UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
_______________

FORM 10-K
(Mark One)
[x]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year ended December 31, 2014

[  ]
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 0-28536
_______________


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

Delaware
74-2781950
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification Number)
   
200 Crescent Court, Suite 1400, Dallas, Texas
75201
(Address of principal executive offices)
(Zip Code)

(214) 661-7488
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:   None

Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
Series A Junior Participating Preferred Stock Purchase Rights
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   [  ] Yes   [x] No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   [  ] Yes   [x] No
 
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
 
 
1
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
  
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]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   [  ] Yes   [x] No
 
The aggregate market value of the registrant’s outstanding Common Stock held by non-affiliates of the registrant computed by reference to the price at which the Common Stock was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $11,092,209.
 
As of March 27, 2015, the registrant had 5,869,002 shares of Common Stock outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K incorporate by reference portions of an amendment to this Form 10-K or portions of a definitive proxy statement of the registrant for its Annual Meeting of Shareholders, which in either case will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2014.
 
 
 
 
 
 
2
 
WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES
 
Annual Report on Form 10-K
 
For the Year Ended December 31, 2014
 
     
PAGE
       
 
 
 
 
 
 
       
       
 
 
 
 
 
 
 
 
       
       
 
 
 
 
 
       
       
 
 
 
 
3
 
PART I
 
ITEM 1.
 
FORWARD LOOKING STATEMENTS
 
This Annual Report on Form 10-K contains certain “forward-looking” statements as such term is defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995 and information relating to Wilhelmina International, Inc. (the “Company” or “Wilhelmina”) 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 forward-looking statements include, in particular, projections about the Company’s future results, statements about its plans, strategies, business prospects, changes and trends in its business and the markets in which it operates. Additionally, statements concerning future matters such as gross billing levels, revenue levels, expense levels, and other statements regarding matters that are not historical are forward-looking statements. Management cautions that these forward-looking statements relate to future events or the Company’s future financial performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance, or achievements of its business or its industry to be materially different from those expressed or implied by any forward-looking statements. Based upon changing conditions, should 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.

DESCRIPTION OF THE WILHELMINA BUSINESS
 
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 and largest fashion model management companies in the world.  Since its founding, it has grown to include operations located in Los Angeles, Miami, London and the Republic of Chile, as well as a growing network of licensees comprising leading modeling agencies in various local markets across the U.S. as well as in Panama, 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.  The Company was incorporated in the State of Delaware in 1996.

  Organization and Operating Divisions
 
The Company is comprised of operating companies and divisions focused on the fashion model and talent management business, as well as business areas complimentary to the fashion model and talent management business such as licensing, branding, contests, events and television.  Our business is primarily focused around the following key areas:
 
 
•
Fashion model management,
 
• 
Hair & makeup,
 
• 
Talent management, and
 
• 
Licensing & branding (including contests, consumer products, events and television)
 
Fashion Model Management
 
Wilhelmina is focused on providing fashion modeling and talent product-endorsement services to clients such as ad agencies, branded consumer goods companies, fashion designers, magazines, retailers, department stores, product catalogs and Internet sites.
 
The fashion model management industry can be divided into many subcategories, including advertising campaigns as well as catalog, runway, showroom and editorial work.  Advertising work involves modeling for advertisements featuring consumer products such as cosmetics, clothing and other items, to be placed in magazines and newspapers, on billboards and with other types of media.  Catalog work involves modeling for promotional catalogs that are produced throughout the year.  Runway work involves modeling at fashion shows, which primarily take place in Paris, Milan, London and New York City.  Showroom work involves on-site modeling of products at client showrooms and other events and production “fit” work whereby a model serves as the sizing model for apparel items.  Editorial work involves modeling for the cover and editorial sections of magazines.
  
 
4
 
Clients pay talent for their appearance in photo shoots for magazine features, print advertising, direct mail marketing, product catalogs and Internet sites, as well as for their appearance in runway shows to present new designer collections, fit modeling, and on-location presentations and event appearances.  In addition, talent may also appear in film and TV commercials.
 
Wilhelmina develops and diversifies its talent portfolio through a combination of ongoing local, regional or international scouting and talent-search efforts to source new talent, and cooperates with other agencies that represent talent.
 
Within its fashion model management business, Wilhelmina has two primary sources of revenue:  commissions paid by models as a percentage of their gross earnings and a separate service charge, paid by clients in addition to the booking fees, calculated as a percentage of the models’ booking fees.  Wilhelmina believes that its commission rates and service charge are comparable to those of its principal competitors.
 
Wilhelmina’s fashion model management operations are organized into divisions called “boards,” each of which specializes by the type of models it represents.  Wilhelmina’s boards are generally described in the table below.
 
Board Name
Location
Target Market
Women
NYC, LA, Miami, London, Chile
High-end female fashion models
Men
NYC, LA, Miami
High-end male fashion models
Direct Men
NYC, LA, Miami
Established/commercial male fashion models
Direct Women
NYC, LA, Miami
Established/commercial female fashion models
Curve
NYC
Full-figured female fashion models
Runway
NYC
Catwalk and designer client services
Fitness
NYC
Fit or athletic models
Kids*
NYC
Child models
____________
*
Through partial ownership of Wilhelmina Kids & Creative Management LLC.
 
Each major board is headed by a director who is in charge of the agents assigned to such board.  The agents of each board act both as bookers (includes promoting models, negotiating fees and contracting work) and as talent scouts/managers (includes providing models with career and development guidance and helping them better market themselves).  Although agents individually develop professional relationships with models, models are represented by a board collectively, and not by a specific agent.  Wilhelmina’s organization into boards thereby enables Wilhelmina to provide clients with services tailored to their particular needs, to allow models to benefit from agents’ specialized experience in their particular markets, and to limit Wilhelmina’s dependency on any specialty market or agent.
 
Most senior agents are employed pursuant to employment agreements that include noncompetition provisions such as a prohibition from working with Wilhelmina’s models and clients for a certain period of time after the end of the agent’s employment with Wilhelmina.
 
Wilhelmina typically signs its models to three-year exclusive contracts, which it actively enforces.
 
The LW1 division, based in Los Angeles, offers models the opportunity to be showcased on TV and film through its membership in the Screen Actors Guild.  

Wilhelmina also owns a non-consolidated 50% interest in Wilhelmina Kids & Creative Management LLC, a New York City-based modeling agency that specializes in representing child models, from newborns to children 14 years of age.

Wilhelmina Chile SPA (“Chile”), a wholly owned subsidiary of Wilhelmina International, Inc., was organized in 2013 in order to better serve the Company’s clients in Latin America.  During 2014, the Company actively served new clients in South America and Central America directly from the Chile office and out of Wilhelmina Miami.

Wilhelmina London Limited (“London”), a wholly owned subsidiary of Wilhelmina International, Inc. acquired in January 2015, 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.

 
5
 
Hair & Makeup

The Company has created a division to represent talent in the photography, styling and hair & makeup arenas. These artists work on projects across the globe for well-known companies in the retail, pharmaceutical and music industries. In addition, their work appears in top editorial magazines and on the runways of major fashion houses. 

Wilhelmina Artist Management

Wilhelmina Artist Management, LLC (“WAM”) is a talent management company that seeks to secure endorsement and spokesperson work for various celebrities from the worlds of sports, music and entertainment.  WAM has two primary sources of revenue:  commissions paid by talent as a percentage of their gross earnings and royalties or a service charge paid by clients.

Licensing & Branding
 
Wilhelmina Licensing collects third-party licensing fees in connection with the licensing of the “Wilhelmina” name.  Third-party licensees include several leading fashion model agencies in local markets across the U.S. as well as in Panama, Thailand, Dubai, Vancouver and Tokyo. A consumer products license for fragrance and cosmetics is also in effect.  The film and television business consists of television syndication royalties and production series contracts. Also from time to time, the Company conducts model search contests and other events in an effort to expand the Wilhelmina brand and recruit talent.
 
Competition
 
The fashion model management business is highly competitive.  New York City, Los Angeles and Miami, as well as Paris, Milan, Sao Paulo and London, are considered the most important markets for the fashion talent management industry.  Most of the leading international firms are headquartered in New York City, which is considered to be the “capital” of the global fashion industry.  Wilhelmina’s principal competitors include other large fashion model management businesses in the U.S., including Marilyn Model Agency, IMG Models, Elite Model Management, Ford Models, Inc., DNA Model Management, and NEXT Model Management.   Wilhelmina is the only publicly-listed fashion talent management firm.
 
Competition also includes foreign agencies and smaller U.S. agencies in local markets that recruit local talent and cater to local market needs.  Several of the larger fashion talent firms operate offices in multiple cities and countries, or alternatively have chosen to partner with local or foreign agencies to attempt to harness synergies without increasing overhead.
 
The Company believes that its sources of revenue (mainly generated from commissions and service charges) are comparable to those of its principal competitors.  Therefore, for the Company to obtain a competitive advantage, it must develop and maintain a deep pool of talent and deliver high quality service to its clients.  The Company believes that through its scouting efforts, search contests, licensing network, advertising and TV shows, it is able to recruit a deeper pool of talent relative to its competitors.  These recruitment tools coupled with the broad range of fashion boards available to the Company’s talent, enables the Company to develop talent and generate a broader range of revenues relative to its principal competitors.  While a broad range of talent and boards provides a certain level of stability to the business, certain talent may be more inclined to work with a boutique agency which may appear to tailor more specifically to their needs.
 
Also, over its 48 years of existence, Wilhelmina has created long standing client relationships and a number of business activities related to the fashion model management business that provide exposure to diverse markets and demographics.  The Company has also developed a professional workforce with years of talent management experience.
 
 
6
 
Clients and Customers
 
            As of December 31, 2014, Wilhelmina had approximately 2,000 active models.  Wilhelmina’s active models include Coco Rocha, RJ King, Marlon Teixiera, Ava Smith, Alexandra Richards, Armando Cabral, Soo Joo, Cindy Bruna, Clarke Bockelman, Bastian Van Gaalen, Keilani Asmus, Rayla Guimaraes Jacunda, Elisabeth Erm, Janis Ancens, Kirsten Shiells, Nathan Owens, and Claudio Moreira.

Wilhelmina serves approximately 2,600 external clients.  Wilhelmina’s customer base is highly diversified, with no one customer accounting for more than 5% of overall gross revenues.  The top 100 customers of Wilhelmina together accounted for approximately 55% of overall gross revenues during 2014.
 
Governmental Regulations
 
Certain jurisdictions, in which Wilhelmina operates, such as California and Florida, require that companies maintain a Talent Agency License in order to engage in the “talent agency” business.  The talent agency business is generally considered the business of procuring engagements or any employment or placement of a talent, where the talent performs in his or her artistic capacity.  Where required, the Wilhelmina subsidiaries operating in these jurisdictions maintain Talent Agency Licenses issued by those jurisdictions.  In addition, certain Wilhelmina subsidiaries also maintain required SAG licenses issued by the Screen Actors’ Guild.
 
EMPLOYEES
 
As of December 31, 2014, the Company had 96 employees, 67 of whom were located in New York City, 14 of whom were located at Wilhelmina’s Miami, Florida office, 14 of whom were located at Wilhelmina’s Los Angeles, California office and 1 of whom was located at the corporate headquarters in Dallas, Texas.  In addition, as of January 5, 2015, the London acquisition added 10 employees to our overall headcount.
 
TRADEMARKS AND LICENSING
 
The “Wilhelmina” brand is essential to the success and competitive position of the Company.  Wilhelmina’s trademark is vital to the licensing business because licensees pay for the right to use the trademark.  The Company has invested significant resources in the “Wilhelmina” brands in order to obtain the public recognition that these brands currently have. Wilhelmina relies upon domestic and international trademark laws, license agreements and nondisclosure agreements to protect the “Wilhelmina” brand name used in its business.  Trademarks registered in the U.S. have a duration of ten years and are generally subject to an indefinite number of renewals for a like period on appropriate application.
  
ITEM 1A.
 
Not Applicable.
 
ITEM 1B.
 
Not Applicable.
 
 
7
 
 
ITEM 2.

The Company’s corporate headquarters are currently located at 200 Crescent Court, Suite 1400, Dallas, Texas 75201, which are also the offices of Newcastle Capital Management, L.P. (“NCM”).  NCM is the general partner of Newcastle Partners L.P. (“Newcastle”), the Company’s largest shareholder.  The Company occupies a portion of NCM’s space on a month-to-month basis at $2,500 per month, pursuant to a services agreement entered into between the parties on October 1, 2006.
  
The following table summarizes information with respect to the material facilities of the Company for leased office space and model apartments:
 
Description of Property
Area (sq. feet)
Lease Expiration
     
Office for New York-based operations – New York, NY
12,671
February 28, 2021
Office for California-based operations – Los Angeles, CA
3,605
June 30, 2016
Office for Florida based operations – Miami, FL
2,100
October 1, 2016
Office for London-based operations – London, UK
995
September 6, 2017
Three model apartments – New York, NY
6,000
2015-2016
Three model apartments – Los Angeles, CA
6,000
2015-2016
Five model apartments – Miami, FL
4,000
2015-2016

The Company believes there is sufficient office space available at favorable leasing terms both to replace existing office space and to satisfy any additional needs the Company may have as a result of future expansion.
 
ITEM 3.
 
On May 2, 2012, Sean Patterson, the former President of the Company’s subsidiary, Wilhelmina International, Ltd. (“Wilhelmina International”), filed a lawsuit in the Supreme Court of the State of New York, County of New York, against the Company, Wilhelmina International and Mark Schwarz, the Company’s Chairman of the Board, asserting claims for alleged breach of Mr. Patterson’s expired employment agreement (the “Employment Agreement”) with Wilhelmina International, defamation, and declaratory relief with respect to the alleged invalidity and unenforceability of the Employment Agreement’s non-competition and non-solicitation provisions. The Company and Wilhelmina International denied its material allegations and asserted counterclaims against Mr. Patterson for breach of the Employment Agreement, breach of fiduciary duty, and injunctive relief. On May 23, 2014, the court granted the defendants’ motion to dismiss Mr. Patterson’s defamation claim, and granted Mr. Patterson’s cross-motion for leave to file an amended defamation claim.  Mr. Patterson filed an Amended Complaint on May 15, 2014, repeating the claims for alleged breach of contract and declaratory relief, and filing an amended defamation claim. The Company and Wilhelmina International filed an Answer to the Amended Complaint, denying its material allegations, on June 17, 2014, and again asserted counterclaims for breach of contract, breach of fiduciary duty, and for injunctive relief.  Mr. Patterson replied to those counterclaims on June 27, 2014. The parties continue to be engaged in discovery. The Company believes Mr. Patterson’s claims are without merit and intends to vigorously defend itself and pursue the counterclaims.  
 
