UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

[x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015

For the quarterly period ended March 31, 2016

 OR
  
[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from ________ to ________

Commission File Number 0-28536001-36589

 

WILHELMINA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

 

Delaware74-2781950
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

 

200 Crescent Court, Suite 1400, Dallas, Texas75201
(Address of principal executive offices)(Zip Code)

 

(214) 661-7488
(Registrant’s telephone number, including area code)
 
n/a
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  [x] Yes  [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [x] Yes  [  ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 Large accelerated filer  [  ]Accelerated filer [  ]
 Non-accelerated filer [  ]Smaller reporting company [x]
 (Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   [  ] Yes  [x] No

 

As of November 16, 2015May 13, 2016 the registrant had 5,789,5285,781,668 shares of common stock outstanding.

 

1
 

WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES

 

Quarterly Report on Form 10-Q

 

For the NineThree Months Ended September 30, 2015March 31, 2016

 

PART IFINANCIAL INFORMATION3
   
 Item 1.Financial Statements3
   
  Consolidated Balance Sheets – September 30, 2015 (unaudited)March 31, 2016 (Unaudited) and December 31, 201420153
   
  Unaudited Consolidated Statements of Operations and Other Comprehensive Income - for the Three and Nine Months Ended September 30,March 31, 2016 (Unaudited) and 2015 and 20144
   
  Unaudited Consolidated Statements of Cash Flows - for the NineThree Months Ended September 30,March 31, 2016 (Unaudited) and 2015 and 20145
   
  Notes to Unaudited Consolidated Financial Statements (Unaudited)6
   
 Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations11
   
 Item 3.Quantitative and Qualitative Disclosures About Market Risk1817
   
 Item 4.Controls and Procedures1817
   
PART IIOTHER INFORMATION1918
   
 Item 1.Legal Proceedings1918
   
 Item 1.A.Risk Factors2019
   
 Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2019
   
 Item 3.Defaults Upon Senior Securities2019
   
 Item 4.Mine Safety Disclosures2019
   
 Item 5.Other Information2019
   
 Item 6.Exhibits2019
   
SIGNATURES21

 

2
 

PART I

 

FINANCIAL INFORMATION

 

Item 1. Financial Statements

WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES

Consolidated Balance SheetsCONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

ASSETS    
  (Unaudited)
September 30,
 2015		 December 31, 
2014
Current assets:        
Cash and cash equivalents $2,102  $5,869 
Accounts receivable, net of allowance for doubtful accounts of $671 and $679  17,402   12,482 
Deferred tax asset  1,690   1,986 
Prepaid expenses and other current assets  351   252 
Total current assets  21,545   20,589 
         
Property and equipment, net of accumulated depreciation of $944 and $762, respectively  1,862   1,333 
         
Trademarks and trade names with indefinite lives  8,467   8,467 
Other intangibles with finite lives, net of accumulated amortization of  $8,400 and $8,222  333   115 
Goodwill  13,192   12,563 
Other assets  362   136 
         
Total assets $45,761  $43,203 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
         
Current liabilities:        
Accounts payable and accrued liabilities $3,753  $4,310 
Due to models  11,198   10,011 
Total current liabilities  14,951   14,321 
         
Long term liabilities        
Contingent consideration to seller (Note 3)  171   - 
Deferred tax liability  2,951   2,332 
Total long-term liabilities  3,122   2,332 
         
Total liabilities  18,073   16,653 
         
Shareholders’ equity:        
Preferred stock, $0.01 par value, 10,000,000 shares authorized; none outstanding  -   - 
Common stock, $0.01 par value, 12,500,000 shares authorized; 5,792,867 and 5,869,220 share issued and outstanding at September 30, 2015 and December 31, 2014  65   65 
Treasury stock, 679,171 and 602,818 shares, respectively, at cost  (2,090)  (1,643)
Additional paid-in capital  86,954   86,778 
Accumulated deficit  (57,237)  (58,650)
Accumulated other comprehensive income  (4)  - 
Total shareholders’ equity  27,688   26,550 
         
Total liabilities and shareholders’ equity $45,761  $43,203 

The accompanying notes are an integral part of these consolidated financial statements(Unaudited)

 

3
  March 31,
2016		 December 31,
2015
ASSETS        
Current assets:        
Cash and cash equivalents $2,878  $4,556 

Accounts receivable, net of allowance for doubtful accounts $1,041 and $1,041, respectively

  15,732   13,184 
Deferred tax asset  1,354   1,358 
Prepaid expenses and other current assets  417   191 
Total current assets  20,381   19,289 
         
Property and equipment, net of accumulated depreciation of $1,104 and $1,026, respectively  2,397   2,111 
         
Trademarks and trade names with indefinite lives  8,467   8,467 
Other intangibles with finite lives, net of accumulated amortization of$8,455 and $8,431 respectively  280   306 
Goodwill  13,192   13,192 
Other assets  299   405 
         
TOTAL ASSETS $45,016  $43,770 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable and accrued liabilities $3,842  $3,772 
Due to models  10,856   9,745 

Contingent consideration to seller

  

67

   - 
Total current liabilities  14,765   13,517 
         
Long term liabilities:        
Contingent consideration to seller  -   67 
Deferred income tax liability  2,579   2,407 
Total long-term liabilities  2,579   2,474 
         
Total liabilities  17,344   15,991 
         
Shareholders’ equity:        
Preferred stock, $0.01 par value, 10,000,000 shares authorized; none issued  -   - 
Common stock, $0.01 par value, 12,500,000 shares authorized; 6,472,038 shares issued at March 31, 2016 and December 31, 2015  65   65 
Treasury stock, 690,370 and 683,654 shares, respectively, at cost  (2,163)  (2,118)
Additional paid-in capital  87,064   86,987 
Accumulated deficit  (57,267)  (57,143)
Accumulated other comprehensive income  (27)  (12)
Total shareholders’ equity  27,672   27,779 
         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $45,016  $43,770 

WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Operations and Other Comprehensive Income

(In thousands, except per share amounts)

  Three Months Ended Nine Months Ended
  Sept 30,
2015		 Sept 30,
2014		 Sept 30,
2015		 Sept 30,
2014
Revenues                
Revenues $21,616  $19,853  $64,105  $57,517 
License fees and other income  216   100   445   300 
Total revenues  21,832   19,953   64,550   57,817 
                 
Model costs  15,402   14,185   45,947   41,148 
                 
Revenues net of model costs  6,430   5,768   18,603   16,669 
                 
Operating expenses                
Salaries and service costs  3,691   3,336   11,176   9,690 
Office and general expenses  1,181   1,188   3,480   3,366 
Amortization and depreciation  113   114   365   484 
Corporate overhead  167   305   709   958 
Total operating expenses  5,152   4,943   15,730   14,498 
Operating income  1,278   825   2,873   2,171 
                 
Other income (expense):                
Foreign exchange loss  (21)  (34)  (119)  (34)
Gain (loss) from an unconsolidated affiliate  (3)  (7)  (18)  (22)
Interest income  -   2   -   6 
Interest expense  -   -   -   (8)
   (24)  (39)  (137)  (58)
                 
Income before provision for income taxes  1,254   786   2,736   2,113 
                 
Provision for income taxes:                
Current  (135)  (181)  (486)  (372)
Deferred  (452)  (269)  (837)  (682)
   (587)  (450)  (1,323)  (1,054)
                 
Net income $667  $336  $1,413  $1,059 
                 
Other comprehensive income                
Foreign currency translation loss  (15)  -   (4)  - 
Total comprehensive income  652   336   1,409   1,059 
                 
Basic net income per common share $0.11  $0.06  $0.24  $0.18 
Diluted net income per common share $0.11  $0.06  $0.24  $0.18 
                 
Weighted average common shares outstanding-basic  5,843   5,870   5,856   5,870 
Weighted average common shares outstanding-diluted  5,946   5,968   5,958   5,968 

 

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

 

43
 

WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash FlowsSTATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands)thousands, except per share data)

(Unaudited)

 

  Nine Months Ended
September 30,
  2015 2014
     
Cash flows from operating activities:        
Net income $1,413  $1,059 
Adjustments to reconcile net income to net cash provided by operating activities:        
Amortization and depreciation  364   484 
Share based payment expense  176   155 
Deferred taxes  838   680 
Changes in operating assets and liabilities:        
Accounts Receivable  (4,565)  (1,938)
Prepaid expenses and other current assets  (315)  40 
Due to models  676   747 
Accounts payable and accrued liabilities  (925)  984 
Net cash provided by (used in) operating activities  (2,338)  2,211 
         
Cash flows from investing activities:        
Cash paid for business acquisition, net of cash acquired (Note 3)  (282)  - 
Purchase of property and equipment  (696)  (389)
Net cash used in investing activities  (978)  (389)
         
Cash flows from financing activities:        
Repayment of Amegy line of credit  -   (800)
Purchase of treasury stock  (447)  - 
Net cash used in financing activities  (447)  (800)
         
Foreign currency effect on cash flows  (4)  - 
         
Net increase (decrease) in cash and cash equivalents  (3,767)  1,022 
Cash and cash equivalents, beginning of period  5,869   2,776 
Cash and cash equivalents, end of period $2,102  $3,798 
         
