アシュフォードの四半期報告

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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, 2023


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

For the transition period from ________________ to ________________

Commission file number: 001-36400

ASHFORD INC.

(Exact name of registrant as specified in its charter)


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

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

(972) 490-9600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

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

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


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☑	Smaller reporting company	☑

		Emerging growth company	☐

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

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

AINC

NYSE American LLC

Preferred Stock Purchase Rights

NYSE American LLC

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


Common Stock, $0.001 par value per share						3,214,457
(Class)						Outstanding at August 8, 2023

ASHFORD INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2023

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets as of June 3 0 , 2023 and December 31, 2022			2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30 , 2023 and 2022			3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30 , 2023 and 2022			4
Condensed Consolidated Statements of Equity (Deficit) for the Three and Six Months Ended June 30 , 2023 and 2022			5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022			7
Notes to Condensed Consolidated Financial Statements			9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			48
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			67
ITEM 4. CONTROLS AND PROCEDURES			67
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			68
ITEM 1A. RISK FACTORS			68
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			69
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			69
ITEM 4. MINE SAFETY DISCLOSURES			70
ITEM 5. OTHER INFORMATION			70
ITEM 6. EXHIBITS			71
SIGNATURES			73

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, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	32,505	$	44,390
Restricted cash	36,108		37,058
Restricted investment	224		303

Accounts receivable, net of allowance of $1,180 and $175, respectively	22,880		17,615
Due from affiliates	220		463
Due from Ashford Trust	7,412		—
Due from Braemar	2,058		11,828

Inventories	2,503		2,143
Prepaid expenses and other	15,126		11,226

Total current assets	119,036		125,026
Investments in unconsolidated entities	3,369		4,217
Property and equipment, net	52,438		41,791
Operating lease right-of-use assets	21,054		23,844

Goodwill	59,446		58,675
Intangible assets, net	222,274		226,544
Other assets, net	1,094		2,259
Total assets	$	478,711	$	482,356
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	$	38,320	$	56,079
Dividends payable	27,964		27,285
Due to affiliates	33		15
Due to Ashford Trust	—		1,197


Deferred income	881		444

Notes payable, net	3,690		5,195
Finance lease liabilities	403		1,456
Operating lease liabilities	3,829		3,868
Claims liabilities and other	32,317		25,630
Total current liabilities	107,437		121,169

Deferred income	8,138		7,356
Deferred tax liability, net	26,562		27,873
Deferred compensation plan	2,060		2,849
Notes payable, net	114,485		89,680
Finance lease liabilities	2,957		1,962
Operating lease liabilities	19,323		20,082
Other liabilities	4,373		3,237
Total liabilities	285,335		274,208
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, 2023 and December 31, 2022	478,000		478,000
Redeemable noncontrolling interests	1,726		1,614
EQUITY (DEFICIT)
Common stock, 100,000,000 shares authorized, $0.001 par value, 3,317,321 and 3,181,585 shares issued and 3,214,457 and 3,110,044 shares outstanding at June 30, 2023 and December 31, 2022, respectively	3		3
Additional paid-in capital	299,039		297,715
Accumulated deficit	(583,673)		(568,482)
Accumulated other comprehensive income (loss)	(59)		78
Treasury stock, at cost, 102,864 and 71,541 shares at June 30, 2023 and December 31, 2022, respectively	(1,324)		(947)
Total equity (deficit) of the Company	(286,014)		(271,633)
Noncontrolling interests in consolidated entities	(336)		167
Total equity (deficit)	(286,350)		(271,466)
Total liabilities, mezzanine equity and equity (deficit)	$	478,711	$	482,356

See Notes to Condensed Consolidated Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
REVENUE
Advisory services fees	$	12,114	$	11,969	$	24,417	$	23,771
Hotel management fees	14,878		13,420		27,065		20,598
Design and construction fees	7,605		4,738		14,534		9,262
Audio visual	41,349		35,977		81,706		60,942
Other	11,808		12,072		20,882		23,511
Cost reimbursement revenue	104,956		89,277		209,228		163,328
Total revenues	192,710		167,453		377,832		301,412
EXPENSES
Salaries and benefits	22,629		16,603		45,404		33,448
Cost of revenues for design and construction	3,589		2,206		6,455		4,116
Cost of revenues for audio visual	29,993		23,279		57,821		41,158
Depreciation and amortization	6,990		8,019		13,990		15,644
General and administrative	12,347		10,173		22,057		17,536

Other	5,684		5,669		11,786		11,136
Reimbursed expenses	104,956		89,181		209,154		163,089
Total expenses	186,188		155,130		366,667		286,127
OPERATING INCOME (LOSS)	6,522		12,323		11,165		15,285
Equity in earnings (loss) of unconsolidated entities	(388)		67		(847)		257


Interest expense	(3,422)		(2,536)		(6,259)		(3,815)
Amortization of loan costs	(265)		(232)		(506)		(305)
Interest income	440		38		717		119


Realized gain (loss) on investments	—		—		(80)		(71)

Other income (expense)	(159)		(259)		334		(112)
INCOME (LOSS) BEFORE INCOME TAXES	2,728		9,401		4,524		11,358
Income tax (expense) benefit	(1,227)		(4,076)		(1,847)		(5,354)
NET INCOME (LOSS)	1,501		5,325		2,677		6,004
(Income) loss from consolidated entities attributable to noncontrolling interests	214		298		502		558
Net (income) loss attributable to redeemable noncontrolling interests	(133)		(141)		(288)		(132)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	1,582		5,482		2,891		6,430
Preferred dividends, declared and undeclared	(9,044)		(9,020)		(18,078)		(18,393)


NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(7,462)	$	(3,538)	$	(15,187)	$	(11,963)

INCOME (LOSS) PER SHARE - BASIC AND DILUTED
Basic:
Net income (loss) attributable to common stockholders	$	(2.41)	$	(1.21)	$	(5.00)	$	(4.11)
Weighted average common shares outstanding - basic	3,092		2,913		3,039		2,908
Diluted:
Net income (loss) attributable to common stockholders	$	(2.56)	$	(1.34)	$	(5.10)	$	(4.15)
Weighted average common shares outstanding - diluted	3,334		3,109		3,137		3,006

See Notes to Condensed Consolidated Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

NET INCOME (LOSS)	$	1,501	$	5,325	$	2,677	$	6,004
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustment	(45)		541		(137)		310


COMPREHENSIVE INCOME (LOSS)	1,456		5,866		2,540		6,314
Comprehensive (income) loss attributable to noncontrolling interests	214		298		502		558
Comprehensive (income) loss attributable to redeemable noncontrolling interests	(133)		(141)		(288)		(132)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	1,537	$	6,023	$	2,754	$	6,740

See Notes to Condensed Consolidated Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(unaudited, in thousands)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Noncontrolling Interests in Consolidated Entities		Total		Convertible Preferred Stock			Redeemable Noncontrolling Interests
	Shares	Amount								Shares	Amount						Shares	Amount
Balance at March 31, 2023	3,197	$	3	$	298,118	$	(576,212)	$	(14)	(100)	$	(1,299)	$	(121)	$	(279,525)	19,120	$	478,000	$	1,669


Equity-based compensation	20	—		911		—		—		—	—		(1)		910		—	—		97

Forfeiture of restricted common shares	—	—		7		—		—		—	(7)		—		—		—	—		—
Purchase of treasury stock	(3)	—		—		—		—		(3)	(18)		—		(18)		—	—		—











Dividends declared and undeclared - preferred stock	—	—		—		(9,044)		—		—	—		—		(9,044)		—	—		—


Employee advances	—	—		3		—		—		—	—		—		3		—	—		—





Redemption value adjustment	—	—		—		1		—		—	—		—		1		—	—		(1)
Distributions to consolidated noncontrolling interests	—	—		—		—		—		—	—		—		—		—	—		(172)
Foreign currency translation adjustment	—	—		—		—		(45)		—	—		—		(45)		—	—		—






Net income (loss)	—	—		—		1,582		—		—	—		(214)		1,368		—	—		133
Balance at June 30, 2023	3,214	$	3	$	299,039	$	(583,673)	$	(59)	(103)	$	(1,324)	$	(336)	$	(286,350)	19,120	$	478,000	$	1,726


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Noncontrolling Interests in Consolidated Entities		Total		Convertible Preferred Stock			Redeemable Noncontrolling Interests
	Shares	Amount								Shares	Amount						Shares	Amount
Balance at December 31, 2022	3,110	$	3	$	297,715	$	(568,482)	$	78	(71)	$	(947)	$	167	$	(271,466)	19,120	$	478,000	$	1,614


Equity-based compensation	136	—		1,321		—		—		—	—		(1)		1,320		—	—		164

Forfeiture of restricted common shares	(1)	—		18		—		—		(1)	(18)		—		—		—	—		—
Purchase of treasury stock	(31)	—		—		—		—		(31)	(359)		—		(359)		—	—		—











Dividends declared and undeclared - preferred stock	—	—		—		(18,078)		—		—	—		—		(18,078)		—	—		—


Employee advances	—	—		(15)		—		—		—	—		—		(15)		—	—		—





Redemption value adjustment	—	—		—		(4)		—		—	—		—		(4)		—	—		4
Distributions to consolidated noncontrolling interests	—	—		—		—		—		—	—		—		—		—	—		(344)
Foreign currency translation adjustment	—	—		—		—		(137)		—	—		—		(137)		—	—		—






Net income (loss)	—	—		—		2,891		—		—	—		(502)		2,389		—	—		288
Balance at June 30, 2023	3,214	$	3	$	299,039	$	(583,673)	$	(59)	(103)	$	(1,324)	$	(336)	$	(286,350)	19,120	$	478,000	$	1,726


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


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

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




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






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


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

Contributions from noncontrolling interests	—	—		—		—		—		—	—		164		164		—	—		—


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






Net income (loss)	—	—		—		5,482		—		—	—		(298)		5,184		—	—		141


Balance at June 30, 2022	3,116	$	3	$	295,461	$	(547,602)	$	(257)	(66)	$	(867)	$	459	$	(252,803)	19,120	$	478,000	$	1,509


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


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

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




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






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


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

Contributions from noncontrolling interests	—	—		—		—		—		—	—		164		164		—	—		—


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


Other	—	—		—		(639)		639		—	—		—		—		—	—		—



Net income (loss)	—	—		—		6,430		—		—	—		(558)		5,872		—	—		132


Balance at June 30, 2022	3,116	$	3	$	295,461	$	(547,602)	$	(257)	(66)	$	(867)	$	459	$	(252,803)	19,120	$	478,000	$	1,509

See Notes to Condensed Consolidated Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2023		2022
Cash Flows from Operating Activities
Net income (loss)	$	2,677	$	6,004
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	17,222		18,644

Change in fair value of deferred compensation plan	(790)		(489)


Equity-based compensation	1,480		1,670
Equity in (earnings) loss in unconsolidated entities	847		(257)
Deferred tax expense (benefit)	(1,310)		(2,422)
Change in fair value of contingent consideration	300		—

(Gain) loss on disposal of assets	1,019		779
Amortization of other assets	166		331
Amortization of loan costs	506		305
Realized loss on restricted investment	80		71



Other (gain) loss	704		88



Changes in operating assets and liabilities, exclusive of the effect of acquisitions:
Accounts receivable	(5,529)		(6,720)
Due from affiliates	243		(232)
Due from Ashford Trust	(7,412)		(2,458)
Due from Braemar	9,770		(2,666)
Inventories	(333)		(320)
Prepaid expenses and other	(2,285)		4,297
Investment in unconsolidated entities	—		150

Operating lease right-of-use assets	1,752		1,888
Other assets	(31)		8
Accounts payable and accrued expenses	(20,300)		(2,060)
Due to affiliates	35		101
Due to Ashford Trust	(747)		—

Claims liabilities and other	5,374		3,376
Operating lease liabilities	(1,943)		(1,895)
Deferred income	1,124		(2,225)

Net cash provided by (used in) operating activities	2,619		15,968
Cash Flows from Investing Activities


Additions to property and equipment	(11,954)		(4,094)
Proceeds from sale of property and equipment, net	23		406


Cash acquired in asset acquisition of RHC	849		—
Acquisition of Alii Nui, net of cash acquired	(6,704)		—

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






Proceeds from note receivable	1,000		1,380
Issuance of notes receivable	(1,269)		—
Net cash provided by (used in) investing activities	(18,055)		(8,998)
			(Continued)


	Six Months Ended June 30,
	2023		2022

Cash Flows from Financing Activities


Payments for dividends on preferred stock	(17,399)		(26,519)
Payments on revolving credit facilities	(6,752)		(2,687)
Borrowings on revolving credit facilities	8,450		992
Proceeds from notes payable	21,576		68,061
Payments on notes payable	(2,050)		(29,027)
Payments on finance lease liabilities	(207)		(515)
Payments of loan costs	(329)		(2,694)
Purchase of treasury stock	(359)		(241)
Employee advances	(15)		(257)




Contributions from noncontrolling interest	—		164
Distributions to noncontrolling interests in consolidated entities	(344)		(32)
Net cash provided by (used in) financing activities	2,571		7,245
Effect of foreign exchange rate changes on cash and cash equivalents	30		(4)
Net change in cash, cash equivalents and restricted cash	(12,835)		14,211
Cash, cash equivalents and restricted cash at beginning of period	81,448		72,449
Cash, cash equivalents and restricted cash at end of period	$	68,613	$	86,660

Supplemental Cash Flow Information
Interest paid	$	6,238	$	3,620
Income taxes paid (refunded), net	7,366		1,504
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 of Alii Nui through issuance of RED Units	2,000		—

Acquisition related contingent consideration liability	1,000		1,670



Capital expenditures accrued but not paid	996		571







Finance lease additions	148		585





Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	44,390	$	37,571
Restricted cash at beginning of period	37,058		34,878
Cash, cash equivalents and restricted cash at beginning of period	$	81,448	$	72,449

Cash and cash equivalents at end of period	$	32,505	$	48,422
Restricted cash at end of period	36,108		38,238
Cash, cash equivalents and restricted cash at end of period	$	68,613	$	86,660

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Ashford Inc. (the “Company,” “we,” “us” or “our”), a Nevada corporation, is an alternative asset management company with a portfolio of strategic operating businesses that provides products and services primarily to clients in the real estate and hospitality industries, 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 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 Ashford Trust or Braemar’s individual hotel properties, which duties are, and will continue to be, the responsibility of the hotel management companies that operate such hotel properties. Additionally, Remington Lodging & Hospitality, LLC (“Remington”), a subsidiary of the Company, operates certain hotel properties for Ashford Trust, Braemar and third-parties.

