The body that promotes arts and culture in the Highlands is making all its staff redundant.
But the board of the Inverness-based company HI-Arts said it hopes some of the 10 staff will be able to continue work in the future, but it could not avoid issuing redundancy notices.
Its funding from Creative Scotland and Highlands and Islands Enterprise will end in the next three months.
Director Robert Livingston said he was optimistic staff will find new work in existing initiatives.
A spokeswoman for Creative Scotland said: "Together with HIE, Creative Scotland has offered funding from April to the end of June 2013 to assist the agency in finding a positive way forward."
The agency received £90,000 in 2012/13, Creative Scotland said, to help its "transition to a new business model".
The spokeswoman added it was regrettable that, to date, the business model has not proved deliverable.
A statement from HIE said: "We will carry on working with HI-Arts to help it explore new options and are glad to have been able to award a further three months' funding."
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