Note 1.  Business Activity

 

Overview

 

The primary business of Wilhelmina is fashion model management. These business operations are headquartered in New York City. The Company’s predecessor was founded in 1967 by Wilhelmina Cooper, a renowned fashion model, and became 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, Chicago, and London, as well as a network of licensees in various local markets in the U.S. and several international markets. Wilhelmina provides traditional, full-service fashion model and talent management services, specializing in the representation and management of models, entertainers, artists, athletes and other talent, to various clients, including retailers, designers, advertising agencies, print and electronic media and catalog companies.

 

Business Acquisition

 

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

 

The purchase price of $1.3 million included $0.2 million of discounted value of contingent consideration assuming London achieved certain performance benchmarks. The purchase price net of cash acquired was $0.5 million of which $0.3 million was paid at the time of the closing. In December 2015, the Company reduced the contingent consideration by $104 thousand because London did not achieve the initial benchmark at December 31, 2015. As of September 30, 2016, the Company increased the contingent consideration by $30 thousand based on London’s expectation of meeting its benchmark for 2016. The remaining $0.1 million of contingent consideration was paid in January 2017.

 

Under the purchase method of accounting, the purchase price was allocated to the net tangible and intangible assets acquired and liabilities assumed, based on the fair value of the assets and liabilities of London in accordance with ASC 805, “Business Combinations.” The intangible assets acquired included intangible assets with finite lives, such as customer relationships and talent relationships, which are being amortized on a straight line basis over their estimated useful lives ranging from two to eight years. The remaining acquired intangible assets were allocated to non-amortizable goodwill. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of completion of the London transaction.

 

 

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

F- 7

 

Note 2.  Summary of Significant Accounting Policies

 

The consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). 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 consolidation.

 

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 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 clients as a result of future work, are expensed to model costs as incurred. Any repayments of such costs are credited to model costs in the period received.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. Accounting estimates and assumptions discussed herein 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 net realizable value, do not bear interest and are short-term in nature. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability to collect on accounts receivable. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to the allowance. During 2016, the Company increased its allowance to $1.6 million, with a $0.2 million corresponding charge to earnings. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the 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, Miami, London and the Republic of Chile. Balances in accounts other than “noninterest-bearing transaction accounts” are insured up to Federal Deposit Insurance Corporation (“FDIC”) limits of $250 thousand per institution. At December 31, 2016, the Company had cash balances in excess of FDIC insurance coverage of approximately $3.0 million. Balances in London accounts are covered by Financial Services Compensation Scheme (“FSCS”) limits of £75 thousand or approximately $0.1 million per institution. At December 31, 2016, the Company had cash balances in excess of FSCS coverage of approximately $0.4 million. 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 two to seven 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.

 

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.

 

For the years ended December 31, 2016 and 2015, depreciation expense totaled $0.5 million and $0.3 million, respectively. Depreciation expense increased, primarily due to the Company’s new accounting software being placed into service in the second half of 2016.

 

Goodwill and Intangible Assets

 

Goodwill consists primarily of customer and talent relationships arising from past business acquisitions. Intangible assets with finite lives are amortized over useful lives ranging from two to eight years. Goodwill and intangible assets with indefinite lives are not 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.  

 

The Company annually assesses whether the carrying value of its intangible assets exceeds their fair value and, if necessary, records an impairment loss equal to any such excess. Each interim reporting period, the Company assesses whether events or circumstances have occurred which indicate that the carrying amount of an intangible asset exceeds its 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, 2016 and 2015.

 

Advertising

 

The Company expenses all advertising costs as incurred. Advertising expense for the year ended December 31, 2016 approximated $152 thousand compared to $308 thousand for the year ended December 31, 2015. The decrease in advertising costs was due to the Company’s increase in utilization of our in-house art and marketing department.

 

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, 2016, the Company believes that its deferred tax assets are more likely than not to be realized, and therefore, no valuation allowance has been recorded.

 

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 an established reserve is audited and finally resolved. Federal tax returns for tax years 2013 through 2015 remain open for examination as of December 31, 2016.

