Financial Performance - Total revenues for Q2 2023 were $4.493 million, a decrease of 4.4% compared to $4.699 million in Q2 2022[10] - Service revenues for the first half of 2023 were $8.962 million, down 2.9% from $9.232 million in the same period of 2022[10] - Operating income for Q2 2023 was $149 thousand, a significant decline from $1.040 million in Q2 2022[10] - Net loss for Q2 2023 was $14 thousand, compared to a net income of $921 thousand in Q2 2022[10] - Basic net income per common share for the first half of 2023 was $0.03, down from $0.32 in the same period of 2022[10] - For the six months ended June 30, 2023, the net income decreased to $145 million from $1,660 million in the same period of 2022, representing a decline of approximately 91.3%[14] - Operating expenses for the three months ended June 30, 2023, totaled $4,344,000, an increase of 18.7% from $3,659,000 in the prior year[10] Assets and Liabilities - Total assets as of June 30, 2023, were $41.314 million, a decrease from $41.992 million as of December 31, 2022[8] - Total liabilities decreased to $16.711 million as of June 30, 2023, from $17.781 million at the end of 2022[8] - Shareholders' equity increased to $24.603 million as of June 30, 2023, compared to $24.211 million at the end of 2022[8] - Cash and cash equivalents decreased to $10.943 million as of June 30, 2023, from $11.998 million at the end of 2022[8] Cash Flow - Net cash used in operating activities was $(1,112) million, compared to $(477) million for the same period in 2022, indicating a significant increase in cash outflow[14] - Cash and cash equivalents at the end of the period were $10,943 million, up from $9,311 million at the end of June 30, 2022, reflecting an increase of approximately 17.5%[14] - The company reported a net change in cash and cash equivalents of $(1,055) million, compared to $(940) million in the prior year[14] - The company incurred $49 million in cash paid for income taxes during the first half of 2023, compared to $5 million in the same period of 2022[14] Share Repurchase - The company has repurchased a total of 1,314,694 shares of common stock at an average price of approximately $4.85 per share, totaling approximately $6.4 million in repurchases since 2012[31] - No shares were repurchased under the stock repurchase program during the first six months of 2023[31] Tax and Valuation - The company had no federal income tax loss carryforwards as of June 30, 2023[29] - The company released a full valuation allowance against its deferred tax assets in 2022, resulting in no valuation allowance as of June 30, 2023[28] Legal Proceedings - The company is engaged in various legal proceedings, including the Shanklin and Pressley litigations, which are believed to be without merit but could have a reasonably possible adverse outcome[24]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 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 001-36589 WILHELMINA INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 74-278195 ...

Revenue Growth - Service revenues increased by 10.5% to $17.75 million for the year ended December 31, 2022, compared to $16.07 million in 2021, primarily due to increased bookings as COVID-19 restrictions were lifted [66][68]. - Total revenues rose to $17.78 million in 2022 from $16.10 million in 2021, reflecting a growth driven by the recovery in business activity [66]. - The Company reported total revenues of $17,780 thousand for 2022, an increase of 10.4% from $16,102 thousand in 2021 [95]. Gross Billings - Gross billings increased by 18% to $66.98 million in 2022, up from $56.81 million in 2021, driven by higher client bookings [67][83]. - Gross Billings for 2022 were $66,984 thousand, up 17.8% from $56,813 thousand in 2021 [95]. Income and Profitability - Operating income improved to $2.42 million with an operating margin of 13.6% in 2022, compared to $2.16 million and 13.4% in 2021, indicating effective cost management [66][75]. - Net income decreased to $3.53 million in 2022 from $4.52 million in 2021, impacted by the release of a valuation allowance on deferred tax assets [82]. - The Company had a net income of $3,529 thousand in 2022, compared to $4,518 thousand in 2021, reflecting a decrease of 21.9% [96]. Expenses - Salaries and service costs rose by 26.2% to $10.91 million in 2022, compared to $8.64 million in 2021, due to returning salaries and new hires [66][70]. - Office and general expenses increased by 6.6% to $3.17 million in 2022, up from $2.97 million in 2021, primarily due to higher legal and rent expenses [66][71]. - Model costs increased to $49,204 thousand in 2022 from $40,711 thousand in 2021, representing a rise of 20.5% [95]. Tax and Interest - The effective tax rate was -37.0% in 2022, compared to 15.4% in 2021, largely due to the release of a valuation allowance against deferred tax assets [66][81]. - Interest expense decreased to $0.008 million in 2022 from $0.051 million