* Not Meaningful

Service Revenues

The Company’s service revenues fluctuate in response to its clients’ willingness to spend on advertising and the Company’s ability to have the desired talent available. In the first quarter of 2020, theThe COVID-19 pandemic had a material impact on revenues, as mostmany customers cancelled or postponed bookings for the second half of March 2020 were cancelled oncewhile non-essential business activities were temporarily barred in the cities where Wilhelmina operates. The decrease of 27.4%17.7% for the three months ended March 31, 2020,2021, when compared to the three months ended March 31, 2019,2020, was primarily due to cancelledreduced bookings resulting from COVID-19 (which impacted all three months of the first quarter of 2021, but only impacted the month of March in 2020), a decrease in core model bookings, and the closure of the Wilhelmina Studioshair and makeup artist division in the fourththird quarter of 2019.2020.

License Fees and Other Income

License fees and other income include franchise revenues from independently owned model agencies that use the Wilhelmina trademark and various services provided by the Company. License fees decreasedincreased by 79.2%100.0% for the three months ended March 31, 2020,2021, when compared to three months ended March 31, 2019.2020. The decreaseincrease was primarily due to the timing of income from licensing agreements.

Gross Profit Margin

Gross profit margin decreasedincreased by 7080 basis points for the three months ended March 31, 2020,2021, when compared to the three months ended March 31, 20192020 primarily due to a larger percentage of consolidatedchange in board revenue from the Aperture divisionmix and a reduction in 2020, which is lower margin than traditional coretravel related model bookings.costs in 2021.

Salaries and Service Costs

Salaries and service costs consist of payroll related costs and T&E required to deliver the Company’s services to its clients and talents. The 15.9%40.2% decrease in salaries and service costs during the three months ended March 31, 2020,2021, when compared to the three months ended March 31, 20192020 was primarily the result ofdue to employee layoffs in July 2020, temporary reductions in staff salaries, and the closure of the Wilhelmina Studioshair and makeup artist division duringin the fourth quartersecond half of 2019, open positions for two executives that resigned in January 2020 and a reduction in share based payment expense.2020.

Office and General Expenses

Office and general expenses consist of office and equipment rents, advertising and promotion, insurance expenses, administration and technology cost.  These costs are less directly linked to changes in the Company’s revenues than are salaries and service costs. The decrease in office and general expenses of 14.1%19.0% for the three months ended March 31, 20202021 when compared to the three months ended March 31, 2019, was2020, were primarily due to reduced legalrent expense, rentlegal expense, and other office related expenses partially offset by an increase in bad debt expense.2021.

Amortization and Depreciation

Amortization and depreciation expense is incurred with respect to certain assets, including computer hardware, software, office equipment, furniture and certain intangibles.amortization of finance leases. Amortization and depreciation expense increaseddecreased by 1.4%9.5% for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019,2020, primarily due to new equipment, which will be depreciated going forward, partially offset by reduced amortizationdepreciation of intangible assets that became fully amortized in 2019.2020. Fixed asset purchases (mostly related to technology and computer equipment) totaled approximately $4 thousand and $56 thousand during the three months ended March 31, 2020, compared to $95 thousand for the three months ended March 31, 2019.2021 and 2020.

Goodwill Impairment

As ofNo goodwill impairment charges were incurred during the three months ended March 31, 2021. In March 2020, the Company determined that recent declines in revenue, COVID-19 impacts on ourits retail clients, and recent declines in its stock price triggered the requirement for goodwill impairment testing. The results of the impairment test indicated that the carrying value of goodwill exceeded its estimated fair value and resulted invalue. As a result, during March 2020, the Company recorded an impairment charge of $0.8 million. There were no impairment chargesmillion related to its goodwill. Further declines in the first quarter of 2019.Company’s stock price could result in additional goodwill impairment charges.

Corporate Overhead

Corporate overhead expenses include director and executive officer compensation, legal, audit and professional fees, corporate office rent, travel, and other public company costs. Corporate overhead decreased by 6.9%20.7% for the three months ended March 31, 2020,2021, compared to the three months ended March 31, 2019,2020, primarily due to lowera temporary reduction in fees paid to corporate travel costs achieved by holding corporate meetings telephonically duringemployees and the first quarter of 2020.Company’s directors.

