Item 9A. Controls and Procedures
Item 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of December 31, 2023. The term “disclosure controls and 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 management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Based on the evaluation, the Company’s management has concluded that our disclosure controls and procedures are effective as of December 31, 2023 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.
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 Rules 13a-15(f) and 15d-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, 2023. 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, 2023. Deloitte and Touche LLP, our independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting, which is included below.
Changes in Internal Control Over Financial Reporting
There were no material changes in our internal control over financial reporting that occurred during the year ended December 31, 2022 that have materially affected, or are reasonably believed to be likely to materially affect, our internal control over financial reporting.
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 control over financial reporting will prevent or detect all errors and 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. 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 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 policies or procedures.
66
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of eXp World Holdings, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of eXp World Holdings, Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in 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 of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 22, 2024, 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 effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual 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 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 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 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/ Deloitte & Touche LLP
San Francisco, California
February 22, 2024
67
Item 9B.
OTHER INFORMATION
Insider Trading Arrangements
During the three months ended December 31, 2023, no directors of officers (as defined in Rule 16a-1(f) of the Exchange Act adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408 of Regulation S-K.
Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We have adopted a written Code of Business Conduct and Ethics that applies to all directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, and senior financial officers. Our Code of Business Conduct and Ethics is available in the corporate governance subsection of the investor relations section of our website, www.expworldholdings.com and is available in print upon written request to the Corporate Secretary, eXp World Holdings, Inc., 2219 Rimland Drive, Suite 301, Bellingham, WA 98226. In the event that we make changes in, or provide waivers from, the provisions of the Code of Business Conduct and Ethics that the SEC requires us to disclose, we will disclose these events in the corporate governance section of our website. Information contained on our website is not incorporated by reference into this Annual Report.
The other information required by this Item will be included in the Company’s definitive proxy statement to be filed with the SEC within 120 days after December 31, 2023, in connection with the solicitation of proxies for the Company’s 2024 annual meeting of stockholders (the “2024 Proxy Statement”) and is incorporated herein by reference.
Item 11.
EXECUTIVE COMPENSATION
The information required by this Item will be included in the 2024 Proxy Statement and is incorporated herein by reference.
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 information as of December 31, 2023, regarding shares of our common stock that may be issued under the Company’s equity compensation plan, consisting of our 2015 Equity Incentive Plan:
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 (1)(2)
12,904,824
$ 6.84
7,855,460
Total
12,904,824
$ 6.84
7,855,460
(1) The 2015 Equity Incentive Plan provides for an automatic increase in the number of shares reserved for issuance thereunder on December 1 of each calendar year commencing on December 1, 2019, and ending on (and including) December 1, 2024, in an amount equal to the lesser of (a) three percent (3%) of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (b) the number of shares of common stock repurchased by the Company pursuant to any issuer repurchase plan then in effect; provided that the Board of Directors may act prior to December 1 of a given year to provide that there will be no share increase for such year or that the increase for such year will be a lesser number of shares than otherwise provided in clause (a) or (b).
(2) The weighted average exercise price includes restricted stock unit awards that can be exercised for no consideration. The weighted average exercise price excluding these restricted stock unit awards is $6.84.
68
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item will be included in the 2024 Proxy Statement and is incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item will be included in the 2024 Proxy Statement and is incorporated herein by reference.
69
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements. See Consolidated Financial Statements in Part II, Item 8.
(a)(2) Financial Statements Schedule. All other schedules have been omitted because they are inapplicable, not required or because the information is presented in the Consolidated Financial Statements or notes thereto.
(a)(3) Exhibits. The exhibits listed in the Exhibit Index immediately below are filed as part of this Annual Report or are incorporated herein by reference.
EXHIBITS
Incorporated by Reference
Exhibit Number
Exhibit Description
Form
Exhibit
Filing Date/Period End Date
3.1
Restated Certificate of Incorporation, effective February 21, 2023
10-K
3.1
2/28/2023
3.2
Restated Bylaws, effective January 13, 2022
10-K
3.2
2/28/2023
4.1*
Description of Securities
NA
NA
NA
10.1†
2015 Equity Incentive Plan of eXp World Holdings, Inc. (fka eXp Realty International Corporation)
14C
NA
4/2/2015
10.2†
First Amendment to 2015 Equity Incentive Plan of eXp World Holdings, Inc.
