UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-Q
 (Mark
One)
 ý
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
 
 For the
quarterly period ended March
31, 2009
 OR
  ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
 
 For the
transition period from ________ to ________
 
 Commission
File Number 0-28536
 
 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 No.)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)
 
 n/a
 (Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
 
 Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.   ý
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 during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  ̈
Yes    ̈ No
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):
  Large
      accelerated filer o
              
              Accelerated
      filer oNon-accelerated
      filer o
              
              Smaller
      reporting company ý(Do
      not check if a smaller reporting company)
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    ̈
Yes   ý No
  As of May
14, 2009, the registrant had 129,440,752 shares of common stock
outstanding.
  
  WILHELMINA
INTERNATIONAL, INC. AND SUBSIDIARIES
  Quarterly
Report on Form 10-Q
  For
the Quarter Ended March 31, 2009
  PART
      I
              FINANCIAL INFORMATION
              
              1Item
      1.
              Financial Statements
              
              1Condensed Consolidated Balance Sheets - March 31, 2009
      (unaudited) and December 31, 2008
              
              1Unaudited Condensed Consolidated Statements of Operations -
      for the Three Months Ended March 31, 2009 and
2008
              
              2Unaudited Condensed Consolidated Statements of Cash Flows -
      for the Three Months Ended March 31, 2009 and
2008
              
              3Notes to Unaudited Interim Condensed Consolidated Financial
      Statements
              
              4Item
      2.
              Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              
              18Item
      3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              
              28Item
      4.
              Controls and Procedures
              
              29PART
      II
              OTHER INFORMATION
              
              30Item
      1.
              Legal Proceedings
              
              30Item
      1.A.
              Risk Factors
              
              30Item
      2.
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              
              30Item
      3.
              Defaults Upon Senior Securities
              
              30Item
      4.
              Submission of Matters to a Vote of Security
      Holders
              
              30Item
      5.
              Other Information
              
              33Item
      6.
              Exhibits
              
              33SIGNATURES
              
              34
  
  PARTI
  FINANCIAL
INFORMATION
  Item
1.                 Financial
Statements
  WILHELMINA
INTERNATIONAL, INC. AND SUBSIDIARIES
 Condensed
Consolidated Balance Sheets
 
 (In
thousands, except share data)
 
 ASSETS
              
              (Unaudited)March31,
                  2009
              
              
              December31,
                  2008Current
      assets:Cash
      and cash equivalents
              
              $
              569
              
              
              $
              11,735Accounts
      receivable
              
              
              5,863
              
              
              
              -Due
      from models
              
              
              1,516
              
              
              
              -Restricted
      cash-Esch escrow
              
              
              1,750
              
              
              
              -Prepaid
      expenses and other current assets
              
              
              273
              
              
              
              176Total
      current assets
              
              
              9,971
              
              
              
              11,911Property
      and equipment, net of accumulated depreciation of $13
              
              
              351
              
              
              
              -Trademarks
      and intangibles with indefinite lives
              
              
              9,270
              
              
              
              803Other
      intangible assets with finite lives, net of accumulated amortization
      of  $188
              
              
              7,429
              
              
              
              -Goodwill
              
              
              11,856
              
              
              
              -Restricted
      cash
              
              
              175
              
              
              
              -Other
      assets
              
              
              113
              
              
              
              -Total
      assets
              
              $
              39,165
              
              
              $
              12,714LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued liabilities
              
              $
              2,517
              
              
              $
              293Line
      of credit
              
              
              1,500
              
              
              
              -Due
      to models
              
              
              6,128
              
              
              
              -Deferred
      revenue
              
              
              180
              
              
              
              -Esch
      escrow liability
              
              
              1,756
              
              
              
              -Current
      portion of note payable and capital lease obligations
              
              
              260
              
              
              
              -Income
      taxes payable
              
              
              100
              
              
              
              -Total
      current liabilities
              
              
              12,441
              
              
              
              293Long
      term liabilitiesOther
              
              
              77
              
              
              
              -Deferred
      revenue, net of current portion
              
              
              485
              
              
              
              -Deferred
      income tax liability
              
              
              1,800
              
              
              
              -Earn
      out-contingent liability
              
              
              2,312
              
              
              
              -Total
      long-term liabilities
              
              
              4,674
              
              
              
              -Commitments
      and contingenciesShareholders’
      equity:Preferred
      stock, $0.01 par value, 10,000,000 shares authorized; none
      outstanding
              
              
              -
              
              
              
              -Common
      stock, $0.01 par value, 250,000,000 shares authorized; 129,440,752 shares
      issued and outstanding
              
              
              1,294
              
              
              
              539Additional
      paid-in capital
              
              
              85,072
              
              
              
              75,357Accumulated
      deficit
              
              
              (64,316
              )
              
              
              (63,475
              )Total
      shareholders’ equity
              
              
              22,050
              
              
              
              12,421Total
      liabilities and shareholders’ equity
              
              $
              39,165
              
              
              $
              12,714
  The
accompanying notes are an integral part of these consolidated financial
statements
  1
  WILHELMINAINTERNATIONAL, INC. AND SUBSIDIARIES
 Unaudited
Condensed Consolidated Statements of Operations
  (In
thousands, except per share data)
  March
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008RevenuesRevenues
                  
                  $
                  3,829
                  
                  
                  $
                  -License
      fees and other income
                  
                  
                  191
                  
                  
                  
                  -Total
      revenues
                  
                  
                  4,020
                  
                  
                  
                  -Model
      costs
                  
                  
                  2,586
                  
                  
                  
                  -Revenues
      net of model costs
                  
                  
                  1,434
                  
                  
                  
                  -Operating
      expensesSalaries
      and service costs
                  
                  
                  1,015
                  
                  
                  
                  -Office
      and general expenses
                  
                  
                  404
                  
                  
                  
                  95Amortization
      and depreciation
                  
                  
                  200
                  
                  
                  
                  -Acquisition
      transaction costs
                  
                  
                  645
                  
                  
                  
                  -Total
      operating expenses
                  
                  
                  2,264
                  
                  
                  
                  95Operating
      loss
                  
                  
                  (830
                  )
                  
                  
                  (95
                  )Other
      income (expense):Interest
      income
                  
                  
                  4
                  
                  
                  
                  101Interest
      expense
                  
                  
                  (9
                  )
                  
                  
                  -Total
      other income (expense)
                  
                  
                  (5
                  )
                  
                  
                  101Income
      (loss) before provision for income taxes
                  
                  
                  (835
                  )
                  
                  
                  6Provision
      for  income taxesCurrent
                  
                  
                  6
                  
                  
                  
                  -Deferred
                  
                  
                  -
                  
                  
                  
                  -6
                  
                  
                  
                  -Net
      income (loss) applicable to common stockholders
                  
                  $
                  (841
                  )
                  
                  $
                  6Basic
      and diluted net income (loss) per common share
                  
                  $
                  (0.01
                  )
                  
                  $
                  0.00Weighted
      average common shares outstanding
                  
                  
                  91,662
                  
                  
                  
                  53,884
 
 The
accompanying notes are an integral part of these consolidated financial
statements
  2
  WILHELMINAINTERNATIONAL, INC. AND SUBSIDIARIES
 Unaudited
Condensed Consolidated Statements of Cash Flows
  (in
thousands)
  Three
      Months Ended
                  March
      31,2009
              
              
              2008Cash
      flows from operating activities:Net
      (loss) income
              
              $
              (841
              )
              
              $
              6Adjustments
      to reconcile net (loss) income  to net cash provided by
      operating activities:Amortization
      and depreciation
              
              
              200
              
              
              
              -Changes
      in operating assets and liabilities:(Increase)
      in accounts receivable
              
              
              (339
              )
              
              
              -(Increase)
      in due from models
              
              
              (75
              )
              
              
              -(Increase)
      decrease in prepaid expenses and other assets
              
              
              284
              
              
              
              (150
              )Increase
      in due to models
              
              
              93
              
              
              
              -Increase
      in accounts payable and accrued liabilities
              
              
              1,215
              
              
              
              96Increase
      in other liabilities
              
              
              85
              
              
              
              100Net
      cash provided by operating activities
              
              
              622
              
              
              
              52Cash
      flows from investing activities:Acquisition
      of the Wilhelmina Companies, net of cash acquired
              
              
              (14,763
              )
              
              
              -Purchase
      of property and equipment
              
              
              (1
              )
              
              
              -Net
      cash used in investing activities
              
              
              (14,764
              )
              
              
              -Cash
      flows from financing activitiesProceeds
      from issuance of common stock
              
              
              3,000
              
              
              
              -Note
      payable and capital lease obligations payments
              
              
              (24
              )
              
              
              -Net
      cash provided by financing activities
              
              
              2,976
              
              
              
              -Net
      (decrease) increase in cash and cash equivalents
              
              
              (11,166
              )
              
              
              52Cash
      and cash equivalents, beginning of period
              
              
              11,735
              
              
              
              12,679Cash
      and cash equivalents, end of period
              
              $
              569
              
              
              $
              12,731Supplemental
      disclosure of cash flow informationCash
      paid for interest
              
              $
              9
              
              
              $
              -Cash
      paid for income taxes
              
              $
              19
              
              
              $
              -Supplemental
      disclosure of non-cash investing and financing activitiesEquity
      issuance cost
              
              $
              139
              
              
              $
              -Common
      stock issued in acquisition of Wilhelmina International
              
              $
              7,609
              
              
              $
              -
  The
accompanying notes are an integral part of these consolidated financial
statements
  3
  WILHELMINAINTERNATIONAL, INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
  
