Ashford Inc. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			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: 001-36400

ASHFORD INC.

(Exact name of registrant as specified in its charter)


Nevada						84-2331507
(State or other jurisdiction of incorporation or organization)						(IRS employer identification number)

14185 Dallas Parkway
Suite 1200
Dallas
Texas						75254
(Address of principal executive offices)						(Zip code)

(972) 490-9600

(Registrant’s telephone number, including area code)

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. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☑	Smaller reporting company	☑

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

AINC

NYSE American LLC

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Common Stock, $0.001 par value per share						3,115,816
(Class)						Outstanding at August 10, 2022

ASHFORD INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets as of June 30 , 2022 and December 31, 2021			2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30 , 2022 and 2021			3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30 , 2022 and 2021			4
Condensed Consolidated Statements of Equity (Deficit) for the Three and Six Months Ended June 30 , 2022 and 2021			5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30 , 2022 and 2021			7
Notes to Condensed Consolidated Financial Statements			9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			52
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			72
ITEM 4. CONTROLS AND PROCEDURES			72
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			74
ITEM 1A. RISK FACTORS			74
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			76
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			76
ITEM 4. MINE SAFETY DISCLOSURES			76
ITEM 5. OTHER INFORMATION			76
ITEM 6. EXHIBITS			77
SIGNATURES			79

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (unaudited)

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share amounts)


	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	48,422	$	37,571
Restricted cash	38,238		34,878
Restricted investment	334		576

Accounts receivable, net	16,535		10,502
Due from affiliates	397		165
Due from Ashford Trust	5,033		2,575
Due from Braemar	3,810		1,144

Inventories	1,812		1,555
Prepaid expenses and other	5,266		9,490

Total current assets	119,847		98,456
Investments in unconsolidated entities	4,088		3,581
Property and equipment, net	81,154		83,566
Operating lease right-of-use assets	25,437		26,975

Goodwill	58,602		56,622
Intangible assets, net	239,551		244,726
Other assets, net	531		870
Total assets	$	529,210	$	514,796
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	$	38,167	$	39,897
Dividends payable	26,593		34,574
Due to affiliates	103		—



Deferred income	406		2,937

Notes payable, net	4,688		6,725
Finance lease liabilities	2,424		1,065
Operating lease liabilities	3,760		3,628
Other liabilities	29,275		25,899
Total current liabilities	105,416		114,725

Deferred income	8,274		7,968
Deferred tax liability, net	30,643		32,848
Deferred compensation plan	2,838		3,326
Notes payable, net	89,674		52,669
Finance lease liabilities	42,189		43,479
Operating lease liabilities	21,800		23,477
Other liabilities	1,670		—
Total liabilities	302,504		278,492
Commitments and contingencies (note 10)
MEZZANINE EQUITY
Series D Convertible Preferred Stock, $0.001 par value, 19,120,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021	478,000		478,000
Redeemable noncontrolling interests	1,509		69
EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized, $0.001 par value, 3,182,033 and 3,072,688 shares issued and 3,115,816 and 3,023,002 shares outstanding at June 30, 2022 and December 31, 2021, respectively	3		3
Additional paid-in capital	295,461		294,395
Accumulated deficit	(547,602)		(534,999)
Accumulated other comprehensive income (loss)	(257)		(1,206)
Treasury stock, at cost, 66,217 and 49,686 shares at June 30, 2022 and December 31, 2021, respectively	(867)		(596)
Total equity (deficit) of the Company	(253,262)		(242,403)
Noncontrolling interests in consolidated entities	459		638
Total equity (deficit)	(252,803)		(241,765)
Total liabilities and equity (deficit)	$	529,210	$	514,796

See Notes to Condensed Consolidated Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
REVENUE
Advisory services fees	$	11,969	$	10,062	$	23,771	$	19,989
Hotel management fees	13,420		6,515		20,598		10,987
Design and construction fees	4,738		1,867		9,262		3,409
Audio visual	35,977		9,451		60,942		13,062
Other	12,072		12,166		23,511		22,795
Cost reimbursement revenue	89,277		45,351		163,328		77,538
Total revenues	167,453		85,412		301,412		147,780
EXPENSES
Salaries and benefits	16,603		17,392		33,448		33,168
Cost of revenues for design and construction	2,206		1,022		4,116		1,780
Cost of revenues for audio visual	23,279		6,872		41,158		11,258
Depreciation and amortization	8,019		8,259		15,644		16,398
General and administrative	10,173		6,591		17,536		11,859

Other	5,669		5,059		11,136		8,670
Reimbursed expenses	89,181		45,217		163,089		77,332
Total expenses	155,130		90,412		286,127		160,465
OPERATING INCOME (LOSS)	12,323		(5,000)		15,285		(12,685)
Equity in earnings (loss) of unconsolidated entities	67		(58)		257		(172)


Interest expense	(2,536)		(1,288)		(3,815)		(2,555)
Amortization of loan costs	(232)		(45)		(305)		(131)
Interest income	38		72		119		135


Realized gain (loss) on investments	—		(179)		(71)		(373)

Other income (expense)	(259)		(172)		(112)		(285)
INCOME (LOSS) BEFORE INCOME TAXES	9,401		(6,670)		11,358		(16,066)
Income tax (expense) benefit	(4,076)		697		(5,354)		1,648
NET INCOME (LOSS)	5,325		(5,973)		6,004		(14,418)
(Income) loss from consolidated entities attributable to noncontrolling interests	298		234		558		329
Net (income) loss attributable to redeemable noncontrolling interests	(141)		19		(132)		195
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	5,482		(5,720)		6,430		(13,894)
Preferred dividends, declared and undeclared	(9,020)		(8,633)		(18,393)		(17,239)

Amortization of preferred stock discount	—		(311)		—		(627)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(3,538)	$	(14,664)	$	(11,963)	$	(31,760)

INCOME (LOSS) PER SHARE - BASIC AND DILUTED
Basic:
Net income (loss) attributable to common stockholders	$	(1.21)	$	(5.31)	$	(4.11)	$	(11.66)
Weighted average common shares outstanding - basic	2,913		2,764		2,908		2,724
Diluted:
Net income (loss) attributable to common stockholders	$	(1.34)	$	(5.31)	$	(4.15)	$	(11.66)
Weighted average common shares outstanding - diluted	3,109		2,764		3,006		2,724

See Notes to Condensed Consolidated Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

NET INCOME (LOSS)	$	5,325	$	(5,973)	$	6,004	$	(14,418)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustment	541		104		310		104
Unrealized gain (loss) on restricted investment	—		277		—		250
Less reclassification for realized (gain) loss on restricted investment included in net income	—		179		—		373
COMPREHENSIVE INCOME (LOSS)	5,866		(5,413)		6,314		(13,691)
Comprehensive (income) loss attributable to noncontrolling interests	298		234		558		329
Comprehensive (income) loss attributable to redeemable noncontrolling interests	(141)		19		(132)		195
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	6,023	$	(5,160)	$	6,740	$	(13,167)

See Notes to Condensed Consolidated Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(unaudited, in thousands)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Noncontrolling Interests in Consolidated Entities		Total		Convertible Preferred Stock			Redeemable Noncontrolling Interests
	Shares	Amount								Shares	Amount						Shares	Amount
Balance at March 31, 2022	3,109	$	3	$	294,844	$	(544,076)	$	(798)	(63)	$	(816)	$	378	$	(250,465)	19,120	$	478,000	$	80


Equity-based compensation	10	—		847		—		—		—	—		—		847		—	—		55

Forfeiture of restricted common shares	(1)	—		28		—		—		(1)	(28)		—		—		—	—		—
Purchase of treasury stock	(2)	—		—		—		—		(2)	(23)		—		(23)		—	—		—




Acquisition of Chesapeake	—	—		—		—		—		—	—		—		—		—	—		1,390






Dividends declared and undeclared - preferred stock	—	—		—		(9,020)		—		—	—		—		(9,020)		—	—		—


Employee advances	—	—		(11)		—		—		—	—		—		(11)		—	—		—



Contributions from noncontrolling interests	—	—		—		—		—		—	—		164		164		—	—		—
Reallocation of carrying value	—	—		(247)		—		—		—	—		247		—		—	—		—
Redemption value adjustment	—	—		—		12		—		—	—		—		12		—	—		(12)
Distributions to consolidated noncontrolling interests	—	—		—		—		—		—	—		(32)		(32)		—	—		(145)
Foreign currency translation adjustment	—	—		—		—		541		—	—		—		541		—	—		—






Net income (loss)	—	—		—		5,482		—		—	—		(298)		5,184		—	—		141
Balance at June 30, 2022	3,116	$	3	$	295,461	$	(547,602)	$	(257)	(66)	$	(867)	$	459	$	(252,803)	19,120	$	478,000	$	1,509


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Noncontrolling Interests in Consolidated Entities		Total		Convertible Preferred Stock			Redeemable Noncontrolling Interests
	Shares	Amount								Shares	Amount						Shares	Amount
Balance at December 31, 2021	3,023	$	3	$	294,395	$	(534,999)	$	(1,206)	(49)	$	(596)	$	638	$	(241,765)	19,120	$	478,000	$	69


Equity-based compensation	110	—		1,540		—		—		—	—		—		1,540		—	—		62

Forfeiture of restricted common shares	(2)	—		30		—		—		(2)	(30)		—		—		—	—		—
Purchase of treasury stock	(15)	—		—		—		—		(15)	(241)		—		(241)		—	—		—




Acquisition of Chesapeake	—	—		—		—		—		—	—		—		—		—	—		1,390






Dividends declared and undeclared - preferred stock	—	—		—		(18,393)		—		—	—		—		(18,393)		—	—		—


Employee advances	—	—		(257)		—		—		—	—		—		(257)		—	—		—



Contributions from noncontrolling interests	—	—		—		—		—		—	—		164		164		—	—		—
Reallocation of carrying value	—	—		(247)		—		—		—	—		247		—		—	—		—
Redemption value adjustment	—	—		—		(1)		—		—	—		—		(1)		—	—		1
Distributions to consolidated noncontrolling interests	—	—		—		—		—		—	—		(32)		(32)		—	—		(145)
Foreign currency translation adjustment	—	—		—		—		310		—	—		—		310		—	—		—





Other	—	—		—		(639)		639		—	—		—		—		—	—		—
Net income (loss)	—	—		—		6,430		—		—	—		(558)		5,872		—	—		132
Balance at June 30, 2022	3,116	$	3	$	295,461	$	(547,602)	$	(257)	(66)	$	(867)	$	459	$	(252,803)	19,120	$	478,000	$	1,509


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Noncontrolling Interests in Consolidated Entities		Total		Convertible Preferred Stock			Redeemable Noncontrolling Interests
	Shares	Amount								Shares	Amount						Shares	Amount
Balance at March 31, 2021	3,010	$	3	$	292,140	$	(506,044)	$	(989)	(45)	$	(548)	$	(25)	$	(215,463)	19,120	$	477,263	$	37


Equity-based compensation	15	—		1,215		—		—		—	—		1		1,216		—	—		—

Forfeiture of restricted common shares	(1)	—		15		—		—		(1)	(15)		—		—		—	—		—
Purchase of treasury stock	(2)	—		—		—		—		(2)	(19)		—		(19)		—	—		—










Amortization of preferred stock discount	—	—		—		(311)		—		—	—		—		(311)		—	311		—
Dividends declared and undeclared - preferred stock	—	—		—		(8,633)		—		—	—		—		(8,633)		—	—		—

Deferred compensation plan distribution	1	—		19		—		—		—	—		—		19		—	—		—
Employee advances	—	—		(196)		—		—		—	—		—		(196)		—	—		—


Acquisition of noncontrolling interest in consolidated entities	—	—		(475)		(3)		—		—	—		325		(153)		—	—		—

Reallocation of carrying value	—	—		(184)		—		—		—	—		184		—		—	—		—
Redemption value adjustment	—	—		—		(76)		—		—	—		—		(76)		—	—		76

Foreign currency translation adjustment	—	—		—		—		104		—	—		—		104		—	—		—
Unrealized gain (loss) on available for sale securities	—	—		—		—		277		—	—		—		277		—	—		—
Reclassification for realized loss (gain) on available for sale securities	—	—		—		—		179		—	—		—		179		—	—		—




Net income (loss)	—	—		—		(5,720)		—		—	—		(234)		(5,954)		—	—		(19)


Balance at June 30, 2021	3,023	$	3	$	292,534	$	(520,787)	$	(429)	(48)	$	(582)	$	251	$	(229,010)	19,120	$	477,574	$	94


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Noncontrolling Interests in Consolidated Entities		Total		Convertible Preferred Stock			Redeemable Noncontrolling Interests
	Shares	Amount								Shares	Amount						Shares	Amount
Balance at December 31, 2020	2,868	$	3	$	293,597	$	(491,483)	$	(1,156)	(32)	$	(438)	$	(121)	$	(199,598)	19,120	$	476,947	$	1,834


Equity-based compensation	169	—		2,527		—		—		—	—		3		2,530		—	—		—

Forfeiture of restricted common shares	(2)	—		23		—		—		(2)	(23)		—		—		—	—		—
Purchase of treasury stock	(14)	—		—		—		—		(14)	(121)		—		(121)		—	—		—










Amortization of preferred stock discount	—	—		—		(627)		—		—	—		—		(627)		—	627		—
Dividends declared and undeclared - preferred stock	—	—		—		(17,239)		—		—	—		—		(17,239)		—	—		—

Deferred compensation plan distribution	2	—		26		—		—		—	—		—		26		—	—		—
Employee advances	—	—		49		—		—		—	—		—		49		—	—		—


Acquisition of noncontrolling interest in consolidated entities	—	—		(3,315)		2,559		—		—	—		325		(431)		—	—		(1,648)

Reallocation of carrying value	—	—		(373)		—		—		—	—		373		—		—	—		—
Redemption value adjustment	—	—		—		(103)		—		—	—		—		(103)		—	—		103

Foreign currency translation adjustment	—	—		—		—		104		—	—		—		104		—	—		—
Unrealized gain (loss) on available for sale securities	—	—		—		—		250		—	—		—		250		—	—		—
Reclassification for realized loss (gain) on available for sale securities	—	—		—		—		373		—	—		—		373		—	—		—




Net income (loss)	—	—		—		(13,894)		—		—	—		(329)		(14,223)		—	—		(195)
Balance at June 30, 2021	3,023	$	3	$	292,534	$	(520,787)	$	(429)	(48)	$	(582)	$	251	$	(229,010)	19,120	$	477,574	$	94

See Notes to Condensed Consolidated Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2022		2021
Cash Flows from Operating Activities
Net income (loss)	$	6,004	$	(14,418)
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Depreciation and amortization	18,644		19,375

Change in fair value of deferred compensation plan	(489)		2,801


Equity-based compensation	1,670		2,740
Equity in (earnings) loss in unconsolidated entities	(257)		172
Deferred tax expense (benefit)	(2,422)		(2,205)
Change in fair value of contingent consideration	—		23

(Gain) loss on disposal of assets	779		1,164
Amortization of other assets	331		594
Amortization of loan costs	305		131
Realized loss on restricted investments	71		373


Other (gain) loss	88		34



Changes in operating assets and liabilities, exclusive of the effect of acquisitions:
Accounts receivable	(6,720)		(1,802)
Due from affiliates	(232)		(137)
Due from Ashford Trust	(2,458)		12,683
Due from Braemar	(2,666)		21
Inventories	(320)		(622)
Prepaid expenses and other	4,297		(336)
Investment in unconsolidated entities	150		(186)

Operating lease right-of-use assets	1,888		1,822
Other assets	8		(11)
Accounts payable and accrued expenses	(2,060)		(11,114)
Due to affiliates	101		(1,374)


Other liabilities	3,376		(2,176)
Operating lease liabilities	(1,895)		(1,823)
Deferred income	(2,225)		(1,586)

Net cash provided by (used in) operating activities	15,968		4,143
Cash Flows from Investing Activities


Additions to property and equipment	(3,014)		(2,620)
Proceeds from sale of property and equipment, net	406		1,816





Investment in unconsolidated entity	(400)		—
Acquisition of Chesapeake, net of cash acquired	(6,290)		—


Purchase of common stock of related parties	—		(873)
Acquisition of assets related to RED	(1,080)		(1,536)

Proceeds from note receivable	1,380		—
Issuance of note receivable	—		(2,881)
Net cash provided by (used in) investing activities	(8,998)		(6,094)
			(Continued)


	Six Months Ended June 30,
	2022		2021

Cash Flows from Financing Activities


Payments for dividends on preferred stock	(26,519)		(8,353)
Payments on revolving credit facilities	(2,687)		(620)
Borrowings on revolving credit facilities	992		—
Proceeds from notes payable	68,061		325
Payments on notes payable	(29,027)		(5,347)
Payments on finance lease liabilities	(515)		(91)
Payments of loan costs	(2,694)		—
Purchase of treasury stock	(241)		(121)
Employee advances	(257)		49




Contributions from noncontrolling interest	164		—
Distributions to noncontrolling interests in consolidated entities	(32)		—
Net cash provided by (used in) financing activities	7,245		(14,158)
Effect of foreign exchange rate changes on cash and cash equivalents	(4)		(122)
Net change in cash, cash equivalents and restricted cash	14,211		(16,231)
Cash, cash equivalents and restricted cash at beginning of period	72,449		82,666
Cash, cash equivalents and restricted cash at end of period	$	86,660	$	66,435

Supplemental Cash Flow Information
Interest paid	$	3,620	$	2,304
Income taxes paid (refunded), net	1,504		1,613
Supplemental Disclosure of Non-Cash Investing and Financing Activities





Acquisition of Chesapeake through issuance of Series CHP Units from our subsidiary Ashford Holdings	$	1,390	$	—




Acquisition related contingent consideration liability	1,670		—
Distribution from deferred compensation plan	—		26
Capital expenditures accrued but not paid	571		149







Finance lease additions	585		—



Acquisition of noncontrolling interest in consolidated entities with notes payable and common stock	—		2,127

Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	37,571	$	45,270
Restricted cash at beginning of period	34,878		37,396
Cash, cash equivalents and restricted cash at beginning of period	$	72,449	$	82,666

Cash and cash equivalents at end of period	$	48,422	$	32,089
Restricted cash at end of period	38,238		34,346
Cash, cash equivalents and restricted cash at end of period	$	86,660	$	66,435

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Ashford Inc. (the “Company,” “we,” “us” or “our”) is a Nevada corporation that provides products and services primarily to clients in the hospitality industry, including Ashford Hospitality Trust, Inc. (“Ashford Trust”) and Braemar Hotels & Resorts Inc. (“Braemar”). We became a public company in November 2014, and our common stock is listed on the NYSE American LLC (“NYSE American”).

We provide: (i) advisory services; (ii) asset management services; (iii) hotel management services; (iv) design and construction and architectural services; (v) event technology and creative communications solutions; (vi) mobile room keys and keyless entry solutions; (vii) watersports activities and other travel, concierge and transportation services; (viii) hypoallergenic premium room products and services; (ix) debt placement and related services; (x) real estate advisory and brokerage services; and (xi) wholesaler, dealer manager and other broker-dealer services. We conduct these activities and own substantially all of our assets primarily through Ashford Hospitality Advisors LLC (“Ashford LLC”), Ashford Hospitality Services LLC (“Ashford Services”) and their respective subsidiaries.

We are currently the advisor for Ashford Trust and Braemar. In our capacity as the advisor to Ashford Trust and Braemar, we are responsible for implementing the investment strategies and managing the day-to-day operations of Ashford Trust and Braemar and their respective hotels from an ownership perspective, in each case subject to the respective advisory agreements and the supervision and oversight of the respective boards of directors of Ashford Trust and Braemar. Ashford Trust is focused on investing in full-service hotels in the upscale and upper upscale segments in the United States that have revenue per available room (“RevPAR”) generally less than twice the U.S. national average. Braemar invests primarily in luxury hotels and resorts with RevPAR of at least twice the U.S. national average. Each of Ashford Trust and Braemar is a real estate investment trust (“REIT”) as defined in the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and the common stock of each of Ashford Trust and Braemar is traded on the New York Stock Exchange (the “NYSE”).

We provide the personnel and services that we believe are necessary for each of Ashford Trust and Braemar to conduct their respective businesses. We may also perform similar functions for new or additional platforms. In our capacity as an advisor, we are not responsible for managing the day-to-day operations of the individual hotel properties owned by either Ashford Trust or Braemar, which duties are, and will continue to be, the responsibility of the hotel management companies that operate the hotel properties owned by Ashford Trust and Braemar. Additionally, Remington Lodging & Hospitality, LLC (“Remington”), a subsidiary of the Company, operates certain hotel properties owned by Ashford Trust, Braemar and third-parties. As of June 30, 2022, Remington provided hotel management services to 115 hotels, 41 of which were owned by third-parties.

Other Developments

On March 10, 2022, the Company entered into a Limited Waiver Under Advisory Agreement (“Braemar Limited Waiver”) with Braemar, Braemar Hospitality Limited Partnership (“Braemar OP”), Braemar TRS Corporation (“Braemar TRS”) and Ashford LLC. On March 15, 2022, the Company entered into a Limited Waiver Under Advisory Agreement (the “Ashford Trust Limited Waiver” and together with the Braemar Limited Waiver, the “Limited Waivers”) with Ashford Trust, Ashford Hospitality Limited Partnership (“Ashford Trust OP”), Ashford TRS Corporation (“Ashford Trust TRS”) and Ashford LLC. Pursuant to the Limited Waivers, the parties to the Second Amended and Restated Advisory Agreement with Ashford Trust and the Fifth Amended and Restated Advisory Agreement with Braemar waive the operation of any provision of such agreement that would otherwise limit the ability of Ashford Trust or Braemar, as applicable, in its discretion, at its cost and expense, to award during the first and second fiscal quarters of calendar year 2022 (the “Waiver Period”), cash incentive compensation to employees and other representatives of the Company; provided that, pursuant to the Ashford Trust Limited Waiver, such awarded cash incentive compensation does not exceed $8,476,000, in the aggregate, during the Waiver Period.

On April 1, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with Mustang Lodging Funding LLC, as administrative agent, and the lenders from time to time party thereto. The Credit Agreement evidences a senior secured term loan facility (the “Credit Facility”) in the amount of $100.0 million, including a $50.0 million term loan funded on the closing date of the Credit Facility (the “Closing Date”) and commitments to fund up to an additional $50.0 million of term loans in up to five separate borrowings within 24 months after the Closing Date, subject to certain conditions. On April 18, 2022, the Company drew an additional $20.0 million on the Credit Facility. See note 6.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On April 10, 2022, the Company’s board of directors (the “Board”) declared a cash dividend on the Company’s Series D Convertible Preferred Stock for accrued and unpaid dividends for the quarters ending June 30, 2020 and December 31, 2020 to stockholders of record as of April 11, 2022. The Company paid the dividend of approximately $17.8 million, or $0.932 per share of Series D Convertible Preferred Stock, on April 15, 2022. Dividends for the Series D Convertible Preferred Stock remain in arrears for the quarters ending June 30, 2021 and December 31, 2021. On each of April 15, 2022 and July 15, 2022, the Company paid $8.7 million of dividends previously declared by the Board with respect to the Company’s Series D Convertible Preferred Stock for the first and second quarters of 2022. See note 12.

On April 15, 2022, the Company acquired privately held Chesapeake Hospitality (“Chesapeake”), a third-party hotel management company. See note 4.

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation—The accompanying historical unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed consolidated financial statements include the accounts of Ashford Inc., its majority-owned subsidiaries and entities which it controls. All intercompany accounts and transactions between these entities have been eliminated in these historical condensed consolidated financial statements. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the condensed consolidated financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in our 2021 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 25, 2022.

Cost reimbursement revenue and reimbursed expenses for the three and six months ended June 30, 2021 were restated as previously disclosed in the restated condensed consolidated statement of operations for the three and six months ended June 30, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The restatement related to Remington’s recognition of cost reimbursement revenue and reimbursed expenses for certain insurance costs and the timing of recognition of cost reimbursement revenue and reimbursed expenses for hotel management related salaries and benefits costs that are reimbursed from hotel owners, resulting in a $2.9 million and $4.5 million decrease in cost reimbursement revenue and reimbursed expenses for the three and six months ended June 30, 2021, respectively. These costs are reported gross in the Company’s condensed consolidated statements of operations in cost reimbursement revenue with an offsetting amount reported in reimbursed expenses.

The condensed consolidated balance sheet and statement of equity (deficit) as of June 30, 2022, include a correction of an immaterial error which resulted in $639,000 of cumulative unrealized losses on available-for-sale common shares of Ashford Trust and Braemar held by Remington being reclassified from accumulated other comprehensive income to accumulated deficit. Beginning January 1, 2022, unrealized gains and losses on available-for-sale common shares are recorded in other income (expense) in the Company’s condensed consolidated statements of operations.

