Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation and Basis of Presentation

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

Revenue [Policy Text Block]

Revenue Recognition

The Company has adopted the requirements of Accounting Standards Update (“ASU”)

No.

2014

-

09,

Revenue from Contracts with Customers (Topic

606

) (“ASC

606”

). ASC

606

establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The guidance provides a

five

-step analysis of transactions to determine when and how revenue is recognized.

The new revenue standard became effective for the Company on

January 1, 2018

and was adopted using the modified retrospective method. The adoption of the new revenue standard as of

January 1, 2018

did

not

change the Company’s revenue recognition as its revenues continue to be recognized when the customer takes control of its product. As the Company did

not

identify any material accounting changes that impacted the amount of reported revenues,

no

adjustment to retained earnings was required upon adoption.

The Company adopted the standard to contracts that were

not

completed at the date of initial application (

January 1, 2018).

Under the new revenue standard, the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company recognizes revenues following the

five

-step model prescribed under ASU

No.

2014

-

09:

(i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation.

Service Revenues

Our service revenues are derived primarily from fashion model and artist bookings, and representation of social media influencers and actors for commercials, film, and television. Revenues from services are recognized and related model costs are accrued when the customer obtains control of the Company’s product, which occurs at a point in time, typically when the talent has completed the contractual requirement. The Company expenses incremental costs of obtaining a contract as and when incurred because the expected amortization period of the asset that it would have recognized is

one

year or less or the amount is immaterial. Our performance obligations are primarily satisfied at a point in time when the talent has completed the contractual requirements.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The performance obligations for most of the Company’s core modeling bookings are satisfied on the day of the event, and the “day rate” total fee is agreed in advance, when the customer books the model for a particular date. For contracts with multiple performance obligations (which are typically all satisfied within

1

to

3

days), we allocate the contract’s transaction price to each performance obligation based on the estimated relative standalone selling price.

When reporting service 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 probable, 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 probable, net of pass-through model or talent cost.

License Fees

License fees, in connection with the licensing of the “Wilhelmina” name, are collected on a monthly or quarterly basis under the terms of Wilhelmina’s agreements with licensees. The Company recognizes revenue relating to license fees where payment is deemed to be probable, over the license period.

Contract Assets

Contract assets, which primarily relate to the Company’s right to consideration for work completed but

not

billed at the reporting date are included within accounts receivable and approximated

$2.1

million and

$1.5

million at

December 31, 2019

and

2018,

respectively.

Advances to Models

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. Due to the inherent uncertainty of future work for any individual model, any recoupment of such costs are credited to model costs in the period received.

Use of Estimates, Policy [Policy Text Block]

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. Estimates are used for, but

not

limited to revenue recognition, allowance for doubtful accounts, useful lives for depreciation and amortization, income taxes, the assumptions used for stock-based compensation, and impairments of goodwill and long-lived assets. 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 and Cash Equivalents, Policy [Policy Text Block]

Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of

three

months or less to be cash equivalents.

Receivable [Policy Text Block]

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. At

December 31, 2019,

the Company had an allowance of

$1.4

million, and recorded an

$11

thousand bad debt 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.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

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, and London. 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, 2019,

the Company had cash balances in excess of FDIC insurance coverage of approximately

$4.3

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, 2019,

the Company had cash balances in excess of FSCS coverage of approximately

$2.3

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, Plant and Equipment, Policy [Policy Text Block]

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.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

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.

The process of estimating the fair value of goodwill is subjective and requires the Company to make estimates that

may

significantly impact the outcome of the analysis. A qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors, and overall financial performance. If after performing this assessment, the Company concludes it is more likely than

not

that the fair value of the reporting unit is less than its carrying amount, then the Company performs the quantitative test.

Under the quantitative test, a goodwill impairment is identified by comparing the fair value to the carrying amount, including goodwill. If the carrying amount exceeds the fair value, goodwill is considered impaired and an impairment charge is recognized in an amount equal to the excess,

not

to exceed the carrying amount of goodwill.

Due to Models [Policy Text Block]

Due to Models

Due to models represents the liability for amounts owed to talent for jobs that have taken place, but where the model or talent fee has

not

yet been paid, typically due to the Company awaiting receipt of payment from the customer. The due to model liabilities are accrued in the period in which the event takes place consistent with when the revenue is recognized. The Company’s contractual agreements with models typically condition payment to talent upon the collection of fees from the customer.

Advertising Cost [Policy Text Block]

Advertising

The Company expenses all advertising costs as incurred. Advertising expense for the year ended

December 31, 2019

approximated

$35

thousand, relatively consistent with

$33

thousand of advertising expense for the year ended

December 31, 2018.

Income Tax, Policy [Policy Text Block]

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, 2019,

the Company maintained a

$0.3

million valuation allowance against its deferred tax assets relating to stock options held by the Company’s former Chief Executive Officer, which were forfeited in connection with the effectiveness of his resignation on

January 26, 2020.

In

December 2019,

the Company recorded a

$0.3

million deferred income tax benefit related to the

$4.8

million goodwill impairment charge.

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

2016

through

2018

remained open for examination as of

December 31, 2019.

Share-based Payment Arrangement [Policy Text Block]

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 Measurement, Policy [Policy Text Block]

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.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

ASU

2016

-

02,

Leases. In

2016,

the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting for leases. The new guidance requires the recognition of right of use (“ROU”) assets and lease liabilities for those leases classified as operating leases under previous guidance. In

2018,

the FASB also approved an amendment that would permit the option to adopt the new standard prospectively as of the effective date, without adjusting comparative periods presented. The new standard was effective for the Company beginning

January 1, 2019.

Wilhelmina has elected the optional transition approach to

not

apply the new lease standard in the comparative periods presented and also elected to

not

recognize short-term leases of

12

months or less on the balance sheet. Adoption of the standard resulted in the recognition of ROU assets of

$2.6

million and lease liabilities of

$2.8

million at

January 1, 2019,

primarily from recognition of ROU assets and lease liabilities related to our office space and model apartment leases. The adoption of the new standard did

not

have a material impact on the consolidated statement of income and stockholder’s equity.

ASU

No.

2016

-

13,

“Financial Instruments - Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments,

” In

June 2016,

the FASB issued guidance which amends the FASB’s guidance on the impairment of financial instruments. The ASU adds to GAAP an impairment model (known as the “current expected credit loss model”) that is based on expected losses rather than incurred losses. ASU

2016

-

13

is effective for annual reporting periods ending after

December 15, 2019,

including interim periods within those fiscal years. The Company is currently evaluating the impact of adoption on the Company’s consolidated financial statements.

ASU

No.

2017

-

03

“Intangibles-Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment” In

January 2017,

the FASB issued ASU

2017

-

03,

effective for periods beginning after

December 15, 2019,

with an election to adopt early. The ASU requires only a

one

-step qualitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value. It eliminates Step

2

of the current

two

-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The impact of the new standard will be dependent on the specific facts and circumstances of future individual impairments, if any.

ASU

No.

2018

-

19,

 “Codification Improvements to Topic

326,

Financial Instruments-Credit Losses.”

 In

November 2018,

the FASB issued ASU

2018

-

19,

which clarifies that receivables arising from operating leases are

not

within the scope of the credit losses standard, but rather, should be accounted for in accordance with the lease standard. In general, the amendments in this standard are effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after

December 15, 2019,

and interim periods within those fiscal years. The Company is currently evaluating the impact of adoption on the Company’s consolidated financial statements.