax deductible. The fair values of these net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While we believe that such preliminary estimates provide a reasonable basis for estimating the fair value of assets acquired, we will evaluate any necessary information prior to finalization of the fair value. During the measurement period, we will adjust preliminary valuations assigned to assets and liabilities if new information is obtained about facts and circumstances that existed as of the Acquisition Date, if any, that, if known, would have resulted in revised values for these items as of that date. The impact of all changes, if any, that do not qualify as measurement period adjustments will be included in current period earnings.

The Company ~~used carrying values as of the Acquisition Date to value trade receivables, inventory, and fixed assets, as we determined that they represented the fair value of those items at the Acquisition Date.~~

The Company valued the VirBELA tradename using an Income Approach known as the Relief from Royalty method. We applied a royalty rate of 1.0% to the VirBELA tradename. Once the royalty savings were calculated, we converted to a value using a discounted cash flow technique using a discount rate of 14.0%, to arrive at the estimated fair value. The VirBELA tradename is new and is not a mature brand name. Tradenames are being amortized over its estimated useful life of 10 years.

Similar to the valuation of tradenames, we valued existing technology using the Relief from Royalty method. We applied a royalty rate of 5.0% to the VirBELA technology. Once the royalty savings were calculated, we converted to a value using a discounted cash flow technique using a discount rate of 14.0% to arrive at the estimated fair value of existing technology. Existing technology is being amortized over its estimated useful life of five years. We estimated a useful life of five years since the software will continue to be modified and changed over the next several years making it significantly different than the software acquired today.

The Company valued non-competition agreements using a Loss Profits method. We prepared two projections of net income for the business. One projection which assumed the non-competition agreements were in place and one projection which assumed that no non-competition agreements were in place. The difference in cash flows from these two projections over the life of the non-competition agreements was discounted to present value at a rate of 14.0% to arrive at the estimated fair value of the non-competition agreements. Non-competition agreements are being amortized over their useful lives of three years which is equal to the contractual life of the non-competition agreements.

The Company valued customer contracts using the Multi-Period Excess Earnings Method (MPEEM). In the MPEEM, value is estimated as the present value of the benefits anticipated from ownership of the subject intangible asset in excess of the returns on the contributory assets required to realize those benefits. Taxes have been estimated based upon an effective total state and federal tax rate of 29.4% and the projected return on net assets was 14.0%. These inputs were used to determine an estimated fair value of customer contracts. Customer contracts are being amortized over their estimated useful lives of 10 years.

During the year ended December 31, 2018, the Company incurred total acquisition costs of $141,498. The acquisition costs were primarily related to legal, accounting and consulting services and were expensed as incurred through December 31, 2018 and are included in General and Administrative expenses in the Consolidated Statements of Operations.

From the Acquisition date, the results of operations of VirBELA have been included in and are immaterial to our consolidated financial statements. Pro forma revenue and results of operations have not been presented, being the historical results of VirBELA are not material to our consolidated statements of operations in any period presented.

~~4. PREPAID EXPENSES AND OTHER CURRENT ASSETS~~

~~Prepaid expenses and other current assets consisted of the following:~~

Year Ended December 31,

2018

2017
Prepaid expenses

$
1,070,064

$
219,074
Prepaid insurance

706,435

287,244
Rent deposits

51,113

68,196
Other assets

30,376

16,520

$
1,857,988

$
591,034

~~5. FIXED ASSETS, NET~~

~~Fixed assets, net consisted of the following:~~

Year Ended December 31,

2018

2017

Computer hardware and software

$
3,925,129

$
1,982,749
Furniture, fixture and equipment

5,910

5,910
Total depreciable property and equipment

3,931,039

1,988,659
Less: accumulated depreciation and amortization

(1,320,103)

(450,446)
Depreciable property, net

2,610,936

1,538,213
Assets under development

128,589

–
Fixed assets, net

$
2,739,525

$
1,538,213

~~Depreciation expense for the years ended December 31, 2018 and 2017 was $869,658, and $353,229 respectively.~~

~~6. GOODWILL AND INTANGIBLE ASSETS~~

~~Changes in the carrying amount of goodwill were:~~



		~~Total~~
~~Balance at December 31, 2016 and 2017~~	$	-
~~Acquisitions~~		~~8,248,107~~
~~Balance at December 31, 2108~~	$	~~8,248,107~~

~~Our goodwill was recently recorded in connection with the acquisition of VirBELA in November 2018 and represents preliminary fair value as of the acquisition date. We have~~has a risk of future impairment to the extent that individual reporting unit performance does not meet ~~our~~ projections. Additionally, if ~~our~~ current assumptions and estimates, including projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors, are not met, or if valuation factors outside of ~~our~~the Company’s control change unfavorably, the estimated fair value of ~~our~~ goodwill could be adversely affected, leading to a potential impairment in the future. NoNaN events occurred that indicated it was more likely than not that ~~our~~ goodwill was impaired.

~~Definite-Lived intangible assets at December 31, 2018 were:~~

As of December 31, 2018

Gross Amount

Accumulated Amortization

Net Carrying Amount
Trade name

$
1,169,000

$
(9,742)

$
1,159,258
Existing technology

297,000

(4,950)

292,050
Non-competition agreements

125,000

(3,472)

121,528
Customer contracts

740,000

(6,167)

733,833
Software

225,000

-

225,000
Total

$
2,556,000

$
(24,331)

$
2,531,669

~~There were no definite-lived intangible assets at December 31, 2017.~~ Definite-lived intangible assets were ~~recently recorded in connection with~~as follows:


	December 31, 2020			December 31, 2019
	Gross	Accumulated	Net Carrying	Gross	Accumulated	Net Carrying
	Amount	Amortization	Amount	Amount	Amortization	Amount
Trade name	$ 2,868	($ 267)	$ 2,601	$ 1,169	($ 127)	$ 1,042
Existing technology	1,396	(415)	981	559	(99)	460
Non-competition agreements	125	(87)	38	125	(45)	80
Customer relationships	1,895	(170)	1,725	740	(80)	660
Software	-	-	-	225	-	225
Licensing agreement	210	(41)	169	210	-	210
Intellectual property	2,836	-	2,836	-	-	-
Total intangible assets	$ 9,330	($ 980)	$ 8,350	$ 3,028	($ 351)	$ 2,677

For the ~~acquisition of VirBELA in November~~years ended December 31, 2020, 2019, and 2018, ~~and acquisition of the ShowMeNow mobile application in October 2018. Amortization~~amortization expense for definite-lived intangible assets was ~~$24,331 in 2018~~$629, $327, and ~~zero in 2017. We estimate~~$24, respectively.

As of December 31, 2020, expected amortization related to definite-lived intangible assets will be:



Expected amortization
2019	$	366,967
2020		366,967
2021		363,494	$ 1,199
2022		250,300	1,122
2023 and thereafter		1,183,941
2023			880
2024			665
2025 and thereafter			4,484
Total	$	2,531,669	$ 8,350

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~~7. ACCRUED EXPENSES~~

8.	ACCRUED EXPENSES

Accrued expenses consisted of the following:


	December 31, 2020	December 31, 2019
Commissions payable	$ 50,484	$ 26,030
Payroll payable	6,354	1,201
Taxes payable	1,008	1,205
Stock liability awards	2,093	750
Other accrued expenses	2,811	1,848
	$ 62,750	$ 31,034

DEBT

The Company issued unsecured promissory notes in the aggregate principal amount of $1.5 million in connection with the Showcase Acquisition in July 2020. The promissory notes accrue interest of 8% per annum, and interest is payable monthly beginning six months after the acquisition date.

The first installment payment of outstanding principal in the amount of $0.5 million is due on July 31, 2021, the first anniversary of the acquisition date, with the second installment payment for the remaining $1.0 million of outstanding principal payable on July 31, 2022, the second anniversary of the acquisition date.

Year Ended December 31,

2018

2017
Commissions payable

$
16,368,811

$
7,565,357
Payroll payable

1,117,830

749,203
Vacation payable

690,587

283,077
Taxes payable

217,820

99,809
Other accrued expenses

581,387

120,734

$
18,976,435

$
8,818,180

10.	LEASES

The Company adopted ASU 2016-02 – Leases (Topic 842) effective January 1, 2019 using the modified retrospective approach whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net cumulative effect adjustment to retained earnings as of January 1, 2019 as a result of adoption. ASU 2018-11 – Leases (Topic 842) – Targeted Improvements permits an entity to apply the new leases standard at the date of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with ASC 840 – Leases.

Operating leases

The Company’s lease portfolio consists of office leases with lease terms ranging from less than one year to seven years, with the weighted average lease term being three years.

Certain leases provide for increases in future lease payments once the term of the lease has expired, as defined in the lease agreements. These leases generally also include real estate taxes.

~~8. DEBT~~Information as lessee under ASC 842

~~We have a $1,000,000 line of credit with a variable interest rate computed on a 360-day year that expires on August 29, 2019.~~ The variable interest rate is the higher of either 1) the Prime Rate in effect on such day, 2) Daily One Month LIBOR plus one and one-half percent (1.5%), or 3) the Federal Funds Rate plus one and one-half percent (1.5%). The line of credit agreement requires us to comply with various financial covenants as well as customary affirmative and negative covenants that restrict our ability to, among other things, incur debt and liens, make significant investments, dispose of assets and make distributions without prior consent. The line of credit is secured by accounts receivable. The line of credit contains certain financial covenants, including a fixed charge coverage ratio and a tangible net worth. At December 31, 2018, we were in compliance withCompany reassessed all of leases to determine whether any expired or existing contracts were or contained a lease under ASC 842. Expired or existing contracts previously considered leases under ASC 840 no longer meet the ~~financial covenants~~definition of a lease under ASC 842 and therefore, have been excluded from future lease payments.

The Company still maintains these agreements, along with other short-term leases that are not capitalized, and the ~~line of credit.~~

expenses are recognized in the period incurred.

As of December 31, ~~2018, we had no amount outstanding under the line of credit.~~

~~On November 29, 2018, the Company acquired substantially all~~2020, maturities of the ~~assets of VirBELA. As part of the purchase price, the Company~~operating lease liabilities by fiscal year were as follows:


Year Ending December 31,
2021		$ 371
2022		320
2023		165
2024		5
2025		5
2026 and thereafter		1
Total lease payments		867
Less: interest		(47)
Total operating lease liabilities		$ 820

Included below is issuing shares of the Company’s restricted common stock having a value of $1,000,000 on each of the first, second and third anniversaries of the Closing Date. The present value of future deliveries of eXp World Holdings, Inc. stock, was calculated using a discount rate of 10%. The discount of $392,200 will be amortized over the reporting periods using the effective interest method during Fiscal years 2019, 2020 and 2021. As of December 31, 2018, long-term payables, net of current portion and current portion of long-term payable was $1,654,337and $974,659, respectively.

~~9. STOCKHOLDERS’ EQUITY~~

~~As of December 31, 2018, the Company had 60,609,102 shares of common stock issued and outstanding.~~

~~The following provides a detailed description of the stock-based transactions completed during fiscal years 2018 and 2017:~~

~~During~~other information regarding leases for the year ended December 31, ~~2018,~~2020.


	Year Ended December 31,
	2020	2019
Other information
Operating lease expense	$ 276	$ 249
Short-term lease expense	16	27
Cash paid for operating leases	274	249
Weighted-average remaining lease term (years) – operating leases⁽¹⁾	3.8	3
Weighted-average discount rate – operating leases	4.481%	4.850%

(1)	The Company’s lease terms include options to extend the lease when it is reasonably certain the Company will exercise its option. Additionally, the Company considered any historical and economic factors in determining if a lease renewal or termination option would be exercised.

Rent expense is recorded in general and administrative expense in the ~~Company issued 97,371 shares~~consolidated statements of ~~restricted common stock as consideration for the assets of VirBELA acquired having~~comprehensive income (loss).

11.	STOCKHOLDERS’ EQUITY

The following table represents a ~~value of $1,000,000.~~

~~During the year ended December 31, 2018, the Company issued 2,594,050 shares of common stock upon the exercise of stock options and received cash consideration totaling $2,015,034 upon payment~~reconciliation of the ~~exercise price for the options.~~

During the year ended December 31, 2018, the Company issued 1,684,601 shares of common stock in exchange for services totaling $21,253,677, which includes the expense activity in our 2015 Agent Equity Program.

During the year ended December 31, 2018, the Company issued 1,270,545 shares of common stock in exchange for services totaling $19,053,478, which included the expense activity for Real Estate Agent Growth and Other Incentive Programs. This amount includes expenses for performance based awards of $9,174,019, for which performance conditions were met or considered probable during the year ended December 31, 2018.

During the year ended December 31, 2017, the Company issued the remaining 49,231 shares of common stock to accredited investors following receipt of $160,000 of gross proceeds ($142,158 net of issuance costs) from the Company’s ~~December 2016 private placement. The Company received total gross cash proceeds from the private placement of $760,000.~~

During the year ended December 31, 2017, the Company issued 181,572 shares of common stock upon the exercise of stock options and received cash consideration totaling $46,596 upon payment of the exercise price for the options.

