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

    For the transition period from ________________ to ________________

Commission file number: 001-36400

ASHFORD INC.
(Exact name of registrant as specified in its charter)
Nevada84-2331507
(State or other jurisdiction of incorporation or organization)(IRS employer identification number)
14185 Dallas Parkway
Suite 1200
Dallas
Texas75254
(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 filerAccelerated filer
Non-accelerated filerSmaller 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 classTrading SymbolName of each exchange on which registered
Common StockAINCNYSE 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 share3,115,816
(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)
ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share amounts)
June 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$48,422 $37,571 
Restricted cash38,238 34,878 
Restricted investment334 576 
Accounts receivable, net16,535 10,502 
Due from affiliates397 165 
Due from Ashford Trust5,033 2,575 
Due from Braemar3,810 1,144 
Inventories1,812 1,555 
Prepaid expenses and other5,266 9,490 
Total current assets119,847 98,456 
Investments in unconsolidated entities4,088 3,581 
Property and equipment, net81,154 83,566 
Operating lease right-of-use assets25,437 26,975 
Goodwill58,602 56,622 
Intangible assets, net239,551 244,726 
Other assets, net531 870 
Total assets$529,210 $514,796 
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses$38,167 $39,897 
Dividends payable26,593 34,574 
Due to affiliates103 — 
Deferred income406 2,937 
Notes payable, net4,688 6,725 
Finance lease liabilities2,424 1,065 
Operating lease liabilities3,760 3,628 
Other liabilities29,275 25,899 
Total current liabilities105,416 114,725 
Deferred income8,274 7,968 
Deferred tax liability, net30,643 32,848 
Deferred compensation plan2,838 3,326 
Notes payable, net89,674 52,669 
Finance lease liabilities42,189 43,479 
Operating lease liabilities21,800 23,477 
Other liabilities1,670 — 
Total liabilities302,504 278,492 
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 interests1,509 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
Additional paid-in capital295,461 294,395 
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 entities459 638 
Total equity (deficit)(252,803)(241,765)
Total liabilities and equity (deficit)$529,210 $514,796 
See Notes to Condensed Consolidated Financial Statements.
2


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,
2022202120222021
REVENUE
Advisory services fees$11,969 $10,062 $23,771 $19,989 
Hotel management fees13,420 6,515 20,598 10,987 
Design and construction fees4,738 1,867 9,262 3,409 
Audio visual 35,977 9,451 60,942 13,062 
Other12,072 12,166 23,511 22,795 
Cost reimbursement revenue89,277 45,351 163,328 77,538 
Total revenues167,453 85,412 301,412 147,780 
EXPENSES
Salaries and benefits16,603 17,392 33,448 33,168 
Cost of revenues for design and construction2,206 1,022 4,116 1,780 
Cost of revenues for audio visual23,279 6,872 41,158 11,258 
Depreciation and amortization8,019 8,259 15,644 16,398 
General and administrative10,173 6,591 17,536 11,859 
Other5,669 5,059 11,136 8,670 
Reimbursed expenses89,181 45,217 163,089 77,332 
Total expenses155,130 90,412 286,127 160,465 
OPERATING INCOME (LOSS)12,323 (5,000)15,285 (12,685)
Equity in earnings (loss) of unconsolidated entities67 (58)257 (172)
Interest expense(2,536)(1,288)(3,815)(2,555)
Amortization of loan costs(232)(45)(305)(131)
Interest income38 72 119 135 
Realized gain (loss) on investments— (179)(71)(373)
Other income (expense)(259)(172)(112)(285)
INCOME (LOSS) BEFORE INCOME TAXES9,401 (6,670)11,358 (16,066)
Income tax (expense) benefit(4,076)697 (5,354)1,648 
NET INCOME (LOSS)5,325 (5,973)6,004 (14,418)
(Income) loss from consolidated entities attributable to noncontrolling interests298 234 558 329 
Net (income) loss attributable to redeemable noncontrolling interests(141)19 (132)195 
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY5,482 (5,720)6,430 (13,894)
Preferred dividends, declared and undeclared(9,020)(8,633)(18,393)(17,239)
Amortization of preferred stock discount— (311)— (627)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS$(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)$(11.66)
Weighted average common shares outstanding - basic2,913 2,764 2,908 2,724 
Diluted:
Net income (loss) attributable to common stockholders$(1.34)$(5.31)$(4.15)$(11.66)
Weighted average common shares outstanding - diluted3,109 2,764 3,006 2,724 
See Notes to Condensed Consolidated Financial Statements.
3


ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
NET INCOME (LOSS)$5,325 $(5,973)$6,004 $(14,418)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustment541 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 interests298 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.