  Note
1.  Basis of Presentation
  The
interim condensed consolidated financial statements included herein have been
prepared by Wilhelmina International, Inc. (“Wilhelmina” or the “Company”) and
subsidiaries without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”).  Although certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to those rules
and regulations, all adjustments considered necessary in order to make the
financial statements not misleading have been included.  In the
opinion of the Company’s management, the accompanying interim condensed
consolidated financial statements reflect all adjustments, of a normal recurring
nature, that are necessary for a fair presentation of the Company’s financial
position, results of operations and cash flows for such periods.  It
is recommended that these interim condensed consolidated financial statements be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2008, as amended.  Results of operations for the
interim periods are not necessarily indicative of results that may be expected
for any other interim periods or the full fiscal year.
  Note
2.  Business Activity
  Wilhelmina
Acquisition
  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, L.P. (“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”), and 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, an 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 purchased the outstanding equity interests of the
other Wilhelmina Companies for cash.
  At the
Company’s 2008 Annual Meeting of Stockholders held on February 5, 2009 (the
“2008 Annual Meeting”), the Company’s stockholders approved and adopted an
amendment to the Company’s Amended and Restated Certificate of Incorporation
(the “Certificate of Incorporation”) to change the Company’s name from “New
Century Equity Holdings Corp.” to “Wilhelmina International, Inc.”
  4
  Wilhelmina
is a fashion modeling agency, placing models with clients located principally
throughout the United States. Wilhelmina, which was founded by model Wilhelmina
Cooper, is a broadly diversified full service agency with offices in New York,
Los Angeles and Miami. In addition to its traditional fashion model management
activities, the Company has also expanded into music and sports talent
endorsement, television show production and licensing opportunities for the
Wilhelmina brand name.
  Note
3.  Summary of Significant Accounting Policies
  Principles
of Consolidation and Basis of Presentation
  The
accompanying consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries and subsidiaries in which the Company is
deemed to have control for accounting purposes. All significant inter-company
accounts and transactions have been eliminated in consolidation.
  Revenue
Recognition
  In
compliance with Emerging Issues Task Force (“EITF”) Issue No. 99-19, “Reporting Revenue Gross as a
Principal versus Net as an Agent,” the Company
assesses whether the Company, the model or artist is the primary obligor. The
Company evaluates the terms of its model, artist 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 artist selection and credit risk the Company undertakes. The Company operates
broadly as a modeling agency and in those relationships with models and artists
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 as model cost. In other model and artist relationships where the
Company believes the key indicators suggest the Company acts as an agent on
behalf of the model or artist the Company records revenue, when the revenues are
earned and collectability is reasonably assured, net of pass-through model or
artist 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.
 
 Wilhelmina
and its subsidiaries also record fees from licensees when the revenues are
earned and collectability is reasonably assured.
 
 Use
of Estimates
  The
preparation of the combined 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 combined
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 combined 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 combined 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.
  5
  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
  Certain
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 four different financial institutions in
New York, Los Angeles and Miami. Balances are insured up to FDIC limits of
$250,000 per institution. At March 31, 2009, the Company had cash balances in
financial institutions of approximately $117,000 in excess of such insurance.
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 2-7 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 combined statement of
operations.
  Statement
of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets,” requires the Company to review
long-lived assets and certain identifiable intangibles 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 an impairment has occurred, the
amount of the impairment is charged to operations.
  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
(defined below) acquired in 2005. According to SFAS No. 142, “Goodwill and Other
Intangible Assets,” (“SFAS 142”) 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 3 to 7 years.
  6
  In April
2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position (“FSP”) No. 142-3, “Determination of
the Useful Life of Intangible Assets” (“FSP
142-3”).FSP 142-3
amends the factors to be considered in developing renewal or extension
assumptions used to determine the useful life of intangible assets under SFAS
142. Its intent is to improve the consistency between the useful life of an
intangible asset and the period of expected cash flows used to measure its fair
value. The Company adopted FSP 142-3 on January 1, 2009. The adoption of FSP
142-3 did not have a material impact on the consolidated financial
statements.
  The
Company has determined that the revenue interest in Ascendant meets the
indefinite life criteria outlined in SFAS 142, and, therefore, annually assesses
whether the carrying value of the asset exceeds its fair value, and records an
impairment loss equal to any such excess.
  Deferred
Revenue
  The
Company’s deferred revenue consists of royalties, commissions and service
charges received in advance of being earned, that are in connection with product
licensing agreements with two clients and a related talent the Company
represents (see Note 8).
  Advertising
  The
Company expenses all advertising costs as incurred. Advertising costs
approximated $27,000 for the quarter ended March 31, 2009.
  Financial
Instruments
  SFAS No.
107, “Disclosures About Fair Value of Financial Instruments” (“SFAS 107”),
requires the disclosure of fair value information about financial instruments,
whether or not recognized on the balance sheet, for which it is practicable to
estimate the value.  SFAS 107 excludes certain financial instruments
from its disclosure requirements.  Accordingly, the aggregate fair
market value amounts are not intended to represent the underlying value of the
Company.  The carrying amounts of cash and cash equivalents, current
receivables and current liabilities approximate fair value because of the nature
of these instruments.
  Business
Combinations
  In
December 2007, the FASB released SFAS No. 141(R), “Business Combinations
(revised 2007)” (“SFAS 141(R)”), which changes many well-established business
combination accounting practices and significantly affects how acquisition
transactions are reflected in the financial statements.  Additionally,
SFAS 141(R) will affect how companies negotiate and structure transactions,
model financial projections of acquisitions and communicate to
stakeholders.  SFAS 141(R) must be applied prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.
  Under
SFAS 141(R), contingent consideration or earn outs are recorded at fair value at
the acquisition date.  Except in bargain purchase situations,
contingent consideration typically results in additional goodwill being
recognized.  Contingent consideration classified as an asset or
liability will be adjusted to fair value at each reporting date through earnings
until the contingency is resolved.
  7
  These
estimates are subject to change upon the finalization of the valuation of
certain assets and liabilities and may be adjusted in accordance with SFAS
141(R).
  In
accordance with SFAS 141(R), acquisition transaction costs, such as certain
investment banking fees, due diligence costs and attorney fees are to be
recorded as a reduction of earnings in the period they are
incurred.  Prior to January 1, 2009, the effective date of SFAS 141(R)
for the Company, acquisition transaction costs were included in the cost of the
acquired business. On February 13, 2009, the Company closed the Wilhelmina
Transaction and, therefore, in accordance with the Company’s interpretation of
SFAS 141(R) transition rules, recorded all previously capitalized acquisition
transaction costs of approximately $849,000 as a reduction of earnings for the
year ended December 31, 2008. The Company incurred acquisition transaction costs
of approximately $645,000 for the quarter ended March 31, 2009.
  In April
2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies”
(“FSP 141(R)-1”), to amend SFAS 141 (revised 2007) “Business Combinations.” FSP
141(R)-1 addresses the initial recognition, measurement and subsequent
accounting for assets and liabilities arising from contingencies in a business
combination, and requires that such assets acquired or liabilities assumed be
initially recognized at fair value at the acquisition date if fair value can be
determined during the measurement period. If the acquisition date fair value
cannot be determined, the asset acquired or liability assumed arising from a
contingency is recognized only if certain criteria are met. FSP 141(R)-1 also
requires that a systematic and rational basis for subsequently measuring and
accounting for the assets or liabilities be developed depending on their nature.
FSP 141(R)-1 will be effective for assets or liabilities arising from
contingencies in business combinations for which the acquisition date is after
December 31, 2008. The provisions of FSP 141(R)-1 were considered in connection
with the Wilhelmina Transaction (see Note 4).
  Income
Taxes
  Income
taxes are accounted for under the asset and liability method specified in SFAS
No. 109, “Accounting for Income Taxes” (“SFAS 109”).  Deferred income
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards.  Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.  The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.  The Company continually assesses the
need for a tax valuation allowance based on all available
information.  As of December 31, 2008, and as a result of this
assessment, the Company does not believe that its deferred tax assets are more
likely than not to be realized.  In addition, the Company continuously
evaluates its tax contingencies in accordance with FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109,” (“FIN 48”), which the Company adopted on January 1,
2007.
  FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS 109.  FIN 48
prescribes 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.  FIN 48 also provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.  There was no change to the net
amount of assets and liabilities recognized in the statement of financial
condition as a result of the Company’s adoption of FIN 48.
  8
  Fair
Value
  In
February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement
No. 157” (“FSP 157-2”), which delayed the effective date of SFAS No. 157, “Fair
Value Measurements” (“SFAS 157”), for nonfinancial assets and nonfinancial
liabilities that are recognized or disclosed in the financial statements at fair
value on a nonrecurring basis. FSP 157-2 partially deferred the effective date
of SFAS 157 to fiscal years beginning after November 15, 2008 and interim
periods within those fiscal years for items within the scope of FSP 157-2. The
Company applied the provisions of SFAS 157 to nonfinancial assets and
nonfinancial liabilities beginning January 1, 2009. The adoption did not have a
material effect on the Company’s results of operations or financial position.
  Net
Income (loss) Per Common Share
  SFAS No.
128, “Earnings Per Share” (“SFAS 128”), establishes standards for computing and
presenting earnings per share (“EPS”) for entities with publicly-held common
stock or potential common stock.  For the quarters ended March 31,
2009 and 2008, diluted EPS equals basic EPS, as potentially dilutive common
stock equivalents were anti-dilutive.
  Stock-Based
Compensation
  Effective
January 1, 2006, the Company adopted the provisions of SFAS No. 123(R),
“Share-Based Payment” (“SFAS 123(R)”), using the modified prospective transition
method.  Under this method, previously reported amounts should not be
restated to reflect the provisions of SFAS 123(R).  SFAS 123(R)
requires the Company to record compensation expense for all awards granted after
the date of adoption, and for the unvested portion of previously granted awards
that remain outstanding at the date of adoption.  The fair value
concepts have not changed significantly in SFAS 123(R); however, in adopting
this standard, companies must choose among alternative valuation models and
amortization assumptions.  After assessing alternative valuation
models and amortization assumptions, the Company will continue using both the
Black-Scholes valuation model and straight-line amortization of compensation
expense over the requisite service period for each separately vesting portion of
the grant.  The Company will reconsider use of this model if
additional information becomes available in the future that indicates another
model would be more appropriate, or if grants issued in future periods have
characteristics that cannot be reasonably estimated using this
model.  The Company utilizes stock-based awards as a form of
compensation for employees, officers and directors.
  The fair
value of the stock option grants included in the Company’s statement of
operations totaled $0 for the quarters ended March 31, 2009 and
2008.
  Recent
Accounting Pronouncements
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS
160”), which requires companies to measure an acquisition of noncontrolling
(minority) interest at fair value in the equity section of the acquiring
entity’s balance sheet. The objective of SFAS 160 is to improve the
comparability and transparency of financial data as well as to help prevent
manipulation of earnings. The changes introduced by the new standards are likely
to affect the planning and execution as well as the accounting and disclosure of
merger transactions. The Company adopted SFAS 160 on January 1, 2009. The
adoption of SFAS 160 did not have an effect on the Company’s results of
operations or financial position.
  9
  In April
2009, the FASB issued FSP FAS 107-1, “Interim Disclosures about Fair Value of
Financial Instruments” (“FSP 107-1”). FSP 107-1 requires disclosures about
fairvalue of
financial instruments for interim reporting periods as well as in annual
financial statements. FSP 107-1 will be effective for the Company for the
quarter ending June 30, 2009. The Company expects to adopt FSP 107-1 for
the quarter ending June 30, 2009 and does not expect the adoption of FSP
107-1 to have a material impact on its consolidated financial
statements.
  Note
4.  Wilhelmina Acquisition
  On August
25, 2008, in conjunction with the Company’s strategy to redeploy its assets to
enhance stockholder value, the Company entered into the Acquisition Agreement to
acquire the Wilhelmina Companies. At the closing of the Wilhelmina Transaction,
on February 13, 2009, the Company paid an aggregate purchase price of
approximately $22,432,000 in connection therewith, of which approximately
$16,432,000 was paid for the outstanding equity interests of the Wilhelmina
Companies and $6,000,000 in cash repaid the outstanding balance of a note held
by a Control Seller.  The purchase price included approximately
$7,609,000 (63,411,131 shares) of the Company’s common stock, par value $0.01
per share (“Common Stock”), valued at $0.12 per share (representing the closing
price of the Common Stock on February 13, 2009) that was issued in connection
with the merger of Wilhelmina Acquisition with and into Wilhelmina
International.  Approximately $8,822,000 of the remaining cash was
paid to acquire the equity interests of the remaining Wilhelmina
Companies.
  The
purchase price is subject to certain post-closing adjustments, which may be
effected against a total of 19,229,746 shares of Common Stock (valued at
approximately $2,307,000 on February 13, 2009) that are being held in escrow
pursuant to the Acquisition Agreement.  Approximately $22,432,000 was
paid at closing, less 19,229,746 shares (valued at approximately $2,307,000 on
February 13, 2009) of Common Stock held in escrow in respect of the purchase
price adjustment, provides for a floor purchase price of approximately
$20,125,000 (which amount may be further reduced in connection with certain
indemnification matters).  The shares of Common Stock held in escrow
may be repurchased by the Company for a nominal amount, subject to certain
earnouts and offsets.
  Upon the
closing of the Wilhelmina Transaction, the Control Sellers and Patterson
obtained certain demand and piggyback registration rights pursuant to a
registration rights agreement with respect to the Common Stock issued to them
under the Acquisition Agreement.  The registration rights agreement
contains certain indemnification provisions for the benefit of the Company and
the registration rights holders, as well as certain other customary
provisions.
  The
shares of Common Stock held in escrow support earnout offsets and
indemnification obligations of the Sellers.  The Control Sellers are
required to leave in escrow, through 2011, any stock “earned” following
resolution of “core” adjustment, up to a total value of
$1,000,000.  Losses at WAM and Wilhelmina Miami, respectively, can be
offset against any positive earnout with respect to the other
company.  Losses in excess of earn out amounts could also result in
the repurchase of the remaining shares of Common Stock held in escrow for a
nominal amount.  Working capital deficiencies may also reduce positive
earn out amounts.  The earn outs, which are payable in 2012, are
calculated as follows: (i) the WAM earn out is based on the three year average
of audited WAM EBITDA beginning January 1, 2009 multiplied by 5, payable in cash
or stock (at the Control Seller’s election), provided that the total payment
will not exceed $10,000,000; and (ii) the Miami earn out is based on the three
year average of audited Wilhelmina Miami EBITDA beginning January 1, 2009
multiplied by 7.5, payable in cash or stock (at the Control Seller’s election).
As of February 13, 2009, management’s estimate of the combined fair value of the
WAM and Miami earn outs approximated $2,312,000.
  10
  Concurrently
with the execution of the Acquisition Agreement, the Company entered into a
purchase agreement (the “Equity Financing Agreement”) with Newcastle Partners,
L.P., a Texas limited partnership (“Newcastle”), which at that time owned
19,380,768 shares or approximately 36% of the outstanding Common Stock, for the
purpose of obtaining financing to complete the transactions contemplated by the
Acquisition Agreement.  Pursuant to the Equity Financing Agreement,
upon the closing of the Wilhelmina Transaction, the Company sold to Newcastle
$3,000,000 (12,145,749 shares) of Common Stock at $0.247 per share, or
approximately (but slightly higher than) the per share price applicable to the
Common Stock issuable under the Acquisition Agreement.  As a result,
Newcastle now owns 31,526,517 shares of Common Stock or approximately 24% of the
Company’s outstanding Common Stock.  In addition, under the Equity
Financing Agreement, Newcastle committed to purchase, at the Company’s election
at any time or times prior to six months following the closing, up to an
additional $2,000,000 (8,097,166 shares) of Common Stock on the same
terms.  Upon the closing of the Equity Financing Agreement, Newcastle
obtained certain demand and piggyback registration rights with respect to the
Common Stock it holds, including the Common Stock issuable under the Equity
Financing Agreement.  The registration rights agreement contains
certain indemnification provisions for the benefit of the Company and Newcastle,
as well as certain other customary provisions.
  Under the
purchase method of accounting, the purchase price has been allocated to the net
tangible and intangible assets acquired and liabilities assumed, based on the
fair value of the assets and liabilities of the Wilhelmina Companies in
accordance with SFAS 141(R).
  The
intangible assets acquired include intangible assets with indefinite lives, such
as the Wilhelmina brand/trademarks  and intangible assets with finite
lives, such as customer relationships, model contracts, talent contracts,
noncompetition agreements and license agreements, and the remainder of any
intangible assets not meeting the above criteria has been allocated to
goodwill.  Some of these assets, such as goodwill and the Wilhelmina
brand/trademarks, are non-amortizable.  Other assets, such as customer
relationships, model contracts, talent contracts, noncompetition agreements and
license agreements, are being amortized on a straight line basis over their
estimated useful lives which range from 3-7 years. The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of completion of the Wilhelmina Transaction:
  (in
      thousands)Current
      assets
              