Other Developments

On January 3, 2023, the Company acquired Remington Hotel Corporation (“RHC”), an affiliate owned by Mr. Monty J. Bennett, our 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, from which the Company leases the offices for our corporate headquarters in Dallas, Texas. The purchase price paid was de minimis. The transaction was accounted for as an asset acquisition. See note 15.

On February 1, 2023, the Company, Ashford Trust and Braemar (collectively, the “Parties” and each individually a “Party”) entered into a Third Amended and Restated Contribution Agreement with respect to the funding of certain operating expenses of Ashford Securities LLC, a subsidiary of the Company (“Ashford Securities”). The Third Amended and Restated Contribution Agreement states that after 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 (the “Amended and Restated True-Up Date”) capital contributions to Ashford Securities for the remainder of fiscal year 2023 will be divided between each Party based on the actual amount of capital raised by such Party through Ashford Securities. Thereafter on a yearly basis at year-end, starting with the year-end of 2023, there will be a true-up between the Parties whereby there will be adjustments so that the capital contributions made by each Party will be based on the cumulative amount of capital raised by each Party through Ashford Securities as a percentage of the total amount raised by the Parties collectively through Ashford Securities since June 19, 2019 (the resulting ratio of capital contributions among the Company, Ashford Trust and Braemar following this true-up, the “Cumulative Ratio”). Thereafter, the capital contributions will be divided among each Party in accordance with the Cumulative Ratio, as recalculated at the end of each year.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On March 17, 2023, RED Hospitality & Leisure LLC (“RED”) acquired certain privately held entities and assets associated with the Alii Nui and Maui Dive Shop (“Alii Nui”), which provides luxury sailing and watersports experiences in Maui, Hawaii, for a total purchase price of $11.0 million, excluding working capital adjustments. The purchase price consisted of $8.0 million in cash, subject to certain adjustments, $1.0 million of contingent consideration and 80,000 Preferred Units issued by RED (the “RED Units”) issued at $25 per unit for a total liquidation value of $2.0 million. See note 4.

On March 24, 2023, Inspire Event Technologies Holdings, LLC (“INSPIRE”) amended its credit agreement dated as of November 1, 2017 (the “INSPIRE Amendment”). The INSPIRE Amendment increased the maximum borrowing capacity under INSPIRE’s revolving credit facility (the “Revolving Note”) from $3.0 million to $6.0 million, provides for a $20.0 million senior secured term loan (“Term Note”) and an equipment note (“Equipment Note” and together with the Revolving Note and the Term Note, the “Notes”) pursuant to which, until September 24, 2027, INSPIRE may request advances up to $4.0 million in the aggregate to purchase new machinery or equipment to be used in the ordinary course of business. The INSPIRE Amendment extended the maturity date of INSPIRE’s Notes from January 1, 2024 to March 24, 2028. See note 6.

On May 15, 2023, the Company and Computershare Trust Company, N.A., a federally chartered trust company (the “Rights Agent”) entered into Amendment No. 1 (“Amendment No. 1”) to the Rights Agreement dated as of August 30, 2022 (the “Rights Agreement”). Our board of directors implemented the rights plan by declaring (i) a dividend to the holders of the Company’s common stock of one preferred share purchase right (a “Right”) for each share of common stock and (ii) a dividend to the holders of the Company’s Series D Convertible Preferred Stock of one Right in respect of each share of the Company’s common stock issuable upon conversion of the Series D Convertible Preferred Stock. The dividends were distributed on September 9, 2022, to our stockholders of record on that date. Each of those Rights become exercisable on the date on which the Rights separate and begin trading separately from our common stock and entitles the registered holder to purchase from the Company one one-thousandth of a share of our Series F Preferred Stock, par value $0.001 per share (“Series F Preferred Stock”), at a price of $275 per one one-thousandth of a share of our Series F Preferred Stock represented by such Right, subject to adjustment. Pursuant to Amendment No. 1, the Rights Agreement was amended to (i) extend the final expiration date with respect to the Company’s Rights until July 30, 2024, and (ii) decrease the beneficial ownership threshold in the definition of an acquiring person from 10% to 7%. The value of the Rights was de minimus.

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 that it controls. All significant 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 2022 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 17, 2023.

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

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Noncontrolling Interests—The following tables present information about noncontrolling interests in our consolidated subsidiaries, including those related to consolidated VIEs, as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023
	Ashford Holdings			OpenKey (3)		Pure Wellness (4)
Ashford Inc. ownership interest	99.49		%	76.78	%	70.00	%
Redeemable noncontrolling interests (1) (2)	0.51		%	—	%	—	%
Noncontrolling interests in consolidated entities	—		%	23.22	%	30.00	%
	100.00		%	100.00	%	100.00	%

Carrying value of redeemable noncontrolling interests	$	1,726		n/a		n/a

Redemption value adjustment, year-to-date	4			n/a		n/a
Redemption value adjustment, cumulative	617			n/a		n/a
Carrying value of noncontrolling interests	n/a			(188)		(148)
Assets, available only to settle subsidiary’s obligations (5)	n/a			1,576		901
Liabilities (6)	n/a			702		1,530
Notes payable (6)	n/a			158		—
Revolving credit facility (6)	n/a			—		150


















	December 31, 2022
	Ashford Holdings			OpenKey (3)		Pure Wellness (4)
Ashford Inc. ownership interest	99.87		%	76.79	%	70.00	%
Redeemable noncontrolling interests (1) (2)	0.13		%	—	%	—	%
Noncontrolling interests in consolidated entities	—		%	23.21	%	30.00	%
	100.00		%	100.00	%	100.00	%

Carrying value of redeemable noncontrolling interests	$	1,614		n/a		n/a
Redemption value adjustment, year-to-date	32			n/a		n/a
Redemption value adjustment, cumulative	613			n/a		n/a
Carrying value of noncontrolling interests	n/a			273		(106)
Assets, available only to settle subsidiary’s obligations (5)	n/a			2,114		1,580
Liabilities (6)	n/a			1,078		2,048

Revolving credit facility (6)	n/a			—		150

________

(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.

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

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(5) Total assets consist primarily of cash and cash equivalents, property and equipment 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, 2023 and 2022.

We held an investment in an unconsolidated variable interest entity with a carrying value of $500,000 at June 30, 2023 and December 31, 2022. 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, 2023 and 2022. 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 audit for calendar year 2023.

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


	June 30, 2023			December 31, 2022
Carrying value of the investment in REA Holdings	$	2,219		$	3,067
Ownership interest in REA Holdings	30		%	30		%

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Equity in earnings (loss) in unconsolidated entities REA Holdings	$	(388)	$	67	$	(847)	$	257

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 and the appropriate weighted-average cost of capital. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in our condensed 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.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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.

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.

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


	June 30, 2023		December 31, 2022
REIT Advisory:
Insurance claim reserves (1)	$	30,007	$	23,471

Remington:
Managed hotel properties’ reserves (2)	3,400		11,464
Insurance claim reserves (3)	2,701		2,123
Total Remington restricted cash	6,101		13,587











Total restricted cash	$	36,108	$	37,058

________

(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 “claims liabilities and other” 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 to/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” in our condensed consolidated balance sheets.

(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 “claims liabilities and other” in our condensed consolidated balance sheets.

Accounts Receivable—Accounts receivable consists primarily of receivables from customers of audio visual services and third-party owned properties managed by Remington. 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 maintained at a level adequate to absorb estimated receivable losses. The estimate is based on past receivable loss experience, known and inherent credit risks, current economic conditions and other relevant factors, including specific reserves for certain accounts.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Notes Receivable—Notes receivable were comprised of the following (in thousands):


	June 30, 2023		December 31, 2022
Remington note receivable (1)	$	525	$	1,506
Ashford LLC note receivable (2)	1,042		535
REA Holdings affiliate (3)	815		—
Total notes receivable	$	2,382	$	2,041

________

(1) Remington holds a note receivable from a third-party which matures on January 31, 2024. The interest rate on the note receivable is 10% per annum with payments of interest payable quarterly commencing March 31, 2023. As of June 30, 2023 and December 31, 2022, the outstanding principal balance is included in “prepaid expenses and other” and “other assets, net,” respectively, in our condensed consolidated balance sheets.

(2) Ashford LLC holds a note receivable from a third-party. The note bears interest at 8.00% per annum, compounding annually. Interest is paid in-kind and added to the outstanding principal balance until the note maturity date of November 11, 2026. The note receivable is recorded in “other assets, net” in our condensed consolidated balance sheet.

(3) On April 3, 2023, the Company entered into a note receivable with an affiliate of REA Holdings. Principal plus any accrued interest is due to the Company on demand or, in the absence of any demand, 24 months. Interest is paid in-kind and added to the outstanding principal balance until the note maturity date. The interest rate on the note receivable is 7.5% per annum. The note receivable is recorded in “prepaid expenses and other” in our condensed consolidated balance sheet.

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, 2023 and December 31, 2022, property and equipment, net of accumulated depreciation, included enhanced return funding program (“ERFP”) assets of $3.5 million and $5.9 million, audio visual equipment at INSPIRE of $12.5 million and $8.8 million and marine vessels at RED of $22.3 million and $14.2 million, respectively.

Claims Liabilities and Other—As of June 30, 2023 and December 31, 2022, claims liabilities and other included reserves in the amount of $29.8 million and $23.5 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, 2023 and December 31, 2022, claims liabilities and other also included $2.0 million and $2.2 million, respectively, relating to reserves for Remington health insurance claims and, as of June 30, 2023, a contingent consideration liability of $500,000 from the Company’s acquisition of Alii Nui. See notes 4 and 8.

Other Liabilities—As of June 30, 2023, other liabilities included the contingent consideration liability from the Company’s acquisition of Chesapeake Hospitality (“Chesapeake”) of $2.6 million, $500,000 of contingent consideration and $300,000 of cash held in escrow payable to the sellers of Alii Nui, subject to certain conditions, related to the Company’s acquisition of Alii Nui (see notes 4 and 8), and an uncertain tax position of $953,000. As of December 31, 2022, other liabilities included a liability for contingent consideration from the Company’s acquisition of Chesapeake of $2.3 million and an uncertain tax position liability of $917,000.

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.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 2018 through 2022 remain subject to potential examination by certain federal and state taxing authorities.

Recently Adopted 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. We adopted ASU 2016-13 and ASU 2019-10 effective January 1, 2023 and the adoption did not have a material impact on our condensed consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provides optional guidance through December 31, 2022 to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which further clarified the scope of the reference rate reform optional practical expedients and exceptions outlined in Topic 848. The amendments in ASU Nos. 2020-04 and 2021-01 apply to contract modifications that replace a reference rate affected by reference rate reform, providing optional expedients regarding the measurement of hedge effectiveness in hedging relationships that have been modified to replace a reference rate. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) (“ASU 2022-06”), which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The Company applied the optional expedient in evaluating debt modifications converting from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”). The Company adopted the standards upon the respective effective dates. There was no material impact as a result of this adoption.

Recently Issued Accounting Standards—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 smaller reporting companies, 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. The Company continues to evaluate whether the adoption of ASU 2020-06 will have any impact on the Company’s financial statements.

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

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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, the base fee is paid monthly in an amount equal to 1/12th of 0.70% of Ashford Trust’s total market capitalization plus the Net Asset Fee Adjustment, as defined in our Second Amended and Restated Advisory Agreement with Ashford Trust, as amended, subject to certain minimums.

For Braemar, the base fee is paid monthly in an amount equal to 1/12th of 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.

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 whenever a hotel’s gross operating profit (“GOP”) exceeds the hotel’s budgeted GOP. The incentive fee is equal to the lesser of 1% of each hotel’s annual gross revenue or the amount by which the respective hotel’s GOP exceeds the hotel’s budgeted GOP. The base management fees and incentive management fees that Remington receives for third-party owned properties vary by property. Other management fees primarily includes fees for health insurance programs administered on behalf of certain third-party properties. Health insurance program fees are recognized monthly at rates which approximate market rates for similar plans provided by independent insurance companies. Other management fees additionally includes fees for fixed monthly accounting services, revenue management services and other services at certain third-party properties.

Design and Construction Fees Revenue

Design and construction fees 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.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 our subsidiary, Lismore Capital II LLC (“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, modification or other transaction 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 and our Amended and Restated Contribution Agreement with Ashford Trust and Braemar (as defined below), 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 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.

The recognition of cost reimbursement revenue and reimbursed expenses for centralized software programs reimbursed by Ashford Trust and Braemar may result in temporary timing differences 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.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 12 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.

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


	Deferred Income
	2023		2022
Balance as of March 31	$	9,469	$	10,377
Increases to deferred income	2,392		1,961
Recognition of revenue (1)	(2,842)		(3,658)
Balance as of June 30	$	9,019	$	8,680

________

(1) Deferred income recognized in the three months ended June 30, 2023, includes (a) $302,000 of advisory revenue primarily related to our advisory agreements and our Amended and Restated Contribution Agreement with Ashford Trust and Braemar, (b) $390,000 of audio visual revenue and (c) $2.1 million of “other services” revenue earned by our products and services companies.

Deferred income recognized in the three months ended June 30, 2022, includes (a) $390,000 of advisory revenue primarily related to our advisory agreements and our Amended and Restated Contribution Agreement 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
	2023		2022
Balance as of January 1	$	7,800	$	10,905
Increases to deferred income	7,676		5,812
Recognition of revenue (1)	(6,457)		(8,037)
Balance as of June 30	$	9,019	$	8,680

________

(1) Deferred income recognized in the six months ended June 30, 2023 includes (a) $670,000 of advisory revenue primarily related to our advisory agreements and our Amended and Restated Contribution Agreement with Ashford Trust and Braemar, (b) $1.5 million of audio visual revenue, and (c) $4.3 million of “other services” revenue earned by our products and services companies. Revenue recognized in the six months ended June 30, 2023 includes $4.9 million which was recorded in deferred income in our condensed consolidated balance sheet as of December 31, 2022.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Deferred income recognized in the six months ended June 30, 2022 includes (a) $833,000 of advisory revenue primarily related to our advisory agreements and our Amended and Restated Contribution Agreement with Ashford Trust and Braemar, (b) $1.7 million of audio visual revenue, (c) $2.3 million of other revenue 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.