4


ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
(unaudited, in thousands)

Common StockAdditional Paid-in CapitalAccumulated
 Deficit
Accumulated Other Comprehensive Income (Loss)Treasury StockNoncontrolling Interests in Consolidated EntitiesTotalConvertible Preferred StockRedeemable Noncontrolling Interests
SharesAmountSharesAmountSharesAmount
Balance at March 31, 20223,109 $$294,844 $(544,076)$(798)(63)$(816)$378 $(250,465)19,120 $478,000 $80 
Equity-based compensation10 — 847 — — — — — 847 — — 55 
Forfeiture of restricted common shares(1)— 28 — — (1)(28)— — — — — 
Purchase of treasury stock(2)— — — — (2)(23)— (23)— — — 
Acquisition of Chesapeake— — — — — — — — — — — 1,390 
Dividends declared and undeclared - preferred stock— — — (9,020)— — — — (9,020)— — — 
Employee advances— — (11)— — — — — (11)— — — 
Contributions from noncontrolling interests— — — — — — — 164 164 — — — 
Reallocation of carrying value— — (247)— — — — 247 — — — — 
Redemption value adjustment— — — 12 — — — — 12 — — (12)
Distributions to consolidated noncontrolling interests— — — — — — — (32)(32)— — (145)
Foreign currency translation adjustment— — — — 541 — — — 541 — — — 
Net income (loss)— — — 5,482 — — — (298)5,184 — — 141 
Balance at June 30, 20223,116 $$295,461 $(547,602)$(257)(66)$(867)$459 $(252,803)19,120 $478,000 $1,509 

Common StockAdditional Paid-in CapitalAccumulated
 Deficit
Accumulated Other Comprehensive Income (Loss)Treasury StockNoncontrolling Interests in Consolidated EntitiesTotalConvertible Preferred StockRedeemable Noncontrolling Interests
SharesAmountSharesAmountSharesAmount
Balance at December 31, 20213,023 $$294,395 $(534,999)$(1,206)(49)$(596)$638 $(241,765)19,120 $478,000 $69 
Equity-based compensation110 — 1,540 — — — — — 1,540 — — 62 
Forfeiture of restricted common shares(2)— 30 — — (2)(30)— — — — — 
Purchase of treasury stock(15)— — — — (15)(241)— (241)— — — 
Acquisition of Chesapeake— — — — — — — — — — — 1,390 
Dividends declared and undeclared - preferred stock— — — (18,393)— — — — (18,393)— — — 
Employee advances— — (257)— — — — — (257)— — — 
Contributions from noncontrolling interests— — — — — — — 164 164 — — — 
Reallocation of carrying value— — (247)— — — — 247 — — — — 
Redemption value adjustment— — — (1)— — — — (1)— — 
Distributions to consolidated noncontrolling interests— — — — — — — (32)(32)— — (145)
Foreign currency translation adjustment— — — — 310 — — — 310 — — — 
Other— — — (639)639 — — — — — — — 
Net income (loss)— — — 6,430 — — — (558)5,872 — — 132 
Balance at June 30, 20223,116 $$295,461 $(547,602)$(257)(66)$(867)$459 $(252,803)19,120 $478,000 $1,509 
5


Common StockAdditional Paid-in CapitalAccumulated
 Deficit
Accumulated Other Comprehensive Income (Loss)Treasury StockNoncontrolling Interests in Consolidated EntitiesTotalConvertible Preferred StockRedeemable Noncontrolling Interests
SharesAmountSharesAmountSharesAmount
Balance at March 31, 20213,010 $$292,140 $(506,044)$(989)(45)$(548)$(25)$(215,463)19,120 $477,263 $37 
Equity-based compensation15 — 1,215 — — — — 1,216 — — — 
Forfeiture of restricted common shares(1)— 15 — — (1)(15)— — — — — 
Purchase of treasury stock(2)— — — — (2)(19)— (19)— — — 
Amortization of preferred stock discount— — — (311)— — — — (311)— 311 — 
Dividends declared and undeclared - preferred stock— — — (8,633)— — — — (8,633)— — — 
Deferred compensation plan distribution— 19 — — — — — 19 — — — 
Employee advances— — (196)— — — — — (196)— — — 
Acquisition of noncontrolling interest in consolidated entities— — (475)(3)— — — 325 (153)— — — 
Reallocation of carrying value— — (184)— — — — 184 — — — — 
Redemption value adjustment— — — (76)— — — — (76)— — 76 
Foreign currency translation adjustment— — — — 104 — — — 104 — — — 
Unrealized gain (loss) on available for sale securities— — — — 277 — — — 277 — — — 
Reclassification for realized loss (gain) on available for sale securities— — — — 179 — — — 179 — — — 
Net income (loss)— — — (5,720)— — — (234)(5,954)— — (19)
Balance at June 30, 20213,023 $$292,534 $(520,787)$(429)(48)$(582)$251 $(229,010)19,120 $477,574 $94 