              $
              7,545Property,
      plant and equipment
              
              
              364Trademarks
      and intangibles with indefinite lives
              
              
              8,467Other
      intangible assets with finite lives
              
              
              7,617Goodwill
              
              
              11,856Other
      assets
              
              
              289Total
      assets acquired
              
              
              36,138Earn
      out-contingent liability
              
              
              (2,312
              )Deferred
      income tax liability
              
              
              (1,800
              )Other
      liabilities assumed
              
              
              (9,594
              )Total
      liabilities assumed
              
              
              (13,706
              )Net
      assets acquired
              
              $
              22,432
 
 These
estimates are subject to change until the finalization of the valuation of
certain assets and liabilities and may be adjusted in accordance with SFAS
141(R).  Approximately $8,971,000 of the purchase price results in tax
deductible goodwill which will be amortized straight-line over 15 years for
income tax purposes.
  11
  The
results of operations for the Wilhelmina Companies are included in the Company’s
consolidated results from the effective date of the acquisition. The following
table sets forth certain unaudited pro forma consolidated earnings data for the
quarters ended March 31, 2009 and 2008, as if the acquisition had occurred at
the beginning of each quarter ended March 31, 2009 and 2008 and was consummated
on the same terms.  Amounts are in millions, except earnings per
share.
  March
      31,2009
                
                
                2008Total
      revenues
                
                $
                8,392
                
                
                $
                10,029Net
      loss
                
                $
                (1,147
                )
                
                $
                (566
                )Loss
      per common share
                
                $
                (0.01
                )
                
                $
                (0.01
                )
  Note
5.  Line of Credit, Note Payable and Esch Escrow
  In
January 2008, Wilhelmina International renewed a revolving line of credit with a
bank with an increase in borrowing capacity to $2,000,000, with availability
subject to a borrowing base computation. The revolving line of credit expired on
January 31, 2009.  On March 31, 2009, the Company entered into a
modification and extension agreement with the bank that extended the maturity
date to April 30, 2009. The line of credit has expired and the Company is
currently negotiating with the bank to further extend the maturity
date.  The bank has not requested repayment of the line and the
Company has continued to finance its operations using this revolving line of
credit.
  On
February 13, 2009, in order to facilitate the acquisition of the Wilhelmina
Companies, the Company entered into a certain letter agreement with Esch (the
“Letter Agreement”), pursuant to which Esch agreed that $1,756,000 of the cash
proceeds to be paid to him at the closing of the Acquisition Agreement would
instead be held in escrow. All or a portion of such amount held in escrow will
be used to satisfy the Company’s indebtedness in connection with its credit
facility upon the occurrence of specified events including, but not limited to,
written notification to the Company of the termination or acceleration of the
credit facility. Any amount remaining will be released to Esch upon the renewal,
replacement or extension of the Company’s credit facility, subject to certain
requirements set forth in the Letter Agreement. In the event any portion of the
amount held in escrow is used to pay off the credit facility, the Company will
promptly issue to Esch, in replacement thereof, a promissory note in the
principal amount of the amount paid.
  The term
note is payable in monthly installments of $23,784 including principal and
interest calculated at a fixed rate of 6.65% per annum and matures in December
2009. Interest on the revolving credit note is payable monthly at an annual rate
of prime plus one-half percent which equaled to 3.75% at March 31,
2009.
  The line
of credit and note payable are collateralized by all of the assets of the
Wilhelmina Companies, cross collateralized by the combined and consolidated
Wilhelmina Companies and is guaranteed by a stockholder of the
Company.
  Note
6.  Restricted Cash
  At March
31, 2009, the Company had $175,000 of restricted cash that serves as collateral
for an irrevocable standby letter of credit. The letter of credit serves as
additional security under the lease extension relating to the Company’s office
space in New York that expires in December 2010.
  12
  Note
7.  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 2011. 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 13) certain
corporate office space.
  Future
minimum payments under the lease agreements are summarized as
follows:
  Years
      EndingMarch
      31,
              