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.

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 $22.9 million and $17.6 million included in “accounts receivable, net” primarily related to our products and services segment, $7.4 million and $0 in “due from Ashford Trust,” and $2.1 million and $11.8 million included in “due from Braemar” related to REIT advisory services at June 30, 2023 and December 31, 2022, respectively. See note 15.

Disaggregated Revenue

Our revenues were comprised of the following for the three and six months ended June 30, 2023 and 2022, respectively (in thousands):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Advisory services fees:
Base advisory fees	$	11,917	$	11,839	$	24,025	$	23,513
Incentive advisory fees	67		—		134		—


Other advisory revenue	130		130		258		258
Total advisory services fees revenue	12,114		11,969		24,417		23,771

Hotel management fees:
Base fees	10,388		9,484		19,398		15,658
Incentive fees	2,059		2,867		3,041		3,871
Other management fees	2,431		1,069		4,626		1,069
Total hotel management fees revenue	14,878		13,420		27,065		20,598

Design and construction fees revenue	7,605		4,738		14,534		9,262

Audio visual revenue	41,349		35,977		81,706		60,942

Other revenue:

Watersports, ferry and excursion services (1)	9,794		7,684		17,422		13,729
Debt placement and related fees (2)	1,016		690		1,411		3,173
Cash management fees (3)	53		—		179		—
Claims management services	—		1		1		16

Other services (4)	945		3,697		1,869		6,593
Total other revenue	11,808		12,072		20,882		23,511

Cost reimbursement revenue	104,956		89,277		209,228		163,328

Total revenues	$	192,710	$	167,453	$	377,832	$	301,412

REVENUES BY SEGMENT (5)
REIT advisory	$	20,297	$	19,221	$	41,178	$	38,614
Remington	106,178		90,799		207,642		161,306
Premier	10,404		7,085		20,175		13,311
INSPIRE	41,403		36,016		81,812		61,038
RED	9,817		7,693		17,468		13,738
OpenKey	422		413		811		795
Corporate and other	4,189		6,226		8,746		12,610
Total revenues	$	192,710	$	167,453	$	377,832	$	301,412

________

(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 and Maui 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) Cash management fees include revenue earned by providing active management and investment of Ashford Trust and Braemar’s excess cash in short-term U.S. Treasury securities.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(4) 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. The three and six months ended June 30, 2022 included the revenue of Marietta Leasehold LP (“Marietta”), which holds the leasehold rights to a single hotel and convention center property in Marietta, Georgia, and was acquired by Ashford Trust on December 16, 2022.

(5) We have six reportable segments: REIT Advisory, Remington, Premier, INSPIRE, RED and OpenKey. We combine the operating results of Pure Wellness and, for the three and six months ended June 30, 2022, Marietta 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, the U.S. Virgin Islands 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, 2023 and 2022, respectively (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
INSPIRE:
United States	$	29,628	$	27,057	$	56,340	$	46,127
Mexico	9,002		7,156		20,065		11,774

Dominican Republic	2,773		1,803		5,407		3,137
Total audio visual revenue	$	41,403	$	36,016	$	81,812	$	61,038
RED:
Continental United States	$	2,980	$	3,386	$	5,470	$	5,834
Hawaii	1,845		—		2,269		—
U.S. Virgin Islands	3,600		3,202		6,924		6,020
United Kingdom (Turks and Caicos Islands)	1,392		1,105		2,805		1,884

Total watersports, ferry and excursion services	$	9,817	$	7,693	$	17,468	$	13,738

4. Business Combination

Alii Nui

On March 17, 2023, RED acquired certain privately held entities and assets associated with Alii Nui, which provides luxury sailing and watersports experiences in Maui, Hawaii, for a total purchase price of $11.0 million, excluding working capital adjustments. The purchase price consisted of $8.0 million in cash, subject to certain adjustments, $1.0 million of contingent consideration and 80,000 RED Units issued at $25 per unit for a total liquidation value of $2.0 million. The RED Units accrue interest at 6.5% per annum with required quarterly payments.

The $8.0 million cash consideration includes $300,000 of cash held back by the Company to be paid eighteen months after the acquisition date (the “Holdback Date”), subject to certain conditions. The $1.0 million of contingent consideration is subject to Alii Nui obtaining a permit to operate a marine vessel (the “Permit”) prior to the Holdback Date of which $500,000 is to be paid upon the later of January 15, 2024 or the date the Permit is obtained and the remaining $500,000 is to be paid on the Holdback Date, subject to certain conditions. Subsequent to the acquisition date, Alii Nui obtained approval to be issued the Permit upon registration of the marine vessel.

Both the Company and the holders of the RED Units have the right to convert the RED Units at the liquidation value of $25 per unit three years after the acquisition date upon providing notice to the respective party. The Company may convert the RED Units by paying cash or a combination of cash or the Company’s common shares at the sole discretion of the Company (the “Call Right”). The holders of the RED Units may convert their RED Units for cash (the “Put Right”). Under current accounting guidance, the Call Right and the Put Right are accounted for on a combined basis as a form of financing the acquisition of Alii Nui and recorded as a non-current note payable of $2.0 million in our condensed consolidated balance sheet.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The acquisition of Alii Nui 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 Alii Nui 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. For goodwill reporting purposes, the operations and goodwill for Alii Nui are included in our RED reporting unit as they are similar businesses. See note 5.

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 RED Units, the contingent consideration and the intangible assets; the tax basis of which is impacted by the final assignment of holdback values as further allocated to the acquired assets versus the acquired business corporate entity. Thus, the balances reflected below are subject to change, and any such changes could result in adjustments to the allocation.

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




Cash	$	7,700
Cash consideration payable	300
Contingent consideration	1,000
RED Units	2,000
Working capital adjustments	304

Total fair value of purchase price	$	11,304


	Fair Value		Estimated Useful Life
Current assets including cash of $996	$	1,286

Property and equipment, net	2,254		20 years

Goodwill	771

Trademarks	1,600

Boat slip rights	6,250		20 years
Total assets acquired	12,161
Current liabilities	857






Total assumed liabilities	857
Net assets acquired	$	11,304

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 RED’s operations to new markets in Hawaii.

Results of Alii Nui

The results of operations of Alii Nui have been included in our results of operations since the acquisition date of March 17, 2023. Our condensed consolidated statements of operations for the three and six months ended June 30, 2023 include total revenue from Alii Nui of $2.0 million and $2.4 million, respectively. In addition, our condensed consolidated statements of operations for the three and six months ended June 30, 2023 include net income from Alii Nui of $12,000 and $92,000, respectively.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Pro Forma Financial Results

The following table reflects the unaudited pro forma results of operations as if the Alii Nui acquisition had occurred on January 1, 2022, and the removal of $57,000 and $375,000, respectively, of transaction costs directly attributable to the acquisition (net of the incremental tax expense) for the three and six months ended June 30, 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Total revenues	$	192,710	$	169,410	$	379,672	$	305,585
Net income (loss)	1,543		5,627		3,155		6,939
Net income (loss) attributable to common stockholders	(7,420)		(3,236)		(14,709)		(11,028)

5. Goodwill and Intangible Assets, net

Goodwill

The carrying amount of goodwill as of June 30, 2023 is as follows (in thousands):


	Remington		RED		Corporate and Other (1)		Consolidated







Balance at December 31, 2022	$	56,658	$	1,235	$	782	$	58,675
Changes in goodwill:
Additions (2)	—		686		—		686
Adjustments (2)	—		85		—		85


Balance at June 30, 2023	$	56,658	$	2,006	$	782	$	59,446

________

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

(2) The additions and subsequent adjustments relate to RED’s acquisition of Alii Nui. See note 4.

Intangible Assets

Intangible assets, net as of June 30, 2023 and December 31, 2022, are as follows (in thousands):


	June 30, 2023				December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Definite-lived intangible assets:
Remington management contracts	$	114,731	$	(46,201)	$	68,530	$	114,731	$	(40,519)	$	74,212
Premier management contracts	194,000		(59,111)		134,889		194,000		(53,415)		140,585
INSPIRE customer relationships	9,319		(6,086)		3,233		9,319		(5,527)		3,792

RED boat slip rights (1)	9,350		(718)		8,632		3,100		(535)		2,565


	$	327,400	$	(112,116)	$	215,284	$	321,150	$	(99,996)	$	221,154

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

Remington trademarks	$	4,900					$	4,900


RED trademarks (2)	2,090						490
	$	6,990					$	5,390

________

(1) Includes $6.3 million of boat slip rights acquired in RED’s acquisition of Alii Nui on March 17, 2023. See note 4.

(2) Includes $1.6 million of trademarks acquired in RED’s acquisition of Alii Nui on March 17, 2023. See note 4.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Amortization expense for definite-lived intangible assets was $6.1 million and $12.1 million for the three and six months ended June 30, 2023, respectively. 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. The useful lives of our customer relationships range from seven 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 years and 20 years, respectively.

6. Notes Payable, net

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


Indebtedness	Borrower	Maturity	Interest Rate	June 30, 2023		December 31, 2022
Credit facility (6) (9)	Ashford Inc.	April 1, 2027	Base Rate (1) + 6.35% or Adjusted Term SOFR (3) + 7.35%	$	82,000	$	70,000

Note payable (6) (11)	Ashford Inc.	February 29, 2028	4.00%	1,366		1,495
Note payable (18)	OpenKey	On demand	15.00%	158		—
Term loan (5) (7) (10)	INSPIRE	March 24, 2028	BSBY Rate (2) + 2.75%	19,500		17,300
Revolving credit facility (5) (7) (10)	INSPIRE	March 24, 2028	BSBY Rate (2) + 2.75%	1,699		—




Revolving credit facility (5) (12)	Pure Wellness	On demand	Prime Rate (4) + 1.00%	150		150
Revolving credit facility (5) (8) (13)	RED	December 5, 2023	Prime Rate (4) + 1.75%	3		—

Term loan (5) (8) (14)	RED	July 18, 2029	6.00%	1,663		1,596
Term loan (5) (8)	RED	July 18, 2023	6.50%	195		337


Term loan (5) (8) (15)	RED	August 5, 2029	Prime Rate (4) + 2.00%	830		858
Term loan (5) (8)	RED	August 5, 2029	Prime Rate (4) + 2.00%	1,905		1,980
Term loan (6) (8)	RED	August 5, 2029	Prime Rate (4) + 1.75%	2,841		3,006
Term loan (5) (8) (19)	RED	March 17, 2033	Prime Rate (4) + 1.50%	1,660		—
Term loan (5) (8) (19)	RED	March 17, 2033	Prime Rate (4) + 1.50%	2,373		—
Term loan (5) (8) (21)	RED	May 19, 2033	Prime Rate (4) + 1.00%	643		—
Draw term loan (5) (8) (16)	RED	March 17, 2032	5.00%	988		641
Draw term loan (5) (8) (16)	RED	March 17, 2032	5.00%	1,025		640
Draw term loan (5) (8) (17)	RED	Various (17)	Prime Rate (4) + 1.00%	1,442		1,099
RED Units (5) (20)	RED	See footnote (20)	6.50%	2,000		—
Total notes payable				122,441		99,102
Capitalized default interest, net				—		148
Deferred loan costs, net				(2,706)		(2,643)
Original issue discount, net (9)				(1,560)		(1,732)
Notes payable including capitalized default interest and deferred loan costs, net				118,175		94,875

Less current portion				(3,690)		(5,195)
Total notes payable, net - non-current				$	114,485	$	89,680

__________________

(1) Base Rate, as defined in the amended 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) Adjusted Term SOFR plus 1.00%, or (iv) 1.25%.

(2) The Daily Adjusting Bloomberg Short-Term Bank Yield Index rate (the “BSBY Rate”) was 5.22% at June 30, 2023.

(3) Adjusted Term SOFR is the one-month forward-looking SOFR rate plus 0.03%. Adjusted Term SOFR was 5.17% at June 30, 2023.

(4) The Prime Rate was 8.25% and 7.50% at June 30, 2023 and December 31, 2022, 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 $10.8 million as of June 30, 2023.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 $14.8 million and $13.6 million as of June 30, 2023 and December 31, 2022, respectively.

(9) On March 31, 2023, the Company amended its Credit Agreement (the “Credit Agreement”), previously entered into on April 1, 2022, with Mustang Lodging Funding LLC, as administrative agent, and the lenders from time to time party thereto. The amendment replaced the one-month LIBOR rate with Adjusted Term SOFR. 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 and March 7, 2023, the Company drew an additional $20.0 million and $12.0 million on the Credit Facility, respectively. 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 Adjusted Term SOFR plus an applicable margin, or the Base Rate plus an applicable margin. The applicable margin for borrowings under the Credit Agreement for Adjusted Term SOFR 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% during the first 24 months of the term, payable on the last business day of each month. The Credit Facility included an original issue discount of $2.0 million on the Closing Date. As of June 30, 2023, the amount unused under the Credit Facility was $18.0 million.

(10) On March 24, 2023, INSPIRE amended its credit agreement by entering into the INSPIRE Amendment. The INSPIRE Amendment increased the maximum borrowing capacity under INSPIRE’s Revolving Note from $3.0 million to $6.0 million, provides for a $20.0 million Term Note and an Equipment Note pursuant to which, until September 24, 2027, INSPIRE may request advances up to $4.0 million in the aggregate to purchase new machinery or equipment to be used in the ordinary course of business. The INSPIRE Amendment extended the maturity date of INSPIRE’s Notes from January 1, 2024 to March 24, 2028. Monthly principal payments commence on April 1, 2023 for the Term Note in the amount of approximately $167,000. Borrowings under the Revolving Note require monthly payments of interest only until the maturity date and borrowings under the Equipment Note require monthly principal payments at 1/60th of the original principal amount of each advance. The Notes bear interest at the BSBY Rate plus a margin of 2.75% and the undrawn balance of the Revolving Note and the Equipment Note are subject to an unused fee of 0.25% per annum. As of June 30, 2023, the amount unused under INSPIRE’s revolving credit facility was $4.3 million. As of June 30, 2023, no balances had been drawn on the Equipment Note.