On October 24, 2013, a purported class action lawsuit brought by former Wilhelmina model Alex Shanklin and others (the “Shanklin Litigation”), naming as defendants the Company’s subsidiaries Wilhelmina International 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 a prior, now-dismissed action brought by Louisa Raske (the “Raske Litigation”). The claims in the Shanklin Litigation include breach of contract and unjust enrichment and are alleged to arise out of matters relating to those matters 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. As previously noted, 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.  The Company believes the claims asserted in the Shanklin Litigation are without merit and intends to vigorously defend itself and its subsidiaries.  On January 6, 2014, the Wilhelmina Subsidiary Parties moved to dismiss the Amended Complaint in the Shanklin Litigation for failure to state a cause of action upon which relief can be granted and other grounds, and other defendants also filed motions to dismiss.  By Decision and Order dated August 11, 2014, the court denied the Wilhelmina Subsidiary Parties’ motion to dismiss.   The parties were directed to engage in court-ordered mediation, but during that process, in October 2014, plaintiffs lost their principal attorney and new lead counsel for plaintiffs has not yet been identified.  On March 10, 2015, the court granted the motion by plaintiffs’ local New York counsel for leave to withdraw, gave the plaintiffs 90 days to find substitute counsel, and stayed the action in the interim.  The Company intends to vigorously defend the Wilhelmina Subsidiary Parties in the event plaintiffs move forward with substitute counsel.
 
 
8
 
In addition to the legal proceedings otherwise 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.
 
ITEM 4.
 
Not Applicable

 
 
 
 
 
 
9
 
PART II
 
ITEM 5.
 
Market Information
 
On July 11, 2014, the Company effected a one for twenty reverse stock split of its outstanding Common Stock. The Company has retroactively adjusted all the share information to reflect this reverse stock split in this report and the accompanying consolidated financial statements and notes.

The Company’s shares of Common Stock are currently listed on the NASDAQ Capital Market (“NASDAQ”) under the symbol “WHLM”.   Until September 10, 2014, the Common Stock was quoted on the OTC Bulletin Board (“OTCBB”) under the symbol “WHLM.OB”.  The table below sets forth, for each of the fiscal quarters during the period from January 1, 2013 through December 31, 2014, the high and low bid prices of the Common Stock on the OTCBB and the high and low sales prices of the Common Stock on NASDAQ, as applicable.  The price quotations for the period during which the Common Stock was quoted on the OTCBB reflect inter-dealer prices, without retail mark-up, mark-down or commission, may not necessarily represent actual transactions, and are based on information from published financial sources:
 
   
High
   
Low
 
Year Ended December 31, 2013:
           
1st Quarter
 
$
3.40
   
$
2.20
 
2nd Quarter
 
$
3.20
   
$
2.80
 
3rd Quarter
 
$
7.00
   
$
3.00
 
4th Quarter
 
$
6.80
   
$
3.20
 
 
Year Ended December 31, 2014:
           
1st Quarter
 
$
6.60
   
$
4.80
 
2nd Quarter
 
$
6.00
   
$
4.60
 
3rd Quarter
 
$
7.00
   
$
5.26
 
4th Quarter
 
$
6.40
   
$
4.53
 
 
 
The following table provides information regarding purchases of the Company’s Common Stock made by the Company during the fourth quarter of 2014:

Period
 
Total Number
of Shares
Purchased
   
Average Price
Paid per Share
   
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs(1)
   
Maximum
Number (or
Approximate
Dollar Value)
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs(1)
 
October 1 – October 31, 2014
    -       -       -       398,295  
November 1 – November 30, 2014
    -       -       -       398,295  
December 1 – December 31, 2014
    1,113     $ 5.34       1,113       397,182  
Total
    1,113     $ 5.34       1,113       397,182  
 
(1)
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. 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 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 Company’s credit facility (the “Credit Agreement”) with Amegy Bank National Association (“Amegy Bank”). 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 500,000 shares of Common Stock.
 
 
10
 
During the year ended December 31, 2013, the Company repurchased 113,156 shares of Common Stock at an average price of approximately $3.64 per share, for a total of approximately $410,000. During the year ended December 31, 2014, the Company repurchased 1,113 shares of Common Stock at an average price of approximately $5.34 per share, for a total of approximately $5,900.
 
In total, the Company has repurchased 602,818 shares of Common Stock at an average price of approximately $2.58 per share, for a total of approximately $1,643,000.
 
Shareholders
 
As of March 27, 2015, there were 5,869,002 shares of Common Stock outstanding, held by 452 holders of record.  The last reported sales price of the Common Stock was $5.39 per share on March 27, 2015.
 
Dividend Policy
 
The Company has not declared or paid any cash dividends on its Common Stock during the past two completed fiscal years.  The Company’s Credit Agreement with Amegy Bank contains a covenant which could limit its ability to pay dividends on the Common Stock.

ITEM 6.
 
Not applicable.
 
ITEM 7.
 
The following is a discussion of the Company’s financial condition and results of operations comparing the calendar years ended December 31, 2014 and 2013.  You should read this section in conjunction with the Company’s Consolidated Financial Statements and the Notes thereto that are incorporated herein by reference and the other financial information included herein and the notes thereto.
 
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, London and the Republic of Chile, as well as a growing network of licensees comprising leading modeling agencies in various local markets across the U.S., as well as in Panama, 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.
 
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 TV 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 cutting 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. Wilhelmina closely monitors economic conditions, client spending and other factors and continually looks for ways to reduce costs, manage working capital and conserve cash.  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.
 
 
11
 
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 Wilhelmina competes with other leading full service agencies, Wilhelmina competed successfully in 2014.  

With total advertising expenditures on major media (newspapers, magazines, television, cinema, outdoor and Internet) exceeding approximately $165 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.
 
Strategy
 
Management’s strategy is to increase value to shareholders through the following initiatives:
 
 
•
develop Wilhelmina into a global brand;
 
•
expand the women’s high end fashion board;
 
•
expand celebrity endorsements;
 
•
strategic acquisitions;
 
•
licensing the “Wilhelmina” name to leading model management agencies;
 
•
licensing the “Wilhelmina” brand in connection with consumer products, cosmetics and other beauty products; and
 
•
promoting model search contests, and events and partnering on media projects (television, film, books, etc.).
 
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 their 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.  At the same time, the Internet presents challenges for the Company, including (i) the cannibalization of traditional print advertising business and (ii) pricing pressures with respect to photo shoots and client engagements.

In January 2015, the Company purchased 100% of the outstanding shares of Union Models Management Ltd. in London England and renamed it Wilhelmina London Limited (“London”).  London represents a strategic acquisition for the Company that 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.
 
RESULTS OF OPERATIONS OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 2014 COMPARED TO YEAR ENDED DECEMBER 31, 2013
 
The key financial indicators that the Company reviews to monitor the 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, Direct, Direct 2, Runway, Curve, Lifestyle, Kids, etc.)) of the business, revenues by geographic locations and revenues from significant clients.  Wilhelmina has three primary sources of revenue: revenues from principal relationships whereby the gross amount billed to the client is recorded as revenue, when the revenues are earned and collectability is reasonably assured; revenues from agent relationships whereby the commissions paid by models as a percentage of their gross earnings are recorded as revenue when earned and collectability is reasonably assured; and 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 Accounting Policies - Revenue Recognition.  Gross billings are an important business metric that ultimately drive revenues, profits and cash flows.
 
Because Wilhelmina provides professional services, 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, meals and entertainment) 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)
 
Year
Ended
December
31, 2014
   
Year
Ended
December
31, 2013
   
Percent
Change
2014 vs
2013
 
                   
GROSS BILLINGS
    78,472       68,546       14.5 %
                         
Revenues
    76,414       65,360       16.9 %
License fees and other income
    396       584       -32.2 %
TOTAL REVENUES
    76,810       65,944       16.5 %
Model costs
    54,780       46,242       18.5 %
REVENUES NET OF MODEL COSTS
    22,030       19,702       11.8 %
GROSS PROFIT MARGIN
    28.70 %     29.90 %        
Salaries and service costs
    13,035       11,460       13.7 %
Office and general expenses
    4,645       3,658       27.0 %
Amortization and depreciation
    603       1,572       -61.6 %
Corporate overhead
    1,212       1,198       1.2 %
OPERATING INCOME
    2,535       1,814       39.70 %
OPERATING MARGIN
    3.30 %     2.80 %        
Foreign exchange loss
    (42 )     -       -100.0 %
Interest income
    6       8       -25.0 %
Interest expense
    (8 )     (61 )     -86.9 %
Equity Earnings in affiliate
    (42 )     (7 )     500.0 %
INCOME BEFORE INCOME TAXES
    2,449       1,754       39.6 %
Current income tax (expense)
    (530 )     (532 )     - 12 %
Deferred tax benefit
    (718 )     2,170       - 134.6 %
Effective tax rate
    52.8 %     -93.4 %        
NET INCOME
    1,201       3,392       -63.7 %

Gross Billings
 
Generally, the Company’s gross billings fluctuate in response to its clients’ willingness to spend on advertising and the Company’s ability to have the desired talent available.

 The Company experienced a 14.5% increase in gross billings, which reflects a 17.1% increase in core gross billings partially offset by a 33.1% decline in WAM gross billings during the year ended December 31, 2014, when compared to the gross billings across the core modeling and WAM businesses for the year ended December 31, 2013. Gross billings of the core business increased across the boards with the growth of the advertising market and increased market penetration. Gross billings of the WAM business decreased due to expiration of the contracts associated with the product licensing and related royalty agreements. Management does not expect to generate material gross billings and operating results from the WAM business in 2015.

Revenues
 
The increase in revenues for the year ended December 31, 2014, is attributable to the increases in gross billings of the core modeling business, partially offset by a decline in revenues from the WAM business.  Revenues of the core business increased across the boards with growth of the advertising market and increased market penetration.  The decline in the WAM revenues is directly associated with the expiration of an associated product licensing contract.

License Fees and Other Income
 
License fees and other income include the following:

•
Product licensing agreements between the Company, its clients and talent, whereby the Company participated in the sharing of royalties. During the year ended December 31, 2014, there were no royalties from these licensing agreements, compared to $180,000 for the year ended December 31, 2013.

•
An agreement between the Company and an unconsolidated affiliate to provide management and administrative services, as well as sharing of space.  For each of the years ended December 31, 2014 and December 31, 2013, management fee and rental income from the unconsolidated affiliate amounted to approximately $110,000.
 
 
13
 
 
•
Franchise revenues from independently owned model agencies that use the Wilhelmina trademark name and various services provided by the Company.  During the year ended December 31, 2014, franchise fees totaled approximately $286,000, compared to approximately $298,000 for the year ended December 31, 2013.
 
•
Fees derived from participants in the Company’s model search contests, events and television syndication royalties.  
 
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.
 
Gross profit margins were lower during the year ended December 31, 2014, when compared to the year ended December 31, 2013, as a result of the following:
 
•
Royalties earned in the WAM business are reported on a net basis and have ended, as previously discussed.
 
•
Mother agency fees measured as a percentage of core gross billings increased slightly, as a result of increased scouting efforts.
 
Salaries and Service Costs
 
Salaries and service costs consist of payroll and related costs and T&E (travel, meals and entertainment) costs required to deliver the Company’s services to its customers and talent. The following factors contributed to the increases in salaries and service costs when comparing the year ended December 31, 2014 to the year ended December 31, 2013:
 
•
The Company hired additional key personnel, such as talent agents and scouts, to execute the Company’s strategy to increase value to shareholders through the initiatives discussed in the “Strategy” section above. In addition, the Company has hired staff in order to facilitate the upgrade of its accounting system and enhanced reporting system.

•
During the year ended December 31, 2014, the Company experienced an increase in T&E costs in connection with delivering services to its customers and models.
 
The amount of salaries and service costs as a percentage of revenue decreased slightly to 17.0% for the year ended December 31, 2014 as compared to 17.4%, for the year ended December 31, 2013.  

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 year ended December 31, 2014, office and general expenses increased, when compared to the year ended December 31, 2013, due to costs associated with legal and professional fees, technology, and leases associated with equipment and property. The Company continues to invest in technology, equipment and property to improve delivery of model management services to its talent.
 
The amount of office and general expenses as a percentage of revenue for the year ended December 31, 2014 increased slightly to 6.0% from 5.6% for the year ended December 31, 2013.  

 
14
 
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 year ended December 31, 2014, depreciation and amortization expense totaled $603,000 (of which $333,000 relates to amortization of intangibles acquired in connection with the acquisition of the operating companies and divisions that currently conduct the Company’s fashion model management business (the “Wilhelmina Acquisition”), compared to $1,572,000 of depreciation and amortization expense during the year ended December 31, 2013 (of which $1,432,000 relates to amortization of intangibles acquired in connection with the Wilhelmina Acquisition).  Fixed asset purchases totaled approximately $771,000 and $421,000 during the year ended December 31, 2014 and December 31, 2013, respectively. Approximately $585,000 of the fixed assets purchases during the year ended December 31, 2014 related to the cost of upgrading accounting and reporting software.  The project is currently in process and is expected to be complete during the third quarter of 2015.
 
Corporate Overhead
 
Corporate overhead expenses include public company costs, director and executive officer compensation, legal, audit and professional fees, corporate office rent and travel.  Corporate overhead increased for the year ended December 31, 2014, when compared to the year ended December 31, 2013, primarily due to an increase in fees associated with listing the Company’s shares of Common Stock on NASDAQ, partially offset by a decrease in executive officer compensation and executive search fees.
 
Operating Margin

Operating margins increased for the year ended December 31, 2014, when compared to the year ended December 31, 2013, as a result of an increase in revenues from the core modeling business and the decrease in amortization expense associated with the completion of amortization on certain intangible assets, partially offset by increases in salaries and service costs, office and general expenses and corporate overhead costs.
 
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 years ended December 31, 2014 and December 31, 2013.
 
Interest Expense
 
The decrease in interest expense for the year ended December 31, 2014, when compared to the year ended December 31, 2013, is the result of a decrease in average borrowings under the Credit Agreement.

