What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-25 compared with 2021-03-11 · 124 added, 179 removed, 725 unchanged (29% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms

Reports of Independent Registered Public Accounting Firms (PCAOB ID No.

Consolidated Balance Sheets

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We have audited the accompanying consolidated balance sheets of eXp World Holdings, Inc.

and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income (loss), equity, and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years 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), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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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.

The Company has a revenue sharing plan where agents and brokers may receive a commission 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.

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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.

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

● With the assistance of our IT specialists, we:

o 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.

o 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.

o Performed testing of automated controls for the system calculation of revenue share and the system determination of number of Front-Line Qualifying Active agents.

● We selected samples of commissions paid to agents and brokers under the revenue sharing plan and recalculated the commissions amount based on the terms of the respective independent contractor agreements.

● For the samples selected:

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San Francisco, California

March 11, 2021

February 25, 2022

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 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 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 audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

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

Salt Lake City, Utah

March 18, 2019

EXP WORLD HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

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Restricted cash

Accounts receivable, net of allowance for credit losses of $ 1,879 and allowance for bad debt of $ 137 , respectively

Accounts receivable, net of allowance for credit losses of $ 2,198 and $ 1,879 , respectively

Prepaids and other assets

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Intangible assets, net

Deferred tax assets

LIABILITIES AND EQUITY

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TOTAL LIABILITIES

Commitments and Contingencies (Note 14)

Common Stock, $ 0.00001 par value 900,000,000 shares authorized;

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6,751,692 and 2,534,494 shares held, respectively

Accumulated deficit

Accumulated earnings (deficit)

Accumulated other comprehensive income

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TOTAL LIABILITIES AND EQUITY

(1) All applicable period amounts have been adjusted to reflect the two -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.

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Other expense

Other expense (income), net

Other expense, net

Equity in losses of unconsolidated affiliates

Total other expense (income), net

Total other expense, net

Income (loss) before income tax expense

Income tax expense

Income tax (benefit) expense

Net income (loss)

1 unchanged sentence

Net income (loss) attributable to eXp World Holdings, Inc.

Earnings (loss) per share (1)

Earnings per share (1)

Weighted average shares outstanding (1)

Comprehensive income (loss):

Comprehensive income:

Net income (loss)

1 unchanged sentence

Net income (loss) attributable to eXp World Holdings, Inc.

Other comprehensive income (loss):

Other comprehensive income:

Foreign currency translation (loss) gain, net of tax

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CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share amounts)

(In thousands)

Year Ended December 31,

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Balance, beginning of year

Balance, end of year

Balance, end of period

Treasury stock:

Balance, beginning of year

Balance, beginning of period

Repurchases of common stock

Retirement of treasury stock

Balance, end of year

Balance, end of period

Additional paid-in capital:

Balance, beginning of year

Cumulative effect from the adoption of new accounting standards

Shares issued for acquisition

Balance, beginning of period

Shares issued for stock options exercised

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Retirement of treasury stock

Balance, end of year

Accumulated deficit:

Balance, beginning of year

Cumulative effect from the adoption of new accounting standards

Balance, end of period

Accumulated earnings (deficit):

Balance, beginning of period

Net income (loss)

Balance, end of year

Accumulated other comprehensive income (loss):

Balance, beginning of year

Foreign currency translation gain (loss)

Balance, end of year

Dividends declared and paid

Balance, end of period

Accumulated other comprehensive income:

Balance, beginning of period

Foreign currency translation loss

Balance, end of period

Noncontrolling interest:

Balance, beginning of year

Balance, beginning of period

Stock compensation

Contributions by noncontrolling interests

Balance, end of year

Balance, end of period

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share amounts)

(In thousands)

Year Ended December 31,

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Net income (loss)

Reconciliation of net income (loss) to net cash provided by operating activities:

Reconciliation of net income to net cash provided by operating activities:

Depreciation expense

2 unchanged sentences

Asset impairments

Allowance for credit losses on receivables/bad debt on receivables

Allowance for credit losses on receivables

Equity in loss of unconsolidated affiliates

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Agent equity stock compensation expense

Deferred income taxes

Changes in operating assets and liabilities:

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Purchases of property, plant and equipment

Acquisition of businesses, net of cash acquired

Acquisition of businesses

Intangible assets acquired

Other investing activities

Investments in unconsolidated affiliates

NET CASH (USED IN) INVESTING ACTIVITIES

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Transactions with noncontrolling interests

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

Dividends declared and paid

NET CASH (USED IN) FINANCING ACTIVITIES

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

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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Termination of lease liabilities

Retirement of treasury stock

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Intangible assets in accounts payable

Termination of lease liabilities

Liabilities incurred associated with business acquisition

Property, plant and equipment purchases in accounts payable

Liabilities incurred associated with a business acquisition

Liabilities assumed in business acquisition

Common stock issued for business acquisition

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

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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 the United Kingdom (U.K.), Australia, South Africa, Portugal, France, India, and Mexico.

The Company expanded its business into Australia and the United Kingdom in 2019, and into South Africa, India, Mexico, Portugal and France, during 2020 and into Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama and Germany in 2021.

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.

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Certain amounts within the following tables may not foot due to rounding.

The following table illustrates changes in earnings (loss) per share and weighted average shares outstanding as previously reported prior to, and as adjusted subsequent to, the impact of the Stock Split retroactively adjusted for the years ended December 31, 2019 and 2018:

Year ended December 31,

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Impact of Stock Split

As Previously Reported

Impact of Stock Split

Weighted average shares outstanding

Earnings (loss) per share

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

The following table illustrates changes in equity as previously reported prior to, and as adjusted subsequent to, the impact of the Stock Split retroactively adjusted for the years ended 2019:

Year ended December 31,

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Impact of Stock Split

As Previously Reported

Impact of Stock Split

Common stock:

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(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 give effect to the Stock Split retroactively adjusted for the following periods:

Stock awards under the Company’s equity incentive program for agents were adjusted retroactively to give effect to the Stock Split retroactively adjusted for the following periods:

Weighted Average Grant Date Fair Value

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Principles of consolidation

The accompanying consolidated financial statements include the accounts of eXp World Holdings, Inc., its wholly-owned subsidiaries, and 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.

The accompanying consolidated financial statements include the accounts of eXp World Holdings, Inc., its wholly-owned subsidiaries, and entities in which we have a variable interest of which we are the primary beneficiary.

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.

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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.

As of December 31, 2021, First Cloud’s operations have ceased and 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 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.

In July 2021, the Company entered into a joint venture with Kind Partners, LLC, a subsidiary of Kind Lending, LLC, forming SUCCESS Lending, LLC (“SUCCESS Lending”), a residential mortgage service company.

Neither of these joint venture investments are consolidated and the Company recognizes its share of income and expenses and equity movement in the joint ventures in proportion to their percentage of ownership.

As of December 31, 2021, Silverline and SUCCESS Lending’s operations are not material to the Company’s financial position or results of operations.

Use of estimates

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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.

When necessary, the Company will reclassify certain amounts in prior-period financial statements to conform to the current period’s presentation.

No material reclassifications occurred during the current period.

Cash and cash equivalents

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Goodwill represents the excess of the consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business combination.

The Company evaluates 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.

Generally, 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.

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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 no t recognize an impairment for either of the years ended December 31, 2020 and 2019.

The Company did no t recognize any impairments for either of the years ended December 31, 2021 and 2020.

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 .

Each intangible asset is amortized on a straight-line basis over its useful life, ranging from 3 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 $ 225 for the year ended December 31, 2020.

No impairment was recognized for the year ended December 31, 2019.

The Company recognized no impairment for the year ended December 31, 2021.

The Company recognized and impairment of $ 225 for the year ended December 31, 2020.

Software development costs

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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 does not have contracts with customers that provide variable consideration.