Operating Income and Operating Margin

Operating income decreasedincreased to a$0.1 million for the three months ended March 31, 2021, compared to an operating loss of $1.6 million for the three months ended March 31, 2020, compared2020. As a result, operating margin increased to operating income of $17 thousand0.8% for the three months ended March 31, 2019. As a result, operating margin decreased2021, compared to negative 11.3% for the three months ended March 31, 2020, compared to 0.0% for the three months ended March 31, 2019.2020. In both cases, the declineincrease was primarily the result of decreasedlower operating expenses in 2021, partially offset by lower revenue net of model costs and goodwill impairment, partially offset by lower operating expenses.costs.

Foreign Currency Gain and LossExchange

The Company realized $65 thousand of foreign currency exchange gains during the three months ended March 31, 2020, and $15$68 thousand of foreign currency exchange loss during the three months ended March 31, 2019.2021, and $65 thousand of foreign currency exchange gain during the three months ended March 31, 2020. Foreign currency gain and loss is due to fluctuations in currencies from Great Britain, Europe, and Latin America.

Gain on Forgiveness of Loan

On March 27, 2021, the Company received notice from the Small Business Administration that $1.9 million of loans under the Paycheck Protection Program were forgiven. The Company recorded this gain on forgiveness of loan during the first quarter of 2021.

Employee Retention Credit Income

During the three months ended March 31, 2021, the Company was eligible for employee retention credits under the CAA, as a refundable tax credit against certain employment taxes of up to $7,000 per employee. For the three months ended March 31, 2021, the Company recorded $0.4 million of employee retention credit funds receivable.

Interest Expense

Interest expense for the three months ended March 31, 20202021 and March 31, 20192020 was primarily attributable to accrued interest on term loans drawn during 2016 and 2018.2018 and PPP loans drawn in 2020. See, “Liquidity and Capital Resources.”

Income and Loss before Income Taxes

LossIncome before income taxes was $1.6$2.3 million for the three months ended March 31, 2020,2021, compared to $30 thousanda $1.6 million loss before income taxes for the three months ended March 31, 2019,2020. The income in 2021 was primarily due to the decreasegain on forgiveness of loan, employee retention credits and operating income. The loss in 2020 was primarily due to operating income.losses and goodwill impairment expense.

Income Taxes

Generally, the Company’s combined effective tax rate is high relative to reported net income as a result of certain valuation allowances on deferred tax assets, amortization expense, foreign taxes, and corporate overhead not being deductible and income being attributable to certain states in which it operates. The Company operates in four states which have relatively high tax rates: California, New York, Illinois and Florida. IncomeIn addition, foreign taxes in the United Kingdom related to our London office are not deductible from U.S. federal taxes. The Company had income tax expense wasof $0.1 million for the three months ended March 31, 2021, compared to $1.1 million for the three months ended March 31, 2020. The higher income tax expense in 2020 comparedwas primarily due to $79 thousanda newly established valuation allowance against its deferred tax assets due to the effects of the COVID-19 pandemic on its business.

Net Income and Loss

Net income for the three months ended March 31, 2019. As of March 31, 2020, due primarily tothe effects of the COVID-19 pandemic and its impact our business, the Company believes it is more likely than not that the benefit from deferred tax assets will not be realized and has maintained a $1.22021 was $2.2 million valuation allowance against its deferred tax assets.

Net Loss

The Company had acompared to $2.7 million net loss of $2.7 million for the three months ended March 31, 2020, compared to $109 thousand for the three months ended March 31, 2019,2020. The increase in net income was primarily due to the decreasean increase in operating income, gain on forgiveness of loan, employee retention credits, and increasethe absence of any further valuation allowance on deferred tax assets in income tax expense in 2020.2021.

Liquidity and Capital Resources

The Company’s cash balance decreasedincreased to $5.3$5.7 million at March 31, 20202021 from $7.0$5.6 million at December 31, 2019.2020. The cash balances decreasedbalance increased primarily as a result of $1.2$0.3 million net cash used inprovided by operating activities, partially offset by $0.1 million net cash used in investing activities and $0.2 cash used in financing activities.

Net cash used inprovided by operating activities of $1.2$0.3 million was primarily the result of decreasesnet income and increases in amounts due to models lease liabilities,and accounts payable and accrued liabilities, partially offset by a decreaseincreases in accounts receivable right of useand prepaid and other assets. The $0.1 million of cash used in investing activities was attributable to purchases of property and equipment, including software and computer equipment. The $0.2 million of cash used in financing activities was primarily attributable to principal payments on the Company’s Amegy Bank term loan.loan, and payments on finance leases.