Foreign Currency Loss

For the year ended December 31, 2014, the Company incurred a loss on foreign currency of $42,000.  This loss is primarily associated with the conversion of funds in Chilean Pesos to US Dollars.

Equity in Operations from Wilhelmina Kids & Creative Mgmt., LLC

Wilhelmina also owns a non-consolidated 50% interest in Wilhelmina Kids & Creative Management LLC (“Kids”), a New York City-based modeling agency that specializes in representing child models, from newborns to children 14 years of age. The Company incurred a loss that is reflective of the pro rata ownership interest in Kids for the years ended December 31, 2014.

 
15
 
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. After adjusting for taxable income in 2014, the Company had federal income tax loss carryforwards of approximately $900,000, which begin expiring in 2019. A portion of the Company’s federal net operating loss carryforwards were utilized to offset federal taxable income generated during the year ended December 31, 2014.  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 future taxable income.  

Liquidity and Capital Resources
 
The Company’s cash balance increased to $5,870,000 at December 31, 2014, from $2,776,000 at December 31, 2013. For the year ended December 31, 2014, cash balances increased as a result of cash flows from operations of approximately $4,450,000.
 
Cash flow from operations were also utilized during the year ended December 31, 2014 to make payments under the Credit Agreement with Amegy Bank of $800,000, to repurchase shares of the Company’s Common Stock totaling approximately $6,000 and to purchase approximately $771,000 of fixed assets.
 
The Company’s primary liquidity needs are for financing working capital associated with the expenses it incurs in performing services under its client contracts. Generally, the Company incurs significant operating expenses with payment terms shorter than its average collections on billings.

Amegy Bank Credit Agreement
 
On October 24, 2012, the Company executed and closed a second amendment to its revolving Credit Agreement with Amegy Bank (the "Second Credit Agreement Amendment"), which amended and replaced the terms of the Credit Agreement, as previously amended. Under the terms of the Second Credit Agreement Amendment, (1) total availability under the revolving credit facility is $5,000,000, (2) the borrowing base is 75% of eligible accounts receivable (as defined in the Credit Agreement) and (3) the Company’s minimum net worth covenant is $22,000,000. The maturity date of the facility is October 15, 2015. Under the terms of the Second Amended and Restated Promissory Note evidencing the Company's obligation to repay advances under the facility, the interest rate on borrowings is prime rate plus 1%.

On July 31, 2014, the Company executed and closed the third amendment (the “Third Credit Agreement Amendment”) to its revolving facility with Amegy Bank. The terms of the Third Credit Agreement Amendment are essentially the same as those set forth in the Second Credit Agreement Amendment with the exception of the ability to issue up to $300,000 of standby letters of credit. Outstanding letters of credit will reduce the Company’s availability under the facility.
  
As of March 27, 2015, the Company had no outstanding borrowings under the Credit Agreement.
 
The Credit Agreement contains certain representations and warranties and affirmative and negative covenants.  Amounts outstanding under the Credit Agreement may be accelerated and become immediately due and payable upon the occurrence of an event of default.  All indebtedness and other obligations of the Company under the Credit Agreement are secured by all of the assets of the Company and its subsidiaries, provided, however, that the collateral does not include the intellectual property of the Company or the stock or equity interests in the Company’s subsidiaries.

Off-Balance Sheet Arrangements

As of December 31, 2013, the Company had $222,000 of restricted cash that served as collateral for an irrevocable standby letter of credit.  During 2014, the Company issued a replacement letter of credit and recovered the restricted cash of $222,000.  This replacement letter of credit is secured by available and unused borrowing capacity under the Company’s existing line of credit with Amegy Bank. 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.
 
 
16
 
Effect of Inflation
 
Inflation has not 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
 
See Note 2 Summary of Significant Accounting Policies in the audited financial statements included herewith.

ITEM 7A.
 
Not Applicable.
 
 
 
 
17
 
 
ITEM 8.
 
The Consolidated Financial Statements of the Company and the related report of the Company’s independent registered public accounting firm thereon, are included in this report at the page indicated.
 
 
Page
 
 
 
18
 
MONTGOMERY COSCIA GREILICH LLP
Certified Public Accountants
972.748.0300 p
972.748.0700 f
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
To the Board of Directors and Shareholders of
Wilhelmina International, Inc. and Subsidiaries:
 
 
We have audited the accompanying consolidated balance sheets of Wilhelmina International, Inc. and Subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wilhelmina International, Inc. and Subsidiaries as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
 
 
/s/ Montgomery Coscia Greilich, LLP
 
 
 
Plano, TX
March 27, 2015

 
19
 
WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
 
(In thousands, except share data)

ASSETS
           
   
2014
   
2013
 
Current assets:
           
Cash and cash equivalents
  $ 5,869     $ 2,776  
Accounts receivable, net of allowance for doubtful accounts of $679 and $571
    12,482       11,327  
Deferred tax asset
    1,986       1,659  
Prepaid expenses and other current assets
    252       257  
Total current assets
    20,589       16,019  
                 
Property and equipment, net of accumulated depreciation of $762 and $493
    1,333       831  
                 
Trademarks and trade names with indefinite lives
    8,467       8,467  
Other intangibles with finite lives, net of accumulated amortization of $8,222 and $7,888
    115       449  
Goodwill
    12,563       12,563  
Restricted cash
    -       222  
Other assets
    136       340  
                 
Total assets
  $ 43,203     $ 38,891  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
                 
Current liabilities:
               
Accounts payable and accrued liabilities
  $ 4,310     $ 2,969  
Due to models
    10,011       8,669  
Total current liabilities
    14,321       11,638  
                 
Long term liabilities
               
Amegy credit facility
    -       800  
Deferred income tax liability
    2,332       1,287  
Total long-term liabilities
    2,332       2,087  
                 
Total liabilities
    16,653       13,725  
                 
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; 5,869,220 and 5,870,333 shares issued and outstanding at December 31, 2014 and 2013
    65       65  
Treasury stock 602,818 and 601,705 shares in 2014 and 2013, at cost
    (1,643 )     (1,637 )
Additional paid-in capital
    86,778       86,589  
Accumulated deficit
    (58,650 )     (59,851 )
Total shareholders’ equity
    26,550       25,166  
                 
Total liabilities and shareholders’ equity
  $ 43,203     $ 38,891  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
20
 
WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Years ended December 31,
 
(In thousands, except per share data)
 
   
2014
   
2013
 
Revenues
           
Revenues
  $ 76,414     $ 65,360  
License fees and other income
    396       584  
Total revenues
    76,810       65,944  
                 
Model costs
    54,780       46,242  
                 
Revenues net of model costs
    22,030       19,702  
                 
Operating expenses
               
Salaries and service costs
    13,035       11,460  
Office and general expenses
    4,645       3,658  
Amortization and depreciation
    603       1,572  
Corporate overhead
    1,212       1,198  
Total operating expenses
    19,495       17,888  
Operating income
    2,535       1,814  
                 
Other income (expense):
               
Foreign exchange loss
    (42 )     -  
Loss from Wilhelmina Kids & Creative Mgmt., LLC
    (42 )     (7 )
Interest income
    6       8  
Interest expense
    (8 )     (61 )
Total other income (expense)
    (86 )     (60 )
                 
Income before provision for income taxes
    2,449       1,754  
                 
Provision for income taxes: (expense) benefit
               
Current
    (530 )     (532 )
Deferred
    (718 )     2,170  
      (1,248 )     1,638  
                 
Net income applicable to common stockholders
  $ 1,201     $ 3,392  
                 
                 
Basic income per common share
  $ 0.20     $ 0.60  
Diluted income per common share
  $ 0.20     $ 0.60  
                 
Weighted average common shares outstanding-basic
    5,869       5,952  
Weighted average common shares outstanding-diluted
    5,872       5,999  


The accompanying notes are an integral part of these consolidated financial statements.
 
 
21
 
WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
 
For the Years Ended December 31, 2014 and 2013
(In thousands)
 
   
Common
Shares
   
Stock
Amount
   
Treasury
Shares
   
Stock
Amount
   
Additional
Paid-in
Capital
   
Accum-
lated
Deficit
   
Total
 
Balances at December 31, 2012
    6,472     $ 65       (489 )   $ (1,227 )   $ 86,430     $ (63,243 )   $ 22,025  
Share based payment expense
    -       -       -       -       159       -       159  
Net income common shareholders
    -       -       -       -       -       3,392       3,392  
Purchase of Treasury Stock
    -       -       (113 )     (410 )     -       -       (410 )
Balances at December 31, 2013
    6,472       65       (602 )     (1,637 )     86,589       (59,851 )     25,166  
                                                         
Share based payment expense
    -       -       -       -       189       -       189  
Net income common shareholders
    -       -       -       -       -       1,201       1,201  
Purchase of Treasury Stock
    -       -       (1 )     (6 )     -       -       (6 )
Balances at December 31, 2014
    6,472     $ 65       (603 )   $ (1,643 )   $ 86,778     $ (58,650 )   $ 26,550  
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
22
 
WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Years ended December 31,
 
(In thousands)
 
   
2014
   
2013
 
             
Cash flows from operating activities:
           
Net income
  $ 1,201     $ 3,392  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Amortization and depreciation
    603       1,572  
Share based payment expense
    189       159  
Deferred income taxes
    718      
 (2,170
)
Changes in operating assets and liabilities:
               
(Increase) in accounts receivable
    (1,155 )     (1,423 )
(Increase) decrease in prepaid expenses and other current assets
    209       (85 )
Increase in due to models
    1,342       1,612  
Increase  in accounts payable and accrued liabilities
    1,341       303  
(Decrease) in foreign withholding claim
    -       (428 )
Net cash provided by operating activities
    4,448       2,932  
                 
Cash flows from investing activities:
               
Purchase of property and equipment
    (771 )     (421 )
Proceeds from sale of restricted certificate of deposit
    222       -  
Net cash used in investing activities
    (549 )     (421 )
                 
Cash flows from financing activities
               
Decrease in earn-out liability
    -       (20 )
Proceeds from Amegy line of credit
    -       500  
Repayment of Amegy line of credit
    (800 )     (950 )
Purchases of Treasury Stock
    (6 )     (410 )
Net cash used in financing activities
    (806 )     (880 )
                 
Net increase  in cash and cash equivalents
    3,093       1,631  
Cash and cash equivalents, beginning of period
    2,776       1,145  
Cash and cash equivalents, end of period
  $ 5,869     $ 2,776  
                 
Supplemental disclosures of cash flow information
               
Cash paid for interest
  $ 8     $ 61  
Cash paid for income taxes
  $ 298     $ 346  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
23
 
WILHELMINA INTERNATIONAL, INC. AND SUBSIDIARIES
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
 
Note 1.  Business Activity
 
Overview
 
The primary business of Wilhelmina International, Inc. ("Wilhelmina" or the "Company") 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, Wilhelmina has grown to include operations located in Los Angeles, Miami, London and the Republic of Chile, as well as a growing network of licensees comprising leading modeling agencies in various local markets across the U.S. as well as in Panama, Thailand, Dubai, Vancouver and Tokyo.  Wilhelmina 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.
 
Wilhelmina Transaction
 
On August 25, 2008, the Company and Wilhelmina Acquisition Corp., a New York corporation and wholly owned subsidiary of the Company (“Wilhelmina Acquisition”), entered into an agreement (the “Acquisition Agreement”) with Dieter Esch (“Esch”), Lorex Investments AG, a Swiss corporation (“Lorex”), Brad Krassner (“Krassner”), Krassner Family Investments Limited Partnership, a Nevada limited partnership (“Krassner L.P.” and together with Esch, Lorex and Krassner, the “Control Sellers”), Wilhelmina International, Ltd., a New York corporation (“Wilhelmina International”), Wilhelmina – Miami, Inc., a Florida corporation (“Wilhelmina Miami”), Wilhelmina Artist Management LLC, a New York limited liability company (“WAM”), Wilhelmina Licensing LLC, a Delaware limited liability company (“Wilhelmina Licensing”), Wilhelmina Film & TV Productions LLC, a New York limited liability company (“Wilhelmina TV” and together with Wilhelmina International, Wilhelmina Miami, WAM and Wilhelmina Licensing, the “Wilhelmina Companies”), Sean Patterson, a former executive with the Wilhelmina Companies (“Patterson”), and the shareholders of Wilhelmina Miami (the “Miami Holders” and together with the Control Sellers and Patterson, the “Sellers”).  Pursuant to the Acquisition Agreement, which closed February 13, 2009, the Company acquired the Wilhelmina Companies subject to the terms and conditions thereof (the “Wilhelmina Transaction”).  The Acquisition Agreement provided for (i) the merger of Wilhelmina Acquisition with and into Wilhelmina International in a stock-for-stock transaction, as a result of which Wilhelmina International became a wholly owned subsidiary of the Company and (ii) the Company’s purchase of the outstanding equity interests of the other Wilhelmina Companies for cash.

Reverse Stock Split

On July 11, 2014, the Company effected a one for twenty reverse stock split of its outstanding Common Stock (the “Reverse Stock Split”). The Company has retroactively adjusted all the share information to reflect the Reverse Stock Split in the accompanying consolidated financial statements and notes.
 
Note 2.  Summary of Significant Accounting Policies
 
The consolidated financial statements are prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States of America. The following is a summary of significant policies used in the preparation of the accompanying financial statements.
 
Principles of Consolidation and Basis of Presentation
 
The financial statements include the consolidated accounts of Wilhelmina and its wholly owned subsidiaries. Wilhelmina also owns a non-consolidated 50% interest in Wilhelmina Kids & Creative Management LLC which is accounted for under the equity method of accounting.  All significant inter-company accounts and transactions have been eliminated in the consolidation.
 
Reclassifications
 
Certain prior period amounts have been reclassified to conform to the current period presentation.
 
 
24
 
Revenue Recognition
 
In compliance with GAAP, when reporting revenue gross as a principal versus net as an agent, the Company assesses whether 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 the revenues are earned and collectability is reasonably assured, and the related costs incurred to the model or talent as model or talent cost.  In other model and talent relationships, where the Company believes the key indicators suggest the Company acts as an agent on behalf of the model or talent, the Company records revenue, when the revenues are 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 initial portfolios and other out-of-pocket costs, which are reimbursable only from collections from the Company’s customers 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.
 