A variable interest entity (“VIE”) must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. We determine whether we are the primary beneficiary of a VIE upon our initial involvement with the VIE and we reassess whether we are the primary beneficiary of a VIE on an ongoing basis. Our determination of whether we are the primary beneficiary of a VIE is based upon the facts and circumstances for each VIE and requires significant judgment.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Noncontrolling Interests—The following tables present information about noncontrolling interests in our consolidated subsidiaries, including those related to consolidated VIEs, as of June 30, 2022 and December 31, 2021 (in thousands):


	June 30, 2022
	Ashford Holdings			OpenKey (3)		Pure Wellness (4)
Ashford Inc. ownership interest	99.87		%	76.10	%	70.00	%
Redeemable noncontrolling interests (1) (2)	0.13		%	—	%	—	%
Noncontrolling interests in consolidated entities	—		%	23.90	%	30.00	%
	100.00		%	100.00	%	100.00	%

Carrying value of redeemable noncontrolling interests	$	1,509		n/a		n/a

Redemption value adjustment, year-to-date	1			n/a		n/a
Redemption value adjustment, cumulative	582			n/a		n/a
Carrying value of noncontrolling interests	n/a			439		20
Assets, available only to settle subsidiary’s obligations (5)	n/a			2,224		1,252
Liabilities (6)	n/a			602		1,471

Revolving credit facility (6)	n/a			—		50


















	December 31, 2021
	Ashford Holdings			OpenKey (3)		Pure Wellness (4)
Ashford Inc. ownership interest	99.87		%	75.38	%	70.00	%
Redeemable noncontrolling interests (1) (2)	0.13		%	—	%	—	%
Noncontrolling interests in consolidated entities	—		%	24.62	%	30.00	%
	100.00		%	100.00	%	100.00	%

Carrying value of redeemable noncontrolling interests	$	69		n/a		n/a
Redemption value adjustment, year-to-date	96			n/a		n/a
Redemption value adjustment, cumulative	581			n/a		n/a
Carrying value of noncontrolling interests	n/a			479		159
Assets, available only to settle subsidiary’s obligations (5)	n/a			2,533		1,779
Liabilities (6)	n/a			424		1,643

Revolving credit facility (6)	n/a			—		100

________

(1) Redeemable noncontrolling interests are included in the “mezzanine” section of our condensed consolidated balance sheets as they may be redeemed by the holder for cash or registered shares in certain circumstances outside of the Company’s control. The carrying value of the noncontrolling interests is based on the greater of the accumulated historical cost or the redemption value, which is generally fair value.

(2) Redeemable noncontrolling interests in Ashford Hospitality Holdings LLC (“Ashford Holdings”) represent the members’ proportionate share of equity in earnings/losses of Ashford Holdings. Net income/loss attributable to the common unit holders is allocated based on the weighted average ownership percentage of the members’ interest.

(3) Represents ownership interests in OpenKey, Inc. (“OpenKey”), a VIE for which we are considered the primary beneficiary and therefore we consolidate it. OpenKey is a hospitality focused mobile key platform that provides a universal smartphone app for keyless entry into hotel guest rooms. On March 9, 2021, we acquired all of the redeemable noncontrolling interests in OpenKey for a purchase price of approximately $1.9 million. See note 6.

(4) Represents ownership interests in PRE Opco, LLC (“Pure Wellness”), a VIE for which we are considered the primary beneficiary and therefore we consolidate it. Pure Wellness provides hypoallergenic premium rooms in the hospitality and commercial office industry. See note 11.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(5) Total assets consist primarily of cash and cash equivalents, property and equipment, intangibles and other assets that can only be used to settle the subsidiaries’ obligations.

(6) Liabilities consist primarily of accounts payable, accrued expenses and notes payable for which creditors do not have recourse to Ashford Inc. See note 6.

Investments in Unconsolidated Entities—We hold “investments in unconsolidated entities” in our condensed consolidated balance sheets, which are considered to be variable interests and voting interests in the underlying entities. Certain of our investments in variable interests are not consolidated because we have determined that we are not the primary beneficiary. Certain other investments are not consolidated as the underlying entity does not meet the definition of a VIE and we do not control more than 50% of the voting interests. We review our “investments in unconsolidated entities” for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of our investment. No such impairment was recorded during the three and six months ended June 30, 2022 and 2021.

We held an investment in an unconsolidated variable interest entity with a carrying value of $500,000 at June 30, 2022 and December 31, 2021. We account for the investment at estimated fair value based on recent observable transactions as we do not exercise significant influence over the entity. No equity in earnings (loss) of unconsolidated entities due to a change in fair value of the investment was recognized during the three and six months ended June 30, 2022 and 2021. In the event that the assumptions used to estimate fair value change in the future, we may be required to record an impairment charge related to this investment.

Our investment in Real Estate Advisory Holdings LLC (“REA Holdings”) is accounted for under the equity method as we have significant influence over the voting interest entity. We have an option to acquire an additional 50% of the ownership interests in REA Holdings for $12.5 million beginning on January 1, 2022, which expires on the later of (i) February 28, 2024 and (ii) 30 business days following the completion date of the Company’s preliminary audit for calendar year 2023.

The following table summarizes our carrying value and ownership interest in REA Holdings (in thousands):


	June 30, 2022			December 31, 2021
Carrying value of the investment in REA Holdings	$	2,938		$	2,831
Ownership interest in REA Holdings	30		%	30		%

The following table summarizes our equity in earnings (loss) in REA Holdings (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Equity in earnings (loss) in unconsolidated entities REA Holdings	$	67	$	96	$	257	$	(18)

Use of Estimates—The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Acquisitions—We account for acquisitions and investments in businesses as business combinations if the target meets the definition of a business and (a) the target is a VIE and we are the target’s primary beneficiary, and therefore we must consolidate its financial statements, or (b) we acquire more than 50% of the voting interest of the target and it was not previously consolidated. We record business combinations using the acquisition method of accounting, which requires all of the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill. The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in our consolidated financial statements may be exposed to potential impairment of the intangible assets and goodwill.

If our investment involves the acquisition of an asset or group of assets that does not meet the definition of a business, the transaction is accounted for as an asset acquisition. An asset acquisition is recorded at cost, which includes capitalizing transaction costs, and does not result in the recognition of goodwill.

Cash and Cash Equivalents—Cash and cash equivalents include cash on hand or held in banks and short-term investments with an initial maturity of three months or less at the date of purchase.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Restricted Cash—Restricted cash was comprised of the following (in thousands):


	June 30, 2022		December 31, 2021
REIT Advisory:
Insurance claim reserves (1)	$	26,796	$	24,588

Remington:
Managed hotel properties’ reserves (2)	8,233		6,923
Insurance claim reserves (3)	2,154		1,312
Total Remington restricted cash	10,387		8,235

INSPIRE:
Debt service related operating reserves (4)	—		1,000

Marietta:
Capital improvement reserves (5)	255		255
Restricted cash held in escrow (6)	800		800
Total Marietta restricted cash	1,055		1,055



Total restricted cash	$	38,238	$	34,878

________

(1) Ashford Inc.’s Risk Management department collects funds from the Ashford Trust and Braemar properties and their respective management companies in an amount equal to the actuarial forecast of that year’s expected casualty claims and associated fees. These funds are deposited into restricted cash and used to pay casualty claims throughout the year as they are incurred. The claim liability related to the restricted cash balance is included in current “other liabilities” in our condensed consolidated balance sheets.

(2) Cash received from hotel properties managed by Remington is used to pay certain centralized operating expenses as well as hotel employee bonuses. The liability related to the restricted cash balance for centralized billing is primarily included as a payable which is presented net within “due from Ashford Trust” and “due from Braemar” in our condensed consolidated balance sheets. The liability related to the restricted cash balance for hotel employee bonuses is included in “accounts payable and accrued expenses.”

(3) Cash reserves for health insurance claims are collected primarily from Remington’s managed properties as well as certain of Ashford Inc.’s other subsidiaries to cover employee health insurance claims. The liability related to this restricted cash balance is included in current “other liabilities.”

(4) Our subsidiary, Inspire Event Technologies Holdings, LLC (“INSPIRE”), provides event technology and creative communications solutions services. On June 27, 2022, INSPIRE’s credit agreement was amended to remove the previous requirement for INSPIRE to maintain an operating reserve account of $1.0 million to service interest expense and projected operating costs. See note 6.

(5) Includes cash reserves for capital improvements associated with renovations at the hotel leased by our consolidated subsidiary, Marietta Leasehold LP (“Marietta”), which holds the leasehold rights to a single hotel and convention center property in Marietta, Georgia. The liability related to the restricted cash balance for the hotel’s renovations are included in “accounts payable and accrued expenses.”

(6) Restricted cash is held in escrow in accordance with the Marietta lease agreement. The cash held in escrow is funded from hotel cash flows and can only be used for repairs and maintenance or capital improvements at the property.

Accounts Receivable—Accounts receivable consists primarily of receivables from customers of audio visual services. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments for services. The allowance is recorded based on management’s judgment regarding our ability to collect as well as the age of the receivables. Accounts receivable are written off when they are deemed uncollectible. As of June 30, 2022 and December 31, 2021, accounts receivable also includes a note receivable due to Remington of approximately $1.5 million and $2.9 million, respectively.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Property and Equipment, net—Property and equipment, including assets acquired under finance leases, is depreciated using the straight-line method over estimated useful lives or lease terms if shorter. We record property and equipment at cost. As of June 30, 2022 and December 31, 2021, property and equipment, net of accumulated depreciation, included assets related to Marietta’s finance lease of $41.0 million and $41.6 million, enhanced return funding program (“ERFP”) furniture fixture & equipment (“FF&E”) of $10.7 million and $12.4 million, audio visual equipment at INSPIRE of $6.5 million and $7.0 million and marine vessels at RED Hospitality & Leisure, LLC (“RED”) of $12.6 million and $12.8 million, respectively.

Other Liabilities—As of June 30, 2022 and December 31, 2021, other current liabilities included reserves in the amount of $26.8 million and $24.6 million, respectively, related primarily to Ashford Trust and Braemar properties’ insurance claims and related fees. The liability for casualty insurance claims and related fees is established based upon an analysis of historical data and actuarial estimates. We record the related funds received from Ashford Trust and Braemar in “restricted cash” in our condensed consolidated balance sheets. As of June 30, 2022 and December 31, 2021, other liabilities also included $2.4 million and $1.3 million, respectively, relating to reserves for Remington health insurance claims. Other liabilities non-current of $1.7 million includes the liability for contingent consideration from the Company’s acquisition of Chesapeake. See notes 4 and 8.

Revenue Recognition—See note 3.

Income Taxes—We are a taxable corporation for federal and state income tax purposes. Income tax expense includes U.S. federal and state income taxes, Mexico and Dominican Republic income taxes and U.S. Virgin Islands taxes. In accordance with authoritative accounting guidance, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between our consolidated financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

The “Income Taxes” topic of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance requires us to determine whether tax positions we have taken or expect to take in a tax return are more likely than not to be sustained upon examination by the appropriate taxing authority based on the technical merits of the positions. Tax positions that do not meet the more likely than not threshold would be recorded as additional tax expense in the current period. We analyze all open tax years, as defined by the statute of limitations for each jurisdiction, which includes the federal jurisdiction and various states. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our portfolio companies file income tax returns in the U.S. federal jurisdiction and various states and cities, beginning in 2017, in Mexico and the Dominican Republic and, beginning in 2018, in the U.S. Virgin Islands. Tax years 2017 through 2021 remain subject to potential examination by certain federal and state taxing authorities.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law and includes certain income tax provisions relevant to our business. The Company is required to recognize the effect on the consolidated financial statements in the period the law was enacted, which is the period ended March 31, 2020. The CARES Act did not have a material impact on the Company’s consolidated financial statements for the year ended December 31, 2020. The Company filed a claim to carryback the 2018 tax net operating loss to a prior year as provided for by the CARES Act. The Company received the carryback amount of $1.0 million in March of 2021.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law and extends several COVID-19 tax related measures passed as part of the CARES Act. Among these is the extension of the deferral period of the remittance of Social Security taxes. The Company is required to recognize the effect on the consolidated financial statements in the period the law was enacted, which is the period ended December 31, 2020. The Company has deferred $1.3 million of Social Security taxes within “accounts payable and accrued expenses” in our consolidated balance sheets as of June 30, 2022 and December 31, 2021 related to the Consolidated Appropriations Act, 2021.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Recently Issued Accounting Standards—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 sets forth an “expected credit loss” impairment model to replace the current “incurred loss” method of recognizing credit losses. The standard requires measurement and recognition of expected credit losses for most financial assets held. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”). ASU 2019-10 revised the mandatory adoption date for public business entities that meet the definition of a smaller reporting company to be effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. We are currently evaluating the impact ASU 2016-13 and ASU 2019-10 may have on our condensed consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. We are currently evaluating the impact that ASU 2020-06 may have on our condensed consolidated financial statements and related disclosures.

3. Revenues

Revenue Recognition—Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We determine revenue recognition through the following steps:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, we satisfy a performance obligation

In determining the transaction price, we include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved.

The following provides detailed information on the recognition of our revenues from contracts with customers:

Advisory Services Fees Revenue

Advisory services fees revenue is reported within our REIT Advisory segment and primarily consists of advisory fees that are recognized when services have been rendered. Advisory fees consist of base fees and incentive fees. For Ashford Trust, from January 1, 2021 through January 14, 2021, the base fee ranged from 0.50% to 0.70% per annum of the total market capitalization ranging from greater than $10.0 billion to less than $6.0 billion plus the Net Asset Fee Adjustment (as defined in the Amended and Restated Advisory Agreement with Ashford Trust, dated June 10, 2015, as amended), subject to certain minimums. On January 14, 2021, the Company entered into the Second Amended and Restated Advisory Agreement with Ashford Trust. The Second Amended and Restated Advisory Agreement amends and restates the terms of the Amended and Restated Advisory Agreement to, among other things, fix the percentage used to calculate the base fee thereunder at 0.70% per annum.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On January 15, 2021, Ashford Trust and Ashford Trust OP entered into a Credit Agreement (as amended, the “Credit Agreement”) with certain funds and accounts managed by Oaktree Capital Management L.P. (“Oaktree”). In connection with the transactions contemplated by the Credit Agreement, on January 15, 2021, the Company and certain of its affiliates entered into a Subordination and Non-Disturbance Agreement (the “SNDA”) with Ashford Trust, Ashford Trust OP, Ashford Trust TRS and Oaktree pursuant to which the Company agreed to subordinate to the prior repayment in full of all obligations under the Credit Agreement, (1) prior to the later of (i) the second anniversary of the Credit Agreement and (ii) the date accrued interest “in kind” is paid in full, advisory fees (other than reimbursable expenses) in excess of 80% of such fees paid during the fiscal year ended December 31, 2019 (the “Advisory Fee Cap”); (2) any termination fee or liquidated damages amounts under the Second Amended and Restated Advisory Agreement, or any amount owed under any enhanced return funding program in connection with the termination of the Second Amended and Restated Advisory Agreement or sale or foreclosure of assets financed thereunder; and (3) any payments to Lismore Capital II LLC, an indirect consolidated subsidiary of the Company (“Lismore”), in connection with the transactions contemplated by the Credit Agreement.

Prior to the fourth quarter of 2021, advisory fees under the Second Amended and Restated Advisory Agreement earned from Ashford Trust in 2021 in excess of the Advisory Fee Cap were a form of variable consideration that were constrained and deferred until such fees were probable of not being subject to significant reversal. The Advisory Fee Cap is approximately $29.0 million each year as stated in the Credit Agreement. As a result, base advisory fee revenue was recognized each month equal to the lesser of (1) base fees calculated as described above based on Ashford Trust’s market capitalization or (2) 1/12th of $29.0 million.

On October 12, 2021, Ashford Trust and Ashford Trust OP entered into Amendment No. 1 to the Credit Agreement (“Amendment No. 1”) with Oaktree. Amendment No. 1, subject to the conditions set forth therein, among other things, suspended Ashford Trust’s obligation to subordinate fees due under the Second Amended and Restated Advisory Agreement if at any point there is no accrued interest outstanding or any accrued dividends on any of Ashford Trust’s preferred stock and Ashford Trust has sufficient unrestricted cash to repay in full all outstanding loans under the Credit Agreement. In the fourth quarter of 2021, Ashford Trust met the requirements to suspend its obligation to subordinate fees due under the Second Amended and Restated Advisory Agreement and paid the Company $7.2 million for advisory fees that had been deferred in 2021 as a result of the Advisory Fee Cap. The $7.2 million payment was recorded as revenue in “advisory services fees” in the fourth quarter of 2021 in our consolidated statements of operations for the year ended December 31, 2021. Based upon Ashford Trust’s ability to meet the requirements stated in Amendment No. 1, the Company has concluded that base fees from our Second Amended and Restated Advisory Agreement with Ashford Trust which exceed the Advisory Fee Cap are no longer probable of being subject to significant reversal and will be recorded within “advisory services fees” in our condensed consolidated statements of operations based upon the fees calculated from Ashford Trust’s market capitalization as described above.

For Braemar, the base fee is paid monthly and is fixed at 0.70% of Braemar’s total market capitalization plus the Net Asset Fee Adjustment, as defined in our Fifth Amended and Restated Advisory Agreement with Braemar, as amended, subject to certain minimums.

Incentive advisory fees are measured annually in each year that Ashford Trust’s and/or Braemar’s annual total stockholder return exceeds the average annual total stockholder return for each company’s respective peer group, subject to the Fixed Charge Coverage Ratio Condition (the “FCCR Condition”), as defined in the respective advisory agreements. Incentive advisory fees are paid over a three-year period and each payment is subject to the FCCR Condition, which relates to the ratio of adjusted EBITDA to fixed charges for Ashford Trust or Braemar, as applicable. Incentive advisory fees are a form of variable consideration and therefore must be (i) deferred until such fees are probable of not being subject to significant reversal, and (ii) tied to a performance obligation in the contract with the customer so that revenue recognition depicts the transfer of the related advisory services to the customer. Accordingly, the Company does not record incentive advisory fee revenue in interim periods prior to the fourth quarter of the year in which the incentive fee is measured. The first year installment of incentive advisory fees will generally be recognized only upon measurement in the fourth quarter of the first year of the three year period. The second and third year installments of incentive advisory fees are recognized as revenue on a pro-rata basis each quarter subject to meeting the FCCR Condition. Ashford Trust and Braemar’s annual total stockholder return did not meet the relevant incentive fee thresholds during the 2021, 2020 and 2019 measurement periods.

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(unaudited)

Hotel Management Fees Revenue

Hotel management fees revenue is reported within our Remington segment and primarily consists of base management fees, incentive management fees and other management fees. Base management fees, incentive management fees and other management fees are recognized when services have been rendered. For hotels owned by Ashford Trust and Braemar, Remington receives base management fees of 3% of gross hotel revenue for managing the hotel employees and daily operations of the hotels, pursuant to Remington’s hotel management agreements, subject to a specified floor (which is subject to increase annually based on increases in the consumer price index). Remington additionally receives an incentive management fee for hotels owned by Ashford Trust and Braemar equal to the lesser of 1% of each hotel’s annual gross revenue or the amount by which the respective hotel’s gross operating profit exceeds the hotel’s budgeted gross operating profit. The base management fees and incentive management fees that Remington receives for third-party owned hotels vary by property. Other management fees include fixed monthly accounting and revenue management fees for managing hotel employees and the daily operations of the hotels.

Design and Construction Fees Revenue

Design and construction fees revenue (formerly called project management revenue) primarily consists of revenue generated by our subsidiary, Premier Project Management LLC (“Premier”). Premier provides design and construction management services, capital improvements, refurbishment, project management, and other services such as purchasing, interior design, architectural services and freight management at properties. Premier receives fees for these services and recognizes revenue over time as services are provided to the customer.

Audio Visual Revenue

Audio visual revenue primarily consists of revenue generated within our INSPIRE segment by providing event technology services such as audio visual services, audio visual equipment rental, staging and meeting services and event-related communication systems as well as related technical support, to our customers in various venues including hotels and convention centers. Revenue is recognized in the period in which services are provided pursuant to the terms of the contractual arrangements with our customers. We also evaluate whether it is appropriate to present: (i) the gross amount that our customers pay for our services as revenue, and the related commissions paid to the venue as cost of revenue; or (ii) the net amount (gross revenue less the related commissions paid to the venue) as revenue. We are responsible for the delivery of the services, including providing the necessary labor and equipment to perform the services. We are generally subject to inventory risk, have latitude in establishing prices and selecting suppliers and, while in many cases the venue bills the end customer on our behalf, we bear the risk of collection from the customer. The venues’ commissions are not dependent on collections. As a result, our revenue is primarily reported on a gross basis. Cost of revenues for audio visual principally includes commissions paid to venues, direct labor costs, the cost of equipment sub-rentals, depreciation of equipment, amortization of signing bonuses, as well as other costs such as supplies, freight, travel and other overhead from our venue and customer facing operations and any losses on equipment disposal.

Other Revenue

Other revenue includes revenue provided by certain of our products and service businesses, including RED. RED’s revenue is primarily generated through the provision of watersports activities and ferry and excursion services. The revenue is recognized as services are provided based on contractual customer rates. Debt placement and related fees include revenue earned from providing placement, modifications, forbearances or refinancing of certain mortgage debt by Lismore. For certain agreements, the fees are recognized based on a stated percentage of the loan amount when services have been rendered and the subject loan is closed. For other agreements, deferred income related to the various Lismore fees will be recognized over the term of the agreement on a straight line basis as the service is rendered, only to the extent it is probable that a significant reversal of revenue will not occur. Constraints relating to variable consideration are resolved generally upon the closing of a transaction or financing event and the resulting change in the transaction price will be adjusted on a cumulative catch-up basis in the period a transaction or financing event closes.

Cost Reimbursement Revenue

Cost reimbursement revenue is recognized in the period we incur the related reimbursable costs. Under our advisory agreements, we are entitled to be reimbursed for certain costs we incur on behalf of Ashford Trust and Braemar, with no added mark-up. These costs primarily consist of expenses related to Ashford Securities (as defined below), overhead, internal audit, risk management advisory services and asset management services, including compensation, benefits and travel expense

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(unaudited)

reimbursements. We record cost reimbursement revenue for equity grants of Ashford Trust and Braemar common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period.

Under our project management agreements and hotel management agreements, we are entitled to be reimbursed for certain costs we incur on behalf of Ashford Trust, Braemar and other hotel owners, with no added mark-up. Design and construction costs primarily consist of costs for accounting, overhead and project manager services. Hotel management costs primarily consist of the properties’ payroll, payroll taxes and benefits related expenses at managed properties where we are the employer of the employees at the properties as provided for in our contracts with Ashford Trust, Braemar and other hotel owners.

We recognize revenue within “cost reimbursement revenue” in our condensed consolidated statements of operations when the amounts may be billed to Ashford Trust, Braemar and other hotel owners, and we recognize expenses within “reimbursed expenses” in our condensed consolidated statements of operations as they are incurred. This pattern of recognition results in temporary timing differences between the costs incurred for centralized software programs and the related reimbursements we receive from Ashford Trust and Braemar in our operating and net income. Over the long term, these programs and services are not designed to impact our economics, either positively or negatively.

Certain of our consolidated entities enter into contracts with customers that contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our consolidated entities’ overall pricing objectives taking into consideration market conditions and other factors, including the customer and the nature and value of the performance obligations within the applicable contracts.

Practical Expedients and Exemptions

We do not disclose the amount of variable consideration that we expect to recognize in future periods in the following circumstances:

(1) if we recognize the revenue based on the amount invoiced or services performed;

(2) if the consideration is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of the consideration relate specifically to our efforts to transfer, or to a specific outcome from transferring the service.

Deferred Income and Contract Balances

Deferred income primarily consists of customer billings in advance of revenue being recognized from our advisory agreements and other products and services contracts. Generally, deferred income that will be recognized within the next twelve months is recorded as current deferred income and the remaining portion is recorded as noncurrent. The change in the deferred income balance is primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by revenue recognized that was included in the deferred income balance at the beginning of the period.

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(unaudited)

The following tables summarize our consolidated deferred income activity (in thousands):


	Deferred Income
	2022		2021
Balance as of March 31	$	10,377	$	20,519
Increases to deferred income	1,961		4,307
Recognition of revenue (1)	(3,658)		(5,163)
Balance as of June 30	$	8,680	$	19,663

________

(1) Deferred income recognized in the three months ended June 30, 2022, includes (a) $390,000 of advisory revenue primarily related to our advisory agreements with Ashford Trust and Braemar, (b) $1.5 million of audio visual revenue, and (c) $1.8 million of “other services” revenue earned by our products and services companies. Deferred income recognized in the three months ended June 30, 2021, includes (a) $527,000 of advisory revenue primarily related to our advisory agreements with Ashford Trust and Braemar, (b) $669,000 of audio visual revenue, (c) $2.3 million of other revenue related to the Ashford Trust Agreement with Lismore (see note 15), and (d) $1.7 million of “other services” revenue earned by our products and services companies, excluding Lismore.