The Company’s primary liquidity needs are for working capital associated with performing services under its client contracts and servicing its remaining term loan. Generally, the Company incurs significant operating expenses with payment terms shorter than its average collections on billings. The COVID-19 pandemic has had an impact on the Company’s cash flows during the three monthsquarter ended March 31, 2020,2021, primarily due to delayed payments from customers. The pandemic could have a more significant impact on the Company’s cash flows in subsequent periods due to the lack ofreduced bookings and modeling jobs currently taking place, and due to the customary payment terms extended to clients.delayed payments from customers. The Company has taken actions to address the impact of COVID-19 by reducing expenses and has the ability to implement more significant cost savings measures if the current quarantines and limitations on non-essential workadverse effects of the pandemic persist for an extended period. Based on 2021 budgeted and year-to-date cash flow information, management believes that the Company has sufficient liquidity to meet its projected operational expenses and capital expenditure requirements for the next twelve months.

Amegy Bank Credit Agreement

The Company has a credit agreement with Amegy Bank which providesoriginally provided a $4.0 million revolving line of credit and previously provided up to a $3.0 million term loan which could be drawn through October 24, 2016. Amounts outstanding under the term loan reduce the availability under the revolving line of credit. The revolving line of credit is also subject to a borrowing base derived from 80% of eligible accounts receivable (as defined) and the Company’s minimum net worth covenant of $20.0 million.covenant. The revolving line of credit bears interest at prime plus 0.50% payable monthly. As of March 31, 2020,2021, the Company had a $0.2 million irrevocable standby letter of credit outstanding under the revolving line of credit and had additional borrowing capacity of $2.0$1.8 million. The revolving line of credit presently expires October 24, 2022.

On August 16, 2016, the Company drew $2.7 million of the term loan and used the proceeds to fund the purchase of shares of its common stock in a private transaction. The term loan bearsbore interest at 4.5% per annum and was payable in monthly payments of interest only until November, 2016, followed by 47 equal monthly payments of principal and interest computed on a 60-month amortization schedule and aschedule. A final $0.6 million payment of principal and interest duewas paid on October 24,28, 2020.

On July 16, 2018, the Company amended its Credit Agreementcredit agreement with Amegy Bank to provide for an additional term loan of up to $1.0 million that could be drawn by the Company through July 12, 2019, for the purpose of repurchases of its common stock. The additional term loan is evidenced by a promissory note bearing interest at 5.15% per annum and was payable in monthly installments of interest only through July 12, 2019. Thereafter, the note is payable in monthly installments sufficient to fully amortize the outstanding principal balance in 60 months with the balance of principal and accrued interest due on July 12, 2023. The amendment also revised the calculation of the fixed charge coverage ratio for the three quarters following the maturity date of the previous term loan.

Amounts outstanding under the additional term loan further reduce the availability under the Company’s revolving line of credit with Amegy Bank. On August 1, 2018, the Company drew $0.7 million of the additional term loan and used the proceeds to fund the purchase of 100,000 shares of its common stock in a private transaction. On December 12, 2018, the Company drew $0.3 million of the additional term loan and used the proceeds to partially fund a purchase of 50,000 shares of its common stock in a private transaction. As of March 31, 2020,2021, a total of $1.8$0.7 million was outstanding on the two term loans.loan.