              Amount2010
              
              $
              845,0002011
              
              
              527,0002012
              
              
              584,000$
              1,956,000
 
 Rent
expense totaled approximately $101,000 and $8,000 for the quarters ended March
31, 2009 and 2008, respectively.
  Note
8.  Licensing Agreements
  The
Company has two product licensing agreements with two clients (each a
“Licensee”) and a related talent (the “Talent”) the Company represents. Under
the first agreement, the Company earns service charges from the Licensee and
commissions from the Talent for services performed in connection with the
licensing agreement. This licensing agreement has a six-year term that ends
March 31, 2014. During the first three years of the agreement, the Talent and
the Company are required to render services to the Licensee in exchange for a
guaranteed minimum payment.  The next three years of the agreement is
the sell-off period, as defined.  During the sell-off period, the
Talent and the Company are not required to render services.  The
Talent will earn royalties based on a certain percentage of net sales, as
defined, and the Company will earn a commission based on a certain percentage of
the royalties earned by the Talent.  For the quarter ended March 31,
2009, the Company recorded approximately $12,000 of revenue from this licensing
agreement.
  Under the
second licensing agreement, the Company earns commissions from the Talent and
royalties from the Licensee that is based on a certain percentage of net sales,
as defined. The initial term of this second agreement expires on December 31,
2012. The second agreement is renewable for another two years if certain
conditions are met. For the quarter ended March 31 2009, the Company recognized
approximately $35,000 of revenues from this agreement.
  Deferred
revenues, which were received in advance, will be recognized as
follows:
  13
  Years
      Ending
                December
      31,
              
              Amount2009
              
              $
              135,0002010
              
              
              180,0002011
              
              
              89,0002012
              
              
              261,000665,000Less,
      current portion
              
              
              (180,000
              )Deferred
      revenue, net of current portion
              
              $
              485,000
  Note
9.  Revenue Interest
  On
October 5, 2005, the Company made an investment in ACP Investments L.P. (d/b/a
Ascendant Capital Partners) (“Ascendant”).  Ascendant is a Berwyn,
Pennsylvania based alternative asset management company whose funds have
investments in long/short equity funds and which distributes its registered
funds primarily through various financial intermediaries and related
channels.
  The
Company entered into an agreement (the “Ascendant Agreement”) with Ascendant to
acquire an interest in the revenues generated by Ascendant.  Ascendant
had assets under management of approximately $37,300,000 and $35,600,000 as of
March 31, 2009 and December 31, 2008, respectively.  The Company has
not recorded any revenue or received any revenue sharing payments for the period
from July 1, 2006 through March 31, 2009.  According to the Ascendant
Agreement, if Ascendant acquires the revenue interest from the Company,
Ascendant must pay the Company a return on the capital that it
invested.
  Note
10.  Commitments and Contingencies
  The
Company is engaged in various legal proceedings that are routine in nature and
incidental to its business.  None of these proceedings, either
individually or in the aggregate, is believed, in the Company’s opinion, to have
a material adverse effect on either its consolidated financial position or its
consolidated results of operations.
  The
Company, which was formerly known as Billing Concepts Corp. (“BCC”), was
incorporated in the state of Delaware in 1996.  BCC was previously a
wholly owned subsidiary of U.S. Long Distance Corp. (“USLD”) and principally
provided third-party billing clearinghouse and information management services
to the telecommunications industry (the “Transaction Processing and Software
Business”).  Upon its spin-off from USLD, BCC became an independent,
publicly held company.  In October 2000, the Company completed the
sale of several wholly owned subsidiaries that comprised the Transaction
Processing and Software Business to Platinum Holdings (“Platinum”) for
consideration of $49,700,000 (the “Platinum Transaction”).
  Under the
terms of the Platinum Transaction, all leases and corresponding obligations
associated with the Transaction Processing and Software Business were assumed by
Platinum.  Prior to the Platinum Transaction, the Company guaranteed
two operating leases for office space of the divested companies.  The
first lease was related to office space located in San Antonio, Texas, and
expired in 2006.  The second lease is related to office space located
in Austin, Texas, and expires in 2010.  Under the original terms of
the second lease, the remaining minimum undiscounted rent payments total
approximately $1,063,000 at March 31, 2009.  In conjunction with the
Platinum Transaction, the purchaser agreed to indemnify the Company should the
underlying operating companies not perform under the terms of the office
leases.  The Company can provide no assurance as to the purchaser’s
ability, or willingness, to perform its obligations under the
indemnification.  The Company does not believe it is probable that it
will be required to perform under the remaining lease guarantee and, therefore,
no liability has been accrued in the Company’s financial
statements.
  14
  Note
11.  Share Capital
  On July
10, 2006, as amended on August 25, 2008, the Company entered into a shareholders
rights plan (the “Rights Plan”) that replaced the Company’s shareholders rights
plan dated July 10, 1996 (the “Old Rights Plan”) that expired according to its
terms on July 10, 2006.  The Rights Plan provides for a dividend
distribution of one preferred share purchase right (a “Right”) for each
outstanding share of Common Stock.  The terms of the Rights and the
Rights Plan are set forth in a Rights Agreement, dated as of July 10, 2006, 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”) and capital loss
carryforwards.  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 and/or its capital loss carryforwards).  In
addition, the Company’s Board of Directors has exempted 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 and/or its capital loss
carryforwards.  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.
  On August
25, 2008, in connection with the Wilhelmina Transaction, the Company entered
into an amendment to the Rights Agreement (the “Rights Agreement
Amendment”).  The Rights Agreement Amendment, among other things, (i)
provides that the execution of the Acquisition Agreement, the acquisition of
shares of Common Stock pursuant to the Acquisition Agreement, the consummation
of the other transactions contemplated by the Acquisition Agreement and the
issuance of stock options to the Sellers or the exercise thereof, will not be
deemed to be events that cause the Rights to become exercisable, (ii) amends the
definition of Acquiring Person to provide that the Sellers and their existing or
future Affiliates and Associates (each as defined in the Rights Agreement) will
not be deemed to be an Acquiring Person solely by virtue of the execution of the
Acquisition Agreement, the acquisition of Common Stock pursuant to the
Acquisition Agreement, the consummation of the other transactions contemplated
by the Acquisition Agreement or the issuance of stock options to the Sellers or
the exercise thereof and (iii) amends the Rights Agreement to provide that a
Distribution Date (as defined below) shall not be deemed to have occurred solely
by virtue of the execution of the Acquisition Agreement, the acquisition of
Common Stock pursuant to the Acquisition Agreement, the consummation of the
other transactions contemplated by the Acquisition Agreement or the issuance of
stock options to the Sellers or the exercise thereof.  The Rights
Agreement Amendment also provides for certain other conforming amendments to the
terms and provisions of the Rights Agreement.  The date that the
Rights become exercisable is known as the “Distribution Date.”
  15
  In
connection with the Wilhelmina Transaction, the Company issued 12,145,749 shares
of Common Stock to Newcastle and 63,411,131 shares to Patterson, the Control
Sellers and their advisor.
  At the
2008 Annual Meeting, the Company’s stockholders approved and adopted an
amendment to the Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 75,000,000 to 250,000,000.
  Also, at
the 2008 Annual Meeting, the Company’s stockholders approved a proposal granting
authority to the Company’s Board of Directors to effect at any time prior to
December 31, 2009 a reverse stock split of the Common Stock at a ratio within
the range from one-for-ten to one-for-thirty, with the exact ratio to be set at
a whole number within this range to be determined by the Company’s Board of
Directors in its discretion.
  Below is
a table showing changes in Common Stock and paid-in capital during the quarter
ended March 31, 2009 (in thousands, except share data):
  Additional
      Paid-in Capital
              
              
              Common
      Stock Shares
              
              
              Common
      Stock AmountBalance
      December 31, 2008
              
              $
              75,357
              
              
              
              53,883,872
              
              
              $
              539Common
      Stock issued in the Wilhelmina Transaction to Patterson, Control Sellers
      and their advisors
              
              
              6,975
              
              
              
              63,411,131
              
              
              
              634Newcastle
      equity issuance cost
              
              
              (139
              )
              
              
              -
              
              
              
              -Common
      Stock issued to Newcastle under Equity Financing Agreement
              
              
              2,879
              
              
              
              12,145,749
              
              
              
              121Balance
      March 31, 2009
              
              $
              85,072
              
              
              