	Deferred Income
	2022		2021
Balance as of January 1	$	10,905	$	21,359
Increases to deferred income	5,812		10,218
Recognition of revenue (1)	(8,037)		(11,914)
Balance as of June 30	$	8,680	$	19,663

________

(1) Deferred income recognized in the six months ended June 30, 2022, includes (a) $833,000 of advisory revenue primarily related to our advisory agreements with Ashford Trust and Braemar, (b) $1.7 million of audio visual revenue, (c) $2.3 million of other revenue primarily related to Ashford Trust’s agreement with Lismore (see note 15), and (d) $3.2 million of “other services” revenue earned by our products and services companies, excluding Lismore. Deferred income recognized in the six months ended June 30, 2021, includes (a) $1.1 million of advisory revenue primarily related to our advisory agreements with Ashford Trust and Braemar, (b) $1.2 million of audio visual revenue, (c) $6.6 million of other revenue related to Ashford Trust’s and Braemar’s agreements with Lismore (see note 15), and (d) $3.1 million of “other services” revenue earned by our products and services companies, excluding Lismore.

We do not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was primarily related to (i) reimbursed software costs that will be recognized evenly over the period the software is used to provide advisory services to Ashford Trust and Braemar, (ii) a $5.0 million cash payment received in June 2017 from Braemar in connection with our Fourth Amended and Restated Advisory Agreement with Braemar, which is recognized evenly over the 10-year initial contract period that we are providing Braemar advisory services, and (iii) debt placement and related fees that will be recognized over the term of the agreement on a straight line basis as the service was rendered, only to the extent it was probable that a significant reversal of revenue would not occur. Constraints relating to variable consideration were resolved generally upon the closing of a transaction or financing event and the resulting change in the transaction price was adjusted on a cumulative catch-up basis in the period a transaction or financing event closed. See note 15. Incentive advisory fees that are contingent upon future market performance are excluded as the fees are considered variable and not included in the transaction price at June 30, 2022.

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(unaudited)

The timing of revenue recognition may differ from the timing of payment by customers. We record a receivable when revenue is recognized prior to payment and we have an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, we record deferred income until the performance obligations are satisfied. We had receivables related to revenues from contracts with customers of $15.0 million and $7.6 million included in “accounts receivable, net” primarily related to our products and services segment, $5.0 million and $2.6 million in “due from Ashford Trust”, and $3.8 million and $1.1 million included in “due from Braemar” related to REIT advisory services at June 30, 2022 and December 31, 2021, respectively. We had no significant impairments related to these receivables during the three and six months ended June 30, 2022 and 2021. See note 15.

Disaggregated Revenue

Our revenues were comprised of the following for the three and six months ended June 30, 2022 and 2021, respectively (in thousands):

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(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Advisory services fees:
Base advisory fees	$	11,839	$	9,932	$	23,513	$	19,731



Other advisory revenue	130		130		258		258
Total advisory services fees revenue	11,969		10,062		23,771		19,989

Hotel management fees:
Base fees	9,484		5,308		15,658		9,165
Incentive fees	2,867		1,207		3,871		1,822
Other management fees	1,069		—		1,069		—
Total hotel management fees revenue	13,420		6,515		20,598		10,987

Design and construction fees revenue	4,738		1,867		9,262		3,409

Audio visual revenue	35,977		9,451		60,942		13,062

Other revenue:

Watersports, ferry and excursion services (1)	7,684		6,861		13,729		11,422
Debt placement and related fees (2)	690		2,290		3,173		6,578
Claims management services	1		16		16		33

Other services (3)	3,697		2,999		6,593		4,762
Total other revenue	12,072		12,166		23,511		22,795

Cost reimbursement revenue	89,277		45,351		163,328		77,538

Total revenues	$	167,453	$	85,412	$	301,412	$	147,780

REVENUES BY SEGMENT (4)
REIT advisory	$	19,221	$	16,745	$	38,614	$	31,813
Remington	90,799		44,083		161,306		74,892
Premier	7,085		2,430		13,311		4,374
INSPIRE	36,016		9,451		61,038		13,062
RED	7,693		6,861		13,738		11,422
OpenKey	413		477		795		931
Corporate and other	6,226		5,365		12,610		11,286
Total revenues	$	167,453	$	85,412	$	301,412	$	147,780

________

(1) Watersports, ferry and excursion services revenue is earned by RED, which includes the entity that conducts RED’s legacy U.S. Virgin Islands operations, the Turks and Caicos Islands operations and Sebago, a provider of watersports activities and excursion services based in Key West, Florida.

(2) Debt placement and related fees are earned by Lismore for providing placement, modification, forbearance or refinancing services to Ashford Trust and Braemar.

(3) Other services revenue relates primarily to other hotel services provided by our consolidated subsidiaries OpenKey and Pure Wellness, to Ashford Trust, Braemar and third parties, and the revenue of Marietta, which holds the leasehold rights to a single hotel and convention center property in Marietta, Georgia.

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(unaudited)

(4) We have six reportable segments: REIT Advisory, Remington, Premier, INSPIRE, RED and OpenKey. We combine the operating results of Marietta and Pure Wellness into an “all other” category, which we refer to as “Corporate and Other.” See note 17 for discussion of segment reporting.

Geographic Information

Our REIT Advisory, Remington, Premier, OpenKey, and Corporate and Other reporting segments conduct their business primarily within the United States. Our INSPIRE reporting segment conducts business in the United States, Mexico, and the Dominican Republic. RED conducts business in the United States and the Turks and Caicos Islands, a territory of the United Kingdom.

The following table presents revenue from INSPIRE and RED geographically for the three and six months ended June 30, 2022 and 2021, respectively (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
INSPIRE:
United States	$	27,057	$	7,837	$	46,127	$	10,752
Mexico	7,156		1,260		11,774		1,671

Dominican Republic	1,803		354		3,137		639
Total audio visual revenue	$	36,016	$	9,451	$	61,038	$	13,062
RED:
United States	$	6,588	$	6,861	$	11,854	$	11,422
United Kingdom (Turks and Caicos Islands)	1,105		—		1,884		—

Total watersports, ferry and excursion services	$	7,693	$	6,861	$	13,738	$	11,422

4. Acquisitions

Chesapeake

On April 15, 2022, the Company acquired privately held Chesapeake, a third-party hotel management company. The Company paid to the sellers $6.3 million in cash, subject to certain adjustments, and issued to the sellers 378,000 Series CHP Convertible Preferred Units of Ashford Holdings (the “Series CHP Units”) at $25 per Unit, for a total liquidation value of $9.45 million. The Series CHP Units include a discount of $8.1 million resulting in a total fair value of $1.4 million. The discount is due to the Company’s ability to convert the Series CHP Units to common units of Ashford Holdings at the preferred conversion price of $117.50. Common units of Ashford Holdings are exchangeable into common stock of the Company on a 1:1 ratio. The sellers also have the ability to earn up to $10.25 million of additional consideration based on the base management fee contribution from the acquired business for the trailing 12 month periods ending March 2024 and March 2025, respectively, for a total potential consideration of $18.1 million, subject to certain adjustments. The first $6.3 million of such additional consideration is payable in cash and any amounts payable in excess of such $6.3 million may be satisfied by the issuance of shares of common stock of the Company, common units of Ashford Holdings or additional Series CHP Units, as determined by the Company in its sole discretion.

The acquisition of Chesapeake was recorded using the acquisition method of accounting in accordance with the authoritative guidance for business combinations, and the purchase price allocation was based on our valuation of the fair value of the tangible and intangible assets acquired and liabilities assumed at the date of acquisition. The fair values of the assets acquired were determined using various valuation techniques, including an income approach. The fair value measurements were primarily based on significant inputs that are not directly observable in the market and are considered Level 3 under the fair value measurements and disclosure framework. Key assumptions include cash flow projections for Chesapeake and the discount rate applied to those cash flows. The excess of the purchase price over the estimated fair values of the identifiable net assets acquired was recorded as goodwill. See note 8.

We have allocated the purchase price to the assets acquired and liabilities assumed on a preliminary basis using estimated fair value information currently available. We are in the process of evaluating the values assigned to the intangible assets. Thus, the balances reflected below are subject to change, and any such changes could result in adjustments to the allocation.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The fair value of the purchase price and preliminary allocation of the purchase price are as follows (in thousands):


Series CHP Units	$	9,450
Discount on Series CHP Units	(8,063)
Cash	6,300
Fair value of contingent consideration	1,670
Working capital adjustments	120
Total fair value of purchase price	$	9,477


	Fair Value		Estimated Useful Life
Current assets including cash of $228	$	930



Goodwill	1,980


Management contracts	7,131		8 years
Total assets acquired	10,041
Current liabilities	347
Deferred tax liability	217





Total assumed liabilities	564
Net assets acquired	$	9,477

We do not expect any of the goodwill balance to be deductible for tax purposes. The qualitative factors that make up the recorded goodwill includes value attributable to growth opportunities to expand Remington’s hotel management services to third-party owners in the hospitality industry.

Results of Chesapeake

The results of operations of Chesapeake have been included in our results of operations since the acquisition date. Our condensed consolidated statements of operations for the three and six months ended June 30, 2022 include total revenue from Chesapeake of $11.9 million. In addition, our condensed consolidated statements of operations for the three and six months ended June 30, 2022 include net income from Chesapeake of $1.4 million.

Pro Forma Financial Results

The following table reflects the unaudited pro forma results of operations as if the Chesapeake acquisition had occurred on January 1, 2021, and the removal of $692,000 and $942,000 of transaction costs directly attributable to the acquisition (net of the incremental tax expense) for the three and six months ended June 30, 2022, respectively (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Total revenues	$	169,299	$	93,413	$	314,332	$	161,848
Net income (loss)	5,380		(6,777)		5,528		(16,288)
Net income (loss) attributable to common stockholders	(3,510)		(15,640)		(12,638)		(34,064)

5. Goodwill and Intangible Assets, net

The carrying amount of goodwill as of June 30, 2022 is as follows (in thousands):

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(unaudited)


	Remington		RED		Corporate and Other (1)		Consolidated







Balance at December 31, 2021	$	54,605	$	1,235	$	782	$	56,622
Changes in goodwill:
Additions (2)	1,980		—		—		1,980



Balance at June 30, 2022	$	56,585	$	1,235	$	782	$	58,602

________

(1) Corporate and Other includes the goodwill from the Company’s acquisition of Pure Wellness.

(2) The addition relates to the Company’s acquisition of Chesapeake. See note 4.

Intangible assets, net as of June 30, 2022 and December 31, 2021, are as follows (in thousands):


	June 30, 2022				December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Definite-lived intangible assets:
Remington management contracts (1)	$	114,730	$	(34,045)	$	80,685	$	107,600	$	(28,284)	$	79,316
Premier management contracts	194,000		(47,517)		146,483		194,000		(41,619)		152,381
INSPIRE customer relationships	9,319		(4,968)		4,351		9,319		(4,409)		4,910

RED boat slip rights	3,100		(458)		2,642		3,100		(380)		2,720
Pure Wellness customer relationships	175		(175)		—		175		(166)		9

	$	321,324	$	(87,163)	$	234,161	$	314,194	$	(74,858)	$	239,336

	Gross Carrying Amount						Gross Carrying Amount
Indefinite-lived intangible assets:

Remington trademarks	$	4,900					$	4,900


RED trademarks	490						490
	$	5,390					$	5,390

________

(1) As of June 30, 2022, Remington’s management contracts include $7.1 million of gross management contracts acquired in the Company’s acquisition of Chesapeake. See note 4.

Amortization expense for definite-lived intangible assets was $6.4 million and $12.3 million for the three and six months ended June 30, 2022, respectively. Amortization expense for definite-lived intangible assets was $6.4 million and $12.8 million for the three and six months ended June 30, 2021, respectively. The useful lives of our customer relationships range from five to 15 years and the useful lives of our Remington management contracts range from eight to 22 years. Our Premier management contracts and RED’s boat slip rights intangible assets were assigned useful lives of 30 and 20 years, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

6. Notes Payable, net

Notes payable—Notes payable, net consisted of the following (in thousands):


Indebtedness	Borrower	Maturity	Interest Rate	June 30, 2022		December 31, 2021
Credit facility (9)	Ashford Inc.	April 1, 2027	Base Rate (1) + 6.35% or LIBOR (3) +7.35%	$	70,000	$	—
Term loan (9)	Ashford Inc.	March 19, 2024	Base Rate (2) + 2.00% to 2.25% or LIBOR (3) +3.00% to 3.25%	—		27,271
Note payable (12)	Ashford Inc.	February 29, 2028	4.00%	1,622		1,746
Term loan (5) (7) (10)	INSPIRE	January 1, 2024	Prime Rate (4) + 2.25%	18,800		20,000
Revolving credit facility (5) (7) (10)	INSPIRE	January 1, 2024	Prime Rate (4) + 2.25%	224		1,869




Revolving credit facility (5) (13)	Pure Wellness	On demand	Prime Rate (4) + 1.00%	50		100

Revolving credit facility (6) (8) (14)	RED	November 3, 2022	Prime Rate (4) + 1.75%	—		—


Term loan (5) (8) (15)	RED	July 17, 2029	6.00%	1,619		1,641
Term loan (5) (8)	RED	July 17, 2023	6.50%	474		607


Term loan (5) (8) (16)	RED	August 5, 2029	Prime Rate (4) + 2.00%	889		888
Term loan (5) (8)	RED	August 5, 2029	Prime Rate (4) + 2.00%	2,058		2,143
Term loan (6) (8)	RED	August 5, 2029	Prime Rate (4) + 1.75%	3,176		3,357
Draw term loan (5) (8) (17)	RED	March 17, 2032	5.00%	26		—
Draw term loan (5) (8) (17)	RED	March 17, 2032	5.00%	22		—
Total notes payable				98,960		59,622
Capitalized default interest, net (11)				219		290
Deferred loan costs, net				(2,921)		(518)
Original issue discount, net (9)				(1,896)		—
Notes payable including capitalized default interest and deferred loan costs, net				94,362		59,394

Less current portion				(4,688)		(6,725)
Total notes payable, net - non-current				$	89,674	$	52,669

__________________

(1) Base Rate, as defined in the credit facility agreement with Mustang Lodging Funding LLC, is the greater of (i) the Wall Street Journal prime rate, (ii) the federal funds rate plus 0.50%, (iii) LIBOR plus 1.00%, or (iv) 1.25%.

(2) Base Rate, as defined in the Term Loan Agreement (the “Term Loan Agreement”) with Bank of America, N.A., is the greater of (i) the prime rate set by Bank of America, N. A., (ii) the federal funds rate plus 0.50%, or (iii) LIBOR plus 1.00%.

(3) The one-month LIBOR rate was 1.79% and 0.10% at June 30, 2022 and December 31, 2021, respectively.

(4) The Prime Rate was 4.75% and 3.25% at June 30, 2022 and December 31, 2021, respectively.

(5) Creditors do not have recourse to Ashford Inc.

(6) Creditors have recourse to Ashford Inc.

(7) INSPIRE’s revolving credit facility is collateralized primarily by INSPIRE’s eligible receivables, including accounts receivable, due from Ashford Trust and due from Braemar, with a total carrying value of $10.4 million and $5.0 million as of June 30, 2022 and December 31, 2021, respectively. INSPIRE’s term loan is collateralized by substantially all of the assets of INSPIRE.

(8) RED’s loans are collateralized primarily by RED’s marine vessels and associated leases with a carrying value of $13.3 million and $12.5 million as of June 30, 2022 and December 31, 2021, respectively.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(9) On April 1, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with Mustang Lodging Funding LLC, as administrative agent, and the lenders from time to time party thereto. The Credit Agreement evidences a senior secured term loan facility (the “Credit Facility”) in the amount of $100.0 million, including a $50.0 million term loan funded on the closing date of the Credit Facility (the “Closing Date”) and commitments to fund up to an additional $50.0 million of term loans in up to five separate borrowings within 24 months after the Closing Date, subject to certain conditions. The Company used a portion of the proceeds from the Credit Agreement to pay off the remaining $26.6 million balance of the Company’s existing Term Loan Agreement and pay dividends to the holders of the Series D Convertible Preferred Stock. On April 18, 2022, the Company drew an additional $20.0 million on the Credit Facility. The Credit Facility is a five-year interest-only facility with all outstanding principal due at maturity, with three successive one-year extension options subject to an increase in the interest rate during each extension period. Borrowings under the Credit Agreement will bear interest, at the Company’s option, at either the Eurodollar Rate (defined as LIBOR or a comparable or successor rate, with a floor of 0.25%) plus an applicable margin, or the base rate (defined as the highest of the federal funds rate plus 0.50%, the prime rate or the Eurodollar Rate plus 1.00%, with a floor of 1.25%) plus an applicable margin. The applicable margin for borrowings under the Credit Agreement for Eurodollar loans will be 7.35% per annum and the applicable margin for base rate loans will be 6.35% per annum, with increases to both applicable margins of 0.50%, 0.75% and 1.00% per annum during each of the three extension periods, respectively. The remaining undrawn balance of the Credit Facility is subject to an unused fee of 1.0%. The Credit Facility included an original issue discount of $2.0 million on the Closing Date. As of June 30, 2022, the amount unused under the Credit Facility was $30.0 million.

(10) On December 31, 2020, INSPIRE amended its credit agreement dated as of November 1, 2017 (the “INSPIRE Amendment”). The maximum borrowing capacity under the INSPIRE Amendment for the revolving credit facility is $3.0 million. As of June 30, 2022, the amount unused under INSPIRE’s revolving credit facility was $2.8 million. The INSPIRE Amendment provides INSPIRE with an option to elect a one-year extension subject to satisfaction of certain conditions, including a payment of a one-time, permanent principal reduction of the term loan of not less than $2.5 million and other fees as of the date of INSPIRE’s election to extend. Pursuant to the INSPIRE Amendment, INSPIRE’s obligations to comply with certain financial and other covenants were waived until March 31, 2023. Amounts borrowed under the revolving credit facility and the term loan bear interest at the Prime Rate plus a margin of 1.25%, with the margin increasing by 0.25% beginning on July 1, 2021 and at the beginning of each successive quarter thereafter. Commencing January 1, 2022, INSPIRE is required to make monthly payments under the term loan of $200,000 through June 2022, $250,000 through December 2022 and $300,000 thereafter. INSPIRE holds an interest rate cap with an initial notional amount totaling $5.0 million and a strike rate of 4.0%. The fair value of the interest rate cap at June 30, 2022 and December 31, 2021 was not material.

(11) The INSPIRE Amendment was considered a troubled debt restructuring due to terms that allowed for deferred interest and the forgiveness of default interest and late charges. As a result of the troubled debt restructuring, $427,000 of accrued default interest and late charges were capitalized into the INSPIRE term loan balance upon commencement and are amortized over the remaining term of the loan using the effective interest method.

(12) On March 9, 2021, we acquired all of the redeemable noncontrolling interests in OpenKey for a purchase price of approximately $1.9 million. Pursuant to the agreement, the purchase price will be paid to the seller in equal monthly installments over a seven year term and will include interest in arrears at an annualized rate of 4.0%. The purchase price is payable in Ashford Inc. common stock, including a 10% premium or cash at our sole discretion.

(13) As of June 30, 2022, the amount unused under Pure Wellness’s revolving credit facility was $200,000.

(14) As of June 30, 2022, the amount unused under RED’s revolving credit facility was $250,000.

(15) The interest rate for the term loan is 6.0% for the first five years. After five years, the interest rate is equal to the Prime Rate plus 0.5% with a floor of 6.0%.

(16) RED was not required to make any payments of principal until May 5, 2022.

(17) On March 17, 2022, in connection with the purchase and construction of marine vessels, RED entered into two closed-end non-revolving line of credit loans of $1.5 million each which convert to term loans once fully drawn. Each loan bears an interest rate of 5.0% for the first three years. After three years, the interest rate is equal to the Prime Rate plus 0.5% with a floor of 5.0%. As of June 30, 2022, the amount unused under RED’s non-revolving line of credit loans were $1.5 million and $1.5 million, respectively.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We are required to maintain certain financial ratios under various debt and related agreements. If we violate covenants in any debt or related agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may result in the inability of our portfolio companies to borrow unused amounts under their respective lines of credit. As of June 30, 2022, our Credit Agreement was in compliance with all covenants or other requirements and debt held by our subsidiaries was in compliance with all covenants or other requirements.

7. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses were comprised of the following (in thousands):


	June 30, 2022		December 31, 2021

Accounts payable	$	14,035	$	11,682
Accrued payroll expense	17,810		23,648
Accrued vacation expense	2,977		3,427
Accrued interest	265		259
Other accrued expenses	3,080		881

Total accounts payable and accrued expenses	$	38,167	$	39,897

8. Fair Value Measurements

Fair Value Hierarchy—Our assets and liabilities measured at fair value, either on a recurring or a non-recurring basis, are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below:

•Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):


	Quoted Market Prices (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
June 30, 2022
Assets










Restricted Investment:
Ashford Trust common stock	$	77	(1)	$	—		$	—		$	77
Braemar common stock	257		(1)	—			—			257
Total	$	334		$	—		$	—		$	334
Liabilities




Contingent consideration	$	—		$	—		$	(1,670)	(2)	$	(1,670)
Subsidiary compensation plan	—			(27)		(1)	—			(27)
Deferred compensation plan	(2,838)			—			—			(2,838)


Total	$	(2,838)		$	(27)		$	(1,670)		$	(4,535)
Net	$	(2,504)		$	(27)		$	(1,670)		$	(4,201)

__________________

(1) The restricted investment includes shares of common stock of Ashford Trust and Braemar purchased by Remington on the open market and held for the purpose of providing compensation to certain employees. The compensation agreement liability is based on ratably accrued vested shares through June 30, 2022, which are exercisable upon vesting. The liability is the total accrued vested shares multiplied by the fair value of the quoted market price of the underlying investment.

(2) Represents the fair value of the contingent consideration liability related to the achievement of certain performance targets associated with the acquisition of Chesapeake, which is reported within long-term “other liabilities” in our condensed consolidated balance sheets. See notes 1 and 4.


	Quoted Market Prices (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
December 31, 2021
Assets










Restricted Investment:
Ashford Trust common stock	$	150	(1)	$	—		$	—	$	150
Braemar common stock	426		(1)	—			—		426
Total	$	576		$	—		$	—	$	576
Liabilities





Subsidiary compensation plan	$	—		$	(164)	(1)	$	—	$	(164)
Deferred compensation plan	(3,326)			—			—		(3,326)


Total	$	(3,326)		$	(164)		$	—	$	(3,490)
Net	$	(2,750)		$	(164)		$	—	$	(2,914)

__________________

(1) The restricted investment includes shares of common stock of Ashford Trust and Braemar purchased by Remington on the open market and held for the purpose of providing compensation to certain employees. The compensation agreement liability is based on ratably accrued vested shares through December 31, 2021, which are exercisable upon vesting. The liability is the total accrued vested shares multiplied by the fair value of the quoted market price of the underlying investment.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table presents our rollforward of our Level 3 contingent consideration liability (in thousands):


	Contingent Consideration Liability
Balance at December 31, 2021	$	—
Acquisition of Chesapeake (1)	(1,670)
Gains (losses) included in earnings	—
Dispositions and settlements	—
Transfers into/out of Level 3	—
Balance at June 30, 2022	$	(1,670)

__________________

(1) The Company measures contingent consideration liabilities at fair value at each reporting period using significant unobservable inputs classified within Level 3 of the fair value hierarchy. The fair value of the contingent consideration liability is based on the present value of the expected future payments to be made to the sellers of Chesapeake in accordance with the provisions outlined in the respective purchase agreements, which is a Level 3 fair value measurement. In determining fair value, the Company estimates Chesapeake’s future performance using a Monte Carlo simulation model. The key assumptions in applying the Monte Carlo simulation model are a) a discount rate, with a range of 35.18% to 35.27%; b) a forward looking risk-free rate, with a range of 2.14% to 3.17%; and c) a volatility rate of 52.64%.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Effect of Fair Value Measured Assets and Liabilities on Our Condensed Consolidated Statements of Operations

The following table summarizes the effect of fair value measured assets and liabilities on our condensed consolidated statements of operations (in thousands):


	Gain (Loss) Recognized
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Assets






Unrealized gain (loss) on investment: (1)
Ashford Trust common stock	$	(54)	$	—	$	56	$	—
Braemar common stock	(113)		—		(56)		—
Realized gain (loss) on investment: (2)
Ashford Trust common stock	—		(156)		(94)		(331)
Braemar common stock	—		(23)		23		(42)




Total	$	(167)	$	(179)	$	(71)	$	(373)
Liabilities






Contingent consideration (3)	$	—	$	—	$	—	$	(23)
Subsidiary compensation plan (4)	(21)		(150)		(68)		(273)
Deferred compensation plan (4)	600		(2,743)		489		(2,801)
Total	$	579	$	(2,893)	$	421	$	(3,097)
Net	$	412	$	(3,072)	$	350	$	(3,470)

__________________

(1) Represents the unrealized gain (loss) on shares of common stock of Ashford Trust and Braemar purchased by Remington on the open market and held for the purpose of providing compensation to certain employees. Reported as a component of “other income (expense)” in our condensed consolidated statements of operations.