Non-cash investing and financing activities:        
Issuance of contingent consideration to seller $171  $- 
         
         
Supplemental disclosures of cash flow information        
Cash paid for interest $-  $8 
Cash paid for income taxes $235  $300 
  Three Months Ended
March 31,
  2016 2015
Revenues:        
Service revenues $21,390  $20,951 
License fees and other income  27   97 
Total revenues  21,417   21,048 
         
Model costs  15,109   14,902 
         
Revenues net of model costs  6,308   6,146 
         
Operating expenses:        
Salaries and service costs  4,189   3,727 
Office and general expenses  1,624   1,174 
Amortization and depreciation  104   127 
Corporate overhead  293   280 
Total operating expenses  6,210   5,308 
Operating income  98   838 
         
Other income (expense):        
Foreign exchange gain (loss)  4   (77)
Loss from unconsolidated affiliate  (37)  (24)
Total other income (expense)  (33)  (101)
         
Income before provision for income taxes  65   737 
         
Provision for income taxes: (expense) benefit        
Current  (13)  (206)
Deferred  (176)  (158)
Income tax expense  (189)  (364)
         
Net income (loss) $(124) $373 
         
Other comprehensive gain (loss), net of tax:        
Foreign currency translation income (expense)  (15)  2 
Total comprehensive income (loss) $(139) $375 
         
Basic income (loss) per common share $(0.02) $0.06 
Diluted income (loss) per common share $(0.02) $0.06 
         
Weighted average common shares outstanding-basic  5,844   5,863 
Weighted average common shares outstanding-diluted  5,844   5,959 

 

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

54
 

WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATE STATEMENTS OF CASH FLOW

Notes to the Unaudited Consolidated Financial StatementsS

(in thousands except share data)In thousands)

(Unaudited)

 

  Three Months Ended
March 31,
  2016 2015
Cash flows from operating activities:        
Net income (loss) $(124) $373 
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Amortization and depreciation  104   127 
Share based payment expense  77   55 
Deferred income taxes  176   158 
Changes in operating assets and liabilities:        
Accounts receivable  (2,548)  (2,696)
Prepaid expenses and other current assets  (226)  76 
Other assets  106   (31)
Due to models  1,111   697 
Accounts payable and accrued liabilities  70   (413)
Net cash used in operating activities  (1,254)  (1,654)
         
Cash flows from investing activities:        
Cash paid for business acquisition, net of cash acquired (Note 3)  -   (282)
Purchase of property and equipment  (364)  (158)
Net cash used in investing activities  (364)  (440)
         
Cash flows from financing activities:        
Purchase of treasury stock  (45)  (72)
Net cash used in financing activities  (45)  (72)
         
Foreign currency effect on cash flows  (15)  2 
         
Net change in cash and cash equivalents:  (1,678)  (2,164)
Cash and cash equivalents, beginning of period  4,556   5,869 
Cash and cash equivalents, end of period $2,878  $3,705 
         
Non-cash investing and financing activities:        
Issuance of contingent consideration to seller $-  $171 
         
Supplemental disclosures of cash flow information:        
Cash paid for interest $-  $- 
Cash paid for income taxes $-  $- 

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

5

WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Note 1.   Basis of Presentation

 

The interim consolidated financial statements included herein have been prepared by Wilhelmina International, Inc. (“Wilhelmina”(together with its subsidiaries "Wilhelmina" or the “Company”"Company") and subsidiaries without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Although certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, all adjustments considered necessary in order to make the consolidated financial statements not misleading have been included. In the opinion of the Company’s management, the accompanying interim unaudited consolidated financial statements reflect all adjustments, of a normal recurring nature, that are necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for such periods.  It is recommended that thesethe periods presented. Except as otherwise noted, all dollar amounts other than per share date are presented in thousands. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014,2015, as amended. Results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.

 

Note 2.   Business Activity

Overview

 

The primary business of Wilhelmina is fashion model management, which ismanagement. These business operations are headquartered in New York City. The Company’s predecessor was founded in 1967 by Wilhelmina Cooper, a renowned fashion model, and isbecame one of the oldest, best known and largest fashion model management companies in the world. Since its founding, Wilhelmina has grown to include operations located in Los Angeles, Miami, London and London,Chile, as well as a growing network of licensees comprising leading modeling agencies in various local markets acrossin the U.S. as well as in Thailand, Dubai, Vancouver and Tokyo.several international markets. Wilhelmina provides traditional, full-service fashion model and talent management services, specializing in the representation and management of models, entertainers, artists, athletes and other talentstalent, to various customers and clients, including retailers, designers, advertising agencies, print and electronic media and catalog companies.

 

 

6
 

Note 3.   Business Acquisition

 

InOn January 5, 2015, the Company purchased 100% of the outstanding shares of Union Models Management Ltd. in London and renamed it Wilhelmina London Limited (“London”). The strategic acquisition of London establishes a footprint for the Company and the brand in Western Europe. It will also serveserves as a base of operations to service the Company’s European clients and as a new talent development office for European models and artists.

 

The purchase price includes theof $1,321 included $171 of discounted value of contingent consideration assuming London achieves certain performance benchmarks during the post-closing period. These amounts are due to the former seller in the post-closing period subject to achieving these performance benchmarks. The purchase price net of cash acquired was $453, of which $282 was paid at the time of the closing. The Company reduced the contingent consideration to $67 because London did not achieve the initial benchmark at December 31, 2015. The remaining contingent consideration payable is due on February 4, 2017, if London achieves its performance benchmark for the year ending December 31, 2016.

 

Under the purchase method of accounting, the purchase price has beenwas allocated to the net tangible and intangible assets acquired and liabilities assumed, based on the preliminary fair value of the assets and liabilities of London in accordance with ASC 805.

The intangible assets acquired includeincluded intangible assets with finite lives, such as customer relationships and talent relationships, and the remainder of any intangible assets not meeting the above criteria has been allocated to goodwill. The goodwill is non-amortizable. Other assets such as customer relationships and talent relationshipswhich are being amortized on a straight line basis over their estimated useful lives with rangeranging from 2two to 8eight years.

The remaining acquired intangible assets were allocated to non-amortizable goodwill. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of completion of the London transaction:transaction.

 

(in thousands)  
Fair value of operating assets acquired:      
Cash $868  $868 
Accounts receivable  355   355 
Other current assets  10   10 
Equipment  15   15 
Total operating assets acquired  1,248   1,248 
Fair value of intangible assets acquired:        
Other intangible assets with finite lives  400   400 
Goodwill  629   629 
Total intangible assets acquired  1,029   1,029 
Total assets acquired  2,277   2,277 
Fair value of liabilities assumed:        
Accounts payable and accrued liabilities  360   360 
Due to models  511   511 
Indemnification seller basket  8   8 
Deferred income tax liability  77   77 
Total liabilities assumed  956   956 
Total net assets acquired $1,321  $1,321 

 

The results of operations for London are included in the Company’s consolidated results from the effective date of the acquisition.

 

Note 4.   Foreign Currency Translation

 

The functional currency of the wholly owned subsidiary, London is the British Pound, Sterling. Its assetsand business is conducted in Chile using the Chilean Peso. Assets and liabilities are translated into U.S. dollars at the exchange rates in effect at each balance sheet date, revenues and expenses are translated at average monthly exchange rates and resulting translation gains or losses are accumulated in other comprehensive income as a separate component of shareholders’ equity.

 

7
 

Note 5.   Line of Credit

 

On July 31, 2014,November 10, 2015, the Company executed and closed the third amendmentFourth Amendment to Credit Agreement (the “Third“Fourth Credit Agreement Amendment”) to its revolving facility with Amegy National Bank National Association (“Amegy”). effective October 24, 2015. The Fourth Credit Agreement Amendment includes a $7.0 million facility under which there is an extension of the $4.0 million revolving line of credit along with a $3.0 million term loan.

Under the terms of the ThirdFourth Credit Agreement, Amendment are essentially the same as those set forth intotal availability of $7.0 million is subject to a borrowing base derived from 80% of eligible accounts receivable (as defined) and the Second Credit Agreement Amendment, including a maturity dateCompany’s minimum net worth covenant of $20.0 million. The revolving line of credit is due on October 24, 2015,2016 with the exceptioninterest paid monthly at prime plus 0.50%. The term loan, which is currently undrawn, would be payable in 60 monthly payments, interest only at 4.25% until November 2016 followed by 47 equal monthly payments of principal and interest computed based on a 60-month amortization schedule and a final payment of principal and interest due on October 24, 2019. The revolving facility contains the ability to issue up to $300$0.5 million of standby letters of credit. Outstanding letters of credit reduce the Company’s availability under the facility.

 

Under the terms of the Third Credit Agreement Amendment, (1) total availability under the revolving credit facility is $5,000 (2) the borrowing base is derived from 75% of eligible accounts receivable (as defined) and (3) the Company’s minimum net worth covenant is $22,000.

In addition, the facility was renewed, see Note 11 Subsequent Event. The Company’s obligation to repay advances under the amended facility is evidenced by a second amended and restated promissory note (the “Second Amended and Restated Promissory Note”).  Under the terms of the Second Amended and Restated Promissory Note, the interest rate on borrowings is prime rate plus 1%.