              129,440,752
              
              
              $
              1,294
  16
  Note
12.  Income Taxes
  As of
December 31, 2008, the Company had a federal income tax loss carryforward of
approximately $13,400,000, which begins expiring in 2019.  In
addition, the Company had a federal capital loss carryforward of approximately
$68,500,000 which expires in 2009.  Realization of the Company’s
carryforwards is dependent on future taxable income and capital
gains.  At this time, the Company cannot assess whether or not the
carryforward will be realized; therefore, a valuation allowance has been
recorded. Ownership changes, as defined in the Internal Revenue Code, may have
limited the amount of net operating loss carryforwards that can be utilized
annually to offset future taxable income.  Subsequent ownership
changes could further affect the limitation in future years.
  Note
13.  Related Parties
  Mark
Schwarz, Chief Executive Officer and Chairman of Newcastle Capital Management,
L.P. (“NCM”), John Murray, Chief Financial Officer of NCM, and Evan Stone,
General Counsel of NCM, hold executive officer and board of director positions
with the Company as follows: Chairman of the Board and Chief Executive Officer,
Director and Chief Financial Officer, and Director and General Counsel and
Secretary, respectively, of the Company. NCM is the general partner of
Newcastle, which owns 31,526,517 shares of Common Stock.
  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 $32,000 and $8,000 for
the quarters ended March 31, 2009 and 2008, respectively.
  The
Company owed NCM approximately $62,000 and $0 as of March 31, 2009 and 2008,
respectively.
  On August
25, 2008, concurrently with the execution of the Acquisition Agreement, the
Company entered into the Equity Financing Agreement with Newcastle for the
purpose of obtaining financing to complete the transactions contemplated by the
Acquisition Agreement (see Note 4).
  Note
14.  Treasury Stock
  In 2000,
the Company’s Board of Directors approved the adoption of a common stock
repurchase program.  Under the terms of the program, the Company may
purchase an aggregate of $25,000,000 of its Common Stock in the open market or
in privately negotiated transactions.  The Company records repurchased
Common Stock at cost. The Company made no purchases of Common Stock during the
quarter ended March 31, 2009.  As of March 31, 2009, the Company has
purchased an aggregate $20,100,000, or 8,300,000 shares of Common Stock under
the program, which shares have been placed in treasury.  The Company
does not have any plans to make additional purchases of Common Stock under the
program.
  17
  Item2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
  The
following is a discussion of the interim unaudited condensed consolidated
financial condition and results of operations for the Company and its
subsidiaries for the three months ended March 31, 2009 and March 31,
2008.  It should be read in conjunction with the Unaudited Interim
Condensed Consolidated Financial Statements of the Company, the notes thereto
and other financial information included elsewhere in this report, and the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as
amended.
  The
following discussion of the results of operations for the quarter ended March
31, 2009, compared to the quarter ended March 31, 2008, has been separated into
two sections.  The first section is a discussion of the Company’s
Unaudited Interim Condensed Consolidated Financial Statements included in this
report, which takes into account the results of operations, financial condition
and cash flows of the Wilhelmina Companies from February 13, 2009 (the closing
date of the Wilhelmina Transaction) through March 31, 2009.  The
second section is a discussion of pro forma unaudited financial information of
the Wilhelmina Companies for the three months ended March 31, 2009 and March 31,
2008, which does not take into account any amounts attributable to the Company’s
operations at the holding company level during such periods, including corporate
overhead, amortization of intangibles, acquisition transaction fees and interest
income.
  Forward-Looking
Statements
  This
Quarterly Report on Form 10-Q contains certain “forward-looking” statements as
such term is defined in the Private Securities Litigation Reform Act of 1995 and
information relating to the Company and its subsidiaries that are based on the
beliefs of the Company’s management as well as assumptions made by and
information currently available to the Company’s management.  When
used in this report, the words “anticipate”, “believe”, “estimate”, “expect” and
“intend” and words or phrases of similar import, as they relate to the Company
or its subsidiaries or Company management, are intended to identify
forward-looking statements.  Such statements reflect the current
risks, uncertainties and assumptions related to certain factors including,
without limitation, the Company’s success in integrating the operations of the
Wilhelmina Companies in a timely manner, or at all, the Company’s ability to
realize the anticipated benefits of the Wilhelmina Companies to the extent, or
in the timeframe, anticipated, competitive factors, general economic conditions,
the interest rate environment, governmental regulation and supervision,
seasonality, changes in industry practices, one-time events and other factors
described herein and in other filings made by the Company with the
SEC.  Based upon changing conditions, 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 intend to update these forward-looking statements.
  Overview
  Wilhelmina’s
primary business is fashion model management, which activity is headquartered in
New York City.  Wilhelmina 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, Wilhelmina has
grown to include operations located in Los Angeles and Miami, 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.  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.
  18
  Wilhelmina
has strong brand recognition that enables it to attract and retain top talent to
service a broad universe of quality media and retail clients. The Company
believes its position in the fashion model management industry provides a
platform for organic growth, business line extension, and branded consumer goods
and licensing opportunities, as well as acquisitive growth.
  The
fashion model management industry is highly fragmented, with smaller, local
talent management firms frequently competing with a small group of
internationally operating talent management firms for client
assignments.  New York City, Los Angeles and Miami, as well as Paris,
Milan 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.  Apart from Paris-based and publicly-listed
Elite SA (and now Wilhelmina), all other fashion talent management firms are
privately-held. The business of talent management firms such as Wilhelmina is
related to the state of the advertising industry, as demand for talent is driven
by print, TV and other forms of media advertising campaigns for consumer goods
and retail clients.
  Contractions
in the availability of business and consumer credit, a decrease in consumer
spending, a significant rise in unemployment and other factors have all led to
increasingly volatile capital markets over the course of 2008 and 2009. During
recent months, the financial services, automotive and other sectors of the
global economy have come under increased pressure, resulting in, among other
consequences, extraordinarily difficult conditions in the capital and credit
markets and a global economic recession that has negatively impacted
Wilhelmina’s clients’ spending on the services that the Company
provides.
  During
the quarter ended March 31, 2009, the Wilhelmina Companies experienced a decline
in the rate of revenue growth compared to the first quarter of the previous
year.  Additionally, due to the rapidly changing economic conditions,
the Company cannot accurately forecast its clients’ spending plans in the near
term.  The Company intends to continue to closely monitor economic
conditions, client spending and other factors, and in response, will take
actions to reduce costs, manage working capital and conserve cash.  In
the current economic environment, there can be no assurance as to the effects on
the Company of future economic circumstances, client spending patterns, client
credit worthiness and other developments and whether, or to what extent, the
Company’s efforts to respond to them will be effective.
  Recent
Events
  On
February 13, 2009, the Company closed the Wilhelmina Transaction and acquired
the Wilhelmina Companies as discussed in further detail elsewhere in this Form
10-Q.  As of the closing of the Wilhelmina Transaction, the business
of Wilhelmina represents the Company’s primary operating
business.  Prior to closing of the Wilhelmina Transaction, the
Company’s interest in Ascendant, which it acquired on October 5, 2005,
represented the Company’s sole operating business.  Ascendant is a
Berwyn, Pennsylvania based alternative asset management company whose funds have
investments in long/short equity funds and which distributes its registered
funds primarily through various financial intermediaries and related
channels.
  19
  Ascendant
  The
Company entered into an agreement (the “Ascendant Agreement”) with Ascendant to
acquire an interest in the revenues generated by Ascendant.  Ascendant
had assets under management of approximately $37,300,000 and $35,600,000 as of
March 31, 2009 and December 31, 2008, respectively.  The Company has
not recorded any revenue or received any revenue sharing payments for the period
from July 1, 2006 through March 31, 2009.  According to the Ascendant
Agreement, if Ascendant acquires the revenue interest from the Company,
Ascendant must pay the Company a return on the capital that it
invested.
  Results
of Operations of the Company for the Quarter Ended March 31, 2009 Compared to
the Quarter Ended March 31, 2008
  The key
financial indicators that the Company reviews to monitor the business are
revenues, 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,
Sophisticated, Runway, 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 and a separate service charge, paid by clients in addition to the
booking fees, is calculated as a percentage of the models’ booking fees. While
gross billings are not formally recorded as a line item in the financial
statements, it remains an important business metric that ultimately drives
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 travel costs
required to deliver the Company’s services and to enable new business
development activities.
  Expense
Trends
  Prior to
the closing of the Wilhelmina Transaction, Krassner and Esch, the former
principal equity holders of the Wilhelmina Companies, received salary, bonus and
consulting fee payments, under certain agreements, in an amount of approximately
$975,000 annually.  As neither Krassner nor Esch continue to serve as
officers or directors of the Company as of the closing of the Wilhelmina
Transaction, these payments to Krassner and Esch have
ceased.  Similarly, upon the closing of the Wilhelmina Transaction, a
$6,000,000 promissory note, carrying an interest rate of 12.5% for an annual
interest payment of $750,000, in favor of Krassner L.P., a Control Seller, was
repaid.  Taken together, following the closing of the Wilhelmina
Transaction, annual operating expenses and interest expense, which have
historically included the above will not include costs of $1,725,000 due to the
elimination of these agreements and the repayment of the promissory note. The
Company expects to incur compensation expense, of approximately $450,000
annually, related to the positions of chief executive officer, chief financial
officer and general counsel and could employ certain individuals (including but