The Company does not have contracts with customers that provide variable consideration.

Real Estate Brokerage Services

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As principal, and upon satisfaction of the performance obligation, the Company recognizes revenue in the gross amount of consideration to which the Company expects to be entitled.

The Company estimates and accrues revenue to which it is entitled to for closed transactions but has yet to receive all the necessary closing documents.

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 the completion of a residential real estate transaction once the Company has satisfied the performance obligation.

Agent related fees are currently recorded as a reduction to commissions and other agent related costs.

Agent related fees charged by the Company are recorded as a reduction to commissions and other agent related costs.

Software Subscription and Professional Services

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(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 (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.

income tax returns, the open taxation years subject to examination range from 2011 to 2020 .

Comprehensive income (loss)

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Basic 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 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 common shares outstanding during the period.

Diluted 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 common shares outstanding during the period.

The Company does not pay dividends or have participating shares outstanding.

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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 estimate an expected lifetime credit loss on financial assets.

The ASU amends the impairment model to utilize an expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables.

The amendment requires entities to consider other factors, such as economic conditions and future economic conditions.

The Company adopted ASU 2016-13 effective January 1, 2020 and concluded it did not have a material impact on either the financial position, results of operations, cash flows, or related disclosures of the Company.

There was no impact on beginning balance retained earnings upon adoption of this ASU.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the 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 and reasons for transfers between Level 1 and Level 2, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements, such as disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurement.

The Company adopted ASU 2018-13 on January 1, 2020 and concluded it did not have an impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15 – Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”).

The amendments in this update apply to an entity who is a 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 the implementation should be capitalized and costs with the other stages should be expensed.

The Company adopted ASU 2018-15 on January 1, 2020 and concluded it did not have an impact on the Company’s consolidated financial statements and related disclosures.

Recently issued accounting pronouncements

In December 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740).

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12 – Income Taxes (Topic 740) (“ASU 2019-12”).

ASU 2019-12 removes certain exceptions for investments, intraperiod allocations and interim calculations and adds guidance to reduce complexity in accounting for income taxes.

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early adoption is permitted.

The Company adopted this amendment on January 1, 2021.

The Company has assessed the amendments of ASU 2019-12 and determined the amendments to have an immaterial impact on the Company’s consolidated financial statements and related disclosures.

The adoption of ASU 2019-12 had no material impact on the Company’s condensed consolidated financial statements and related disclosures.

Recently issued accounting pronouncements

In November 2021, the FASB issued ASU 2021-08 – Business Combinations (Topic 805).

ASU 2021-08 addresses diversity and inconsistencies related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination.

The amendments in this Update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers.

This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

The Company has reviewed the amendments of ASU 2021-08 and will apply the guidance as needed.

No business combinations were executed during the year ended December 31, 2021.

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.

No business combinations were executed during the year ended December 31, 2019.

Showcase Web Sites, L.L.C.

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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.

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 15 – Related Party Transactions .

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Other accrued expenses

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.

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 .

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

Certain leases provide for increases in future lease payments once the term of the lease has expired, as defined in the lease agreements.

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STOCKHOLDERS’ EQUITY

Common Stock – As of December 31, 2021, our amended and restated certificate of incorporation authorized us to issue 900,000,000 shares of common stock with a par value of $ 0.00001 per share.

The following table represents a reconciliation of the Company’s common stock for the periods presented, adjusted to give effect to the Stock Split:

Year Ended December 31,

(Shares of Common Stock)

Common stock:

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( 3,636,546 )

Shares issued for acquisition

Shares issued for stock options exercised

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For the years ended December 31, 2021, 2020 and 2019, the Company’s stock compensation attributable to the AGIP was $ 24,493 , $ 15,239 , and $ 13,959 , respectively.

The total amount of stock compensation attributable to liability classified awards was $ 3,246 and $ 901 for the years ended December 31, 2020 and 2019, respectively, and none during 2018.