in 2021, reflecting the repayment of the Amegy term loan [66][79]. Cash and Liquidity - The cash balance increased to $12.0 million at December 31, 2022, from $10.3 million at December 31, 2021, primarily due to net cash provided by operating activities [84]. EBITDA - EBITDA for 2022 was $2,776 thousand, a decrease of 55.6% from $6,247 thousand in 2021 [96]. - Adjusted EBITDA for 2022 was $2,802 thousand, down 23.3% from $3,649 thousand in 2021 [96]. - Pre-Corporate EBITDA for 2022 was $3,895 thousand, a decline of 14.4% from $4,546 thousand in 2021 [96]. Non-Recurring Items - The Parent PPP Loan of $128 thousand was fully forgiven, resulting in a gain of $1000 recorded in the quarter ended June 30, 2021 [90]. - The Company’s non-recurring items in 2021 included a gain on forgiveness of PPP loans and cybersecurity incident expenses [96]. Reporting Standards - The Company’s financial results are reported in accordance with GAAP, but management believes non-GAAP measures like EBITDA and Gross Billings provide additional useful information [91].

Revenue Performance - Service revenues increased by 7.6% to $16.256 million for the three months ended September 30, 2022, and by 21.5% to $50.490 million for the nine months ended September 30, 2022, compared to the same periods in 2021[51]. - Total revenues rose by 7.6% to $16.264 million for the three months and by 21.4% to $50.513 million for the nine months ended September 30, 2022, compared to the same periods in 2021[51]. - Net income increased by 63.7% to $1.887 million for the three months ended September 30, 2022, but decreased by 21.1% to $3.547 million for the nine months ended September 30, 2022, compared to the same periods in 2021[51]. - The Company reported net income of $1.9 million and $3.5 million for the three and nine months ended September 30, 2022, compared to $1.2 million and $4.5 million for the same periods in 2021[67]. Cost and Expenses - Model costs increased by 10.1% to $11.822 million for the three months and by 23.6% to $36.824 million for the nine months ended September 30, 2022, compared to the same periods in 2021[51]. - Salaries and service costs rose by 22.8% to $2.753 million for the three months and by 31.3% to $8.102 million for the nine months ended September 30, 2022, compared to the same periods in 2021[55]. - Operating income decreased by 34.1% to $0.671 million for the three months ended September 30, 2022, but increased by 28.7% to $2.585 million for the nine months ended September 30, 2022, compared to the same periods in 2021[59]. Profitability Metrics - Gross profit margin decreased to 27.3% for the three months and to 27.1% for the nine months ended September 30, 2022, compared to 28.9% and 28.4% in the same periods in 2021[54]. - The effective tax rate was -143.2% for the three months and -27.2% for the nine months ended September 30, 2022, compared to 21.7% and 13.4% in the same periods in 2021[64]. - The effective tax rate for the three and nine months ended September 30, 2022, was influenced by a $1.5 million valuation allowance release against deferred tax assets, resulting in an income tax benefit of $1.1 million and $0.8 million[66]. Cash Flow and Liquidity - Cash balance increased to $10.5 million at September 30, 2022, from $10.3 million at December 31, 2021, primarily due to $1.2 million net cash provided by operating activities[68]. - Net cash provided by operating activities of $1.2 million was driven by net income and increases in accounts payable, partially offset by increases in accounts receivable and prepaid expenses[69]. - The Company has sufficient liquidity to meet projected operational expenses and capital expenditure requirements for the next twelve months[70]. - The Company had a credit agreement with Amegy Bank providing a $3.0 million revolving line of credit, with borrowing capacity fully utilized as of September 30, 2022[71]. - The Company incurred $0.1 million in cash used for investing activities, primarily for purchases of property and equipment, including software and computer equipment[69]. Revenue Recognition - The Company recognized service revenues when the customer obtains control of the product or service, typically upon completion of contractual requirements[78]. - The Company has adopted ASC 606 for revenue recognition, establishing principles for recognizing revenue upon the transfer of promised goods or services[76]. - Model costs include amounts owed to talent and related costs, which are accrued in the period the event takes place[79]. Strategic Initiatives - The company plans to expand its women's high-end fashion board and increase brand awareness among advertisers and potential talent as part of its long-term strategy[50]. - The company realized foreign currency gains of $107 thousand and $211 thousand for the three and nine months ended September 30, 2022, compared to gains of $4 thousand and losses of $84 thousand in the same periods in 2021[60].