Use of Estimates
 
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes.  Accounting estimates and assumptions are those that management considers to be the most critical to an understanding of the consolidated financial statements because they inherently involve significant judgments and uncertainties.  All of these estimates reflect management’s judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements.  If such conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates could change, which may result in future impairments of assets among other effects.
 
Cash Equivalents
 
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
 
Accounts Receivable and Allowance for Doubtful Accounts
 
Accounts receivable are accounted for at fair 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.
 
Concentrations of Credit Risk
 
The balance sheet items that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents and accounts receivable.  The Company maintains its cash balances in several different financial institutions in New York, Los Angeles and Miami. Balances in accounts other than “noninterest-bearing transaction accounts” are insured up to Federal Deposit Insurance Corporation (“FDIC”) limits of $250,000 per institution.  At December 31, 2014, the Company had cash balances in excess of FDIC insurance coverage of approximately $5,620,000. Concentrations of credit risk with accounts receivable are mitigated by the Company’s large number of clients and their dispersion across different industries and geographical areas.  The Company performs ongoing credit evaluations of its clients and maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable.
 
Property and Equipment
 
Property and equipment are stated at cost.  Depreciation and amortization, based upon the estimated useful lives (ranging from 2 to 7 years) of the assets or terms of the leases, are computed by use of the straight-line method.  Leasehold improvements are amortized based upon the shorter of the terms of the leases or asset lives.  When property and equipment are retired or sold, the cost and accumulated depreciation and amortization are eliminated from the related accounts and gains or losses, if any, are reflected in the consolidated statement of operations.
 
 
25
 
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  If it is determined that impairment has occurred, the amount of the impairment is charged to operations.
 
Depreciation expense totaled $269,000 and $140,000 for the years ended December 31, 2014 and 2013, respectively.
 
Goodwill and Intangible Assets
 
Goodwill and intangible assets consist primarily of goodwill and buyer relationships resulting from the Wilhelmina Transaction and the revenue interest in Ascendant Capital Partners acquired in 2005.  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.  A significant amount of judgment is required in estimating fair value and performing goodwill impairment tests.  Intangible assets with finite lives are amortized over useful lives ranging from 2 to 7 years.
 
The Company annually assesses whether the carrying value of their intangible assets exceeds its fair value and, if necessary, records an impairment loss equal to any such excess.
 
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 years ended December 31, 2014 and 2013.
 
Advertising
 
The Company expenses all advertising costs as incurred. Advertising expense for the year ended December 31, 2014 approximated $286,000 compared to $26,000 for the year ended December 31, 2013.
 
 
 
 
 
26
 
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 base 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 December 31, 2014, and as a result of this assessment, the Company believes that its deferred tax assets are more likely than not to be realized, and therefore, no valuation allowance has been recorded. 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.  Tax positions are subject to change in the future, as a number of years may elapse before a particular matter for which we have established a reserve is audited and finally resolved.  Federal tax returns for tax years 2011 through 2013 remain open for examination as of March 31, 2015.
 
Stock-Based Compensation
 
The Company records compensation expense for all awards granted.  The Company uses the Black-Scholes valuation model and straight-line amortization of compensation expense over the requisite service period for each separately vesting portion of the grants.  The Company utilizes stock-based awards as a form of compensation for employees and officers.
 
Net Income Per Common Share

At December 31, 2013, options to purchase 2,500 shares of Common Stock at an exercise price of $5.60 per share were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the Common Stock during the year.

  Fair Value Measurements
 
Effective January 1, 2008, the Company adopted the provisions of ASC 820, “Fair Value Measurements” (“ASC 820”), for financial assets and financial liabilities.  ASC 820 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosure about fair value measurements.  ASC 820 applies to all financial instruments that are being measured and reported on a fair value basis.  ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  ASC 820 also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into the following three levels:
 
•
Level 1 Inputs-Unadjusted quoted prices in active markets for identical assets or liabilities.
•
Level 2 Inputs-Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3 Inputs-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
 
Note 3.  Line of Credit
 
On April 29, 2011, the Company closed a credit agreement (the “Credit Agreement”) for a new $500,000 revolving credit facility with Amegy Bank National Association (“Amegy”). Borrowings under the facility are to be used for working capital and other general business purposes of the Company.
 
On January 12, 2012, the Company executed and closed an amendment (the “Credit Agreement Amendment”) to its revolving Credit Agreement with Amegy.  Under the terms of the Credit Agreement Amendment, which was effective as of January 1, 2012, (1) total availability under the revolving credit facility was increased to $1,500,000 (from $500,000), (2) the borrowing base was modified to 65% (from 80%) of eligible accounts receivable (as defined in the Credit Agreement) and (3) the Company's minimum net worth covenant was increased to $21,250,000 (from $20,000,000). In addition, the maturity date of the facility was extended to December 31, 2012.   The parties also executed an amendment to their pledge and security agreement ("Security Agreement Amendment") to reflect the execution of the Credit Agreement Amendment. The Company's obligation to repay advances under the amended facility is evidenced by an amended and restated promissory note.
 
 
27
 
On October 24, 2012, the Company executed and closed the second amendment (the “Second Credit Agreement Amendment”) to its revolving Credit Agreement with Amegy, which amended and replaced the terms amended by the Credit Agreement Amendment. Under the terms of the Second Credit Agreement Amendment, (1) total availability under the revolving credit facility was increased to $5,000,000 (from $1,500,000), (2) the borrowing base was modified to 75% (from 65%) of eligible accounts receivable (as defined in the Credit Agreement) and (3) the Company’s minimum net worth covenant was increased to $22,000,000 (from $21,250,000). In addition, the maturity date of the facility was extended to October 15, 2015 (from December 31, 2012). 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 was reduced to the prime rate plus 1% (from prime plus 2%) and a minimum interest rate (formerly 5%) was eliminated.

On July 31, 2014, the Company executed and closed the third amendment (the “Third Credit Agreement Amendment”) to its revolving facility with Amegy. The terms of the Third Credit Agreement Amendment are essentially the same as those set forth in the Second Credit Agreement Amendment with the exception of the ability to issue up to $300,000 of standby letters of credit. Outstanding letters of credit will reduce the Company’s availability under the facility.

As of December 31, 2014, the Company had no outstanding borrowings under the Credit Agreement.

Note 4.  Restricted Cash
 
As of December 31, 2013, the Company had $222,000 of restricted cash that served as collateral for an irrevocable standby letter of credit.  During 2014, the Company issued a replacement letter of credit and recovered the restricted cash of $222,000.  This replacement letter of credit is secured by available and unused borrowing capacity under the Company’s existing line of credit with 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.
 
Note 5.  Operating Leases
 
The Company is obligated under non-cancelable lease agreements for the rental of office space and various other lease agreements for the leasing of office equipment. These operating leases expire at various dates through 2021.  In addition to the minimum base rent, the office space lease agreements provide that the Company shall pay its pro-rata share of real estate taxes and operating costs as defined in the lease agreement.
  
The Company also leases, pursuant to a services agreement (see Note 11), certain corporate office space.
 
Future minimum payments under the lease agreements are summarized as follows:

Years Ending
December 31
 
Amount
(in
thousands)
 
       
2015
 
$
1,067
 
2016
   
822
 
2017
   
554
 
2018
   
568
 
2019
   
582
 
Thereafter
   
699
 
   
$
4,292
 

Rent expense totaled approximately $1,662,000 and $1,377,000 for the years ended December 31, 2014 and 2013, respectively.
 
 
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Note 6.  Licensing Agreements and Deferred Revenue
 
The Company is a party to various contracts by virtue of its relationship with certain talent.  The various contracts contain terms and conditions which require the revenue and the associated talent cost to be recognized on a straight-line basis over the contract period.  The Company was a party to product licensing agreements with a talent it previously represented.  Under the product licensing agreements, the Company earned a commission based on a certain percentage of the royalties earned by the talent or earned royalties from the licensee that was based on a certain percentage of net sales, as defined.  The Company recognized revenue from product licensing agreements of approximately $0 and $180,000 for the years ended December 31, 2014 and 2013, respectively.
 
Note 7.  Commitments and Contingencies
 
 On May 2, 2012, Sean Patterson, the former President of the Company’s subsidiary, Wilhelmina International, Ltd. (“Wilhelmina International”), filed a lawsuit in the Supreme Court of the State of New York, County of New York, against the Company, Wilhelmina International and Mark Schwarz, the Company’s Chairman of the Board, asserting claims for alleged breach of Mr. Patterson’s expired employment agreement (the “Employment Agreement”) with Wilhelmina International, defamation, and declaratory relief with respect to the alleged invalidity and unenforceability of the Employment Agreement’s non-competition and non-solicitation provisions. The Company and Wilhelmina International denied its material allegations and asserted counterclaims against Mr. Patterson for breach of the Employment Agreement, breach of fiduciary duty, and injunctive relief. On May 23, 2014, the court granted the defendants’ motion to dismiss Mr. Patterson’s defamation claim, and granted Mr. Patterson’s cross-motion for leave to file an amended defamation claim.  Mr. Patterson filed an Amended Complaint on May 15, 2014, repeating the claims for alleged breach of contract and declaratory relief, and filing an amended defamation claim. The Company and Wilhelmina International filed an Answer to the Amended Complaint, denying its material allegations, on June 17, 2014, and again asserted counterclaims for breach of contract, breach of fiduciary duty, and for injunctive relief.  Mr. Patterson replied to those counterclaims on June 27, 2014. The parties continue to be engaged in discovery. The Company believes Mr. Patterson’s claims are without merit and intends to vigorously defend itself and pursue the counterclaims.  
 
On October 24, 2013, a purported class action lawsuit brought by former Wilhelmina model Alex Shanklin and others (the “Shanklin Litigation”), naming as defendants the Company’s subsidiaries Wilhelmina International 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 a prior, now-dismissed action brought by Louisa Raske (the “Raske Litigation”). The claims in the Shanklin Litigation include breach of contract and unjust enrichment and are alleged to arise out of matters relating to those matters 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. As previously noted, 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.  The Company believes the claims asserted in the Shanklin Litigation are without merit and intends to vigorously defend itself and its subsidiaries.  On January 6, 2014, the Wilhelmina Subsidiary Parties moved to dismiss the Amended Complaint in the Shanklin Litigation for failure to state a cause of action upon which relief can be granted and other grounds, and other defendants also filed motions to dismiss.  By Decision and Order dated August 11, 2014, the court denied the Wilhelmina Subsidiary Parties’ motion to dismiss.   The parties were directed to engage in court-ordered mediation, but during that process, in October 2014, plaintiffs lost their principal attorney and new lead counsel for plaintiffs has not yet been identified.  On March 10, 2015, the court granted the motion by plaintiffs’ local New York counsel for leave to withdraw, gave the plaintiffs 90 days to find substitute counsel, and stayed the action in the interim.  The Company intends to vigorously defend the Wilhelmina Subsidiary Parties in the event plaintiffs move forward with substitute counsel.
 
In addition to the legal proceedings otherwise 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 December 31, 2014, a number of the Company’s employees were covered by employment agreements that vary in length from one to two years.  As of December 31, 2014, total compensation payable under the remaining contractual term of these agreements was approximately $4,956,000.  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 December 31, 2014, invoking the non-compete provisions would require the Company to compensate additional amounts to the covered employees during the non-compete period in the amount of approximately $4,115,000.
 
 
29
 
During 2010, the Company received IRS notices totaling approximately $726,000 related to foreign withholding claims for tax years 2006 and 2008.  As part of settlement negotiations with the IRS, the Company determined that approximately $197,000 of the foreign withholding claim for 2008 related to tax liabilities which the Company assumed as a result of the Wilhelmina Acquisition. To satisfy this liability, the Company paid the IRS, including penalties and interest of $26,000, a total of $223,000 during the year ended December 31, 2011. Since this amount was previously accrued as a liability at the Wilhelmina Acquisition date, no adjustment was required. During February 2013, the IRS division of Appeals concluded that there was no basis for abatement of the 2006 and 2008 foreign withholding claims, within the protective framework of reasonable cause, and therefore, closed the case. During March 2013, the Company paid approximately $454,000   in settlement of the foreign withholding claims for tax years 2006 and 2008. During March 2013, the Company offset approximately $454,000 of the Company’s remaining earnout obligation for losses incurred in the settlement of the foreign withholding claims for tax years 2006 and 2008. The Company is indemnified by certain of the selling parties in the Wilhelmina Acquisition for losses incurred as a result of such deficiency notice, and the selling parties have confirmed such responsibility to the Company.  Such indemnification was satisfied by offset to earn-out payments. 

Note 8.  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").  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, 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.  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.

Standstill Agreement
 
On April 24, 2013, the Company and Ronald L. Chez (“Chez”), a shareholder of the Company, entered into a letter agreement (the “Standstill Agreement”), pursuant to which Chez and his Affiliates (as defined in the Standstill Agreement) agreed not to, without the prior approval of the Board of Directors of the Company, (a) beneficially own in excess of 5,000,000 shares of Common Stock of the Company nor (b) directly or indirectly, make any proposal or offer to acquire (other than pursuant to a confidential proposal to the Board of Directors of the Company), or agree to acquire or to become the beneficial owner of (i) any shares of Common Stock, (ii) any other securities of the Company convertible, exchangeable or exercisable into shares of Common Stock or (iii) any other voting securities of the Company, which, when added together with any such securities beneficially owned by Chez and his Affiliates immediately prior thereto, would provide Chez and his Affiliates with voting power in the aggregate in excess of 5,000,000 shares of Common Stock.
 
The Company agreed to, within three (3) business days of the execution of the Standstill Agreement, promptly execute (and submit for signature by the Rights Agent) an amendment to the Rights Agreement, which amendment provides that Chez shall not be deemed to be an “Acquiring Person” under the Rights Agreement by virtue of (a) the acquisition of shares of Common Stock purchased by Chez and disclosed in the initial Schedule 13D with respect to his ownership of Company Common Stock filed by Chez on March 22, 2013 (the “Initial Chez 13D”) or (b) the acquisition of additional shares of Common Stock in one or more purchases which in the aggregate, when added together with the shares of Common Stock reflected in the Initial Chez 13D, do not exceed 5,000,000 shares of Common Stock.
 
The restrictions set forth in the Standstill Agreement will terminate upon the earlier of sixty (60) days following the expiration of the Rights Agreement or the earlier termination of the Rights Agreement (including pursuant to a redemption of the outstanding rights in accordance therewith) by the Company.
 