(2) Represents the realized gain (loss) on shares of common stock of Ashford Trust and Braemar purchased by Remington on the open market and held for the purpose of providing compensation to certain employees.

(3) Represents the changes in fair value of the contingent consideration liabilities related to the level of achievement of certain performance targets associated with the acquisition of BAV Services Inc. Changes in the fair value of contingent consideration are reported within “other” operating expense in our condensed consolidated statements of operations.

(4) Reported as a component of “salaries and benefits” in our condensed consolidated statements of operations.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Restricted Investment

The historical cost and approximate fair values, together with gross unrealized gains and losses, of securities restricted for use in our subsidiary compensation plan are as follows (in thousands):


	Historical Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:
June 30, 2022
Equity securities (1)	$	825	$	—	$	(491)	$	334

__________________

(1) Distributions of $359,000 of available-for-sale securities occurred in the six months ended June 30, 2022.


	Historical Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:
December 31, 2021
Equity securities (1)	$	1,068	$	—	$	(492)	$	576

__________________

(1) Distributions of $855,000 of available-for-sale securities occurred as of December 31, 2021.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

9. Summary of Fair Value of Financial Instruments

Certain of our financial instruments are not measured at fair value on a recurring basis. The estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled. The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):


	June 30, 2022				December 31, 2021
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:
Restricted investment	$	334	$	334	$	576	$	576
Financial liabilities measured at fair value:

Deferred compensation plan	$	2,838	$	2,838	$	3,326	$	3,326

Contingent consideration	1,670		1,670		—		—
Financial assets not measured at fair value:
Cash and cash equivalents	$	48,422	$	48,422	$	37,571	$	37,571
Restricted cash	38,238		38,238		34,878		34,878
Accounts receivable, net	15,035		15,035		7,622		7,622
Notes receivable	1,500		1,500		2,880		2,880
Due from affiliates	397		397		165		165
Due from Ashford Trust	5,033		5,033		2,575		2,575
Due from Braemar	3,810		3,810		1,144		1,144
Investments in unconsolidated entities	4,088		4,088		3,581		3,581
Financial liabilities not measured at fair value:
Accounts payable and accrued expenses	$	38,167	$	38,167	$	39,897	$	39,897
Dividends payable	26,593		26,593		34,574		34,574
Due to affiliates	103		103		—		—


Other liabilities	29,275		29,275		25,899		25,899
Notes payable	98,960		94,011 to 103,907		59,622		56,641 to 62,603

Restricted investment. These financial assets are carried at fair value based on quoted market prices of the underlying investments. This is considered a Level 1 valuation technique.

Deferred compensation plan. The liability resulting from the deferred compensation plan is carried at fair value based on the closing prices of the underlying investments. This is considered a Level 1 valuation technique.

Cash, cash equivalents and restricted cash. These financial assets bear interest at market rates and have maturities of less than 90 days. The carrying values approximate fair value due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

Accounts receivable, net, due from affiliates, due from Ashford Trust, due from Braemar, notes receivable, accounts payable and accrued expenses, dividends payable, due to affiliates and other liabilities. The carrying values of these financial instruments approximate their fair values due primarily to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

Contingent consideration. The liability associated with the Company’s acquisition of Chesapeake was carried at fair value based on the terms of the acquisition agreements and any changes to fair value are recorded in “other” operating expenses in our condensed consolidated statements of operations. This is considered a Level 3 valuation technique. See note 8.

Investments in unconsolidated entities. The carrying value of the assets resulting from investment in unconsolidated entities approximates fair value based on recent observable transactions. This is considered a Level 2 valuation technique. See note 2.

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Notes payable. The fair value of notes payable is based on credit spreads on observable transactions of a similar nature and is considered a Level 2 valuation technique.

10. Commitments and Contingencies

Purchase Commitment—As of June 30, 2022, we had approximately $11.4 million of remaining purchase commitments related to our Ashford Trust ERFP Agreement which, under the Extension Agreement with Ashford Trust, must be fulfilled by December 31, 2022. See note 15 for further discussion of our ERFP Agreement with Ashford Trust.

Litigation—On December 20, 2016, a class action lawsuit was filed against one of the Company’s subsidiaries in The Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws. The court has entered an order granting class certification with respect to: (i) a statewide class of non-exempt employees who were allegedly deprived of rest breaks as a result of the subsidiary’s previous written policy requiring employees to stay on premises during rest breaks; and (ii) a derivative class of non-exempt former employees who were not paid for allegedly missed breaks upon separation from employment. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time. As of June 30, 2022, no amounts have been accrued.

We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters, matters relating to compliance with applicable law (for example, the ADA and similar state laws), and other general matters. The likelihood of loss for these legal proceedings is based on definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Legal costs associated with loss contingencies are expensed as incurred. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations, or cash flow. However, our assessment may change depending upon the development of these legal proceedings, and final results of these legal proceedings cannot be predicted with certainty. If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.

11. Equity (Deficit)

Noncontrolling Interests in Consolidated Entities—See note 2 for details regarding ownership interests, carrying values and allocations related to noncontrolling interests in our consolidated subsidiaries.

The following table summarizes the (income) loss attributable to noncontrolling interests for each of our consolidated entities (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
(Income) loss attributable to noncontrolling interests:

OpenKey	$	228	$	208	$	454	$	411
RED	—		59		—		(38)
Pure Wellness	70		(33)		104		(44)




Total net (income) loss attributable to noncontrolling interests	$	298	$	234	$	558	$	329

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

12. Mezzanine Equity

Redeemable Noncontrolling Interests—Redeemable noncontrolling interests are included in the mezzanine section of our condensed consolidated balance sheets as the ownership interests are redeemable for cash or registered shares outside of the Company’s control. See note 2 for tables summarizing the redeemable noncontrolling ownership interests and carrying values.

The following table summarizes the net (income) loss attributable to our redeemable noncontrolling interests (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net (income) loss attributable to redeemable noncontrolling interests:
Ashford Holdings	$	(141)	$	19	$	(132)	$	43


OpenKey	—		—		—		152




Total net (income) loss attributable to redeemable noncontrolling interests	$	(141)	$	19	$	(132)	$	195

Series CHP Units—In connection with the acquisition of Chesapeake, Ashford Holdings issued 378,000 Series CHP Units to the sellers of Chesapeake. The Series CHP Units represent a preferred membership interest in Ashford Holdings having a priority in payment of cash dividends over the common unit holders of Ashford Holdings and are recorded as a redeemable noncontrolling interest in the mezzanine section of our condensed consolidated balance sheets. Each Series CHP Unit (i) has a liquidation value of $25 plus all unpaid accrued and accumulated distributions thereon; (ii) is entitled to cumulative dividends at the rate of 7.28% per annum, payable quarterly in arrears; (iii) participates in any dividend or distribution paid on all outstanding common units of Ashford Holdings in addition to the preferred dividends; (iv) is convertible, along with the aggregate accrued or accumulated and unpaid distributions thereon, into common units of Ashford Holdings at the option of the holder or the issuer, which common units of Ashford Holdings will then be redeemable by the holder thereof into common stock of the Company on a 1:1 ratio or cash, at the Company’s discretion; and (v) provides for customary anti-dilution protections. The number of common units of Ashford Holdings to be received upon conversion of Series of CHP Units, along with the aggregate accrued or accumulated and unpaid distributions thereon, is determined by: (i) multiplying the number of Series CHP Units to be converted by the liquidation value thereof; and then (ii) dividing the result by the preferred conversion price, which is $117.50 per unit. In the event the Company fails to pay the required dividends on the Series CHP Units for two consecutive quarterly periods (a “Preferred Unit Breach”), then until such arrearage is paid in cash in full, the dividend rate on the Series CHP Units will increase to 10.00% per annum until no Preferred Unit Breach exists. Except with respect to certain protective provisions, no holder of Series CHP Units will have voting rights in its capacity as such. As long as any Series CHP Units are outstanding, the Company is prohibited from taking specified actions without the consent of at least 50% of the holders of Series CHP Units, including (i) modifying the terms, rights, preferences, privileges or voting powers of the Series CHP Units or (ii) altering the rights, preferences or privileges of any Units of Ashford Holdings so as to adversely affect the Series CHP Units.

For the three and six months ended June 30, 2022 the Company declared a preferred dividend to the holders of the Series CHP Units totaling $145,000, or $0.3842 per share, which was paid on July 15, 2022 and is recorded as net (income) loss attributable to redeemable noncontrolling interests for Ashford Holdings in the table above.

Convertible Preferred Stock—Each share of Series D Convertible Preferred Stock: (i) has a liquidation value of $25 per share; (ii) accrues cumulative dividends at the rate of: (a) 6.59% per annum until November 6, 2020; (b) 6.99% per annum from November 6, 2020 until November 6, 2021; and (c) 7.28% per annum thereafter; (iii) participates in any dividend or distribution on the common stock in addition to the preferred dividends; (iv) is convertible into voting common stock at $117.50 per share; and (v) provides for customary anti-dilution protections. In the event the Company fails to pay the dividends on the Series D Convertible Preferred Stock for two consecutive quarterly periods (a “Preferred Stock Breach”), then until such arrearage is paid in cash in full: (A) the dividend rate on the Series D Convertible Preferred Stock will increase to 10.00% per annum until no Preferred Stock Breach exists; (B) no dividends on the Company’s common stock may be declared or paid, and no other distributions or redemptions may be made, on the Company’s common stock; and (C) the Board will be increased by two seats and the holders of 55% of the outstanding Series D Convertible Preferred Stock will be entitled to fill such newly created seats. The Series D Convertible Preferred Stock is held primarily by Mr. Monty J. Bennett, the Chairman of our Board and our Chief Executive Officer, Mr. Archie Bennett, Jr., who is Mr. Monty J. Bennett’s father, one of our other executive officers and several other individuals.

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

To the extent not paid on April 15, July 15, October 15 and January 15 of each calendar year in respect of the quarterly periods ending on March 31, June 30, September 30 and December 31, respectively (each such date, a “Dividend Payment Date”), all accrued dividends on any share shall accumulate and compound on the applicable Dividend Payment Date whether or not declared by the Board and whether or not funds are legally available for the payment thereof. All accrued dividends shall remain accumulated, compounding dividends until paid in cash or converted to common shares.

The Series D Convertible Preferred Stock is entitled to vote alongside our voting common stock on an as-converted basis, subject to applicable voting limitations.

So long as any shares of Series D Convertible Preferred Stock are outstanding, the Company is prohibited from taking specified actions without the consent of the holders of 55% of the outstanding Series D Convertible Preferred Stock, including: (i) modifying the terms, rights, preferences, privileges or voting powers of the Series D Convertible Preferred Stock; (ii) altering the rights, preferences or privileges of any capital stock of the Company so as to affect adversely the Series D Convertible Preferred Stock; (iii) issuing any security senior to the Series D Convertible Preferred Stock, or any shares of Series D Convertible Preferred Stock other than pursuant to the Combination Agreement dated May 31, 2019 between us, the Bennetts, Remington Holdings, L.P. and certain other parties, as amended (the “Combination Agreement”); (iv) entering into any agreement that expressly prohibits or restricts the payment of dividends on the Series D Convertible Preferred Stock or the common stock of the Company or the exercise of the Change of Control Put Option (as defined in the Combination Agreement); or (v) other than the payment of dividends on the Series D Convertible Preferred Stock or payments to purchase any of the Series D Convertible Preferred Stock, transferring all or a substantial portion of the Company’s or its subsidiaries’ cash balances or other assets to a person other than the Company or its subsidiaries, other than by means of a dividend payable by the Company pro rata to the holders of the Company common stock (together with a corresponding dividend payable to the holders of the Series D Convertible Preferred Stock).

After June 30, 2026, we will have the option to purchase all or any portion of the Series D Convertible Preferred Stock, in $25.0 million increments, on a pro rata basis among all holders of the Series D Convertible Preferred Stock (subject to the ability of the holders to provide for an alternative allocation amongst themselves), at a price per share equal to: (i) $25.125; plus (ii) all accrued and unpaid dividends (provided any holder of Series D Convertible Preferred Stock shall be entitled to exercise its right to convert its shares of Series D Convertible Preferred Stock into common stock not fewer than five business days before such purchase is scheduled to close).

Under the applicable authoritative accounting guidance, the increasing dividend rate feature of the Series D Convertible Preferred Stock resulted in a discount that was reflected in the fair value of the preferred stock, which was recorded in “Series D Convertible Preferred Stock, net of discount” on our condensed consolidated balance sheets, until the increasing dividend rate feature ended on November 6, 2021. For the three and six months ended June 30, 2021, we recorded $311,000 and $627,000, respectively, of amortization related to preferred stock discounts.

On April 10, 2022, the Board declared a cash dividend on the Company’s Series D Convertible Preferred Stock for accrued and unpaid dividends for the quarters ending June 30, 2020 and December 31, 2020 to stockholders of record as of April 11, 2022. The Company paid the dividend of approximately $17.8 million, or $0.932 per share of Series D Convertible Preferred Stock, on April 15, 2022. Dividends for the Series D Convertible Preferred Stock remain in arrears for the quarters ending June 30, 2021 and December 31, 2021. On each of April 15, 2022 and July 15, 2022, the Company paid $8.7 million of dividends previously declared by the Board with respect to the Company’s Series D Convertible Preferred Stock for the first and second quarters of 2022. As of June 30, 2022, the Company had aggregate undeclared preferred stock dividends of approximately $17.7 million, which relates to the second and fourth quarters of 2021. All dividends, declared and undeclared, are recorded as a reduction in net income (loss) attributable to common stockholders in the period incurred in our condensed consolidated statements of operations. All accrued dividends accumulate and compound until paid in cash or converted into common stock of the Company pursuant to the Certificate of Designation for the Series D Convertible Preferred Stock. Unpaid Series D Convertible Preferred Stock dividends, declared and undeclared, totaling $26.4 million and $34.6 million at June 30, 2022 and December 31, 2021, respectively, are recorded as a liability in our condensed consolidated balance sheets as “dividends payable.” See note 18.

Declared convertible preferred stock cumulative dividends for all issued and outstanding shares were as follows (in thousands, except per share amounts):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Preferred dividends - declared	$	26,519	$	—	$	35,219	$	8,353
Preferred dividends per share - declared	$	1.3870	$	—	$	1.8420	$	0.4369

Aggregate undeclared convertible preferred stock cumulative dividends (in thousands, except per share amounts):



	June 30, 2022		December 31, 2021




Aggregate preferred dividends - undeclared	$	17,748	$	34,574

Aggregate preferred dividends - undeclared per share	$	0.9282	$	1.8083

13. Equity-Based Compensation

Equity-based compensation expense is primarily recorded in “salaries and benefits expense” and REIT equity-based compensation expense is primarily recorded in “reimbursed expenses” in our condensed consolidated statements of operations. The components of equity-based compensation expense for the three and six months ended June 30, 2022 and 2021 are presented below by award type (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Equity-based compensation
Class 2 LTIP Units and stock option amortization (1)	$	32	$	543	$	386	$	1,549
Employee equity grant expense (2)	488		309		829		541
Director and other non-employee equity grants expense (3)	401		525		455		650


Total equity-based compensation	$	921	$	1,377	$	1,670	$	2,740

Other equity-based compensation
REIT equity-based compensation (4)	$	4,150	$	4,840	$	8,479	$	8,177
	$	5,071	$	6,217	$	10,149	$	10,917

________

(1) As of June 30, 2022, the Company had approximately $352,000 of total unrecognized compensation expense related to Class 2 Long-Term Incentive Partnership Units (the “Class 2 LTIP Units”) that will be recognized over a weighted average period of 2.7 years.

(2) As of June 30, 2022, the Company had approximately $3.3 million of total unrecognized compensation expense related to restricted shares and LTIP units that will be recognized over a weighted average period of 1.9 years. In March 2022, approximately 39,000 Long-Term Incentive Plan units (the “LTIP units”) with a fair value of approximately $627,000 were issued to one of our executive officers as compensation. The LTIP units have a vesting period of three years. Each LTIP unit once vested can be converted by the holder into one common limited partnership unit of Ashford Holdings which can then be redeemed for cash or, at our election, settled in our common stock.

(3) Grants of stock, restricted stock and stock units to independent directors and other non-employees are recorded at fair value based on the market price of our shares at grant date, and this amount is expensed in “general and administrative” expense.

(4) REIT equity-based compensation expense is primarily recorded in “reimbursed expenses” and is associated with equity grants of Ashford Trust’s and Braemar’s common stock and LTIP units awarded to our officers and employees.

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(unaudited)

14. Deferred Compensation Plan

We administer a non-qualified deferred compensation plan (“DCP”) for certain executive officers and other employees which give the participants various investment options, including Ashford Inc. common stock, for measurement that can be changed by the participant at any time. These modifications resulted in the DCP obligation being recorded as a liability in accordance with the applicable authoritative accounting guidance. Distributions under the DCP for our executive officers are made in cash, unless the participant has elected Ashford Inc. common stock as the investment option, in which case any such distributions would be made in Ashford Inc. common stock. Additionally, the DCP obligation is carried at fair value with changes in fair value reflected in “salaries and benefits” in our condensed consolidated statements of operations and comprehensive income (loss).

The following table summarizes the DCP activity (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Change in fair value
Unrealized gain (loss)	$	600	$	(2,743)	$	489	$	(2,801)





Distributions
Fair value (1)	$	—	$	19	$	—	$	26
Shares (1)	—		1		—		2

________

(1) Distributions made to one participant.

As of June 30, 2022 and December 31, 2021, the carrying value of the DCP liability was $2.8 million and $3.3 million, respectively.

15. Related Party Transactions

As an asset manager providing advisory services to Ashford Trust and Braemar, as well as holding an ownership interest in other businesses providing products and services to the hospitality industry, including Ashford Trust and Braemar, related party transactions are inherent in our business. Details of our related party transactions are presented below.

Ashford Trust—We are party to the Second Amended and Restated Advisory Agreement with Ashford Trust. See note 3 for a description of the Second Amended and Restated Advisory Agreement.

Premier is party to a master project management agreement with Ashford Trust OP and Ashford Trust TRS, a subsidiary of Ashford Trust OP, and certain of their affiliates to provide comprehensive and cost-effective design, development, architectural, and project management services and a related mutual exclusivity agreement with Ashford Trust and Ashford Trust OP.

Remington is party to a master hotel management agreement with Ashford Trust TRS and certain of its affiliates to provide hotel management services. Ashford Trust pays the Company a monthly hotel management fee equal to the greater of $15,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenue (the “base fee”) as well as annual incentive hotel management fees, if certain operational criteria are met, and other general and administrative expense reimbursements. Ashford Trust pays the base fee and reimburses all expenses for Remington-managed hotels on a weekly basis for the preceding week. Remington is also party to a mutual exclusivity agreement with Ashford Trust and Ashford Trust OP.

On July 1, 2020, Lismore and Ashford Trust amended and restated the Ashford Trust Agreement with an effective date of April 6, 2020 to negotiate the refinancing, modification or forbearance of the existing mortgage and mezzanine debt on Ashford Trust’s hotels (the “Ashford Trust Agreement”). The Ashford Trust Agreement terminated effective April 6, 2022. For the three and six months ended June 30, 2022, the Company recognized revenue of $0 and $2.3 million, respectively. For the three and six months ended June 30, 2021, the Company recognized revenue of $2.3 million and $5.7 million, respectively. The six month period ended June 30, 2021 includes a $1.1 million cumulative catch-up adjustment to revenue which was previously considered constrained. As of June 30, 2022 and December 31, 2021, the Company recorded $0 and $2.4 million, respectively, as deferred income. The deferred income related to the various Lismore fees described above was recognized over the 24 month term of the agreement on a straight line basis as the service was rendered, only to the extent it was probable that a significant

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(unaudited)

reversal of revenue would not occur. Constraints relating to variable consideration were resolved generally upon the closing of a transaction or financing event and the resulting change in the transaction price was adjusted on a cumulative catch-up basis in the period a transaction or financing event closed. See the table below for details of the revenue recognized by the Company and note 3 for additional discussion of the related deferred income.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes the revenues and expenses related to Ashford Trust (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
REVENUES BY TYPE
Advisory services fees:
Base advisory fees (1)	$	8,612	$	7,254	$	17,347	$	14,508






Hotel management fees:
Base management fees	6,573		4,473		11,575		7,850
Incentive management fees	1,921		1,065		2,704		1,601
Total hotel management fees revenue (2)	8,494		5,538		14,279		9,451

Design and construction fees revenue (3)	2,344		634		4,816		1,037


Other revenue

Watersports, ferry and excursion services (5)	81		—		124		—
Debt placement and related fees (6)	690		2,290		2,983		5,725

Claims management services (7)	1		14		15		30


Other services (8)	328		433		676		792
Total other revenue	1,100		2,737		3,798		6,547

Cost reimbursement revenue	61,620		36,567		119,926		62,556

Total revenues	$	82,170	$	52,730	$	160,166	$	94,099

REVENUES BY SEGMENT (9)
REIT advisory	$	12,154	$	11,204	$	25,160	$	21,758
Remington	64,358		37,807		122,487		64,180
Premier	3,874		995		7,480		1,643
INSPIRE	17		—		55		—
RED	86		—		129		—
OpenKey	30		30		64		60
Corporate and other	1,651		2,694		4,791		6,458
Total revenues	$	82,170	$	52,730	$	160,166	$	94,099

COST OF REVENUES
Cost of revenues for audio visual (4)	$	2,225	$	560	$	3,673	$	696


SUPPLEMENTAL REVENUE INFORMATION
Audio visual revenue from guests at REIT properties (4)	$	5,286	$	1,270	$	8,636	$	1,573
Watersports, ferry and excursion services revenue from guests at REIT properties (4)	52		143		64		210

________

(1) Advisory fees earned from Ashford Trust during the three and six months ended June 30, 2021, excluded $1.7 million and $3.2 million, respectively, of advisory fees that were deferred as a result of the $29.0 million annual Advisory Fee Cap. See note 3 for discussion of the advisory services revenue recognition policy.

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(unaudited)

(2) Hotel management fees revenue is reported within our Remington segment. Base management fees and incentive management fees are recognized when services have been rendered. Remington receives base management fees of 3% of gross hotel revenue for managing the hotel employees and daily operations of the hotels, subject to a specified floor (which is subject to increase annually based on increases in the consumer price index). Remington receives an incentive management fee equal to the lessor of 1% of each hotel’s annual gross revenues or the amount by which the respective hotel’s gross operating profit exceeds the hotel’s budgeted gross operating profit. See note 3 for discussion of the hotel management fees revenue recognition policy.

(3) Design and construction fees revenue primarily consists of revenue generated within our Premier segment by providing design, development, architectural, and project management services for which Premier receives fees. See note 3 for discussion of the design and construction fees revenue recognition policy.

(4) INSPIRE and RED primarily contract directly with customers to whom they provide services. INSPIRE and RED recognize the gross revenue collected from their customers by the hosting hotel or venue. Commissions retained by the hotel or venue, including Ashford Trust, for INSPIRE and RED are recognized in “cost of revenues for audio visual” and “other” operating expense, respectively, in our condensed consolidated statements of operations. See note 3 for discussion of the revenue recognition policy.

(5) Watersports, ferry and excursion services revenue includes revenue that is earned by RED for providing services directly to Ashford Trust rather than contracting with third-party customers.

(6) Debt placement and related fees are earned by Lismore for providing debt placement, modification, forbearance and refinancing services.

(7) Claims management services include revenue earned from providing insurance claim assessment and administration services.

(8) Other services revenue is primarily associated with other hotel products and services, such as mobile key applications and hypoallergenic premium rooms, provided to Ashford Trust by our consolidated subsidiaries, OpenKey and Pure Wellness.

(9) See note 17 for discussion of segment reporting.

Braemar—We are also a party to an amended and restated advisory agreement with Braemar and its operating subsidiary Braemar OP.