Reduced outstanding accounts receivable available as collateral under the Company’s credit agreement with Amegy Bank has limited access to additional financing. Net losses in recent periods have also impacted compliance with the financial covenants under the Amegy Bank credit agreement, further impeding the Company’s ability to obtain additional financing. On March 26, 2020, the Company entered into a Thirteenth Amendment to Credit Agreement (the “Thirteenth Amendment”) with ZB, N.A. dba Amegy Bank. The Thirteenth Amendment amended the minimum net worth covenant to require the Company to maintain tangible net worth (as defined therein) of $4.0 million, determined on a quarterly basis. Under the Thirteenth Amendment, Amegy Bank also waived an existing default caused by the Company’s failure to satisfy the oldpreviously required $20.0 million minimum net worth covenant as of December 31, 2019. On May 12, 2020, the Company entered into a Fourteenth Amendment to Credit Agreement (the “Fourteenth Amendment”) with ZB, N.A. dba Amegy Bank. The Fourteenth Amendment amended the line of credit to reduce the maximum borrowing capacity to $3.0 million. Under the Fourteenth Amendment, Amegy Bank also waived an existing default caused by the Company’s failure to satisfy both the minimum fixed charge coverage ratio through March 31, 2020 and minimum tangible net worth as of March 31, 2020. Current economic conditions makeThe Company obtained waivers from Amegy Bank of its failures to satisfy the fixed charge coverage ratio, the minimum tangible net worth, and the borrowing base for the quarters ended June 30, 2020 and September 30, 2020. On November 10, 2020, the Company entered into a Fifteenth Amendment to Credit Agreement (the “Fifteenth Amendment”) with Amegy Bank. The Fifteenth Amendment waived the minimum tangible net worth covenant until December 31, 2021, after which a minimum tangible net worth of $1.5 million will be required. The Fifteenth Amendment also revised the calculation of the fixed charge coverage ratio such that it likelywill be tested at December 31, 2020 based on the preceding six month period, tested at March 31, 2021 based on the preceding nine month period, and tested at June 30, 2021 and subsequent periods using a twelve month rolling period.

Paycheck Protection Program Loan

On April 15, 2020, Wilhelmina International, Ltd. (the “Borrower”), a wholly-owned subsidiary of the Company, executed a Business Loan Agreement and a Promissory Note each dated April 13, 2020 (collectively, the “Sub PPP Loan Documents”), with respect to a loan in the amount of $1.8 million (the “Sub PPP Loan”) from Amegy Bank. The Sub PPP Loan was obtained pursuant to the PPP. The Sub PPP Loan originally matured on April 13, 2022 and bore interest at a rate of 1.00% per annum. As allowed under the Paycheck Protection Flexibility Act, the Sub PPP Loan was extended to mature on April 13, 2025. On March 27, 2021, the Company received notice from the SBA that the Sub PPP loan, including $17 thousand accrued interest, had been fully forgiven, resulting in $1.9 million of gain on forgiveness of loan recorded during the first quarter of 2021.

On April 18, 2020, the Company will require additional waiversexecuted a Business Loan Agreement and a Promissory Note each dated April 17, 2020 (collectively, the “Parent PPP Loan Documents”), with respect to a loan in subsequent periodsthe amount of 2020.$128 thousand (the “Parent PPP Loan”) from Amegy Bank. The Parent PPP Loan was also obtained pursuant to the PPP. The Parent PPP Loan originally matured on April 17, 2022 and bore interest at a rate of 1.00% per annum. As allowed under the Paycheck Protection Flexibility Act, the Parent PPP Loan was extended to mature on April 17, 2025. On April 3, 2021, the Company received notice from the SBA that the Parent PPP Loan, including $1 thousand accrued interest, had been fully forgiven. Since the loan was forgiven after the end of the first quarter of 2021, the Parent PPP Loan liability remained on the Company’s balance sheet at March 31, 2021, and the Company has recorded $129 thousand of gain on forgiveness of loan in the second quarter of 2021.

Off-Balance Sheet Arrangements

As of March 31, 2020,2021, the Company had outstanding a $0.2 million irrevocable standby letter of credit under the revolving credit facility with Amegy Bank. The letter of credit servesserved as security under the lease relating to the Company’s office space in New York City that expiresexpired on February 2021. The Company expects to terminate the letter of credit once the final office utility fees are billed and paid during the second quarter of 2021.

Effect of Inflation

Inflation has not historically been a material factor affecting the Company’s business. General operating expenses, such as salaries, employee benefits, insurance and occupancy costs are subject to normal inflationary pressures.

Critical Accounting Policies

Basis of Presentation

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

Revenue Recognition

On January 1, 2018, theThe Company has adopted the requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”). ASC 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services.

Our revenues are derived primarily from fashion model and artist bookings, and representation of social media influencers and actors for commercials, film, and television. Our performance obligations are primarily satisfied at a point in time when the talent has completed the contractual requirements.

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

Model Costs

Model costs include amounts owed to talent, including taxes required to be withheld and remitted directly to taxing authorities, commissions owed to other agencies, and related costs such as those paid for photography. Costs are accrued in the period in which the event takes place consistent with when the revenue is recognized. The Company typically enters into contractual agreements with models under which the Company is obligated to pay talent upon collection of fees from the customer.