~~During the year ended December 31, 2017, the Company repurchased and retired 1,307 shares of~~ common stock for ~~cash consideration totaling $3,607.~~the periods presented, adjusted to give effect to the Stock Split:


	Year Ended December 31,
	2020	2019	2018
Common stock:
Balance, beginning of year	132,398,616	121,218,204	109,925,070
Retirement of common stock	-	(3,636,546)	-
Shares issued for acquisition	-	-	194,742
Shares issued for stock options exercised	6,538,628	4,522,244	5,223,574
Agent growth incentive stock compensation	1,978,072	2,691,508	2,541,924
Agent equity stock compensation	5,762,470	7,603,206	3,332,894
Balance, end of year	146,677,786	132,398,616	121,218,204

~~During~~The Company’s shareholder approved equity plans described below are administered under the ~~year ended December 31, 2017,~~2013 Stock Option Plan and the 2015 Equity Incentive Plan. Although a limited number of awards under the plan remain outstanding, no awards have been granted under the 2013 Stock Option Plan since 2015. The purpose of the equity plans is to retain the services of valued employees, directors, officers, agents, and consultants and to incentivize such persons to make contributions to the Company ~~issued 1,464,997 shares of common stock in exchange for services totaling $5,857,554, which includes the expense activity in our 2015 Agent Equity Program.~~and motivate excellent performance.

During the year ended December 31, 2017, the Company issued 1,000,594 shares of common stock in exchange for services totaling $10,961,631, which included the expense activity for Real Estate Agent Growth and Other Incentive Programs. This amount includes expenses for performance based awards of $7,177,854, for which performance conditions were met or considered probable during the year ended December 31, 2017.

~~2015~~ Agent Equity Program

The Company provides agents and brokers the opportunity to elect to receive 5% of commissions earned from each completed residential real estate transaction in the form of common ~~stock.~~stock (the “Agent Equity Program” or “AEP”). If agents and brokers elect to receive portions of their commissions in common stock, they are entitled to receive the equivalent number of shares of common stock, based on the fixed monetary value of the commission payable. ~~The shares are issued at~~Prior to January 1, 2020, the Company recognized a 20% discount ~~to market~~ on ~~the date of issuance. We recognize this 20% discount~~these issuances as an additional cost of sales charge during the periods presented.

~~All agents and brokers~~ Effective in ~~good standing with~~January 2020, the Company ~~are eligible~~amended the AEP and adjusted the discount on issued shares from 20% to participate in the Agent Equity Program. To be considered in good standing, agents and brokers must be current in their financial obligations, including all fees, to the Company. In addition, all required licenses, local, state and national dues and subscriptions which are required to conduct real estate business in their state must be current and in effect.10%.

~~During~~For the years ended December 31, ~~2018~~2020, 2019, and ~~2017,~~2018, the Company issued ~~1,684,601~~5,762,470, 7,603,206, and ~~1,464,997~~3,332,894 shares ~~respectively,~~ of common stock, respectively, to agents and brokers for ~~total consideration~~$60,968, $37,768, and $21,254, respectively, net of ~~$21,253,677 and, $5,857,554 respectively for the settlement of commissions payable.~~discount.

~~Real Estate~~ Agent Growth Incentive Program

The Company administers an equity incentive program whereby agents and brokers become eligible to receive awards of the Company’s common stock through agent attraction and performance ~~benchmarks. Agents who qualify are awarded~~benchmarks (the “Agent Growth Incentive Program” or “AGIP”). The incentive program encourages greater performance and awards agents with common stock based on achievement of performance milestones.

~~Under this program,~~ Awards typically vest after performance benchmarks are reached and three years of subsequent service is provided to the ~~Company~~Company. Share-based performance awards ~~common stock to our agents and brokers that become issuable upon~~are based on a fixed-dollar amount of shares based on the achievement of ~~certain milestones~~performance metrics. As such, the awards are classified as liabilities until the number of share awards becomes fixed once the performance metric is achieved.

For the years ended December 31, 2020, 2019, and 2018, the Company’s stock compensation attributable to the AGIP was $15,239, $13,959, and $19,053, respectively. The total amount of stock compensation attributable to liability classified awards was $3,246 and $901 for ~~both~~ the ~~individual~~years ended December 31, 2020 and 2019, respectively, and NaN during 2018. Stock compensation expense related to the AGIP is included in general and administrative expense in the consolidated statements of comprehensive income (loss).

The following table illustrates changes in the Company’s stock compensation liability for the periods presented:


		Amount
Balance, December 31, 2018	$	-
Stock grant liability increase year to date		901
Stock grants reclassified from liability to equity year to date		(624)
Balance, December 31, 2019		277
Stock grant liability increase year to date		3,246
Stock grants reclassified from liability to equity year to date		(1,430)
Balance, December 31, 2020		$ 2,093

As of December 31, 2020, the Company had 6,550,390 unvested common stock awards, adjusted to give effect to the Stock Split and unrecognized compensation costs totaling $25,586 attributable to stock awards where the performance metric has been achieved and the ~~recruited agents.~~

number of shares awarded are fixed. The cost is expected to be recognized over a weighted average period of 2.16 years.

The following table illustrates the Company’s stock activity for the ~~Real Estate~~ Agent Growth Incentive Program for stock awards where the performance metric has been achieved for the following ~~periods:~~periods, adjusted to give effect to the Stock Split:


		Weighted Average
		Grant Date
	Shares	Fair Value
Balance, December 31, 2018	7,745,754	$ 5.82
Granted	3,374,914	4.62
Vested and issued	(2,989,266)	5.61
Forfeited	(1,355,184)	1.70
Balance, December 31, 2019	6,776,218	$ 5.52
Granted	2,777,894	9.11
Vested and issued	(1,980,870)	6.42
Forfeited	(1,022,852)	5.66
Balance, December 31, 2020	6,550,390	$ 6.75

Stock Option Awards

Weighted Average

Shares

Fair Value

Balance, December 31, 2016

3,057,879

4.05

Granted

2,024,498

7.60

Issued

(1,457,538)

5.27

Forfeited

(565,774)

4.76

Balance, December 31, 2017

3,059,065

7.60

Granted

2,380,100

11.59

Issued

(889,769)

12.16

Forfeited

(676,519)

4.05

Balance, December 31, 2018

3,872,877

11.63

Stock options are granted to directors, officers, certain employees, and consultants with an exercise price equal to the fair market value of common stock on the grant date, and the stock options expire 10 years from the date of grant. These options have time-based restrictions with equal and quarterly graded vesting over a three-year period.

The fair value of ~~stock awards is based on~~ the ~~closing price of our common stock on~~options issued was calculated using a Black-Scholes-Merton option-pricing model with the applicable grant date. As of December 31, 2018, the Company had 1,909,023 unvested stock awards and 3,872,877 expected to vest, respectively, with unrecognized compensation costs totaling $22,773,241.following assumptions:

~~Stock Option Awards~~

During the year ended December 31, 2018, the Company granted 870,000 stock options with an estimated grant date fair value of $8,538,739. The assumptions used to estimate the grant date fair value of the awards issued for the year ended December 31, 2018 include: expected volatility based on historical stock prices ranging from 129.2% to 153.7%; an average expected term between 6.25 and 10 years; risk free rates based on U.S. Treasury instruments for the expected term of approximately 2.9%; and no dividend payments. ~~The assumptions used to estimate the grant date fair value of the awards issued for the year ended December 31, 2017 include:~~ expected volatility based on historical stock prices ranging from 142% to 155%; an average expected term between 6.25 and 10 years; risk free rates based on U.S. Treasury instruments for the expected term of approximately 2.2%; and no dividend payments.

In January 2017, the Company modified certain terms of previously outstanding option awards to purchase 500,000 shares of common stock, including accelerating portions of the award to vest prior to the original terms and the forfeiture of unvested options to purchase 275,000 shares of common stock. As a result of this modification, the Company recognized approximately $368,000 of additional stock option expense during the year ended December 31, 2017.


	Year Ended December 31,
	2020	2019	2018
Expected term	5 - 6 years	5 - 6.25 years	6.25 - 10 years
Expected volatility	69.01% - 116.16%	91.0% - 127.9%	129.2% - 153.7%
Risk-free interest rate	0.21% - 1.58%	1.5% - 2.7%	2.9%
Dividend yield	-%	-%	-%

4654

The following table illustrates the Company’s stock option activity for the following ~~periods:~~periods, adjusted to give effect to the Stock Split:


				Weighted
				Average
		Weighted		Remaining
		Average		Contractual Term
	Options	Exercise Price	Intrinsic Value	(Years)
Balance, December 31, 2018	17,395,226	$ 1.04	$ 5.00	6.07
Granted	1,553,492	4.72	0.64	9.52
Exercised	(4,522,244)	0.51	8.56	-
Forfeited	(875,762)	3.97	2.45	-
Balance, December 31, 2019	13,550,712	$ 1.45	$ 8.43	5.59
Granted	3,441,772	10.85	0.05	9.55
Exercised	(6,538,628)	1.06	17.91	-
Forfeited	(602,798)	4.30	19.29	-
Balance, December 31, 2020	9,851,058	$ 4.82	$ 53.49	5.95
Exercisable at December 31, 2020	5,495,394	$ 1.27	$ 60.57	3.41
Vested at December 31, 2020	5,495,394	$ 1.27	$ 60.57	5.87

Range of stock option exercise prices at December 31, 2020:
$0.01 - $5.00 (average remaining life - 3.71 years)	5,750,462	$ 1.02
$5.01 - $15.00 (average remaining life - 8.98 years)	3,545,116	$ 8.13
$15.01 - $30.00 (average remaining life - 9.78 years)	555,480	$ 22.93

The grant date fair value of options to purchase common stock is recorded as stock-based compensation over the vesting period. As of December 31, 2020, unrecognized compensation cost associated with the Company’s outstanding stock options was $25,736, which is expected to be recognized over a weighted-average period of approximately 1.23 years.

Stock Repurchase Plan

In December 2018, the Company’s board of directors (“the Board”) approved a stock repurchase program authorizing the Company to purchase up to $25.0 million of its common stock, which was later amended in November 2019 and again in June 2020 increasing the authorized repurchase amount to $75.0 million. In December 2020, the Board approved another amendment to the repurchase plan, increasing the total amount authorized to be purchased from $75.0 million to $400.0 million. Purchases under the repurchase program may be made in the open market or through a 10b5-1 plan and are expected to comply with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The timing and number of shares repurchased depends upon market conditions. The repurchase program does not require the Company to acquire a specific number of shares. The cost of the shares that are repurchased is funded from cash and cash equivalents on hand.

In December 2019, the Board approved the retirement of the Company’s common stock related to repurchases made during 2019. On December 31, 2019, the Company retired 1,818,273 shares of common stock available in treasury valued at $18,433.

For accounting purposes, common stock repurchased under the stock repurchase programs is recorded based upon the settlement date of the applicable trade. Such repurchased shares are held in treasury and are presented using the cost method. These shares are considered issued but not outstanding. The following table shows the changes in treasury stock for the periods presented:


	Year Ended December 31,
	2020	2019	2018
Treasury stock:
Balance, beginning of year	925,364	-	-
Repurchases of common stock	1,609,130	2,743,637	-
Retirement of treasury stock	-	(1,818,273)	-
Balance, end of year	2,534,494	925,364	-

12.	EARNINGS (LOSS) PER SHARE

Weighted

Average

Weighted

Remaining

Average

Contractual Term

Options

Exercise Price

Intrinsic Value

(Years)
Balance, December 31, 2016

10,747,558

$
0.67

$
3.56

7.75
Granted

2,848,231

3.76

-

6.15
Exercised

(181,572)

0.26

6.86

Forfeited

(2,540,925)

2.31

3.20

Balance, December 31, 2017

10,873,292

$
1.50

$
5.08

6.65
Granted

870,000

10.86

(3.78)

9.34
Exercised

(2,594,050)

0.78

11.90

Forfeited

(451,629)

3.03

9.59

Balance, December 31, 2018

8,697,613

$
2.08

$
5.00

6.07
Exercisable at December 31, 2018

6,620,042

0.92

6.16

5.29
Vested at December 31, 2018

6,823,772

$
1.00

$
6.08

5.37

Basic earnings (loss) per share is computed based on net income (loss) attributable to eXp shareholders divided by the basic weighted-average shares outstanding during the period. Dilutive earnings per share is computed consistently with the basic computation while giving effect to all dilutive potential common shares and common share equivalents that were outstanding during the period. The Company uses the treasury stock method to reflect the potential dilutive effect of unvested stock awards and unexercised options. The

Company uses the if-converted method to reflect the potential dilutive effect of a $1.0 million payment obligation relating to the November 2018 acquisition of Virbela, LLC, that may be paid in cash or common stock in November 2021.

The following table sets forth the calculation of basic and diluted earnings per share attributable to common stock during the periods presented, adjusted to give effect to the Stock Split:


	Year Ended December 31,
	2020	2019	2018
Numerator:
Net income (loss) attributable to common stock	$ 31,131	($ 9,528)	($ 22,430)
Denominator:
Weighted average shares - basic	138,572,358	126,256,407	115,379,840
Dilutive effect of common stock equivalents	12,977,717	-	-
Weighted average shares - diluted	151,550,075	126,256,407	115,379,840
Earnings (loss) per share:
Earnings (loss) per share attributable to common stock- basic	$ 0.22	($ 0.08)	($ 0.19)
Earnings (loss) per share attributable to common stock- diluted	0.21	(0.08)	(0.19)

For the years ended December 31, 2020, 2019, and 2018, total outstanding shares of common stock excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive were 283,842, NaN, and ~~2017,~~NaN, respectively.