Premier is party to a master project management agreement with Braemar OP and Braemar TRS Corporation, a wholly owned subsidiary of Braemar OP, and certain of their affiliates to provide comprehensive and cost-effective design, development, architectural, and project management services and a related mutual exclusivity agreement with Braemar and Braemar OP.

Remington is party to a master hotel management agreement with Braemar TRS Corporation and certain of its affiliates to provide hotel management services. Braemar pays the Company a monthly hotel management fee equal to the greater of $15,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenue (the “base fee”) as well as annual incentive hotel management fees, if certain operational criteria are met and other general and administrative expense reimbursements. Braemar pays the base fee and reimburses all expenses for Remington-managed hotels on a weekly basis for the preceding week. Remington is also party to a mutual exclusivity agreement with Braemar and Braemar OP.

On March 20, 2020, Lismore entered into an agreement with Braemar to negotiate the refinancing, modification or forbearance of the existing mortgage and mezzanine debt on Braemar’s hotels (the “Braemar Agreement”). The Braemar Agreement terminated effective March 20, 2021. For the three and six months ended June 30, 2021, the Company recognized revenue of $0 and $853,000, respectively, related to the Braemar Agreement.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes the revenues and expenses related to Braemar (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
REVENUES BY TYPE
Advisory services fees:
Base advisory fees	$	3,227	$	2,678	$	6,166	$	5,223



Other advisory revenue (1)	130		130		258		258
Total advisory services fees revenue	3,357		2,808		6,424		5,481

Hotel management fees:
Base management fees	795		584		1,495		915
Incentive management fees	262		142		464		221
Total hotel management fees revenue (2)	1,057		726		1,959		1,136

Design and construction fees revenue (3)	1,645		350		2,965		621


Other revenue


Watersports, ferry and excursion services (5)	691		695		1,274		1,227
Debt placement and related fees (6)	—		—		190		853

Claims management services (7)	—		2		1		3


Other services (8)	30		36		72		87
Total other revenue	721		733		1,537		2,170

Cost reimbursement revenue	12,074		6,722		23,119		11,225

Total revenues	$	18,854	$	11,339	$	36,004	$	20,633

REVENUES BY SEGMENT (9)
REIT advisory	$	7,067	$	5,545	$	13,455	$	10,059
Remington	7,131		4,000		14,193		6,639
Premier	2,320		511		4,151		873
INSPIRE	22		—		41		—
RED	695		695		1,278		1,227
OpenKey	10		9		19		19
Corporate and other	1,609		579		2,867		1,816
Total revenues	$	18,854	$	11,339	$	36,004	$	20,633

COST OF REVENUES (4)
Cost of revenues for audio visual	$	1,055	$	76	$	1,756	$	99
Other	96		111		182		196

SUPPLEMENTAL REVENUE INFORMATION
Audio visual revenues from guests at REIT properties (5)	$	2,638	$	161	$	4,309	$	213
Watersports, ferry and excursion services revenue from guests at REIT properties (4)	598		479		1,211		736

________

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(1) In connection with our Fourth Amended and Restated Braemar Advisory Agreement, a $5.0 million cash payment was made by Braemar upon approval by Braemar’s stockholders, which is recognized over the 10-year initial term.

(4) INSPIRE and RED primarily contract directly with third-party customers to whom they provide services. INSPIRE and RED recognize the gross revenue collected from their customers by the hosting hotel or venue. Commissions retained by the hotel or venue, including Braemar, for INSPIRE and RED are recognized in “cost of revenues for audio visual” and “other” operating expense, respectively, in our consolidated statements of operations. See note 3 for discussion of the revenue recognition policy.

(5) Watersports, ferry and excursion services revenue includes revenue that is earned by RED for providing services directly to Braemar rather than contracting with third-party customers.

(6) Debt placement and related fees are earned by Lismore for providing debt placement, modification, forbearance and refinancing services.

(7) Claims management services include revenue earned from providing insurance claim assessment and administration services.

(8) Other services revenue is primarily associated with other hotel products and services, such as mobile key applications and hypoallergenic premium rooms, provided to Braemar by our consolidated subsidiaries, OpenKey and Pure Wellness.

(9) See note 17 for discussion of segment reporting.

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(unaudited)

ERFP Commitments—On June 26, 2018, the Company entered into the Ashford Trust ERFP Agreement with Ashford Trust. The independent members of the board of directors of each of the Company and Ashford Trust, with the assistance of separate and independent legal counsel, engaged to negotiate the Ashford Trust ERFP Agreement on behalf of the Company and Ashford Trust, respectively. On January 15, 2019, the Company entered into the Braemar ERFP Agreement (collectively with the Ashford Trust ERFP Agreement, the “ERFP Agreements”) with Braemar. The independent members of the board of directors of each of the Company and Braemar, with the assistance of separate and independent legal counsel, engaged to negotiate the Braemar ERFP Agreement on behalf of the Company and Braemar, respectively. Under the ERFP Agreements, the Company agreed to provide $50 million (each, an “Aggregate ERFP Amount” and collectively, the “Aggregate ERFP Amounts”) to each of Ashford Trust and Braemar (collectively, the “REITs”), respectively, in connection with each such REIT’s acquisition of hotels recommended by us, with the option to increase each Aggregate ERFP Amount to up to $100 million upon mutual agreement by the parties to the respective ERFP Agreement. Under each of the ERFP Agreements, the Company paid each REIT 10% of each acquired hotel’s purchase price in exchange for furniture, fixtures and equipment (“FF&E”) at a property owned by such REIT, which were subsequently leased by us to such REIT rent-free. Each of the REITs must provide reasonable advance notice to the Company to request ERFP funds in accordance with the respective ERFP Agreement. The ERFP Agreements required that the Company acquire the related FF&E either at the time of the property acquisition or at any time generally within two years of the respective REITs’ acquisition of the hotel property. The Company recognized the related depreciation tax deduction at the time such FF&E was purchased by the Company and placed into service at the respective REIT’s hotel properties. However, the timing of the FF&E purchased and placed into service was subject to uncertainties outside of the Company’s control that could delay the realization of any tax benefit associated with the purchase of FF&E.

In the first quarter of 2021, Ashford Trust purchased FF&E from the Company at the fair market value of $82,000 upon expiration of the underlying leases of the FF&E under the Ashford Trust ERFP Agreement. The Company recorded a loss on sale of the FF&E of $107,000 which is included within “other” operating expense in our condensed consolidated statements of operations. Additionally, on January 20, 2021, Ashford Trust sold the Le Meridien hotel in Minneapolis, Minnesota. The hotel contained FF&E with a net book value of $399,000 which was owned by the Company and leased to Ashford Trust rent-free pursuant to the Ashford Trust ERFP Agreement. The Company recorded a loss on disposal of FF&E of $271,000 within “other” operating expense in our condensed consolidated statements of operations. Pursuant to the agreement, Ashford Trust provided replacement FF&E to the Company in the third quarter of 2021 equal to the fair market value of the sold FF&E with a fair market value of $128,000, which was subsequently leased back to Ashford Trust rent-free.

On April 20, 2021, the Company received written notice from Ashford Trust of Ashford Trust’s intention not to renew the Ashford Trust ERFP Agreement. As a result, the Ashford Trust ERFP Agreement terminated in accordance with its terms on June 26, 2021. The expiration of the Ashford Trust ERFP Agreement has no impact on the Extension Agreement, which continues in full force and effect in accordance with its terms. See note 10.

During the second quarter of 2021, the Company purchased $1.6 million of FF&E from Braemar. The Company set-off the purchased FF&E against a $1.6 million outstanding receivable previously incurred by Braemar. The FF&E purchased by the Company was subsequently leased back to Braemar rent-free.

In the second quarter of 2021, Braemar purchased FF&E from the Company at the fair market value of $144,000 upon expiration of the underlying leases of the FF&E under the Braemar ERFP Agreement. The Company recorded a loss on sale of the FF&E of $267,000 which is included within “other” operating expense in our condensed consolidated statements of operations.

On November 8, 2021, the Company delivered written notice to Braemar of the Company’s intention not to renew the Braemar ERFP Agreement. As a result, the Braemar ERFP Agreement terminated in accordance with its terms on January 15, 2022.

In the first quarter of 2022, Ashford Trust purchased FF&E with a net book value of $1.1 million from the Company at the fair market value of $406,000 upon expiration of the underlying leases of the FF&E under the Ashford Trust ERFP Agreement (which continue to survive following the termination of such agreement). The Company recorded a loss on sale of the FF&E of $706,000 which is included within “other” operating expense in our condensed consolidated statement of operations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Ashford Securities—On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by the Company, Ashford Trust and Braemar with respect to expenses to be reimbursed by Ashford Securities. Beginning on the effective date of the Amended and Restated Contribution Agreement, costs to fund the operations of Ashford Securities were allocated based upon an allocation percentage of 50% to the Company, 50% to Braemar and 0% to Ashford Trust. Upon reaching the earlier of $400 million in aggregate non-listed preferred equity offerings or other debt or equity offerings through Ashford Securities or June 10, 2023, there will be an amended and restated true up (the “Amended and Restated True-Up Date”) among the Company, Ashford Trust and Braemar whereby the actual expense reimbursement paid by each company will be based on the actual amount of capital raised by the Company, Ashford Trust and Braemar, respectively, through Ashford Securities. After the Amended and Restated True-Up Date, the expense reimbursements will be allocated among the Company, Ashford Trust and Braemar quarterly based on the actual capital raised through Ashford Securities. On January 27, 2022, the Company entered into a Second Amended and Restated Contribution Agreement with Ashford Trust and Braemar which provided for an additional $18 million in expenses to be reimbursed with all expenses allocated 10% to the Company, 45% to Ashford Trust, and 45% to Braemar.

As of June 30, 2022, Ashford Trust and Braemar have funded approximately $4.7 million and $4.9 million, respectively. The Company recognized $664,000 and $1.2 million of cost reimbursement revenue from Ashford Trust for the three and six months ended June 30, 2022, respectively, in our condensed consolidated statements of operations. The Company recognized $1.6 million and $2.6 million of cost reimbursement revenue from Braemar for the three and six months ended June 30, 2022, respectively, in our condensed consolidated statements of operations. The Company recognized $553,000 and $897,000 of cost reimbursement revenue from Braemar for the three and six months ended June 30, 2021, respectively, in our condensed consolidated statements of operations. Cost reimbursement revenue for the three and six months ended June 30, 2022 includes $839,000 and $1.2 million of dealer manager fees earned by Ashford Securities for the placement of Braemar’s non-listed preferred equity offerings.

Other Related Party Transactions—The Company leases office space from Remington Hotel Corporation (“RHC”), an affiliate owned by the Bennetts, at our corporate headquarters in Dallas, Texas. For the three and six months ended June 30, 2022, we recorded $838,000 and $1.7 million, respectively, in rent expense related to our corporate office lease with RHC. For the three and six months ended June 30, 2021, we recorded $838,000 and $1.7 million, respectively, in rent expense related to our corporate office lease with RHC.

Ashford Inc.’s Risk Management department collects funds from the Ashford Trust and Braemar properties and their respective management companies in an amount equal to the actuarial forecast of that year’s expected casualty claims and associated fees. These funds are deposited into restricted cash and used to pay casualty claims throughout the year as they are incurred. The claim liability related to the restricted cash balance is included in current “other liabilities” in our condensed consolidated balance sheets. See note 2.

Ashford Trust held a 15.81% and 16.65% noncontrolling interest in OpenKey as of June 30, 2022 and December 31, 2021, respectively, and Braemar held a 7.85% and 7.77% noncontrolling interest in OpenKey as of June 30, 2022 and December 31, 2021. Braemar invested $164,000 in OpenKey during the three and six months ended June 30, 2022.

The Company or its affiliates provide to the Bennetts or their permitted designees certain services, including, but not limited to, accounting, tax and administrative services pursuant to that certain Transition Cost Sharing Agreement entered into on November 6, 2019 in connection with Company’s acquisition of Remington from the Bennetts. The gross amount of expenses and reimbursements for these transition services for the three and six months ended June 30, 2022 was $96,000 and $190,000, respectively. The gross amount of expenses and reimbursements for these transition services for the three and six months ended June 30, 2021 was $94,000 and $201,000, respectively. The expenses and reimbursements for transition services are recorded on a net basis and, therefore, the reimbursed activity does not impact our condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

16. Income (Loss) Per Share

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income (loss) attributable to common stockholders – basic and diluted:
Net income (loss) attributable to the Company	$	5,482	$	(5,720)	$	6,430	$	(13,894)
Less: Dividends on preferred stock, declared and undeclared (1)	(9,020)		(8,633)		(18,393)		(17,239)
Less: Amortization of preferred stock discount	—		(311)		—		(627)




Undistributed net income (loss) allocated to common stockholders	(3,538)		(14,664)		(11,963)		(31,760)

Distributed and undistributed net income (loss) - basic	$	(3,538)	$	(14,664)	$	(11,963)	$	(31,760)

Effect of deferred compensation plan	(618)		—		(524)		—


Distributed and undistributed net income (loss) - diluted	$	(4,156)	$	(14,664)	$	(12,487)	$	(31,760)




Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	2,913		2,764		2,908		2,724


Effect of deferred compensation plan shares	196		—		98		—



Weighted average common shares outstanding – diluted	3,109		2,764		3,006		2,724

Income (loss) per share – basic:


Net income (loss) allocated to common stockholders per share	$	(1.21)	$	(5.31)	$	(4.11)	$	(11.66)
Income (loss) per share – diluted:


Net income (loss) allocated to common stockholders per share	$	(1.34)	$	(5.31)	$	(4.15)	$	(11.66)

________

(1) Undeclared dividends were deducted to arrive at net income (loss) attributable to common stockholders. See note 12.

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income (loss) allocated to common stockholders is not adjusted for:

Net income (loss) attributable to redeemable noncontrolling interests in Ashford Holdings	$	141	$	(19)	$	132	$	(43)
Net income (loss) attributable to redeemable noncontrolling interests in subsidiary common stock	—		—		—		(152)


Dividends on preferred stock, declared and undeclared	9,020		8,633		18,393		17,239
Amortization of preferred stock discount	—		311		—		627
Total	$	9,161	$	8,925	$	18,525	$	17,671
Weighted average diluted shares are not adjusted for:

Effect of unvested restricted shares	83		121		90		71

Effect of assumed conversion of Ashford Holdings units	73		4		40		4
Effect of incremental subsidiary shares	120		97		112		159

Effect of assumed conversion of preferred stock	4,243		4,246		4,304		4,227
Total	4,519		4,468		4,546		4,461

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

17. Segment Reporting

Our operating segments include: (a) REIT Advisory, which provides asset management and advisory services to other entities; (b) Remington, which provides hotel management services; (c) Premier, which provides comprehensive and cost-effective design, development, architectural, and project management services; (d) INSPIRE, which provides event technology and creative communications solutions services; (e) OpenKey, a hospitality focused mobile key platform that provides a universal smartphone app for keyless entry into hotel guest rooms; (f) RED, a provider of watersports activities and other travel and transportation services; (g) Marietta, which holds the leasehold rights to a single hotel and convention center property in Marietta, Georgia; and (h) Pure Wellness, which provides hypoallergenic premium rooms in the hospitality and commercial office industry. For 2022, OpenKey, RED, Marietta and Pure Wellness do not meet the aggregation criteria or the quantitative thresholds to individually qualify as reportable segments. However, we have elected to disclose RED and OpenKey as reportable segments. Accordingly, we have six reportable segments: REIT Advisory, Remington, Premier, INSPIRE, RED and OpenKey. We combine the operating results of Marietta and Pure Wellness into an “all other” seventh reportable segment, which we refer to as “Corporate and Other.” See footnote 3 for details of our segments’ material revenue generating activities.

Our chief operating decision maker’s (“CODM”) primary measure of segment profitability is net income. Our CODM currently reviews assets at the consolidated level and does not currently review segment assets to make key decisions on resource allocations. Since such asset information by segment is not reviewed by our CODM, segment assets are not available for disclosure.

Certain information concerning our segments for the three and six months ended June 30, 2022 and 2021 are presented in the following tables (in thousands). Consolidated subsidiaries are reflected as of their respective acquisition dates or as of the date we were determined to be the primary beneficiary of variable interest entities.


	Three Months Ended June 30, 2022
	REIT Advisory		Remington		Premier		INSPIRE		RED		OpenKey		Corporate and Other		Ashford Inc. Consolidated
REVENUE
Advisory services	$	11,969	$	—	$	—	$	—	$	—	$	—	$	—	$	11,969
Hotel management	—		13,420		—		—		—		—		—		13,420
Design and construction fees	—		—		4,738		—		—		—		—		4,738
Audio visual	—		—		—		35,977		—		—		—		35,977
Other	—		—		—		—		7,684		413		3,975		12,072
Cost reimbursement revenue (1)	7,252		77,379		2,347		39		9		—		2,251		89,277
Total revenues	19,221		90,799		7,085		36,016		7,693		413		6,226		167,453
EXPENSES
Depreciation and amortization	852		3,123		2,974		472		214		2		382		8,019

Other operating expenses (2)	—		5,937		3,721		28,435		5,669		1,367		12,801		57,930
Reimbursed expenses (1)	7,156		77,379		2,347		39		9		—		2,251		89,181
Total operating expenses	8,008		86,439		9,042		28,946		5,892		1,369		15,434		155,130
OPERATING INCOME (LOSS)	11,213		4,360		(1,957)		7,070		1,801		(956)		(9,208)		12,323
Equity in earnings (loss) of unconsolidated entities	—		—		—		—		—		—		67		67
Interest expense	—		—		—		(276)		(183)		—		(2,077)		(2,536)
Amortization of loan costs	—		—		—		(35)		(16)		—		(181)		(232)
Interest income	—		38		—		—		—		—		—		38

Other income (expense)	—		(168)		—		(17)		(2)		4		(76)		(259)
INCOME (LOSS) BEFORE INCOME TAXES	11,213		4,230		(1,957)		6,742		1,600		(952)		(11,475)		9,401
Income tax (expense) benefit	(2,896)		138		(907)		(2,377)		(531)		—		2,497		(4,076)
NET INCOME (LOSS)	$	8,317	$	4,368	$	(2,864)	$	4,365	$	1,069	$	(952)	$	(8,978)	$	5,325

________

(1) Our segments are reported net of eliminations upon consolidation. Approximately $3.1 million of hotel management fees revenue, cost reimbursement revenue and reimbursed expenses were eliminated in consolidation primarily for overhead expenses reimbursed to Remington including rent, payroll, office supplies, travel and accounting.

(2) Other operating expenses includes salaries and benefits, costs of revenues for design and construction, cost of revenues for audio visual, general and administrative expenses and other expenses.

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Six Months Ended June 30, 2022
	REIT Advisory		Remington		Premier		INSPIRE		RED		OpenKey		Corporate and Other		Ashford Inc. Consolidated
REVENUE
Advisory services fees	$	23,771	$	—	$	—	$	—	$	—	$	—	$	—	$	23,771
Hotel management fees	—		20,598		—		—		—		—		—		20,598
Design and construction fees	—		—		9,262		—		—		—		—		9,262

Audio visual	—		—		—		60,942		—		—		—		60,942
Other	15		181		—		—		13,729		791		8,795		23,511
Cost reimbursement revenue (1)	14,828		140,527		4,049		96		9		4		3,815		163,328
Total revenues	38,614		161,306		13,311		61,038		13,738		795		12,610		301,412
EXPENSES
Depreciation and amortization	1,705		5,819		5,936		940		326		6		912		15,644

Other operating expenses (2)	706		10,245		6,716		50,806		10,738		2,662		25,521		107,394
Reimbursed expenses (1)	14,589		140,527		4,049		96		9		4		3,815		163,089
Total operating expenses	17,000		156,591		16,701		51,842		11,073		2,672		30,248		286,127
OPERATING INCOME (LOSS)	21,614		4,715		(3,390)		9,196		2,665		(1,877)		(17,638)		15,285
Equity in earnings (loss) of unconsolidated entities	—		—		—		—		—		—		257		257
Interest expense	—		—		—		(516)		(341)		—		(2,958)		(3,815)
Amortization of loan costs	—		—		—		(70)		(32)		—		(203)		(305)
Interest income	—		107		—		—		—		—		12		119
Realized gain (loss) on investments	—		(71)		—		—		—		—		—		(71)
Other income (expense)	—		—		—		(3)		(40)		4		(73)		(112)
INCOME (LOSS) BEFORE INCOME TAXES	21,614		4,751		(3,390)		8,607		2,252		(1,873)		(20,603)		11,358
Income tax (expense) benefit	(5,347)		5		(566)		(3,371)		(872)		—		4,797		(5,354)
NET INCOME (LOSS)	$	16,267	$	4,756	$	(3,956)	$	5,236	$	1,380	$	(1,873)	$	(15,806)	$	6,004

________

(1) Our segments are reported net of eliminations upon consolidation. Approximately $6.1 million of hotel management fees revenue, cost reimbursement revenue and reimbursed expenses were eliminated in consolidation primarily for overhead expenses reimbursed to Remington including rent, payroll, office supplies, travel and accounting.

(2) Other operating expenses includes salaries and benefits, costs of revenues for design and construction, cost of revenues for audio visual, general and administrative expenses and other expenses.

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Three Months Ended June 30, 2021
	REIT Advisory		Remington		Premier		INSPIRE		RED		OpenKey		Corporate and Other		Ashford Inc. Consolidated
REVENUE
Advisory services fees	$	10,062	$	—	$	—	$	—	$	—	$	—	$	—	$	10,062
Hotel management fees	—		6,515		—		—		—		—		—		6,515
Design and construction fees	—		—		1,867		—		—		—		—		1,867
Audio visual	—		—		—		9,451		—		—		—		9,451
Other	16		—		—		—		6,861		477		4,812		12,166
Cost reimbursement revenue (1)	6,667		37,568		563		—		—		—		553		45,351
Total revenues	16,745		44,083		2,430		9,451		6,861		477		5,365		85,412
EXPENSES
Depreciation and amortization	1,084		3,034		3,057		470		93		4		517		8,259

Other operating expenses (2)	267		3,333		2,274		10,027		4,799		1,314		14,922		36,936
Reimbursed expenses (1)	6,533		37,568		563		—		—		—		553		45,217
Total operating expenses	7,884		43,935		5,894		10,497		4,892		1,318		15,992		90,412
OPERATING INCOME (LOSS)	8,861		148		(3,464)		(1,046)		1,969		(841)		(10,627)		(5,000)
Equity in earnings (loss) of unconsolidated entities	—		(154)		—		—		—		—		96		(58)
Interest expense	—		—		—		(210)		(147)		—		(931)		(1,288)
Amortization of loan costs	—		—		—		(15)		(9)		—		(21)		(45)
Interest income	—		72		—		—		—		—		—		72
Realized gain (loss) on investments	—		(179)				—		—		—		—		(179)
Other income (expense)	—		1		—		14		(163)		—		(24)		(172)
INCOME (LOSS) BEFORE INCOME TAXES	8,861		(112)		(3,464)		(1,257)		1,650		(841)		(11,507)		(6,670)
Income tax (expense) benefit	(2,179)		(400)		552		257		(534)		—		3,001		697
NET INCOME (LOSS)	$	6,682	$	(512)	$	(2,912)	$	(1,000)	$	1,116	$	(841)	$	(8,506)	$	(5,973)

________

(1) Our segments are reported net of eliminations upon consolidation. Approximately $2.1 million of hotel management fees revenue, cost reimbursement revenue and reimbursed expenses were eliminated in consolidation primarily for overhead expenses reimbursed to Remington including rent, payroll, office supplies, travel and accounting.