 
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Amendment to Rights Agreement
 
On April 25, 2013, the Company entered into a Thirteenth Amendment (the “Thirteenth Amendment”) to the Rights Agreement. The Thirteenth Amendment, among other things, (i) amends the definition of Acquiring Person (as defined in the Rights Agreement) to provide that Chez shall not be deemed to be an Acquiring Person solely by virtue of (a) purchases by Chez, individually and through individual retirement accounts for his benefit, of shares of Common Stock which resulted in his beneficial ownership exceeding 4.99% of the Common Stock outstanding, as disclosed in the Initial Chez 13D (the “Reported Chez Purchases”) or (b) purchases by Chez, individually or through individual retirement accounts for his benefit, of a number of shares of Common Stock which in the aggregate, when added together with the number of shares of Common Stock beneficially owned by Chez as reflected in the Initial Chez 13D (i.e., 335,093 shares of Common Stock), shall not exceed 500,000 shares of Common Stock (the “Permitted Additional Chez Purchases”), (ii) amends the definition of Triggering Event (as defined in the Rights Agreement) to provide that no Triggering Event shall result solely by virtue of any Reported Chez Purchases or Permitted Additional Chez Purchases, (iii) provides that a Distribution Date (as defined in the Rights Agreement) shall not be deemed to have occurred solely by virtue of any Reported Chez Purchases or Permitted Additional Chez Purchases and (iv) provides that no Reported Chez Purchases or Permitted Additional Chez Purchases shall be deemed to be events that cause the Rights to become exercisable. The Thirteenth Amendment also provides for certain other conforming and technical amendments to the terms and provisions of the Rights Agreement.

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 effected the Reverse Stock Split. The Company's stockholders previously approved the granting of authority to the Company’s Board of Directors to effect 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.
 
 
31
 
Note 9.  Income Taxes
 
The income tax (expense) benefit is comprised of the following (in thousands):

   
Year
Ended
December
31,
2014
   
Year
Ended
December
31,
2013
 
Current:
           
Federal
  $ 52     $ (37 )
State
    (527 )     (294 )
Foreign
    (55 )     (201 )
Total
    (530 )     (532 )
Deferred:
               
Federal
    (733 )     2,162  
State
    15       8  
Total
    (718 )     2,170  
Total
  $ (1,248 )   $ 1,638  
 
The income tax (expense) benefit differs from the amount computed by applying the statutory federal and state income tax rates to the net income before income tax.  The reasons for these differences were as follows (in thousands):
 
 
 
Year
Ended
December
31,
2014
   
Year
Ended
December
31,
2013
 
Computed income tax expense at statutory rate
  $ (828 )   $ (614 )
Increase in taxes resulting from:
               
Permanent and other deductions, net
    (187 )     (70 )
State income taxes, net of federal benefit
    (233 )     (191 )
Valuation allowance
    -       2,513  
Total income tax (expense) benefit
  $ (1,248 )   $ 1,638  

The tax effect of significant temporary differences, which comprise the deferred tax asset and liability, is as follows (in thousands):
 
   
2014
   
2013
 
Deferred tax asset:
           
Net operating loss carryforward
  $ 307     $ 1,057  
AMT credits
    352       387  
Accrued expenses
    1,024       739  
Allowance for doubtful accounts
    263       220  
Asset impairment
    281       281  
Stock-based compensation
    77       -  
Net deferred income tax asset
    2,304       2,684  
Deferred tax liability:
               
Property and equipment
    (280 )     (44 )
Intangible assets-brand name
    (1,798 )     (1,800 )
Goodwill
    (547 )     (452 )
Other Intangible assets
    (25 )     (16 )
Net deferred income tax liability
    (2,650 )     (2,312 )
                 
Net deferred tax asset/(liability)
  $ (346 )   $ 372  
 
 
32
 
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, the Company had federal income tax loss carryforwards of approximately $900,000, which begin expiring in 2019. A portion of the Company’s federal net operating loss carryforwards were utilized to offset federal taxable income generated during the year ended December 31, 2014.  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 future taxable income.

As of December 31, 2013, management determined that the deferred tax asset ("DTA") valuation allowance of approximately $2,500,000 should be reversed. The decision to reverse the DTA valuation allowance is based on the sustained profitability by the Company in recent years and management’s expectation of sufficient profitability in subsequent years to fully utilize the net operating losses. As a result of the DTA allowance reversal, net income for the year ended December 31, 2013 increased by approximately $2,170,000.

  Note 10.  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. 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 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 Credit Agreement.

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 500,000 shares of Common Stock. During the year ended December 31, 2013, the Company repurchased 113,156 shares of Common Stock at an average price of approximately $3.64 per share, for a total of approximately $410,000.

During the year ended December 31, 2014, the Company repurchased 1,113 shares of Common Stock at an average price of approximately $5.34 per share, for a total of approximately $6,000.

In total, the Company has repurchased 602,818 shares of Common Stock at an average price of approximately $2.73 per share, for a total of approximately $1,643,000 under the foregoing stock repurchase program during 2013 and 2014.
 
Note 11.  Related Parties
 
As of December 31, 2014, Mark Schwarz, the Chairman, Chief Executive Officer and Portfolio Manager of Newcastle Capital Management, L.P. (“NCM”), and John Murray, then Chief Financial Officer of NCM, held the following executive officer and board of director positions with the Company: Chairman of the Board and Executive Chairman, and Chief Financial Officer, respectively. NCM is the General Partner of Newcastle, which owns 2,430,726 shares of Common Stock. Clinton Coleman (Managing Director at NCM) and James Dvorak (Managing Director at NCM) also serve as directors of the Company. Mr. Murray is no longer Chief Financial Officer of the Company or NCM.
 
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 $2,500 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 $30,000 for the years December 31, 2014 and 2013. The Company owed NCM $0 as of December 31, 2014 and 2013, under the services agreement.
 
The Company has an agreement with an unconsolidated 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 $110,000 for the years December 31, 2014 and 2013.
 
 
33
 
Note 12.  Stock Options and Stock Purchase Warrants

During the year ended December 31, 2011, the Company adopted the 2011 Incentive Plan under which directors, officers, consultants, advisors and employees of the Company are eligible to receive stock option grants. The Company has reserved 300,000 shares of its Common Stock for issuance pursuant to the 2011 Incentive Plan. Under the 2011 Incentive Plan, options vest and expire pursuant to individual award agreements; however, the expiration date of unexercised options may not exceed ten years from the date of grant. The Company used the Black Scholes method to measure the compensation cost.
 
During 2012, the Company issued to its Chief Executive Officer, Alex Vaickus, an option grant of 100,000 shares of its Common Stock, under the 2011 Incentive Plan, with an exercise price of $2.34 per share, a five year vesting schedule (vesting in equal annual increments beginning on the first anniversary of the date of the grant) and a ten year term

In November 2014 and September 2013, the Company issued to its Chief Executive Officer, Alex Vaickus, option grants of 100,000 shares in each year of its Common Stock with an exercise price of $5.72 and $3.80 per share, respectively.  The grants have a five year vesting schedule (vesting in equal annual increments beginning on the first anniversary of the date of the grant) and a ten year term. In connection with this grant of options, the Company recognized compensation expense of approximately $189,000 and $159,000 during the years ended December 31, 2014 and 2013, respectively.
 
Option activity for the years ended December 31, 2014, is summarized as follows:
 
   
Number
of Shares
   
Weighted
Average
Exercise
Price
 
Outstanding, January 1, 2013
    102,500     $ 2.40  
Granted
    100,000       3.80  
Canceled
    -       -  
Outstanding, December 31, 2013
    202,500     $ 3.07  
                 
Granted
    100,000       5.72  
Canceled
    -       -  
Outstanding, December 31, 2014
    302,500     $ 3.95  
 
Total unrecognized compensation on options granted as of December 31, 2014 is $449,000.  Stock options to purchase an aggregate of 75,000 and 30,000 shares, as of December 31, 2014 and 2013, were exercisable and had a weighted average exercise price of $2.80 and $5.72 per share, respectively.
 
Note 13.  Benefit Plans
 
The Company established a 401(k) Plan (the “Plan”) for eligible employees of the Company.  Generally, all employees of the Company who are at least twenty-one years of age are eligible to participate in the Plan.  The Plan is a defined contribution plan which provides that participants may make voluntary salary deferral contributions, on a pretax basis, between 1% and 15% of their compensation in the form of voluntary payroll deductions, up to a maximum amount as indexed for cost-of-living adjustments.  The Company may make discretionary contributions.  No discretionary contributions were made during the years ended December 31, 2014 and 2013.
 
 
34
 
Note 14.  Intangible Assets
 
As of December 31, 2014, intangible assets with finite lives consisted of the following (in thousands):
 
Intangible assets subject to
amortization:
 
Gross
Cost
   
Accumulated
Amortization
   
Weighted-average
amortization
period (in years)
Customer lists
 
$
3,143
   
$
(3,127
)
 
5.1
Non-compete agreements
   
1,047
     
(951
)
 
6.5
Talent and model contractual relationships
   
2,514
     
(2,511
)
 
4.0
Employee contractual relationships
   
1,633
     
(1,633
)
 
5.0
Total
 
$
8,337
   
$
(8,222
)
 
4.9
 
Amortization expense totaled $333,000 and $1,432,000 for the years ended December 31, 2014 and 2013, respectively.
 
For the year ending December 31, 2015 the Company will record the remaining amortization of $115,000.
 
Note 15. Subsequent Event

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”). London represents a strategic acquisition for the Company that 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. The Company paid cash of $1,168,000 in exchanges for net operating assets of $ 373,000 resulting in $795 ,000 of intangible assets .


 
35
 

ITEM 9.
 
None.
 
ITEM 9A.
 
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’s 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 the Company’s management, have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2014, to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to 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 of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met.  In addition, the design of any control system is based in part upon certain assumptions about 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 have concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2014.
 
Management’s Annual Report on Internal Control Over Financial Reporting
 
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).  Under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 based on the framework in Internal Control - Integrated Framework 2013  issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on that evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2014.
 
Changes in Internal Control Over Financial Reporting
 
As of the end of the period covered by this report, there were no changes in the Company’s internal controls over financial reporting, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
ITEM 9B.
 
None.
 

 
36
 
PART III
 
ITEM 10.
 
The information required by Item 10 will be furnished on or prior to April 30, 2015 (and is hereby incorporated by reference) by an amendment hereto or pursuant to a definitive proxy statement in connection with the Company’s Annual Meeting of Shareholders for the fiscal year ended December 31, 2014.

ITEM 11.
 
The information required by Item 11 will be furnished on or prior to April 30, 2015 (and is hereby incorporated by reference) by an amendment hereto or pursuant to a definitive proxy statement in connection with the Company’s Annual Meeting of Shareholders for the fiscal year ended December 31, 2014.
 
ITEM 12.
 
The information required by Item 12 will be furnished on or prior to April 30, 2015 (and is hereby incorporated by reference) by an amendment hereto or pursuant to a definitive proxy statement in connection with the Company’s Annual Meeting of Shareholders for the fiscal year ended December 31, 2014.
 
ITEM 13.
 
The information required by Item 13 will be furnished on or prior to April 30, 2015 (and is hereby incorporated by reference) by an amendment hereto or pursuant to a definitive proxy statement in connection with the Company’s Annual Meeting of Shareholders for the fiscal year ended December 31, 2014.
 
ITEM 14.
 
The information required by Item 14 will be furnished on or prior to April 30, 2015 (and is hereby incorporated by reference) by an amendment hereto or pursuant to a definitive proxy statement in connection with the Company’s Annual Meeting of Shareholders for the fiscal year ended December 31, 2014.


 
37
 
PART IV
 
ITEM 15.
 
 
(a)
Documents Filed as Part of Report
 
 
1.
Financial Statements:
 
The Consolidated Financial Statements of the Company and the related report of the Company’s independent public accountants thereon have been filed under Item 8 hereof.
 
 
2.
Financial Statement Schedules:
 
The information required by this item is not applicable.
 
 
3.
Exhibits:
 
The exhibits listed below are filed as part of or incorporated by reference in this report.  Where such filing is made by incorporation by reference to a previously filed document, such document is identified in parentheses.  See the Index of Exhibits included with the exhibits filed as a part of this report.
 
 
 
 
 
38
 
 
Exhibit
Number
 
Description of Exhibits
     
2.1
 
Plan of Merger and Acquisition Agreement between Billing Concepts Corp., CRM Acquisition Corp., Computer Resources Management, Inc. and Michael A. Harrelson, dated June 1, 1997 (incorporated by reference from Exhibit 2.1 to Form 10-Q, dated June 30, 1997).
 
2.2
 
Stock Purchase Agreement between Billing Concepts Corp. and Princeton TeleCom Corporation, dated September 4, 1998 (incorporated by reference from Exhibit 2.2 to Form 10-K, dated September 30, 1998).
 
2.3
 
Stock Purchase Agreement between Billing Concepts Corp. and Princeton eCom Corporation, dated February 21, 2000 (incorporated by reference from Exhibit 2.1 to Form 8-K, dated March 16, 2000).
 
2.4
 
Agreement and Plan of Merger between Billing Concepts Corp., Billing Concepts, Inc., Enhanced Services Billing, Inc., BC Transaction Processing Services, Inc., Aptis, Inc., Operator Service Company, BC Holding I Corporation, BC Holding II Corporation, BC Holding III Corporation, BC Acquisition I Corporation, BC Acquisition II Corporation, BC Acquisition III Corporation and BC Acquisition IV Corporation, dated September 15, 2000 (incorporated by reference from Exhibit 2.1 to Form 8-K, dated September 15, 2000).
 
2.5
 
Stock Purchase Agreement by and among New Century Equity Holdings Corp., Mellon Ventures, L.P., Lazard Technology Partners II LP, Conning Capital Partners VI, L.P. and Princeton eCom Corporation, dated March 25, 2004 (incorporated by reference from Exhibit 10.1 to Form 8-K, dated March 29, 2004).
 
2.6
 
Series A Convertible 4% Preferred Stock Purchase Agreement by and between New Century Equity Holdings Corp. and Newcastle Partners, L.P., dated June 18, 2004 (incorporated by reference from Exhibit 2.1 to Form 8-K, dated June 30, 2004).
 