The total amount of stock compensation attributable to liability classified awards was $ 4,977 , $ 3,246 , and $ 901 for the years ended December 31, 2021, 2020 and 2019, respectively.

Stock compensation expense related to the AGIP is included in general and administrative expense in the consolidated statements of comprehensive income (loss).

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Balance, December 31, 2021

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 number of shares awarded are fixed.

As of December 31, 2021, the Company had 5,158,639 unvested common stock awards and unrecognized compensation costs totaling $ 46,862 attributable to stock awards where the performance metric has been achieved and the number of shares awarded are fixed.

The cost is expected to be recognized over a weighted average period of 2.22 years.

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( 2,062,212 )

( 1,022,852 )

Balance, December 31, 2021

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The fair value of the options issued was calculated using a Black-Scholes-Merton option-pricing model with the following assumptions:

Year Ended December 31,

Expected term

5 - 6.25 years

6.25 - 10 years

Expected volatility

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0.21 % - 1.58 %

1.48 % - 2.70 %

Dividend yield

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Year Ended December 31,

(Shares of Treasury Stock)

Treasury stock:

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The Company uses the treasury stock method to reflect the potential dilutive effect of unvested stock awards and unexercised options.

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 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 was paid 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:

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Earnings (loss) per share:

Earnings (loss) per share attributable to common stock- basic

Earnings (loss) per share attributable to common stock- diluted

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 , nil , and nil , respectively.

Earnings per share attributable to common stock- basic

Earnings per share attributable to common stock- diluted

For the years ended December 31, 2021, 2020 and 2019, total outstanding shares of common stock excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive were 102,880 , 283,842 , and nil , respectively.

The following table provides the components of income (loss) before provision for income taxes by domestic and foreign subsidiaries:

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Permanent differences

Research & Development Credit

Unrecognized tax benefit

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Net operating loss carryforward

Accruals and reserves

Research and Development Credit

Temporary differences

Lease liability

Legal Settlement Accrual

Share-based compensation

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Right of use lease asset

Unrealized FX Gain/Loss

Valuation allowance

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The weight given to the evidence is commensurate with the extent to which it can be objectively verified.

As of December 31, 2020, based on its assessment of the realizability of its net deferred tax assets, the Company continued to maintain a full valuation allowance against all of its federal and state net deferred tax assets.

The Company has provided a valuation allowance as of December 31, 2020 and 2019 of $ 22,116 and $ 19,271 , respectively, for its net deferred tax assets as it cannot conclude it is more likely than not all of the estimated deferred tax assets will be realized.

The valuation allowance increased by $ 2,845 and $ 12,696 in 2020 and 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, 2020, the Company 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, 2021, based on its assessment of the realizability of its net deferred tax assets, we reached the conclusion that our US federal and State net deferred tax assets more-likely-than-not will be fully realized and therefore we recorded a valuation allowance release of $ 22.1 million resulting in the recognition of the deferred tax assets and income tax benefit for the period.

The company has provided a valuation allowance as of December 31, 2021 and 2020 of $ 0 and $ 22.1 million, respectively.

As December 31, 2021, the Company had federal, state and foreign net operating losses of approximately $ 153.6 million, $ 79.1 million, and $ 7.7 million, respectively.

Out of the federal net operating loss, approximately $ 8.7 million will carry forward for 20 years and can offset 100% of future taxable income;

and $ 144.9 million carries forward indefinitely and can offset 80% of future taxable income.

As of December 31, 2021, the Company conducted an IRC Section 382 analysis with respect to its net operating loss carryforward and determined there was an immaterial limitation.

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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.

As of December 31, 2021, the undistributed earnings of the Company’s foreign subsidiaries could result in withholding taxes of approximately $ 0.3 million, if repatriated.

The Company maintains liabilities for uncertain tax positions.

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Unrecognized tax benefits - end of year

The unrecognized tax 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 nil and $ 61 , respectively.