13.	INCOME TAXES

The following table provides the ~~Company recognized total stock-based compensation~~components of ~~$19,053,478~~income (loss) before provision for income taxes by domestic and ~~$10,961,631, respectively, associated with all equity and equity-linked awards.~~foreign subsidiaries:


	Year Ended December 31,
	2020	2019	2018
Domestic	$ 31,356	($ 9,442)	($ 22,448)
Foreign	47	382	96
Total	$ 31,403	($ 9,060)	($ 22,352)

~~As of December 31, 2018, the total unrecognized compensation cost associated with options was approximately $11,972,694.~~

~~10. INCOME TAXES~~

The components of the provision for (benefit from) income tax expense are as follows:


	Year Ended December 31,
	2020	2019	2018
Current:
Federal	$ -	$ -	$ -
State	275	320	77
Foreign	466	262	1
Total current income tax provision	741	582	78
Deferred
Federal	23	17	-
State	24	15	-
Foreign	(375)	(117)	-
Total deferred income tax benefit	(328)	(85)	-
Total provision (benefit) for income taxes	$ 413	$ 497	$ 78

Year Ended December 31,

2018

2017

Current:

Federal

$
-

$
-

State

77,494

86,787

Foreign

306

10,447

77,800

97,234

Deferred

Federal

-

-

State

-

-

-

-

Total provision (benefit) for income taxes

$
77,800

$
97,234

~~The Company is subject to United States federal and state income taxes at an approximate rate of 25.02%.~~ The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:


	Year Ended December 31,
	2020	2019	2018
Statutory tax rate	21.00%	21.00%	21.00%
State taxes	6.52%	0.35%	4.02%
Permanent differences	(0.09)%	(2.54)%	(0.57)%
Unrecognized tax benefit	(0.19)%	(0.67)%	-%
Share-based compensation	(42.09)%	11.51%	(10.46)%
Sec. 162m compensation limitation	4.03%	(1.31)%	-%
Foreign tax rate differential	0.01%	(1.68)%	(0.10)%
Valuation allowance	8.99%	(140.59)%	(15.43)%
Prior year true up items	3.07%	109.08%	-%
Other net	0.08%	(0.65)%	1.19%
Total	1.33%	(5.50)%	(0.35)%

Year Ended December 31,

2018

2017

Statutory tax rate

21.00
%

38.25
%
State taxes

4.02
%

(0.39)
%
Permanent differences

(0.57)
%

(0.31)
%
Non-deductible share-based compensation

(10.46)
%

(19.70)
%
Foreign tax rate differential

(0.10)
%

(0.05)
%
Change in tax rate

-
%

(6.33)
%
Valuation allowance

(15.43)
%

(11.90)
%
Other net

1.19
%

(0.01)
%
Total

(0.35)
%

(0.44)
%

Deferred tax assets and liabilities consist of the following ~~at:~~for the periods presented:


	December 31, 2020	December 31, 2019
Deferred tax assets:
Net operating loss carryforward	$ 17,628	$ 12,789
Accruals and reserves	883	436
Lease liability	219	311
Share-based compensation	5,575	6,456
Total gross deferred tax assets	24,305	19,992
Deferred tax liabilities:
Property and equipment	(1,139)	(145)
Intangibles/Goodwill	(383)	(180)
Right of use lease asset	(214)	(311)
Valuation allowance	(22,116)	(19,271)
Net deferred tax assets	$ 453	$ 85

Year Ended December 31,

2018

2017

Deferred tax assets:

Net operating loss carryforward

$
6,186,379

$
2,445,965

Temporary differences

598,732

241,649

Share-based compensation

228,989

430,614

Total gross deferred tax assets

$
7,014,100

$
3,118,228

Deferred tax liabilities

Property and equipment

(439,388)

(17,835)

Valuation allowance

(6,574,712)

(3,100,394)

Net deferred tax assets

$
-

$
-

AtThe Company accounts for deferred taxes under ASC Topic 740 – Income Taxes (“ASC 740”), which requires a reduction of the carrying amount of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that the Company weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. As of December 31, ~~2018,~~2020, based on its assessment of the realizability of its net deferred tax assets, the Company ~~had~~continued to maintain a full valuation allowance against all of its federal and state net ~~operating losses of approximately $24.7 million which could be subject to certain limitations under section 382 of the Internal Revenue Code.~~

deferred tax assets. The Company has provided a valuation allowance atas of December 31, ~~2018~~2020 and ~~2017~~2019 of ~~$6,574,712~~$22,116 and ~~$3,100,394,~~$19,271, respectively, for its net deferred tax assets as it cannot conclude it is more likely than not all of the estimated ~~net~~ deferred tax assets will be realized. The valuation allowance increased by ~~$3,474,318~~$2,845 and ~~increased by $2,357,426~~$12,696 in ~~2018~~2020 and ~~2017,~~2019, respectively.

We intend to maintain a full valuation allowance until sufficient positive evidence exists to support reversal of all or some portion of the allowance. Due to improvements in the Company’s operating results over the past year and anticipated growth in future periods, management believes that there is a reasonable possibility that, within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.

As of December 31, ~~2018, and 2017,~~2020, the Company ~~did not have any~~had federal, state, and foreign net operating losses of approximately $70.2 million, $33.1 million, and $2.2 million, respectively. Out of the federal net operating loss, approximately $8.7 million will carry forward 20 years and can offset 100% of future taxable income; and $61.5 million carries forward indefinitely and can offset 80% of taxable income. As of December 31, 2019, the Company conducted an IRC Section 382 analysis with respect to its net operating loss carryforward and determined there was an immaterial limitation.

Undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested and accordingly, no provision for applicable income taxes has been provided thereon. Upon distribution of those earnings, the Company would be subject to withholding taxes payable to various foreign countries. As of December 31, 2020 and 2019, the undistributed earnings of the Company’s foreign subsidiaries were immaterial.

The Company maintains liabilities for uncertain tax positions. These liabilities involve considerable judgment and estimation and are continuously monitored by management based on the best information available, including changes in tax regulations, the outcome of relevant court cases, and other information. A reconciliation of the beginning and ending amount of gross unrecognized benefits is as follows:


	Year Ended December 31,
	2020	2019	2018
Unrecognized tax benefits - beginning of year	$ 54	$ -	$ -
Gross increase for tax positions of prior years	-	54	-
Gross decrease for federal tax rate change for tax positions of prior years	-	-	-
Gross increase for tax positions of current year	-	-	-
Settlements	(54)	-	-
Lapse of statute of limitations	-	-	-
Unrecognized tax benefits - end of year	$ -	$ 54	$ -

The unrecognized tax ~~benefits.~~benefits relate primarily to state taxes. As of December 31, 2020 and 2019, the total amount of unrecognized tax benefits, inclusive of interest, that would affect the Company effective tax rate, if recognized, was NaN and $61, respectively. The Company's policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2020 and 2019, the Company accrued interest or penalties related to uncertain tax positions in the amount of NaN and $7, respectively. The Company currently has no federal or state tax examinations in progress nor has it had any federal or state tax examinations since its inception.

~~Our ability to utilize~~ Because the ~~domestic~~Company has net operating ~~losses (NOLs)~~loss carryforwards, there are open statues of limitations in which federal, state and foreign taxing authorities may examine the Company's tax credit forwards may be limited due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code Section 382, as well as similar state provisions. An “ownership change,” as defined by the code, resultsreturns for all years from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Any limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization.

The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”), which became law on December 22, 2017, reduced the U.S. Federal corporate tax rate from 35% to 21% for tax years beginning in 2018. The Company remeasured its net deferred tax assets and liabilities as a result of the 2017 Tax Act along with the corresponding valuation allowance resulting in no net expense or benefit. The Company applied the reduced federal tax rate in its tax provision for the year ended December 31, ~~2018.~~

~~11. COMMITMENTS AND CONTINGENCIES~~

~~Operating leases~~

~~At December 31, 2018,~~2011 through the ~~Company was obligated under non-cancelable operating leases for office space.~~current period.

~~The following table illustrates the Company’s future obligations related to its non-cancellable operating leases:~~

Year Ending December 31,

2019

$
451,710
2020

420,518
2021

237,142
2022

42,532
2023 and thereafter

4,134
Total

$
1,156,036

~~Legal proceedings~~

14.	COMMITMENTS AND CONTINGENCIES

From time to time, ~~we are~~the Company is subject to potential liability under laws and government regulations and various claims and legal actions that may be asserted against us that could have a material adverse effect on ~~our~~the business, reputation, results of operations or financial condition. Such litigation may include, but is not limited to, actions or claims relating to sensitive data, including ~~our~~ proprietary business information and intellectual property and that of ~~our~~ clients and personally identifiable information of ~~our~~ employees and contractors, cyber-attacks, data breaches and non-compliance with ~~our~~ contractual or other legal obligations.

There are no matters pending or, to ~~our~~the Company’s knowledge, threatened that ~~we expect~~are expected to have a material adverse impact on ~~our~~the business, reputation, results of operations, or financial condition.

There are no proceedings in which any of ~~our~~the Company’s directors, officers or affiliates, or any registered or beneficial stockholder is an adverse party or has a material interest adverse to ~~our~~the Company’s interest.

15.	SEGMENT INFORMATION

Historically, management has not made operating decisions and assessed performance based on geographic locations. Rather, the chief operating decision maker makes operating decisions and assesses performance based on the products and services of the identified operating segments. While management does consider real estate and brokerage services, the acquired technology and affiliated services provided to be identified operating segments, the profits and losses and assets of the acquired technology and affiliated series are not material.

Operating Segments

The Company primarily operates as a cloud-based real estate brokerage. The real estate brokerage business represented 99.6% and 99.9% of the total revenue of the Company for the years ended December 31, 2020 and 2019, respectively. The real estate brokerage business represents 98.9% and 95.8% of the total assets of the Company as of December 31, 2020 and 2019, respectively.

~~12. SEGMENT INFORMATION~~The Company offers software subscriptions to customers to access its virtual reality software platform. Additionally, the Company offers professional services for implementation and consulting services. However, the operations and assets of the technology segment are not managed by the Company’s chief operating decision-maker as a separate reportable segment.

Services provided through First Cloud and eXp Silverline are in the emerging stages of development as contributing segments and are not material to the Company’s total revenue, total net income (loss) or total assets as of December 31, 2020.

In 2020, the Company completed the Showcase and the Success acquisition. These are considered technology and affiliated services to the business, respectively, and are not material to the Company’s total revenue, total net income (loss), or total assets for the year ended and as of December 31, 2020.

The Company aggregates the identified operating segments for reporting purposes and has 1 reportable segment.

Geographical Information

The Company primarily operates within the real estate brokerage markets in the United States and Canada. ~~In November 2018,~~During the previous two years, the Company ~~acquired substantially all of~~expanded operations into the ~~assets of VirBELA, LLC which operates in software subscription~~U.K., Australia, South Africa, France, India, Portugal, and professional services for use of our virtual reality software platform. The Company’s management generally does not rely on historical geographical results in making operational decisions and has not used financial information derived from subscription and professional services due to the insignificance of the operating activities of VirBLEA, LLC. While management may consider the newly acquired technology to be a reportable segment from our real estate brokerage activities in the future, as of December 31, 2018, there is not information currently being used by the chief operating decision maker to assess performance and make operational decisions. The Company has likewise concluded that only one reporting unit exists for the purposes of its annual goodwill impairment analysis.

Mexico.

The Company’s management analyzes geographical locations on a forward-looking basis to identify growth opportunities. For the ~~year~~years ended December 31, ~~2018,~~2020 and 2019, approximately 1%5% and 2%, respectively, of the Company’s total ~~net~~ revenue ~~of $500,147,681~~ was generated ~~in Canada. The Company did not possess material assets located~~ outside of the ~~United States~~U.S. Assets held outside of the U.S. were 7% and 2% as of December 31, ~~2018~~2020 and ~~2017.~~2019.

~~13. RELATED PARTY TRANSACTIONS~~

~~As of December 31, 2018,~~The Company’s technology services and affiliated services are currently provided primarily in the ~~Company did not have transactions with related and certain other parties.~~U.S.

In January 2017, and as part of her agreement to join the Company’s Board of Directors, Ms. Laurie Hawkes was granted an option to purchase a total of 350,000 shares of common stock from a significant stockholder at an exercise price of $4.22 per share. The Company estimated the grant date fair value of these options using a Black-Scholes model with the assumptions described in Note 9. The aggregate grant date fair value of this award was $1,333,501. During the year ended December 31, 2017, the Company recognized compensation cost totaling $254,522 associated with this award. The transaction was accounted for as a deemed contribution from the significant stockholder.

16.	RELATED PARTY TRANSACTIONS

On ~~August 7, 2017, Ms. Hawkes submitted to the Company her resignation as~~November 4, 2020, Sanford Enterprises, a ~~member~~wholly-owned entity of Mr. Glenn Sanford, Chief Executive Officer and Chairman of the Board of ~~Directors effective August 9, 2017. The options~~the Company, purchased all of the membership equity interests in Success from Success Partners Holding Co, an unaffiliated third party, for cash consideration of $8.0 million. In order to ~~purchase common stock~~facilitate the Success Acquisition, the Company purchased all equity interests of Success from ~~a significant stockholder were forfeited subsequent~~Sanford Enterprises for equal cash consideration of $8.0 million on December 4, 2020. Prior to ~~her resignation.~~the acquisition, the Company was the largest customer of Success.

~~14. DEFINED CONTRIBUTION SAVINGS PLAN~~

17.	DEFINED CONTRIBUTION SAVINGS PLAN

During ~~the year ended December 31,~~ 2018, the Company established a defined contribution savings plan to provide eligible employees with a retirement benefit that permits eligible employees the opportunity to actively participate in the process of building a personal retirement fund. The Company sponsors the defined contribution savings plan.

~~15.SUBSEQUENT EVENTS~~

~~On December 27, 2018,~~In 2019, the Company ~~introduced its Sustainable Equity Plan~~began matching a portion of contributions made by participating employees. For the years ended December 31, 2020 and 2019, the Company's costs for ~~real estate agents~~contributions to this plan were $1,189 and ~~brokers at eXp realty. In addition,~~$654, respectively. The Company did 0t make any plan contributions during the year ended December 31, 2018.