 

Stock-Based Compensation

 

The Company utilizes stock-based awards as a form of compensation for certain officers. 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.

 

Fair Value Measurements

 

The Company has 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.  Notes Payable

 

The Company has a credit agreement with Amegy Bank which provides a $4.0 million revolving line of credit and previously provided up to a $3.0 million term loan which could be drawn through October 24, 2016. The revolving line of credit is subject to a borrowing base derived from 80% of eligible accounts receivable (as defined) and the Company’s minimum net worth covenant of $20 million. The revolving line of credit bears interest at prime plus 0.50% payable monthly. As of December 31, 2016, the Company had a $0.2 million irrevocable standby letter of credit outstanding under the revolving line of credit. The revolving line of credit presently expires on October 24, 2017.

 

On August 16, 2016, the Company drew $2.7 million of the term loan and used the proceeds to fund the purchase of shares of its common stock from Lorex Investment AG. The term loan bears interest at 4.5% per annum and is payable in monthly payments of interest only until November, 2016, followed by 47 equal monthly payments of principal and interest computed on a 60-month amortization schedule and a final payment of principal and interest due on October 24, 2020.

F- 10

 

Note 4.  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 certain corporate office space with an affiliate.

 

The following table summarizes future minimum payments under the current lease agreements:

 

Years Ending December 31		Amount (in thousands)
2017		$	1,307
2018			1,200
2019			1,131
2020			1,081
2021			340
Total		$	5,059

 

Rent expense totaled approximately $1.1 million and $1.8 million for the years ended December 31, 2016 and 2015 respectively.

Note 5.  Commitments and Contingencies

 

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

 

On June 6, 2016, another purported class action lawsuit was brought against the Company by former Wilhelmina model Shawn Pressley and others (the “Pressley Litigation”), in New York State Supreme Court (New York County) by the same counsel representing the plaintiffs in the Shanklin Litigation, and asserting identical, although more recent, claims as those in the Shanklin Litigation. On June 14, 2016, the Court stayed all proceedings in the Pressley Litigation until a decision is issued on the motion to dismiss in the Shanklin Litigation. The Company believes the claims asserted in the Pressley Litigation are without merit, and intends to vigorously defend the action.

 

On August 20, 2015, a lawsuit was brought against the Company and the Company’s former Chief Accounting Officer by a former employee of Wilhelmina model, Angel Betancourt (the “Plaintiff”). The lawsuit alleged that the Plaintiff was discriminated against during his time of employment and upon his termination. The lawsuit further alleged that the Plaintiff was not properly compensated due to misclassification by the Company under the federal Fair Labor Standards Act. During the fourth quarter of 2016, the Company paid $25 thousand in excess of its insurance coverage to settle the matter.

  

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

Note 6.  Income Taxes

 

The following table summarizes the income tax (expense) benefit for the years ended December 31, 2016 and 2015 (in thousands):

 

		2016				2015
Current:
Federal		$	-			$	(4	)
State			(177	)			(24	)
Foreign			(119	)			(180	)
Current Total			(296	)			(208	)
Deferred:
Federal			(380	)			(797	)
State			(119	)			74
Foreign			(20	)			97
Deferred Total			(519	)			(626	)
Total		$	(815	)		$	(834	)

 

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 following table shows the reasons for these differences (in thousands):

 

		2016				2015
Computed income tax expense at statutory rate		$	(319	)		$	(815	)
Increase in taxes resulting from:
Permanent and other deductions, net			(94	)			(4	)
Forfeiture of stock options, net			(164	)			-
Foreign income taxes			(71	)			-
State income taxes, net of federal benefit			(167	)			(15	)
Total income tax (expense) benefit		$	(815	)		$	(834	)

 

 

The following table shows the tax effect of significant temporary differences, which comprise the deferred tax asset and liability (in thousands):

 