(2) Other operating expenses includes salaries and benefits, costs of revenues for design and construction, cost of revenues for audio visual, general and administrative expenses and other expenses

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Six Months Ended June 30, 2021
	REIT Advisory		Remington		Premier		INSPIRE		RED		OpenKey		Corporate and Other		Ashford Inc. Consolidated
REVENUE
Advisory services fees	$	19,989	$	—	$	—	$	—	$	—	$	—	$	—	$	19,989
Hotel management fees	—		10,987		—		—		—		—		—		10,987
Design and construction fees	—		—		3,409		—		—		—		—		3,409
Audio visual	—		—		—		13,062		—		—		—		13,062
Other	33		20		—		—		11,422		931		10,389		22,795
Cost reimbursement revenue (1)	11,791		63,885		965		—		—		—		897		77,538
Total revenues	31,813		74,892		4,374		13,062		11,422		931		11,286		147,780
EXPENSES
Depreciation and amortization	2,073		6,068		6,113		937		185		8		1,014		16,398

Other operating expenses (2)	619		6,622		3,953		16,845		8,345		2,561		27,790		66,735
Reimbursed expenses (1)	11,585		63,885		965		—		—		—		897		77,332
Total operating expenses	14,277		76,575		11,031		17,782		8,530		2,569		29,701		160,465
OPERATING INCOME (LOSS)	17,536		(1,683)		(6,657)		(4,720)		2,892		(1,638)		(18,415)		(12,685)
Equity in earnings (loss) of unconsolidated entities	—		(154)		—		—		—		—		(18)		(172)
Interest expense	—		—		—		(413)		(301)		—		(1,841)		(2,555)
Amortization of loan costs	—		—		—		(44)		(11)		—		(76)		(131)
Interest income	—		133		—		—		—		—		2		135
Realized gain (loss) on investments	—		(373)		—		—		—		—		—		(373)
Other income (expense)	—		1		—		(107)		(163)		(1)		(15)		(285)
INCOME (LOSS) BEFORE INCOME TAXES	17,536		(2,076)		(6,657)		(5,284)		2,417		(1,639)		(20,363)		(16,066)
Income tax (expense) benefit	(4,133)		(663)		1,320		1,077		(794)		—		4,841		1,648
NET INCOME (LOSS)	$	13,403	$	(2,739)	$	(5,337)	$	(4,207)	$	1,623	$	(1,639)	$	(15,522)	$	(14,418)

________

(1) Our segments are reported net of eliminations upon consolidation. Approximately $4.0 million of hotel management fees revenue, cost reimbursement revenue and reimbursed expenses were eliminated in consolidation primarily for overhead expenses reimbursed to Remington including rent, payroll, office supplies, travel and accounting.

(2) Other operating expenses includes salaries and benefits, costs of revenues for design and construction, cost of revenues for audio visual, general and administrative expenses and other expenses.

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

18. Subsequent Events

On April 15, 2022, the Company and Ashford Services agreed with Jeremy Welter, the Chief Operating Officer of the Company, that, effective on July 15, 2022, Mr. Welter would terminate employment with and service to the Company, Ashford Services and their affiliates. Mr. Welter was also the Chief Operating Officer of Ashford Trust and Braemar and accordingly his service as Chief Operating Officer of each of Ashford Trust and Braemar also ended on July 15, 2022. The Company has commitments related to cash compensation for the departure of Mr. Welter which include a cash termination payment of $750,000, which was paid on August 5, 2022, and severance payments totaling approximately $6.4 million, which are payable in 24 substantially equal monthly installments of approximately $267,000 beginning in August 2022.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

As used in this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the references to “we,” “us,” “our,” and the “Company” refer to Ashford Inc., a Nevada corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Advisors LLC, a Delaware limited liability company, which we refer to as “Ashford LLC” or “our operating company” Ashford Hospitality Holdings LLC, a Delaware limited liability company, which we refer to as “Ashford Holdings” Ashford Hospitality Services LLC, a Delaware limited liability company, which we refer to as “Ashford Services” Premier Project Management LLC, a Maryland limited liability company, which we refer to as “Premier Project Management,” or “Premier” and Remington Lodging & Hospitality, LLC, a Delaware limited liability company, which we refer to as “Remington.”“Braemar” refers to Braemar Hotels & Resorts Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Braemar Hospitality Limited Partnership, a Delaware limited partnership, which we refer to as “Braemar OP.” “Ashford Trust” or “AHT” refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership and Ashford Trust’s operating partnership, which we refer to as “Ashford Trust OP.”

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature:

•the impact of the ongoing COVID-19 pandemic, including the resurgence of cases relating to the spread of the Delta, Omicron or other potential variants, on our business, financial condition, liquidity and results of operations;

•the impact of numerous governmental travel restrictions and other orders related to COVID-19 on our clients’ and our business, including one or more possible recurrences of COVID-19 case surges that could cause state and local governments to reinstate travel restrictions;

•our business and investment strategy;

•our projected operating results;

•our ability to obtain future financing arrangements;

•our ability to maintain compliance with the NYSE American LLC (the “NYSE American”) continued listing standards;

•our understanding of our competition;

•market trends;

•the future success of recent acquisitions;

•the future demand for our services as our clients in the hospitality industry, including Ashford Trust and Braemar, recover from the COVID-19 pandemic;

•projected capital expenditures; and

•the impact of technology on our operations and business.

Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, taking into account all information currently available to us, our actual results and performance could differ materially from those set forth in our forward-looking statements. Factors that could have a material adverse effect on our forward-looking statements include, but are not limited to:

•the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 25, 2022, including under the sections captioned “Item 1. Business,” “Item 1A. Risk Factors,” “Item 3. Legal Proceedings,” and “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” as supplemented by our subsequent Quarterly Reports on Form 10-Q and other filings under the Exchange Act;

•adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and potential travel restrictions in regions where our clients’ hotels are located, and one or more possible recurrences of

COVID-19 case surges causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or local governments;

•extreme weather conditions may cause property damage or interrupt business;

•actions by our clients’ lenders to accelerate loan balances and foreclose on our clients’ hotel properties that are security for our clients’ loans that are in default;

•uncertainty associated with the ability of the Company to remain in compliance with all covenants in our Credit Agreement and our subsidiaries to remain in compliance with the covenants of their debt and related agreements;

•general volatility of the capital markets, the general economy or the hospitality industry, whether the result of market events or otherwise, and the market price of our common stock;

•availability, terms and deployment of capital;

•changes in our industry and the market in which we operate, interest rates or the general economy;

•the degree and nature of our competition;

•actual and potential conflicts of interest with or between Ashford Trust and Braemar, our executive officers and our non-independent directors;

•availability of qualified personnel;

•changes in governmental regulations, accounting rules, tax rates and similar matters;

•our ability to implement effective internal controls to address the material weakness identified in this report;

•legislative and regulatory changes;

•the possibility that we may not realize any or all of the anticipated benefits from transactions to acquire businesses, including the 2018 acquisition of Premier, the 2019 acquisition of Remington and the 2022 acquisition of Chesapeake, and the possibility we will be required to record additional goodwill impairments relating to Remington as a result of the impact of the COVID-19 pandemic on our clients’, and our business;

•the possibility that the lodging industry may not fully recover to pre-pandemic levels as a result of the acceptance of “work-from-home” business practices and potentially lasting increased adoption of remote meeting and collaboration technologies;

•the possibility that we may not realize any or all of the anticipated benefits from our business initiatives;

•the failure to make full dividend payments on our Series D Convertible Preferred Stock in consecutive quarters, which would result in a higher interest rate and the right of Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. to each have the right to appoint one member to the Board until such arrearages are paid in full;

•disruptions relating to the acquisition or integration of Premier, Remington or any other business we invest in or acquire, which may harm relationships with customers, employees and regulators; and

•unexpected costs of further goodwill impairments relating to the acquisition or integration of Remington or any other business we invest in or acquire.

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements under “Item 1A. Risk Factors” of our Annual Report and this Quarterly Report, the discussion in this Management’s Discussion and Analysis of Financial Conditions and Results of Operations, and elsewhere which could cause our actual results and performance to differ significantly from those contained in our forward-looking statements. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 outbreak and the numerous government travel restrictions imposed in response thereto. The extent to which COVID-19 impacts us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Form 10-Q. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Form 10-Q to conform these statements to actual results and performance, except as may be required by applicable law.

Overview

Ashford Inc. is a Nevada corporation that provides products and services primarily to clients in the hospitality industry, including Ashford Trust and Braemar. We became a public company in November 2014, and our common stock is listed on the NYSE American. As of August 10, 2022, Mr. Monty J. Bennett, Ashford Inc.’s Chairman and Chief Executive Officer and the Chairman of Ashford Trust and Braemar, and his father, Mr. Archie Bennett, Jr., Chairman Emeritus of Ashford Trust, owned approximately 610,246 shares of our common stock, which represented an approximately 19.6% ownership interest in Ashford Inc., and owned 18,758,600 shares of our Series D Convertible Preferred Stock (the “Series D Convertible Preferred Stock”), which is convertible at a price of $117.50 per share into an additional approximate 3,991,191 shares of Ashford Inc. common stock, which if exercised as of August 10, 2022 would have increased Mr. Monty J. Bennett and Mr. Archie Bennett, Jr.’s ownership interest in Ashford Inc. to approximately 64.7%.

We provide: (i) advisory services; (ii) asset management services; (iii) hotel management services; (iv) design and construction and architectural services; (v) event technology and creative communications solutions; (vi) mobile room keys and keyless entry solutions; (vii) watersports activities and other travel, concierge and transportation services; (viii) hypoallergenic premium room products and services; (ix) debt placement and related services; (x) real estate advisory and brokerage services; and (xi) wholesaler, dealer manager and other broker-dealer services. We conduct these activities and own substantially all of our assets primarily through Ashford LLC, Ashford Services and their respective subsidiaries.

We seek to grow through the implementation of two primary strategies: (i) increasing our assets under management; and (ii) pursuing third-party business to grow our other products and services businesses.

We are currently the advisor for Ashford Trust and Braemar. In our capacity as the advisor to Ashford Trust and Braemar, we are responsible for implementing the investment strategies and managing the day-to-day operations of Ashford Trust and Braemar and their respective hotels from an ownership perspective, in each case subject to the respective advisory agreements and the supervision and oversight of the respective boards of directors of Ashford Trust and Braemar. Ashford Trust is focused on investing in full-service hotels in the upscale and upper upscale segments in the United States that have RevPAR generally less than twice the U.S. national average. Braemar invests primarily in luxury hotels and resorts with RevPAR of at least twice the U.S. national average. Each of Ashford Trust and Braemar is a REIT as defined in the Internal Revenue Code, and the common stock of each of Ashford Trust and Braemar is traded on the NYSE.

We provide the personnel and services that we believe are necessary for each of Ashford Trust and Braemar to conduct their respective businesses. We may also perform similar functions for new or additional platforms. In our capacity as an advisor, we are not responsible for managing the day-to-day operations of the individual hotel properties owned by either Ashford Trust or Braemar, which duties are, and will continue to be, the responsibility of the hotel management companies that operate the hotel properties owned by Ashford Trust and Braemar. Additionally, Remington, a subsidiary of the Company, operates certain hotel properties owned by Ashford Trust, Braemar and third-parties.

Recent Developments

As of June 30, 2022, the Company had aggregate undeclared preferred stock dividends of approximately $17.7 million, which relates to the second and fourth quarters of 2021. On April 10, 2022, the Board declared a cash dividend on the Company’s Series D Convertible Preferred Stock for accrued and unpaid dividends for the quarters ending June 30, 2020 and December 31, 2020 to stockholders of record as of April 11, 2022. The Company paid the dividend of approximately $17.8 million, or $0.932 per share of Series D Convertible Preferred Stock, on April 15, 2022. Dividends for the Series D Convertible Preferred Stock remain in arrears for the quarters ending June 30, 2021 and December 31, 2021. On each of April 15, 2022 and July 15, 2022, the Company paid $8.7 million of dividends previously declared by the Board with respect to the Company’s Series D Convertible Preferred Stock for the first and second quarters of 2022.

On April 1, 2022, the Company entered into the Credit Agreement with Mustang Lodging Funding LLC, as administrative agent, and the lenders from time to time party thereto. The Credit Agreement evidences the Credit Facility in the amount of $100.0 million, including a $50.0 million term loan funded upon closing and commitments to fund up to an additional $50.0 million of term loans in up to five separate borrowings within 24 months after the Closing Date, subject to certain conditions. The Company used a portion of the proceeds from the Credit Agreement to pay off the remaining $26.6 million balance of the Company’s existing Term Loan Agreement and pay dividends to the holders of the Series D Convertible Preferred Stock as stated above. On April 18, 2022, the Company drew an additional $20.0 million on the Credit Facility.

discount is due to the Company’s ability to convert the Series CHP Units to common units of Ashford Holdings at the preferred conversion price of $117.50. Common units of Ashford Holdings are exchangeable into common stock of the Company on a 1:1 ratio. The sellers also have the ability to earn up to $10.25 million of additional consideration based on the base management fee contribution from the acquired business for the trailing 12 month periods ending March 2024 and March 2025, respectively, for a total potential consideration of $18.1 million, subject to certain adjustments. The first $6.3 million of such additional consideration is payable in cash and any amounts payable in excess of such $6.3 million may be satisfied by the issuance of shares of common stock of the Company, common units of Ashford Holdings or additional Series CHP Units, as determined by the Company in its sole discretion. Each Series CHP Unit (i) has a liquidation value of $25 plus all unpaid accrued and accumulated distributions thereon; (ii) is entitled to cumulative dividends at the rate of 7.28% per annum, payable quarterly in arrears; (iii) participates in any dividend or distribution paid on all outstanding common units of Ashford Holdings in addition to the preferred dividends; (iv) is convertible, along with the aggregate accrued or accumulated and unpaid distributions thereon, into common units of Ashford Holdings at the option of the holder or the issuer, which common units of Ashford Holdings will then be redeemable by the holder thereof into common stock of the Company on a 1:1 ratio or cash, at the Company’s discretion; and (v) provides for customary anti-dilution protections. The number of common units of Ashford Holdings to be received upon conversion of Series of CHP Units, along with the aggregate accrued or accumulated and unpaid distributions thereon, is determined by: (i) multiplying the number of Series CHP Units to be converted by the liquidation value thereof; and then (ii) dividing the result by the preferred conversion price, which is $117.50 per unit. In the event the Company fails to pay the required dividends on the Series CHP Units for two consecutive quarterly periods (a “Preferred Unit Breach”), then until such arrearage is paid in cash in full, the dividend rate on the Series CHP Units will increase to 10.00% per annum until no Preferred Unit Breach exists. Except with respect to certain protective provisions, no holder of Series CHP Units will have voting rights in its capacity as such. As long as any Series CHP Units are outstanding, the Company is prohibited from taking specified actions without the consent of at least 50% of the holders of Series CHP Units, including (i) modifying the terms, rights, preferences, privileges or voting powers of the Series CHP Units or (ii) altering the rights, preferences or privileges of any Units of Ashford Holdings so as to adversely affect the Series CHP Units.

Discussion of Presentation

The discussion below relates to the financial condition and results of operations of Ashford Inc. and entities which it controls. The historical financial information is not necessarily indicative of our future results of operations, financial position and cash flows.

RESULTS OF OPERATIONS

Cost reimbursement revenue and reimbursed expenses for the three and six months ended June 30, 2021, were restated as previously disclosed in the restated condensed consolidated statement of operations for the three and six months ended June 30, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. See discussion in note 2 to our condensed consolidated financial statements.

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

The following table summarizes the changes in key line items from our condensed consolidated statements of operations for the three months ended June 30, 2022 and 2021 (in thousands):


	Three Months Ended June 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
REVENUE
Advisory services fees	$	11,969	$	10,062	$	1,907	19.0	%
Hotel management fees	13,420		6,515		6,905		106.0	%
Design and construction fees	4,738		1,867		2,871		153.8	%
Audio visual	35,977		9,451		26,526		280.7	%
Other	12,072		12,166		(94)		(0.8)	%
Cost reimbursement revenue	89,277		45,351		43,926		96.9	%
Total revenues	167,453		85,412		82,041		96.1	%
EXPENSES
Salaries and benefits	16,603		17,392		789		4.5	%
Cost of revenues for design and construction	2,206		1,022		(1,184)		(115.9)	%
Cost of revenues for audio visual	23,279		6,872		(16,407)		(238.8)	%
Depreciation and amortization	8,019		8,259		240		2.9	%
General and administrative	10,173		6,591		(3,582)		(54.3)	%

Other	5,669		5,059		(610)		(12.1)	%
Reimbursed expenses	89,181		45,217		(43,964)		(97.2)	%
Total expenses	155,130		90,412		(64,718)		(71.6)	%
OPERATING INCOME (LOSS)	12,323		(5,000)		17,323		346.5	%


Equity in earnings (loss) of unconsolidated entities	67		(58)		125		215.5	%
Interest expense	(2,536)		(1,288)		(1,248)		(96.9)	%
Amortization of loan costs	(232)		(45)		(187)		(415.6)	%
Interest income	38		72		(34)		(47.2)	%


Realized gain (loss) on investments	—		(179)		179		100.0	%

Other income (expense)	(259)		(172)		(87)		(50.6)	%
INCOME (LOSS) BEFORE INCOME TAXES	9,401		(6,670)		16,071		240.9	%
Income tax (expense) benefit	(4,076)		697		(4,773)		(684.8)	%
NET INCOME (LOSS)	5,325		(5,973)		11,298		189.2	%
(Income) loss from consolidated entities attributable to noncontrolling interests	298		234		64		27.4	%
Net (income) loss attributable to redeemable noncontrolling interests	(141)		19		(160)		(842.1)	%
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	5,482		(5,720)		11,202		195.8	%
Preferred dividends, declared and undeclared	(9,020)		(8,633)		(387)		(4.5)	%
Amortization of preferred stock discount	—		(311)		311		100.0	%
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(3,538)	$	(14,664)	$	11,126	75.9	%

Net Income (Loss) Attributable to Common Stockholders. Net income (loss) attributable to common stockholders changed $11.1 million, or 75.9%, to a $3.5 million loss for the three months ended June 30, 2022 (“the 2022 quarter”) compared to the three months ended June 30, 2021 (“the 2021 quarter”) as a result of the factors discussed below.

Total Revenues. Total revenues increased $82.0 million, or 96.1%, to $167.5 million for the 2022 quarter compared to the 2021 quarter due to the following (in thousands):


	Three Months Ended June 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
Advisory services fees:
Base advisory fees (1)	$	11,839	$	9,932	$	1,907	19.2	%



Other advisory revenue (2)	130		130		—		—	%
Total advisory services fees revenue	11,969		10,062		1,907		19.0	%

Hotel management fees:
Base management fees	9,484		5,308		4,176		78.7	%
Incentive management fees	2,867		1,207		1,660		137.5	%
Other management fees	1,069		—		1,069
Total hotel management fees revenue (3)	13,420		6,515		6,905		106.0	%

Design and construction fees revenue (4)	4,738		1,867		2,871		153.8	%

Audio visual revenue (5)	35,977		9,451		26,526		280.7	%

Other revenue:


Watersports, ferry and excursion services (6)	7,684		6,861		823		12.0	%
Debt placement and related fees (7)	690		2,290		(1,600)		(69.9)	%

Claims management services (8)	1		16		(15)		(93.8)	%



Other services (9)	3,697		2,999		698		23.3	%
Total other revenue	12,072		12,166		(94)		(0.8)	%

Cost reimbursement revenue (10)	89,277		45,351		43,926		96.9	%

Total revenues	$	167,453	$	85,412	$	82,041	96.1	%

REVENUES BY SEGMENT (11)
REIT advisory	$	19,221	$	16,745	$	2,476	14.8	%
Remington	90,799		44,083		46,716		106.0	%
Premier	7,085		2,430		4,655		191.6	%
INSPIRE	36,016		9,451		26,565		281.1	%
RED	7,693		6,861		832		12.1	%
OpenKey	413		477		(64)		(13.4)	%
Corporate and other	6,226		5,365		861		16.0	%
Total revenues	$	167,453	$	85,412	$	82,041	96.1	%

________

(1)The increase in base advisory fee is primarily due to higher revenue of $1.4 million from Ashford Trust and higher revenue of $549,000 from Braemar. Advisory fees earned from Ashford Trust during the 2021 quarter excluded $1.7 million of advisory fees that were deferred as a result of the $29.0 million annual Advisory Fee Cap. See note 3 to our condensed consolidated financial statements for discussion of the advisory services revenue recognition policy.

(2) Other advisory revenue from Braemar is a result of the $5.0 million cash payment received upon stockholder approval of the Fourth Amended and Restated Braemar Advisory Agreement in June 2017. The payment is included in “deferred income” on our condensed consolidated balance sheet and is being recognized evenly over the initial ten-year term of the

agreement.

(3) The increase in hotel management fees revenue is due to higher base management fees from Ashford Trust, Braemar and third-parties of $2.1 million, $211,000 and $1.9 million, respectively, higher incentive management fees of $856,000, $120,000 and $684,000 from Ashford Trust, Braemar and third-parties, respectively and other management fees of $1.1 million from third-parties. The increase from Ashford Trust and Braemar are due to increased demand compared to the 2021 quarter as the industry recovers from COVID-19. The increase in third-party revenue is primarily due to Remington’s acquisition of Chesapeake in the 2022 quarter.

(4) The increase in design and construction fees revenue is due to higher revenue from Ashford Trust and Braemar of $1.7 million and $1.3 million, respectively, due to increased capital expenditures by our clients as the industry continues to recover from COVID-19

(5) The $26.5 million increase in audio visual revenue is due to a recovery in operations as the industry recovers from COVID-19.

(6) The $823,000 increase in watersports, ferry and excursion services revenue is due to $1.1 million in revenue from RED’s expansion in the Turks and Caicos Islands in the third quarter of 2021 partially offset by a decrease in revenue for RED’s recreational services in the U.S. Virgin Islands and Key West, Florida.

(7) The decrease in debt placement and related fee revenue is due to lower revenue of $1.6 million from Ashford Trust. Debt placement and related fees are earned by Lismore for providing debt placement, modification, forbearance and refinancing services. The decrease is due to Lismore’s agreement with Ashford Trust for providing modifications, forbearances or refinancing of Ashford Trust’s loans as a result of the financial impact from COVID-19. The 2022 quarter does not include revenue from the Ashford Trust Agreement with Lismore which expired April 6, 2022.

(8) Claims management services include revenue earned from providing insurance claim assessment and administration services to Ashford Trust and Braemar.

(9) The increase in other services revenue is primarily due to higher revenue from Marietta of $1.0 million in the 2022 quarter compared to the 2021 quarter as Marietta’s operations continue to recover from COVID-19. Other services revenue relates to other hotel services provided by our consolidated subsidiaries, OpenKey and Pure Wellness, to Ashford Trust, Braemar and other third parties and also includes Marietta.

(10) The increase in cost reimbursement revenue is primarily due to an increase in Remington’s cost reimbursement revenue of $39.8 million in the 2022 quarter due a recovery in operations in the 2022 quarter compared to the 2021 quarter and Remington’s acquisition of Chesapeake in the 2022 quarter. The increase is additionally due to an increase of $1.8 million in cost reimbursement revenue from Premier in the 2022 quarter due to a recovery in operations in the 2022 quarter compared to the 2021 quarter and an increase of $585,000 in cost reimbursement revenue in the 2022 quarter related to reimbursable advisory expenses for Ashford Trust and Braemar.

(11) See note 17 to our condensed consolidated financial statements for discussion of segment reporting.

Salaries and Benefits Expense. Salaries and benefits expense decreased $789,000, or 4.5%, to $16.6 million for the 2022 quarter compared to the 2021 quarter. The change in salaries and benefits expense consisted of the following (in thousands):


	Three Months Ended June 30,
	2022		2021		$ Change
Salaries and benefits:
Salary expense (1)	$	10,562	$	9,118	$	1,444
Bonus expense	3,502		3,560		(58)
Benefits related expenses (2)	2,623		1,120		1,503
Total salary, bonus, and benefits related expenses	16,687		13,798		2,889
Non-cash equity-based compensation:
Stock option grants (3)	32		543		(511)
Employee equity grant expense	484		308		176


Total equity-based compensation	516		851		(335)
Non-cash (gain) loss in deferred compensation plan (4)	(600)		2,743		(3,343)
Total salaries and benefits	$	16,603	$	17,392	$	(789)

________

(1)The increase in salary expense is primarily due to an increase in corporate employees at both the Company’s corporate office and our subsidiaries’ corporate offices compared to the 2021 quarter as the industry continues to recover from COVID-19. The increase is additionally due to an increase in RED’s corporate employees compared to 2021 as RED began operating in Turks and Caicos in the third quarter of 2021.

(2)The increase in benefits related expenses is primarily due to the reinstatement of the Company’s 401(k) contribution to employees at the start of the 2022 fiscal year and due to an increase in corporate employees at both the Company’s corporate office and our subsidiaries’ corporate offices compared to the 2021 quarter.

(3)The decrease in stock option grant related expense in the 2022 quarter primarily relates to the Company not issuing stock option grants beginning in 2020 (when the Company began to issue restricted stock in lieu of stock options under its equity incentive program).

(4) The DCP obligation is recorded as a liability at fair value with changes in fair value reflected in earnings. The gain in the 2022 quarter and the loss in the 2021 quarter are primarily attributable to decreases and increases in the fair value of the DCP obligation, respectively. See note 14 to our condensed consolidated financial statements.

Cost of Revenues for Design and Construction. Cost of revenues for design and construction increased $1.2 million, or 115.9%, to $2.2 million during the 2022 quarter compared to $1.0 million for the 2021 quarter due to increased capital expenditures by our clients as the industry recovers from COVID-19.