(11) 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.

(12) As of June 30, 2023, the amount unused under Pure Wellness’s revolving credit facility was $100,000.

(13) As of June 30, 2023, the amount unused under RED’s revolving credit facility was $247,000.

(14) On July 18, 2019, RED entered into a term loan of $1.7 million. 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%.

(15) On July 23, 2021, RED entered into a term loan agreement with a maximum principal amount of $900,000.

(16) 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%.

(17) On September 15, 2022, RED entered into a closed-end non-revolving line of credit for $1.5 million that converts into an individual term loan each time RED draws upon the facility. As of June 30, 2023, RED had drawn the full amount allowed under the line of credit. Maturity dates for amounts drawn under the facility are November 30, 2027, December 28, 2027 and January 20, 2028.

(18) On February 2, 2023, OpenKey entered into a loan funding agreement with Braemar with a maximum loan amount of $395,000. As of June 30, 2023, the remaining unused loan balance was $237,000.

(19) On March 17, 2023, in connection with the acquisition of Alii Nui, RED entered into two term loans of $1.7 million and $2.4 million. RED is required to make monthly payments on the term loans starting April 17, 2023.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(20) On March 17, 2023, in connection with the Alii Nui acquisition, RED issued 80,000 RED Units at $25 per unit with a liquidation value of $2.0 million. The RED Units accrue interest at 6.5% per annum with required quarterly payments. The RED Units are considered a form of financing the acquisition of Alii Nui under current accounting guidance and is recorded as a non-current note payable in our condensed consolidated balance sheet. See note 4.

(21) On May 19, 2023, RED entered into a term loan for two vessels. The interest rate is equal to the Prime Rate plus 1.00% and the note matures on May 19, 2033. RED is required to make monthly principal payments on the term loan starting in June 2023.

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, 2023, 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, 2023		December 31, 2022

Accounts payable	$	19,325	$	18,841
Accrued payroll expense	15,574		30,626
Accrued vacation expense	2,240		2,418
Accrued interest	402		381
Other accrued expenses	779		3,813

Total accounts payable and accrued expenses	$	38,320	$	56,079

8. Fair Value Measurements

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

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

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

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

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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


	Quoted Market Prices (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
June 30, 2023
Assets










Restricted Investment:
Ashford Trust common stock	$	38	(1)	$	—		$	—		$	38
Braemar common stock	186		(1)	—			—			186
Total	$	224		$	—		$	—		$	224
Liabilities




Contingent consideration	$	(1,000)	(2)	$	—		$	(2,620)	(3)	$	(3,620)
Subsidiary compensation plan	—			(15)		(1)	—			(15)
Deferred compensation plan	(2,060)			—			—			(2,060)


Total	$	(3,060)		$	(15)		$	(2,620)		$	(5,695)
Net	$	(2,836)		$	(15)		$	(2,620)		$	(5,471)

__________________

(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, 2023, which are distributed to the plan participants 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 Alii Nui obtaining the Permit, $500,000 of which is reported within each of “claims liabilities and other” and “other liabilities” in our condensed consolidated balance sheets.

(3) 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 “other liabilities” in our condensed consolidated balance sheets.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Quoted Market Prices (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
December 31, 2022
Assets










Restricted Investment:
Ashford Trust common stock	$	57	(1)	$	—		$	—		$	57
Braemar common stock	246		(1)	—			—			246
Total	$	303		$	—		$	—		$	303
Liabilities




Contingent consideration	$	—		$	—		$	(2,320)	(2)	$	(2,320)
Subsidiary compensation plan	—			(74)		(1)	—			(74)
Deferred compensation plan	(2,849)			—			—			(2,849)


Total	$	(2,849)		$	(74)		$	(2,320)		$	(5,243)
Net	$	(2,546)		$	(74)		$	(2,320)		$	(4,940)

__________________

(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, 2022, which are distributed to the plan participants 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 “other liabilities” in our condensed consolidated balance sheets.

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


	Contingent Consideration Liability (1)

Balance at December 31, 2022	$	(2,320)

Gains (losses) from fair value adjustments included in earnings	(300)


Balance at June 30, 2023	$	(2,620)

__________________

(1) The Company measures contingent consideration liabilities related to the Chesapeake acquisition in April of 2022 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 35.58% to 36.41%; b) a forward-looking risk-free rate, with a range of 5.09% to 5.38%; and c) a volatility rate of 55.37%.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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

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


	Gain (Loss) Recognized
	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Assets






Unrealized gain (loss) on investment: (1)
Ashford Trust common stock	$	5	$	(54)	$	63	$	56
Braemar common stock	8		(113)		7		(56)
Realized gain (loss) on investment: (2)
Ashford Trust common stock	—		—		(73)		(94)
Braemar common stock	—		—		(7)		23




Total	$	13	$	(167)	$	(10)	$	(71)
Liabilities






Contingent consideration (3)	$	480	$	—	$	(300)	$	—
Subsidiary compensation plan (4)	(19)		(21)		(6)		(68)
Deferred compensation plans (4)	570		600		790		489
Total	$	1,031	$	579	$	484	$	421
Net	$	1,044	$	412	$	474	$	350

__________________

(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 our contingent consideration liabilities. The change in the fair value in the three and six months ended June 30, 2023 related to the level of achievement of certain performance targets associated with the acquisition of Chesapeake in April of 2022. Changes in the fair value of contingent consideration are reported within “other” operating expense in our condensed consolidated statements of operations.

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

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Restricted Investment

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


	Historical Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:
June 30, 2023
Equity securities (1)	$	672	$	—	$	(448)	$	224

__________________

(1) Distributions of $195,000 of available-for-sale securities occurred in the six months ended June 30, 2023.


	Historical Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities:
December 31, 2022
Equity securities (1)	$	821	$	—	$	(518)	$	303

__________________

(1) Distributions of $365,000 of available-for-sale securities occurred in the year ended December 31, 2022.

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, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:
Restricted investment	$	224	$	224	$	303	$	303
Financial liabilities measured at fair value:

Deferred compensation plan	$	2,060	$	2,060	$	2,849	$	2,849

Contingent consideration	3,620		3,620		2,320		2,320
Financial assets not measured at fair value:
Cash and cash equivalents	$	32,505	$	32,505	$	44,390	$	44,390
Restricted cash	36,108		36,108		37,058		37,058
Accounts receivable, net	22,880		22,880		17,615		17,615
Notes receivable	2,382		2,382		2,041		2,041
Due from affiliates	220		220		463		463
Due from Ashford Trust	7,412		7,412		—		—
Due from Braemar	2,058		2,058		11,828		11,828
Investments in unconsolidated entities	3,369		3,369		4,217		4,217
Financial liabilities not measured at fair value:
Accounts payable and accrued expenses	$	38,320	$	38,320	$	56,079	$	56,079
Dividends payable	27,964		27,964		27,285		27,285
Due to affiliates	33		33		15		15
Due to Ashford Trust	—		—		1,197		1,197

Claims liabilities and other	33,070		33,070		26,547		26,547
Notes payable	122,441		116,319 to 128,563		99,102		94,147 to 104,057

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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.

Contingent consideration. The liabilities associated with the Company’s acquisition of Chesapeake and Alii Nui are 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. The Chesapeake liability is considered a Level 3 valuation technique and the Alii Nui liability is considered a Level 1 valuation technique. See note 8.

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 to/from Ashford Trust, due from Braemar, notes receivable, accounts payable and accrued expenses, dividends payable, due to affiliates and claims liabilities and other. 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.

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.

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

Release and Waiver Agreement—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 included a cash termination payment of $750,000, which was paid on August 5, 2022, and payments totaling approximately $6.4 million, which are payable in 24 substantially equal monthly installments of approximately $267,000 beginning in August 2022. As of June 30, 2023, the Company’s remaining commitment to Mr. Welter totaled approximately $3.5 million.

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. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class, however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. The opt out period has been extended until such time that discovery has concluded. In May of 2023, the trial court requested additional briefing from the parties to determine whether the case should be maintained, dismissed, or the class decertified. The trial court set a due date of August 7, 2023 for the briefs. If this litigation goes to trial, we expect that the earliest the trial would occur is the last quarter of 2023, based on various extensions to which the parties have agreed. 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, 2023, no amounts have been accrued.

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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 Americans with Disability Act 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,
	2023		2022		2023		2022
(Income) loss attributable to noncontrolling interests:

OpenKey	$	234	$	228	$	460	$	454

Pure Wellness	(20)		70		42		104




Total net (income) loss attributable to noncontrolling interests	$	214	$	298	$	502	$	558

12. Mezzanine Equity

Redeemable Noncontrolling Interests—Redeemable noncontrolling interests are included in the mezzanine section of our condensed consolidated balance sheets as the ownership interests are redeemable for cash or registered shares outside of the Company’s control. Redeemable noncontrolling interests in Ashford Holdings includes the Series CHP Unit preferred membership interest issued in our acquisition of Chesapeake in April of 2022 and the membership interests of common units and LTIP units.

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,
	2023		2022		2023		2022
Net (income) loss attributable to redeemable noncontrolling interests:
Ashford Holdings	$	(133)	$	(141)	$	(288)	$	(132)

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. 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.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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, 2023, the Company recorded net income attributable to redeemable noncontrolling interests of $172,000 and $344,000, respectively, to the Series CHP Unit holders which is included in Ashford Holdings in the table above. For the three and six months ended June 30, 2022, the Company recorded net income attributable to redeemable noncontrolling interests of $145,000 to the Series CHP Unit holders.

Convertible Preferred Stock—Each share of Series D Convertible Preferred Stock: (i) has a liquidation value of $25 per share plus the amount of all unpaid accrued and accumulated dividends on such share; (ii) accrues cumulative dividends at the rate of 7.28% per annum; (iii) participates in any dividend or distribution on the common stock in addition to the preferred dividends; (iv) is convertible, along with all unpaid accrued and accumulated dividends thereon, 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 beneficially 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.

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).

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

After June 30, 2026, we will have the option to purchase all or any portion of the Series D Convertible Preferred Stock (except that the option to purchase may not be exercised with respect to shares of Series D Convertible Preferred Stock with an aggregate purchase price less than $25.0 million) 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).

As of June 30, 2023, the Company had aggregate undeclared preferred stock dividends of approximately $19.1 million, which relates to the second and fourth quarters of 2021. On April 14, 2023, 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 quarter of 2023. On June 8, 2023, the Board declared a cash dividend on the Company’s Series D Convertible Preferred Stock for the quarter ended June 30, 2023. The Company paid the dividend of $8.7 million, or $0.455 per share of Series D Convertible Preferred Stock, on July 12, 2023.

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 $27.8 million and $27.1 million at June 30, 2023 and December 31, 2022, respectively, are recorded as a liability in our condensed consolidated balance sheets as “dividends payable.”

Convertible preferred stock cumulative dividends declared during the three and six months ended June 30, 2023 and 2022 for all issued and outstanding shares were as follows (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Preferred dividends - declared	$	8,700	$	26,519	$	17,400	$	35,219
Preferred dividends per share - declared	$	0.4550	$	1.3870	$	0.9100	$	1.8420

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



	June 30, 2023		December 31, 2022




Aggregate preferred dividends - undeclared	$	19,092	$	18,414

Aggregate preferred dividends - undeclared per share	$	0.9985	$	0.9631

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

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, 2023 and 2022 are presented below by award type (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Equity-based compensation
Class 2 LTIP units and stock option amortization (1)	$	33	$	32	$	65	$	386
Employee LTIP units and equity grant expense (2)	441		488		880		829
Director and other non-employee equity grants expense (3)	517		401		535		455


Total equity-based compensation	$	991	$	921	$	1,480	$	1,670

Other equity-based compensation
REIT equity-based compensation (4)	$	3,503	$	4,150	$	7,138	$	8,479
	$	4,494	$	5,071	$	8,618	$	10,149

________

(1) As of June 30, 2023, the Company had approximately $222,000 of total unrecognized compensation expense related to the Class 2 LTIP units that will be recognized over a weighted average period of 1.7 years.

(2) As of June 30, 2023, 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 2.1 years.

(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.

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,
	2023		2022		2023		2022
Change in fair value
Unrealized gain (loss)	$	570	$	600	$	790	$	489

As of June 30, 2023 and December 31, 2022, the carrying value of the DCP liability was $2.1 million and $2.8 million, respectively. No distributions were made to any participant during the three and six months ended June 30, 2023 and 2022.

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.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Ashford Trust—We are a party to an amended and restated advisory agreement with Ashford Trust and its operating subsidiary, Ashford Hospitality Limited Partnership (“Ashford Trust OP”).

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 approximately $16,000 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.

Lismore has certain agreements with Ashford Trust to provide debt placement, modifications and refinancings of certain mortgage debt. Lismore’s fees are recognized based on a stated percentage of the loan amount when services have been rendered and the subject loan, modification or other transaction is closed.

Lismore also previously held an agreement with Ashford Trust (the “Ashford Trust Agreement”) with an effective date of April 6, 2020 pursuant to which Lismore negotiated forbearance, modifications and refinancings of the existing mortgage debt on Ashford Trust’s hotels. The Ashford Trust Agreement additionally allowed for the Company to receive certain fees for refinancings performed within eight months after the Ashford Trust Agreement terminated. 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, under the Ashford Trust Agreement.

During June 2023, Lismore entered into various 12-month agreements with Ashford Trust to seek modifications or refinancings of certain mortgage loans held by Ashford Trust. For the three and six months ended June 30, 2023, Ashford Trust paid approximately $525,000 to Lismore in nonrefundable work fees. The fees are included in “deferred income” in our condensed consolidated balance sheet and are recognized on a straight line basis over the term of the agreements. As of June 30, 2023, the Company had $492,000 of deferred income recorded related to these agreements.