Common StockAdditional Paid-in CapitalAccumulated
 Deficit
Accumulated Other Comprehensive Income (Loss)Treasury StockNoncontrolling Interests in Consolidated EntitiesTotalConvertible Preferred StockRedeemable Noncontrolling Interests
SharesAmountSharesAmountSharesAmount
Balance at December 31, 20202,868 $$293,597 $(491,483)$(1,156)(32)$(438)$(121)$(199,598)19,120 $476,947 $1,834 
Equity-based compensation169 — 2,527 — — — — 2,530 — — — 
Forfeiture of restricted common shares(2)— 23 — — (2)(23)— — — — — 
Purchase of treasury stock(14)— — — — (14)(121)— (121)— — — 
Amortization of preferred stock discount— — — (627)— — — — (627)— 627 — 
Dividends declared and undeclared - preferred stock— — — (17,239)— — — — (17,239)— — — 
Deferred compensation plan distribution— 26 — — — — — 26 — — — 
Employee advances— — 49 — — — — — 49 — — — 
Acquisition of noncontrolling interest in consolidated entities— — (3,315)2,559 — — — 325 (431)— — (1,648)
Reallocation of carrying value— — (373)— — — — 373 — — — — 
Redemption value adjustment— — — (103)— — — — (103)— — 103 
Foreign currency translation adjustment— — — — 104 — — — 104 — — — 
Unrealized gain (loss) on available for sale securities— — — — 250 — — — 250 — — — 
Reclassification for realized loss (gain) on available for sale securities— — — — 373 — — — 373 — — — 
Net income (loss)— — — (13,894)— — — (329)(14,223)— — (195)
Balance at June 30, 20213,023 $$292,534 $(520,787)$(429)(48)$(582)$251 $(229,010)19,120 $477,574 $94 
See Notes to Condensed Consolidated Financial Statements.
6


ASHFORD INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended June 30,
20222021
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 amortization18,644 19,375 
Change in fair value of deferred compensation plan(489)2,801 
Equity-based compensation1,670 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 assets779 1,164 
Amortization of other assets331 594 
Amortization of loan costs305 131 
Realized loss on restricted investments71 373 
Other (gain) loss88 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 other4,297 (336)
Investment in unconsolidated entities150 (186)
Operating lease right-of-use assets1,888 1,822 
Other assets(11)
Accounts payable and accrued expenses(2,060)(11,114)
Due to affiliates101 (1,374)
Other liabilities3,376 (2,176)
Operating lease liabilities(1,895)(1,823)
Deferred income(2,225)(1,586)
Net cash provided by (used in) operating activities15,968 4,143 
Cash Flows from Investing Activities
Additions to property and equipment(3,014)(2,620)
Proceeds from sale of property and equipment, net406 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 receivable1,380 — 
Issuance of note receivable— (2,881)
Net cash provided by (used in) investing activities(8,998)(6,094)
(Continued)
7


Six Months Ended June 30,
20222021
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 facilities992 — 
Proceeds from notes payable68,061 325 
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 interest164 — 
Distributions to noncontrolling interests in consolidated entities(32)— 
Net cash provided by (used in) financing activities7,245 (14,158)
Effect of foreign exchange rate changes on cash and cash equivalents(4)(122)
Net change in cash, cash equivalents and restricted cash14,211 (16,231)
Cash, cash equivalents and restricted cash at beginning of period72,449 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), net1,504 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 liability1,670 — 
Distribution from deferred compensation plan— 26 
Capital expenditures accrued but not paid571 149 
Finance lease additions585 — 
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 period34,878 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 period38,238 34,346 
Cash, cash equivalents and restricted cash at end of period$86,660 $66,435 
See Notes to Condensed Consolidated Financial Statements.
8

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.
9

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.
10

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 interest99.87 %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/an/a
Redemption value adjustment, year-to-daten/an/a
Redemption value adjustment, cumulative582 n/an/a
Carrying value of noncontrolling interestsn/a439 20 
Assets, available only to settle subsidiary’s obligations (5)
n/a2,224 1,252 
Liabilities (6)
n/a602 1,471 
Revolving credit facility (6)
n/a— 50 

December 31, 2021
Ashford
Holdings
OpenKey (3)
Pure
Wellness
(4)
Ashford Inc. ownership interest99.87 %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/an/a
Redemption value adjustment, year-to-date96 n/an/a
Redemption value adjustment, cumulative581 n/an/a
Carrying value of noncontrolling interestsn/a479 159 
Assets, available only to settle subsidiary’s obligations (5)
n/a2,533 1,779 
Liabilities (6)
n/a424 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.
11