not limited to Esch and/or Krassner) in a consulting capacity to facilitate the
transition of the Wilhelmina Companies business to the executive management
team.  These compensation expenses would somewhat offset the
$1,725,000 from the elimination of the abovementioned agreements.
  Gross
Billings
  During
the quarter ended March 31, 2009, gross billings of the Company were
approximately $4,806,000, compared to $0 during the quarter ended March 31,
2008.  The Company completed the Wilhelmina Transaction on February
13, 2009 and, therefore, recorded gross billings of the Wilhelmina Companies for
the period from February 13, 2009 through March 31, 2009.
  20
  Revenues
  During
the quarter ended March 31, 2009, revenues of the Company were approximately
$3,829,000 compared to $0 during the quarter ended March 31,
2008.  The Company completed the Wilhelmina Transaction on February
13, 2009 and, therefore, recorded revenues of the Wilhelmina Companies for the
period from February 13, 2009 through March 31, 2009 in its statement of
operations for the three months ended March 31, 2009.
  License
Fees and Other Income
  The
Company completed the Wilhelmina Transaction on February 13, 2009 and,
therefore, recorded license fees and other income of the Wilhelmina Companies
for the period from February 13, 2009 through March 31, 2009 in its statement of
operations for the three months ended March 31, 2009.
  The
Company, from time to time, has agreements with both affiliated and
non-affiliated entities to provide management and administrative services, as
well as sharing of space where applicable.  Compensation under these
agreements may be either a fixed amount or contingent upon the other parties’
commission income. The portion of management fee income from an unconsolidated
affiliate amounted to approximately $14,000 and $0 for the quarters ended March
31, 2009 and 2008, respectively.
  License
fees consist primarily of franchise revenues from independently owned model
agencies that use the Wilhelmina trademark name and various services provided to
them by the Wilhelmina Companies.  License fees totaled approximately
$23,000 and $0 for the quarters ended March 31, 2009 and 2008,
respectively.
  The
Company has entered into two product licensing agreements with two clients (each
a “Licensee”) and a related talent (the “Talent”) they represent. Under the
first agreement, the Company earns service charges from the Licensee and
commissions from the Talent for services performed in connection with the
licensing agreement. This licensing agreement has a six-year term, which ends
March 31, 2014. During the first three years of the agreement, the Talent and
the Company are required to render services to the Licensee in exchange for a
guaranteed minimum payment.  The next three years of the agreement is
the sell-off period, as defined.  During the sell-off period, the
Talent and the Company are not required to render services.  The
Talent will earn royalties based on a certain percentage of net sales, as
defined, and the Company will earn a commission based on a certain percentage of
the royalties earned by the Talent.  For the quarter ended March 31,
2009, the Company recorded approximately $12,000 of revenue from this licensing
agreement.
  Under the
second licensing agreement, the Company earns commissions from the Talent it
represents and royalties from the client that are based on a certain percentage
of net sales, as defined. The initial term of this second agreement expires on
December 31, 2012. The second agreement is renewable for another two years if
certain conditions are met. For the quarter ended March 31, 2009, the Company
recognized approximately $35,000 of revenues from this agreement.
  Other
income includes mother agency fees that are paid to the Company by another
agency when the other agency books a model under contract with the Company for a
client engagement. Other income also consists of fees derived from participants
in the Company’s model search contests and miscellaneous fees charged to models
for various services provided.
  21
  Other
income also consists of television syndication royalties and a production series
contract.  In 2005, the Wilhelmina Companies produced the television
show “The Agency” and in 2007 the  Wilhelmina Companies entered into
an agreement with a television network to develop a television series titled
“She’s Got the Look”, which is now in its second season (scheduled to start
airing in June 2009 on the network channel TV Land Prime).  The
television series documents the lives of women competing in a modeling
competition.  The Wilhelmina Companies provided the television series
with the talent and the “Wilhelmina” brand image, and will agree to a modeling
contract with the winner of the competition, in consideration of a fee per
episode produced, plus 15% of Modified Gross Adjusted Receipts by the television
network for the series, as defined.
  Model
Costs
  Model
costs consist of costs associated with relationships with models where the key
indicators suggest that the Company acts as a principal. Therefore, 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 as model cost. During the quarter ended March 31, 2009, model cost
was approximately $2,586,000 compared to $0 during the quarter ended March 31,
2008. The Company completed the Wilhelmina Transaction on February 13, 2009 and,
therefore, recorded model costs of the Wilhelmina Companies for the period from
February 13, 2009 through March 31, 2009 in its statement of operations for the
three months ended March 31, 2009.
  Operating
Expenses
  The
Company completed the Wilhelmina Transaction on February 13, 2009 and,
therefore, recorded operating expenses of the Wilhelmina Companies for the
period from February 13, 2009 through March 31, 2009 in its statement of
operations for the three months ended March 31, 2009.
  Operating
expenses consist of amortization and depreciation, acquisition transaction
costs, corporate overhead and costs that support the operations of the Company,
including payroll, rent, overhead, insurance, travel and professional
fees.  During the quarter ended March 31, 2009, operating expenses
increased approximately $2,169,000, to approximately $2,264,000, compared to
approximately $95,000 during the quarter ended March 31, 2008. All operating
costs except corporate overhead expenses are attributable to the Wilhelmina
Transaction and are discussed below. Corporate overhead expenses include public
company costs, director and executive officer compensation, directors’ and
officers’ insurance, certain legal and professional fees, rent and travel.
During the quarter ended March 31, 2009, corporate
overhead  approximated $126,000 compared to $95,000 for the three
months ended March 31, 2008.
  Salaries
and Service Costs
  Salaries
and service costs are comprised of payroll and related costs and travel costs
required to deliver the Company’s services to the customers and models. During
the quarter ended March 31, 2009, salaries and service costs were approximately
$1,015,000 compared to $0 during the quarter ended March 31, 2008. The Company
completed the Wilhelmina Transaction on February 13, 2009 and, therefore,
recorded salaries and service costs of the Wilhelmina Companies for the period
from February 13, 2009 through March 31, 2009 in its statement of operations for
the three months ended March 31, 2009.
  22
  Office
and General Expenses
  Office
and general expenses are comprised of office and equipment rents, advertising
and promotion, corporate overhead expenses, insurance expenses, professional
fees and technology cost.  These costs are less directly linked to
changes in the Wilhelmina Companies’ revenues than are salaries and service
costs. During the quarter ended March 31, 2009, office and general expenses,
excluding corporate overhead, were approximately $278,000 compared to $0 during
the quarter ended March 31, 2008. The Company completed the Wilhelmina
Transaction on February 13, 2009 and, therefore, recorded office and general
expenses of the Wilhelmina Companies for the period from February 13, 2009
through March 31, 2009 in its statement of operations for the three months ended
March 31, 2009.
  Interest
Income
  Interest
income totaled approximately $4,000 during the quarter ended March 31, 2009,
compared to approximately $101,000 during the quarter ended March 31, 2008. The
decrease in interest income is the result of a significant decrease in yields on
cash balances and the full utilization of the Company’s cash balances to fund
the closing of the Wilhelmina Transaction on February 13, 2009.
  Depreciation
and Amortization
  Depreciation
and amortization expense is incurred with respect to certain assets, including
computer hardware, software, office equipment, furniture, and other
intangibles.  During each of the quarters ended March 31, 2009 and
March 31, 2008, depreciation and amortization expense totaled $200,000 (of which
$188,000 relates to amortization of intangibles acquired in connection with the
Wilhelmina Transaction) and $0, respectively.  The Company made
approximately $1,000 of fixed asset purchases during the quarter ended March 31,
2009.
  Acquisition
Transaction Costs
  In
December 2007, the FASB released SFAS 141(R), which changes many
well-established business combination accounting practices and significantly
affects how acquisition transactions are reflected in the financial
statements.  Additionally, SFAS 141(R) will affect how companies
negotiate and structure transactions, model financial projections of
acquisitions and communicate to stakeholders.  SFAS 141(R) must be
applied prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008.  In accordance with SFAS 141(R), acquisition
transaction costs, such as certain investment banking fees, due diligence costs
and attorney fees are to be recorded as a reduction of earnings in the period
they are incurred.  Prior to January 1, 2009, the effective date of
SFAS 141(R) for the Company, acquisition transaction costs were included in the
cost of the acquired business. On February 13, 2009, the Company closed the
Wilhelmina Transaction, and therefore, in accordance with the Company’s
interpretation of SFAS 141(R) transition rules, recorded all previously
capitalized acquisition transaction costs of approximately $849,000 as a
reduction of earnings for the year ended December 31, 2008.
  As of
December 31, 2008, the Company had deferred approximately $139,000 of costs
associated with the Wilhelmina Transaction, which the Company has determined
relate to the issuance of equity securities.  These costs were
reclassified as a reduction of capital when the equity securities were issued at
the closing of the acquisition. For the quarter ended March 31, 2009, the
Company recorded acquisition transaction costs of approximately
$645,000.
  Pro
Forma Results of Operations of the Wilhelmina Companies for the Quarter Ended
March 31, 2009 Compared to the Quarter Ended March 31, 2008
  The
Company is providing the pro forma financial information and discussion below
relating solely to the Wilhelmina Companies, without taking into account any
amounts attributable to the Company’s operations on the holding company level,
to aid you in your analysis of the Company’s financial
performance.  Such information and discussion should be read in
conjunction with the Unaudited Interim Condensed Consolidated Financial
Statements of the Company and the notes thereto included in this
report.  The unaudited pro forma information and discussion below is
not necessarily indicative of the current or future financial position or
operating results of the Company.
  23
  Pro Forma
Operating Income of the Wilhelmina Companies:
  Quarter
      ended March 31,(in
      thousands)2009
              