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

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
REVENUES BY TYPE
Advisory services fees:
Base advisory fees	$	8,250	$	8,612	$	16,718	$	17,347






Hotel management fees:
Base management fees	7,051		6,573		13,408		11,575
Incentive management fees	2,167		1,921		2,733		2,704
Total hotel management fees revenue (1)	9,218		8,494		16,141		14,279

Design and construction fees revenue (2)	4,858		2,344		8,239		4,816


Other revenue:

Watersports, ferry and excursion services (4)	21		81		37		124
Debt placement and related fees (5)	905		690		1,300		2,983

Cash management fees (6)	16		—		87		—
Claims management services (7)	—		1		1		15


Other services (8)	336		328		733		676
Total other revenue	1,278		1,100		2,158		3,798

Cost reimbursement revenue	67,084		61,620		136,661		119,926

Total revenues	$	90,688	$	82,170	$	179,917	$	160,166

REVENUES BY SEGMENT (9)
REIT advisory	$	11,941	$	12,154	$	24,703	$	25,160
Remington	69,238		64,358		139,238		122,487
Premier	6,581		3,874		11,802		7,480
INSPIRE	27		17		56		55
RED	34		86		62		129
OpenKey	29		30		59		64
Corporate and other (10)	2,838		1,651		3,997		4,791
Total revenues	$	90,688	$	82,170	$	179,917	$	160,166

COST OF REVENUES
Cost of revenues for audio visual (3)	$	2,538	$	2,225	$	5,193	$	3,673


SUPPLEMENTAL REVENUE INFORMATION
Audio visual revenue from guests at REIT properties (3)	$	5,788	$	5,286	$	12,283	$	8,636

________

(1) 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(2) 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.

(3) INSPIRE primarily contracts directly with customers to whom they provide services. INSPIRE recognizes 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 are recognized in “cost of revenues for audio visual” in our condensed consolidated statements of operations. See note 3 for discussion of the revenue recognition policy.

(4) 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.

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

(6) Cash management fees include revenue earned by providing active management and investment of Ashford Trust’s excess cash in short-term U.S. Treasury securities.

(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.

(10) The Corporate and Other segment’s revenue includes cost reimbursement revenue from Ashford Trust’s capital contributions to Ashford Securities under the Third Amended and Restated Contribution Agreement between the Company, Ashford Trust and Braemar. Capital contributions are divided between the Company, Ashford Trust and Braemar based upon the actual amount of capital raised through Ashford Securities for each company which may result in increases or decreases to cost reimbursement revenue in any given reporting period. See discussion regarding Ashford Securities below.

Braemar—We are also a party to an amended and restated advisory agreement with Braemar and its operating subsidiary, Braemar Hospitality Limited Partnership (“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 approximately $16,000 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.

Lismore has certain agreements with Braemar to provide debt placement, modifications and refinancings of certain mortgage debt. Lismore’s fees are recognized based on a stated percentage of the loan amount when services have been rendered and the subject loan, modification or other transaction is closed.

During June 2023, Lismore entered into a 12-month agreement with Braemar to seek modifications or refinancings of certain mortgage debt held by Braemar. For the three and six months ended June 30, 2023, Braemar paid approximately $150,000 to Lismore in nonrefundable work fees. The fees are included in “deferred income” in our condensed consolidated balance sheet and are recognized on a straight line basis over the term of the agreements. As of June 30, 2023, the Company had $138,000 of deferred income recorded related to the agreement.

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

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
REVENUES BY TYPE
Advisory services fees:
Base advisory fees	$	3,667	$	3,227	$	7,307	$	6,166


Incentive advisory fees (1)	67		—		134		—
Other advisory revenue (2)	130		130		258		258
Total advisory services fees revenue	3,864		3,357		7,699		6,424

Hotel management fees:
Base management fees	636		795		1,213		1,495
Incentive management fees	—		262		—		464
Total hotel management fees revenue (3)	636		1,057		1,213		1,959

Design and construction fees revenue (4)	1,763		1,645		4,283		2,965


Other revenue:


Watersports, ferry and excursion services (6)	689		691		1,307		1,274
Debt placement and related fees (7)	111		—		111		190

Cash management fees (8)	37		—		92		—
Claims management services (9)	—		—		—		1


Other services (10)	72		30		161		72
Total other revenue	909		721		1,671		1,537

Cost reimbursement revenue	12,143		12,074		26,662		23,119

Total revenues	$	19,315	$	18,854	$	41,528	$	36,004

REVENUES BY SEGMENT (11)
REIT advisory	$	8,357	$	7,067	$	16,475	$	13,455
Remington	6,301		7,131		12,985		14,193
Premier	2,735		2,320		6,175		4,151
INSPIRE	25		22		49		41
RED	700		695		1,328		1,278
OpenKey	11		10		20		19
Corporate and other (12)	1,186		1,609		4,496		2,867
Total revenues	$	19,315	$	18,854	$	41,528	$	36,004

COST OF REVENUES (5)
Cost of revenues for audio visual	$	1,244	$	1,055	$	2,415	$	1,756
Other	419		96		1,051		182

SUPPLEMENTAL REVENUE INFORMATION
Audio visual revenues from guests at REIT properties (5)	$	3,087	$	2,638	$	6,015	$	4,309
Watersports, ferry and excursion services revenue from guests at REIT properties (5)	749		598		1,514		1,211

________

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(1) The incentive advisory fees for the three months and six months ended June 30, 2023 includes the pro-rata portion of the second year installment of the 2022 incentive advisory fee which will be paid in January 2024. Incentive fee payments are subject to meeting the December 31st FCCR Condition each year, as defined in our advisory agreements. The annual total stockholder return did not meet the relevant incentive fee thresholds during the 2021 measurement period.

(2) 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.

(3) 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.

(4) 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.

(5) 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 condensed consolidated statements of operations. See note 3 for discussion of the revenue recognition policy.

(6) 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.

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

(8) Cash management fees include revenue earned by providing active management and investment of Braemar’s excess cash in short-term U.S. Treasury securities.

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

(10) 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.

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

(12) The Corporate and Other segment’s revenue includes cost reimbursement revenue from Braemar’s capital contributions to Ashford Securities under the Third Amended and Restated Contribution Agreement between the Company, Ashford Trust and Braemar. Capital contributions are divided between the Company, Ashford Trust and Braemar based upon the actual amount of capital raised through Ashford Securities for each company which may result in increases or decreases to cost reimbursement revenue in any given reporting period. See discussion regarding Ashford Securities below.

Ashford Securities—On December 31, 2020, the Company entered into an Amended and Restated Contribution Agreement with the Parties with respect to funding certain expenses of Ashford Securities. Beginning on the effective date of the Amended and Restated Contribution Agreement, costs to fund the operations of Ashford Securities were allocated 50% to the Company, 50% to Braemar and 0% to Ashford Trust. Upon reaching the Amended and Restated True-Up Date, there will be a true up among the Parties whereby the actual amount contributed by each Party will be based on the actual amount of capital raised by such Party through Ashford Securities (the resulting ratio of contributions among the Parties, the “Initial True-Up Ratio”). On January 27, 2022, the Parties entered into a Second Amended and Restated Contribution Agreement which provided for an additional $18 million in aggregate contributions to Ashford Securities allocated 10% to the Company, 45% to Ashford Trust and 45% to Braemar. On February 3, 2023, the Amended and Restated True-Up Date occurred and, on March 30, 2023, Braemar paid the Company $8.7 million for Braemar’s portion of their contributions to fund Ashford Securities as calculated under the Initial True-Up Ratio. The $8.7 million payment consisted of $2.5 million and $6.2 million for the Company’s and Ashford Trust’s prior contributions made to Ashford Securities, respectively, which were owed by Braemar as calculated under the Initial True-Up Ratio. On March 30, 2023, the Company paid Ashford Trust $6.2 million.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On February 1, 2023, the Parties entered into a Third Amended and Restated Contribution Agreement. The Third Amended and Restated Contribution Agreement states that after reaching the Amended and Restated True-Up Date capital contributions for the remainder of fiscal year 2023 will be divided between each Party based on the actual amount of capital raised by such Party through Ashford Securities. Thereafter on a yearly basis at year-end, starting with the year-end of 2023, there will be a true-up between the Parties whereby there will be adjustments so that the capital contributions made by each Party will be based on the cumulative amount of capital raised by each Party through Ashford Securities as a percentage of the total amount raised by the Parties collectively through Ashford Securities since June 19, 2019 (the resulting ratio of capital contributions among the Company, Ashford Trust and Braemar following this true-up, the “Cumulative Ratio”). Thereafter, the capital contributions will be divided among each Party in accordance with the Cumulative Ratio, as recalculated at the end of each year.

As of June 30, 2023, Ashford Trust and Braemar had funded approximately $153,000 and $17.9 million, respectively. The Company recognized cost reimbursement revenue from Ashford Trust in our condensed consolidated statements of operations of $1.6 million and $2.0 million for the three and six months ended June 30, 2023, respectively, and $664,000 and $1.2 million for the three and six months ended June 30, 2022, respectively. The Company recognized cost reimbursement revenue from Braemar in our condensed consolidated statements of operations of $1.0 million and $4.2 million for the three and six months ended June 30, 2023, respectively, and $553,000 and $897,000 for the three and six months ended June 30, 2022, respectively. Cost reimbursement revenue for the three and six months ended June 30, 2023 includes $558,000 and $785,000 of dealer manager fees earned by Ashford Securities for the placement of Ashford Trust’s non-listed preferred equity offerings, respectively. Cost reimbursement revenue for the three and six months ended June 30, 2023 includes $2.0 million of dealer manager fees earned by Ashford Securities for the placement of Braemar’s non-listed preferred equity offerings.

Expiration of Ashford Trust ERFP Agreement Related Leases—On June 26, 2018, the Company entered into an Enhanced Return Funding Program Agreement with Ashford Trust (the “Ashford Trust ERFP Agreement”). Although the Ashford Trust ERFP Agreement expired in accordance with its terms on June 26, 2021, certain obligations of the parties survived. In the first quarter of 2022, Ashford Trust purchased furniture, fixtures and equipment (“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. 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 for the six months ended June 30, 2022.

In the fourth quarter of 2022, Ashford Trust purchased FF&E with a net book value of $3.1 million from the Company at the fair market value of $1.0 million upon expiration of the underlying leases of the FF&E under the Ashford Trust ERFP Agreement. The Company recognized a $1.0 million outstanding receivable which is recorded in “due from Ashford Trust” in our condensed consolidated balance sheet as of June 30, 2023.

In the first quarter of 2023, Ashford Trust purchased FF&E with a net book value of $1.5 million from the Company at the fair market value of $450,000 upon expiration of the underlying leases of the FF&E under the Ashford Trust ERFP Agreement. The Company recognized a $450,000 outstanding receivable which is recorded in “due from Ashford Trust” in our condensed consolidated balance sheet as of June 30, 2023. The Company recorded a loss on the sale of the FF&E of $1.0 million which is included within “other” operating expense in our condensed consolidated statement of operations for the six months ended June 30, 2023.

Other Related Party Transactions—On January 3, 2023, the Company acquired RHC, an affiliate owned by Mr. Monty J. Bennett, our 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, from which the Company leases the offices for our corporate headquarters in Dallas, Texas. The purchase price paid was de minimis. We accounted for this transaction as an asset acquisition because substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets. Upon the acquisition date, the operating lease asset and corresponding operating lease liability of $17.2 million associated with the Company’s lease with RHC was eliminated upon consolidation.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes the assets and liabilities acquired by the Company on the asset acquisition date (in thousands):


	January 3, 2023
Restricted cash	$	849
Property and equipment, net	2,183
Operating lease right-of-use assets	15,017
Total assets acquired	18,049
Operating lease liabilities	17,200
Other liabilities	849
Total assumed liabilities	18,049
Net assets acquired	$	—

On March 2, 2023, the Company entered into a Limited Waiver Under Advisory Agreement (the “2023 Braemar Limited Waiver”) with Braemar, Braemar OP, and Braemar TRS and a Limited Waiver Under Advisory Agreement (the “2023 Ashford Trust Limited Waiver” and, together with the 2023 Braemar Limited Waiver, the “2023 Limited Waivers”) with Ashford Trust, Ashford Trust OP, and Ashford Trust TRS. Pursuant to the 2023 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 2023 (the “2023 Waiver Period”), cash incentive compensation to employees and other representatives of the Company; provided that, pursuant to the 2023 Ashford Trust Limited Waiver, such awarded cash incentive compensation does not exceed $13.1 million, in the aggregate, during the 2023 Waiver Period.

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.

As of June 30, 2023 and December 31, 2022, Ashford Trust held a 15.06% noncontrolling interest in OpenKey, and Braemar held a 7.92% noncontrolling interest in OpenKey.

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, 2023 was $101,000 and $202,000, respectively. 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 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, 2023 and 2022.