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, 2022December 31, 2021
Carrying value of the investment in REA Holdings$2,938 $2,831 
Ownership interest in REA Holdings30 %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,
2022202120222021
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.
12

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.
13

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, 2022December 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 cash10,387 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 cash1,055 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.
14

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.
15

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.
16

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.
17

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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
18

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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.
19

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following tables summarize our consolidated deferred income activity (in thousands):
Deferred Income
20222021
Balance as of March 31$10,377 $20,519 
Increases to deferred income1,961 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
20222021
Balance as of January 1$10,905 $21,359 
Increases to deferred income5,812 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.
20

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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):
21

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Advisory services fees:
Base advisory fees
$11,839 $9,932 $23,513 $19,731 
Other advisory revenue130 130 258 258 
Total advisory services fees revenue11,969 10,062 23,771 19,989 
Hotel management fees:
Base fees9,484 5,308 15,658 9,165 
Incentive fees2,867 1,207 3,871 1,822 
Other management fees1,069 — 1,069 — 
Total hotel management fees revenue13,420 6,515 20,598 10,987 
Design and construction fees revenue4,738 1,867 9,262 3,409 
Audio visual revenue35,977 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 services16 16 33 
Other services (3)
3,697 2,999 6,593 4,762 
Total other revenue12,072 12,166 23,511 22,795 
Cost reimbursement revenue89,277 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 
Remington90,799 44,083 161,306 74,892 
Premier7,085 2,430 13,311 4,374 
INSPIRE36,016 9,451 61,038 13,062 
RED7,693 6,861 13,738 11,422 
OpenKey413 477 795 931 
Corporate and other6,226 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.
22

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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,
2022202120222021
INSPIRE:
United States$27,057 $7,837 $46,127 $10,752 
Mexico7,156 1,260 11,774 1,671 
Dominican Republic1,803 354 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.
23

ASHFORD INC. AND SUBSIDIARIES
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)
Cash6,300 
Fair value of contingent consideration1,670 
Working capital adjustments120 
Total fair value of purchase price$9,477 

Fair ValueEstimated Useful Life
Current assets including cash of $228
$930 
Goodwill1,980 
Management contracts7,131 8 years
Total assets acquired10,041 
Current liabilities347 
Deferred tax liability217 
Total assumed liabilities564 
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,
2022202120222021
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):
24

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

RemingtonRED
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, 2022December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Definite-lived intangible assets:
Remington management contracts (1)
$114,730 $(34,045)$80,685 $107,600 $(28,284)$79,316 
Premier management contracts194,000 (47,517)146,483 194,000 (41,619)152,381 
INSPIRE customer relationships9,319 (4,968)4,351 9,319 (4,409)4,910 
RED boat slip rights3,100 (458)2,642 3,100 (380)2,720 
Pure Wellness customer relationships175 (175)— 175 (166)
$321,324 $(87,163)$234,161 $314,194 $(74,858)$239,336 
Gross Carrying AmountGross Carrying Amount
Indefinite-lived intangible assets:
Remington trademarks$4,900 $4,900 
RED trademarks490 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.
25

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

6. Notes Payable, net
Notes payable—Notes payable, net consisted of the following (in thousands):
IndebtednessBorrowerMaturityInterest RateJune 30, 2022December 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)
INSPIREJanuary 1, 2024
Prime Rate (4) + 2.25%
18,800 20,000 
Revolving credit facility (5) (7) (10)
INSPIREJanuary 1, 2024
Prime Rate (4) + 2.25%
224 1,869 
Revolving credit facility (5) (13)
Pure WellnessOn demand
Prime Rate (4) + 1.00%
50 100 
Revolving credit facility (6) (8) (14)
REDNovember 3, 2022
Prime Rate (4) + 1.75%
— — 
Term loan (5) (8) (15)
REDJuly 17, 2029
6.00%
1,619 1,641 
Term loan (5) (8)
REDJuly 17, 2023
6.50%
474 607 
Term loan (5) (8) (16)
REDAugust 5, 2029
Prime Rate (4) + 2.00%
889 888 
Term loan (5) (8)
REDAugust 5, 2029
Prime Rate (4) + 2.00%
2,058 2,143 
Term loan (6) (8)
REDAugust 5, 2029
Prime Rate (4) + 1.75%
3,176 3,357 
Draw term loan (5) (8) (17)
REDMarch 17, 2032
5.00%
26 — 
Draw term loan (5) (8) (17)
REDMarch 17, 2032
5.00%
22 — 
Total notes payable98,960 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, net94,362 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.
26