Cost of Revenues for Audio Visual. Cost of revenues for audio visual increased $16.4 million, or 238.8%, to $23.3 million during the 2022 quarter compared to $6.9 million for the 2021 quarter, primarily due to an increase in operations as the industry recovers from COVID-19.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased $240,000, or 2.9%, to $8.0 million for the 2022 quarter compared to the 2021 quarter, primarily due to a decrease in FF&E related to the respective ERFP agreements with Ashford Trust and Braemar compared to the 2021 quarter. Depreciation and amortization expense for the 2022 quarter and the 2021 quarter excludes depreciation expense related to audio visual equipment of $1.2 million and $1.2 million, respectively, which is included in “cost of revenues for audio visual” and also excludes depreciation expense for the 2022 quarter and the 2021 quarter related to marine vessels in the amount of $280,000 and $247,000, respectively, which are included in “other” operating expense.

General and Administrative Expense. General and administrative expenses increased $3.6 million, or 54.3%, to $10.2 million for the 2022 quarter compared to the 2021 quarter. The change in general and administrative expense consisted of the following (in thousands):


	Three Months Ended June 30,
	2022		2021		$ Change
Professional fees (1)	$	3,923	$	2,234	$	1,689
Office expense	2,643		2,028		615
Public company costs	131		246		(115)
Director costs	751		827		(76)
Travel and other expense (2)	2,506		1,211		1,295
Non-capitalizable - software costs	219		45		174
Total general and administrative	$	10,173	$	6,591	$	3,582

________

(1) The increase includes increased corporate legal and accounting fees associated with Remington’s acquisition of Chesapeake in the 2022 quarter.

(2) The increase in travel and other expense includes increases in the Company’s business travel in the 2022 quarter as the Company’s subsidiaries’ operations accelerated compared to the 2021 quarter. The increase is also due to an increase in advertising expense at INSPIRE associated with their strategic rebranding from JSAV to INSPIRE.

Other. Other operating expense increased $610,000, or 12.1%, to $5.7 million for the 2022 quarter compared to the 2021 quarter. The increase was primarily caused by operating expenses associated with RED and Marietta as their operations increased due to their respective recoveries from COVID-19’s impact on their operations. Other operating expense also includes cost of goods sold, royalties and operating expenses associated with OpenKey and Pure Wellness.

Reimbursed Expenses. Reimbursed expenses increased $44.0 million to $89.2 million during the 2022 quarter compared to $45.2 million for the 2021 quarter primarily due to increased hotel management expenses incurred by Remington due to the increase in hotel room demand and Remington’s acquisition of Chesapeake during the 2022 quarter.

Reimbursed expenses recorded may vary from cost reimbursement revenue recognized in the quarter due to timing differences between the costs we incur for centralized software programs and the related reimbursements we receive from Ashford Trust and Braemar. Over the long term, these timing differences are not designed to impact our economics, either positively or negatively. The timing differences consisted of the following (in thousands):


	Three Months Ended June 30,
	2022		2021		$ Change
Cost reimbursement revenue	$	89,277	$	45,351	$	43,926
Reimbursed expenses	89,181		45,217		43,964
Net total	$	96	$	134	$	(38)

Equity in Earnings (Loss) of Unconsolidated Entities. Equity in earnings (loss) of unconsolidated entities changed $125,000 for the 2022 quarter. Equity in earnings (loss) of unconsolidated entities primarily represents earnings (loss) in our equity method investment in REA Holdings. See note 2 to our condensed consolidated financial statements.

Interest Expense. Interest expense was $2.5 million and $1.3 million for the 2022 quarter and the 2021 quarter, respectively. The increase is primarily due to the Company’s Credit Facility entered into in the 2022 quarter. Interest expense relates to our Credit Facility and notes payable, lines of credit and finance leases held by our consolidated subsidiaries. See note 6 to our condensed consolidated financial statements.

Amortization of Loan Costs. Amortization of loan costs was $232,000 and $45,000 for the 2022 quarter and the 2021 quarter, respectively. The increase is primarily due to the Company’s Credit Facility entered into in the 2022 quarter. Amortization of loan costs relates to our Credit Facility and notes payable held by our consolidated subsidiaries. See note 6 to our condensed consolidated financial statements.

Interest Income. Interest income was $38,000 and $72,000 for the 2022 quarter and the 2021 quarter, respectively.

Realized Gain (Loss) on Investments. Realized loss on investments was $0 and $179,000 for the 2022 quarter and the 2021 quarter, respectively. The realized loss on investments for the 2021 quarter primarily relates to realized losses on shares of common stock of Ashford Trust and Braemar purchased by Remington on the open market and held for the purpose of providing compensation to certain employees. See note 7 to our condensed consolidated financial statements.

Other Income (Expense). Other income (expense) was $259,000 of expense in the 2022 quarter and $172,000 of expense in the 2021 quarter.

Income Tax (Expense) Benefit. Income tax (expense) benefit changed by $4.8 million, from a benefit of $697,000 in the 2021 quarter to an expense of $4.1 million in the 2022 quarter. Current income tax expense changed by $4.3 million, from $898,000 of expense in the 2021 quarter to $5.2 million of expense in the 2022 quarter. Deferred income tax benefit changed by $521,000 from a $1.6 million benefit in the 2021 quarter to a $1.1 million benefit in the 2022 quarter. The difference in income tax (expense) benefit is related to an increase in operations.

(Income) Loss from Consolidated Entities Attributable to Noncontrolling Interests. The noncontrolling interests in consolidated entities were allocated a loss of $298,000 in the 2022 quarter and a loss of $234,000 in the 2021 quarter. See notes 2, 11 and 15 to our condensed consolidated financial statements for more details regarding ownership interests, carrying values and allocations.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests. Redeemable noncontrolling interests were allocated income of $141,000 in the 2022 quarter and a loss of $19,000 in the 2021 quarter. The 2022 quarter includes $145,000 of preferred dividends declared to the holders of the Series CHP Units. Redeemable noncontrolling interests represents ownership interests in Ashford Holdings which include the Series CHP Units which are recorded as a redeemable noncontrolling interest in the mezzanine section of our condensed consolidated balance sheets. For a summary of ownership interests, carrying values and allocations, see notes 2 and 12 to our condensed consolidated financial statements.

Preferred Dividends, Declared and Undeclared. Preferred dividends increased $387,000, or 4.5%, to $9.0 million during the 2022 quarter compared to $8.6 million for the 2021 quarter, due to the increase in the dividend rate of the Series D Convertible Preferred Stock which occurred on November 6, 2021 and due to accumulating and compounding dividends related to undeclared preferred stock dividends. See note 12 to our condensed consolidated financial statements.

Amortization of Preferred Stock Discount. The amortization of preferred stock discount decreased $311,000, or 100.0%, to $0 during the 2022 quarter compared to $311,000 for the 2021 quarter, due to the ending of the amortization period on the dividend rate of the Series D Convertible Preferred Stock on November 6, 2021. See note 12 to our condensed consolidated financial statements.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

The following table summarizes the changes in key line items from our condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021 (in thousands):


	Six Months Ended June 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
REVENUE
Advisory services fees	$	23,771	$	19,989	$	3,782	18.9	%
Hotel management fees	20,598		10,987		9,611		87.5	%
Design and construction fees	9,262		3,409		5,853		171.7	%
Audio visual	60,942		13,062		47,880		366.6	%
Other	23,511		22,795		716		3.1	%
Cost reimbursement revenue	163,328		77,538		85,790		110.6	%
Total revenues	301,412		147,780		153,632		104.0	%
EXPENSES
Salaries and benefits	33,448		33,168		(280)		(0.8)	%
Cost of revenues for design and construction	4,116		1,780		(2,336)		(131.2)	%
Cost of revenues for audio visual	41,158		11,258		(29,900)		(265.6)	%
Depreciation and amortization	15,644		16,398		754		4.6	%
General and administrative	17,536		11,859		(5,677)		(47.9)	%

Other	11,136		8,670		(2,466)		(28.4)	%
Reimbursed expenses	163,089		77,332		(85,757)		(110.9)	%
Total expenses	286,127		160,465		(125,662)		(78.3)	%
OPERATING INCOME (LOSS)	15,285		(12,685)		27,970		220.5	%
Equity in earnings (loss) of unconsolidated entities	257		(172)		429		249.4	%


Interest expense	(3,815)		(2,555)		(1,260)		(49.3)	%
Amortization of loan costs	(305)		(131)		(174)		(132.8)	%
Interest income	119		135		(16)		(11.9)	%


Realized gain (loss) on investments	(71)		(373)		302		81.0	%

Other income (expense)	(112)		(285)		173		60.7	%
INCOME (LOSS) BEFORE INCOME TAXES	11,358		(16,066)		27,424		170.7	%
Income tax (expense) benefit	(5,354)		1,648		(7,002)		(424.9)	%
NET INCOME (LOSS)	6,004		(14,418)		20,422		141.6	%
(Income) loss from consolidated entities attributable to noncontrolling interests	558		329		229		69.6	%
Net (income) loss attributable to redeemable noncontrolling interests	(132)		195		(327)		(167.7)	%
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	6,430		(13,894)		20,324		146.3	%
Preferred dividends, declared and undeclared	(18,393)		(17,239)		(1,154)		(6.7)	%
Amortization of preferred stock discount	—		(627)		627		100.0	%
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(11,963)	$	(31,760)	$	19,797	62.3	%

Net Income (Loss) Attributable to Common Stockholders. Net loss attributable to common stockholders changed $19.8 million to a $12.0 million loss for the six months ended June 30, 2022 (“the 2022 period”) compared to the six months ended June 30, 2021 (“the 2021 period”) as a result of the factors discussed below.

Total Revenues. Total revenues increased by $153.6 million, or 104.0%, to $301.4 million for the 2022 period compared to the 2021 period due to the following (in thousands):


	Six Months Ended June 30,				Favorable (Unfavorable)
	2022		2021		$ Change		% Change
Advisory services fees:
Base advisory fees (1)	$	23,513	$	19,731	$	3,782	19.2	%



Other advisory revenue (2)	258		258		—		—	%
Total advisory services fees revenue	23,771		19,989		3,782		18.9	%

Hotel management fees:
Base management fees	15,658		9,165		6,493		70.8	%
Incentive management fees	3,871		1,822		2,049		112.5	%
Other management fees	1,069		—		1,069
Total hotel management fees revenue (3)	20,598		10,987		9,611		87.5	%

Design and construction fees revenue (4)	9,262		3,409		5,853		171.7	%

Audio visual revenue (5)	60,942		13,062		47,880		366.6	%



Other revenue:


Watersports, ferry and excursion services (6)	13,729		11,422		2,307		20.2	%
Debt placement and related fees (7)	3,173		6,578		(3,405)		(51.8)	%

Claims management services (8)	16		33		(17)		(51.5)	%



Other services (9)	6,593		4,762		1,831		38.5	%
Total other revenue	23,511		22,795		716		3.1	%

Cost reimbursement revenue (10)	163,328		77,538		85,790		110.6	%

Total revenues	$	301,412	$	147,780	$	153,632	104.0	%

REVENUES BY SEGMENT (11)
REIT advisory	$	38,614	$	31,813	$	6,801	21.4	%
Remington	161,306		74,892		86,414		115.4	%
Premier	13,311		4,374		8,937		204.3	%
INSPIRE	61,038		13,062		47,976		367.3	%
RED	13,738		11,422		2,316		20.3	%
OpenKey	795		931		(136)		(14.6)	%
Corporate and other	12,610		11,286		1,324		11.7	%
Total revenues	$	301,412	$	147,780	$	153,632	104.0	%

________

(1)The increase in base advisory fees is primarily due to higher revenue of $2.8 million from Ashford Trust and higher revenue of $943,000 from Braemar. Advisory fees earned from Ashford Trust during the 2021 period excluded $3.2 million of advisory fees that were deferred as a result of the $29.0 million annual Advisory Fee Cap. See note 3 to our condensed consolidated financial statements for discussion of the advisory services revenue recognition policy.

(3) The increase in hotel management fees revenue is due to higher base management fees from Ashford Trust, Braemar and

third-parties of $3.7 million, $580,000 and $2.2 million, respectively, incentive management fees of $1.1 million, $243,000 and $703,000 from Ashford Trust, Braemar and third-parties, respectively and other management fees of $1.1 million from third-parties. The increase from Ashford Trust and Braemar are due to increased demand compared to the 2021 period as the industry recovers from COVID-19. The increase in third-party revenue is primarily due to Remington’s acquisition of Chesapeake in the 2022 period.

(4) The increase in design and construction fees revenue is due to higher revenue from Ashford Trust and Braemar of $3.8 million and $2.3 million, respectively, due to increased capital expenditures by our clients as the industry continues to recover from COVID-19.

(5) The $47.9 million increase in audio visual revenue is due to a recovery in operations as the industry recovers from COVID-19.

(6) The $2.3 million increase in watersports, ferry and excursion services revenue is due primarily to $1.9 million in revenue from RED’s expansion in the Turks and Caicos Islands in the third quarter of 2021 and increased demand in the 2022 period for RED’s recreational services in the U.S. Virgin Islands and Key West, Florida as the U.S. travel and hospitality industry continues to recover from COVID-19.

(7) The decrease in debt placement and related fee revenue is due to lower revenue of $2.7 million from Ashford Trust and lower revenue of $663,000 from Braemar. Debt placement and related fees are earned by Lismore for providing debt placement, modification, forbearance and refinancing services. The decrease in revenue from Ashford Trust in the 2022 period is due to the expiration of the Ashford Trust Agreement with Lismore on April 6, 2022. The decrease in revenue from Braemar in the 2022 period is due to the expiration of the Braemar Agreement with Lismore in March 2021.

(8) Claims management services include revenue earned from providing insurance claim assessment and administration services to Ashford Trust and Braemar.

(9) The increase in other services revenue is primarily due to higher revenue of $2.1 million in the 2022 period from Marietta due to a recovery in the 2022 period compared to the 2021 period. Other services revenue relates to other hotel services provided by our consolidated subsidiaries, OpenKey and Pure Wellness, to Ashford Trust, Braemar and other third parties and also includes Marietta.

(10) The increase in cost reimbursement revenue is primarily due to an increase in Remington’s cost reimbursement revenue of $76.6 million in the 2022 period due a recovery in operations in the 2022 period compared to the 2021 period and Remington’s acquisition of Chesapeake in the 2022 period. The increase is additionally due to an increase of $3.1 million in cost reimbursement revenue from Premier in the 2022 period due to a recovery in operations in the 2022 period compared to the 2021 period and an increase of $3.0 million in cost reimbursement revenue in the 2022 period related to reimbursable advisory expenses for Ashford Trust and Braemar.

(11) See note 17 to our condensed consolidated financial statements for discussion of segment reporting.

Salaries and Benefits Expense. Salaries and benefits expense increased by $280,000, or 0.8%, to $33.4 million for the 2022 period compared to the 2021 period. The change in salaries and benefits expense consisted of the following (in thousands):


	Six Months Ended June 30,
		2022		2021		$ Change
Salaries and benefits:
Salary expense (1)		$	20,190	$	17,824	$	2,366
Bonus expense		7,746		7,831		(85)
Benefits related expenses (2)		4,786		2,623		2,163
Total salary, bonus, and benefits related expenses		32,722		28,278		4,444
Non-cash equity-based compensation:
Stock option grants (3)		386		1,549		(1,163)
Employee equity grant expense		829		540		289


Total equity-based compensation		1,215		2,089		(874)
Non-cash (gain) loss in deferred compensation plan (4)		(489)		2,801		(3,290)
Total salaries and benefits		$	33,448	$	33,168	$	280

________

(1) The increase in salary expense is primarily due to an increase in corporate employees at both the Company’s corporate office and our subsidiaries’ corporate offices compared to the 2021 period as the industry continues to recover from COVID-19. The increase is additionally due to an increase in RED’s corporate employees compared to 2021 as RED began operating in Turks and Caicos in the third quarter of 2021.

(2) The increase in benefits related expenses is primarily due to the reinstatement of the Company’s 401(k) contribution to employees at the start of the 2022 period and due to an increase in corporate employees at both the Company’s corporate office and our subsidiaries’ corporate offices compared to the 2021 period.

(3) The decrease in stock option grant related expense in the 2022 period primarily relates to the Company not issuing stock option grants beginning in 2020 (when the Company began to issue restricted stock in lieu of stock options under its equity incentive program).

(4) The DCP obligation is recorded as a liability at fair value with changes in fair value reflected in earnings. The gain in the 2022 period and the loss in the 2021 period are primarily attributable to decreases and increases, respectively, in the fair value of the DCP obligation which is based on the Company’s common stock price. See note 14 to our condensed consolidated financial statements.

Cost of Revenues for Design and Construction. Cost of revenues for design and construction increased $2.3 million, or 131.2% to $4.1 million during the 2022 period compared to $1.8 million for the 2021 period due to increased capital expenditures by our clients as the industry recovers from COVID-19.

Cost of Revenues for Audio Visual. Cost of revenues for audio visual increased $29.9 million, or 265.6%, to $41.2 million during the 2022 period compared to $11.3 million for the 2021 period, primarily due to an increase in operations as the industry recovers from COVID-19.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased by $754,000, or 4.6%, to $15.6 million for the 2022 period compared to the 2021 period, primarily due to a decrease in FF&E related to the respective ERFP agreements with Ashford Trust and Braemar compared to the 2021 period. Depreciation and amortization expense for the 2022 period and the 2021 period excludes depreciation expense related to audio visual equipment of $2.4 million and $2.5 million, respectively, which is included in “cost of revenues for audio visual” and also excludes depreciation expense for the 2022 period and the 2021 period related to marine vessels in the amount of $567,000 and $466,000, respectively, which are included in “other” operating expense.

General and Administrative Expense. General and administrative expenses increased by $5.7 million, or 47.9%, to $17.5 million for the 2022 period compared to the 2021 period. The change in general and administrative expense consisted of the following (in thousands):


	Six Months Ended June 30,
		2022		2021		$ Change
Professional fees (1)		$	6,058	$	4,012	$	2,046
Office expense (2)		5,046		3,862		1,184
Public company costs		358		416		(58)
Director costs		1,148		1,274		(126)
Travel and other expense (3)		4,492		2,172		2,320
Non-capitalizable - software costs		434		123		311
Total general and administrative		$	17,536	$	11,859	$	5,677

________

(1) The increase includes increased corporate legal and accounting fees associated with Remington’s acquisition of Chesapeake in the 2022 period.

(2) The increase in office expenses in the 2022 period is primarily due to increases within INSPIRE related to the industry’s recovery from COVID-19 compared to the 2021 period.

(3) The increase in travel and other expense is primarily due to increases in the Company’s business travel in the 2022 period as the Company’s subsidiaries’ operations accelerated compared to the 2021 period. The increase is also due to an increase in advertising expense at INSPIRE associated with their strategic rebranding from JSAV to INSPIRE.

Other. Other operating expense increased $2.5 million, or 28.4%, to $11.1 million for the 2022 period compared to the 2021 period. The increase was primarily caused by operating expenses associated with RED and Marietta as their operations increased due to their respective recoveries from COVID-19’s impact on their operations. Other operating expenses for the 2022 period also includes a loss on sale of FF&E previously leased to Ashford Trust of $706,000. Other operating expense also includes cost of goods sold, royalties and operating expenses associated with OpenKey and Pure Wellness.

Reimbursed Expenses. Reimbursed expenses increased $85.8 million to $163.1 million during the 2022 period compared to $77.3 million for the 2021 period primarily due to an increase in hotel management reimbursed expenses incurred by Remington due to a recovery in hotel operations in the 2022 period compared to the 2021 period and Remington’s acquisition of Chesapeake in the 2022 period.

Reimbursed expenses may vary from cost reimbursement revenue recognized in the period due to timing differences between the costs we incur for centralized software programs and the related reimbursements we receive from our clients. Over the long term, these timing differences are not designed to impact our economics, either positively or negatively. The timing differences consisted of the following shown below (in thousands):


	Six Months Ended June 30,
	2022		2021		$ Change
Cost reimbursement revenue	$	163,328	$	77,538	$	85,790
Reimbursed expenses	163,089		77,332		85,757
Net total	$	239	$	206	$	33

Equity in Earnings (Loss) of Unconsolidated Entities. Equity in earnings (loss) of unconsolidated entities were earnings of $257,000 and a loss of $172,000 for the 2022 period and the 2021 period, respectively. Equity in earnings (loss) of unconsolidated entities primarily represents earnings (loss) in our equity method investment in REA Holdings. See note 2 to our condensed consolidated financial statements.

Interest Expense. Interest expense was $3.8 million and $2.6 million for the 2022 period and the 2021 period, respectively. The increase is primarily due to the Company’s Credit Facility entered into in the 2022 period. Interest expense relates to our Credit Facility and notes payable, lines of credit and finance leases held by our consolidated subsidiaries. See note 6 to our condensed consolidated financial statements.

Amortization of Loan Costs. Amortization of loan costs was $305,000 and $131,000 for the 2022 period and the 2021 period, respectively. The increase is primarily due to the Company’s Credit Facility entered into in the 2022 period. Amortization of loan costs relates to our Credit Facility and notes payable held by our consolidated subsidiaries. See note 6 to our condensed consolidated financial statements.

Interest Income. Interest income was $119,000 and $135,000 for the 2022 period and the 2021 period, respectively. See note 2 to our condensed consolidated financial statements.

Realized Gain (Loss) on Investments. Realized loss on investments was $71,000 and $373,000 for the 2022 period and the 2021 period, respectively. The realized loss on investments for the 2022 period and the 2021 period primarily relate to realized losses on shares of common stock of Ashford Trust and Braemar purchased by Remington on the open market and held for the purpose of providing compensation to certain employees. See note 8 to our condensed consolidated financial statements.

Other Income (Expense). Other income (expense) was expense of $112,000 and expense of $285,000 in the 2022 period and the 2021 period, respectively.

Income Tax (Expense) Benefit. Income tax (expense) benefit changed by $7.0 million from a $1.6 million benefit in the 2021 period to $5.4 million of expense in the 2022 period due to an increase in operations. Current income tax expense changed by $7.2 million from $589,000 of expense in the 2021 period to $7.8 million in expense in the 2022 period. Deferred income tax benefit changed by $210,000 from a $2.2 million benefit in the 2021 period to a $2.4 million benefit in the 2022 period.

(Income) Loss from Consolidated Entities Attributable to Noncontrolling Interests. The noncontrolling interests in consolidated entities were allocated a loss of $558,000 in the 2022 period and a loss of $329,000 in the 2021 period. See notes 2 and 11 to our condensed consolidated financial statements for more details regarding ownership interests, carrying values and allocations.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests. The redeemable noncontrolling interests were allocated income of $132,000 in the 2022 period and loss of $195,000 in the 2021 period. The 2022 period includes $145,000 of preferred dividends declared to the holders of the Series CHP Units. Redeemable noncontrolling interests represents ownership interests in Ashford Holdings which include the Series CHP Units which are recorded as a redeemable noncontrolling interest in the mezzanine section of our condensed consolidated balance sheets. The change in the 2022 period compared to the 2021 period is also due to the Company’s acquisition of all of the redeemable noncontrolling interests in OpenKey in the 2021 period. Redeemable noncontrolling interests represents ownership interests in Ashford Holdings and, in the 2021 period, OpenKey. For a summary of ownership interests, carrying values and allocations, see notes 2 and 12 to our condensed consolidated financial statements.

Preferred Dividends, Declared and Undeclared. Preferred dividends, declared and undeclared, increased $1.2 million to $18.4 million during the 2022 period compared to $17.2 million for the 2021 period due to the increase in the dividend rate of the Series D Convertible Preferred Stock which occurred on November 6, 2021 and due to accumulating and compounding dividends related to undeclared preferred stock dividends. See note 12 to our condensed consolidated financial statements.

Amortization of Preferred Stock Discount. The amortization of preferred stock discount decreased $627,000 to $0 during the 2022 period compared to $627,000 from the 2021 period due to the ending of the amortization period on the dividend rate of the Series D Convertible Preferred Stock on November 6, 2021. See note 12 to our condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

The prolonged presence of COVID-19 has continued to impact the Company’s operating results and cash flows. However, the Company has taken significant steps to improve its operating results and liquidity. We continue to see improvement in the operations of our clients, Ashford Trust and Braemar, and our subsidiaries as the industry continues to recover from COVID-19. Facts and circumstances related to COVID-19 could change in the future that are outside of management’s control, such as changes in Ashford Trust’s and Braemar’s financial position and liquidity, that could impact future operating results, future cash flows and our ability to pay dividends on the Series D Convertible Preferred Stock.