As of September 30, 2015,March 31, 2016, the Company had no outstanding borrowings under the revolving credit facility.facility or the term loan.

 

Note 6.   Commitments and Contingencies

 

In July 2015, an action was commenced in New York State Supreme Court (New York County) against Wilhelmina Models, Inc. by a model previously under contract to Wilhelmina, Kimberly Forbes, claiming  that Wilhelmina had authorized the re-use of certain of her photos, allegedly without her authorization, without paying her; asserting that the IRS had asserted claims against her arising out of an IRS Form 1099 issued by Wilhelmina with respect to payments she had not received; and seeking  an unspecified amount in compensatory damages and $1,000 in exemplary damages.   When the model informally brought the matter to its attention prior to commencing litigation, Wilhelmina acknowledged owing her compensation she had not received because of her change of address, and offered to pay her in full and reimburse her for related costs (although the exact amount has not been calculated, it is not a material amount).  Despite that fact, this action was thereafter commenced.  The parties have agreed to a settlement in principle with Forbes, subject to execution of settlement documents, by Wilhelmina’s payment of $15 to Forbes.

On October 24, 2013, a purported class action lawsuit was brought against the Company by former Wilhelmina model Alex Shanklin and others (the “Shanklin Litigation”), naming the Company’s subsidiaries Wilhelmina International, Ltd. and Wilhelmina Models, Inc. (the “Wilhelmina Subsidiary Parties”), was initiated in New York State Supreme Court (New York County) by the same lead counsel who represented plaintiffs in thea prior, now-dismissed action brought by Louisa Raske (the “Raske Litigation”). The claims in the Shanklin Litigation initially included breach of contract and unjust enrichment and are alleged to ariseallegations arising out of matters relatingsimilar to those involved in the Raske Litigation, such as the handling and reporting of funds on behalf of models and the use of model images. Other parties named as defendants in the Shanklin Litigation include other model management companies, advertising firms, and certain advertisers. On January 6, 2014, the Wilhelmina Subsidiary PartiesCompany moved to dismiss the Amended Complaint in the Shanklin Litigation for failure to state a claim upon which relief can be granted and other grounds, and other defendants also filed motions to dismiss. On August 11, 2014, the court denied the motion to dismiss as to Wilhelmina and other of the model management defendants. Further, on March 3, 2014, the judge assigned to the Shanklin Litigation wrote the Office of the New York Attorney General bringing the case to its attention, generally describing the claims asserted therein against the model management defendants, and stating that the case “may involve matters in the public interest.” The judge’s letter also enclosed a copy of his decision in the Raske Litigation, which dismissed that case. Plaintiffs have retained substitute counsel, who has filed a Second Amended Complaint. Plaintiffs’ Second Amended Complaint asserts causes of action for alleged breaches of the plaintiffs' management contracts with the defendants, conversion, breach of the duty of good faith and fair dealing, and unjust enrichment. The Second Amended Complaint also alleges that the plaintiff models were at all relevant times employees, and not independent contractors, of Wilhelmina and the other model management defendants, and that defendants violated the New York Labor Law in several respects, including, among other things, by allegedly failing to pay the models the minimum wages and overtime pay required thereunder, not maintaining accurate payroll records, and not providing plaintiffs with full explanations of how their wages and deductions therefrom were computed. The Second Amended Complaint seeks certification of the action as a class action, damages in an amount to be determined at trial, plus interest, costs, attorneys’ fees, and such other relief as the court deems proper. On October 6, 2015, the CompanyWilhelmina filed a motion to dismiss as to most of the claims in the Second Amended Complaint. The motion to dismiss will behas been fully briefed, by December 2015.and the Court has scheduled a hearing on the motion to dismiss for May  2016. The Company believes the claims asserted in the Second Amended Complaint are without merit, and intends to continue to vigorously defend itself.the action.

 

8

TheOn August 20, 2015, a lawsuit previously commenced by Sean Patterson, the former president of Wilhelmina International, Ltd.,was brought against the Company and the Company’s former Chief Accounting Officer by a former employee of Wilhelmina International, Ltd.,model, Angel Betancourt (the “Plaintiff”). The lawsuit alleges that the Plaintiff was discriminated against during his time of employment and Mark Schwarz, previously reported,upon his termination. The lawsuit further alleges that the Plaintiff was settled pursuantnot compensated fully due to anFLSA misclassification by the Company. The Company has provided documentation to the Plaintiff’s counsel that suggests that the Plaintiff unlikely was due additional compensation during the time of employment. The proceeding is in the preliminary stages, and by agreement dated aswith the Plaintiff further action in the lawsuit has been abated pending ongoing settlement discussions. The Company expects that the lawsuit will be resolved within the limits of August 21, 2015, which includes a confidentiality provision regarding its terms.the Company¹s insurance coverage.

 

In addition to the legal proceedings disclosed herein, the Company is also engaged in various legal proceedings that are routine in nature and incidental to its business. None of these routine proceedings, either individually or in the aggregate, are believed, in the Company's opinion, to have a material adverse effect on its consolidated financial position or its results of operations.

 

As of September 30, 2015, a number ofDuring the Company’s employees were covered by employmentfirst quarter, in relation to two termination agreements that vary in length from one to three years. As of September 30, 2015, total compensation payable under the remaining contractual term of these agreements was approximately $4,037. In addition, the employment agreements contain non-compete provisions ranging from six months to one year following the term of the applicable agreement. Therefore, subject to certain exceptions, as of September 30, 2015, invoking the non-compete provisions would requirewith former employee, the Company to compensate additional amounts to the covered employees during the non-compete periodrecorded $283 of severance expense. $126 of this severance was paid in the amountfirst quarter of approximately $3,184. During2016. The remaining $157 will be paid in the three and nine months ended September 30, 2015, the Company paid $0 and $16 compensation cost in connection with certain non-compete and contractual arrangementssecond quarter of former employees, respectively. There were no such payments during 2014.

2016.

 

8

Note 7.   Share Capital

 

The Company has a shareholder’s rights plan (the “Rights Plan”). The Rights Plan provides for a dividend distribution of one preferred share purchase right (a “Right”) for each outstanding share of the Company's Common Stock, $.01 par value (the "Common Stock").Stock.  The terms of the Rights and the Rights Plan are set forth in a Rights Agreement, dated as of July 10, 2006, as amended, by and between the Company and The Bank of New York Trust Company, N.A., now known as The Bank of New York Mellon Trust Company, N.A., as Rights Agent (the “Rights Agreement”).

 

The Company’s Board of Directors adopted the Rights Plan to protect shareholder value by protecting the Company’s ability to realize the benefits of its net operating loss carryforwards (“NOLs”). In general terms, the Rights Plan imposes a significant penalty upon any person or group that acquires 5% or more of the outstanding Common Stock without the prior approval of the Company’s Board of Directors. Shareholders that own 5% or more of the outstanding Common Stock as of the close of business on the Record Date (as defined in the Rights Agreement) may acquire up to an additional 1% of the outstanding Common Stock without penalty so long as they maintain their ownership above the 5% level (such increase subject to downward adjustment by the Company’s Board of Directors if it determines that such increase will endanger the availability of the Company’s NOLs). In addition, the Company’s Board of Directors has exempted Newcastle Partners, L.P. (“Newcastle”), the Company’s largest shareholder, from the penalties of the Rights Plan and may exempt any person or group that owns 5% or more if the Board of Directors determines that the person’s or group’s ownership will not endanger the availability of the Company’s NOLs. AAbsent an exemption, a person or group that acquires a percentage of Common Stock in excess of the applicable threshold is called an “Acquiring Person”. Any Rights held by an Acquiring Person are void and may not be exercised. The Company’s Board of Directors authorized the issuance of one Right per each share of Common Stock outstanding on the Record Date. If the Rights become exercisable, each Right would allow its holder to purchase from the Company one one-hundredth of a share of the Company’s Series A Junior Participating Preferred Stock, par value $0.01 (the “Preferred Stock”), for a purchase price of $10.00. Each fractional share of Preferred Stock would give the shareholder approximately the same dividend, voting and liquidation rights as does one share of Common Stock. Prior to exercise, however, a Right does not give its holder any dividend, voting or liquidation rights.

One for Twenty Reverse Stock Split

The Company's Board of Directors approved the implementation of the Reverse Stock Split and the applicable ratio of one-for-twenty on July 7, 2014. On July 11, 2014, the Company filed a certificate of amendment to the Company's restated certificate of incorporation (the “Certificate of Amendment”) which affected the Reverse Stock Split. The Company's stockholders previously approved the granting of authority to the Company’s Board of Directors to affect a reverse stock split at a ratio between one-for-ten and one-for-forty at the Company’s annual meeting of stockholders held on September 26, 2013. The Certificate of Amendment provided that, effective as of 5:00 pm (Eastern Time) on July 11, 2014, every twenty outstanding shares of Common Stock were combined automatically into one share of Common Stock. Fractional shares resulting from the Reverse Stock Split were cancelled and stockholders otherwise entitled to a fractional share received a cash payment in lieu of the fractional share based on the average of the last reported sales price of the Common Stock as quoted on the OTCBB for the five business days prior to the effectiveness of the Reverse Stock Split (which average price was $.30). The Certificate of Amendment also proportionally reduced the Company’s authorized shares of Common Stock from 250,000,000 shares to 12,500,000 shares. The rights and privileges of the holders of the Common Stock are unaffected by the Reverse Stock Split.