Financial Performance - Total revenues for the three months ended June 30, 2022, were $17,604,000, representing a 21.5% increase from $14,510,000 in the same period of 2021[11] - Service revenues increased to $17,596,000 for the three months ended June 30, 2022, up from $14,502,000 in 2021, marking a growth of 21.5%[11] - Net income for the six months ended June 30, 2022, was $1,660,000, a decrease of 50.4% compared to $3,342,000 in the same period of 2021[11] - Total revenues for the six months ended June 30, 2022, rose to $34,249 thousand compared to $26,486 thousand in 2021, marking a 29.4% increase[11] - Operating income for the three months ended June 30, 2022, was $1,040,000, compared to $891,000 in the same period of 2021, indicating a 16.7% increase[11] - Basic net income per common share for the three months ended June 30, 2022, was $0.18, down from $0.22 in the same period of 2021[11] - Net income for the six months ended June 30, 2022, was $1,660 thousand, down from $3,342 thousand in 2021, indicating a decline of 50.3%[14] Assets and Liabilities - Total assets as of June 30, 2022, were $38,751,000, an increase from $37,424,000 as of December 31, 2021[9] - Total liabilities increased to $16,480,000 as of June 30, 2022, compared to $16,411,000 as of December 31, 2021[9] - Shareholders' equity rose to $22,271,000 as of June 30, 2022, from $21,013,000 at the end of 2021, reflecting a growth of 5.96%[9] - As of June 30, 2022, total assets amounted to $38.751 million, an increase from $37.424 million as of December 31, 2021, reflecting a growth of approximately 3.5%[9] - Total current liabilities were $12.913 million as of June 30, 2022, slightly up from $12.859 million at the end of 2021, showing a marginal increase of about 0.4%[9] - The company reported an accumulated deficit of $59.578 million, a slight improvement from $61.238 million at the end of 2021[9] Cash Flow and Expenses - Cash and cash equivalents at the end of the period were $9.31 million, down from $10.25 million at the beginning of the period[14] - Operating cash flow for the six months ended June 30, 2022, was $(477) thousand, compared to $1.55 million for the same period in 2021[14] - The company experienced a net cash used in operating activities of $477 thousand for the six months ended June 30, 2022, compared to a net cash provided of $1,546 thousand in 2021[14] - Total operating expenses for the six months ended June 30, 2022, increased to $7,333 thousand from $6,444 thousand in 2021, a rise of 13.8%[11] - The company recorded a share-based payment expense of $110 thousand for the six months ended June 30, 2022, compared to $4 thousand in 2021[14] - The company reported a bad debt expense of $79 thousand for the six months ended June 30, 2022, compared to $78 thousand in 2021[14] Credit and Financing - The company has a $3.0 million revolving line of credit with Amegy Bank, with borrowing capacity fully available as of June 30, 2022[18] - The company had no outstanding balance on its term loan as of June 30, 2022, after prepaying the remaining balance of $0.6 million in August 2021[19] - The Company drew $0.7 million from a term loan to repurchase 100,000 shares of its common stock and later drew an additional $0.3 million for another stock purchase, with no outstanding balance on the term loan as of June 30, 2022[19] - The revolving line of credit expires on October 24, 2022, and the Company was in compliance with its bank covenants as of June 30, 2022[18] Legal and Tax Matters - The company is currently involved in legal proceedings, including the Shanklin and Pressley litigations, which may have a reasonably possible adverse outcome, although the company cannot estimate the potential loss[29] - The effective tax rate for the company was lower in 2021 due to PPP loan forgiveness, which was not subject to income tax, highlighting the impact of external financial assistance on tax liabilities[31] - The Company operates in states with relatively high tax rates, including California, New York, and Florida, affecting its effective tax rate[31] - The Company maintained a full valuation allowance of $1.5 million against its deferred tax assets as of June 30, 2022, due to the impact of the COVID-19 pandemic on its business[31] Share Repurchase and Stock Activity - The company has repurchased a total of 1,314,694 shares of common stock at an average price of approximately $4.85 per share, totaling around $6.4 million in repurchases since the program's inception[34] - The Company has repurchased 1,314,694 shares of common stock at an average price of approximately $4.85 per share, totaling approximately $6.4 million in repurchases under the stock repurchase program[34] - The Company received a $1.8 million PPP loan, which was fully forgiven, resulting in a $1.9 million gain recorded in the quarter ended March 31, 2021[21] - The Parent PPP Loan of $128,000 was also fully forgiven, resulting in a $0.1 million gain recorded in the quarter ended June 30, 2021[22] Operational Expansion - The company has expanded its operations to include locations in Los Angeles, Miami, and London, enhancing its market presence[16] - The company incurred expenses of $15 thousand under a services agreement with Newcastle Capital Management for the six months ended June 30, 2022, consistent with the previous year[37]