The unrecognized tax benefits relate primarily Federal and California research and development credit in 2021 and to state taxes in 2020.

As of December 31, 2021, the total amount of unrecognized tax benefits that would affect the Company effective tax rate, if

recognized, is $ 0 .

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 nil 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.

Because the Company has net operating loss carryforwards, there are open statues of limitations in which federal, state and foreign taxing authorities may examine the Company's tax returns for all years from December 31, 2011 through the current period.

As of December 31, 2021, the Company accrued interest or penalties related to uncertain tax positions in the amount of $ 0 .

The Company is currently under federal examination for 2019 and no state tax examinations in progress nor has it had any state tax examinations since its inception.

Because the Company has net operating loss carryforwards, there are open statues of limitations in which federal taxing authorities may examine the Company's tax returns for all years from December 31, 2011 through the current period.

State Taxing authorities may examine the Company’s tax returns for all years from December 31, 2015 through the current period and foreign tax authorities may examine the Company’s tax returns for all years from December 31, 2019 through the current period.

COMMITMENTS AND CONTINGENCIES

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Such litigation may include, but is not limited to, actions or claims relating to sensitive data, including proprietary business information and intellectual property and that of clients and personally identifiable information of employees and contractors, cyber-attacks, data breaches and non-compliance with contractual or other legal obligations.

On November 19, 2021, the Company agreed to settle a class action lawsuit filed against the Company in 2018 alleging violations under the Telephone Consumer Protection Act.

Pursuant to the proposed settlement agreement terms, the Company will grant certain monetary and non-monetary settlements.

The Company decided to set aside provisions at the amount of $ 10,000,000 to cover current estimated settlement fees and costs.

The settlement agreement terms remain subject to judicial review and approval.

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

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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.

While management does consider real estate and brokerage services, the acquired technology and affiliate and media 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

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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 one reportable segment.

In 2021, the Company completed the Showcase and the SUCCESS acquisitions.

These are not material to the Company’s total revenue, total net income (loss), or total assets as of December 31, 2021.

The Company primarily operates within the real estate brokerage markets in the United States and Canada.

Geographical Information

The Company primarily operates within the real estate brokerage markets in the United States and Canada.

During the previous two years, the Company expanded operations into the U.K., Australia, South Africa, France, India, Portugal, and Mexico.

The Company’s management analyzes geographical locations on a forward-looking basis to identify growth opportunities.

During the previous two years, the Company expanded operations into the United Kingdom, Australia, South Africa, India, Mexico, Portugal, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama and Germany.

The Company continues to expand real estate brokerage services internationally.

For the years ended December 31, 2021, 2020 and 2019 approximately 8 %, 5 % and 2 %, respectively, of the Company’s total revenue was generated outside of the U.S.

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were 8 % and 7 % as of December 31, 2021 and 2020.

The Company’s technology services and affiliated services are currently provided primarily in the U.S.

The Company’s technology services and affiliate and media services are currently provided primarily in the U.S.

RELATED PARTY TRANSACTIONS

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For the years ended December 31, 2021, 2020 and 2019, the Company's costs for contributions to this plan were $ 3,196 , $ 1,189 and $ 654 , respectively.

The Company did no t make any plan contributions during the year ended December 31, 2018.

SUBSEQUENT EVENTS

On March 2, 2021, the Company repaid all outstanding promissory notes issued to the previous owners of Showcase and notes payable assumed as part of the Showcase Acquisition.

The repayments totaling approximately $ 1.7 million represented the 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.

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 Stock Split.

Commissions and other agent-related costs

Earnings (loss) per share

Weighted average shares outstanding

Commissions and other agent-related costs

Net (loss) income

Earnings (loss) per share

Weighted average shares outstanding

Quarterly Cash Dividend

On February 17, 2022 , our Board of Directors approved a cash dividend of $ 0.04 per common share to be paid on March 31, 2022 to shareholders of record on March 11, 2022 .The ex-dividend date is March 8, 2022.

The dividend will be paid in cash.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data