Trading of the Common Stock on a split-adjusted basis began at the opening of trading on July 14, 2014. In September 2014, the Company began trading on the NASDAQ under the ticker symbol WHLM.

 

9

Note 8.   Income Taxes

 

Generally, the Company’s combined effective tax rate is high relative to reported net income as a result of certain amounts of amortization expense and corporate overhead not being deductible or attributable to states in which it operates. Currently, the majority of taxes being paid by the Company are state taxes, not federal taxes. The Company operates in three states which have relatively high tax rates: California, New York and Florida. The Company’s combined (federal and state) effective tax rate would be even higher if it were not for federal net operating loss carryforwards available to offset current federal taxable income. As of December 31, 2014,2015, the Company had federal income tax loss carryforwards of approximately $1,200,$1.2 million, which begin expiring in 2019. A portion ofare expected to be fully utilized upon filing the Company’s federal net operating loss carryforwards were utilized to offset federal taxable2015 income generatedtax return during the three and nine months ended September 30, 2015. Realization of the Company’s carryforwards is dependent on future taxable income.2016. As defined in the Internal Revenue Code, ownership changes may limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income. The Company also operates and pays taxes in international jurisdictions.

 

Note 9.   Treasury Stock

 

During the year ended December 31, 2012, the Board of Directors authorized a stock repurchase program whereby the Company could repurchase up to 500,000 shares of its outstanding Common Stock. During August 2013, the Board of Directors renewed and extended the Company’s share repurchase authority to enable it to repurchase up to an additional 500,000aggregate of 1,000,000 shares of Common Stock.

The shares may be repurchased from time-to-timetime to time in the open market or through privately negotiated transactions at prices the Company deems appropriate. The program does not obligate the Company to acquire any particular amount of Common Stock and the program may be modified or suspended at any time at the Company’s discretion. The stock repurchase plan will be funded through the Company’s cash on hand and the Second Credit Agreement Amendment.

 

From 2012 through September 20, 2015,March 31, 2016, the Company has repurchased 679,271690,370 shares of Common Stock at an average price of approximately $3.08$3.14 per share, for a total of approximately $2,090$2,163 under the foregoing stock repurchase program. During the nine monthsquarter ended September 30, 2015, 76,353March 31, 2016, 6,716 shares were repurchased at an average price of $5.83$6.75 per share.

9

 

Note 10.  Related Parties

 

AsThe Executive Chairman of September 30, 2015,the Company, Mark E. Schwarz, is also the Chairman, Chief Executive Officerchairman, chief executive officer and Portfolio Managerportfolio manager of Newcastle Capital Management, L.P. (“NCM”) held the Chairman of the Board and Executive Chairman positions with the Company., NCM is the General Partnergeneral partner of Newcastle, which owns 2,430,726 sharesis the largest shareholder of Common Stock.the Company. Clinton Coleman (Managing Director at NCM) and James Dvorak (Managing Director at NCM) also serve as directors of the Company.

 

The Company’s corporate headquarters are located at 200 Crescent Court, Suite 1400, Dallas, Texas 75201, which are also the offices of NCM. The Company occupies a portion of NCM space on a month-to-month basis at $2.5 per month, pursuant to a services agreement entered into between the parties. Pursuant to the services agreement, the Company receives the use of NCM’s facilities and equipment and accounting, legal and administrative services from employees of NCM. The Company incurred expenses pursuant to the services agreement totaling approximately $7.5 and $22.5 for the threequarters ended March 31, 2016 and nine months ended September 30, 2015 and 2014.2015. The Company oweddid not owe NCM $7.5 as of September 30, 2015 and $0 as of September 30, 2014,any amounts under the services agreement.agreement as of March 31, 2016 or 2015.

 

The Company has an agreement with anthe unconsolidated Wilhelmina Kids affiliate to provide management and administrative services, as well as sharing of space. Management fee and rental income from the unconsolidated affiliate amounted to approximately $27.5 and $82.5 for the three nine monthsquarters ended September 30, 2015March 31, 2016 and 2014.

2015.

 

Note 11. Subsequent Event

 

On November 10, 2015, the Company executed and closed the Fourth Amendment to Credit Agreement (the “Fourth Credit Agreement Amendment”) with Amegy National Bank National Association (“Amegy”) effective October 24, 2015. The Fourth Credit Agreement Amendment includes a $7,000 facility under which there is an extension of the revolving line of credit along with a term loan.

Under the terms of the Fourth Credit Agreement, the total availability is $7,000 subject to a borrowing base derived from 80% of eligible accounts receivable (as defined) and the Company’s minimum net worth covenant of $20,000 in the form of: (1) revolving credit facility of $4,000 (2) term loan of $3,000. The revolving line of credit is due on October 24, 2016 with interest paid monthly at prime plus 0.50%. The term loan is payable in 60 monthly installments as follows: interest only at 4.25% for the 12 months; followed by 47 equal monthly payments of principal and interest computed based on a 60 month amortization schedule; and a final payment of principal and interest due on October 24, 2019. The Company’s obligation to repay the loans is evidenced by promissory notes. The revolving facility contains the ability to issue up to $500 of standby letters of credit. Outstanding letters of credit reduce the Company’s availability under the facility.

10
 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following is a discussion of the interim unaudited consolidated financial condition and results of operations for the Company and its subsidiaries for the threequarter ended March 31, 2016 and nine months ended September 30, 2015 and 2014.2015. It should be read in conjunction with the financial statements of the Company, the notes thereto and other financial information included elsewhere in this report, and the Company’s Annual Report on Form 10-K for the year ended December 31, 2014,2015, as amended.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains certain “forward-looking” statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and informationsuch forward looking statement relating to the Company and its subsidiaries that are based on the beliefs of the Company’s management as well as information currently available to the Company’s management.  When used in this report, the words “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements.  Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitation, competitive factors, general economic conditions, the interest rate environment, governmental regulation and supervision, seasonality, changes in industry practices, one-time events and other factors described herein and in other filings made by the Company with the SEC.  Based upon changing conditions, shouldShould any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended.  The Company does not undertake any obligation to publicly update these forward-looking statements.  As a result, you should not place undue reliance on these forward-looking statements.

 

OVERVIEW

 

The Company’s primary business is fashion model management which is headquartered in New York City. The Company’s predecessor was founded in 1967 by Wilhelmina Cooper, a renowned fashion model, and is one of the oldest, best known and largest fashion model management companies in the world. Since its founding, it has grown to include operations located in Los Angeles, Miami and London, as well as a growing network of licensees comprising leading modeling agencies in various local markets across the U.S., as well as in Thailand, Dubai, Vancouver and Tokyo. The Company provides traditional, full-service fashion model and talent management services, specializing in the representation and management of models, entertainers, artists, athletes and other talent to various customers and clients, including retailers, designers, advertising agencies and catalog companies.

complementary business activities. The business of talent management firms, such as Wilhelmina, depends heavily on the state of the advertising industry, as demand for talent is driven by Internet, print and TVtelevision advertising campaigns for consumer goods and retail clients.

Wilhelmina believes it has strong brand recognition which enables it to attract and retain top agents and talent to service a broad universe of clients. In order to take advantage of these opportunities and support its continued growth, the Company will need to continue to successfully allocate resources and staffing in a way that enhances its ability to respond to these new opportunities. The Company continues to focus on cuttingtightly managing costs, recruiting top agents when available, and scouting and developing new talent.

 

Although Wilhelmina has a large and diverse client base, it is not immune to global economic conditions. WilhelminaThe Company closely monitors economic conditions, client spending, and other industry factors and continually looks for waysevaluates opportunities to reduce costs, manage working capitalincrease its market share and conserve cash.further expand its geographic reach.  There can be no assurance as to the effects on Wilhelmina of future economic circumstances, client spending patterns, client credit worthiness and other developments and whether, or to what extent, Wilhelmina’s efforts to respond to them will be effective.

 

Trends and Opportunities

 

The Company expects that the combination of Wilhelmina’s main operating base in New York City, the industry’s capital, with the depth and breadth of its talent pool and client roster and its diversification across various talent management segments, together with its geographical reach should make Wilhelmina’s operations more resilient to industry changes and economic swings than those of many of the smaller firms operating in the industry.  Similarly, in the segments where the Company competes with other leading full service agencies, Wilhelmina competed successfully during the thirdfirst quarter of 2015.2016.  

 

With 2015 total annual advertising expenditures on major media (newspapers, magazines, television, cinema, outdoor and Internet) expecting to exceedexceeding approximately $189$175 billion in recent years, North America is by far the world’s largest advertising market.  For the fashion talent management industry, including Wilhelmina, advertising expenditures on magazines, television, Internet and outdoor are of particular relevance.