18.

18.	SUBSEQUENT EVENTS

On March 2, 2021, the Company ~~announced that its Board~~repaid all outstanding promissory notes issued to the previous owners of ~~Directors authorized a stock repurchase program to offset equity issuances for up to $25 million of company common stock which began subsequent to year end~~

In 2013, eXp Realty became a public company for the primary purpose of sharing equity with its agents. Shortly thereafter, the Company introduced the industry’s first Agent Equity Award program for agentsShowcase and brokers who reach certain milestones. At the time, eXp Realty had approximately 400 agents and the plan defined equity incentives up to 16,000 agents. As we are quickly approaching 16,000 agents, the new Sustainable Equity Plan will pay agents a dollar value of shares rather than a stair-stepped number of shares for achieving certain goals.

The repurchase program will help offset equity issuances that the Company awards to its agents for meeting certain milestones in the Sustainable Equity Plan. Purchases under the repurchase program will company with Rule 10b-18 under the Securities Exchange Act of 1934,notes payable assumed as amended. The timing and number of shares repurchased will depend upon market conditions. The repurchase program does not require the company to acquire a specific number of shares. As the Company continues to grow its cash balance, the costpart of the ~~shares repurchased will be funded from available working capital. Any shares repurchased under~~Showcase Acquisition. The repayments totaling approximately $1.7 million represented the ~~program will be returned~~principal balance plus accrued interest and unpaid fees. The repayments of the notes payable did not result in a gain or loss on early extinguishment.

19.	SELECTED QUARTERLY DATA (UNAUDITED)

Provided below is selected unaudited quarterly financial data for 2020 and 2019, including earnings per share, adjusted to give effect to the ~~status of authorized but unissued shares of common stock.~~Stock Split.


	2020
	Q1	Q2	Q3	Q4
Revenue	$ 271,421	$ 353,525	$ 564,017	$ 609,322
Commissions and other agent-related costs	243,406	319,164	517,169	558,935
Net income	141	8,235	14,918	7,696
Earnings (loss) per share
Basic	$ 0.00	$ 0.06	$ 0.10	$ 0.05
Diluted	$ 0.00	$ 0.06	$ 0.10	$ 0.05
Weighted average shares outstanding
Basic	133,241,235	137,267,291	140,754,887	143,026,018
Diluted	144,647,818	147,078,181	153,548,236	156,543,876
	2019
	Q1	Q2	Q3	Q4
Revenue	$ 157,034	$ 266,705	$ 282,179	$ 274,019
Commissions and other agent-related costs	142,542	244,587	259,141	249,612
Net (loss) income	(6,296)	(2,195)	(1,847)	781
Earnings (loss) per share
Basic	($ 0.05)	($ 0.02)	($ 0.01)	$ 0.01
Diluted	($ 0.05)	($ 0.02)	($ 0.01)	$ 0.01
Weighted average shares outstanding
Basic	121,686,468	123,607,064	127,667,358	131,907,796
Diluted	121,686,468	123,607,064	127,667,358	131,907,796

5160

~~Item 9. CHANGES IN AND~~

~~DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~

Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

~~Item 9A. CONTROLS AND PROCEDURES~~

Item 9A.
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Our~~The Company’s management, with the participation of our ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer,~~Chief Financial Officer, has evaluated the effectiveness of ~~our~~the Company’s disclosure controls and procedures ~~as of December 31, 2018~~ pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)., as of December 31, 2020. The term “disclosure controls and ~~procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,~~procedures” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the ~~company’s~~Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation, ofthe Company’s management has concluded that our disclosure controls and procedures as of December 31, 2018, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of material weaknesses in our internal control over financial reporting and discussed below, our disclosure controls and procedures were notare effective as of December 31, ~~2018.~~

~~Management’s Annual Report on Internal Control Over Financial Reporting~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2018. In making its evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in ~~Internal Control — Integrated Framework (2013).~~ Our assessment of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls and procedures of our subsidiary, eXp World Technologies, LLC, which was newly formed on November 29, 2018 when we acquired substantially all of the assets of VirBELA, LLC. This acquisition did not result in any material change to our internal control over financial reporting.

Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2018 due to the material weakness described below. The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in its report, which is included below.

~~Material Weakness:~~

~~Control Environment and Monitoring~~

The Company did not properly design or maintain effective controls over the control environment and monitoring components which contributed to material weaknesses at the control activity level. As it relates to the control environment, the Company did not have sufficient oversight and competencies to address the Company’s overall financial reporting and information technology requirements. As it relates to monitoring, the Company did not perform timely and ongoing evaluations to ascertain whether the components of internal control are present and functioning. The failures within these COSO components contributed to the following material weaknesses at the control activity level:

~~Control Activities~~

The Company did not have effective business processes and controls as well as resources with adequate training and support to conduct an effective review of manual reconciliations including the complex data feeds into the reconciliations of high-volume transactions. This resulted in several errors mainly to revenue, accounts receivable, and commission expense during the period covered by this report and could have resulted in errors in other financial statement line items

~~Remediation Actions on Material Weakness~~:

To address the above material weaknesses described above, our management is currently in the process of undertaking a re-design of the control workflows within our software and systems for processing high-volume transactions. This will include further validations between the systems to ensure accuracy and completeness of the transactions. Additionally, we will provide additional training of the appropriate personnel involved with these business processes and the related control activities.

~~Material Weaknesses Previously Identified~~

~~We previously~~ reported material weaknesses in our Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Reports on Form 10-Q for the quarters during the subsequent period through September 30, 2018. The material weaknesses previously reported are summarized below:

Our internal controls failed to properly recognize and measure the fair value of equity and equity-linked awards issued to employees and non-employees. Our policies procedures failed to identify the need to consider certain areas of US GAAP applicable to stock awards issued to employees and non-employees.

Our internal controls failed to identify the need to consider certain areas of US GAAP applicable to the classification of certain agent fees. Our agent fees are no longer classified as revenue, rather they are offset against commission and other agent related costs.

Our internal controls failed to identify the mathematical error contained in the foreign currency translation calculation in the statement of cash flows of our foreign subsidiary that are incorporated in the consolidated financial statements.

~~Remediation Actions on Previously Identified Material Weaknesses:~~

To address the above material weaknesses related to equity awards and revenue classification, management completed additional training associated with accounting for equity-based payments to employees and non-employees, inclusive both internally as well as with an outside financial reporting firm with advanced experience in reporting for equity-based instruments and implemented additional review controls of the accounting for equity awards. We are also currently implementing a cloud-based platform to maintain all equity-based awards to ensure consistency in the identification and classification of share-based payments of current as well as future share-based payment arrangements. We also completed an analysis of the historical option grants to ensure that they have been correctly recorded. We also reviewed our revenue recognition policies and trained staff to ensure compliance with US GAAP. Management has tested these new controls and found them to be effective and has concluded that these material weaknesses have been remediated.

To address the above material weakness related to the foreign currency translation calculation, we have engaged a third party to assist with rebuilding our financial reporting cash flow templates used to calculate and disclose the effect of foreign translation in our statement of cash flows. To prevent errors in our manual financial reporting process, we have also incorporated additional management review controls to ensure our financial reporting is accurate.

~~Management has tested the effectiveness of the new controls and found the controls to be effective and has concluded that the material weakness has been remediated.~~

~~Report of Independent Registered Public Accounting Firm~~

~~Shareholders and Board of Directors~~

~~eXp World Holdings, Inc.~~

~~Bellingham, Washington~~

~~Opinion on Internal Control over Financial Reporting~~

~~We have audited eXp World Holdings, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2018, based on criteria established in~~ ~~Internal Control – Integrated Framework(2013)~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

~~We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.~~

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company and subsidiaries as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated March 18, 2019 expressed an unqualified opinion thereon.

~~Basis for Opinion~~

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

As indicated in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the subsidiary eXp World Technologies, LLC, which was newly formed to acquire substantially all of the assets of VirBELA, LLC on November 29, 2018, and which is included in the consolidated balance sheet of the Company and subsidiaries as of December 31, 2018, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for the year then ended. eXp World Technologies, LLC constituted 20.12% and (1.00%) of total assets and net assets, respectively, as of December 31, 2018, and 0.02% and 1.34% of revenues and net loss, respectively, for the year then ended. Management did not assess the effectiveness of internal control over financial reporting of eXp World Technologies, LLC because of the timing of the acquisition which was completed on November 29, 2018. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of eXp World Technologies, LLC.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and described in management’s assessment: failure to design and maintain controls over the control environment, monitoring controls, and certain control activities which resulted in several errors mainly to revenue, accounts receivable, and commission expense and could have resulted in errors in other financial statement line items. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 consolidated financial statements, and this report does not affect our report dated March 18, 2019 on those consolidated financial statements.

~~Definition and Limitations of Internal Control over Financial Reporting~~

~~A company’s internal control over financial reporting is a process designed~~2020 to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~/s/ BDO USA, LLP~~

~~Salt Lake City, Utah~~

~~March 18, 2019~~

Changes in Internal Control Over Financial Reporting

~~Other than the efforts noted above to remediate the previously reported material weaknesses, there~~There have not been noany changes in ~~our~~the Company’s internal control over financial reporting (as such term is defined in Rules 13a- 15(f) and 15d-15(f) under the Exchange Act) during the ~~period covered by this annual report on Form 10-K~~fourth quarter of 2020 that ~~has~~have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting, except as follows.

Material Weakness Remediation

As previously reported, management identified that the Company had a material weakness in its internal control over financial reporting as of December 31, 2019, related to its general information technology controls (“GITC”) in certain areas related to user access and program change-management over information technology (“IT”) systems utilized by the Company. Since some of our business process controls (automated and manual) were dependent on the affected GITCs, they too were deemed ineffective because they could have been adversely impacted. We believe that these control deficiencies were a result of: IT control processes lacking sufficient documentation; insufficient testing of changes; lack of training for our personnel on the importance of GITCs; and a lack of access control considerations in the design of the systems that could impact internal control over financial reporting. The Company also identified that it did not fully implement key components of the COSO framework, including control and monitoring activities relating to: (i) providing oversight over the system of internal control, (ii) overseeing the nature and scope of monitoring activities and management's evaluation and remediation of deficiencies, (iii) using appropriate processes and technology to assign responsibility and segregate duties as necessary, (iv) maintaining quality through processing, and (v) attracting, developing, and retaining sufficient and competent personnel to support the achievement of internal control objectives. Management determined that the deficiencies, evaluated in the aggregate, could have potentially resulted in a material misstatement of the consolidated financial statements in a future annual or interim period that would not be prevented or detected. Therefore, the deficiencies constituted material weaknesses in internal control.

In response to these deficiencies, management implemented measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions included: (i) establishing an internal audit team to support the Company’s entire control environment and its ongoing internal controls development and monitoring; (ii) creating and filling an IT compliance oversight function; (iii) educating control owners concerning the principles and requirements of each control, with a focus on those related to user access and change-management over IT systems impacting financial reporting; (iv) developing and maintaining documentation underlying GITCs to promote knowledge transfer upon personnel and function changes; (v) developing enhanced controls and reviews related to changes in IT systems; and (vi) performing an in-depth analysis of who should have access to perform key functions within the system that impact financial reporting and redesigning aspects of the system to better allow the access rights to be implemented. As a result of these efforts, the Company determined that the material weaknesses were remediated, and our internal control over financial ~~reporting.~~reporting was effective as of December 31, 2020.

Management’s Annual Report on Internal Control Over Financial Reporting

~~Inherent Limitations on Effectiveness of Internal Controls~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management, including our Chief Executive Officer and Chief Financial

Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020. In making its evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020. Our independent auditor, Deloitte and Touche LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting, which is included below.

Inherent Limitations on Effectiveness of Controls

Our management, including the Principal Executive Officer, the Principal Financial Officer, and the Principal Accounting Officer, does not expect that our disclosure controls and procedures or our internal ~~controls~~control over financial reporting will prevent or detect all errors and ~~all~~ fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. ~~Because~~The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part ~~upon~~on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with ~~associated~~ policies or procedures. ~~Because of~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the ~~inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.~~

~~Item 9B. OTHER INFORMATION~~

~~None.~~

~~PART III~~

~~Item 10.~~ ~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

~~Directors and Executive Officers~~

The following individuals serve as directors and executive officers of our company. All directors of our company hold office until the next annual meeting of our stockholders or until their successors have been elected and qualified. The executive officers of our company are appointed by our board of directors and hold office until their resignation or removal from office.


