Note 1. Business Activity

Overview

The primary business of Wilhelmina International, Inc. (together with its subsidiaries "Wilhelmina" or the "Company") 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, London and Chile, 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.

Reverse Stock Split

On July 11, 2014, the Company effected a one-for-twenty reverse split of its outstanding Common Stock. The Company has retroactively adjusted all share information to reflect the reverse stock split in the accompanying consolidated financial statements and notes.

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

Under the purchase method of accounting, the purchase price 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. 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.

(in thousands)
Fair value of operating assets acquired:
Cash	$	868
Accounts receivable		355
Other current assets		10
Equipment		15
Total operating assets acquired		1,248
Fair value of intangible assets acquired:
Other intangible assets with finite lives		400
Goodwill, not tax deductible		629
Total intangible assets acquired		1,029
Total assets acquired		2,277
Fair value of liabilities assumed:
Accounts payable and accrued liabilities		360
Due to models		511
Indemnification seller basket		8
Deferred income tax liability		77
Total liabilities assumed		956
Total net assets acquired	$	1,321

Revenues of $2,533 and operating loss of $362, including the non-recurring costs associated with acquisition and transition of $175, related to London are included in the Company’s consolidated results from the effective date of the acquisition.