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.
27

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, 2022December 31, 2021
Accounts payable $14,035 $11,682 
Accrued payroll expense17,810 23,648 
Accrued vacation expense2,977 3,427 
Accrued interest265 259 
Other accrued expenses3,080 881 
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.
28

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 stock257 
(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 stock426 
(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.
29

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%.
30

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,
2022202120222021
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.
31

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 CostGross Unrealized GainsGross Unrealized LossesFair 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 CostGross Unrealized GainsGross Unrealized LossesFair 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.
32

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, 2022December 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 consideration1,670 1,670 — — 
Financial assets not measured at fair value:
Cash and cash equivalents$48,422 $48,422 $37,571 $37,571 
Restricted cash38,238 38,238 34,878 34,878 
Accounts receivable, net15,035 15,035 7,622 7,622 
Notes receivable1,500 1,500 2,880 2,880 
Due from affiliates397 397 165 165 
Due from Ashford Trust5,033 5,033 2,575 2,575 
Due from Braemar3,810 3,810 1,144 1,144 
Investments in unconsolidated entities4,088 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 payable26,593 26,593 34,574 34,574 
Due to affiliates103 103 — — 
Other liabilities29,275 29,275 25,899 25,899 
Notes payable98,960 
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.
33

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 CommitmentAs 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,
2022202120222021
(Income) loss attributable to noncontrolling interests:
OpenKey$228 $208 $454 $411 
RED— 59 — (38)
Pure Wellness70 (33)104 (44)
Total net (income) loss attributable to noncontrolling interests$298 $234 $558 $329 

34

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

12. Mezzanine Equity
Redeemable Noncontrolling InterestsRedeemable 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,
2022202120222021
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.
35

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):
36

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
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, 2022December 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,
2022202120222021
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.
37

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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,
2022202120222021
Change in fair value
Unrealized gain (loss)$600 $(2,743)$489 $(2,801)
Distributions
Fair value (1)
$— $19 $— $26 
Shares (1)
— — 
________
(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 TrustWe 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
38

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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.
39

ASHFORD INC. AND SUBSIDIARIES
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,
2022202120222021
REVENUES BY TYPE
Advisory services fees:
Base advisory fees (1)
$8,612 $7,254 $17,347 $14,508 
Hotel management fees:
Base management fees6,573 4,473 11,575 7,850 
Incentive management fees1,921 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)
14 15 30 
Other services (8)
328 433 676 792 
Total other revenue1,100 2,737 3,798 6,547 
Cost reimbursement revenue61,620 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 
Remington64,358 37,807 122,487 64,180 
Premier3,874 995 7,480 1,643 
INSPIRE17 — 55 — 
RED86 — 129 — 
OpenKey30 30 64 60 
Corporate and other1,651 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.
40

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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.
BraemarWe 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.
41

ASHFORD INC. AND SUBSIDIARIES
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,
2022202120222021
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 revenue3,357 2,808 6,424 5,481 
Hotel management fees:
Base management fees795 584 1,495 915 
Incentive management fees262 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)
— 
Other services (8)
30 36 72 87 
Total other revenue721 733 1,537 2,170 
Cost reimbursement revenue12,074 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 
Remington7,131 4,000 14,193 6,639 
Premier2,320 511 4,151 873 
INSPIRE22 — 41 — 
RED695 695 1,278 1,227 
OpenKey10 19 19 
Corporate and other1,609 579 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 
Other96 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 
________
42

ASHFORD INC. AND SUBSIDIARIES
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.
(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 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.

43

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

ERFP CommitmentsOn 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.
44

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Ashford SecuritiesOn 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 TransactionsThe 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.
45

ASHFORD INC. AND SUBSIDIARIES
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,
2022202120222021
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)$(31,760)
Weighted average common shares outstanding:
Weighted average common shares outstanding – basic2,913 2,764 2,908 2,724 
Effect of deferred compensation plan shares196 — 98 — 
Weighted average common shares outstanding – diluted3,109 2,764 3,006 2,724 
Income (loss) per share – basic:
Net income (loss) allocated to common stockholders per share$(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,
2022202120222021
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 shares83 121 90 71 
Effect of assumed conversion of Ashford Holdings units73 40 
Effect of incremental subsidiary shares120 97 112 159 
Effect of assumed conversion of preferred stock4,243 4,246 4,304 4,227 
Total4,519 4,468 4,546 4,461 
46

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 AdvisoryRemingtonPremierINSPIREREDOpenKeyCorporate and OtherAshford 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 — 2,251 89,277 
Total revenues19,221 90,799 7,085 36,016 7,693 413 6,226 167,453 
EXPENSES
Depreciation and amortization852 3,123 2,974 472 214 382 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 — 2,251 89,181 
Total operating expenses8,008 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)(76)(259)
INCOME (LOSS) BEFORE INCOME TAXES11,213 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.