 

11

Strategy

 

Management’s strategy is to increase value to shareholders through the following initiatives:

 

Develop Wilhelmina into a global brand;increase Wilhelmina’s brand awareness and consideration among advertisers and potential talent;
Expandexpand the Wilhelmina’s network through strategic geographic market development;
expand the women’s high end fashion board;
Expandexpand celebrity endorsements;representation;
Strategic acquisitions;
Licenseexpand the “Wilhelmina” name to leading model managementnetwork of licensee agencies;
License the “Wilhelmina” brand in connection with consumer products, cosmetics and other beauty products; and
Promotepromote model search contests, and events and partnering on media projects (television, film, books, etc.).

 

11

Due to the increasing ubiquity of the Internet as a standard business tool, the Company has increasingly sought to harness the opportunities of the Internet and other digital media to improve its communications with clients and to facilitate the effective exchange of fashion model and talent information.  The Company continues to make significant investments in technology (including developing in-house art and social media departments) in pursuit of gains in efficiency and better communications with customers.clients.  At the same time, the Internet presents challenges for the Company, including (i) the cannibalization of traditional print advertising businessmedia businesses, and (ii) pricing pressures with respect to digital media photo shoots and client engagements.

 

In January 2015, the Company purchased 100% of the outstanding shares of Union Models Management Ltd. in London and renamed it Wilhelmina London Limited (“London”). The strategic acquisition of London establishes a footprint for the Company and the brand in Western Europe. It will also serve as a base of operations to service the Company’s European clients, and as a new talent development office for European models and artists.

 

Key Financial Indicators

The key financial indicators that the Company reviews to monitor theits business are gross billings, revenues, model costs, operating expenses and cash flows.

 

The Company analyzes revenue by reviewing the mix of revenues generated by the different “boards” (each a specific division of the fashion model management operations which specializes by the type of model it represents (Women, Men, Select, Media, Runway, Curve, Lifestyle, Kids, etc.)) of the business, revenues by geographic locations and revenues from significant clients. Wilhelmina has three primary sources of revenue: (i) revenues from principal relationships wherebywhere the gross amount billed to the client is recorded as revenue when the revenues are earned and collectability is reasonably assured; (ii) revenues from agent relationships whereby thewhere commissions paid by models as a percentage of their gross earnings are recorded as revenue when earned and collectability is reasonably assured; and (iii) separate service charges, paid by clients in addition to the booking fees, which are calculated as a percentage of the models’ booking fees and are recorded as revenues when earned and collectability is reasonably assured. See Critical“Critical Accounting Policies - Revenue Recognition isRecognition.”  Gross billings are an important business metric that ultimately drive revenues, profits and cash flows.

 

Because Wilhelmina provides professional services,services. Therefore, salary and service costs represent the largest part of the Company’s operating expenses.  Salary and service costs are comprised of payroll and related costs and T&E (travel,travel, meals and entertainment)entertainment (“T&E”) to deliver the Company’s services and to enable new business development activities.

 

12
 

Analysis of Consolidated Statements of Operations and Gross Billings

 

(in thousands) Three Months Ended Nine Months Ended  
  Sept 30 Sept 30 % Change Sept 30 Sept 30 % Change
  2015 2014 2015 vs 2014 2015 2014 2015 vs 2014
             
Revenues  21,616   19,853   8.9%  64,105   57,517   11.5%
License fees and other income  216   100   116.0%  445   300   48.3%
TOTAL REVENUES  21,832   19,953   9.4%  64,550   57,817   11.6%
Model costs  15,402   14,185   8.6%  45,947   41,148   11.7%
REVENUES NET OF MODEL COSTS  6,430   5,768   11.5%  18,603   16,669   11.6%
GROSS PROFIT MARGIN  29.5%  28.9%      28.8%  28.8%    
Salaries and service costs  3,691   3,336   10.6%  11,176   9,690   15.3%
Office and general expenses  1,182   1,188   (0.6%)  3,480   3,366   3.4%
Amortization and depreciation  112   114   (0.9%)  365   484   (24.6%)
Corporate overhead  174   305   (45.2%)  709   958   (26.0%)
OPERATING INCOME  1,271   825   54.1%  2,873   2,171   32.3%
OPERATING MARGIN  5.8%  4.1%      4.5%  3.8%    
Foreign exchange loss  (21)  (34)  (38.2%)  (119)  (34)  250.0%
Interest income  -   2   (100.0%)  -   6   (100.0%)
Interest expense  -   -       -   (8)  (100.0%)
Equity Earnings (loss) in affiliate  (3)  (7)  (57.1%)  (18)  (22)  (18.2%)
INCOME BEFORE INCOME TAXES  1,247   786   58.7%  2,736   2,113   29.5%
Income taxes expense  (135)  (181)  (25.4%)  (486)  (372)  30.6%
Deferred tax benefits  (452)  (269)  68.0%  (837)  (682)  22.7%
Effective tax rate  (47.1%)  (57.3%)      (48.4%)  (49.9%)    
NET INCOME  660   336   96.4%  1,413   1,059   33.4%

(in thousands)

  Three Months Ended
  March 31 March 31 Percent Change
  2016 2015 2016 vs 2015
Service revenues  21,390   20,951   2.1%
License fees and other income  27   97   (72.2%)
TOTAL REVENUES  21,417   21,048   1.8%
Model costs  15,109   14,902   1.4%
REVENUES NET OF MODEL COSTS  6,308   6,146   2.6%
GROSS PROFIT MARGIN  29.5%  29.2%    
Salaries and service costs  4,189   3,727   12.4%
Office and general expenses  1,624   1,174   38.3%
Amortization and depreciation  104   127   (18.1%)
Corporate overhead  293   280   4.6%
OPERATING INCOME  98   838   (88.3%)
OPERATING MARGIN  0.5%  4.0%    
Foreign exchange gain (loss)  4   (77)    
Loss from unconsolidated subsidiary  (37)  (24)  54.2%
INCOME BEFORE INCOME TAXES  65   737   (91.2%)
Income taxes expense  (189)  (364)    
Effective tax rate  290.8%  49.4%    
NET INCOME  (124)  373   (133.2%)

 

Service Revenues

 

Generally, the Company’s service revenues fluctuate in response to its clients’ willingness to spend on advertising and the Company’s ability to have the desired talent available.

The 2.1% increase in total service revenues for the three and nine months ended September 30, 2015consisted of 8.9% and 11.5% when compared to the three and nine months ended September 30, 2014 were driven by an expanded developed talent pool and our customers’ increased interest in booking the Company's talent. The Company’s expanded talent pool continues to be driven by an emphasis on scouting and relationships with mother agencies around the world.

Allrecurring core model bookings. Some boards of the core modeling business experienced positive growth during the three months and nine monthsquarter ended September 30, 2015March 31, 2016 when compared to the corresponding period of the prior year.quarter ended March 31, 2015. The increase was driven primarily by growth from London.

 

License Fees and Other Income

License fees and other income include management and administrative services from an unconsolidated affiliate and franchise revenues from independently owned model agencies that use the Wilhelmina trademark name and various services provided by the Company. License fees remained materially unchangeddecreased by 72.2% for the quarter ended March 31, 2016, when compared to quarter ended in March 31, 2015 due to a reduction in the corresponding periodnumber of the prior year.licensed affiliates.

 

13

Gross Profit Margin

 

Fluctuations in gross profit margin, between periods, are predominantly due to the following:

The mix of revenues being derived from talent relationships, which require the reporting of revenues gross (as a principal) versus net (as an agent). Model costs consist of costs associated with relationships with models where the key indicators suggest that the Company acts as a principal.  

An increase or decrease in mother agency fees, relative to model costs.

An increase or decrease in the rate of recovery of advances to models (for the cost of producing initial portfolios and other out-of-pocket costs). These costs are expensed as incurred and repayments of such costs are credited to model costs in the period received.

Inclusion of the London operations.

Gross profit margin as a percentagemargins increased by 0.3% of revenue in the three and nine monthsquarter ended September 30, 2015,March 31, 2016, when compared to the three and nine monthsquarter ended September 30, 2014, remained relatively unchanged. AllMarch 31, 2015 as a result of the components of gross margin increased proportionally with the increase in revenue.revenues exceeding the increase in model costs.

 

Salaries and Service Costs

 

Salaries and service costs consist of payroll and related costs and T&E (travel, meals and entertainment) coststravel & entertainment required to deliver the Company’s services to its customersclients and talent. 

The Company continues to recruit agents when available and investincrease in scouting and development activities. The Company believes these investments are necessary to support its continued growth. Additional cost increases are due to the inclusion of London and the accounting system upgrade project

Salariessalaries and service costs increases includewhen comparing the costquarter ended March 31, 2016 to the quarter ended March 31, 2015 was primarily due to severance costs to the Company’s former Chief Executive Officer and another former employee of additional resources to support$283 in the increase in revenues along with increased administration salaries associated with the systems and technology upgrade
first quarter of 2016.

 

Office and General Expenses

 

Office and general expenses consist of office and equipment rents, advertising and promotion, insurance expenses, administration and technology cost. These costs are less directly linked to changes in the Company’s revenues than are salaries and service costs. 