Financial Performance - Total revenues for the three months ended March 31, 2022, were $16,645, a 39.5% increase from $11,976 in the same period of 2021[11] - Service revenues increased to $16,638, up from $11,966, while license fees decreased slightly to $7 from $10[11] - Net income for Q1 2022 was $739,000, a decrease of 66.7% compared to $2,221,000 in Q1 2021[11] - Operating income rose to $874,000, compared to $100, reflecting improved operational efficiency[11] - Basic net income per common share was $0.14, down from $0.43 in the previous year[11] Assets and Liabilities - Total current assets decreased slightly to $19,173,000 from $19,200, while total assets decreased to $37,239,000 from $37,424,000[10] - Total liabilities decreased to $15,606,000 from $16,411,000, indicating improved financial stability[10] - Shareholders' equity increased to $21,633,000 from $21,013,000, reflecting a positive trend in equity growth[10] - Cash and cash equivalents at the end of the period were $9,428,000, down from $10,251,000, indicating a cash outflow[15] Tax and Valuation - As of March 31, 2022, the Company maintained a full $1.4 million valuation allowance against its deferred tax assets due to the impact of the COVID-19 pandemic[31] - The Company had federal income tax loss carryforwards of $0.8 million as of March 31, 2022[32] - The Company operates in high-tax states, including California, New York, and Florida, affecting its effective tax rate[31] Financing and Credit - The Company has a $3.0 million revolving line of credit with Amegy Bank, with borrowing capacity based on 80% of eligible accounts receivable[19] - The Company’s credit agreement with Amegy Bank includes a term loan of up to $1.0 million, of which $0.7 million was drawn for stock repurchases[20] Stock and Share Repurchase - The Company has repurchased 1,314,694 shares of common stock at an average price of approximately $4.85 per share, totaling approximately $6.4 million in repurchases since 2012[34] - The Company incurred expenses of $7.5 thousand for services provided by Newcastle Capital Management for the three months ended March 31, 2022[36] Legal Matters - The Company believes the claims in ongoing litigation are without merit and intends to vigorously defend against them[29] - The Company has been involved in legal proceedings, including class action lawsuits, but believes the claims are without merit and intends to defend vigorously[29] Business Operations - The Company’s primary business is fashion model management, with operations in New York City, Los Angeles, Miami, and London[17] - The Company has expanded its operations to include locations in Los Angeles, Miami, and London, in addition to its headquarters in New York City[17] Other Financial Adjustments - The company reported a foreign currency translation adjustment loss of $174,000 for the period[11] - The Company received a $1.8 million loan under the Paycheck Protection Program, which was fully forgiven, resulting in a $1.9 million gain recorded in Q1 2021[22]

Financial Performance - Total revenues for the year ended December 31, 2021, were $56.813 million, a 36.6% increase from $41.603 million in 2020[79] - Service revenues increased by 36.6% to $56.780 million in 2021, driven by increased bookings as cities reopened[80] - Operating income improved to $2.158 million in 2021, compared to a loss of $3.969 million in 2020, marking a 154.4% increase[79] - Net income for 2021 was $4.518 million, a significant recovery from a net loss of $4.941 million in 2020, representing a 191.4% increase[79] - Operating income increased to $2.2 million with an operating margin of 3.8% for the year ended December 31, 2021, compared to an operating loss of $4.0 million and a negative operating margin of 9.5% in 2020[90] - Net income for the year ended December 31, 2021, was $4.5 million, a significant improvement from a net loss of $4.9 million in 2020, driven by increased operating income and gains from PPP loan forgiveness[96] Cost and Expense Management - Model costs rose by 36.2% to $40.711 million in 2021, reflecting the recovery in demand[79] - Salaries and service costs decreased by 5.4% to $8.644 million in 2021, attributed to previous layoffs and salary reductions[83] - Office and general expenses decreased by 17.6% to $2.973 million in 2021, primarily due to reduced rent and other operational costs[84] - Cybersecurity incident expenses amounted to $0.575 million in 2021, resulting from a fraud incident[87] Tax and Income - The effective tax rate for 2021 was 15.4%, lower than typical years due to non-taxable gains from PPP loan forgiveness and employee retention payroll tax credits[94] - The company had $0.8 million in income tax expense for 2021, down from $0.9 million in 2020, despite a pre-tax loss in 2020 due to a valuation allowance against deferred tax assets[95] - Income before income taxes was $5.3 