5. VARIABLE INTEREST ENTITIES

First Cloud Investment Group, LLC (“First Cloud”), a Nevada limited liability company, holds investment and profit interests in IntroLend First Cloud, LLC “IntroLend First Cloud”), a Delaware limited liability company that provides mortgage origination for end-consumers.

During the quarter ended December 31, 2019, the Company made capital contributions in consideration for an ownership interest in First Cloud with the remaining ownership interest held by certain of our independent agents and brokers. First Cloud was organized for the purpose of managing IntroLend First Cloud, a wholly-owned indirect subsidiary of the Company. The Company will always retain at least 50% of the outstanding equity ownership units in First Cloud. During the start-up phase, eXp holds a greater than 50% interest in First Cloud. As eXp agents continue to invest in First Cloud, agents’ interests will increase until the interest for both eXp and agents equal 50%.

First Cloud is considered a VIE.

A company is deemed to be the primary beneficiary of a VIE and must consolidate the entity if the company has both (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) 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. The Company has concluded that the Company is the primary beneficiary since the Company has the power to direct the activities of the entity and has an economic interest that will absorb the losses and/or receive benefits that could be significant to the VIE. Accordingly, the Company consolidates the assets and liabilities and operating results in the consolidated financial statements. The Company recognizes noncontrolling interest in the consolidated balance sheets. The income or loss allocations reflected on the consolidated statement of operations may create volatility in the reported results of operations, including net losses attributable to common stockholders.

The financial information of First Cloud, which is included in the Company’s consolidated balance sheet and the consolidated statement of operations for the period of ownership is presented below. As of December 31, 2019, the operations of First Cloud are not material to the Company’s financial position or results of operations.


	As of
	December 31, 2019
Assets
Cash	$	424,407
Prepaid expenses		368
Security deposits		1,600
Total assets	$	426,375

Liabilities & Equity
Membership interests payable	$	45,500
Accounts payable		14,735
Total liabilities	$	60,235

Equity	$
Members equity		474,500
Current year profit (loss)		(108,360)
Total equity	$	366,140

Total liabilities & equity	$	426,375

	Year Ended December 31, 2019

Revenues	$	21,600

Expenses		129,960

Net loss	$	(108,360)