StockShare Based Compensation

Stock-basedShare-based compensation expense is estimated at the grant date based on the award’s fair value as calculated by the Black-Scholes option pricing model and is recognized on a straight line basis as an expense over the requisite service period, which is generally the vesting period. The determination of the fair value of stock-basedshare-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the estimated volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates, estimated forfeitures and expected dividends.

Income Taxes

We are subject to income taxes in the United States, the United Kingdom, and numerous local jurisdictions.

Deferred tax assets are recognized for unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Unused tax loss carry-forwards are reviewed at each reporting date and a valuation allowance is established if it is doubtful we will generate sufficient future taxable income to utilize the loss carry-forwards.

In determining the amount of current and deferred income tax, we take into account whether additional taxes, interest, or penalties may be due. Although we believe that we have adequately reserved for our income taxes, we can provide no assurance that the final tax outcome will not be materially different. To the extent that the final tax outcome is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and operating results.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are accounted for at net realizable value, do not bear interest and are short-term in nature. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability to collect on accounts receivable. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to the allowance.  Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable.  The Company generally does not require collateral.

Goodwill and Intangible Asset Impairment Testing

The Company performs impairment testing at least annually and more frequently if events and circumstances indicate that the asset might be impaired.

An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit’s fair value. The Company sometimes utilizes an independent valuation specialist to assist with the determination of fair value. In accordance with ASU 2017-03, effective January 1, 2020, only a one-step qualitativequantitative impairment test is performed, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value. If the carrying amount of the reporting unit’s goodwill exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill.

Whenever events or circumstances change, entities have the option to first make a qualitative evaluation about the likelihood of goodwill impairment. If impairment is deemed more likely than not, management would perform the goodwill impairment test. Otherwise, the goodwill impairment test is not required. In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry and market considerations, overall financial performance, Company specific events and share price trends, an assessment of whether each relevant factor will impact the impairment test positively or negatively, and the magnitude of any such impact.impact

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting company

Item 4.  Controls and Procedures.

The Company maintains disclosure controls and procedures designed to ensure that information it is required to disclose in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, including the Company’s principal executive officer and principal financial officer have evaluated the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Remediation of Material Weakness

As discussedDuring the most recent fiscal quarter, there have been no changes in the Company’s Annual Report on Form 10-K forinternal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the year ended December 31, 2019, the Company’s management previously determined that undue reliance on Level 2 and Level 3 inputs in goodwill impairment testing had resulted in a material weakness in internal control over financial reporting. This material weakness did not result in a material misstatement of any previously filed financial statements but posed a risk of material misstatement that might not be prevented or detected on a timely basis.

During the first quarter of 2020, management addressed this control deficiency by increasing reliance on the Level 1 input of the Company’s market capitalization in evaluating goodwill for impairment. Management changed its control procedures to prioritize the appropriate Level 1 input and reviewed the related calculations. Due to a decrease in market capitalization during the first quarter of 2020, management concluded that a goodwill impairment of $0.8 million should be recorded at March 31, 2020. As a result of these changes and subsequent review and testing, management has concluded that the previously reported material weakness has been remediated and no longer existed as of March 31, 2020.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

On October 24, 2013, a putative class action lawsuit was brought against the Company by former Wilhelmina model Alex Shanklin and others, including Louisa Raske, Carina Vretman, Grecia Palomares and Michelle Griffin Trotter (the “Shanklin Litigation”), in New York State Supreme Court (New York County) by the same lead counsel who represented plaintiffs in a prior, now-dismissed action brought by Louisa Raske (the “Raske Litigation”).  The claims in the Shanklin Litigation initially included breach of contract and unjust enrichment allegations arising out of matters similar to the Raske Litigation, such as the handling and reporting of funds on behalf of models and the use of model images.  Other parties named as defendants in the Shanklin Litigation include other model management companies, advertising firms, and certain advertisers.  On January 6, 2014, the Company moved to dismiss the Amended Complaint in the Shanklin Litigation for failure to state a claim upon which relief can be granted and other grounds, and other defendants also filed motions to dismiss.  On August 11, 2014, the court denied the motion to dismiss as to Wilhelmina and other of the model management defendants.  Separately, on March 3, 2014, the judge assigned to the Shanklin Litigation wrote the Office of the New York Attorney General bringing the case to its attention, generally describing the claims asserted therein against the model management defendants, and stating that the case “may involve matters in the public interest.” The judge’s letter also enclosed a copy of his decision in the Raske Litigation, which dismissed that case. 