2.7
 
Agreement by and among New Century Equity Holdings Corp., Wilhelmina Acquisition Corp., Wilhelmina International, Ltd., Wilhelmina – Miami, Inc., Wilhelmina Artist Management LLC, Wilhelmina Licensing LLC, Wilhelmina Film & TV Productions LLC, Dieter Esch, Lorex Investments AG, Brad Krassner, Krassner Family Investments, L.P., Sean Patterson and the shareholders of Wilhelmina – Miami, Inc., dated August 25, 2008 (incorporated by reference from Exhibit 10.1 to Form 8-K, dated August 26, 2008).
 
2.8
 
Purchase Agreement by and between New Century Equity Holdings Corp. and Newcastle Partners, L.P., dated August 25, 2008 (incorporated by reference from Exhibit 10.3 to Form 8-K, dated August 26, 2008).
 
2.9
 
Letter Agreement, dated February 13, 2009, by and among New Century Equity Holdings Corp., Wilhelmina Acquisition Corp., Wilhelmina International Ltd., Wilhelmina – Miami, Inc., Wilhelmina Artist Management LLC, Wilhelmina Licensing LLC, Wilhelmina Film & TV Productions LLC, Dieter Esch, Lorex Investments AG, Brad Krassner, Krassner Family Investments Limited Partnership, Sean Patterson and the shareholders of Wilhelmina – Miami, Inc. (incorporated by reference from Exhibit 10.1 to Form 8-K, dated February 18, 2009).
 
3.1
 
Restated Certificate of Incorporation of Wilhelmina International, Inc. (incorporated by reference from Exhibit 3.1 to Form S-1/A, dated January 30, 2012).
 
3.2
 
Amended and Restated Bylaws of Wilhelmina International, Inc. (incorporated by reference from Exhibit 3.2 to Form 8-K, dated May 18, 2011).
 
 
3.3
 
Certificate 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).
 
 
39
 

4.1
 
Form 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).
 
4.2
 
Rights 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).
 
4.3
 
Amendment 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).
 
4.4
 
Form of Rights Certificate (incorporated by reference from Exhibit 4.1 to Form 8-K, dated July 10, 2006).
 
4.5
 
Registration 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).
 
4.6
 
Registration 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).
 
4.7
 
Second 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).
 
4.8
 
Third 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).
 
4.9
 
Fourth 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).
 
4.10
 
Fifth 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).
 
4.11
 
Sixth 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).
 
4.12
 
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 4.1 to Form 8-K, dated July 2, 2010).
 
4.13
 
Eighth Amendment to Rights Agreement, dated August 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).
 
4.14
 
Ninth 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).
 
4.15
 
Tenth 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).
 
 
40
 
 
4.16
 
Eleventh 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).
 
4.17
 
Twelfth 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).
 
4.18
 
Thirteenth 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).
 
4.19
 
Fourteenth Amendment to Rights Agreement, dated July 10, 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).
     
*10.1
 
Billing Concepts Corp’s 1996 Employee Comprehensive Stock Plan amended as of August 31, 1999 (incorporated by reference from Exhibit 10.8 to Form 10-K, dated September 30, 1999).
 
*10.2
 
Form of Option Agreement between Billing Concepts Corp. and its employees under the 1996 Employee Comprehensive Stock Plan (incorporated by reference from Exhibit 10.9 to Form 10-K, dated September 30, 1999).
 
*10.3
 
Amended and Restated 1996 Non-Employee Director Plan of Billing Concept Corp. amended as of August 31, 1999 (incorporated by reference from Exhibit 10.10 to Form 10-K, dated September 30, 1999).
 
*10.4
 
Form of Option Agreement between Billing Concepts Corp. and non-employee directors (incorporated by reference from Exhibit 10.11 to Form 10-K, dated September 30, 1998).
 
*10.5
 
Billing Concept Corp.’s 401(k) Retirement Plan (incorporated by reference from Exhibit 10.14 to Form 10-K, dated September 30, 2000).
 
10.6
 
Revenue Sharing Agreement, dated as of October 5, 2005, by and between New Century Equity Holdings Corp. and ACP Investments LP (incorporated by reference from Exhibit 10.1 to Form 10-Q, dated September 30, 2005).
 
10.7
 
Principals Agreement, dated as of October 5, 2005, by and between New Century Equity Holdings Corp. and ACP Investments LP (incorporated by reference from Exhibit 10.2 to Form 10-Q, dated September 30, 2005).
 
*10.8
 
Employment Agreement by and among New Century Equity Holdings Corp., Wilhelmina International, Ltd. and Sean Patterson, dated November 10, 2008 (incorporated by reference from Exhibit 10.1 to Form 10-Q, dated September 30, 2008).
 
10.9
 
Letter Agreement, dated February 13, 2009, by and between New Century Equity Holdings Corp. and Dieter Esch (incorporated by reference from Exhibit 10.2 to Form 8-K, dated February 18, 2009).
 
10.10
 
Promissory Note, dated December 31, 2009, issued by Wilhelmina International, Inc. to Dieter Esch (incorporated by reference from Exhibit 10.1 to Form 8-K, dated January 6, 2010).
 
10.11
 
Global Settlement Agreement, dated October 18, 2010, by and among Wilhelmina International, Inc., Newcastle Partners, L.P., Dieter Esch, Lorex Investments AG, Brad Krassner and Krassner Family Investments Limited Partnership (incorporated by reference from Exhibit 10.1 to Form 8-K, dated October 21, 2010).
 
10.12
 
Mutual Support Agreement, dated August 25, 2008, by and among Newcastle Partners, L.P., Dieter Esch, Lorex Investments AG, Brad Krassner and Krassner Family Investments Limited Partnership (incorporated by reference from Annex D to the Proxy Statement on Schedule 14A filed December 22, 2008).
 
10.13
 
First Amendment to Mutual Support Agreement, dated October 18, 2010, by and among Newcastle Partners, L.P., Dieter Esch, Lorex Investments AG, Brad Krassner and Krassner Family Investments Limited Partnership (incorporated by reference from Exhibit 10.2 to Form 8-K, dated October 21, 2010).
 
 
41
 
 
10.14
 
Amendment to Promissory Note, dated December 7, 2010, issued by Wilhelmina International, Inc. to Dieter Esch (incorporated by reference from Exhibit 10.1 to Form 8-K, dated December 9, 2010).
 
10.15
 
Credit Agreement, dated as of April 29, 2011, by and between Wilhelmina International, Inc. and Amegy Bank National Association (incorporated by reference from Exhibit 10.1 to Form 8-K, dated April 29, 2011).
 
10.16
 
Promissory Note, dated as of April 20, 2011, of Wilhelmina International, Inc. for the benefit of Amegy Bank National Association (incorporated by reference from Exhibit 10.2 to Form 8-K, dated April 29, 2011).
 
10.17
 
Pledge and Security Agreement, dated as of April 20, 2011, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association (incorporated by reference from Exhibit 10.3 to Form 8-K, dated April 29, 2011).
 
10.18
 
Guaranty, dated as of April 20, 2011, by the guarantor signatories thereto for the benefit of Amegy Bank National Association (incorporated by reference from Exhibit 10.4 to Form 8-K, dated April 29, 2011).
 
10.19
 
Wilhelmina International, Inc. 2011 Incentive Plan (incorporated by reference from Exhibit 10.5 to Form 8-K, dated April 29, 2011).
 
10.20
 
Form of Option Agreement (incorporated by reference from Exhibit 10.6 to Form 8-K, dated April 29, 2011).
 
10.21
 
First Amendment to Credit Agreement, dated January 1, 2012, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association (incorporated by reference from Exhibit 10.1 to Form 8-K, dated January 12, 2012).
 
10.22
 
Amended and Restated Line of Credit Promissory Note, dated as of January 1, 2012, by Wilhelmina International, Inc. for the benefit of Amegy Bank National Association (incorporated by reference from Exhibit 10.2 to Form 8-K, dated January 12, 2012).
 
10.23
 
First Amendment to Pledge and Security Agreement, dated as of January 1, 2012, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association (incorporated by reference from Exhibit 10.3 to Form 8-K, dated January 12, 2012).
 
*10.24
 
Employment Agreement, dated as of August 29, 2012, by and between Wilhelmina International, Inc. and Alex Vaickus (incorporated by reference from Exhibit 10.1 to Form 8-K, dated September 25, 2012).
 
*10.25
 
Stock Option Letter Agreement, dated as of September 25, 2012, by and between Wilhelmina International, Inc. and Alex Vaickus (incorporated by reference from Exhibit 10.2 to Form 8-K, dated September 25, 2012).
 
10.26
 
Second Amendment to Credit Agreement, dated as of October 24, 2012, by and between Wilhelmina International, Inc. and Amegy Bank National Association (incorporated by reference from Exhibit 10.1 to Form 8-K, dated October 24, 2012).
 
10.27
 
Second Amended and Restated Line of Credit Promissory Note, dated as of October 24, 2012, by Wilhelmina International, Inc. for the benefit of Amegy Bank National Association (incorporated by reference from Exhibit 10.2 to Form 8-K, dated October 24, 2012).
 
10.28
 
Second Amendment to Pledge and Security Agreement, dated as of October 24, 2012, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association (incorporated by reference from Exhibit 10.3 to Form 8-K, dated October 24, 2012).
 
10.29
 
 
Letter 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).
 
10.30
 
Third Amendment to Pledge and Security Agreement, dated as of July 31, 2014, by and among Wilhelmina International, Inc., the guarantor signatories thereto and Amegy Bank National Association (filed herewith).
 
*10.31
 
Offer Letter, dated January 23, 2015, by and between Wilhelmina International, Inc. and David Chaiken (incorporated by reference from Exhibit 10.1 to the Form 8-K, dated January 23, 2015).
 
14.1
 
Wilhelmina International, Inc. Code of Business Conduct and Ethics (incorporated by reference from Exhibit 14.1 to Form 8-K, dated April 21, 2009).
 
 
42
 
 
16.1
 
Burton, McCumber & Cortez, L.L.P. Letter, dated September 28, 2012 (incorporated by reference from Exhibit 16.1 to Form 8-K, dated September 27, 2012).
     
21.1
 
List of Subsidiaries (filed herewith).
     
23.1
 
Consent of Montgomery, Coscia & Greilich, L.L.P. (filed herewith).
 
31.1
 
Certification of Principal Executive Officer in Accordance with Section 302 of the Sarbanes-Oxley Act (filed herewith).
 
31.2
 
Certification of Principal Financial Officer in Accordance with Section 302 of the Sarbanes-Oxley Act (filed herewith).
 
32.1
 
Certification of Principal Executive Officer in Accordance with Section 906 of the Sarbanes-Oxley Act (filed herewith).
 
32.2
 
Certification of Principal Financial Officer in Accordance with Section 906 of the Sarbanes-Oxley Act (filed herewith).
                                                                                                                                                                                                 

*
Includes compensatory plan or arrangement.
 
 
 
 
43
 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) 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:  March 27, 2015
By:
/s/ Alex Vaickus
 
 
Name
Alex Vaickus
 
 
Title:
Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 27th day of March 2015.
 
     
/s/Mark E. Schwarz
 
Executive Chairman and
Mark E. Schwarz
 
Chairman of the Board
     
/s/Alex Vaickus
 
Chief Executive Officer
Alex Vaickus
 
Principal Executive Officer
     
/s/David S. Chaiken
 
Chief Accounting Officer
David S. Chaiken
 
(Principal Financial Officer and
Principal Accounting Officer)
     
/s/Clinton Coleman
 
Director
Clinton Coleman
   
     
     
/s/James Dvorak
 
Director
James Dvorak
   
     
/s/Horst-Dieter Esch
 
Director
Horst-Dieter Esch
   
     
/s/Mark Pape
 
Director
Mark Pape
   
     
/s/Jeffrey Utz
 
Director
Jeffrey Utz
   
     
/s/James Roddey
 
Director
James Roddey
   
 
 
 
 
44
 
 
 
Exhibit 10.30
 
THIRD AMENDMENT TO CREDIT AGREEMENT
 
This THIRD AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”) is made effective as of July 31, 2014, by and among WILHELMINA INTERNATIONAL, INC. , a Delaware corporation, (“ Borrower ”), AMEGY BANK NATIONAL ASSOCIATION , a national banking association (“ Bank ”), and each of the Guarantors set forth on the signature pages hereof (each a “ Guarantor ”, and collectively the “ Guarantors ”).
 
RECITALS
 
A.   Borrower and Bank entered into that certain Credit Agreement dated as of April 20, 2011, as amended by that certain First Amendment to Credit Agreement dated as of January 1, 2012, and as amended by that certain Second Amendment to Credit Agreement dated as of October 24, 2012 (the “ Credit Agreement ”).
 
B.   In connection with the Credit Agreement, Borrower executed and delivered to Bank that certain Line of Credit Promissory Note dated April 20, 2011, in the stated principal amount of $500,000.00, as amended and restated by that certain Amended and Restated Line of Credit Promissory Note dated as of January 1, 2012, in the stated principal amount of $1,500,000.00, and as amended and restated by that certain Second Amended and Restated Line of Credit Promissory Note dated as of October 24, 2012, in the stated principal amount of $5,000,000.00 (the “ Line of Credit Note ”).
 
C.   In connection with the Credit Agreement, (i) Guarantors (other than Wilhelmina Creative, LLC) executed and delivered to Bank that certain Unlimited Guaranty Agreement dated April 20, 2011, and (ii) Wilhelmina Creative, LLC, at the time of its formation as an additional subsidiary of Borrower, executed and delivered to Lender pursuant to Section 4.14 of the Credit Agreement that certain Unlimited Guaranty Agreement dated effective as of May 25, 2012 (the “ Guaranty Agreements ”).
 
D.   Borrower has requested Bank (i) to extend additional credit to Borrower and (ii) to amend the Credit Agreement in certain respects, and Bank has agreed to the same upon the terms and conditions hereinafter set forth.
 
NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:
 
ARTICLE I
DEFINITIONS
 
Section 1.1.   Definitions .  Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meaning as assigned to them in the Credit Agreement, as amended hereby.
 