14C
NA
10/6/2017
10.3†
Second Amendment to 2015 Equity Incentive Plan of eXp World Holdings, Inc.
14C
NA
12/15/2019
10.4
eXp World Holdings, Inc. Stock Repurchase Program
8-K
NA
12/27/2018
10.5
First Amendment to eXp World Holdings, Inc Stock Repurchase Program
8-K
NA
11/27/2019
10.6
Second Amendment to eXp World Holdings, Inc. Stock Repurchase Program
10-K
10.8
3/11/2021
10.7
Third Amendment to eXp World Holdings, Inc. Stock Repurchase Program
8-K
NA
5/4/2022
10.8
Fourth Amendment to eXp World Holdings, Inc. Stock Repurchase Program
8-K
NA
5/22/2023
10.9
Issuer Repurchase Plan, dated January 10, 2022, by and between eXp World Holdings, Inc. and Stephens Inc. (“Stock Repurchase Plan”)
8-K
10.3
5/4/2022
10.10
First Amendment to eXp World Holdings, Inc. Stock Repurchase Plan
8-K
10.4
5/4/2022
10.11
Second Amendment to eXp World Holdings, Inc. Stock Repurchase Plan
8-K
10.5
9/29/2022
10.12
Third Amendment to eXp World Holdings, Inc. Stock Repurchase Plan
8-K
10.10
12/27/2022
10.13
Fourth Amendment to eXp World Holdings, Inc. Stock Repurchase Plan
8-K
10.1
5/12/2023
10.14
Fifth Amendment to eXp World Holdings, Inc. Stock Repurchase Plan
8-K
10.1
6/26/2023
10.15
Sixth Amendment to eXp World Holdings, Inc. Stock Repurchase Plan
8-K
10.1
11/17/2023
10.16
U.S. Form of Independent Contractor Agreement
NA
NA
NA
10.17
U.S. Form of Policies & Procedures
NA
NA
NA
10.18†
U.S. Form of 2015 Agent Equity Program Participation Election Form
NA
NA
NA
14.1*
Code of Business Conduct and Ethics
NA
NA
NA
21.1*
Subsidiaries of the Registrant
NA
NA
NA
23.1
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm***
NA
NA
NA
24.1*
Power of Attorney (included on signature page hereto)
NA
NA
NA
70
31.1*
Certification of the Chief Executive pursuant to Rule 13a ‑ 14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
NA
NA
NA
31.2*
Certification of the Chief Financial Officer pursuant to Rule 13a ‑ 14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
NA
NA
NA
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
NA
NA
NA
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
NA
NA
NA
97*
Policy Relating to Recovery of Erroneously Awarded Compensation
NA
NA
NA
101.INS*
Inline XBRL Instance Document
NA
NA
NA
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
NA
NA
NA
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
NA
NA
NA
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
NA
NA
NA
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
NA
NA
NA
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
NA
NA
NA
104*
Cover Page Interactive Data File (embedded within the inline XBRL document)
NA
NA
NA
*Filed herewith
**Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
† Management contract or compensatory plan or arrangement
Item 16.
Form 10-K Summary
None
71
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: February 22, 2024
/s/ Glenn Sanford
Glenn Sanford
Chief Executive Officer (Principal Executive Officer)
Date: February 22, 2024
/s/ Kent Cheng
Kent Cheng
Chief Accounting Officer (Principal Financial Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Glenn Sanford and Kent Cheng, severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
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
/s/ GLENN SANFORD
Chief Executive Officer and Chairman of the Board
February 22, 2024
Glenn Sanford
(Principal Executive Officer)
/s/ KENT CHENG
Chief Accounting Officer
February 22, 2024
Kent Cheng
(Principal Financial Officer)
/s/ JAMES BRAMBLE
Chief Legal Counsel and Corporate Secretary
February 22, 2024
James Bramble
/s/ RANDALL MILES
Director
February 22, 2024
Randall Miles
/s/ DAN CAHIR
Director
February 22, 2024
Dan Cahir
/s/ MONICA WEAKLEY
Director
February 22, 2024
Monica Weakley
/s/ PEGGIE PELOSI
Director
February 22, 2024
Peggie Pelosi
/s/ FRED REICHHELD
Director
February 22, 2024
Fred Reichheld
72