During the three and nine monthsquarter ended September 30, 2015,March 31, 2016, office and general expenses decreased by 0.6% and increased by 3.4%, when compared to quarter ended March 31, 2015, primarily due to recruiting fees of $165 related to the threehiring of the Company’s new Chief Executive Officer in January 2016 and nine months ended September 30, 2014 respectively. When removing the London Office and General Expenses, the 2015 over 2014 decreased by 2.6% and increased by 1.6%$160 accrual for the three and nine months reflecting managements’ effort to control overnon-income tax expenses during a period of Company growth.owed.

13

Amortization and Depreciation

 

Depreciation and amortization expense is incurred with respect to certain assets, including computer hardware, software, office equipment, furniture, and other intangibles. During the three and nine monthsquarter ended September 30, 2015,March 31, 2016, depreciation and amortization expense totaled $112 and $365 (of which $47 and $182 relatesdecreased by 18.1% primarily due to amortization of intangibles acquired in connection with the Wilhelmina Acquisition), compared to $114 and $484 of depreciation and amortization expenseseveral intangible assets being fully amortized during the three and nine months ended September 30, 2014 (of which $44 and $289 relates to amortizationfirst quarter of intangibles acquired in connection with the Wilhelmina Acquisition).  Certain intangible assets were fully amortized as of Aug 31, 2015, therefore amortization expense decreased from $68 to $47, decrease of 29.8% from second quarter to third quarter for the three months ended September 30, 2015.

2016. Fixed asset purchases (mostly related to technology) totaled approximately $612$364 and $389$158 during the nine monthsquarters ended September 30,March 31, 2016 and March 31, 2015, and September 30, 2014, respectively.

 

Corporate Overhead

 

Corporate overhead expenses include public company costs, director and executive officer compensation, directors’ and officers’ insurance, legal, audit and professional fees, corporate office rent and travel. The decline in corporateCorporate overhead of 43.0% and 26.0%increased by 4.6% for the three and nine monthsquarter ended September 30, 2015,March 31, 2016, when compared to the three and nine monthsquarter ended September 30, 2014 reflects a general decline in corporate salaries as well as public company costs. March 31, 2015, primarily due to costs incurred to enhance the Company’s internal control processes.

 

14

Operating Margin

 

Operating margins improvedmargin for the three and nine monthsquarter ended September 30, 2015March 31, 2016, decreased from 4.0% to 5.9% and 4.5% from 4.1% and 3.8%0.5% when compared to the corresponding periodsquarter ended March 31, 2015, primarily as a result of the prior year due to a declineseverance, recruiting and non-income tax expenses incurred in operating costs relative to revenues for the three an d nine months ended September 30, 2015 to 23.6% and 24.4% from 24.8% and 25.1%. The resulting operating income for the three and nine months ended September 30, 2015 increased by 54.9% and 32.3% from the corresponding periods of the prior year.

2016.

 

Asset Impairment Charge

 

Each reporting period, the Company assesses whether events or circumstances have occurred which indicate that the carrying amount of an intangible asset exceeds its fair value. If the carrying amount of the intangible asset exceeds its fair value, an asset impairment charge will be recognized in an amount equal to that excess. No asset impairment charges were incurred during the threequarters ended March 31, 2016 and nine months ended September 30, 2015 and September 30, 2014.March 31, 2015.

 

Foreign ExchangeCurrency Translation

 

The Company realized $21and $119 (including $14 from the acquisition of London) ofnominal foreign currency exchange lossgain during the three and nine monthsquarter ended September 30, 2015. FluctuationsMarch 31, 2016 as compared to a loss in the same period of the prior year due to fluctuations in currencies from Latin America, Great Britain and the Euro caused $21 and $105 of the loss.

Europe.

Interest Expense

There was no interest expense for the three and nine months ended September 30, 2015, compared to a small interest expense the three and nine months ended September 30, 2014, both associated with a decline in the average borrowings under the Third Credit Agreement Amendment to zero.

Income Taxes

 

Generally, the Company’s combined effective tax rate is high becauserelative to reported net income as a result of certain amounts of amortization expense and corporate overhead not being deductible or attributable to states in which it operates. Currently, the majority of taxes being paid by the Company are state taxes, not federal taxes. The Company operates in three states thatwhich have relatively high income tax rates.rates: California, New York and Florida. The Company’s combined (federal and state) effective tax rate would be even higher if it were not for federal net operating loss carryforwards available to offset current federal taxable income. As of December 31, 2014,2015, the Company has ahad federal income tax loss carryforwardcarryforwards of $1,239,approximately $1.2 million, which begins expiringare expected to be fully utilized upon filing the Company’s 2015 income tax return during 2016. As defined in 2025.  The Company anticipates the remainingInternal Revenue Code, ownership changes may limit the amount of net operating loss willcarryforwards that can be used in 2015.  The Company also operates in international jurisdictions.  Accordingly,utilized annually to offset future taxable income.

During the quarter ended March 31, 2016, the Company pays taxincurred $164 of income taxes related to a change in those international jurisdictions, creating foreign tax credits which are useddeferred taxes resulting from the cancellation of stock options of the Company’s former Chief Executive Officer. Realization of the Company’s carryforwards is dependent on future taxable income. As defined in the Internal Revenue Code, ownership changes may limit the amount of net operating loss carryforwards that can be utilized annually to offset federal income taxes payable.future taxable income.

 

15

Liquidity and Capital Resources

 

The Company’s cash balance decreased to $2,102$2.9 million at September 30, 2015,March 31, 2016, from $5,869$4.6 million at December 31, 2014.2015. For the nine monthsquarter ended September 30, 2015,March 31, 2016, cash balances decreased primarily as a result of cash flows used by operations of approximately $2,338, investing activities used $978, including $282 to purchase the stock of Wilhelmina London$1.3 million and approximately $696$0.4 million of capital expenditures. $0.3 million of the capital expenditures during the first quarter of 2016 related to the upgrade of the Company’s accounting and reporting software. Cash flows from operating activitiesactivity include the use of cash due tofrom an increase in accounts receivables as well as a decrease in accounts payable and accrued expenses. The increase in accounts receivable is driven by increased revenues and an increase induring the average number of days it takesquarter ended March 31, 2016 compared to collect from its customers. The Company has increased its collection resources and is actively working to improve the average collection days.quarter ended December 31, 2015. The increase in revenues usually negatively impactimpacts cash flows as typically, the collection of customer receivables averages greater than 60 days, while the Company’s operating expenses usually have shorter payment terms.

The Company’s primary liquidity needs are for working capital associated with performing services under its client contracts. Generally, the Company incurs significant operating expenses with payment terms shorter payment terms.

Amegy Credit Agreement

On November 10, 2015, the Company executed and closed the Fourth Amendment to Credit Agreement (the “Fourth Credit Agreement Amendment”) with Amegy National Bank National Association (“Amegy”) effective October 24, 2015. The Fourth Credit Agreement Amendment includes a $7,000 facility under which there is an extension of the revolving line of credit along with a term loan.

Under the terms of the Fourth Credit Agreement, the total availability is $7,000 subject to a borrowing base derived from 80% of eligible accounts receivable (as defined) and the Company’s minimum net worth covenant of $20,000 in the form of: (1) revolving credit facility of $4,000 (2) term loan of $3,000. The revolving line of credit is duethan its average collections on October 24, 2016 with interest paid monthly at prime plus 0.50%. The term loan is payable in 60 monthly payments, interest only at 4.25% for the 12 months followed by 47 equal monthly payments of principal and interest computed based on a 60 month amortization schedule and a final payment of principal and interest due on October 24, 2019. The Company’s obligation to repay the loans is evidenced by promissory notes. The revolving facility contains the ability to issue up to $500 of standby letters of credit. Outstanding letters of credit reduce the Company’s availability under the facility.billings.

 

As of November 16, 2015,March 13, 2016, the Company had no outstanding borrowings under theits revolving or term credit facility.

14

Off-Balance Sheet Arrangements

 

As of March 31, 2014,2016, the Company was responsible for $222 of restricted cash that served as collateral for anhad outstanding a $0.2 million irrevocable standby letter of credit. In September 2014, the Company issued a replacement letter of credit and recovered the restricted cash of $222. This replacement letter of credit is secured by available and unused borrowing capacity under the Company’s existing line ofrevolving credit facility with Amegy Bank.Amegy. The letter of credit serves as additional security under the lease extension relating to the Company’s office space in New York City that expires February 2021.

 

Effect of Inflation

 

Inflation has not historically been a material factor affecting the Company’s business. General operating expenses, such as salaries, employee benefits, insurance and occupancy costs are subject to normal inflationary pressures.

 

Critical Accounting Policies

 

Basis of Presentation

The financial statements include the consolidated accounts of Wilhelmina and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

Revenue Recognition

 

In compliance with generally accepted accounting principles (GAAP)in United States of America, when reporting revenue gross as a principal versus net as an agent, the Company assesses whether it,the Company, the model or the talent is the primary obligor. The Company evaluates the terms of its model, talent and client agreements as part of this assessment. In addition, the Company gives appropriate consideration to other key indicators such as latitude in establishing price, discretion in model or talent selection and credit risk the Company undertakes. The Company operates broadly as a modeling agency and in those relationships with models and talents where the key indicators suggest the Company acts as a principal, the Company records the gross amount billed to the client as revenue when earned and collectability is reasonably assured, and the related costs incurred to the model or talent as model or talent costs.cost. In other model and talent relationships, where the Company believes the key indicators suggest itthe Company acts as an agent on behalf of the model or talent, the Company records revenue when earned and collectability is reasonably assured, net of pass-through model or talent cost.