~~Name~~	~~Position~~	~~Age~~	~~Date First Elected~~ ~~or Appointed~~
~~Glenn Sanford~~	~~Chairman, Chief Executive Officer, Treasurer, Secretary, and Director~~	52	~~March 12, 2014~~
~~Jason Gesing~~	~~Executive Vice President, Business Development and Director~~	45	~~September 27, 2014~~
~~Jeff Whiteside~~	~~Chief Financial Officer~~	55	~~November 1, 2018~~
~~Alan Goldman~~	~~Chief Accounting Officer~~	40	~~March 16, 2016~~
~~Eugene Frederick~~	~~Director~~	63	~~April 7, 2016~~
~~Richard Miller~~	~~Director~~	60	~~July 20, 2016~~
~~Randall Miles~~	~~Director~~	62	~~July 20, 2016~~
~~Darren Jacklin~~	~~Director~~	46	~~May 22, 2014~~
~~Susan Truax~~	~~Director~~	53	~~August 9, 2017~~
~~Dan Cahir~~	~~Director~~	36	~~November 29, 2018~~

~~Business Experience~~

The following is a brief description of the business experience and education of each director and executive officer during at least the past five years, indicating the person’s principal occupation during that period,Stockholders and the ~~name and principal business~~Board of ~~the organization in which such occupation and employment were carried out.~~

~~Glenn Sandford~~ has served as our Chief Executive Officer and Director since March 12, 2014. Since 2002, Mr. Sanford has been actively involved in the online real estate space. In early 2007, Mr. Sanford launched eXp Realty, LLC and grew the Company to three offices and into two states. After the decline in the real estate market in 2008, Mr. Sanford and his executive team rewrote the entire business model to reduce costs and provide consumers with more information and access than ever before. In October 2009, eXp Realty International, Inc. was launched as the first truly cloud-based national real estate brokerage which meant giving up the traditional brink and mortar environment and moving to a fully-immersive 3D virtual office environment where agents, brokers and staff collaborate across borders while learning and transacting business form anywhere in the world. Since that timeDirectors of eXp World Holdings, Inc. ~~has quickly grown throughout the United States and Canada.~~

Prior to joining the Company Mr. Sanford ran a large mega-agent team and consulted to Keller Williams International as a member of the Agent Technology Council in the areas of online client acquisition, client conversion and technology. Mr. Sanford was also a significant contributor to Keller Williams Internet Lead Generation Masterminds. Prior to real estate, Mr. Sanford was active at the executive level with a number of technology-related companies. In 1998, Mr. Sanford founded and served as President for eShippers.com, an online e-commerce and logistics company.Opinion on Internal Control over Financial Reporting

We ~~believe Mr. Sanford is qualified to serve on our board~~have audited the internal control over financial reporting of ~~directors because of his business and management experience.~~

~~Jason Gesing~~ joined the Company in March 2010 and was appointed Chief Business Development Officer in September 2012, a position he held until June 2014. From June 2014 through September 2016, Mr. Gesing served as the Corporation’s President. And from September 2016 through August 2018, Mr. Gesing served as Chief Executive Officer of our Real Estate Brokerage Division. Mr. Gesing currently serves as Executive Vice President, Business Development. With over a decade of experience in real estate in various capacities, Mr. Gesing holds broker's license in Massachusetts.

Mr. Gesing has been practicing law at Gesing Law Offices, LLP since 2009, and was an attorney with Murphy, Hesse, Toomey & Lehane, LLP in Boston, MA from 2002 to 2010. In his capacity as a lawyer, he obtained a broad base of experience in corporate, municipal, real estate, compliance, health care, construction, litigation, and administrative law, and advising clients on day to day issues and managing crises. He has acted in a variety of roles and undertaken a variety of matters including: corporate counsel; municipal counsel; hospital counsel; leasing, licensing and contract negotiation; governance and compliance; appearances before administrative hearing officers and state judges; defense of management in unfair labor practice charges; collective bargaining; internal investigations; and, owner representative in construction matters.

Mr. Gesing obtained a Bachelor of Arts (Magna Cum Laude) in 1996 from Syracuse University, and a Juris Doctor in 2002 from Boston College Law School. He is licensed to practice law in Massachusetts and New Hampshire.

~~We believe Mr. Gesing is qualified to serve on our board of directors because of his business and legal experience.~~

~~Jeff Whiteside~~ joined the Company as its Chief Financial Officer and Chief Collaboration Officer on November 1, 2018. Mr. Whiteside has more than 30 years of experience in global finance and operational leadership including executive positions at General Electric, Pitney Bowes, and RM Sotheby’s Auctions. Additionally, Mr. Whiteside held the positions of Chief Financial Officer and Chief Operating Officer at three software and technology companies. Mr. Whiteside has extensive international experience from living and working in Asia, Australia, Europe, and Canada.

Recently, Mr. Whiteside founded and served as the Auction Director at Saratoga Auto Museum from November 2016 through October 2018, Chief Operating Officer of Saratoga Juice Bar, LLC from January 2015 through November 2016, Chief Operating Officer and Chief Financial Officer at RM Sotheby’s Auctions in 2014 and 2015, and Vice President and Group Financial Officer at Pitney Bowes from 2008 through 2013.

~~Mr. Whiteside works closely with~~ eXp World Holdings, Inc. ~~CEO, Glenn Sanford~~ and ~~leads finance, business development, new ventures, international markets and investor relations.~~

~~Mr. Whiteside is a graduate~~subsidiaries (the “Company”) as of ~~Rensselaer Polytechnic, obtaining both his B.S. (with an emphasis~~December 31, 2020, based on criteria established in ~~Managerial Economics) and M.B.A. in 1986.~~

~~Alan Goldman~~ ~~joined~~Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as ~~its Chief Financial Officer~~of December 31, 2020, based on ~~March 16, 2016, a position held until November 2018. Mr. Goldman currently serves as Chief Accounting Officer. Prior to his employment~~criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company ~~Mr. Goldman served~~Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as ~~a partner at Ingenium Accounting Associates, a PCAOB registered firm, from February 2013 to March 2016. While at Ingenium, he was responsible~~of and for ~~both attest and non-attest engagements primarily with public issuers, many of whom are in~~ the real estate industry. Prior to Ingenium, Mr. Goldman worked as an auditor for Excelsis Accounting (formerly known as Mark Bailey and Company) from May 2011 to February 2013. Prior to joining Excelsis, Mr. Goldman served as the Controller for Pacific West Companies, a vertically integrated multi-family developer. During his tenure of four years with Pacific West, the group was recognized as a top condominium developer. Mr. Goldman earned a Bachelor of Business Administration, with an emphasis in Finance, from the University of Georgia. He is also licensed as a Certified Public Accountant in the state of Nevada.

~~Eugene Frederick~~ ~~has served as a director~~year ended December 31, 2020, of the Company ~~since April 2016~~ and ~~joined~~our report dated March 11, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the ~~Company as an agent in April 2015. For~~effectiveness of internal control over a decade prior to joining the Company, Mr. Frederick served in various management capacities at Keller Williams Realty. Mr. Frederick spent much of this time recruiting other top-producing real estate agentsfinancial reporting, included in the ~~states of Virginia and Texas. Prior~~accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to joining the Keller Williams management team in the mid-nineties, Mr. Frederick was one of the top-producing real estate agents in the State of Texas beginning in the late eighties. Earlier in his career, in the mid-eighties, Mr. Frederick served as Controller for Texas Instruments before leaving the corporate world for real estate.

The Board believes that Mr. Frederick is qualified to serve on our board of directors because of his extensive experience in residential real estate and his leadership ability, particularly in managing growth.

~~Richard Miller~~ ~~has served as~~express an independent director of the Company since July 2016. For over 25 years, Mr. Miller has held senior leadership positions in companies ranging in size from a Fortune 10 company to a startup. His extensive experience as a turnaround specialist and an expert in sustainable growth has been applied as an executive inside organizations and as a consultant advising from outside companies. Mr. Miller began his career as a sales trainee at Sperry/Unisys and left 15 years later as Divisional VP/GM of North America. Mr. Miller was recruited by AT&T where he served as President of the $13 billion Global Services unit. He later served as President, COO, and as a Board member at internet startup OPUS360 where he led the company’s successful IPO. Mr. Miller was later recruited by Lucent Technologies to lead their $21 billion world-wide sales efforts. Later, he was named President, Lucent Government Solutions. Mr. Miller also served as CEO at the Balance & Stretch Center, a non-profit focused on supporting children with diabetes.

Mr. Miller is currently CEO at Being Chief LLC, where he serves as an advisor to a broad range of executives, across a diverse number of industries. He is also an author and public speaker. Mr. Miller’s success and unconventional approach has been highlighted in Harvard Business Review, Selling Power, USA Today, Yahoo, and MSN Business. Most recently, Mr. Miller was named to serve on the Executive Committee for the Strategic Innovation Lab at Case University’s Weatherhead School of Management, focusing on sustainable growth.

~~Mr. Miller earned a Bachelor of Arts degree in Management from Bentley University and a Master’s degree in Business Administration from Columbia University.~~

~~The Board believes that Mr. Miller is well qualified to serve~~opinion on the Company’s ~~board of directors because of his extensive management experience, particularly in managing sustainable growth.~~

~~Randall Miles~~ ~~has served as an~~internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent ~~director of~~with respect to the Company ~~since July 2016 and was appointed Vice-Chairman on January 20, 2018. For over 25 years Mr. Miles has held senior leadership positions~~ in global financial services, financial technology and investment banking companies. His extensive investment banking background at bulge bracket, regional and boutique firms advising financial services companies on strategic and financial needs has crossed many disciplines. Mr. Miles transactional and advisory experience is complemented by leadership of public and private equity backed financial technology, specialty finance and software companies that have included Chairman and CEO at LIONMTS where he was nominated for the Ernst & Young Entrepreneur of the Year award, CEO at Syngence Corporation, COO of AtlasBanc Holdings Corp. and CEO of Advantage Funding / NAFCO Holdings which grew to in excess of $1 billion.

Mr. Miles was Managing Partner at SCM Capital Group, a global strategic and financial advisory firm, where he served beginning in 2000 through January 2013. Subsequently, he served as a Managing Director at Riparian Partners, a division of Oppenheimer & Co., Inc. Since June 2014, Mr. Miles has served as Senior Managing Director, Head of FIG and COO, Investment Banking at Cantor Fitzgerald & Co. Mr. Miles has held senior leadership roles at Oppenheimer& Co., D.A. Davidson and & Co., The First Boston Corporation (Credit Suisse) Meridian Capital and Greenwich Capital Markets. Mr. Miles has broad public, private and nonprofit board experience and has been active for many years in leadership rolesaccordance with the ~~Make-A-Wish Foundation. He presently serves on~~U.S. federal securities laws and the ~~boards~~applicable rules and regulations of ~~Kuity, Corp. and Posiba, Inc. as Vice Chairman and Chairman respectively.~~

~~Mr. Miles holds a BBA from the University of Washington and holds FINRA licenses Series 7, 24, 63 and 79.~~

~~The Board believes that Mr. Miles is well qualified to serve on the Company’s board of directors because of his extensive background in investment banking and financial services.~~

~~Darren Jacklin~~ has served as an independent director of the Company since May 22, 2014. For over 24 years, Darren Jacklin has traveled four continents and over 48 countries mentoring entrepreneurs and business owners on specific and measurable strategies that they can consistently use to increase their income, transform their obstacles into cash flow and turn their passion into profits.

His uncanny ability to increase wealth and success by uncovering hidden assets, overlooked opportunities and undervalued possibilities has captured the attention of Tiger 21, The Wall Street Journal, Yahoo Finance, NBC TV, CBS TV, Global TV international radio stations, magazines and newspapers, movie producers, best-selling authors, CEO’s and business experts worldwide.

Darren Jacklin currently sits on paid international boards of directors of public companies and advisory boards. Darren has personally trained over 150 Fortune 500 companies such as Microsoft, AT&T, Black & Decker, Barclays Bank, as well as high school, college, university students and professional athletes and has connected with people in more than 126 countries.

~~We believe Mr. Jacklin is qualified to serve on our board of directors because of his business experience and venture capital background.~~

~~Susan (Suzy) Truax~~ brings to the Board 15 years of experience in the real estate industry. Since March 2017, she has served as the Chief Executive Officer and Founder of The Smart Move Realty Group, a brokerage powered by eXp Realty. From April 2016 to March 2017, Ms. Truax served as Chief Executive Officer of Keller Williams Realty in San Carlos, California, and from November 2015 to May 2016, she served as Productivity Coach and a real estate professional with Keller Williams Realty in San Francisco, California. From September 2014 to November 2015, Ms. Truax served as a real estate professional with Alain Pinel Realtors in the San Francisco Bay Area. From May 2013 to September 2014, she served as a Realtor with Berkshire Hathaway and Fox & Roach Realtors in Blue Bell, Pennsylvania and Cape May County, New Jersey. Previously, from February 2011 to December 2012, she served as Vice President and Realtor with Coldwell Banker Realty Corp. Associates. Ms. Truax is a licensed Realtor in the San Francisco Bay Area, Greater Philadelphia, South New Jersey and Florida.

The Board believes that Ms. Truax is well qualified to serve on our Board because of her experience as both a realtor and having management roles in various brokerages across the United States, in addition to her role on eXp’s Agent Advisory Council.

~~Dan Cahir~~ was appointed as an independent director of the Company on November 29, 2018. Mr. Cahir has more than 10 years of experience managing public and private equity investments across a variety of industries. Currently, Mr. Cahir serves as the Chief Executive Officer and Chief Investment Officer of Amherst Ave Capital, positions he has held since June 2018.

From June 2013 to June 2018, Mr. Cahir served as a portfolio manager at Long Light Capital, managing a public equity portfolio and evaluating venture capital and private equity investments and allocations to external fund managers. From September 2011 to April 2013, Mr. Cahir was a member of the investment team at Ziff Brothers Investments, a private investment firm. From August 2007 to September 2009, Mr. Cahir was a member of the investment team at Madrone Capital Partners where he led the analysis on venture capital, private equity and public equity investments.

~~Mr. Cahir began his career in September 2005 with Bain & Co., where he advised Fortune 500 and private equity clients on M&A, growth and efficiency initiatives until June 2007.~~

Mr. Cahir completed his studies and earned his Bachelor of Arts Degree in Economics in 2005, graduating with the summa cum laude distinction from Claremont McKenna College and completed his studies and earned a Master of Business Administration from Harvard Business School in 2011.

The Board believes that Mr. Cahir is qualified to serve on our board of directors because of his extensive experience in managing equity portfolios and well as advising Fortune 500 clients on M&A, growth and cost-cutting strategies.