              
              2008$
              
              
              %
      of Revenues net of model costs
              
              
              %
      of Operating Expenses
              
              
              $
              
              
              %
      of Revenues net of model costs
              
              
              %
      of Operating ExpensesTotal
      revenues
              
              $
              8,392
              
              
              
              
              
              
              
              
              $
              10,029Model
      costs
              
              
              5,860
              
              
              
              
              
              
              
              
              
              7,066Revenues
      net of model costs
              
              
              2,532
              
              
              
              
              
              
              
              
              
              2,962Operating
      expenses:Salary
      and service costs
              
              
              1,928
              
              
              
              76.1
              %
              
              
              76.2
              %
              
              
              1,756
              
              
              
              59.3
              %
              
              
              74.6
              %Office
      and general expenses
              
              
              603
              
              
              
              23.8
              %
              
              
              23.8
              %
              
              
              597
              
              
              
              20.1
              %
              
              
              25.4
              %Total
      Operating expenses
              
              
              2,531
              
              
              
              99.9
              %
              
              
              100.0
              %
              
              
              2,353
              
              
              
              79.4
              %
              
              
              100.0
              %Operating  income
              
              $
              1
              
              
              
              
              
              
              
              
              
              
              $
              609
  Gross
Billings
  During
the quarter ended March 31, 2009, gross billings of the Wilhelmina Companies
decreased approximately $1,750,000, or 15.6%, to approximately $9,485,000,
compared to approximately $11,235,000 during the quarter ended March 31,
2008.  The Wilhelmina Companies experienced decreases in gross
billings across the core modeling business as a result of a decrease in spending
by its clients due to the global economic recession, somewhat offset by an
increase in gross billings in the artist management business.
  Revenues
  During
the quarter ended March 31, 2009, revenues net of model costs of the Wilhelmina
Companies decreased approximately $430,000, or 14.5%, to approximately
$2,532,000, compared to approximately $2,962,000 during the quarter ended March
31, 2008. The Wilhelmina Companies experienced decreases in revenues, net of
model costs, across the core modeling business as a result of a decrease in
spending by its clients due to the global economic recession somewhat offset by
an increase in  revenues, net of model costs, in the artist management
business.
  Operating
Expenses
  Operating
expenses consist of costs that support the operations of the Wilhelmina
Companies, including payroll, rent, insurance, travel and professional
fees.  During the quarter ended March 31, 2009, operating expenses
increased approximately $178,000, or 7.6%, to approximately $2,531,000, compared
to approximately $2,353,000 during the quarter ended March 31,
2008.
  24
  Salaries
and Service Costs
  During
the quarter ended March 31, 2009, the Wilhelmina Companies continued to invest
in professional personnel and pursue new business.  Salaries and
service costs as a percentage of total operating expenses were 76.2% and 74.6%
for the quarters ended March 31, 2009 and 2008,
respectively.  Approximately $172,000, or 96%, of the approximately
$178,000 increase in total operating expenses in the quarter ended March 31,
2009, resulted from increases in salaries and service costs.  The
increase in labor cost was associated with certain management changes from the
prior year that resulted in higher salaries for certain key managers.
  Office
and General Expenses
  Office
and general expenses are comprised of office and equipment rents, advertising
and promotion, overhead expenses, insurance expenses, professional fees and
technology cost.  These costs are less directly linked to changes in
the Wilhelmina Companies’ revenues than salaries and service
costs.  Office and general expenses, as a percentage of total
operating expenses, were 23.8% for the quarter ended March 31, 2009 and 25.4%
for the quarter ended March 31, 2008.  The actual dollar amount of
office and general expenses remained relatively flat due to the typically fixed
nature of these expenses, even though revenues decreased approximately 14.5% for
the quarter ended March 31, 2009 as compared to the quarter ended March 31,
2008.
  Operating
Income
  During
the quarter ended March 31, 2009, the Wilhelmina Companies recorded operating
income of approximately $1,000 compared to operating income of approximately
$609,000 during the quarter ended March 31, 2008.  The decline in
operating income was caused by a decline in revenues which was attributable to
decreased spending by the clients of the Wilhelmina Companies due to the
worldwide economic recession.
  Liquidity
and Capital Resources
  The
Company’s cash balance decreased to $569,000 at March 31, 2009, from $11,735,000
at December 31, 2008. The decrease is attributable to the funding of the
acquisition of the Wilhelmina Companies and the associated acquisition
transaction costs.
  On
February 13, 2009, the Company closed the Wilhelmina Transaction and funded
approximately $13,066,000 to the various parties involved in accordance with the
Acquisition Agreement and $1,756,000 associated with the escrow facility
discussed below.  Cash on hand and the $3,000,000 in proceeds from
Newcastle under the Equity Financing Agreement were used to fund the closing
amounts.
  Signature
Bank Credit Facility
  The
Company’s primary liquidity needs are for financing working capital associated
with the expenses it incurs in performing services under its client
contracts.  The Company has in place a credit facility with Signature
Bank (the “Credit Facility”), which includes a term loan with a balance of
approximately $233,000 as of March 31, 2009, and a revolving line of credit with
a balance of $1,500,000 as of March 31, 2009, that allows the Company to manage
its cash flows.  The revolving line under the Credit Facility expired
on January 31, 2009, was subsequently extended, and expired on April 30,
2009.  The Company is currently negotiating with the bank to further
extend the line of credit. Signature Bank has not requested repayment of the
line, which as of May 19, 2009 had an unpaid balance of
$2,000,000.  The term note is payable in monthly installments of
$23,784 including interest at a fixed rate of 6.65% per annum and matures in
December 2009.  Interest on the revolving credit note was payable
monthly at an annual rate of prime plus 0.5% (3.75% at March 31,
2009).  Availability under the revolving line of credit is subject to
a borrowing base computation.  The line of credit and term note are
collateralized by all of the assets of the Wilhelmina Companies, cross
collateralized by the combined and consolidated Wilhelmina Companies and are
guaranteed by a stockholder of the Company.
  25
  The
Company’s ability to make payments on the Credit Facility, to replace its
indebtedness, and to fund working capital and planned capital expenditures will
depend on its ability to generate cash in the future, which, to a certain
extent, is subject to general economic, financial, competitive and other factors
that are beyond its control.  The Company has historically secured its
working capital facility through accounts receivable balances and, therefore,
the Company’s ability to continue servicing debt is dependent upon the timely
collection of those receivables.
  As the
revolving line under the Credit Facility expired, and in order to facilitate the
closing of the Wilhelmina Transaction on February 13, 2009, the Company entered
into an agreement with Esch (the “Letter Agreement”), pursuant to which Esch
agreed that $1,756,000 of the cash proceeds to be paid to him at the closing of
the Wilhelmina Transaction would instead be held in escrow.  All or a
portion of such amount held in escrow will be used to satisfy the Company’s
indebtedness in connection with the Credit Facility upon the occurrence of
specified events including, but not limited to, written notification to the
Company of the termination of the Credit Facility.  Any amount
remaining in escrow under the Letter Agreement will be released to Esch upon the
renewal, extension or replacement of the Credit Facility, subject to certain
requirements set forth in the Letter Agreement.  In the event any
portion of the proceeds is paid from escrow to pay off the Credit Facility, the
Company will promptly issue to Esch, in replacement thereof, a promissory note
in the principal amount of the amount paid.
  Newcastle
Financing Arrangement
  Concurrently
with the execution of the Acquisition Agreement, the Company entered into the
Equity Financing Agreement with Newcastle whereby Newcastle committed to
purchase, at the Company’s election at any time or times prior to six months
following the closing, up to an additional $2,000,000 (8,097,166 shares at
$0.247 per share) of Common Stock.
  Purchase
Price Adjustment under Acquisition Agreement
  The
aggregate purchase price under the Acquisition Agreement is subject to certain
purchase price adjustments related to “core business” EBITDA
calculations.  Depending on the outcome of these purchase price
adjustments, the Control Sellers may have the option to pay to the Company in
cash, such amount of the adjustments, not to exceed $4,500,000.
  Lease
Guarantees
  Under the
terms of the Platinum Transaction, all leases and corresponding obligations
associated with the Transaction Processing and Software Business were assumed by
Platinum.  Prior to the Platinum Transaction, the Company guaranteed
two operating leases for office space of the divested companies.  The
first lease was related to office space located in San Antonio, Texas, and
expired in 2006.  The second lease is related to office space located
in Austin, Texas, and expires in 2010.  Under the original terms of
the second lease, the remaining minimum undiscounted rent payments total
approximately $1,063,000 at March 31, 2009.  In conjunction with the
Platinum Transaction, Platinum agreed to indemnify the Company should the
underlying operating companies not perform under the terms of the office
leases.  The Company can provide no assurance as to Platinum’s
ability, or willingness, to perform its obligations under the
indemnification.  The Company does not believe it is probable that it
will be required to perform under the remaining lease guarantee and, therefore,
no liability has been accrued in the Company’s financial
statements.
  26
  Off-Balance
Sheet Arrangements
  The
Company guaranteed two operating leases for office space for certain of its
wholly owned subsidiaries prior to the Platinum Transaction (see Liquidity and
Capital Resources – Lease Guarantees above).  One such lease expired
in 2006.
  Critical
Accounting Policies
  Revenue
Recognition
  In
compliance with Emerging Issues Task Force (“EITF”) Issue No. 99-19, “Reporting Revenue Gross as a
Principal versus Net as an Agent,” the Company
assesses whether it, the model or artist is the primary obligor. The Company
evaluates the terms of its model, artist 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
artist selection and credit risk the Company undertakes. The Company operates
broadly as a modeling agency and in those relationships with models and artists
where the key indicators suggest the Company acts as a principal, the Company
records the gross amount billed to the client as revenue and the related costs
incurred to the model as model cost. In other model and artist relationships
where the Company believes the key indicators suggest it acts as an agent on
behalf of the model or artist the Company records revenue net of pass-through
model or artist 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.
  Wilhelmina
and its subsidiaries also record fees from licensees when the revenues are
earned and collectability is reasonably assured.
  Goodwill
and Intangible Assets
  Goodwill
and intangible assets consist primarily of goodwill and buyer relationships
resulting from a business acquisition. According to SFAS 142, 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.
  In April
2008, the FASB issued FSP FAS 142-3, “Determination of
the Useful Life of Intangible Assets” (“FSP
142-3”).FSP 142-3
amends the factors to be considered in developing renewal or extension
assumptions used to determine the useful life of intangible assets under SFAS
142. Its intent is to improve the consistency between the useful life of an
intangible asset and the period of expected cash flows used to measure its fair
value. The Company adopted FSP 142-3 on January 1, 2009. The adoption of
FSP 142-3 did not have a material impact on the consolidated financial
statements.
  27
  The
Company has determined that the revenue interest meets the indefinite life
criteria outlined in SFAS 142, and, therefore, annually assesses whether the
carrying value of the asset exceeds its fair value, and records an impairment
loss equal to any such excess.
  Business
Combinations
  In
December 2007, the FASB released SFAS 141(R), which changes many
well-established business combination accounting practices and significantly
affects how acquisition transactions are reflected in the financial
statements.  Additionally, SFAS 141(R) will affect how companies
negotiate and structure transactions, model financial projections of
acquisitions and communicate to stakeholders.  SFAS 141(R) must be
applied prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008.
  Under
SFAS 141(R), contingent consideration or earn outs will be recorded at their
fair value at the acquisition date.  Except in bargain purchase
situations, contingent considerations typically will result in additional
goodwill being recognized.  Contingent consideration classified as an
asset or liability will be adjusted to fair value at each reporting date through
earnings until the contingency is resolved.
  These
estimates are subject to change upon the finalization of the valuation of
certain assets and liabilities and may be adjusted in accordance with SFAS
141(R).
  In
accordance with SFAS 141(R), acquisition transaction costs, such as certain
investment banking fees, due diligence costs and attorney fees are to be
recorded as a reduction of earnings in the period they are
incurred.  Prior to January 1, 2009, the effective date of SFAS 141(R)
for the Company, acquisition transaction costs were included in the cost of the
acquired business. On February 13, 2009, the Company closed the Wilhelmina
Transaction and therefore, in accordance with the Company’s interpretation of
SFAS 141(R) transition rules, recorded all previously capitalized acquisition
transaction costs of approximately $849,000 as a reduction of earnings for the
year ended December 31, 2008. The Company incurred acquisition transaction costs
of approximately $645,000 for the quarter ended March 31, 2009.
  In April
2009, the FASB issued FSP 141(R)-1 to amend SFAS 141 (revised 2007) “Business
Combinations.” FSP 141(R)-1 addresses the initial recognition, measurement and
subsequent accounting for assets and liabilities arising from contingencies in a
business combination, and requires that such assets acquired or liabilities
assumed be initially recognized at fair value at the acquisition date if fair
value can be determined during the measurement period. If the acquisition date
fair value cannot be determined, the asset acquired or liability assumed arising
from a contingency is recognized only if certain criteria are met. FSP 141(R)-1
also requires that a systematic and rational basis for subsequently measuring
and accounting for the assets or liabilities be developed depending on their
nature. FSP 141(R)-1 will be effective for assets or liabilities arising from
contingencies in business combinations for which the acquisition date is after
December 31, 2008. The provisions of FSP 141(R)-1 were considered in connection
with the Wilhelmina Transaction.
 