Loan Agreements—On April 1, 2022, the Company entered into the Credit Agreement with Mustang Lodging Funding LLC, as administrative agent, and the lenders from time to time party thereto. The Credit Agreement evidences the Credit Facility in the amount of $100.0 million, including a $50.0 million term loan funded upon closing and commitments to fund up to an additional $50.0 million of term loans in up to five separate borrowings within 24 months after the Closing Date, subject to certain conditions. The Company used a portion of the proceeds from the Credit Agreement to pay off the remaining $26.6 million balance of the Company’s existing Term Loan Agreement and pay dividends to the holders of the Series D Convertible Preferred Stock as stated below. On April 18, 2022, the Company drew an additional $20.0 million on the Credit Facility. The Credit Facility is a five-year interest-only facility with all outstanding principal due at maturity, with three successive one-year extension options subject to an increase in the interest rate during each extension period. Borrowings under the Credit Agreement will bear interest, at the Company’s option, at either the Eurodollar Rate (defined as LIBOR or a comparable or successor rate, with a floor of 0.25%) plus an applicable margin, or the base rate (defined as the highest of the federal funds rate plus 0.50%, the prime rate or the Eurodollar Rate plus 1.00%, with a floor of 1.25%) plus an applicable margin. The applicable margin for borrowings under the Credit Agreement for Eurodollar loans will be 7.35% per annum and the applicable margin for base rate loans will be 6.35% per annum, with increases to both applicable margins of 0.50%, 0.75% and 1.00% per annum during each of the three extension periods, respectively. The remaining undrawn balance of the Credit Facility is subject to an unused fee of 1.0%.

The Credit Facility does not require the maintenance of financial covenants, but if the ratio (the “Leverage Ratio”) of consolidated funded indebtedness that is recourse to the Company or any guarantor (less unrestricted cash) to consolidated EBITDA of the Company and its subsidiaries is greater than 4.00 to 1.00 as of the end of any fiscal quarter during the term of the loan, including any extension period, then the Company is required to apply 100% of the excess cash flow generated during such fiscal quarter to prepay the term loans. During any extension period, the Company is also required to apply 100% of the excess cash flow generated during such period to prepay the term loans. The Company may not pay dividends on the Company’s shares of common stock or preferred stock if the Leverage Ratio is greater than 3.00 to 1.00 after giving effect to the payment of such dividends. The Credit Agreement is guaranteed by the Company, Ashford LLC, and certain subsidiaries of the Company, and secured by, among other things, all of the assets of Ashford LLC and each guarantor and a pledge of the equity interests in Ashford LLC and each guarantor. As of June 30, 2022, our Credit Agreement was in compliance with all covenants or other requirements and debt held by our subsidiaries was in compliance with all covenants or other requirements. The Company does not expect our Credit Agreement and debt held by our subsidiaries to violate any loan covenants within one year of the issuance of the financial statements.

Certain segments of our business are capital intensive and may require additional financing from time to time. Any additional financings, if and when pursued, may not be available on favorable terms or at all, which could have a negative impact on our liquidity and capital resources. Aggregate portfolio companies’ notes payable, net were $27.3 million and $30.6 million as of June 30, 2022 and December 31, 2021, respectively. For further discussion see note 6 to our condensed consolidated financial statements.

Preferred stock dividends—As of June 30, 2022, the Company had aggregate undeclared preferred stock dividends of approximately $17.7 million, which relates to the second and fourth quarters of 2021. On April 10, 2022, the Board declared a cash dividend on the Company’s Series D Convertible Preferred Stock for accrued and unpaid dividends for the quarters ending June 30, 2020 and December 31, 2020 to stockholders of record as of April 11, 2022. The Company paid the dividend of approximately $17.8 million, or $0.932 per share of Series D Convertible Preferred Stock, on April 15, 2022. Dividends for the Series D Convertible Preferred Stock remain in arrears for the quarters ending June 30, 2021 and December 31, 2021. On each of April 15, 2022 and July 15, 2022, the Company paid $8.7 million of dividends previously declared by the Board with respect to the Company’s Series D Convertible Preferred Stock for the first and second quarters of 2022.

The Company currently intends to declare and pay the accrued and unpaid dividends on the Series D Convertible Preferred Stock for the quarters ending June 30, 2021 and December 31, 2021 during calendar year 2023 and to keep current on future preferred dividend payments. However, the independent members of the Board plan to revisit the dividend payment policy with respect to the Series D Convertible Preferred Stock on an ongoing basis and will make decisions on such preferred dividend payments based on the ongoing liquidity and capital needs of the Company.

Each share of Series D Convertible Preferred Stock: (i) has a liquidation value of $25 per share; (ii) accrues cumulative dividends at the rate of: (a) 6.59% per annum until November 6, 2020; (b) 6.99% per annum from November 6, 2020 until November 6, 2021; and (c) 7.28% per annum thereafter; (iii) participates in any dividend or distribution on the common stock in addition to the preferred dividends; (iv) is convertible into voting common stock at $117.50 per share; and (v) provides for customary anti-dilution protections. In the event the Company fails to pay the dividends on the Series D Convertible Preferred Stock for two consecutive quarterly periods (a “Preferred Stock Breach”), then until such arrearage is paid in cash in full: (A) the dividend rate on the Series D Convertible Preferred Stock will increase to 10.00% per annum until no Preferred Stock Breach exists; (B) no dividends on the Company’s common stock may be declared or paid, and no other distributions or redemptions may be made, on the Company’s common stock; and (C) the Board will be increased by two seats and the holders of 55% of the outstanding Series D Convertible Preferred Stock will be entitled to fill such newly created seats. The Series D Convertible Preferred Stock is held primarily by Mr. Monty J. Bennett, the Chairman of our Board and our Chief Executive Officer, Mr. Archie Bennett, Jr., who is Mr. Monty J. Bennett’s father, one of our other executive officers and several other individuals.

ERFP Commitments—On June 26, 2018, the Company entered into the Ashford Trust ERFP Agreement with Ashford Trust. The independent members of the board of directors of each of the Company and Ashford Trust, with the assistance of separate and independent legal counsel, engaged to negotiate the Ashford Trust ERFP Agreement on behalf of the Company and Ashford Trust, respectively. On January 15, 2019, the Company entered into the Braemar ERFP Agreement (collectively with the Ashford Trust ERFP Agreement, the “ERFP Agreements”) with Braemar. The independent members of the board of directors of each of the Company and Braemar, with the assistance of separate and independent legal counsel, engaged to negotiate the Braemar ERFP Agreement on behalf of the Company and Braemar, respectively. Under the ERFP Agreements, the Company agreed to provide $50 million (each, an “Aggregate ERFP Amount” and collectively, the “Aggregate ERFP Amounts”) to each of Ashford Trust and Braemar (collectively, the “REITs”), respectively, in connection with each such REIT’s acquisition of hotels recommended by us, with the option to increase each Aggregate ERFP Amount to up to $100 million upon mutual agreement by the parties to the respective ERFP Agreement. Under each of the ERFP Agreements, the Company paid each REIT 10% of each acquired hotel’s purchase price in exchange for FF&E at a property owned by such REIT, which were subsequently leased by us to such REIT rent-free. Each of the REITs must provide reasonable advance notice to the Company to request ERFP funds in accordance with the respective ERFP Agreement. The ERFP Agreements required that the Company acquire the related FF&E either at the time of the property acquisition or at any time generally within two years of the respective REITs’ acquisition of the hotel property. The Company recognized the related depreciation tax deduction at the time such FF&E was purchased by the Company and placed into service at the respective REIT’s hotel properties. However, the timing of the FF&E purchased and placed into service was subject to uncertainties outside of the Company’s control that could delay the realization of any tax benefit associated with the purchase of FF&E.

On March 13, 2020, the Company entered into an Extension Agreement related to the Ashford Trust ERFP Agreement. Under the terms of the Extension Agreement, the deadline to fund the remaining ERFP commitment under the Ashford Trust ERFP Agreement of $11.4 million, was extended from January 22, 2021 to December 31, 2022. As of June 30, 2022, the Company has no remaining ERFP commitment to Braemar under the Braemar ERFP Agreement. See note 10 to our condensed consolidated financial statements.

Other liquidity considerations—On December 5, 2017, the Board approved a stock repurchase program pursuant to which the Board granted a repurchase authorization to acquire shares of the Company’s common stock, having an aggregate value of up to $20 million. No shares were repurchased under the stock repurchase program during the six months ended June 30, 2022.

Our deferred compensation plan currently has only one participant, Mr. Monty J. Bennett, our Chairman and Chief Executive Officer. Mr. Monty J. Bennett has elected to invest his deferred compensation account in our common stock. As a result, we have an obligation to issue approximately 196,000 shares of our common stock to Mr. Monty J. Bennett in quarterly installments over five years beginning in 2024. Mr. Monty J. Bennett may postpone all or a portion of the distributions, for a minimum of 5 years, if he notifies the Company 12 months prior to the scheduled distributions. As of June 30, 2022, the fair value of the DCP liability was $2.8 million.

The Company has commitments related to cash compensation for the departure of Mr. Welter which include a cash termination payment of $750,000, which was paid on August 5, 2022, and severance payments totaling approximately $6.4 million, which are payable in 24 substantially equal monthly installments of approximately $267,000 beginning in August 2022.

Additional information pertaining to other liquidity considerations of the Company can be found in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments.”

Sources and Uses of Cash

As of June 30, 2022 and December 31, 2021, we had $48.4 million and $37.6 million of cash and cash equivalents, respectively, and $38.2 million and $34.9 million of restricted cash, respectively. Our principal sources of funds to meet our cash requirements include: net cash provided by operations and existing cash balances, which include borrowings from our existing lending agreements. Additionally, our principal uses of funds are expected to include possible operating shortfalls, capital expenditures, preferred dividends, debt interest and principal payments. Items that impacted our cash flow and liquidity during the periods indicated are summarized as follows:

Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities were $16.0 million for the six months ended June 30, 2022 compared to net cash flows provided by operating activities of $4.1 million for the six months ended June 30, 2021. The increase in cash flows from operating activities was primarily due to an increase in earnings due to a recovery in the Company’s operations in the six months ended June 30, 2022 from the effects of the COVID-19 pandemic and the timing of payments of accounts payable and accrued expenses to third-parties. These increases in cash flows were offset by decreases in operating cash flows due to the timing of receipt of our receivables from Ashford Trust, Braemar and third-parties.

Net Cash Flows Provided by (Used in) Investing Activities. For the six months ended June 30, 2022, net cash flows used in investing activities were $9.0 million. These cash flows consisted of net cash paid to acquire Chesapeake of $6.3 million, capital expenditures primarily of FF&E and audio visual equipment totaling $3.0 million, capital expenditures of $1.1 million for RED’s marine vessels and an investment in an unconsolidated entity of $400,000. These were offset by cash inflows of $406,000 in proceeds received from the sale of FF&E to Ashford Trust and proceeds from a note receivable of $1.4 million.

For the six months ended June 30, 2021, net cash flows used in investing activities were $6.1 million. These cash flows consisted of the receipt of a note receivable of $2.9 million from a third party hotel owner, purchases of Ashford Trust and Braemar common stock related to Remington’s employee compensation plan of $873,000, capital expenditures of $1.5 million for RED’s marine vessels and capital expenditures of FF&E of $2.6 million, including $1.8 million FF&E purchased from Braemar. Net cash flows used in investing activities were offset by the sale of FF&E of $1.8 million to Braemar.

Net Cash Flows Provided by (Used in) Financing Activities. For the six months ended June 30, 2022, net cash flows provided by financing activities were $7.2 million. These cash flows consisted of $68.1 million of proceeds from borrowings on notes payable primary related to the Company’s Credit Agreement entered into in the 2022 quarter and $164,000 of contributions from Braemar’s investment in OpenKey in the 2022 quarter. These were offset by $29.0 million of payments on notes payable which were primarily related to paying off the remaining balance of the Company’s Term Loan Agreement with Bank of America, N.A and $26.5 million of dividend payments on the Series D Convertible Preferred Stock. Other cash flows used in financing activities consist of $2.7 million of loan cost payments, $1.7 million of net payments on our revolving credit facilities, $515,000 of payments on finance leases, net repayments in advances to employees of $257,000 associated with tax withholdings for restricted stock vestings, purchases of $241,000 of treasury stock and $32,000 of distributions to consolidating noncontrolling interests.

For the six months ended June 30, 2021, net cash flows used in financing activities were $14.2 million. These cash flows consisted of $8.4 million of payments for dividends on preferred stock, $5.3 million of payments on notes payable, $620,000 of payments on our revolving credit facilities, purchases of $121,000 of treasury stock and $91,000 of payments on finance leases. These were offset by $325,000 of proceeds from borrowings on notes payable and employee advances of $49,000 associated with tax withholdings for restricted stock vesting.

Seasonality

Quarterly revenues may be adversely affected by events beyond our control, such as the COVID-19 pandemic and government-issued travel restrictions in response, extreme weather conditions, natural disasters, terrorist attacks or alerts, civil unrest, government shutdowns, airline strikes or reduced airline capacity, economic factors and other considerations affecting travel and products and services. To the extent that cash flows from operations are insufficient during any quarter due to temporary or seasonal fluctuations in revenues, we expect to utilize cash on hand or borrowings to fund operations.

Contractual Obligations and Commitments

There have been no material changes since December 31, 2021, outside the ordinary course of business, to contractual obligations and commitments included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Form 10-K, other than items as described in Liquidity and Capital Resources.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in our 2021 Form 10-K. There have been no material changes in these critical accounting policies.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our primary market risk exposures consist of changes in interest rates on borrowings under our debt instruments that bear interest at variable rates that fluctuate with market interest rates as well as foreign currency exchange rate risk.

Interest Rate Risk—At June 30, 2022, our total indebtedness of $99.0 million included $95.2 million of variable-rate debt. The impact on our results of operations of a 100 basis point change in interest rate on the outstanding balance of variable-rate debt at June 30, 2022, would be approximately $952,000 annually. Interest rate changes have no impact on the remaining $3.8 million of fixed rate debt.

The amount above was determined based on the impact of a hypothetical interest rate on our borrowings and assumes no changes in our capital structure. As the information presented above includes only those exposures that existed at June 30, 2022, it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies at the time, and the related interest rates.

Foreign Exchange Risk—The majority of our revenues, expenses and capital purchases are transacted in U.S. dollars. INSPIRE has operations in Mexico and the Dominican Republic, and therefore, we have exposure with respect to exchange rate fluctuations. Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses in our income statement as incurred. We have chosen not to hedge foreign exchange risks related to our foreign currency denominated earnings and cash flows through the use of financial instruments. RED’s operations outside of the U.S. are primarily transacted in U.S. dollars, which is the official currency of the Turks and Caicos Islands.

ITEM 4.CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2022 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

As disclosed in our Annual Form 10-K for the year ended December 31, 2021, as part of the Company’s fourth quarter of 2021 financial statement close process and preparation of the 2021 Form 10-K, we identified a material weakness related to management’s review controls over Remington’s cost reimbursement revenue and reimbursed expenses. To remediate this

material weakness, during the first and second quarters of 2022, we provided additional training to our associates and added procedures to our review controls related to the accounting for cost reimbursement revenue and reimbursed expenses to ensure that our consolidated financial statements as of and for the three and six months ended June 30, 2022 are prepared in accordance with U.S. GAAP. The Company tested the controls that were implemented and concluded that the controls were operating effectively as of June 30, 2022. As a result, management concluded that the material weakness was remediated as of June 30, 2022.

Our management has evaluated, with the participation of our principal executive and principal financial officers, whether any changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2022 have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Based on the evaluation we conducted, other than remediation of the material weakness identified and discussed above, our management has concluded that no such changes have occurred.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On December 20, 2016, a class action lawsuit was filed against one of the Company’s subsidiaries in The Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws. The court has entered an order granting class certification with respect to: (i) a statewide class of non-exempt employees who were allegedly deprived of rest breaks as a result of the subsidiary’s previous written policy requiring employees to stay on premises during rest breaks; and (ii) a derivative class of non-exempt former employees who were not paid for allegedly missed breaks upon separation from employment. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time. As of June 30, 2022, no amounts have been accrued.

ITEM 1A.RISK FACTORS

The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to the risk factors contained therein and to the following:

We may acquire other complementary businesses, which could require significant management attention, disrupt our business, dilute stockholder value and harm our business, revenue and financial results.

We have in the past, and may in the future, make certain strategic acquisitions of complementary businesses, such as our recent acquisition of Chesapeake. Our acquisitions may not achieve our goals, and we may not realize benefits from acquisitions. Any integration process will require significant time and resources, and we may not be able to manage the process successfully or fully realize all of the anticipated benefits and synergies from our acquisitions. If we fail to successfully integrate acquisitions, or the personnel or technologies associated with those acquisitions, the business, revenue and financial results of the combined company could be harmed. We may not successfully evaluate or utilize the acquired assets and accurately forecast the financial impact of an acquisition, including accounting charges. We may also incur unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could affect our financial condition or the value of our securities. We would expect to finance any future acquisitions through a combination of additional issuances of equity, corporate indebtedness or cash from operations. The sale of equity to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. Further, the companies we acquire may require increases in working capital and capital expenditure investments to fund their growth, and may not achieve anticipated revenue, earnings or cash flows, including as a result of the loss of any key employees or declines in hotel occupancy and/or revenue per available room due to COVID-19 or other factors.

In the future, we may not be able to find other suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all. Our acquisition strategy could require significant management attention, disrupt our business and harm our business, revenue and financial results.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

The following table provides information with respect to purchases and forfeitures of shares of our common stock during each of the months in the second quarter of 2022:


Period	Total Number of Shares Purchased		Average Price Paid Per Share			Total Number of Shares Purchased as Part of a Publicly Announced Plan (1)	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
Common stock:
April 1 to April 30	9		$	—	(3)	—	$	20,000,000
May 1 to May 31	2,973	(2)	$	15.50	(3)	—	$	20,000,000
June 1 to June 30	612	(2)	$	13.97	(3)	—	$	20,000,000
Total	3,594		$	15.49		—

________

(1) On December 5, 2017, the Board approved a stock repurchase program pursuant to which the Board granted a repurchase authorization to acquire shares of the Company’s common stock, having an aggregate value of up to $20 million. No shares were repurchased under the stock repurchase program during the three months ended June 30, 2022.

(2) Includes 1,623 and 16 shares that were withheld to cover tax-withholding requirements in May and June, respectively, related to the vesting of restricted shares of our common stock issued to employees pursuant to the Company’s stockholder-approved stock incentive plan.

(3) There is no cost associated with the forfeiture of 9, 1,350 and 596 restricted shares of our common stock in April, May and June, respectively.

ITEM 3.DEFAULT UPON SENIOR SECURITIES

As of June 30, 2022, the Company had aggregate undeclared preferred stock dividends of approximately $17.7 million, which relates to the second and fourth quarters of 2021. All dividends, declared and undeclared, are recorded as a reduction in net income (loss) attributable to common stockholders in the period incurred in our condensed consolidated statements of operations. All accrued dividends accumulate and compound until paid in cash or converted into common stock of the Company pursuant to the Certificate of Designation for the Series D Convertible Preferred Stock. Unpaid Series D Convertible Preferred Stock dividends, declared and undeclared, totaling $26.4 million and $34.6 million at June 30, 2022 and December 31, 2021, respectively, are recorded as a liability in our condensed consolidated balance sheets as “dividends payable.” As previously disclosed, each share of Series D Convertible Preferred Stock (i) accrues cumulative preferred dividends at the rate of (a) 6.59% per annum until November 6, 2020; (b) 6.99% per annum from the November 6, 2020 until November 6, 2021; and (c) 7.28% per annum thereafter and (ii) will participate in any dividend or distribution on the common stock in addition to the preferred dividends.

See note 12 in our condensed consolidated financial statements for a full description of all material terms of the Series D Cumulative Convertible Preferred Stock. The Series D Convertible Preferred Stock is held primarily by Mr. Monty J. Bennett, the Chairman of our Board and our Chief Executive Officer and Mr. Archie Bennett, Jr., who is Mr. Monty J. Bennett’s father.

ITEM 4.MINE SAFETY DISCLOSURES

None.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS


Exhibit						Description
2.1						Membership Interest Purchase and Contribution Agreement (the “Purchase Agreement”), dated as of April 15, 2022, by and among Ashford Hospitality Holdings, LLC, Remington Holdings, L.P., MHI Hotels Services, LLC, Chesapeake Hospitality, LLC, Chesapeake Hospitality II, LLC, Chesapeake Hospitality III, LLC, Chesapeake Hospitality IV, LLC, Chesapeake Hospitality V, LLC, Chesapeake Hospitality VI, LLC, ACSB Hospitality, LLC, KES Family Partnership, R.L.L.L.P, CLS Family Partnership, R.L.L.L.P, Steven McDonnell Smith Family Partnership, LLP, W. Chris Green, Clifford G. Ferrara and Louis Schaab; and solely for purposes of Section 6.15 of the Purchase Agreement, Kim Sims, Chris Sims and Steven Smith (incorporated by reference to Exhibit 2.1 of Form 10-Q, filed May 11, 2022) (File No. 001-36400)
3.1						Amended and Restated Certificate of Incorporation of Ashford Inc. (incorporated by reference to Exhibit 3.1 of Form 8-K, filed on November 6, 2019) (File No. 001-36400)
3.2						Articles of Amendment to the Certificate of Incorporation of Ashford Inc. (incorporated by reference to Exhibit 3.3 of Form 8-K, filed on November 6, 2019) (File No. 001-36400)
3.3						Articles Supplementary establishing the Series B Convertible Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.3 of Form 8-K, filed on August 8, 2018) (File No. 001-36400)
3.4						Certificate of Correction, filed on November 4, 2019, to Articles Supplementary establishing the Series B Convertible Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.4 of Form 10-Q, filed on November 7, 2019) (File No. 001-36400)
3.5						Articles Supplementary establishing the Series C Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.4 of Form 8-K, filed on August 8, 2018) (File No. 001-36400)
3.6						Amended and Restated Bylaws of Ashford Inc. (incorporated by reference to Exhibit 3.4 of Form 8-K, filed on November 6, 2019) (File No. 001-36400)
3.7						Certificate of Designation of the Series D Convertible Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.2 of Form 8-K, filed on November 6, 2019) (File No. 001-36400)
3.8						Certificate of Designation of Series E Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.1 of Form 8-K, filed on March 16, 2020) (File No. 001-36400)
10.1†						Release and Waiver, dated as of April 15, 2022, by and between Jeremy Welter and Ashford Hospitality Services, LLC (incorporated by reference to Exhibit 99.1 of Form 8-K, filed on April 19, 2022) (File No. 001-36400)
10.2†						First Amendment to Amended and Restated Employment Agreement, dated as of May 12, 2022, by and among Ashford Inc., Ashford Hospitality Advisors, LLC, and Richard J. Stockton. (incorporated by reference to Exhibit 10.2 of Form 8-K, filed on May 17, 2022)(File No. 001-36400)
10.3*						Fifth Amendment to Loan Documents, dated as of June 27, 2022, by and among Inspire Event Technologies Holdings, LLC, Inspire Event Technologies, LLC, Inspire Event Technologies Dominican Republic, LP, Inspire Event Technologies DR, GP, LLC, PT DR Holdings, LLC, PT Holdco, LLC and Comerica Bank
10.4						Credit Agreement, dated as of April 1, 2022, by and among Ashford Inc., Ashford Hospitality Holdings LLC, Ashford Hospitality Advisors LLC, Ashford Hospitality Services LLC, and Mustang Lodging Funding LLC, as administrative agent (incorporated by reference to Exhibit 10.1 of Form 8-K, filed on April 4, 2022) (File No. 001-36400)
10.4.1*						First Amendment to Credit Agreement, dated as of July 11, 2022, by and among Ashford Inc., Ashford Hospitality Holdings LLC, Ashford Hospitality Advisors LLC, Ashford Hospitality Services LLC, and Mustang Lodging Funding LLC, as administrative agent
10.5						Amendment No. 2 to Third Amended and Restated Limited Liability Company Agreement of Ashford Hospitality Holdings LLC, dated as of April 15, 2022 (incorporated by reference to Exhibit 10.1 of Form 8-K, filed on April 18, 2022) (File No. 001-36400)
31.1*						Certifications of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
31.2*						Certifications of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
32.1**						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following materials from the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2022, are formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iv) Condensed Consolidated Statements of Equity (Deficit); (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.



101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Submitted electronically with this report.
101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document	Submitted electronically with this report.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically with this report.
101.LAB	Inline XBRL Taxonomy Label Linkbase Document.	Submitted electronically with this report.
101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document.	Submitted electronically with this report.
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

___________________________________

* Filed herewith.

**Furnished herewith.

† Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ASHFORD INC.

Date:

August 12, 2022

By:

/s/ MONTY J. BENNETT

Monty J. Bennett

Chief Executive Officer

Date:

August 12, 2022

By:

/s/ DERIC S. EUBANKS

Deric S. Eubanks

Chief Financial Officer