~~Family Relationships~~

~~There are no family relationships between our directors or executive officers.~~

~~Involvement in Certain Legal Proceedings~~

~~None of our directors or executive officers has been involved in any of the following events during the past ten years:~~

(a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

~~(b) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);~~

(c) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

~~(d) being found by a court of competent jurisdiction (in a civil action),~~ the Securities and Exchange Commission ~~or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law,~~ and the ~~judgment has~~PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not ~~been reversed, suspended,~~prevent or ~~vacated;~~

(e) being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

~~(f) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated,~~detect misstatements. Also, projections of any ~~self-regulatory organization (as defined~~evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in ~~Section 3(a)(26)~~conditions, or that the degree of compliance with the ~~Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act),~~policies or ~~any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with~~procedures may deteriorate.

/s/ Deloitte & Touche LLP

San Francisco, California

March 11, 2021

Item 9B.

OTHER INFORMATION

None.

PART III

Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We have adopted a ~~member.~~

written Code of Business Conduct and Ethics

~~On September 20, 2018, the Company adopted~~ that applies to all directors, officers and employees, including a separate code ~~of business conduct and ethics which is available on~~that applies to only our ~~website at www.expworldholdings.com.~~

~~Security Holder Nominating Procedures~~

~~We do not have any formal procedures by which our stockholders may recommend nominees to our board of directors.~~

~~Committees of the Board of Directors~~

~~As of the date of this report, our directors served on the committees of the Board indicated in the following table:~~


~~Director~~	~~Independent~~	~~Compensation Committee~~	~~Audit Committee~~	~~Governance Committee~~
~~Glenn Sanford~~		~~Chair~~		X
~~Richard Miller~~	X	X	X	~~Chair~~
~~Randall Miles~~	X	X	~~Chair~~	X
~~Darren Jacklin~~	X			X
~~Susan Truax~~		X
~~Dan Cahir~~	X		X

~~Audit Committee~~

Our audit committee consists of three independent members: Randall Miles, Chairman and financial expert; Richard Miller and Dan Cahir. Our audit committee approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the audit committee reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.

~~Compensation Committee~~

Our Compensation Committee is appointed by the Board of Directors and is responsible to the Board for carrying out their duties, namely, determining and approving the Executive Compensation Packages. Our Compensation Committee has the ultimate responsibility to oversee the development, implementation, and effectiveness of all pay and benefit programs.

~~Governance Committee~~

Our Corporate Governance Committee is appointed by the Board of Directors to oversee and evaluate the Board’s performance and the Company’s compliance with corporate governance regulations, guidelines and principles. Additionally, our Governance Committee identifies individuals qualified to be Board members and recommends to the Board directors to serve on each standing committee.

~~Section 16(a) Beneficial Ownership Reporting Compliance~~

~~Section 16(a) of the Exchange Act requires the Company’s directors,~~principal executive officers and ~~persons who owned more than 10%~~senior financial officers in accordance with Section 406 of the ~~Company’s common stock (collectively, “Reporting Persons”) to file reports~~Sarbanes-Oxley Act of ~~ownership~~2002 and changes in ownership of common stock and other securities of the Company on Forms 3, 4 and 5 with the SEC. Reporting Persons were required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they filed.

Based solely on review of reports received by the Company or written representations from the Reporting Persons, the Company believes that with respect to the fiscal year ended December 31, 2018, all Reporting Persons complied with all applicable Section 16(a) filing except Mr. Cahir, Mr. Jacklin, Ms. Truax, Mr. Whiteside and Mr. Petronis filed late Form 3 reports. Ms. Coleman, who is no longer employed by the Company, did not file a Form 3 report. Additionally, late Form 4 reports were filed by Mr. Cahir on December 11, 2018; Mr. Frederick on March 15, 2019; Mr. Jacklin on August 16, 2018; Mr. Miles on June 15, 2018 and August 6, 2018; Mr. Miller on August 6, 2018; Ms. Truax on August 30, 2018; Mr. Sanford on August 31, 2018; and Mr. Whiteside on November 19, 2018.

~~Item 11. EXECUTIVE COMPENSATION~~

~~The particulars of the compensation paid to:~~


		~~our principal executive and principal financial officer;~~


		~~our president;~~


		~~and certain other officers, all of whom will collectively refer to as the “named executive officers” of our company,~~


		~~are set out in the following summary compensation table:~~

SUMMARY COMPENSATION TABLE
Name and Principal Position

Year

Salary

Bonus

Stock Awards(1)

Option Awards(2)

Non-Equity Incentive Plan Compensation

Change in Pension Value and Nonqualified Deferred Compensation Earnings

All Other Compensation(3)

Total

($)

($)

($)

($)

($)

($)

($)

($)
Glenn Sanford

2018

58,875

-0-

-0-

-0-

-0-

-0-

1,748,092(4)

1,806,967
Chief Executive Officer and Chairman of the Board

2017

488,880

-0-

6,008

-0-

-0-

-0-

284,307(4)(6)

779,195
Jason Gesing,

2018

150,000

-0-

89,813

-0-

-0-

-0-

583,558(4)

823,371
Director and Executive Vice President, Business Development

2017

202,238

58,000

66,179

-0-

-0-

-0-

99,523(4)(7)

425,940
Jeff Whiteside,

2018

33,125

36,000

-0-

2,638,017(5)

-0-

-0-

-0-

2,707,142
Chief Financial Officer

2017

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-


~~(1)~~	Amounts in this column represent stock awards issued to the individuals noted, with the fair value determined at the date of grant in accordance with U.S. GAAP based on the closing price of our common stock on the applicable grant date. See Note 9, Stockholders’ Equity, above for the assumptions used in determining the grant date fair value of stock awards Director compensation as part of stock awards for Glenn Sanford amounted to $6,008 in 2017. Director compensation as part of stock awards for Jason Gesing amounted to $89,813 and $6,008 in 2018 and 2017, respectively.

~~(2)~~	Amounts in this column represent option awards issued to the individuals noted, based on the fair value determined at the date of grant in accordance with U.S. GAAP. See Note 9, Stockholders’ Equity, above for the assumptions used in determining the grant date fair value of option awards.

~~(3)~~	The value of privileges and other personal benefits, perquisites and property for the officers that do not exceed the lesser of $10,000 or 10% of the total of the annual salary and bonus and is not reported herein.

~~(4)~~	~~Consists of revenue sharing earned and officer revenue.~~

~~(5)~~	~~The dollar amount shown represents the aggregate grant date fair value of common stock awards granted, determined in accordance with US GAAP, but not what was fully vested as of December 31, 2018.~~

~~(6)~~	For the year ended December 31, 2017, $439,380 in commissions earned was included in all other compensation. In the current period, this amount has been excluded from all other compensation and included in salary in the table above for the 2017 disclosure.

~~(7)~~	For the year ended December 31, 2017, $56,133 in commissions earned was included in all other compensation. In the current period, this amount has been excluded from all other compensation and included in salary in the table above for the 2017 disclosure.

~~Retirement or Similar Benefit Plans~~

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options and stock grants at the discretion of our board of directors. We do not have any bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options or stock grants may be granted at the discretion of our board of directors. Mr. Sanford and Mr. Gesing are participants in the Company’s revenue share plan and would continue to receive those benefits similar to all other agents and brokers of eXp Realty on a long-term basis. Any revenue share bonuses that are paid to officers and directors would discontinue at the point that they are no longer in an executive position with the Company, however revenue share benefits based on their position in the revenue share system would continue as would be consistent with the revenue share plan.

~~Resignation, Retirement, Other Termination, or Change in Control Arrangements~~

The Company does not have any agreements or plans in place for the named executive officers that would provide additional compensation in connection with a resignation, retirement or other termination or a change in control..

~~Outstanding Equity Awards at Fiscal Year End~~

Option awards

Stock awards
Name

Number of securities underlying unexercised options (#) exercisable

Number of securities underlying unexercised options (#) unexercisable

Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)

Option exercise price ($)

Option expiration date

Number of shares or units of stock that have not vested (#)

Market value of shares of units of stock that have not vested ($)

Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)

Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)
Glenn Sanford, Chief Executive Officer and Chairman of the Board

1,617,000

-

-

$ 0.13

10/1/2022

-

-

-

-
Jeff Whiteside, Chief Financial Officer

-

250,000

-

$ 11.65

11/1/2028

-

-

-

-

~~Compensation of Directors~~

~~Mr. Sanford is also our Chief Executive Officer (see Executive Compensation table for services acting as Officers).~~

During the year-ended December 31, 2018, Mr. Jacklin was compensated $2,000 per month for directorship actives which was paid in common stock. Newly appointed directors received $75,000 a year as compensation. Directors are reimbursed for reasonable out-of-pocket expenses incurred in the performance of duties as a Board member.

The following table sets forth certain information regarding the compensation earned by or awarded to each non-employee director during fiscal year 2018 who served on our Board during the fiscal year 2018:

Name

Fees Earned or Paid in Cash

Option Awards (1)

Stock Awards (2)

Total
Richard Miller (3)

$
75,000

$
-

$
-

$
75,000
Randall Miles (4)

$
75,000

$
-

$
-

$
75,000
Darren Jacklin

$
24,000

$
-

$
24,108

$
48,108
Dan Cahir (5)

$
16,688

$
963,273

$
-

$
979,961

~~(1)~~

~~The dollar amounts shown represent the aggregate grant date fair value of stock options granted, determined in accordance with U.S. GAAP, but not what has fully vested as of December 31, 2018.~~

~~(2)~~

The dollar amounts shown represent the grant date fair value of stock awards granted, with the fair valued determined at the date of grant in accordance with US GAAP, based on the closing price of our common stock on the applicable grant date.

~~(3)~~

~~As of December 31, 2018, Mr. Miller has 1,285,000 unexercised option awards, which includes 350,000 options under a personal contract between Mr. Miller and Ms. Sanford.~~

~~(4)~~

~~As of December 31, 2018, Mr. Miles has 1,247,701unexercised option awards, which includes 350,000 options under a contract between Mr. Miles and Ms. Sanford.~~

~~(5)~~

~~As of December 31, 2018, Mr. Cahir has 100,000 unexercised option awards.~~

In 2016, we agreed to compensate each of Mr. Miles and Mr. Miller the award of stock options to purchase 1,350,000 shares of the Company’s common stock at an exercise price equal to the fair market value on the grant date, with such shares vesting over a three-year period in equal monthly installments, in addition to their $75,000 a year as compensation and reimbursement of expenses reasonably incurred.

~~Item 12. SECURITY OWNERSHIP~~ ~~OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~

~~Principal Stockholders and Management~~

~~The following table provides certain information regarding the ownership of our common stock, as of March 10, 2019 by:~~


		~~each person known to us to own more than 5% of our outstanding common stock;~~
		~~each of our executive officers;~~
		~~each of our directors; and~~
		~~all of our executive officers and directors and as a group.~~

Amount and Nature of

Percentage of
Title of Class

Name and Address of Beneficial Owner

Beneficial Ownership(1)

Class(2)

More than 5% stockholders:

Common Stock

Penny Sanford 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

16,279,325

26.70%

Directors and named executive officers:

Common Stock

Glenn Sanford 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

22,661,144(3)

36.20%
Common Stock

Jason Gesing 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

1,940,011(4)

3.12%
Common Stock

Jeff Whiteside 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

15,700(5)

0.03%
Common Stock

Alan Goldman 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

458,334(6)

0.75%
Common Stock

Eugene Frederick 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

1,552,351(7)

2.55%
Common Stock

Richard Miller 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

1,237,500(8)

1.99%
Common Stock

Randall Miles 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

1,237,500(9)

1.99%
Common Stock

Darren Jacklin 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

77,585

0.13%
Common Stock

Susan Truax 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

16,187(10)

0.03%
Common Stock

Dan Cahir 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

13,889(11)

0.02%
Common Stock

Mary Frances Coleman 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

59,401(12)

0.10%
Common Stock

Scott Petronis 2219 Rimland Drive, Suite 301 Bellingham, WA 98226

116,250(13)

0.19%
Common Stock

All executive officers and directors as a group (12 persons)

29,385,852

43.97%

~~Notes~~

~~(1)~~ Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC promulgated thereunder. Our Code of Business Conduct and ~~generally includes voting or investment power with respect to securities.~~

~~(2)~~ ~~Percentage~~Ethics is available in the corporate governance subsection of ~~ownership is based on 60,978,604 shares~~the investor relations section of our ~~common stock issued~~ website, www.expworldholdings.com, and ~~outstanding as of March 10, 2019. Common stock subject~~is available in print upon written request to ~~options~~the Corporate Secretary, eXp World Holdings, Inc., 2219 Rimland Drive, Suite 301, Bellingham, WA 98226. In the event that we make changes in, or ~~warrants exercisable within 60 days of March 10, 2019 are deemed outstanding for purposes of computing~~provide waivers from, the ~~percentage ownership~~provisions of the ~~person holding such option or warrants, but are not deemed outstanding for purposes~~Code of ~~computing~~Business Conduct and Ethics that the ~~percentage ownership of any other person.~~

~~(3)~~ ~~Includes 21,044,144 shares~~SEC requires us to disclose, we will disclose these events in the corporate governance section of our ~~common stock including 300,000 shares of~~website. Information contained on our ~~common stock pledged as collateral to secure a line of credit~~website is not incorporated by reference into this report.

The information required by this item will be contained under the following headings in the Proxy Statement and ~~stock options to acquire 1,617,000 shares of our common stock exercisable within 60 days of March 10, 2019.~~is incorporated herein by reference:

●

Matters to be Voted on – Proposal 1: Election of Directors;

●

Corporate Governance;

●

Executive Officers;

●

Section 16(a) Beneficial Ownership Reporting Compliance;

●

Accounting Matters – Report of Audit Committee; and

●

Certain Relationships and Related Transaction.