 Item3.
              Quantitative
      and Qualitative Disclosures About Market
Risk.
  Not
applicable.
  28
  Item4.
              Controls
      and Procedures.
  Evaluation
of Disclosure Controls and Procedures
  Disclosure
controls are procedures that are designed with the objective of ensuring that
information required to be disclosed in the Company’s reports under the Exchange
Act, such as this Form 10-Q, is reported in accordance with the rules of the
SEC.  Disclosure controls are also designed with the objective of
ensuring that such information is accumulated appropriately and communicated to
management, including the chief executive officer and chief financial officer,
as appropriate, to allow for timely decisions regarding required
disclosures.
  As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s management,
including the Company’s chief executive officer and chief financial officer, of
the effectiveness of the design and operation of the Company’s disclosure
controls and procedures pursuant to Exchange Act Rules 13a-15(e) and
15d-15(e).  Based upon that evaluation, the chief executive officer
and chief financial officer concluded that the Company’s disclosure controls and
procedures were effective as of March 31, 2009 to ensure that information
required to be disclosed by the Company (including its consolidated
subsidiaries) in the reports that the Company files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and are operating in an effective
manner.
  Changes
in Internal Control Over Financial Reporting
  As a
result of the closing of the Wilhelmina Transaction, during the quarter ended
March 31, 2009, certain employees of the Wilhelmina Companies were integrated
into the Company’s financial reporting process, which materially affected the
Company’s internal control over financial reporting.
  Except as
stated above, 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.
  Limitations
on the Effectiveness of Internal Control
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
  29
  PARTII
 OTHER
INFORMATION
  Item
      1.
              Legal
      Proceedings.
  The
Company is engaged in various legal proceedings that are routine in nature and
incidental to its business.  None of these proceedings, either
individually or in the aggregate, is believed, in the Company’s opinion, to have
a material adverse effect on its consolidated financial position or its results
of operations.
  Item1.A.
              Risk
      Factors.
  Not
applicable.
  Item2.
              Unregistered
      Sales of Equity Securities and Use of
Proceeds.
  On
February 13, 2009, concurrently with the closing of the Wilhelmina Transaction
and pursuant to the Acquisition Agreement, the Company issued 63,411,131 shares
of Common Stock to Patterson, the Control Sellers and their advisor, valued at
$0.239 per share (representing the book value of the Common Stock of $0.247 per
share as of July 31, 2008 as agreed by the parties to the Acquisition Agreement,
subject to adjustment to reflect certain transaction expenses incurred by the
Company), as a portion of the consideration paid in the Wilhelmina
Transaction.
  On
February 13, 2009, concurrently with the closing of the Wilhelmina Transaction
and for the purpose of obtaining financing to complete the Wilhelmina
Transaction, the Company completed the sale of 12,145,749 shares of Common Stock
to Newcastle pursuant to the Equity Financing Agreement.  The
aggregate purchase price paid was approximately $3,000,000, representing a per
share price slightly higher than the per share price applicable to the Common
Stock issued pursuant to the Acquisition Agreement.
  The
shares of Common Stock issued in connection with the Wilhelmina Transaction and
the Equity Financing Agreement were not registered under the Securities Act of
1933, as amended (the “Securities Act”), in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act, which exempts
transactions by an issuer not involving any public offering.
  Item3.
              Defaults
      Upon Senior Securities.
  None.
  Item4.
              Submission
      of Matters to a Vote of Security
Holders.
  The
Company held the 2008 Annual Meeting on February 5, 2009.  A quorum
was present at the 2008 Annual Meeting, with 52,558,047 of the 53,883,872
outstanding shares of Common Stock entitled to vote represented in person or by
proxy.
  30
  At the
2008 Annual Meeting, the Company’s stockholders voted to approve the Company’s
acquisition of the Wilhelmina Companies (the “Acquisition Proposal”) by the
following votes:
  SharesFor:
              
              
              36,842,042Against:
              
              
              4,906,514Abstain:
              
              
              15,737
 The
Company’s stockholders voted to adopt an amendment to the Certificate of
Incorporation to change the Company’s name from “New Century Equity Holdings
Corp.” to “Wilhelmina International, Inc.” by the following votes:
  SharesFor:
              
              
              34,916,613Against:
              
              
              4,526,636Abstain:
              
              
              6,043
 The
Company’s stockholders voted to adopt an amendment to the Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
75,000,000 to 250,000,000 by the following votes:
  SharesFor:
              
              
              34,271,287Against:
              
              
              4,958,458Abstain:
              
              
              218,546
 The
Company’s stockholders voted to grant authority to the Board to effect at any
time prior to December 31, 2009 a reverse stock split of the Common Stock at a
ratio within the range from one-for-ten to one-for-thirty, with the exact ratio
to be set at a whole number within this range to be determined by the Board in
its discretion, by the following votes:
  SharesFor:
              
              
              34,423,563Against:
              
              
              5,013,519Abstain:
              
              
              11,209
 The
Company’s stockholders voted to adopt an amendment to the Certificate of
Incorporation and Bylaws to provide for the annual election of directors (the
“Declassification Proposal”) by the following votes:
  SharesFor:
              
              
              47,866,511Against:
              
              
              4,665,016Abstain:
              
              
              23,519
 The
Company’s stockholders voted to elect the following number of directors to the
Board by the following votes:
  31
  (a)
              seven
      directors to the Board in the event that both the Acquisition Proposal and
      the Declassification Proposal were
approved
  SharesFor
              
              
              Against
              
              
              WithheldMark
      E. Schwarz
              
              
              45,414,117
              
              
              
              172,574
              
              
              
              6,968,354Jonathan
      Bren
              
              
              45,582,391
              
              
              
              4,300
              
              
              
              6,968,354James
      Risher
              
              
              45,510,801
              
              
              
              75,890
              
              
              
              6,968,354John
      Murray
              
              
              45,394,936
              
              
              
              191,755
              
              
              
              6,968,354Evan
      Stone
              
              
              45,407,825
              
              
              
              178,866
              
              
              
              6,968,354Dr.
      Hans-Joachim Bohlk
              
              
              45,437,863
              
              
              
              148,828
              
              
              
              6,968,354Derek
      Fromm
              
              
              45,402,828
              
              
              
              183,863
              
              
              
              6,968,354
 (b)
              three
      directors in the event that the Acquisition Proposal was not approved and
      the Declassification Proposal was
approved
  SharesFor
              
              
              Against
              
              
              WithheldMark
      E. Schwarz
              
              
              45,413,852
              
              
              
              172,839
              
              
              
              6,968,354Jonathan
      Bren
              
              
              45,582,391
              
              
              
              4,300
              
              
              
              6,968,354James
      Risher
              
              
              45,509,801
              
              
              
              76,890
              
              
              
              6,968,354
 (c)
              five
      directors in the event that the Acquisition Proposal was approved and the
      Declassification Proposal was not
approved
  SharesFor
              
              
              Against
              
              
              WithheldJames
      Risher
              
              
              45,512,369
              
              
              
              74,322
              
              
              
              6,968,354John
      Murray
              
              
              45,395,444
              
              
              
              191,247
              
              
              
              6,968,354Evan
      Stone
              
              
              45,401,193
              
              
              
              178,498
              
              
              
              6,968,354Dr.
      Hans-Joachim Bohlk
              
              
              45,455,520
              
              
              
              131,171
              
              
              
              6,968,354Derek
      Fromm
              
              
              45,402,531
              
              
              
              184,160
              
              
              
              6,968,354
 (d)
              one
      director in the event that neither the Acquisition Proposal nor the
      Declassification Proposal was
approved
  SharesFor
              
              
              Against
              
              
              WithheldJames
      Risher
              
              
              45,521,179
              
              
              
              75,522
              
              
              
              6,968,344
 The
Company’s stockholders voted to ratify the appointment of Burton McCumber &
Cortez, L.L.P. as the Company’s independent registered public accounting firm
for the fiscal year ending December 31, 2008 by the following
votes:
  SharesFor:
              
              
              51,197,532Against:
              
              
              470,969Abstain:
              
              
              886,544
  32
  The
Company’s stockholders voted to adjourn the 2008 Annual Meeting to a later date
or dates, if necessary, to permit the further solicitation and voting of proxies
if, based upon the tabulated vote at the time of the 2008 Annual Meeting, any of
the foregoing proposals have not been approved, by the following
votes:
  SharesFor:
              
              
              47,491,874Against:
              
              
              5,006,549Abstain:
              
              
              58,321
  Item5.
              Other
      Information.
  None.
  Item6.
              Exhibits.
  Exhibit
      No.
              
              Description31.1
              
              Certification
      of Principal Executive Officer in Accordance with Section 302 of the
      Sarbanes-Oxley Act.*31.2
              
              Certification
      of Principal Financial Officer in Accordance with Section 302 of the
      Sarbanes-Oxley Act.*32.1
              
              Certification
      of Principal Executive Officer in Accordance with Section 906 of the
      Sarbanes-Oxley Act.*32.2
              
              Certification
      of Principal Financial Officer in Accordance with Section 906 of the
      Sarbanes-Oxley Act.*
 
 * Filed
herewith
  33
  SIGNATURES
  Pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
 
 WILHELMINA
      INTERNATIONAL, INC.(Registrant)Date:  May
      20, 2009
              By:
              /s/  John
      P. MurrayName:
              John
      P. MurrayTitle:
              Chief
      Financial Officer
                (Duly
      Authorized and
                Principal
      Financial Officer)
   34