		2016				2015
Deferred tax asset:
Net operating loss carryforward		$	506			$	-
AMT credits			261				267
Accrued expenses			959				938
Allowance for doubtful accounts			209				420
Asset impairment			-				281
Stock-based compensation			138				164
Other intangible assets			104				119
Foreign NOL			-				20
Total deferred income tax asset			2,177				2,209
Deferred tax liability:
Property and equipment			(990	)			(667	)
Intangible assets-brand name			(1,798	)			(1,798	)
Goodwill			(661	)			(578	)
Other intangible assets			(295	)			(215	)
Total deferred income tax liability			(3,744	)			(3,258	)
Net deferred tax liability		$	(1,567	)		$	(1,049	)

 

Generally, the Company’s combined effective tax rate is high relative to reported net income as a result of certain amounts of amortization expense, stock based compensation, and corporate overhead not being deductible and income being attributable to certain states in which it operates. In recent years, the majority of taxes being paid by the Company were state taxes, not federal taxes. The Company operates in four states which have relatively high tax rates: California, New York, Illinois, and Florida. The Company’s combined (federal and state) effective tax rate would have been even higher in prior years if it were not for federal net operating loss carryforwards available to offset current federal taxable income. The Company’s prior federal income tax loss carryforwards were fully utilized upon filing the Company’s 2015 income tax return. However, due to tax losses for the 2016 year, the Company has recorded $1.4 million of income tax loss carryforwards as of December 31, 2016.

Note 7.  Treasury Stock

 

During 2012, the Board of Directors authorized a stock repurchase program whereby the Company could repurchase up to 500,000 shares of its outstanding common stock. During 2013, the Board of Directors renewed and extended the Company’s share repurchase authority to enable it to repurchase up to an aggregate of 1,000,000 shares of common stock. On August 12, 2016, the Board of Directors increased by an additional 500,000 shares the number of shares of the Company’s common stock which may be repurchased under its stock repurchase program to an aggregate of 1,500,000 shares. The shares may be repurchased from time-to-time in the open market or through privately negotiated transactions at prices the Company deems appropriate. The program does not obligate the Company to acquire any particular amount of common stock and may be modified or suspended at any time at the Company’s discretion.

 

On August 16, 2016, the Company entered into a Stock Purchase Agreement with Lorex Investment AG (“Lorex”), pursuant to which the Company purchased from Lorex 400,000 shares of the Company’s common stock at a price of $6.83 per share, resulting in an aggregate purchase price of $2.7 million. Lorex is an affiliate of Horst-Dieter Esch, a director of the Company. Mr. Esch recused himself from all deliberations of the Board of Directors with respect to the stock repurchase from Lorex.

 

From 2012 through September 30, 2016, the Company has repurchased an aggregate of 1,090,370 shares of common stock at an average price of approximately $4.49 per share, for a total of approximately $4.9 million in repurchases under the stock repurchase program. During the year ended December 31, 2016, 406,716 shares were repurchased at an average price of $6.82 per share. As a result, the repurchase of an additional 409,630 shares are presently authorized under the stock repurchase program.

Note 8.  Related Parties

 

The Executive Chairman of the Company, Mark E. Schwarz, is also the chairman, chief executive officer and portfolio manager of Newcastle Capital Management, L.P. (“NCM”). NCM is the general partner of Newcastle Partners L.P. (“Newcastle”), which is the largest shareholder of the Company. Clinton J. Coleman (Managing Director at NCM) and James A. Dvorak (Managing Director at NCM) also serve as directors of the Company.

 

The Company’s corporate headquarters are located at 200 Crescent Court, Suite 1400, Dallas, Texas 75201, which are also the offices of NCM. The Company occupies a portion of NCM space on a month-to-month basis at $2,500 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 thousand for each of the years ended December 31, 2016 and 2015. The Company did not owe NCM any amounts under the services agreement as of December 31, 2016.

 

The Company has an agreement with the unconsolidated Wilhelmina Kids affiliate to provide management and administrative services, as well as sharing of office space. Management fees and rental income from the unconsolidated affiliate amounted to approximately $0.1 million for the years ended December 31, 2016 and 2015. At December 31, 2016, Wilhelmina had accrued $0.1 million payable to another owner of Kids in accordance with the December 9, 2016 agreement outlining the planned dissolution of Kids, which was paid on March 1, 2017.