million for the year ended December 31, 2021, compared to a loss of $4.0 million in 2020, mainly due to operating income and PPP loan forgiveness[93] Cash Flow and Liquidity - Cash balance increased to $10.3 million at December 31, 2021, from $5.6 million at the end of 2020, primarily due to $5.5 million net cash provided by operating activities[97] - The company has sufficient liquidity to meet projected operational expenses and capital expenditure requirements for the next twelve months[99] - The company had a borrowing capacity of $3.0 million under its credit agreement with Amegy Bank as of December 31, 2021[100] Foreign Currency and Other Gains - The company recorded a $2.0 million gain on the forgiveness of PPP loans and a $1.3 million employee retention payroll tax credit in 2021[88] - The company reported a foreign currency loss of $80 thousand in 2021, compared to a gain of $16 thousand in 2020, attributed to currency fluctuations in Great Britain, Europe, and Latin America[92] Goodwill and Impairment Testing - The Company maintains an allowance for doubtful accounts to estimate losses from uncollectible accounts receivable[119] - Impairment testing for goodwill and intangible assets is performed at least annually, with a one-step quantitative test to measure impairment losses[120] - If the carrying amount of goodwill exceeds its fair value, an impairment loss is recognized for the excess amount[120] - Management may conduct a qualitative evaluation to assess the likelihood of goodwill impairment based on relevant events and circumstances[121] - Significant judgments and assumptions are involved in identifying macroeconomic conditions and industry considerations that may impact fair value[121]

Financial Performance - Service revenues increased by 43.4% to $15,101 thousand for the three months ended September 30, 2021, and by 40.4% to $41,569 thousand for the nine months ended September 30, 2021, compared to the same periods in 2020 [69]. - Total revenues rose by 43.3% to $15,109 thousand for the three months and by 40.4% to $41,595 thousand for the nine months ended September 30, 2021, compared to the same periods in 2020 [69]. - Operating income improved to $1,018 thousand for the three months and $2,009 thousand for the nine months ended September 30, 2021, compared to $114 thousand and a loss of $4,665 thousand in the same periods of 2020 [78]. - Net income was $1,153 thousand for the three months and $4,495 thousand for the nine months ended September 30, 2021, compared to net income of $22 thousand and a net loss of $5,338 thousand for the same periods in 2020 [84]. - The gross profit margin increased to 28.9% for the three months and 28.4% for the nine months ended September 30, 2021, compared to 28.5% and 27.3% in the same periods of 2020 [72]. - Cash balance increased to $7,500 thousand at September 30, 2021, from $5,600 thousand at December 31, 2020, due to $2,700 thousand net cash provided by operating activities [85]. Loans and Financial Assistance - The Company obtained approximately $2.0 million in loans under the Paycheck Protection Program, which have been 100% forgiven [61]. - The Company recorded a gain on forgiveness of loans totaling $1,994 thousand during the nine months ended September 30, 2021 [80]. - The Company received a $1.8 million Paycheck Protection Program loan, which was fully forgiven, resulting in a $1.9 million gain recorded in Q1 2021 [93]. - A second Paycheck Protection Program loan of $128,000 was also fully forgiven, resulting in a $0.1 million gain recorded in Q2 2021 [94]. - Interest expense decreased by 66.7% to $7 thousand for the three months and by 31.0% to $49 thousand for the nine months ended September 30, 2021, compared to the same periods in 2020 [82]. Operational Changes - The Company experienced a significant reduction in customer bookings beginning in March 2020, with bookings remaining below pre-pandemic levels, although there was an increase during the second half of 2020 and the first nine months of 2021 [54]. - The Company implemented layoffs of approximately 36% of its staff and temporary salary reductions for remaining staff through June 2021 [61]. - The Company closely monitors economic conditions and client spending patterns to evaluate opportunities for market share expansion [65]. - The Company reported that inflation has not historically been a material factor affecting its business operations [96]. Strategic Initiatives - The Company expects to leverage its main operating base in New York City and its diverse talent pool to enhance resilience against industry changes and economic swings [62]. - The Company aims to increase brand awareness among advertisers and potential talent, expand its women's high-end fashion board, and enhance representation in commercials, film, and television [66]. - The Company has made significant investments in technology and infrastructure to support clients and talent, utilizing digital tools for better connectivity [66]. Revenue Sources - The Company’s revenues are heavily dependent on economic activity in the U.S. and U.K., particularly in the fashion, advertising, and publishing industries [54]. - The Company’s primary sources of revenue include gross amounts billed to clients and separate service charges calculated as a percentage of models' booking fees [68]. - The Company’s revenues are primarily derived from fashion model bookings and representation of social media influencers, with performance obligations satisfied at a point in time [99]. Fraud Incident - The Company experienced a criminal fraud incident resulting in approximately $0.7 million in stolen funds, with expectations of recovering at least $0.3 million [109][110]. Taxation - The Company is subject to income taxes in multiple jurisdictions, including the United States and the United Kingdom [103].