 

The Company also recognizes management fees as revenues for providing services to other modeling agencies as well as consulting income in connection with services provided to a television production network according to the terms of the contract.  The Company recognizes royalty income when earned based on terms of the contractual agreement. Revenues received in advance are deferred and amortized using the straight-line method over periods pursuant to the related contract.

The Company also records fees from licensees when the revenues are earned and collectability is reasonably assured.

 

Advances to models for the cost of producing initial portfolios and other out-of-pocket costs, which are reimbursable only from collections from the Company’s clients as a result of future work, are expensed to model costs as incurred. Any repayments of such costs are credited to model costs in the period received.

 

16

Goodwill and Intangible Assets

 

Goodwill and intangible assets consistconsists primarily of goodwillcustomer and buyertalent relationships resultingarising from apast business acquisition.acquisitions. Intangible assets with finite lives are amortized over useful lives ranging from two to seven years. Goodwill and intangible assets with indefinite lives are no longer subject to amortization, but rather to an annual assessment of impairment by applying a fair-value based test.

Management’s assessments A significant amount of the recoverabilityjudgment is required in estimating fair value and performing goodwill impairment tests of goodwill and intangible assets involve critical accounting estimates.  These estimates require significant management judgment, include inherent uncertainties and are often interdependent; therefore, they do not change in isolation.  Factors that management must estimate include, among others, the economic life of the asset, sales volume, prices, inflation, cost of capital, marketing spending, tax rates and capital spending.  These factors are even more difficult to predict when global financial markets are highly volatile.  When performing impairment tests, the Company estimates the fair values of the assets using management’s best assumptions, which it believes would be consistent with what a hypothetical marketplace participant would use.  Estimates and assumptions used in these tests are evaluated and updated as appropriate.  The variability of these factors depends on a number of conditions, including uncertainty about future events, and thus the accounting estimates may change from period to period.  If other assumptions and estimates had been used when these tests were performed, impairment charges could have resulted.

Basis of Presentationtests.

 

The financial statements includeCompany annually assesses whether the consolidated accountscarrying value of Wilhelmina Internationalits intangible assets exceeds their fair value and, if necessary, records an impairment loss equal to any such excess. Each interim reporting period, the Company assesses whether events or circumstances have occurred which indicate that the carrying amount of an intangible asset exceeds its wholly owned subsidiaries.  All significant inter-company accountsfair value. If the carrying amount of the intangible asset exceeds its fair value, an asset impairment charge will be recognized in an amount equal to that excess. No asset impairment charges were incurred during the quarters ended March 31, 2016 and transactions have been eliminated in consolidation.March 31, 2015.

15

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are accounted for at fairnet realizable value, do not bear interest and are short-term in nature. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability to collect on accounts receivable.  Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to the valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. The Company generally does not require collateral.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company continually assesses the need for a tax valuation allowance based on all available information. As of September 30, 2015,March 31, 2016, and as a result of this assessment, the Company believes that its deferred tax assets are more likely than not to be realized.  In addition, the Company continuously evaluates its tax contingencies.

 

Accounting for uncertainty in income taxes recognized in an enterprise’s financial statements requires a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Also, consideration should be given to de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. There was no change to the net amount of assets and liabilities recognized in the consolidated balance sheets as a result of the Company’s tax positions.

 

1716
 

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.required for smaller reporting company

 

Item 4.   Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company’s principal executive officer and principal financial officer evaluated the effectiveness of the Company’sThe Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).  Based on their evaluation of the Company’s disclosure controls and procedures, the Company’s principal executive officer and principal financial officer, with the participation of management, have concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2015designed to ensure that information it is required to be disclosed by the Companydisclose in the reports that it filesfiled or submitssubmitted under the Exchange Act is (a) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and formsforms. The Company’s disclosure controls and (b)procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.

It should be noted that any system ofor persons performing similar functions, have evaluated the Company’s disclosure controls however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectivesprocedures as of the system are met.  In addition,end of the design of any control system is based in part upon certain assumptions aboutperiod covered by this report. Based on such evaluation, the likelihood of future events.  Given these and other inherent limitations of control systems, there is only reasonable assurance that the Company’s controls will succeed in achieving their stated goals under all potential future conditions.  The Company’s principal executive officer and principal financial officer, or persons performing similar functions, have concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2015.

Changes in Internal Control Over Financial Reporting

As of the end of the period covered by this report,report. During the most recent fiscal quarter, there werehave been no changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect these controls, thathave materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

 

1817
 

PART II

 

OTHER INFORMATION

 

Item 1.Legal Proceedings.

On :

In July 2015, an action was commenced in New York State Supreme Court (New York County) against Wilhelmina Models, Inc. by a model previously under contract to Wilhelmina, Kimberly Forbes, claiming  that Wilhelmina had authorized the re-use of certain of her photos, allegedly without her authorization, without paying her; asserting that the IRS had asserted claims against her arising out of an IRS Form 1099 issued by Wilhelmina with respect to payments she had not received; and seeking  an unspecified amount in compensatory damages and $1,000,000 in exemplary damages.   When the model informally brought the matter to its attention prior to commencing litigation, Wilhelmina acknowledged owing her compensation she had not received because of her change of address, and offered to pay her in full and reimburse her for related costs (although the exact amount has not been calculated, it is not a material amount).  Despite that fact, this action was thereafter commenced.  The parties have agreed to a settlement in principle with Forbes, subject to execution of settlement documents, by Wilhelmina’s payment of $15,000 to Forbes.

Shanklin:

 

On October 24, 2013, a purported class action lawsuit was brought against the Company by former Wilhelmina model Alex Shanklin and others (the “Shanklin Litigation”), naming the Company’s subsidiaries Wilhelmina International, Ltd. and Wilhelmina Models, Inc. (the “Wilhelmina Subsidiary Parties”), was initiated in New York State Supreme Court (New York County) by the same lead counsel who represented plaintiffs in thea prior, now-dismissed action brought by Louisa Raske (the “Raske Litigation”). The claims in the Shanklin Litigation initially included breach of contract and unjust enrichment and are alleged to ariseallegations arising out of matters relatingsimilar to those involved in the Raske Litigation, such as the handling and reporting of funds on behalf of models and the use of model images. Other parties named as defendants in the Shanklin Litigation include other model management companies, advertising firms, and certain advertisers. On January 6, 2014, the Wilhelmina Subsidiary PartiesCompany moved to dismiss the Amended Complaint in the Shanklin Litigation for failure to state a claim upon which relief can be granted and other grounds, and other defendants also filed motions to dismiss. On August 11, 2014, the court denied the motion to dismiss as to Wilhelmina and other of the model management defendants. Further, on March 3, 2014, the judge assigned to the Shanklin Litigation wrote the Office of the New York Attorney General bringing the case to its attention, generally describing the claims asserted therein against the model management defendants, and stating that the case “may involve matters in the public interest.” The judge’s letter also enclosed a copy of his decision in the Raske Litigation, which dismissed that case. Plaintiffs have retained substitute counsel, who has filed a Second Amended Complaint.  Plaintiffs’ Second Amended Complaint asserts causes of action for alleged breaches of the plaintiffs' management contracts with the defendants, conversion, breach of the duty of good faith and fair dealing, and unjust enrichment. The Second Amended Complaint also alleges that the plaintiff models were at all relevant times employees, and not independent contractors, of Wilhelmina and the other model management defendants, and that defendants violated the New York Labor Law in several respects, including, among other things, by allegedly failing to pay the models the minimum wages and overtime pay required thereunder, not maintaining accurate payroll records, and not providing plaintiffs with full explanations of how their wages and deductions therefrom were computed. The Second Amended Complaint seeks certification of the action as a class action, damages in an amount to be determined at trial, plus interest, costs, attorneys’ fees, and such other relief as the court deems proper. On October 6, 2015, the CompanyWilhelmina filed a motion to dismiss as to most of the claims in the Second Amended Complaint. The motion to dismiss will behas been fully briefed, by December 2015.and the Court has scheduled a hearing on the motion to dismiss for May 2016. The Company believes the claims asserted in the Second Amended Complaint are without merit, and intends to continue to vigorously defend itself.the action.

 

Patterson:

TheOn August 20, 2015, a lawsuit previously commenced by Sean Patterson, the former president of Wilhelmina International, Ltd.,was brought against the Company and the Company’s former Chief Accounting Officer by a former employee of Wilhelmina International, Ltd.,model, Angel Betancourt (the “Plaintiff”). The lawsuit alleges that the Plaintiff was discriminated against during his time of employment and Mark Schwarz, previously reported,upon his termination. The lawsuit further alleges that the Plaintiff was settled pursuantnot compensated due to anFLSA misclassification by the Company. The Company has provided documentation to the Plaintiff’s counsel that suggests that the Plaintiff unlikely was due additional compensation during the time of employment. The proceeding is in the preliminary stages, and by agreement dated aswith the Plaintiff further action in the lawsuit has been abated pending ongoing settlement discussions. The Company expects that the lawsuit will be resolved within the limits of August 21, 2015, which includes a confidentiality provision regarding its terms.the Company¹s insurance coverage.