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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,
	2023		2022		2023		2022
Net income (loss) attributable to common stockholders – basic and diluted:
Net income (loss) attributable to the Company	$	1,582	$	5,482	$	2,891	$	6,430
Less: Dividends on preferred stock, declared and undeclared (1)	(9,044)		(9,020)		(18,078)		(18,393)





Undistributed net income (loss) allocated to common stockholders	(7,462)		(3,538)		(15,187)		(11,963)

Distributed and undistributed net income (loss) - basic	$	(7,462)	$	(3,538)	$	(15,187)	$	(11,963)

Effect of deferred compensation plan	(581)		(618)		(813)		(524)
Effect of incremental subsidiary shares	(480)		—		—		—

Distributed and undistributed net income (loss) - diluted	$	(8,523)	$	(4,156)	$	(16,000)	$	(12,487)




Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	3,092		2,913		3,039		2,908


Effect of deferred compensation plan shares	196		196		98		98
Effect of incremental subsidiary shares	46		—		—		—


Weighted average common shares outstanding – diluted	3,334		3,109		3,137		3,006

Income (loss) per share – basic:


Net income (loss) allocated to common stockholders per share	$	(2.41)	$	(1.21)	$	(5.00)	$	(4.11)
Income (loss) per share – diluted:


Net income (loss) allocated to common stockholders per share	$	(2.56)	$	(1.34)	$	(5.10)	$	(4.15)

________

(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,
	2023		2022		2023		2022
Net income (loss) allocated to common stockholders is not adjusted for:

Net income (loss) attributable to redeemable noncontrolling interests in Ashford Holdings	$	133	$	141	$	288	$	132
Net income (loss) attributable to subsidiary convertible interests	47		—		366		—


Dividends on preferred stock, declared and undeclared	9,044		9,020		18,078		18,393

Total	$	9,224	$	9,161	$	18,732	$	18,525
Weighted average diluted shares are not adjusted for:

Effect of unvested restricted shares	9		83		21		90

Effect of assumed conversion of Ashford Holdings units	97		73		95		40
Effect of conversion of subsidiary interests	346		120		274		112

Effect of assumed conversion of preferred stock	4,229		4,243		4,228		4,304
Total	4,681		4,519		4,618		4,546

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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; and (g) Pure Wellness, which provides hypoallergenic premium rooms in the hospitality and commercial office industry. For 2023, Premier, OpenKey, RED, 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 Premier, 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 Pure Wellness and, for the three and six months ended June 30, 2022, Marietta, into an “all other” seventh reportable segment, which we refer to as “Corporate and Other.” See note 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, 2023 and 2022 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, 2023
	REIT Advisory		Remington		Premier		INSPIRE		RED		OpenKey		Corporate and Other		Ashford Inc. Consolidated
REVENUE
Advisory services	$	12,114	$	—	$	—	$	—	$	—	$	—	$	—	$	12,114
Hotel management	—		14,878		—		—		—		—		—		14,878
Design and construction fees	—		—		7,605		—		—		—		—		7,605
Audio visual	—		—		—		41,349		—		—		—		41,349
Other	53		3		—		—		9,794		422		1,536		11,808
Cost reimbursement revenue (1)	8,130		91,297		2,799		54		23		—		2,653		104,956
Total revenues	20,297		106,178		10,404		41,403		9,817		422		4,189		192,710
EXPENSES
Depreciation and amortization	369		2,959		2,878		467		286		3		28		6,990

Other operating expenses (2)	—		8,199		5,316		37,766		8,189		1,371		13,401		74,242
Reimbursed expenses (1)	8,130		91,297		2,799		54		23		—		2,653		104,956
Total operating expenses	8,499		102,455		10,993		38,287		8,498		1,374		16,082		186,188
OPERATING INCOME (LOSS)	11,798		3,723		(589)		3,116		1,319		(952)		(11,893)		6,522
Equity in earnings (loss) of unconsolidated entities	—		—		—		—		—		—		(388)		(388)
Interest expense	—		—		—		(375)		(417)		(4)		(2,626)		(3,422)
Amortization of loan costs	—		—		—		(42)		(10)		—		(213)		(265)
Interest income	—		14		—		—		—		—		426		440

Other income (expense)	—		13		—		(92)		(6)		(62)		(12)		(159)
INCOME (LOSS) BEFORE INCOME TAXES	11,798		3,750		(589)		2,607		886		(1,018)		(14,706)		2,728
Income tax (expense) benefit	(2,902)		(921)		123		(1,291)		(234)		—		3,998		(1,227)
NET INCOME (LOSS)	$	8,896	$	2,829	$	(466)	$	1,316	$	652	$	(1,018)	$	(10,708)	$	1,501

________

(1) Our segments are reported net of eliminations upon consolidation. Approximately $2.9 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.

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ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Six Months Ended June 30, 2023
	REIT Advisory		Remington		Premier		INSPIRE		RED		OpenKey		Corporate and Other		Ashford Inc. Consolidated
REVENUE
Advisory services fees	$	24,417	$	—	$	—	$	—	$	—	$	—	$	—	$	24,417
Hotel management fees	—		27,065		—		—		—		—		—		27,065
Design and construction fees	—		—		14,534		—		—		—		—		14,534

Audio visual	—		—		—		81,706		—		—		—		81,706
Other	180		3		—		—		17,422		811		2,466		20,882
Cost reimbursement revenue (1)	16,581		180,574		5,641		106		46		—		6,280		209,228
Total revenues	41,178		207,642		20,175		81,812		17,468		811		8,746		377,832
EXPENSES
Depreciation and amortization	885		5,830		5,766		930		467		6		106		13,990

Other operating expenses (2)	1,032		16,388		9,527		72,810		15,282		2,728		25,756		143,523
Reimbursed expenses (1)	16,507		180,574		5,641		106		46		—		6,280		209,154
Total operating expenses	18,424		202,792		20,934		73,846		15,795		2,734		32,142		366,667
OPERATING INCOME (LOSS)	22,754		4,850		(759)		7,966		1,673		(1,923)		(23,396)		11,165
Equity in earnings (loss) of unconsolidated entities	—		—		—		—		—		—		(847)		(847)
Interest expense	—		—		—		(671)		(693)		(6)		(4,889)		(6,259)
Amortization of loan costs	—		—		—		(79)		(20)		—		(407)		(506)
Interest income	—		54		—		—		—		—		663		717
Realized gain (loss) on investments	—		(80)		—		—		—		—		—		(80)
Other income (expense)	—		72		—		(70)		422		(60)		(30)		334
INCOME (LOSS) BEFORE INCOME TAXES	22,754		4,896		(759)		7,146		1,382		(1,989)		(28,906)		4,524
Income tax (expense) benefit	(5,464)		(1,217)		174		(3,907)		(279)		—		8,846		(1,847)
NET INCOME (LOSS)	$	17,290	$	3,679	$	(585)	$	3,239	$	1,103	$	(1,989)	$	(20,060)	$	2,677

________

(1) Our segments are reported net of eliminations upon consolidation. Approximately $6.0 million of hotel management fees revenue, cost reimbursement revenue and reimbursed expenses were eliminated in consolidation primarily for overhead expenses reimbursed to Remington including rent, payroll, office supplies, travel and accounting.

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

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


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

Other operating expenses (2)	—		5,937		3,721		28,435		5,669		1,367		12,801		57,930
Reimbursed expenses (1)	7,156		77,379		2,347		39		9		—		2,251		89,181
Total operating expenses	8,008		86,439		9,042		28,946		5,892		1,369		15,434		155,130
OPERATING INCOME (LOSS)	11,213		4,360		(1,957)		7,070		1,801		(956)		(9,208)		12,323
Equity in earnings (loss) of unconsolidated entities	—		—		—		—		—		—		67		67
Interest expense	—		—		—		(276)		(183)		—		(2,077)		(2,536)
Amortization of loan costs	—		—		—		(35)		(16)		—		(181)		(232)
Interest income	—		38		—		—		—		—		—		38
Other income (expense)	—		(168)		—		(17)		(2)		4		(76)		(259)
INCOME (LOSS) BEFORE INCOME TAXES	11,213		4,230		(1,957)		6,742		1,600		(952)		(11,475)		9,401
Income tax (expense) benefit	(2,896)		138		(907)		(2,377)		(531)		—		2,497		(4,076)
NET INCOME (LOSS)	$	8,317	$	4,368	$	(2,864)	$	4,365	$	1,069	$	(952)	$	(8,978)	$	5,325

________

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

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

Table of Contents

ASHFORD INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)


	Six Months Ended June 30, 2022
	REIT Advisory		Remington		Premier		INSPIRE		RED		OpenKey		Corporate and Other		Ashford Inc. Consolidated
REVENUE
Advisory services fees	$	23,771	$	—	$	—	$	—	$	—	$	—	$	—	$	23,771
Hotel management fees	—		20,598		—		—		—		—		—		20,598
Design and construction fees	—		—		9,262		—		—		—		—		9,262
Audio visual	—		—		—		60,942		—		—		—		60,942
Other	15		181		—		—		13,729		791		8,795		23,511
Cost reimbursement revenue (1)	14,828		140,527		4,049		96		9		4		3,815		163,328
Total revenues	38,614		161,306		13,311		61,038		13,738		795		12,610		301,412
EXPENSES
Depreciation and amortization	1,705		5,819		5,936		940		326		6		912		15,644

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

________

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

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

18. Subsequent Events

On August 8, 2023, the 40% voting cap under the Investor Rights Agreement, dated November 6, 2019 and entered into by and among the Company, Mr. Archie Bennett and Jr., Mr. Monty J. Bennett (the “Bennetts”) and other holders of the Company’s Series D Convertible Preferred Stock (the “Investor Rights Agreement”), expired. As a result, the Bennetts and the other Covered Investors (as defined in the Investor Rights Agreement) may now vote all of their voting securities of the Company as they determine in their sole discretion.

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” or “AHH”; 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:

•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 continued listing standards;

•our understanding of our competition;

•the future success of recent acquisitions;

•the future demand for our services;

•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 factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 17, 2023, 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 updated in our subsequent Quarterly Reports on Form 10-Q and other filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”);

•changes in interest rates;

•macroeconomic conditions, such as a prolonged period of weak economic growth, inflation and volatility in capital markets;

•uncertainty in the banking sector and market volatility due to the recent failures of Silicon Valley Bank, New York Signature Bank and First Republic Bank;

•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 agreements 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;

•legislative and regulatory changes;

•the possibility that we may not realize any or all of the anticipated benefits from transactions to acquire businesses;

•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 Alii Nui and Chesapeake 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 Alii Nui, Chesapeake 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. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Form 10-Q. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Form 10-Q to conform these statements to actual results and performance, except as may be required by applicable law.

Overview

Ashford Inc., a Nevada corporation, is an alternative asset management company with a portfolio of strategic operating businesses that provides products and services primarily to clients in the real estate and hospitality industries, 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 8, 2023, 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 610,261 shares of our common stock, which represented an approximately 19.0% 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, along with all unpaid accrued and accumulated dividends thereon, is convertible at a price of $117.50 per share into an additional approximate 4,152,301 shares of Ashford Inc. common stock, which if converted as of August 8, 2023 would have increased Mr. Monty J. Bennett and Mr. Archie Bennett, Jr.’s ownership interest in Ashford Inc. to approximately 64.6%.

We provide: (i) advisory services; (ii) asset management services; (iii) hotel management services; (iv) design and construction 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 Ashford Trust or Braemar’s individual hotel properties, which duties are, and will continue to be, the responsibility of the hotel management companies that operate such hotel properties. Additionally, Remington, a subsidiary of the Company, operates certain hotel properties for Ashford Trust, Braemar and third-parties. As of June 30, 2023, Remington provided hotel management services to 120 properties, 47 of which were owned by third-parties.

Recent Developments

On April 3, 2023, the Company entered into a note receivable with an affiliate of REA Holdings for $800,000. The principal plus any accrued interest is due to the Company on demand or, in the absence of any demand, 24 months. The interest rate on the note receivable is 7.5% per annum.

On May 15, 2023, the Company and Computershare Trust Company, N.A., a federally chartered trust company (the “Rights Agent”) entered into Amendment No. 1 (“Amendment No. 1”) to the Rights Agreement dated as of August 30, 2022 (the “Rights Agreement”). The Rights Agreement was adopted in response to volatility of the stock market and trading of our common stock and is intended to protect the Company and its stockholders from efforts to obtain control or rapid share accumulations that are inconsistent with the best interests of the Company and its stockholders. Our board of directors implemented the rights plan by declaring (i) a dividend to the holders of the Company’s common stock of one preferred share purchase right (a “Right”) for each share of common stock and (ii) a dividend to the holders of the Company’s Series D Convertible Preferred Stock of one Right in respect of each share of the Company’s common stock issuable upon conversion of the Series D Convertible Preferred Stock. The dividends were distributed on September 9, 2022, to our stockholders of record on that date. Each of those Rights become exercisable on the date on which the Rights separate and begin trading separately from our common stock and entitles the registered holder to purchase from the Company one one-thousandth of a share of our Series F Preferred Stock, par value $0.001 per share (“Series F Preferred Stock”), at a price of $275 per one one-thousandth of a share of our Series F Preferred Stock represented by such Right, subject to adjustment. Pursuant to Amendment No. 1, the Rights Agreement was amended to (i) extend the final expiration date with respect to the Company’s Rights until July 30, 2024, and (ii) decrease the beneficial ownership threshold in the definition of an acquiring person from 10% to 7%.

The value of the Rights was de minimus.

Please see Item 5 of this Form 10-Q for more information regarding the expiration of such voting restrictions under the Investor Rights Agreement.

Discussion of Presentation

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

RESULTS OF OPERATIONS

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The following table summarizes the changes in key line items from our condensed consolidated statements of operations for the three months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Favorable (Unfavorable)
	2023		2022		$ Change		% Change
REVENUE
Advisory services fees	$	12,114	$	11,969	$	145	1.2	%
Hotel management fees	14,878		13,420		1,458		10.9	%
Design and construction fees	7,605		4,738		2,867		60.5	%
Audio visual	41,349		35,977		5,372		14.9	%
Other	11,808		12,072		(264)		(2.2)	%
Cost reimbursement revenue	104,956		89,277		15,679		17.6	%
Total revenues	192,710		167,453		25,257		15.1	%
EXPENSES
Salaries and benefits	22,629		16,603		(6,026)		(36.3)	%
Cost of revenues for design and construction	3,589		2,206		(1,383)		(62.7)	%
Cost of revenues for audio visual	29,993		23,279		(6,714)		(28.8)	%
Depreciation and amortization	6,990		8,019		1,029		12.8	%
General and administrative	12,347		10,173		(2,174)		(21.4)	%

Other	5,684		5,669		(15)		(0.3)	%
Reimbursed expenses	104,956		89,181		(15,775)		(17.7)	%
Total expenses	186,188		155,130		(31,058)		(20.0)	%
OPERATING INCOME (LOSS)	6,522		12,323		(5,801)		(47.1)	%


Equity in earnings (loss) of unconsolidated entities	(388)		67		(455)		(679.1)	%
Interest expense	(3,422)		(2,536)		(886)		(34.9)	%
Amortization of loan costs	(265)		(232)		(33)		(14.2)	%
Interest income	440		38		402		1,057.9	%




Other income (expense)	(159)		(259)		100		38.6	%
INCOME (LOSS) BEFORE INCOME TAXES	2,728		9,401		(6,673)		(71.0)	%
Income tax (expense) benefit	(1,227)		(4,076)		2,849		69.9	%
NET INCOME (LOSS)	1,501		5,325		(3,824)		(71.8)	%
(Income) loss from consolidated entities attributable to noncontrolling interests	214		298		(84)		(28.2)	%
Net (income) loss attributable to redeemable noncontrolling interests	(133)		(141)		8		5.7	%
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	1,582		5,482		(3,900)		(71.1)	%
Preferred dividends, declared and undeclared	(9,044)		(9,020)		(24)		(0.3)	%

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(7,462)	$	(3,538)	$	(3,924)	(110.9)	%

Net Income (Loss) Attributable to Common Stockholders. Net income (loss) attributable to common stockholders changed $3.9 million, or 110.9%, to a $7.5 million loss for the three months ended June 30, 2023 (“the 2023 quarter”) compared to a $3.5 million loss for the three months ended June 30, 2022 (“the 2022 quarter”) as a result of the factors discussed below.