Item 11.

EXECUTIVE COMPENSATION

~~(4)~~ ~~Includes of 765,880 shares of our common stock~~The information required by this item will be contained under the following headings in the Proxy Statement and ~~stock options to acquire 1,174,131 shares of our common stock exercisable within 60 days of March 10, 2019.~~is incorporated herein by reference:

~~(5)~~ ~~Includes 75 shares of our common stock and stock options to acquire 15,625 shares of our common stock only exercisable within 60 days of March 10, 2019.~~

~~(6)~~ ~~Includes 83,334 shares of our common stock and stock options to acquire 375,000 shares of our common stock exercisable within 60 days of March 10, 2019.~~

~~(7)~~ ~~Includes 797,566 shares of our common stock pledged as collateral.~~

~~(8)~~ ~~Consists of stock options to acquire shares of our common stock only exercisable within 60 days of March 10, 2019.~~

~~(9)~~ ~~Consists of stock options to acquire shares of our common stock only exercisable within 60 days of March 10, 2019.~~

~~(10)~~ ~~Includes 1,187 shares of our common stock and stock options to acquire 15,000 shares of our common stock exercisable within 60 days of March 10, 2019.~~

~~(11)~~ ~~Consists of stock options to acquire shares of our common stock only exercisable within 60 days of March 10, 2019.~~

~~(12)~~ Includes of 26 shares of our common stock and stock options to acquire 59,375 shares of our common stock exercisable within 60 days of March 10, 2019. Ms. Coleman resigned from the Company effective January 25, 2019.

~~(13)~~ ~~Includes of 6,250 shares of our common stock and stock options to acquire 110,000 shares of our common stock exercisable within 60 days of March 10, 2019.~~

● Matters to be Voted on – Proposal 3: Approval of 2020 Executive Compensation on an Advisory Basis;
● Corporate Governance – Compensation Committee;
● Executive Compensation; and
● Director Compensation.

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes certain information regarding our equity compensation plan as at December 31, ~~2018:~~2020:


			Number of securities
			remaining available for
			future issuance under
	Number of securities to	Weighted-average	equity compensation
	be issued upon exercise	exercise price of	plans (excluding
	of outstanding options,	outstanding options,	securities reflected in
	warrants and rights	warrants and rights	column (a))
Plan Category	(a)	(b)	(c)
Equity compensation plans approved by security holders	9,851,058	$ 4.82	23,528,822
Equity compensation plans not approved by security holders	-	-	-
Total	9,851,058	$ 4.82	23,528,822

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)

Weighted-average exercise price of outstanding options, warrants and rights
(b)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)

Equity compensation plans approved by security holders

12,570,491

5.02

5,417,869

Equity compensation plans not approved by security holders

-

-

-

Total

12,570,491

5.02

5,417,869

~~2013 Stock Option Plan~~

~~On September 27, 2013, we adopted a stock option plan. The purpose of~~Other information required by this item will be contained under the stock option plan is to retain the services of valued key employees, directors, officers and consultants and to encourage such persons with an increased initiative to make contributions to our company. Under the stock option plan, eligible employees, consultants and certain other persons who are not eligible employees, may receive awards of “non–qualified stock options”. Individuals, who, at the time of the option grant, are employees of our company or any related company (as definedfollowing headings in the ~~stock option plan) who are subject to tax~~Proxy Statement and is incorporated herein by reference:

●

Beneficial Ownership of Common Stock.

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item will be contained under the following headings in the ~~United States may receive “incentive stock options,”~~Proxy Statement and ~~non–U.S. residents may receive awards of “non-qualified stock options”.~~ is incorporated herein by reference:

●

Corporate Governance – Board of Directors Overview;

●

Corporate Governance – Controlled Company

●

Certain Relationships and Related-Person Transactions; and

●

Corporate Governance – Director Independence.

Item 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The ~~number of shares of our common stock issuable~~information required by this item will be contained under the plan is 10,000,000. As of March 10, 2019, there were stock options to purchase an aggregate of 4,206,416shares of our common stock outstanding. We do not expect to grant future option awards under the 2013 stock option plan.

~~2015 Equity Incentive Plan~~

On March 12, 2015, we adopted an equity incentive plan which was subsequently amended on October 29, 2017. The purpose of the equity incentive plan is to retain the services of valued key employees, directors, officers and consultants and to encourage commitment and motivate excellent performance. Our employees, consultants and directors are eligible to participatefollowing headings in the ~~2015 Equity Incentive Plan as determined~~Proxy Statement and is incorporated herein by the Board. The following equity awards may be granted under the equity incentive plan: “incentive stock options”, “non-qualified stock options,” shares of restricted stock, restricted stock units and other stock-based awards; provided, that “incentive stock options” may be granted only to employees. The number of shares of our common stock issuable under the plan is 21,000,000. As of March 10, 2019, there were stock options to purchase an aggregate of 19,492,568 shares of our common stock outstanding with 1,507,432 available for future issuances.reference:

●

Matters to be Voted on – Proposal 2: Ratification of Appointment of Independent Auditor for 2021;

●

Corporate Governance – Audit Committee; and

●

Accounting Matters – Principal Independent Auditor Fees.

PART IV

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) Financial Statements

~~On November 14, 2017, we filed a registration statement on Form S-8 to register the sale of 23,273,890 shares issuable under the 2013 Stock Option Plan and 2015 Equity Incentive Plan.~~

~~Changes in Control~~

~~We are unaware of any arrangement the operation of which may at a subsequent date result in a change of control of our company.~~

~~Item 13. CERTAIN RELATIONSHIPS~~ ~~AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

~~Transactions with Related Persons~~

~~None~~

~~Director Independence~~

Our bylaws provide that we have at least one director, and as of the date this report, our Board consisted of a total eight directors, consisting of Glenn Sanford, Jason Gesing, Eugene Frederick, Richard Miller, Randall Miles, Darren Jacklin, Susan Truax and Dan Cahir. Under NASDAQ Marketplace Rule 5605(a)(2), a director is not considered to be independent if he or she is also an executive officer or employee of the Company, or otherwise has any material relationship with the Company or its affiliates that would impair independence. Using this definition of director independence, each of the following directors are considered independent; Darren Jacklin, Randall Miles, Richard Miller and Dan Cahir.

~~Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES~~

~~Principal Accounting Fees~~

~~The following table sets forth fees billed or accrued by our independent registered public accountants during the fiscal years ended December 31, 2018 and 2017:~~

Year Ended December 31,

2018

2017

Audit fees

$
785,000

$
490,000
Audit related fees

-

-
Tax fees

-

-
All other fees

-

-
Total fees

$
785,000

$
490,000

~~Audit fees pertain to the audit of our annual~~See Consolidated Financial Statements ~~including reviews of the interim financial statements contained~~ in our Quarterly Reports on Form 10-Q and services that are normally provided by an independent registered accountant in connection with statutory and regulatory filings or engagements. Our current principal accountant BDO USA, LLP was engaged to audit our Consolidated Financial Statements for the years ended December 31, 2018 and December 31, 2017.

Audit-related fees consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements, which are not reported under “Audit Fees.”

~~Tax fees consist of fees billed for professional services for tax compliance, tax advice, and tax planning.~~

The principal accountant for the current year and for the most recently completed fiscal year is not expected to present at the stockholders’ meeting and, therefore, will not make a statement or be available to respond to questions.

All other fees consist of fees for products and services other than the services reported above. There were no management consulting services provided in the fiscal year end December 31, 2018 and 2017.

~~Pre-Approval Policies and Procedures~~

All services provided by our independent registered accountants were pre-approved by the Audit Committee. The Audit Committee is presented, for approval, a description of the Audit-related, Tax and Other services expected to be performed by the independent registered accounts during the fiscal year.

~~The Audit Committee determined that all services provided by our independent registered accountants were compatible with maintaining their independence.~~

~~PART IV~~

Item ~~15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES~~8

(a) (2) Financial Statements Schedule**

All other schedules have been omitted because they are inapplicable, not required or because the information is given in the Consolidated Financial Statements or notes thereto. This supplemental schedule should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this report.

EXHIBITS


Exhibit Number		Exhibit Description
~~Exhibit~~3.1		~~Exhibit~~
~~Number~~		~~Description~~

~~2.1~~		~~Merger Agreement dated August 15, 2013 with eXp Realty International, Inc. and eXp Acquisition Corp. (incorporated by reference on Form 8-K, filed on August 20, 2013)~~

~~3.1~~		Amended and Restated Certificate of Incorporation (incorporated by reference from Appendix A to the Company’s Definitive Information Statement on Schedule 14C filed on October 9, 2018)
3.2
~~3.2~~		Amended and Restated Bylaws (incorporated by reference from Appendix B to the Company’ Definitive Information Statement on Schedule 14C filed on October 9, 2018)
3.3
~~10.1~~		~~Affiliate Stock Purchase Agreement~~Certificate of Correction to the Amended and Restated Certificate of Incorporation (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March ~~18, 2013)~~24, 2020)
4.1		Description of Securities
~~10.2~~ 10.1		2013 Stock Option Plan (incorporated by reference from Exhibit 10.5 to the Company's Current Report on Form ~~8-K,~~8‑K filed on October 2, 2013)
10.2
~~10.3~~		eXp Realty International Corporation 2015 Equity Incentive Plan (incorporated by reference to the Company’s Definitive Information Statement on Schedule 14C filed on April 2, 2015)
10.3
~~10.4~~		First Amendment to eXp Realty International Corporation 2015 Equity Incentive Plan (incorporated by reference to Company’s Definitive Information Statement on Schedule 14C filed on October 6, 2017)
10.4		Second Amendment to eXp World Holdings, Inc 2015 Equity Incentive Plan (incorporated by reference to Company’s Definitive Information Statement on Schedule 14C filed on November 15, 2019)
10.5		eXp Realty International Corporation 2015 Agent Equity Program Enrollment Form (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form ~~8-K~~8‑K filed on April 30, 2015)
10.6
14		~~Code of Ethics~~eXp World Holdings, Inc Stock Repurchase Program (incorporated by reference from Exhibit 99.1 to the Company's Current Report on Form 8-K filed on December 27, 2018)
10.7		First Amendment to eXp World Holdings, Inc Stock Repurchase Program (incorporated by reference from the Company's Current Report on Form 8-K filed on November 27, 2019)
21 10.8		Second Amendment to eXp World Holdings, Inc Stock Repurchase Program, Board Resolution approved December 17, 2020
10.9		2020 Independent Contractor Agreement and Agent Equity Enrollment Form (incorporated by reference from Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 5, 2020)
14.1		Code of Ethics (incorporated by reference from Exhibit 14.1 to the Company's Annual Report on Form 10-K filed on March 12, 2020)
21.1		Subsidiaries of the Registrant
23.1		Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP)
~~31.1~~ 23.2		Consent of Independent Registered Public Accounting Firm (BDO USA, LLP)
31.1		Certification of the Chief Executive pursuant to Rule ~~13a-14(a)~~13a‑14(a) or Rule ~~15d-14(a)~~15d‑14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
~~31.2~~		Certification of the Chief Financial Officer pursuant to Rule ~~13a-14(a)~~13a‑14(a) or Rule ~~15d-14(a)~~15d‑14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
~~32.1~~		Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
~~32.2~~		Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

Item 16.

Form 10-K Summary

None

6968

~~Item 16.~~

~~Form 10-K Summary~~

~~None~~

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	eXp World Holdings, Inc.
	(Registrant)

Date: March ~~18, 2019~~11, 2021	/s/ Glenn Sanford
	Glenn Sanford
	Chief Executive Officer (Principal Executive Officer)


Date: March ~~18, 2019~~11, 2021	/s/ Jeff Whiteside
	Jeff Whiteside
	Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
~~Name~~	~~Title~~	~~Date~~

/s/ ~~Glenn sanford~~GLENN SANFORD	Chief Executive Officer and Chairman of the Board	March ~~18, 2019~~11, 2021
Glenn Sanford	(Principal Executive Officer)

/s/ JEFF WHITESIDE	Chief Financial Officer	March ~~18, 2019~~11, 2021
Jeff Whiteside	(Principal Financial Officer)

/s/ ~~Alan Goldman~~KENT CHENG	~~Chief Accounting Officer~~Global Controller	March ~~18, 2019~~11, 2021
~~Alan Goldman~~Kent Cheng	(Principal Accounting Officer)

/s/ ~~Jason Gesing~~JAMES BRAMBLE	~~Director~~ General Counsel and Corporate Secretary	March ~~18, 2019~~11, 2021
~~Jason Gesing~~James Bramble

/s/ ~~EUGene Frederick~~JASON GESING	Director	March ~~18, 2019~~11, 2021
~~Eugene Frederick~~Jason Gesing

/s/ ~~Richard Miller~~EUGENE FREDERICK	Director	March ~~18, 2019~~11, 2021
~~Richard Miller~~Eugene Frederick

/s/ ~~Randall Miles~~RANDALL MILES	Director	March ~~18, 2019~~11, 2021
Randall Miles

/s/ ~~Darren jacklin~~DARREN JACKLIN	Director	March ~~18, 2019~~11, 2021
Darren Jacklin

/s/ ~~Susan Truax~~FELICIA GENTRY	Director	March ~~18, 2019~~11, 2021
~~Susan Truax~~Felicia Gentry

/s/ DAN CAHIR	Director	March ~~18, 2019~~11, 2021
Dan Cahir

7069

Delaware
~~Delaware~~	98-0681092
(State or other jurisdiction		(IRS Employer
of incorporation)		Identification No.)