 

In addition to the legal proceedings disclosed herein, the Company is also engaged in various legal proceedings that are routine in nature and incidental to its business. None of these routine proceedings, either individually or in the aggregate, are believed, in the Company's opinion, to have a material adverse effect on its consolidated financial position or its results of operations.

 

In additionDuring the first quarter, in relation to the legal proceedings disclosed herein,two termination agreements with former employee, the Company is also engaged in various legal proceedings that are routine in nature and incidental to its business.  Nonerecorded $283 of these routine proceedings, either individually orseverance expense. $126 of this severance was paid in the aggregate, are believed,first quarter of 2016. The remaining $157 will be paid in the Company's opinion, to have a material adverse effect on its consolidated financial position or its resultssecond quarter of operations.2016.

 

1918
 

Item 1.A.Risk Factors.

 

Not applicable.required for smaller reporting company.

 

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.During 2012, the Board of Directors authorized a stock repurchase program whereby the Company could repurchase up to 500,000 shares of its outstanding Common Stock. During 2013, the Board of Directors renewed and extended the Company’s share repurchase authority to enable it to repurchase up to an aggregate of 1,000,000 shares of Common Stock. The shares may be repurchased from time to time in the open market or through privately negotiated transactions at prices the Company deems appropriate. The program does not obligate the Company to acquire any particular amount of Common Stock and may be modified or suspended at any time at the Company’s discretion.

The following table furnishes information for purchases made pursuant to the stock repurchase program during the quarter ended March 31, 2016:

Period 

Total Number of
Shares Purchased

 

Average

Price Paid

Per Share

 

Total Number of
Shares Purchased as
Part of the Publicly
Announced Plans

 

Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans

January 1-31, 2016  6,716  $6.75   690,370   309,630 
February 1-29, 2016  -  $-   690,370   309,630 
March 1-31, 2016  -  $-   690,370   309,630 
Total  6,716  $6.75         

 

Item 3.    Defaults Upon Senior Securities.

 

None.

 

Item 4.    Mine Safety Disclosures.

 

Not applicable.

 

Item 5.    Other Information.

 

None.

 

Item 6.    Exhibits.

 

The following is a list of exhibits filed as part of this Form 10-Q:

 

Exhibit No.Description
10.32

Fourth Amendment to Credit Agreement, dated November 10, 2015, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association.*

10.33

Third Amended and Restated Line of Credit Promissory Note, dated November 10, 2015, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association.*

10.34

Term Loan Promissory Note, dated November, 2015, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association.*

10.35

Third Amended to Pledge and Security Agreement, dated November, 2015, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association.*

31.1Certification of Principal Executive Officer in Accordance with Section 302 of the Sarbanes-Oxley Act.*
31.2Certification of Principal Financial Officer in Accordance with Section 302 of the Sarbanes-Oxley Act.*
32.1Certification of Principal Executive Officer in Accordance with Section 906 of the Sarbanes-Oxley Act.*
32.2Certification of Principal Financial Officer in Accordance with Section 906 of the Sarbanes-Oxley Act.*
101. INSXBRL Instance Document*
101.SCHXBRL Taxonomy Extension Schema*
101.CALXBRL Taxonomy Extension Calculation Linkbase*
101.DEFXBRL Taxonomy Extension Definition Linkbase*
101.LABXBRL Taxonomy Extension Label Linkbase*
101.PREXBRL Taxonomy Extension Presentation Linkbase*

________________

* Filed herewith

20

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WILHELMINA INTERNATIONAL, INC.  
3.1(Registrant)Restated Certificate of Incorporation of Wilhelmina International, Inc. (incorporated by reference from Exhibit 3.1 to Form S-1/A, dated January 30, 2012).
3.2Certificate of Amendment of the Restated Certificate of Incorporation of Wilhelmina International, Inc. (incorporated by reference from Exhibit 3.1 to the Form 8-K, dated July 10, 2014).
3.3Amended and Restated Bylaws of Wilhelmina International, Inc. (incorporated by reference from Exhibit 3.2 to Form 8-K, dated May 18, 2011).
4.1Form of Stock Certificate of Common Stock of Billing Concepts Corp. (incorporated by reference from Exhibit 4.1 to Form 10-Q, dated March 31, 1998).
4.2Rights Agreement, dated as of July 10, 2006, by and between New Century Equity Holdings Corp. and The Bank of New York Trust Company, N.A. (incorporated by reference from Exhibit 4.2 to Form 8-K, dated July 10, 2006).
4.3Form of Rights Certificate (incorporated by reference from Exhibit 4.1 to Form 8-K, dated July 10, 2006).
4.4Amendment to Rights Agreement, dated August 25, 2008, by and between New Century Equity Holdings Corp. and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated August 26, 2008).
4.5Second Amendment to Rights Agreement, dated July 20, 2009, by and between the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated July 21, 2009).
4.6Third Amendment to Rights Agreement, dated February 9, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated February 10, 2010).
4.7Fourth Amendment to Rights Agreement, dated March 26, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated March 30, 2010).
  
19
  
Date:  November 16, 20154.8By:/s/ David S. ChaikenFifth Amendment to Rights Agreement, dated April 29, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated May 3, 2010).
4.9Name:David S. ChaikenSixth Amendment to Rights Agreement, dated June 2, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated June 2, 2010).
4.10Title:

Chief Accounting Officer

(Principal Financial Officer)

21

EXHIBIT INDEX

Seventh Amendment to Rights Agreement, dated July 2, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit No.Description4.1 to Form 8-K, dated July 2, 2010).
10.324.11

FourthEighth Amendment to CreditRights Agreement, dated NovemberAugust 2, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated August 2, 2010).

4.12Ninth Amendment to Rights Agreement, dated September 2, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated September 2, 2010).
4.13Tenth Amendment to Rights Agreement, dated October 1, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated October 1, 2010).
4.14Eleventh Amendment to Rights Agreement, dated October 18, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated October 21, 2010).
4.15Twelfth Amendment to Rights Agreement, dated December 8, 2010, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated December 9, 2010).
4.16Thirteenth Amendment to Rights Agreement, dated April 23, 2013, by and between Wilhelmina International, Inc. and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference from Exhibit 4.1 to Form 8-K, dated April 23, 2013).
4.17Fourteenth Amendment to Rights Agreement, dated July 10, 2015,2014, by and between Wilhelmina International, Inc. and The Bank of New York Mellon Trust Company (incorporated by reference from Exhibit 4.1 to the Form 8-K, dated July 10, 2014).
4.18Letter Agreement, dated as of April 24, 2013, by and between Wilhelmina International, Inc. and Ronald L. Chez (incorporated by reference from Exhibit 10.1 to Form 8-K, dated April 23, 2013).
4.19Registration Rights Agreement, dated August 25, 2008, by and among New Century Equity Holdings Corp., Dieter Esch, Lorex Investments AG, Brad Krassner, Krassner Family Investments, L.P. and Sean Patterson (incorporated by reference from Exhibit 10.2 to Form 8-K, dated August 26, 2008).
4.20Registration Rights Agreement, dated February 13, 2009, by and between New Century Equity Holdings Corp. and Newcastle Partners, L.P. (incorporated by reference from Exhibit 10.3 to Form 8-K, dated February 18, 2009).
10.1Employment Agreement dated January 26, 2016 between Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association.*

10.33

Third Amended and Restated Line of Credit Promissory Note, dated November 10, 2015,William Wackermann (incorporated by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association.*

10.34

Term Loan Promissory Note, dated November 10, 2015, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association.*

10.35

Third Amendedreference from Exhibit 10.1 to Pledge and Security Agreement, dated November 10, 2015, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association.*

Form 8-K filed February 1, 2016).
31.1Certification of Principal Executive Officer in Accordance with Section 302 of the Sarbanes-Oxley Act.*
31.2Certification of Principal Financial Officer in Accordance with Section 302 of the Sarbanes-Oxley Act.*
32.1Certification of Principal Executive Officer in Accordance with Section 906 of the Sarbanes-Oxley Act.*
32.2Certification of Principal Financial Officer in Accordance with Section 906 of the Sarbanes-Oxley Act.*
101. INSXBRL Instance Document*
101.SCHXBRL Taxonomy Extension Schema*
101.CALXBRL Taxonomy Extension Calculation Linkbase*
101.DEFXBRL Taxonomy Extension Definition Linkbase*
101.LABXBRL Taxonomy Extension Label Linkbase*
101.PREXBRL Taxonomy Extension Presentation Linkbase*

________________

* Filed herewith

20

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WILHELMINA INTERNATIONAL, INC.
(Registrant)
Date:  May 13, 2016By:/s/ James A. McCarthy
Name:James A. McCarthy
Title:

Chief Financial Officer

(Principal Financial Officer)

 

 

 

 

 

 

 

22

21