Financial Performance - For the three and six months ended June 30, 2021, the Company recorded $0.4 million and $0.9 million, respectively, of Other Income for employee retention credit funds receivable [59]. - Service revenues increased by 220.6% to $14.5 million for the three months ended June 30, 2021, and by 38.8% to $26.5 million for the six months ended June 30, 2021, compared to the same periods in 2020 [70]. - License fees and other income rose by 60.0% to $0.008 million for the three months and by 80.0% to $0.018 million for the six months ended June 30, 2021, compared to the same periods in 2020 [71]. - Operating income was $0.891 million for the three months and $0.991 million for the six months ended June 30, 2021, compared to losses of $3.140 million and $4.779 million in 2020 [78]. - Net income was $1.121 million for the three months and $3.342 million for the six months ended June 30, 2021, compared to net losses of $2.700 million and $5.360 million in 2020 [84]. - Cash balance increased to $7.0 million at June 30, 2021, from $5.6 million at December 31, 2020, due to $1.5 million net cash from operating activities [85]. - The effective tax rate was 21.2% for the three months and 10.1% for the six months ended June 30, 2021, compared to 15.0% and (12.2%) in 2020 [83]. Impact of COVID-19 - The Company experienced a significant reduction in customer bookings beginning in March 2020, resulting in a negative impact on revenue and earnings, with bookings remaining below pre-pandemic levels [53]. - The Company implemented layoffs of approximately 36% of its staff and elected temporary salary reductions for remaining staff to manage costs during the pandemic [58]. - The Company has suspended share repurchases and eliminated discretionary travel and entertainment expenses to maintain liquidity [58]. Revenue Sources and Recognition - The Company’s primary sources of revenue include revenues from principal relationships and separate service charges calculated as a percentage of models' booking fees [68]. - Revenues are primarily derived from fashion model bookings and representation of social media influencers, with performance obligations satisfied at a point in time [99]. - The Company has adopted ASC 606 for revenue recognition, which reflects expected consideration received upon the transfer of goods or services to customers [98]. Cost Management - Model costs increased by 206.5% to $10.412 million for the three months and by 36.0% to $19.051 million for the six months ended June 30, 2021, compared to the same periods in 2020 [68]. - Model costs include amounts owed to talent and related costs, accrued in the period when the event takes place [101]. Financial Obligations and Credit Arrangements - The Company entered into a Thirteenth Amendment to its credit agreement with Amegy Bank, requiring a minimum tangible net worth of $4.0 million, down from a previous requirement of $20.0 million [92]. - The Company obtained a Sub PPP Loan of $1.8 million, which was fully forgiven, resulting in a gain of $1.9 million recorded in the quarter ended March 31, 2021 [93]. - The Parent PPP Loan of $128 thousand was also fully forgiven, leading to a gain of $0.1 million recorded in the quarter ended June 30, 2021 [94]. - The Company had a $0.2 million irrevocable standby letter of credit that terminated on June 9, 2021, with no outstanding letters of credit as of June 30, 2021 [95]. Asset Management and Controls - The Company performs annual impairment testing for goodwill and intangible assets, recognizing losses when carrying amounts exceed fair value [107]. - The Company maintains an allowance for doubtful accounts for estimated losses from uncollectible accounts receivable [106]. - The Company has effective disclosure controls and procedures in place, as evaluated by its principal executive and financial officers [110]. Strategic Investments - The Company has made significant investments in technology, infrastructure, and personnel to support clients and talent, aiming to increase brand awareness and expand market reach [65][66]. - The Company closely monitors economic conditions and client spending patterns to evaluate opportunities for market share expansion [64]. - The Company anticipates that its operations will be more resilient to industry changes and economic swings due to its geographical reach and diverse talent pool [61].

