3. ACQUISITIONS VirBELA On November 29, 2018, (the Acquisition Date), the Company and its newly formed subsidiary, eXp World Technologies, LLC (Purchaser) acquired substantially all the assets of VirBELA, LLC (VirBELA), 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 Companys current cloud campus called eXp World, which provides 24/7 access to collaborative tools, training and socialization for the Companys real estate agents and employees. The acquisition of VirBELAs 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 of VirBELA for a total purchase price of $10,607,800, consisting of cash of $7,000,000 and shares of the Companys common stock valued at $3,607,800. A cash payment of $6,500,000 was paid at closing and 97,371 shares of the Company restricted common stock having a value of $1,000,000 was issued at closing. On the acquisition date, the Company held $500,000 in accounts payable to secure the Sellers performance of certain post close obligations. During the three months ended March 31, 2019, the Seller performed its post close obligations and the $500,000 was paid to the Seller. The remaining shares of the Companys common stock will be issued having a value of $1,000,000 on each of the first, second and third anniversaries of the Acquisition 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. For the period ended March 31, 2019, the discount amortization was $62,516. The following table shows the allocation of the purchase price of VirBELA, LLC to the acquired identifiable assets, and goodwill: Accounts receivable $ 4,273 Inventory 968 Fixed assets 23,452 Intangible assets 2,331,000 Goodwill 8,248,107 Total purchase price $ 10,607,800 The 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 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 was primarily attributable to an assembled workforce and planned expansion of VirBELA into new markets. The 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 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). 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 managements estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. During the measurement period, we will adjust 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 condensed 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 condensed consolidated statements of operations in any period presented.