Plaintiffs retained substitute counsel, who filed a Second and then Third Amended Complaint. Plaintiffs’ Third Amended Complaint asserts causes of action for alleged breaches of the plaintiffs' management contracts with the defendants, conversion, breach of the duty of good faith and fair dealing, and unjust enrichment.  The Third Amended Complaint also alleges that the plaintiff models were at all relevant times employees, and not independent contractors, of the model management defendants, and that defendants violated the New York Labor Law in several respects, including, among other things, by allegedly failing to pay the models the minimum wages and overtime pay required thereunder, not maintaining accurate payroll records, and not providing plaintiffs with full explanations of how their wages and deductions therefrom were computed.  The Third Amended Complaint seeks certification of the action as a class action, damages in an amount to be determined at trial, plus interest, costs, attorneys’ fees, and such other relief as the court deems proper.  On October 6, 2015, Wilhelmina filed a motion to dismiss as to most of the plaintiffs’ claims.  The Court entered a decision granting in part and denying in part Wilhelmina’s motion to dismiss on May 26, 2017.  The Court (i) dismissed three of the five New York Labor Law causes of action, along with the conversion, breach of the duty of good faith and fair dealing and unjust enrichment causes of action, in their entirety, and (ii) permitted only the breach of contract causes of action, and some plaintiffs’ remaining two New York Labor Law causes of action to continue, within a limited time frame.  The plaintiffs and Wilhelmina each appealed, and the decision was affirmed on May 24, 2018. On August 16, 2017, Wilhelmina timely filed its Answer to the Third Amended Complaint.

On June 6, 2016, another putative class action lawsuit was brought against the Company by former Wilhelmina model Shawn Pressley and others, including Roberta Little (the “Pressley Litigation”), in New York State Supreme Court (New York County) by the same counsel representing the plaintiffs in the Shanklin Litigation, and asserting identical, although more recent, claims as those in the Shanklin Litigation.  The Amended Complaint, asserting essentially the same types of claims as in the Shanklin action, was filed on August 16, 2017.  Wilhelmina filed a motion to dismiss the Amended Complaint on September 29, 2017, which was granted in part and denied in part on May 10, 2018.  Some New York Labor Law and contract claims remain in the case.  Pressley has withdrawn from the case, leaving Roberta Little as the sole remaining named plaintiff in the Pressley Litigation.  On July 12, 2019, the Company filed its Answer and Counterclaim against Little.

On May 1, 2019, the Plaintiffs in the Shanklin Litigation (except Raske) and the Pressley Litigation filed motions for class certification on their contract claims and the remaining New York Labor Law Claims. On July 12, 2019, Wilhelmina filed its opposition to the motions for class certification and filed a cross-motion for summary judgment against Shanklin, Vretman, Palomares, Trotter and Little, and a motion for summary judgment against Raske. 

By Order Dated May 8, 2020 (the “Class Certification Order”), the Court denied class certification in the Pressley case, denied class certification with respect to the breach of contract and alleged unpaid usage claims, granted class certification as to the New York Labor Law causes of action asserted by Vretman, Palomares and Trotter, and declined to rule on Wilhelmina’s reply papers in further support of itsmotions for summary judgment, motions were filed on October 23, 2019.denying them without prejudice to be re-filed at a later date. The motions for class certification and summary judgment were argued on December 4, 2019, andCourt has directed the parties are awaiting decision.to non-binding mediation and that process is underway.

The Company believes the claims asserted in the Shanklin Litigation and Pressley LitigationsLitigation are without merit and intends to continue to vigorously defend the actions.

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

Item 1.A.Risk Factors.

Not required for smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During 2012, the Board of Directors authorized a stock repurchase program whereby the Company could repurchase up to 500,000 shares of its outstanding common stock. During 2013, the Board of Directors renewed and extended the Company’s share repurchase authority to enable it to repurchase up to an aggregate of 1,000,000 shares of common stock. In 2016, the Board of Directors increased by an additional 500,000 shares the number of shares of the Company’s common stock which may be repurchased under its stock repurchase program to an aggregate of 1,500,000 shares. The shares may be repurchased from time to time in the open market or through privately negotiated transactions at prices the Company deems appropriate. The program does not obligate the Company to acquire any particular amount of common stock and may be modified or suspended at any time at the Company’s discretion. The following table furnishes information for purchases madeCompany did not make any purchase pursuant to the stock repurchase program during the quarter ended March 31, 2020:20201.