Title of each class	Trading Symbol	Name of each ~~exchanged~~exchange on which registered
~~None~~Common Stock, par value $0.00001 per share	~~N/A~~EXPI	NASDAQ


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒☐
Emerging growth company	☐

		Page
FORWARD LOOKING STATEMENTS		~~Page~~1
~~FORWARD LOOKING STATEMENTS~~	1

PART 1		6
~~Item 1.~~	~~Business~~	6
~~Item 1A.~~	~~Risk Factors~~	6
~~Item 1B.~~	~~Unresolved Staff Comments~~	16
~~Item 2.~~	~~Properties~~	16
~~Item 3.~~	~~Legal Proceedings~~	16
~~Item 4.~~	~~Mine Safety Disclosures~~	16
		2
~~PART II~~Item 1.	Business	16 2
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosures	19

PART II		20
Item 5 .	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16 20
Item 6.	Selected Financial Data (Reserved)	17 21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19 21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	27 32
Item 8.	Financial Statements and Supplementary Data	27 34
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
~~Item 9A.~~	~~Controls and Procedures~~	52
~~Item 9B.~~	~~Other Information~~	56
		61
~~PART III~~Item 9A.	Controls and Procedures	56 61
Item ~~10.~~9B.	Other Information	64

PART III		65
Item 10.	Directors, Executives, Officers and Corporate Governance	61 65
Item 11.	Executive Compensation	65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
Item 13.	Certain Relationships and Related Transactions, and Director Independence	67 65
Item 14.	Principal Accounting Fees and Services	68
		66
~~PART IV~~		69
~~Item 15.~~	~~Exhibits, Financial Statement and Schedules~~	69
~~Item 16.~~	~~Form 10-K Summary~~	70

~~SIGNATURES~~PART IV		70 67
Item 15.	Exhibits and Financial Statement Schedules	67
Item 16.	Form 10-K Summary	68

SIGNATURES		69



		As of Year Ended December 31,
		2018		2017		2016		2015		2014
Statement of Operations Data:
Revenue	$	500,147,681	$	156,104,544	$	53,555,725	$	22,464,306	$	13,368,905
Total expenses		522,532,196		178,136,198		60,927,558		24,320,560		13,335,473
Income (loss) from operations		(22,384,515)		(22,031,654)		(7,371,833)		(1,856,254)		33,432
Other Income and (expenses)		31,959		(2,077)		(355)		(1,104)		(942)
Income tax (expense) benefit		(77,800)		(97,234)		(42,528)		(103,069)		71,353
Net income (loss)		(22,430,356)		(22,130,965)		(7,414,716)		(1,960,427)		103,843
Less: Net income attributable to noncontrolling interests (a)						29,801		21,526
Net income (loss) attributable to non-controlling interest in subsidiary		(22,430,356)		(22,130,965)		(7,384,915)		(1,938,901)		103,843

Earnings (loss) per share attributable to common shareholders:
Basic earnings (loss) per share		(0.39)		(0.42)		(0.14)		(0.04)		0.00
Diluted earnings (loss) per share		(0.39)		(0.42)		(0.14)		(0.04)		0.00
Weighted average shares outstanding:
Basic		57,689,920		53,194,928		51,081,949		49,409,266		48,068,047
Diluted		57,689,920		53,194,928		51,081,949		49,409,266		51,735,865

Balance Sheet Data:
Cash and cash equivalents		20,538,057		4,672,034		1,684,608		571,814		353,374
Total assets		55,846,028	(b)	14,637,131		6,104,047		1,256,716		913,170
Total Liabilities		25,866,399	(c)	10,376,460		3,577,021		664,210		499,504
Equity		29,979,629		4,260,671		2,527,026		592,506		413,666

		For the Year Ended December 31,
		2018		2017		2016		2015		2014
Operating Statistics
Brokerage Services
Close homesale sides (d)		74,678		25,299		8,560		3,812		2,196
Homesales volume (e)	$	19,844,237,031	$	6,083,479,207	$	1,994,624,240	$	887,225,758	$	495,031,237
Average homesale price (f)	$	265,731	$	240,463	$	233,017	$	232,745	$	225,424



	Year Ended December 31,
	2018		2017		$ Change		% Change

Operating expenses:
Commission and other agent-related costs	$	459,715,836	$	139,603,970	$	320,111,866	229.3	%
General and administrative		57,618,506		35,685,512		21,932,994	61.5
Professional fees		2,236,236		1,274,675		961,561	75.4
Sales and marketing		2,961,618		1,572,041		1,389,577	88.4
Total operating expenses	$	522,532,196	$	178,136,198	$	344,395,998



	Year Ended
	December 31,
	2018		2017			$ Change

Current assets	$	42,326,727	$	13,098,918	$	29,227,809
Current liabilities		(24,212,062)		(10,376,460)		(13,835,602)
Net working capital	$	18,114,665	$	2,722,458	$	15,392,207



	For the Year Ended
	December 31, 2018		December 31, 2017
Net income / (loss)	$	(22,430,356)	$	(22,130,965)
Other (income) / expense		(31,959)		2,077
Taxes		77,800		97,234
Depreciation & Amortization		893,988		353,229
Stock compensation expense		19,053,478		10,961,631
Stock option expense		4,846,906		6,856,029
Adjusted EBITDA	$	2,409,857	$	(3,860,765)



	December 31, 2018		December 31, 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	20,538,057	$	4,672,034
Restricted cash		2,502,591		923,193
Accounts receivable, net of allowance $484,441 and $179,759, respectively		17,428,091		6,912,657
Prepaids and other assets		1,857,988		591,034
TOTAL CURRENT ASSETS		42,326,727		13,098,918
FIXED ASSETS, NET		2,739,525		1,538,213
INTANGIBLES ASSETS, NET		2,531,669		-
GOODWILL		8,248,107		-
TOTAL ASSETS	$	55,846,028	$	14,637,131

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,758,377	$	635,087
Customer deposits		2,502,591		923,193
Accrued expenses		18,976,435		8,818,180
Current portion of long-term payable		974,659		-
TOTAL CURRENT LIABILITIES		24,212,062		10,376,460

LONG-TERM PAYABLE, net of current portion		1,654,337		-
TOTAL LIABILITIES		25,866,399		10,376,460

Commitments and Contingencies (Note 11)

STOCKHOLDERS' EQUITY
Common Stock, $0.00001 par value 220,000,000 shares authorized; 60,609,102 and 54,962,535 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively		606		550
Additional paid-in capital		90,755,616		36,848,041
Accumulated deficit		(60,765,266)		(32,596,374)
Accumulated other comprehensive income (loss)		(11,327)		8,454

TOTAL STOCKHOLDERS' EQUITY		29,979,629		4,260,671
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	55,846,028	$	14,637,131


									Accumulated
	Common Stock				Additional		Accumulated		Other Comprehensive		Total
	Shares		Amount		Paid-In Capital		Deficit		Income (Loss)		Equity
Balance, December 31, 2016	52,316,679	$	523	$	12,987,707	$	(10,465,409)	$	4,205	$	2,527,026

Stock issued for cash at $3.25 per share, net of issuance costs	-		-		142,158		-		-		142,158
Exercise of options	181,572		2		46,594		-		-		46,596
Repurchase and retirement of common stock	(1,307)		-		(3,607)		-		-		(3,607)
Stock compensation expense	1,000,594		10		10,961,621		-		-		10,961,631
Stock option expense	-		-		6,856,029		-		-		6,856,029
Agent equity program	1,464,997		15		5,857,539		-		-		5,857,554
Foreign currency translation adjustment	-		-		-		-		4,249		4,249
Net loss	-		-		-		(22,130,965)		-		(22,130,965)

Balance, December 31, 2017	54,962,535	$	550	$	36,848,041	$	(32,596,374)	$	8,454	$	4,260,671

Cumulative effect adjustment upon the adoption of Accounting Standards Update 2018-07	-		-		5,738,536		(5,738,536)		-		-
Shares issued for acquisition	97,371		1		999,999		-		-		1,000,000
Exercise of options	2,594,050		25		2,015,009		-		-		2,015,034
Stock compensation expense	1,270,545		13		19,053,465		-		-		19,053,478
Stock option expense	-		-		4,846,906		-		-		4,846,906
Agent equity program	1,684,601		17		21,253,660		-		-		21,253,677
Foreign currency translation adjustment	-		-		-		-		(19,781)		(19,781)
Net loss	-		-		-		(22,430,356)		-		(22,430,356)

Balance, December 31, 2018	60,609,102	$	606	$	90,755,616	$	(60,765,266)	$	(11,327)	$	29,979,629



	2018
		Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents
Cash	$	12,486,395	$	-	$	-	$	12,486,395	$	12,486,395

Level 1
Money market funds		8,051,662		-		-		8,051,662		8,051,662
Subtotal		20,538,057		-		-		20,538,057		20,538,057

Level 2		-		-		-		-		-

Level 3		-		-		-		-		-

Total	$	20,538,057	$	-	$	-	$	20,538,057	$	20,538,057


	As of December 31, 2018
		Gross Amount		Accumulated Amortization		Net Carrying Amount
Trade name	$	1,169,000	$	(9,742)	$	1,159,258
Existing technology		297,000		(4,950)		292,050
Non-competition agreements		125,000		(3,472)		121,528
Customer contracts		740,000		(6,167)		733,833
Software		225,000		-		225,000
Total	$	2,556,000	$	(24,331)	$	2,531,669


			Weighted Average
	Shares		Fair Value
Balance, December 31, 2016		3,057,879		4.05
Granted		2,024,498		7.60
Issued		(1,457,538)		5.27
Forfeited		(565,774)		4.76
Balance, December 31, 2017		3,059,065		7.60
Granted		2,380,100		11.59
Issued		(889,769)		12.16
Forfeited		(676,519)		4.05
Balance, December 31, 2018		3,872,877		11.63



							Weighted
							Average
			Weighted				Remaining
			Average				Contractual Term
	Options		Exercise Price		Intrinsic Value		(Years)
Balance, December 31, 2016		10,747,558	$	0.67	$	3.56		7.75
Granted		2,848,231		3.76		-		6.15
Exercised		(181,572)		0.26		6.86
Forfeited		(2,540,925)		2.31		3.20
Balance, December 31, 2017		10,873,292	$	1.50	$	5.08		6.65
Granted		870,000		10.86		(3.78)		9.34
Exercised		(2,594,050)		0.78		11.90
Forfeited		(451,629)		3.03		9.59
Balance, December 31, 2018		8,697,613	$	2.08	$	5.00		6.07
Exercisable at December 31, 2018		6,620,042		0.92		6.16		5.29
Vested at December 31, 2018		6,823,772	$	1.00	$	6.08		5.37


Year Ending December 31,
2019	$	451,710
2020		420,518
2021		237,142
2022		42,532
2023 and thereafter		4,134
Total	$	1,156,036



SUMMARY COMPENSATION TABLE
Name and Principal Position	Year	Salary	Bonus	Stock Awards(1)	Option Awards(2)	Non-Equity Incentive Plan Compensation	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All Other Compensation(3)	Total
		($)	($)	($)	($)	($)	($)	($)	($)
Glenn Sanford	2018	58,875	-0-	-0-	-0-	-0-	-0-	1,748,092(4)	1,806,967
Chief Executive Officer and Chairman of the Board	2017	488,880	-0-	6,008	-0-	-0-	-0-	284,307(4)(6)	779,195
Jason Gesing,	2018	150,000	-0-	89,813	-0-	-0-	-0-	583,558(4)	823,371
Director and Executive Vice President, Business Development	2017	202,238	58,000	66,179	-0-	-0-	-0-	99,523(4)(7)	425,940
Jeff Whiteside,	2018	33,125	36,000	-0-	2,638,017(5)	-0-	-0-	-0-	2,707,142
Chief Financial Officer	2017	-0-	-0-	-0-	-0-	-0-	-0-	-0-	-0-


Name	Fees Earned or Paid in Cash		Option Awards (1)		Stock Awards (2)		Total
Richard Miller (3)	$	75,000	$	-	$	-	$	75,000
Randall Miles (4)	$	75,000	$	-	$	-	$	75,000
Darren Jacklin	$	24,000	$	-	$	24,108	$	48,108
Dan Cahir (5)	$	16,688	$	963,273	$	-	$	979,961



		Amount and Nature of	Percentage of
Title of Class	Name and Address of Beneficial Owner	Beneficial Ownership(1)	Class(2)
	More than 5% stockholders:
Common Stock	Penny Sanford 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	16,279,325	26.70%
	Directors and named executive officers:
Common Stock	Glenn Sanford 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	22,661,144(3)	36.20%
Common Stock	Jason Gesing 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	1,940,011(4)	3.12%
Common Stock	Jeff Whiteside 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	15,700(5)	0.03%
Common Stock	Alan Goldman 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	458,334(6)	0.75%
Common Stock	Eugene Frederick 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	1,552,351(7)	2.55%
Common Stock	Richard Miller 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	1,237,500(8)	1.99%
Common Stock	Randall Miles 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	1,237,500(9)	1.99%
Common Stock	Darren Jacklin 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	77,585	0.13%
Common Stock	Susan Truax 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	16,187(10)	0.03%
Common Stock	Dan Cahir 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	13,889(11)	0.02%
Common Stock	Mary Frances Coleman 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	59,401(12)	0.10%
Common Stock	Scott Petronis 2219 Rimland Drive, Suite 301 Bellingham, WA 98226	116,250(13)	0.19%
Common Stock	All executive officers and directors as a group (12 persons)	29,385,852	43.97%



Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	12,570,491	5.02	5,417,869
Equity compensation plans not approved by security holders	-	-	-
Total	12,570,491	5.02	5,417,869