 

On August 16, 2016, the Company entered into a Stock Purchase Agreement with Lorex, pursuant to which the Company purchased shares of its common stock from Lorex (See Note 7). Lorex is an affiliate of Horst-Dieter Esch, a director of the Company. Mr. Esch recused himself from all deliberations of the Board of Directors with respect to the stock repurchase from Lorex.

Note 9.  Stock Options and Stock Purchase Warrants

 

During 2012, shareholders of the Company approved the 2011 Incentive Plan which authorized the issuance of up to 300,000 shares of the Company’s common stock pursuant to stock options, restricted stock, stock appreciation rights and other equity incentives awarded to directors, officers, consultants, advisors and employees of the Company. During 2015, shareholders of the Company approved the 2015 Incentive Plan which authorized the issuance of up to an additional 500,000 shares of the common stock pursuant to stock options, restricted stock, stock appreciation rights and other equity incentives awarded to directors, officers, consultants, advisors and employees of the Company. Stock option awards under the 2011 Incentive Plan and the 2015 Incentive Plan (collectively, the “Incentive Plans”) are granted at the market value of the common stock on the date of grant, have vesting periods of five years, and expire to the extent unexercised after ten years.

 

Under the Incentive Plans, stock option awards covering 230,000 shares, and 10,000 shares of the common stock were granted during 2016 and 2015, respectively. No stock options were exercised during either 2016 or 2015.

 

The following table shows a summary of stock option transactions under the Incentive Plans during 2016 and 2015:

 

		Number of Shares				Weighted Average Exercise Price
Outstanding, January 1, 2015			302,500			$	3.95
Granted			10,000				5.64
Exercised			-
Forfeited or expired			(2,500	)			5.60
Outstanding, December 31, 2015			310,000			$	4.01
Granted			230,000				6.70
Exercised			-
Forfeited or expired			(310,000	)			5.40
Outstanding, December 31, 2016			230,000			$	6.70

 

Total unrecognized compensation expense on options outstanding as of December 31, 2016 was $0.3 million. No stock options were exercisable as of December 31, 2016.

 

The Company estimates the fair value of each stock option granted on the date of grant using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of Wilhelmina’s and similar companies’ common stock for a period equal to the expected term. The risk-free interest rates for periods within the contractual term of the options are based on rates for U.S. Treasury Notes with maturity dates corresponding to the options’ expected lives on the dates of grant. Expected term is determined based on the option term of ten years.

Note 10.  Benefit Plans

 

The Company has established a 401(k) 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 401(k) Plan. The 401(k) Plan is a defined contribution plan which provides that participants may make voluntary salary deferral contributions, on a pretax basis, between 1% and 100% 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, 2016 and 2015.

F- 15

 

Note 11.  Intangible Assets

 

The following table summarizes the intangible assets with finite for the years ended December 31, 2016 and 2015 (in thousands):

 

Intangible assets subject to amortization:		Gross Cost				Accumulated Amortization				Weighted-average amortization period (in years)
2016 Intangibles:
Customer lists		$	3,204			$	(3,182	)			5.0
Non-compete agreements			1,054				(1,053	)			6.5
Talent and model contractual relationships			2,846				(2,659	)			3.8
Employee contractual relationships			1,633				(1,633	)			5.0
Total		$	8,737			$	(8,527	)			5.1
2015 Intangibles:
Customer lists		$	3,204			$	(3,162	)			5.0
Non-compete agreements			1,054				(1,052	)			6.5
Talent and model contractual relationships			2,846				(2,584	)			3.6
Employee contractual relationships			1,633				(1,633	)			5.0
Total		$	8,737			$	(8,431	)			5.0

 

Amortization expense totaled $0.1 million and $0.2 million for the years ended December 31, 2016 and 2015, respectively. The remaining unamortized balance of $0.2 million will be amortized over the next six years.