Total Revenues. Total revenues increased $25.3 million, or 15.1%, to $192.7 million for the 2023 quarter compared to the 2022 quarter due to the following (in thousands):


	Three Months Ended June 30,				Favorable (Unfavorable)
	2023		2022		$ Change		% Change
Advisory services fees:
Base advisory fees (1)	$	11,917	$	11,839	$	78	0.7	%
Incentive advisory fees (2)	67		—		67


Other advisory revenue (3)	130		130		—		—	%
Total advisory services fees revenue	12,114		11,969		145		1.2	%

Hotel management fees:
Base management fees	10,388		9,484		904		9.5	%
Incentive management fees	2,059		2,867		(808)		(28.2)	%
Other management fees	2,431		1,069		1,362		127.4	%
Total hotel management fees revenue (4)	14,878		13,420		1,458		10.9	%

Design and construction fees revenue (5)	7,605		4,738		2,867		60.5	%

Audio visual revenue (6)	41,349		35,977		5,372		14.9	%

Other revenue:

Watersports, ferry and excursion services (7)	9,794		7,684		2,110		27.5	%
Debt placement and related fees (8)	1,016		690		326		47.2	%

Cash management fees (9)	53		—		53
Claims management services (10)	—		1		(1)		(100.0)	%



Other services (11)	945		3,697		(2,752)		(74.4)	%
Total other revenue	11,808		12,072		(264)		(2.2)	%

Cost reimbursement revenue (12)	104,956		89,277		15,679		17.6	%

Total revenues	$	192,710	$	167,453	$	25,257	15.1	%

REVENUES BY SEGMENT (13)
REIT advisory	$	20,297	$	19,221	$	1,076	5.6	%
Remington	106,178		90,799		15,379		16.9	%
Premier	10,404		7,085		3,319		46.8	%
INSPIRE	41,403		36,016		5,387		15.0	%
RED	9,817		7,693		2,124		27.6	%
OpenKey	422		413		9		2.2	%
Corporate and other	4,189		6,226		(2,037)		(32.7)	%
Total revenues	$	192,710	$	167,453	$	25,257	15.1	%

________

(1)The increase in base advisory fee is primarily due to higher revenue of $440,000 from Braemar offset by lower revenue of $362,000 from Ashford Trust. See note 3 to our condensed consolidated financial statements for discussion of the advisory services revenue recognition policy.

(2) The $67,000 of incentive advisory fees for the 2023 quarter includes the pro-rata portion of the second year installment of the Braemar 2022 incentive advisory fee which will be paid in January 2024. Incentive fee payments are subject to meeting the December 31st FCCR Condition each year, as defined in our advisory agreements. Ashford Trust’s annual total stockholder return did not meet the relevant incentive fee thresholds during the 2022 and 2021 measurement periods. Braemar’s annual total stockholder return did not meet the relevant incentive fee thresholds during the 2021 measurement period.

(3) 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.

(4) The increase in hotel management fees revenue is primarily due to higher base management fees and other management fees. Base management fees from Ashford Trust and third-parties increased by $478,000 and $585,000, respectively, offset by a decrease of $159,000 from Braemar. Other management fees increased $1.4 million primarily due to $628,000 of various management fees earned from third-parties which began in the first quarter of 2023 and due to the timing of Remington’s acquisition of Chesapeake in April of 2022. Other management fees primarily includes fees for health insurance programs administered on behalf of certain third-party properties. Other management fees additionally includes fees for fixed monthly accounting services, revenue management services and other services at certain third-party properties. Incentive management fees from Braemar and third-parties decreased by $262,000 and $792,000, respectively, offset by an increase in incentive management fees from Ashford Trust of $246,000.

(5) The increase in design and construction fees revenue is due to higher revenue from Ashford Trust, Braemar and third-parties of $2.5 million, $118,000 and $235,000, respectively, due to increased capital expenditures from our clients.

(6) The $5.4 million increase in audio visual revenue is due to an increase in demand for group events in the 2023 quarter.

(7) The $2.1 million increase in watersports, ferry and excursion services revenue is due to an increase of $1.8 million from RED’s acquisition of Alii Nui in the first quarter of 2023 and increases of $398,000 and $287,000 in revenue in RED’s operations in the U.S. Virgin Islands and Turks and Caicos, respectively. These increases were partially offset by a decrease in revenue of $406,000 from RED’s operations in the continental U.S.

(8) The increase in debt placement and related fee revenue is due to higher revenue of $215,000 and $111,000 from Ashford Trust and Braemar, respectively. Debt placement and related fees are earned by Lismore for providing debt placement, modification, forbearance and refinancing services.

(9) Cash management fees include revenue earned by providing active management and investment of Ashford Trust and Braemar’s excess cash in short-term U.S. Treasury securities.

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

(11) Other services revenue relates to other hotel services provided by our consolidated subsidiaries, OpenKey and Pure Wellness, to Ashford Trust, Braemar and third-parties. Other revenue in the 2022 quarter additionally includes Marietta which was acquired by Ashford Trust on December 16, 2022. The decrease in other services revenue is primarily due to the sale of Marietta, which recognized $2.8 million of revenue in the 2022 quarter.

(12) The increase in cost reimbursement revenue in the 2023 quarter is primarily due to an increase in Remington’s cost reimbursement revenue of $13.9 million due to the timing of Remington’s acquisition of Chesapeake in April of 2022. The increase is additionally due to an increase of $878,000 in cost reimbursement revenue in the 2023 quarter compared to the 2022 quarter related to reimbursable advisory expenses for Ashford Trust and Braemar and $452,000 in cost reimbursement revenue from Premier due to our clients’ increased capital expenditures in the 2023 quarter compared to the 2022 quarter.

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

Salaries and Benefits Expense. Salaries and benefits expense increased $6.0 million, or 36.3%, to $22.6 million for the 2023 quarter compared to the 2022 quarter. The change in salaries and benefits expense consisted of the following (in thousands):


	Three Months Ended June 30,
	2023		2022		$ Change
Salaries and benefits:
Salary expense (1)	$	13,687	$	10,562	$	3,125
Bonus expense (2)	4,850		3,502		1,348
Benefits related expenses (3)	4,189		2,623		1,566
Total salary, bonus, and benefits related expenses	22,726		16,687		6,039
Non-cash equity-based compensation:
Class 2 LTIP units and stock option grants	32		32		—
Employee equity grant expense	441		484		(43)


Total equity-based compensation	473		516		(43)
Non-cash (gain) loss in deferred compensation plan (4)	(570)		(600)		30
Total salaries and benefits	$	22,629	$	16,603	$	6,026

________

(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 2022 quarter and includes $990,000 of expense recognized in the 2023 quarter related to Mr. Welter’s termination agreement with the Company. See note 10 to our condensed consolidated financial statements.

(2)The increase in bonus expense is primarily due to a reduction to the Company’s bonus accrual in the 2022 quarter due to Mr. Welter’s departure from the Company.

(3)The increase in benefits related expenses is primarily due to an increase in corporate employees at both the Company’s corporate office and our subsidiaries’ corporate offices compared to the 2022 quarter and includes an increase of $737,000 primarily related to Remington corporate payroll taxes and employee insurance related expenses due to the timing of the Chesapeake acquisition.

(4) The DCP obligation is recorded as a liability at fair value with changes in fair value reflected in earnings. The gains in the 2023 quarter and the 2022 quarter are primarily attributable to decreases 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 $1.4 million, or 62.7%, to $3.6 million during the 2023 quarter compared to $2.2 million for the 2022 quarter due to increased capital expenditures by our clients.

Cost of Revenues for Audio Visual. Cost of revenues for audio visual increased $6.7 million, or 28.8%, to $30.0 million during the 2023 quarter compared to $23.3 million for the 2022 quarter, primarily due to an increase in demand for group events.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased $1.0 million, or 12.8%, to $7.0 million for the 2023 quarter compared to the 2022 quarter. The decrease is primarily due to the sale of FF&E which was previously leased to Ashford Trust under the Ashford Trust ERFP Agreement and the sale of Marietta to Ashford Trust in the fourth quarter of 2022. Depreciation and amortization expense for the 2023 quarter and the 2022 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 2023 quarter and the 2022 quarter related to marine vessels in the amount of $495,000 and $280,000, respectively, which are included in “other” operating expense.

General and Administrative Expense. General and administrative expenses increased $2.2 million, or 21.4%, to $12.3 million for the 2023 quarter compared to the 2022 quarter. The change in general and administrative expense consisted of the following (in thousands):


	Three Months Ended June 30,
	2023		2022		$ Change
Professional fees	$	3,160	$	3,923	$	(763)
Office expense (1)	3,741		2,643		1,098
Public company costs	175		131		44
Director costs	805		751		54
Travel and other expense (2)	4,177		2,506		1,671
Non-capitalizable - software costs	289		219		70
Total general and administrative	$	12,347	$	10,173	$	2,174

________

(1) The increase in office expense in the 2023 quarter is primarily due to an increase of $648,000 for INSPIRE due to the increase in their operations compared to the 2022 quarter, $333,000 for RED due to the Alii Nui acquisition and $217,000 for Remington due to the timing of the Chesapeake acquisition in April of 2022.

(2) The increase in travel and other expenses is primarily due to corporate business development and related costs incurred in the 2023 quarter and increases in the Company’s business travel and other related expenses for our products and services companies in the 2023 quarter.

Other. Other operating expense was $5.7 million for the 2023 quarter and $5.7 million for the 2022 quarter. Other operating expense in the 2023 quarter includes a gain of $480,000 related to the change in the fair value of our contingent consideration liability associated with the acquisition of Chesapeake in April of 2022 and an increase of approximately $1.5 million in RED’s operating expenses primarily due to the acquisition of Alii Nui in the first quarter of 2023. The increase in RED’s operating expenses were offset by a decrease of $1.6 million of operating expenses related to Marietta, which was acquired by Ashford Trust in December of 2022.

Reimbursed Expenses. Reimbursed expenses increased $15.8 million to $105.0 million during the 2023 quarter compared to $89.2 million for the 2022 quarter primarily due to increased hotel management expenses incurred by Remington due to the increase in hotel room demand and the timing of Remington’s acquisition of Chesapeake during April of 2022.

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,
	2023		2022		$ Change
Cost reimbursement revenue	$	104,956	$	89,277	$	15,679
Reimbursed expenses	104,956		89,181		15,775
Net total	$	—	$	96	$	(96)

Equity in Earnings (Loss) of Unconsolidated Entities. Equity in earnings (loss) of unconsolidated entities changed $455,000 for the 2023 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 increased $886,000 to $3.4 million during the 2023 quarter compared to $2.5 million for the 2022 quarter. The increase is primarily due to an increase in interest rates from the 2022 quarter. The average SOFR rate in the 2023 quarter was 4.97% and in the 2022 quarter the average LIBOR rate was 1.02%. The average Prime Rate in the 2023 quarter and the 2022 quarter were 8.16% and 3.93%, respectively. 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 $265,000 and $232,000 for the 2023 quarter and the 2022 quarter, respectively.

Interest Income. Interest income was $440,000 and $38,000 for the 2023 quarter and the 2022 quarter, respectively. The increase is primarily due to higher interest rates earned on the Company’s cash and cash equivalents in the 2023 quarter.

Other Income (Expense). Other income (expense) was $159,000 of expense in the 2023 quarter and $259,000 of expense in the 2022 quarter.

Income Tax (Expense) Benefit. Income tax expense decreased by $2.9 million from $4.1 million in the 2022 quarter to $1.2 million in the 2023 quarter. Current income tax expense decreased by $3.4 million from $5.1 million in the 2022 quarter to $1.7 million in the 2023 quarter. Deferred income tax benefit decreased by $552,000 from $1.1 million in the 2022 quarter to $524,000 in the 2023 quarter. The decrease in income tax expense is primarily due to a decrease in operating income and an increase in interest expense.

(Income) Loss from Consolidated Entities Attributable to Noncontrolling Interests. The noncontrolling interests in consolidated entities were allocated a loss of $214,000 in the 2023 quarter and a loss of $298,000 in the 2022 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 $133,000 in the 2023 quarter and $141,000 in the 2022 quarter. 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 $24,000, or 0.3%, to $9.0 million during the 2023 quarter, due to accumulating and compounding dividends related to undeclared preferred stock dividends. See note 12 to our condensed consolidated financial statements.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The following table summarizes the changes in key line items from our condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 (in thousands):


	Six Months Ended June 30,				Favorable (Unfavorable)
	2023		2022		$ Change		% Change
REVENUE
Advisory services fees	$	24,417	$	23,771	$	646	2.7	%
Hotel management fees	27,065		20,598		6,467		31.4	%
Design and construction fees	14,534		9,262		5,272		56.9	%
Audio visual	81,706		60,942		20,764		34.1	%
Other	20,882		23,511		(2,629)		(11.2)	%
Cost reimbursement revenue	209,228		163,328		45,900		28.1	%
Total revenues	377,832		301,412		76,420		25.4	%
EXPENSES
Salaries and benefits	45,404		33,448		(11,956)		(35.7)	%
Cost of revenues for design and construction	6,455		4,116		(2,339)		(56.8)	%
Cost of revenues for audio visual	57,821		41,158		(16,663)		(40.5)	%
Depreciation and amortization	13,990		15,644		1,654		10.6	%
General and administrative	22,057		17,536		(4,521)		(25.8)	%

Other	11,786		11,136		(650)		(5.8)	%
Reimbursed expenses	209,154		163,089		(46,065)		(28.2)	%
Total expenses	366,667		286,127		(80,540)		(28.1)	%
OPERATING INCOME (LOSS)	11,165		15,285		(4,120)		(27.0)	%
Equity in earnings (loss) of unconsolidated entities	(847)		257		(1,104)		(429.6)	%


Interest expense	(6,259)		(3,815)		(2,444)		(64.1)	%
Amortization of loan costs	(506)		(305)		(201)		(65.9)	%
Interest income	717		119		598		502.5	%


Realized gain (loss) on investments	(80)		(71)		(9)		(12.7)	%

Other income (expense)	334		(112)		446		398.2	%
INCOME (LOSS) BEFORE INCOME TAXES	4,524		11,358		(6,834)		(60.2)	%
Income tax (expense) benefit	(1,847)		(5,354)		3,507		65.5	%
NET INCOME (LOSS)	2,677		6,004		(3,327)		(55.4)	%
(Income) loss from consolidated entities attributable to noncontrolling interests	502		558		(56)		(10.0)	%
Net (income) loss attributable to redeemable noncontrolling interests	(288)		(132)		(156)		(118.2)	%
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	2,891		6,430		(3,539)		(55.0)	%
Preferred dividends, declared and undeclared	(18,078)		(18,393)		315		1.7	%

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(15,187)	$	(11,963)	$	(3,224)	(26.9)	%

Net Income (Loss) Attributable to Common Stockholders. Net loss attributable to common stockholders changed $3.2 million to a $15.2 million loss for the six months ended June 30, 2023 (“the 2023 period”) compared to a $12.0 million loss for the six months ended June 30, 2022 (“the 2022 period”) as a result of the factors discussed below.