47

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Six Months Ended June 30, 2022
REIT AdvisoryRemingtonPremierINSPIREREDOpenKeyCorporate and OtherAshford 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 
Other15 181 — — 13,729 791 8,795 23,511 
Cost reimbursement revenue (1)
14,828 140,527 4,049 96 3,815 163,328 
Total revenues38,614 161,306 13,311 61,038 13,738 795 12,610 301,412 
EXPENSES
Depreciation and amortization1,705 5,819 5,936 940 326 912 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 3,815 163,089 
Total operating expenses17,000 156,591 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)(73)(112)
INCOME (LOSS) BEFORE INCOME TAXES21,614 4,751 (3,390)8,607 2,252 (1,873)(20,603)11,358 
Income tax (expense) benefit(5,347)(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.


48

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Three Months Ended June 30, 2021
REIT AdvisoryRemingtonPremierINSPIREREDOpenKeyCorporate and OtherAshford 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 
Other16 — — — 6,861 477 4,812 12,166 
Cost reimbursement revenue (1)
6,667 37,568 563 — — — 553 45,351 
Total revenues16,745 44,083 2,430 9,451 6,861 477 5,365 85,412 
EXPENSES
Depreciation and amortization1,084 3,034 3,057 470 93 517 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 expenses7,884 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)— — 14 (163)— (24)(172)
INCOME (LOSS) BEFORE INCOME TAXES8,861 (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
49

ASHFORD INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Six Months Ended June 30, 2021
REIT AdvisoryRemingtonPremierINSPIREREDOpenKeyCorporate and OtherAshford 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 
Other33 20 — — 11,422 931 10,389 22,795 
Cost reimbursement revenue (1)
11,791 63,885 965 — — — 897 77,538 
Total revenues31,813 74,892 4,374 13,062 11,422 931 11,286 147,780 
EXPENSES
Depreciation and amortization2,073 6,068 6,113 937 185 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 expenses14,277 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 — — — — 135 
Realized gain (loss) on investments— (373)— — — — — (373)
Other income (expense)— — (107)(163)(1)(15)(285)
INCOME (LOSS) BEFORE INCOME TAXES17,536 (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.
50