ARTICLE II
AMENDMENTS
 
Section 2.1.   Amendment to Section 1.1(a) and (b) of the Credit Agreement .   Sections 1.1(a) , (b) , and (c) of the Credit Agreement are hereby amended and restated in their entirety to hereafter read as follows.
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 1
 
 
 
“(a)            Line of Credit .  Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including October 24, 2015 not to exceed at any time the aggregate principal amount of Five Million and No/100 Dollars ($5,000,000.00) minus all outstanding Letter of Credit Liabilities, as hereinafter defined (“ Line of Credit ”), the proceeds of which shall be used (i) to pay fees and expenses incurred in connection with this Agreement and the transaction contemplated hereby, and (ii) for working capital and other general business purposes of Borrower.  Borrower’s obligation to repay advances under the Line of Credit are evidenced by a Second Amended and Restated Line of Credit Promissory Note dated as of October 24, 2012, in the stated principal amount of $5,000,000.00 (as such promissory note may be amended, restated, refinanced or otherwise modified from time to time, the “ Line of Credit Note ”), all terms of which are incorporated herein by this reference.
 
(b)            Limitation on Borrowings .  Outstanding borrowings under the Line of Credit, to a maximum of the principal amount set forth above, shall not at any time exceed the then-current borrowing base (the “ Borrowing Base ”) equal to the following amount as determined in good faith by Bank based upon a Borrowing Base Certificate (herein so called) in the form of Exhibit A attached hereto and incorporated herein by reference or in such other form as may be acceptable to Bank and such other information as Bank may consider relevant to such determination: an amount equal to seventy-five percent (75%) of the aggregate value of Borrower’s Eligible Accounts Receivable (which amount, as of any date of determination, is hereinafter called the “ Borrowing Base Amount ”), minus all outstanding Letter of Credit Liabilities.  All of the foregoing shall be determined by Bank upon receipt and review of all collateral reports required hereunder and such other documents and collateral information as Bank may from time to time reasonably require.  Borrower acknowledges that the Borrowing Base was established by Bank with the understanding that, among other items, the aggregate of all returns, rebates, discounts, credits and allowances for the immediately preceding three (3) months at all times shall be less than five percent (5%) of Borrower’s aggregate gross sales for said period.  If such dilution of Borrower’s accounts for the immediately preceding three (3) months at any time exceeds five percent (5%) of Borrower’s aggregate gross sales for said period, or if there at any time exists any other matters, events, conditions or contingencies which Bank reasonably believes may affect payment of any portion of any Borrower’s accounts, Bank, in its sole discretion, may reduce the foregoing advance rate against Eligible Accounts Receivable to a percentage appropriate to reflect such additional dilution and/or establish additional reserves against Borrowers’ Eligible Accounts Receivable.
 
As used herein, “ Eligible Accounts Receivable ” shall mean and consist solely of trade accounts created in the ordinary course of Borrower’s business, upon which Borrower’s right to receive payment is absolute and not contingent upon the fulfillment of any condition whatsoever, and in which Bank has a perfected security interest of first priority, and shall not include:
 
(i)   any account which is unpaid more than ninety (90) days past the initial invoice date therefor;
 
(ii)   that portion of any account for which there exists any right of setoff, defense or discount (except regular discounts allowed in the ordinary course of business to promote prompt payment) or for which any defense or counterclaim has been asserted;
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 2
 
 
 
(iii)   any account which represents an obligation of any state or municipal government or of the United States government or any political subdivision thereof;
 
(iv)   any account which represents an obligation of an account debtor located in a foreign country;
 
(v)   any account which arises from the sale or lease to or performance of services for, or represents an obligation of, an employee, affiliate, partner, member, parent or subsidiary of Borrower;
 
(vi)   that portion of any account, which represents interim or progress billings or retention rights on the part of the account debtor;
 
(vii)   any account which represents an obligation of any account debtor when twenty percent (20%) or more of Borrower’s accounts from such account debtor are not eligible pursuant to (i) above;
 
(viii)   that portion of any account from an account debtor which represents the amount by which such Borrower’s total accounts from said account debtor exceeds twenty percent (20%) of Borrower’s total accounts; or
 
(ix)   any account deemed ineligible by Bank when Bank, in its sole discretion, deems the creditworthiness or financial condition of the account debtor, or the industry in which the account debtor is engaged, to be unsatisfactory.
 
(c)    Borrowing and Repayment .  Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.  If at any time the total outstanding borrowings under the Line of Credit exceed the then current Borrowing Base, then Borrower shall immediately repay the amount of such excess.”
 
Section 2.2.   Amendment to Section 1.2 of the Credit Agreement .  Subparagraph (c) of Section 1.2 of the Credit Agreement is amended and restated in its entirety to hereafter read as follows:
 
“(c)            Unused Facility Fee .  Borrower agrees to pay to Bank an unused facility fee on the daily average unused amount of the Line of Credit for the period from and including the date of this Agreement to and including October 24, 2015, at the rate of one quarter of one percent (0.25%) per annum based on a 360 day year and the actual number of days elapsed.  For the purpose of calculating the unused facility fee hereunder, the Line of Credit shall be deemed utilized by the amount of all outstanding advances under the Line of Credit and all outstanding Letter of Credit Liabilities.  Accrued unused facility fee shall be payable in arrears on October 24 th of each calendar year during the term of this Agreement commencing October 24, 2014, with the final payment being due on October 24, 2015.”
 
Section 2.3.   Addition of Section 1.5 of the Credit Agreement .  A new Section 1.5 is hereby added to the Credit Agreement in its appropriate numerical order to read as follows:
 
“SECTION 1.5.  LETTERS OF CREDIT .
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 3
 
 
 
(a)   Issuance .  Subject to the terms and conditions of this Agreement, Lender agrees to issue one or more standby letters of credit for the account of Borrower from time to time from the date hereof through the date that is five (5) business days prior to October 24, 2015; provided, however , that the outstanding Letter of Credit Liabilities shall not at any time exceed the least of : (a) Three Hundred Thousand and No/100 Dollars ($300,000.00); (b) an amount equal to $5,000,000.00 minus the outstanding borrowings under the Line of Credit; or (c) an amount equal to the Borrowing Base Amount minus the outstanding borrowings under the Line of Credit.  Each Letter of Credit shall have an expiration date not to exceed three hundred sixty-five (365) days, shall not have an expiration date beyond October 24, 2015, shall be payable in Dollars, shall have a minimum face amount of Fifty Thousand and No/100 Dollars ($50,000.00), must support a transaction that is entered into in the ordinary course of Borrower’s business, must be satisfactory in form and substance to Lender, will be subject to the payment of such Letter of Credit fees as Lender may require, and shall be issued pursuant to such documents and instruments executed by Borrower (including, without limitation, Lender’s form of Letter of Credit application as then in effect) as Lender may require. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a direct or indirect subsidiary of Borrower, Borrower shall be obligated to reimburse Lender hereunder for any and all drawings under such Letter of Credit.  Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any of its direct or indirect subsidiaries inures to the benefit of Borrower, and that Borrower’s business derives substantial benefits from the businesses of such subsidiaries.    For purposes of this Agreement, the term “ Letter of Credit Liabilities ” shall mean, at any time, the aggregate face amount of all outstanding Letters of Credit, plus any amounts drawn under any Letters of Credit for which Bank has not been fully reimbursed by Borrower (unless Lender, in its sole discretion, has cleared the drawn amount, in which case the drawn amount would not constitute a Letter of Credit Liability).  The Letter of Credit Liabilities are part of Borrower’s indebtedness and obligations hereunder.  For purposes of this Agreement, the term “ Letter of Credit ” shall mean any letter of credit issued by Bank for the account of or at the direction of Borrower pursuant to this section.
 
(b)   Fees .  Borrower agrees to pay to Lender, as a condition precedent to the issuance (including the extension) of each Letter of Credit, an issuance fee payable on the date of issuance equal to the greater of (i) one percent (1%) per annum of the face amount of such Letter of Credit, and (ii) $1,000 (including any extension).
 
(c)   Reimbursement .  Each payment by Lender pursuant to a drawing under a Letter of Credit is required to be reimbursed by Borrower to Lender and payable immediately upon such drawing and, at the sole option of Lender, can be charged by Lender as a borrowing under the Line of Credit Note and this Agreement by Borrower as of the day and time such payment is made by Lender and in the amount of such payment.
 
(d)   Additional Costs in Respect of Letters of Credit .  If, after the date hereof, there shall occur the adoption of any applicable law, rule, or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by Lender with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency there shall be imposed, modified, or deemed applicable any tax, reserve, special deposit, or similar requirement against or with respect to or measured by reference to Letters of Credit issued or to be issued hereunder or Lender’s commitment to issue Letters of Credit hereunder, and the result shall be to increase the cost to Lender of issuing or maintaining any Letter of Credit or its commitment to issue Letters of Credit hereunder or reduce any amount receivable by Lender hereunder in respect of any Letter of Credit (which increase in cost, or reduction in amount receivable, shall be the result of Lender’s reasonable allocation of the aggregate of such increases or reductions resulting from such event), then, upon demand by Lender, Borrower agrees to pay to Lender, from time to time as specified by Lender, such additional amounts as shall be sufficient to compensate Lender for such increased costs or reductions in amount.  A statement as to such increased costs or reductions in amount incurred by Lender, submitted by Lender to Borrower, shall be conclusive as to the amount thereof; provided that the determination thereof is made on a reasonable basis.”
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 4
 
 
 
Section 2.4.   Amendment to Section 3.2 of the Credit Agreement .   Section 3.2 of the Credit Agreement is amended and restated in its entirety to hereafter read as follows:
 
“SECTION 3.2.  CONDITIONS OF EACH EXTENSION OF CREDIT .     The obligation of Bank to make each extension of credit requested by Borrower hereunder or issue any Letter of Credit (including the initial Letter of Credit) shall be subject to the fulfillment to Bank’s satisfaction of each of the following conditions:
 
(a)   Borrowing Request or Letter of Credit Request .  Bank shall have received, as the case may be, a borrowing request or a Letter of Credit request, in form and substance satisfactory to Bank, dated the date of such extension of credit or Letter of Credit and executed by an authorized officer of Borrower.
 
(b)   Compliance .  The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of each extension of credit or issuance of Letter of Credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date (except that representations and warranties which are made only as of a specific date or dates shall be true on and as of such date or dates), and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default shall have occurred and be continuing or shall exist.
 
(c)   No Material Adverse Change .  Since September 30, 2010, there shall have been no material adverse change, as reasonably determined by Bank, in the financial condition or business of any Loan Party, nor any material decline, as reasonably determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of any Loan Party.
 
(d)   Documentation .  Bank shall have received all additional documents which may be required in connection with such extension of credit or Letter of Credit, as the case may be.”
 
Section 2.5.   Addition of Section 6.3 to the Credit Agreement .  A new Section 6.3 is hereby added to and made part of the Credit Agreement and shall read as follows:
 
“SECTION 6.3.  CASH COLLATERAL .     If any Event of Default shall occur and be continuing or the termination of the Agreement shall have occurred, Borrower shall, if requested by Lender, immediately deposit with and pledge to Lender cash or cash equivalent investments in an amount equal to the outstanding Letter of Credit Liabilities as security for the indebtedness and obligations of Borrower hereunder.”
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 5
 
 
 
Section 2.6.   Amendment to Section 7.4 of the Credit Agreement .  Subparagraph (c) of Section 7.4 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
 
(c)           any and all other liabilities, losses, damages, penalties, judgments, suits, claims, costs and expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel) in connection with the foregoing and any other investigative, administrative or judicial proceedings, whether or not such Indemnitee shall be designated a party thereto, which may be imposed on, incurred by or asserted against any such Indemnitee, in any manner related to or arising out of or in connection with the making of any loans or advances hereunder, the use or intended use of the proceeds of such loans or advances or any Letter of Credit, or any and all taxes, levies, deductions, and charges imposed on Lender or any of Lender’s correspondents in respect of any Letter of Credit. Notwithstanding the foregoing, Borrower shall not be obligated to indemnify any Indemnitee for any Indemnified Liability caused by the gross negligence or willful misconduct of such Indemnitee.
 
Section 2.7.   Replacement of Borrowing Base Certificate .  The Borrowing Base Certificate attached as Exhibit A to the Credit Agreement is hereby amended and restated in its entirety with the form of Borrowing Base Certificate attached hereto as Exhibit A .
 
ARTICLE III
CONDITIONS PRECEDENT
 
Section 3.1.   Conditions .  The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent, unless specifically waived by the Lender:
 
(a)   The following instruments shall have been duly and validly executed and delivered to Lender by the parties thereto, all in form, scope and content satisfactory to the Lender:
 
(i)   this Amendment executed by Borrower and Guarantors; and
 
(ii)   Resolutions of the Board of Directors (or other governing body) of Borrower and each Guarantor certified by the Secretary or an Assistant Secretary (or other custodian of records of each such entity) which authorize the execution, delivery, and performance by Borrower and each Guarantor of this Amendment and the other Loan Documents to be executed in connection herewith.
 
(b)   The representations and warranties contained herein, in the Credit Agreement, as amended hereby, and in each other Loan Document shall be true and correct as of the date hereof, as if made on the date hereof, except to the extent such representation and warranties relate to an earlier date.
 
(c)   No Event of Default shall have occurred and be continuing and no Default shall exist, unless such Event of Default or Default has been specifically waived in writing by Lender.
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 6
 
 
 
(d)   All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto, shall be satisfactory to Lender and its legal counsel.
 
(e)   There shall have been no material adverse change in the condition (financial or otherwise) of Borrower or any Guarantor since October 24, 2012.
 
ARTICLE IV
RATIFICATIONS, REPRESENTATIONS, WARRANTIES
 
Section 4.1.   Ratifications .  The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect.  Borrower and Guarantors agree that the Credit Agreement, as amended hereby, and the other Loan Documents shall continue to be legal, valid, binding obligations of Borrower and Guarantors, enforceable against Borrower and Guarantors in accordance with their respective terms.
 
Section 4.2.   Renewal of Security Interests .  Each of Borrower and Guarantors hereby renews, regrants and affirms the liens and security interests created and granted in the Credit Agreement and in all other Loan Documents (including, without limitation, those certain Pledge and Security Agreements to which it is a party, as amended), to secure the prompt payment of all indebtedness and obligations of Borrower and each Guarantor under the Loan Documents as amended and increased by the terms hereof, including without limitation any Letter of Credit Liabilities.  Each of Borrower and Guarantors agree that this Amendment shall in no manner affect or impair the liens and security interests securing the indebtedness of Borrowers and Guarantors to Bank and that such liens and security interests shall not in any manner be waived, the purposes of this Amendment being to modify the Credit Agreement as herein provided, and to carry forward all liens and security interests securing same, which are acknowledged by Borrower and Guarantors to be valid and subsisting.
 