Revenue Performance - Service revenues for the three months ended March 31, 2021, were $11.966 million, a decrease of 17.7% compared to $14.547 million for the same period in 2020[65] - Total revenues for the same period were $11.976 million, down 17.7% from $14.552 million in 2020[65] - License fees and other income increased by 100% to $10,000 in Q1 2021 from $5,000 in Q1 2020, attributed to the timing of income from licensing agreements[67] Cost Management - Model costs decreased by 18.5% to $8.639 million in Q1 2021 from $10.606 million in Q1 2020[65] - Salaries and service costs decreased by 40.2% for the three months ended March 31, 2021, compared to the same period in 2020, primarily due to employee layoffs and temporary salary reductions[69] - Office and general expenses decreased by 19.0% for the three months ended March 31, 2021, compared to the same period in 2020, mainly due to reduced rent and legal expenses[70] - Corporate overhead expenses decreased by 20.7% for the three months ended March 31, 2021, compared to the same period in 2020[73] - Amortization and depreciation expenses decreased by 9.5% for the three months ended March 31, 2021, compared to the same period in 2020[71] Profitability - The gross profit margin increased to 27.9% in Q1 2021 from 27.1% in Q1 2020, primarily due to a change in revenue mix and reduced travel-related model costs[68] - The company recorded a net income of $2.221 million for Q1 2021, compared to a net loss of $2.660 million in Q1 2020, representing an increase of 183.5%[65] - Operating income improved to $100,000 in Q1 2021 from a loss of $1.639 million in Q1 2020, marking a 106.1% increase[65] - Operating income increased to $0.1 million for the three months ended March 31, 2021, compared to an operating loss of $1.6 million for the same period in 2020, resulting in an operating margin of 0.8%[74] - Net income for the three months ended March 31, 2021, was $2.2 million, compared to a net loss of $2.7 million for the same period in 2020[80] Cash Flow and Financial Position - The cash balance increased to $5.7 million at March 31, 2021, from $5.6 million at December 31, 2020, primarily due to net cash provided by operating activities[81] - Employee retention credit funds receivable amounted to $0.4 million for the three months ended March 31, 2021[77] - The Company recorded a gain on forgiveness of loans amounting to $1.9 million during the first quarter of 2021[76] Strategic Initiatives - The company implemented significant cost-saving measures, including layoffs of approximately 36% of its staff and suspension of discretionary expenses[59] - The company expects to continue receiving employee retention credits under the Consolidated Appropriations Act, with $0.4 million recorded for Q1 2021[53] - The company aims to expand its brand awareness and geographic market development as part of its long-term strategy[64] Foreign Exchange and Impairment - The Company had a foreign currency exchange loss of $68 thousand for the three months ended March 31, 2021, compared to a gain of $65 thousand for the same period in 2020[75] - The Company performs annual impairment testing for goodwill and intangible assets, recognizing losses if carrying amounts exceed fair value[102] - Management evaluates qualitative factors for goodwill impairment, considering macroeconomic conditions and financial performance[103] Compliance and Controls - The Company maintains effective disclosure controls and procedures, ensuring timely reporting of required information[105] - There have been no changes in internal controls over financial reporting that materially affect the Company's reporting[106]