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.
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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
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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.
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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.
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
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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.
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.
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.
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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):
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Three Months Ended June 30,Favorable (Unfavorable)
20222021$ Change% Change
REVENUE
Advisory services fees$11,969 $10,062 $1,907 19.0 %
Hotel management fees13,420 6,515 6,905 106.0 %
Design and construction fees4,738 1,867 2,871 153.8 %
Audio visual 35,977 9,451 26,526 280.7 %
Other12,072 12,166 (94)(0.8)%
Cost reimbursement revenue89,277 45,351 43,926 96.9 %
Total revenues167,453 85,412 82,041 96.1 %
EXPENSES  
Salaries and benefits16,603 17,392 789 4.5 %
Cost of revenues for design and construction2,206 1,022 (1,184)(115.9)%
Cost of revenues for audio visual23,279 6,872 (16,407)(238.8)%
Depreciation and amortization8,019 8,259 240 2.9 %
General and administrative10,173 6,591 (3,582)(54.3)%
Other5,669 5,059 (610)(12.1)%
Reimbursed expenses89,181 45,217 (43,964)(97.2)%
Total expenses155,130 90,412 (64,718)(71.6)%
OPERATING INCOME (LOSS)12,323 (5,000)17,323 346.5 %
Equity in earnings (loss) of unconsolidated entities67 (58)125 215.5 %
Interest expense(2,536)(1,288)(1,248)(96.9)%
Amortization of loan costs(232)(45)(187)(415.6)%
Interest income38 72 (34)(47.2)%
Realized gain (loss) on investments— (179)179 100.0 %
Other income (expense)(259)(172)(87)(50.6)%
INCOME (LOSS) BEFORE INCOME TAXES9,401 (6,670)16,071 240.9 %
Income tax (expense) benefit(4,076)697 (4,773)(684.8)%
NET INCOME (LOSS)5,325 (5,973)11,298 189.2 %
(Income) loss from consolidated entities attributable to noncontrolling interests298 234 64 27.4 %
Net (income) loss attributable to redeemable noncontrolling interests(141)19 (160)(842.1)%
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY5,482 (5,720)11,202 195.8 %
Preferred dividends, declared and undeclared(9,020)(8,633)(387)(4.5)%
Amortization of preferred stock discount— (311)311 100.0 %
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS$(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.
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Total Revenues. Total revenues increased $82.0 million, or 96.1%, to $167.5 million for the 2022 quarter compared to the 2021 quarter due to the following (in thousands):
Three Months Ended June 30,Favorable (Unfavorable)
20222021$ 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 revenue11,969 10,062 1,907 19.0 %
Hotel management fees:
Base management fees9,484 5,308 4,176 78.7 %
Incentive management fees2,867 1,207 1,660 137.5 %
Other management fees1,069 — 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)
16 (15)(93.8)%
Other services (9)
3,697 2,999 698 23.3 %
Total other revenue12,072 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 %
Remington90,799 44,083 46,716 106.0 %
Premier7,085 2,430 4,655 191.6 %
INSPIRE36,016 9,451 26,565 281.1 %
RED7,693 6,861 832 12.1 %
OpenKey413 477 (64)(13.4)%
Corporate and other6,226 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
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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.
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Salaries and Benefits Expense. Salaries and benefits expense decreased $789,000, or 4.5%, to $16.6 million for the 2022 quarter compared to the 2021 quarter. The change in salaries and benefits expense consisted of the following (in thousands):
Three Months Ended June 30,
20222021$ 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 expenses16,687 13,798 2,889 
Non-cash equity-based compensation:
Stock option grants (3)
32 543 (511)
Employee equity grant expense484 308 176 
Total equity-based compensation516 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.
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General and Administrative Expense. General and administrative expenses increased $3.6 million, or 54.3%, to $10.2 million for the 2022 quarter compared to the 2021 quarter. The change in general and administrative expense consisted of the following (in thousands):
Three Months Ended June 30,
20222021$ Change
Professional fees (1)
$3,923 $2,234 $1,689 
Office expense2,643 2,028 615 
Public company costs131 246 (115)
Director costs751 827 (76)
Travel and other expense (2)
2,506 1,211 1,295 
Non-capitalizable - software costs219 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 $45.2 million for the 2021 quarter primarily due to increased hotel management expenses incurred by Remington due to the increase in hotel room demand and Remington’s acquisition of Chesapeake during the 2022 quarter.
Reimbursed expenses recorded may vary from cost reimbursement revenue recognized in the quarter due to timing differences between the costs we incur for centralized software programs and the related reimbursements we receive from Ashford Trust and Braemar. Over the long term, these timing differences are not designed to impact our economics, either positively or negatively. The timing differences consisted of the following (in thousands):
Three Months Ended June 30,
20222021$ Change
Cost reimbursement revenue$89,277 $45,351 $43,926 
Reimbursed expenses89,181 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.
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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 $311,000 for the 2021 quarter, due to the ending of the amortization period on the dividend rate of the Series D Convertible Preferred Stock on November 6, 2021. See note 12 to our condensed consolidated financial statements.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following table summarizes the changes in key line items from our condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021 (in thousands):
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Six Months Ended June 30,Favorable (Unfavorable)
20222021$ Change% Change
REVENUE
Advisory services fees$23,771 $19,989 $3,782 18.9 %
Hotel management fees20,598 10,987 9,611 87.5 %
Design and construction fees9,262 3,409 5,853 171.7 %
Audio visual 60,942 13,062 47,880 366.6 %
Other23,511 22,795 716 3.1 %
Cost reimbursement revenue163,328 77,538 85,790 110.6 %
Total revenues301,412 147,780 153,632 104.0 %
EXPENSES  
Salaries and benefits33,448 33,168 (280)(0.8)%
Cost of revenues for design and construction4,116 1,780 (2,336)(131.2)%
Cost of revenues for audio visual41,158 11,258 (29,900)(265.6)%
Depreciation and amortization15,644 16,398 754 4.6 %
General and administrative17,536 11,859 (5,677)(47.9)%
Other11,136 8,670 (2,466)(28.4)%
Reimbursed expenses163,089 77,332 (85,757)(110.9)%
Total expenses286,127 160,465 (125,662)(78.3)%
OPERATING INCOME (LOSS)15,285 (12,685)27,970 220.5 %
Equity in earnings (loss) of unconsolidated entities257 (172)429 249.4 %
Interest expense(3,815)(2,555)(1,260)(49.3)%
Amortization of loan costs(305)(131)(174)(132.8)%
Interest income119 135 (16)(11.9)%
Realized gain (loss) on investments(71)(373)302 81.0 %
Other income (expense)(112)(285)173 60.7 %
INCOME (LOSS) BEFORE INCOME TAXES11,358 (16,066)27,424 170.7 %
Income tax (expense) benefit(5,354)1,648 (7,002)(424.9)%
NET INCOME (LOSS)6,004 (14,418)20,422 141.6 %
(Income) loss from consolidated entities attributable to noncontrolling interests558 329 229 69.6 %
Net (income) loss attributable to redeemable noncontrolling interests(132)195 (327)(167.7)%
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY6,430 (13,894)20,324 146.3 %
Preferred dividends, declared and undeclared(18,393)(17,239)(1,154)(6.7)%
Amortization of preferred stock discount— (627)627 100.0 %
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS$(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.
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Total Revenues. Total revenues increased by $153.6 million, or 104.0%, to $301.4 million for the 2022 period compared to the 2021 period due to the following (in thousands):
Six Months Ended June 30,Favorable (Unfavorable)
20222021$ 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 revenue23,771 19,989 3,782 18.9 %
Hotel management fees:
Base management fees15,658 9,165 6,493 70.8 %
Incentive management fees3,871 1,822 2,049 112.5 %
Other management fees1,069 — 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 revenue23,511 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 %
Remington161,306 74,892 86,414 115.4 %
Premier13,311 4,374 8,937 204.3 %
INSPIRE61,038 13,062 47,976 367.3 %
RED13,738 11,422 2,316 20.3 %
OpenKey795 931 (136)(14.6)%
Corporate and other12,610 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.
(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
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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.
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Salaries and Benefits Expense. Salaries and benefits expense increased by $280,000, or 0.8%, to $33.4 million for the 2022 period compared to the 2021 period. The change in salaries and benefits expense consisted of the following (in thousands):
Six Months Ended June 30,
20222021$ 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 expenses32,722 28,278 4,444 
Non-cash equity-based compensation:
Stock option grants (3)
386 1,549 (1,163)
Employee equity grant expense829 540 289 
Total equity-based compensation1,215 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.
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General and Administrative Expense. General and administrative expenses increased by $5.7 million, or 47.9%, to $17.5 million for the 2022 period compared to the 2021 period. The change in general and administrative expense consisted of the following (in thousands):
Six Months Ended June 30,
20222021$ Change
Professional fees (1)
$6,058 $4,012 $2,046 
Office expense (2)
5,046 3,862 1,184 
Public company costs358 416 (58)
Director costs1,148 1,274 (126)
Travel and other expense (3)
4,492 2,172 2,320 
Non-capitalizable - software costs434 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 $77.3 million for the 2021 period primarily due to an increase in hotel management reimbursed expenses incurred by Remington due to a recovery in hotel operations in the 2022 period compared to the 2021 period and Remington’s acquisition of Chesapeake in the 2022 period.
Reimbursed expenses may vary from cost reimbursement revenue recognized in the period due to timing differences between the costs we incur for centralized software programs and the related reimbursements we receive from our clients. Over the long term, these timing differences are not designed to impact our economics, either positively or negatively. The timing differences consisted of the following shown below (in thousands):
Six Months Ended June 30,
20222021$ Change
Cost reimbursement revenue$163,328 $77,538 $85,790 
Reimbursed expenses163,089 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.
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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.
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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 AgreementsOn 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 dividendsAs 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.
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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.
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. See also note 12 to our condensed consolidated financial statements.
ERFP CommitmentsOn 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.
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.
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.
Other liquidity considerationsOn 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.
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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.
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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
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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.
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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.
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.
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.