Section 4.3.   Representations and Warranties .  Borrower and Guarantors hereby represent and warrant to Lender as follows:
 
(a)   The execution, delivery and performance of this Amendment and any and all other Loan Documents executed and delivered in connection herewith have been authorized by all requisite corporate action on the part of Borrower and each Guarantor and do not and will not conflict with or violate any provision of any applicable laws, rules, regulations or decrees, the organizational documents of Borrower or any Guarantor, or any agreement, document, judgment, license, order or permit applicable to or binding upon Borrower or any Guarantor or their respective assets.  No consent, approval, authorization or order of, and no notice to or filing with, any court or governmental authority or third person is required in connection with the execution, delivery or performance of this Amendment or to consummate the transactions contemplated hereby;
 
(b)   The representations and warranties contained in the Credit Agreement, as amended hereby, and the other Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent such representations and warranties relate to an earlier date;
 
(c)   No Event of Default under the Credit Agreement or any Loan Document has occurred and is continuing;
 
(d)   Borrower and Guarantors are in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby, and the other Loan Documents to which each is a party;
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 7
 
 
 
(e)   Neither Borrower nor any Guarantor has amended any of its organizational documents since the date of the execution of the Credit Agreement; and
 
(f)   As of the date of this Amendment, the unpaid principal amount of the Line of Credit Note is $0.00, which amount is unconditionally owed by Borrower to Bank without offset, defense or counterclaim of any kind or nature whatsoever.
 
Section 4.4.   Guarantors’ Consent and Ratification .  Each Guarantor hereby consents and agrees to the terms of this Amendment, and agrees that the Guaranty Agreement to which it is a party shall remain in full force and effect and shall continue to be the legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms.  Furthermore, each Guarantor hereby agrees and acknowledge that (a) the  Guaranty Agreements are Loan Document, (b) the Guaranty Agreements are not subject to any claims, defenses or offsets, (c) nothing contained in this Amendment or any other Loan Document shall adversely affect any right or remedy of Bank under the Guaranty Agreements, (d) the execution and delivery of this Amendment shall in no way reduce, impair or discharge any obligations of any Guarantor pursuant to the Guaranty Agreements and shall not constitute a waiver by Bank against any Guarantor, (e) by virtue hereof and by virtue of the Guaranty Agreements, each Guarantor hereby guarantees to Lender the prompt and full payment and full and faithful performance by the Borrower of the entirety of the Guaranteed Indebtedness (as defined in the Guaranty Agreements) including, without limitation, all amounts owing under the Line of Credit Note and all Letter of Credit Liabilities, (f) no Guarantor’s consent is required to the effectiveness of this Amendment, and (g) no consent by any Guarantor is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Credit Agreement or any present or future Loan Document.
 
ARTICLE V
MISCELLANEOUS
 
Section 5.1.   Survival of Representations and Warranties .  All representations and warranties made in the Credit Agreement or any other Loan Document, including without limitation, any Loan Document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Bank or any closing shall affect such representations and warranties or the right of Bank to rely thereon.
 
Section 5.2.   Reference to Credit Agreement .  Each of the Loan Documents, including the Credit Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement, as amended hereby, are hereby amended so that any reference in such Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement, as amended hereby.
 
Section 5.3.   Expenses of Bank .  As provided in the Credit Agreement, Borrower agrees to pay on demand all reasonable costs and expenses incurred by Bank in connection with the preparation, negotiation and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements hereto, including, without limitation, the reasonable costs and fees of Bank’s legal counsel, and all reasonable costs and expenses incurred by Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, and any other Loan Document, including, without limitation, the reasonable costs and fees of Bank’s legal counsel.
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 8
 
 
 
Section 5.4.   RELEASE . BORROWER AND EACH GUARANTOR HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE BANK, ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN.  ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH BORROWER AND ANY GUARANTOR MAY NOW OR HEREAFTER HAVE AGAINST BANK, ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY LOAN, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS, AND NEGOTIATIONS FOR AND EXECUTION OF THE LOAN DOCUMENTS.
 
Section 5.5.   Severability .  Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.
 
Section 5.6.   GOVERNING LAW .  THIS AMENDMENT SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
 
Section 5.7.   Successors and Assigns .  This Amendment is binding upon and shall inure to the benefit of the parties hereto and their respective successors, assigns, heirs, executors, and legal representatives, except that none of the parties hereto other than Bank may assign or transfer any of its rights or obligations hereunder without the prior written consent of Bank.
 
Section 5.8.   WAIVER OF TRIAL BY JURY .  THE PARTIES HERETO AGREE THAT NO PARTY SHALL REQUEST A TRIAL BY JURY IN THE EVENT OF LITIGATION BETWEEN THEM CONCERNING THE LOAN DOCUMENTS OR ANY CLAIMS OR TRANSACTIONS IN CONNECTION THEREWITH, IN EITHER A STATE OR FEDERAL COURT, THE RIGHT TO TRIAL BY JURY BEING EXPRESSLY WAIVED BY BANK, BORROWER AND GUARANTORS.  EACH OF BANK, BORROWER AND GUARANTORS ACKNOWLEDGES THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING.
 
Section 5.9.   Counterparts .  This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.
 
Section 5.10.   Descriptive Headings .  The captions in this Amendment are for convenience only and shall not define or limit the provisions hereof.
 
Section 5.11.   ENTIRE AGREEMENT .  THIS AMENDMENT, THE CREDIT AGREEMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH AND PURSUANT TO THIS AMENDMENT AND THE CREDIT AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 9
 
 
 
Section 5.12.   Arbitration .  All disputes, claims, and controversies arising from this Amendment shall be arbitrated in accordance with Section 7.15 of the Credit Agreement.
 
[Remainder of Page Intentionally Left Blank]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT - Page 10
 
 
 
EXECUTED as of the date first written above.
 
 
BORROWER :
 
       
 
WILHELMINA INTERNATIONAL, INC. ,
 
 
a Delaware corporation
 
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Chief Financial Officer
 
       
       
 
BANK :
 
       
 
AMEGY BANK NATIONAL ASSOCIATION ,
a national banking association
       
 
By:
/s/ Andrew Cullum
 
  Name:
Andrew Cullum
 
  Title:
VP
 
       
       
 
GUARANTORS :
 
       
 
WILHELMINA LICENSING LLC ,
 
 
a Delaware limited liability company
 
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT – Signature Page
 
 
 
 
 
WILHELMINA FILM & TV PRODUCTIONS LLC ,
a Delaware limited liability company
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
       
       
 
WILHELMINA ARTIST MANAGEMENT LLC ,
a New York limited liability company
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
       
       
 
WILHELMINA-MIAMI, INC. ,
 
 
a Florida corporation
 
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
       
       
 
WILHELMINA INTERNATIONAL, LTD. ,
 
 
a New York corporation
 
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
       
       
 
WILHELMINA WEST, INC. ,
 
 
a California corporation
 
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
       
       
 
WILHELMINA MODELS, INC. ,
 
 
a New York corporation
 
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT – Signature Page
 
 
 
 
 
LW1, INC. ,
 
 
a California corporation
 
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
       
       
 
WILHELMINA CREATIVE, LLC ,
 
 
a Florida limited liability company
 
       
 
By:
/s/ John Murray
 
   
John Murray
 
   
Vice President and Chief Financial Officer
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT – Signature Page
 
 
 
EXHIBIT A

Borrowing Base Certificate

(see attached)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT – Exhibit A
 
 
 
BORROWING BASE CERTIFICATE


Date: _______________, 20__ (the “ Certificate Date ”)
 
Amegy Bank National Association
2501 N. Harwood, Suite 1600
Dallas TX  75201
Attention:  Mr. Drew Cullum
 
To Whom It May Concern:
 
Reference is made to that certain Credit Agreement dated as of April 20, 2011 (as amended by that certain First Amendment to Credit Agreement dated January 1, 2012, that certain Second Amendment to Credit Agreement dated October 24, 2012, and that certain Third Amendment to Credit Agreement dated July [__], 2014, and as amended, restated, supplemented or modified from time to time, the “ Credit Agreement ”) by and between Wilhelmina International, Inc. (“ Borrower ”) and Amegy Bank National Association (“ Bank” ). Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement.
 
This Borrowing Base Certificate (this “ Certificate ”) is prepared, and is based upon information accurate, as of the Certificate Date, and is provided in accordance with Section 3.1(b)(iv) or Section 4.3(d)   of the Credit Agreement.
 
Borrower hereby certifies, represents and warrants to Bank as follows:
 
1.           all information contained herein is true, correct and complete as of the Certificate Date; and
 
2.           the calculation of the Borrowing Base as of the Certificate Date is as follows:
 
A.
Borrowing Base Amount
 
 
  (i)
Maximum Line Amount
 
$5,000,000.00
  (ii)
Eligible Accounts Receivable Advance Rate
 
80%
  (iii)
Eligible Accounts Receivable (see Schedule 1 ):
 
$ ____________
  (iv)
Eligible Account Receivable Component – Line A(ii) multiplied by Line A(iii)
 
$ ____________
B.
Outstanding principal amount of advances, loans, or other extensions of credit:
 
$ ____________
C.
Outstanding Letter of Credit Liabilities:
 
$ ____________
D.
TOTAL AVAILABILITY
 
Line A(iv) minus Line B minus Line C
 
$ ____________
_______________________________
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT – Exhibit A
 
 
 
Borrower has signed this Borrowing Base Certificate as of the day and year first above written.
 
 
WILHELMINA INTERNATIONAL, INC.,
  a Delaware corporation
 
       
 
By:
   
   
John Murray
 
   
Chief Financial Officer
 
 
 
 
 
 
 
 

 
THIRD AMENDMENT TO CREDIT AGREEMENT – Exhibit A
 
 
 
 
SCHEDULE 1
 
CALCULATION OF ELIGIBLE ACCOUNTS RECEIVABLE
 
1.
Trade accounts payable in the ordinary course of Borrowers' business:
 
 
$ _____________
2.
Minus the sum of the following ineligible accounts (to be determined with respect to the accounts of each Borrower and then added to determine the aggregate amount for all Borrowers):
 
   
   
(i)
such accounts as to which payment is not absolute or is contingent:
$                      
 
   
(ii)
such accounts which are unpaid more than 90 days past the initial invoice date therefor:
$                      
 
   
(iii)
that portion of such accounts for which there exists any right of setoff, defense or discount (except regular discounts allowed in the ordinary course of business to promote prompt payment) or for which any defense or counterclaim has been asserted:
 
$                      
 
   
(iv)
such accounts which represent an obligation of any state or municipal government or of the United States government or any political subdivision thereof
 
$                      
 
   
(v)
such accounts which represent an obligation of an account debtor located in a foreign country:
$                      
 
   
(vi)
such accounts which arise from the sale or lease to or performance of services for, or represents an obligation of, an employee, affiliate, partner, member, parent or subsidiary of any Borrower.
 
$                      
 
   
(vii)
that portion of such accounts which represents interim or progress billings or retention rights on the part of the account debtor:
$                      
 
   
(viii)
such accounts which represent an obligation of any account debtor when twenty percent (20%) or more of a Borrower’s accounts from such account debtor are not eligible pursuant to clause (ii) above:
 
$                      
 
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT – Exhibit A
 
 
 
 
 
   
(ix)
[that portion of such accounts from an account debtor which represents the amount by which Borrower’s total accounts from said account debtor exceeds ___________ percent (____%) of Borrower’s total accounts:]
 
and
$                      
 
   
(x)
such accounts deemed ineligible by Bank when Bank, in its sole discretion, deems the creditworthiness or financial condition of the account debtor, or the industry in which the account debtor is engaged, to be unsatisfactory:
$                      
 
     
Subtotal:
 
 
$                                
3.
Total amount of Eligible Accounts Receivable (item 1 minus item 2):
 
$                                


 
 
 
 
 
 
 
 
THIRD AMENDMENT TO CREDIT AGREEMENT – Exhibit A
 
 
Exhibit 21.1
 
Wilhelmina International, Inc. Subsidiaries
 
Subsidiary Name
State / Country of Organization or Incorporation
   
Wilhelmina International, Ltd.
New York
Wilhelmina West, Inc.
California
LW1, Inc.
California
Wilhelmina Models, Inc.
New York
Wilhelmina Kids & Creative Management LLC*
New York
Wilhelmina-Miami, Inc.
Florida
Wilhelmina Artist Management LLC
New York
Artists at Wilhelmina LLC
Florida
Wilhelmina Licensing LLC
Delaware
Wilhelmina Licensing (Texas) LLC
Texas
Wilhelmina Film & TV Productions LLC
Delaware
Wilhelmina Chile SPA (Chile)
Chile
Wilhelmina London Limited (London)
United Kingdom

 
* 50% owned by Wilhelmina International, Ltd.
Exhibit 23.1
 
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
We consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-11492, File No. 333-36785, File No. 333-37420 and File No. 33370951) and Forms S-8 (File No. 333-08249, File No. 333-08251, File No. 333-30854, File No. 333-30926, File No. 333-55316, File No. 333-66903 and File No. 333-70947) of Wilhelmina International, Inc. of our report dated March 27, 2015, which appears on page 17 of this Annual Report on Form 10-K for the years ended December 31, 2014 and 2013.
 
 
/s/ Montgomery Coscia Greilich LLP
 
 
Plano, Texas
 
March 27, 2015
Exhibit 31.1
CERTIFICATION

I, Alex Vaickus, certify that:

1.
I have reviewed this annual report on Form 10-K of Wilhelmina International, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:  March 27, 2015
By:
/s/ Alex Vaickus
 
   
Principal Executive Officer
Exhibit 31.2
CERTIFICATION

I, David S. Chaiken, certify that:

1.
I have reviewed this annual report on Form 10-K of Wilhelmina International, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:  March 27, 2015
By:
/s/ David S. Chaiken
 
   
Principal Financial Officer and
Principal Accounting Officer
 
Exhibit 32.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Wilhelmina International, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alex Vaickus, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  March 27, 2015
By:
/s/ Alex Vaickus
 
    Name:  
Alex Vaickus
 
    Title:   Chief Executive Officer   
     
(Principal Executive Officer)
 
 
Exhibit 32.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Wilhelmina International, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David S. Chaiken, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: March 27, 2015
By:
/s/ David S. Chaiken
 
    Name:
David S. Chaiken
 
    Title:
Chief Accounting Officer
 
     
(Principal Financial Officer)