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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.
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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:
PeriodTotal Number of Shares PurchasedAverage 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$— 
(3)
— $20,000,000 
May 1 to May 312,973 
(2)
$15.50 
(3)
— $20,000,000 
June 1 to June 30612 
(2)
$13.97 
(3)
— $20,000,000 
Total3,594 $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. 
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.
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.
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ITEM 6.EXHIBITS
ExhibitDescription
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
3.2
3.3
3.4
3.5
3.6
3.7
3.8
10.1†
10.2†
10.3*
10.4
10.4.1*
10.5
31.1*
31.2*
32.1**
32.2**
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.
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101.INSXBRL 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.SCHInline XBRL Taxonomy Extension Schema DocumentSubmitted electronically with this report.
101.CALInline XBRL Taxonomy Calculation Linkbase DocumentSubmitted electronically with this report.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentSubmitted electronically with this report.
101.LABInline XBRL Taxonomy Label Linkbase Document.Submitted electronically with this report.
101.PREInline XBRL Taxonomy Presentation Linkbase Document.Submitted electronically with this report.
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
___________________________________
* Filed herewith.
**Furnished herewith.
† Management contract or compensatory plan or arrangement.

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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, 2022By:
/s/ MONTY J. BENNETT
Monty J. Bennett
Chief Executive Officer
Date:August 12, 2022By:
/s/ DERIC S. EUBANKS
Deric S. Eubanks
Chief Financial Officer

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