Total Revenues. Total revenues increased by $76.4 million, or 25.4%, to $377.8 million for the 2023 period compared to the 2022 period due to the following (in thousands):


	Six Months Ended June 30,				Favorable (Unfavorable)
	2023		2022		$ Change		% Change
Advisory services fees:
Base advisory fees (1)	$	24,025	$	23,513	$	512	2.2	%
Incentive advisory fees (2)	134		—		134


Other advisory revenue (3)	258		258		—		—	%
Total advisory services fees revenue	24,417		23,771		646		2.7	%

Hotel management fees:
Base management fees	19,398		15,658		3,740		23.9	%
Incentive management fees	3,041		3,871		(830)		(21.4)	%
Other management fees	4,626		1,069		3,557		332.7	%
Total hotel management fees revenue (4)	27,065		20,598		6,467		31.4	%

Design and construction fees revenue (5)	14,534		9,262		5,272		56.9	%

Audio visual revenue (6)	81,706		60,942		20,764		34.1	%



Other revenue:


Watersports, ferry and excursion services (7)	17,422		13,729		3,693		26.9	%
Debt placement and related fees (8)	1,411		3,173		(1,762)		(55.5)	%
Cash management fees (9)	179		—		179
Claims management services (10)	1		16		(15)		(93.8)	%



Other services (11)	1,869		6,593		(4,724)		(71.7)	%
Total other revenue	20,882		23,511		(2,629)		(11.2)	%

Cost reimbursement revenue (12)	209,228		163,328		45,900		28.1	%

Total revenues	$	377,832	$	301,412	$	76,420	25.4	%

REVENUES BY SEGMENT (13)
REIT advisory	$	41,178	$	38,614	$	2,564	6.6	%
Remington	207,642		161,306		46,336		28.7	%
Premier	20,175		13,311		6,864		51.6	%
INSPIRE	81,812		61,038		20,774		34.0	%
RED	17,468		13,738		3,730		27.2	%
OpenKey	811		795		16		2.0	%
Corporate and other	8,746		12,610		(3,864)		(30.6)	%
Total revenues	$	377,832	$	301,412	$	76,420	25.4	%

________

(1)The increase in base advisory fees is primarily due to higher revenue of $1.1 million from Braemar offset by lower revenue of $629,000 from Ashford Trust. See note 3 in our condensed consolidated financial statements for discussion of the advisory services revenue recognition policy.

(2)The $134,000 of incentive advisory fees for the 2023 period includes the pro-rata portion of the second year installment of the Braemar 2022 incentive advisory fee which will be paid in January 2024. Incentive fee payments are subject to meeting the December 31st FCCR Condition each year, as defined in our advisory agreements. Ashford Trust’s annual total stockholder return did not meet the relevant incentive fee thresholds during the 2022 and 2021 measurement periods. Braemar’s annual total stockholder return did not meet the relevant incentive fee thresholds during the 2021 measurement period.

(4) The increase in hotel management fees revenue is due to higher base management fees and other management fees. Base management fees from Ashford Trust and third-parties increased by $1.8 million and $2.2 million, respectively, offset by a decrease of $282,000 from Braemar. Other management fees increased $3.6 million primarily due to $1.1 million of various management fees earned from third-parties which began in the first quarter of 2023 and due to the timing of Remington’s acquisition of Chesapeake in April of 2022. Other management fees primarily includes fees for health insurance programs administered on behalf of certain third-party properties. Other management fees additionally includes fees for fixed monthly accounting services, revenue management services and other services at certain third-party properties. Incentive management fees from Braemar and third-parties decreased by $464,000 and $395,000, respectively, and incentive management fees from Ashford Trust remained consistent.

(5) The increase in design and construction fees revenue is primarily due to higher revenue from Ashford Trust, Braemar and third-parties of $3.4 million, $1.3 million and $531,000, respectively, due to increased capital expenditures from our clients.

(6) The $20.8 million increase in audio visual revenue is primarily due to an increase in demand for group events in the 2023 period.

(7) The $3.7 million increase in watersports, ferry and excursion services revenue is due to an increase of $2.3 million from RED’s acquisition of Alii Nui in the first quarter of 2023 and increases of $904,000 and $921,000 in revenue in RED’s operations in the U.S. Virgin Islands and Turks and Caicos, respectively. These increases were partially offset by a decrease in revenue of $364,000 from RED’s operations in the continental U.S.

(8) The decrease in debt placement and related fee revenue is due to lower revenue of $1.7 million and $79,000 from Ashford Trust and Braemar, respectively. 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 2023 period is primarily due to the expiration of the Ashford Trust Agreement with Lismore on April 6, 2022. Debt placement and related fees revenue related to the Ashford Trust Agreement in the 2022 period were $2.3 million.

(9) Cash management fees include revenue earned by providing active management and investment of Ashford Trust and Braemar’s excess cash in short-term U.S. Treasury securities.

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

(11) Other services revenue relates to other hotel services provided by our consolidated subsidiaries, OpenKey and Pure Wellness, to Ashford Trust, Braemar and third-parties. Other revenue additionally includes Marietta prior to Ashford Trust’s acquisition of Marietta on December 16, 2022. The decrease in other services revenue is primarily due to the sale of Marietta, which recognized $4.6 million of revenue in the 2022 period.

(12) The increase in cost reimbursement revenue in the 2023 period is primarily due to an increase in Remington’s cost reimbursement revenue of $40.0 million from Remington’s acquisition of Chesapeake in April of 2022. The increase is additionally due to an increase of $1.6 million in Premier’s cost reimbursement revenue due to our clients’ increased capital expenditures in the 2023 period compared to the 2022 period and an increase of $1.8 million in cost reimbursement revenue in the 2023 period related to reimbursable advisory expenses for Ashford Trust and Braemar.

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

Salaries and Benefits Expense. Salaries and benefits expense increased by $12.0 million, or 35.7%, to $45.4 million for the 2023 period compared to the 2022 period. The change in salaries and benefits expense consisted of the following (in thousands):


	Six Months Ended June 30,
		2023		2022		$ Change
Salaries and benefits:
Salary expense (1)		$	26,856	$	20,190	$	6,666
Bonus expense (2)		9,314		7,746		1,568
Benefits related expenses (3)		9,080		4,786		4,294
Total salary, bonus, and benefits related expenses		45,250		32,722		12,528
Non-cash equity-based compensation:
Class 2 LTIP units and stock option grants (4)		64		386		(322)
Employee equity grant expense		880		829		51


Total equity-based compensation		944		1,215		(271)
Non-cash (gain) loss in deferred compensation plan (5)		(790)		(489)		(301)
Total salaries and benefits		$	45,404	$	33,448	$	11,956

________

(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 2022 period and $2.0 million of expense recognized in the 2023 period related to Mr. Welter’s termination agreement with the Company. See note 10 to our condensed consolidated financial statements.

(2) The increase in bonus expense is primarily due to a reduction to the Company’s bonus accrual in the 2022 period due to Mr. Welter’s departure from the Company.

(3) The increase in benefits related expenses is primarily due to an increase in corporate employees at both the Company’s corporate office and our subsidiaries’ corporate offices compared to the 2022 period and includes an increase of $2.2 million primarily related to Remington corporate payroll taxes and employee insurance related expenses due to the timing of the Chesapeake acquisition.

(4) The decrease in Class 2 LTIP units and stock grant expense in the 2023 period primarily relates to the vesting of previously issued stock option grants which were subject to a three-year vesting period. Beginning in 2020, the Company began to issue restricted stock in lieu of stock options under its equity incentive program.

(5) The DCP obligation is recorded as a liability at fair value with changes in fair value reflected in earnings. The gains in the 2023 period and the 2022 period are primarily attributable to decreases in the fair value of the DCP obligation which is based on the Company’s common stock price. See note 14 in our condensed consolidated financial statements.

Cost of Revenues for Design and Construction. Cost of revenues for design and construction increased $2.3 million, or 56.8% to $6.5 million during the 2023 period compared to $4.1 million for the 2022 period due to increased capital expenditures by our clients.

Cost of Revenues for Audio Visual. Cost of revenues for audio visual increased $16.7 million, or 40.5%, to $57.8 million during the 2023 period compared to $41.2 million for the 2022 period, primarily due to an increase in demand for group events.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased by $1.7 million, or 10.6%, to $14.0 million for the 2023 period compared to the 2022 period. The decrease is primarily due to the sale of FF&E which was previously leased to Ashford Trust under the Ashford Trust ERFP Agreement and the sale of Marietta to Ashford Trust in the fourth quarter of 2022. Depreciation and amortization expense for the 2023 period and the 2022 period excludes depreciation expense related to audio visual equipment of $2.3 million and $2.4 million, respectively, which is included in “cost of revenues for audio visual” and also excludes depreciation expense for the 2023 period and the 2022 period related to marine vessels in the amount of $908,000 and $567,000, respectively, which are included in “other” operating expense.

General and Administrative Expense. General and administrative expenses increased by $4.5 million, or 25.8%, to $22.1 million for the 2023 period compared to the 2022 period. The change in general and administrative expense consisted of the following (in thousands):


	Six Months Ended June 30,
		2023		2022		$ Change
Professional fees		$	5,871	$	6,058	$	(187)
Office expense (1)		6,945		5,046		1,899
Public company costs		313		358		(45)
Director costs		1,081		1,148		(67)
Travel and other expense (2)		7,324		4,492		2,832
Non-capitalizable - software costs		523		434		89
Total general and administrative		$	22,057	$	17,536	$	4,521

________

(1) The increase in office expense in the 2023 period is primarily due to an increase of $1.1 million for INSPIRE due to the increase in their operations compared to the 2022 period, an increase of $540,000 for Remington due to the timing of the Chesapeake acquisition in April of 2022 and an increase of $408,000 for RED due to the Alii Nui acquisition.

(2) The increase in travel and other expenses is primarily due to corporate business development and related costs incurred in the 2023 period and increases in the Company’s business travel and other related expenses for our products and services companies in the 2023 period. RED had increased expenses compared to the 2022 period of $734,000 from expenses related to the Alii Nui acquisition.

Other. Other operating expense increased $650,000, or 5.8%, to $11.8 million for the 2023 period compared to the 2022 period. The increase in the 2023 period was primarily due to $300,000 of expense related to the change in the fair value of our contingent consideration liability associated with the acquisition of Chesapeake in April of 2022 and an increase of approximately $2.2 million of RED’s operating expenses. These increases were offset by a decrease of $2.7 million of operating expenses related to Marietta, which was acquired by Ashford Trust in December 2022. Other operating expenses for the 2023 and 2022 periods include losses on the sale of FF&E previously leased to Ashford Trust of $1.0 million and $706,000, respectively, under the Ashford Trust ERFP agreement and cost of goods sold, royalties and operating expenses associated with OpenKey and Pure Wellness.

Reimbursed Expenses. Reimbursed expenses increased $46.1 million to $209.2 million during the 2023 period compared to $163.1 million for the 2022 period primarily due to an increase in hotel management reimbursed expenses due to the timing of Remington’s acquisition of Chesapeake in April of 2022.

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,
	2023		2022		$ Change
Cost reimbursement revenue	$	209,228	$	163,328	$	45,900
Reimbursed expenses	209,154		163,089		46,065
Net total	$	74	$	239	$	(165)

Equity in Earnings (Loss) of Unconsolidated Entities. Equity in earnings (loss) of unconsolidated entities were a loss of $847,000 and earnings of $257,000 for the 2023 period and the 2022 period, respectively. Equity in earnings (loss) of unconsolidated entities primarily represents earnings (loss) in our equity method investment in REA Holdings. See note 2 in our condensed consolidated financial statements.

Interest Expense. Interest expense increased $2.4 million to $6.3 million during the 2023 period compared to $3.8 million for the 2022 period. The increase is primarily due to an increase in the Company’s notes payable under our Credit Facility entered into in April of 2022, which had an outstanding balance of $82.0 million as of June 30, 2023. Interest expense in the 2023 period included expense of $4.9 million related to the Company’s Credit Facility. The increase in interest expense is also due to higher average interest rates during the 2023 period. The average SOFR rate in the 2023 period was 4.73% and in the 2022 period the average LIBOR rate was 0.62%. The average Prime Rates in the 2023 period and the 2022 period were 7.93% and 3.61%, respectively. Interest expense relates to our Credit Facility and notes payable, lines of credit and finance leases held by our consolidated subsidiaries. See note 6 in our condensed consolidated financial statements.

Amortization of Loan Costs. Amortization of loan costs was $506,000 and $305,000 for the 2023 period and the 2022 period, respectively. The increase is primarily due to the Company’s Credit Facility entered into in April of 2022. Amortization of loan costs relates to our Credit Facility and notes payable held by our consolidated subsidiaries. See note 6 in our condensed consolidated financial statements.

Interest Income. Interest income was $717,000 and $119,000 for the 2023 period and the 2022 period, respectively. The increase is primarily due to higher interest rates earned on the Company’s cash and cash equivalents in the 2023 period.

Realized Gain (Loss) on Investments. Realized loss on investments was $80,000 and $71,000 for the 2023 period and the 2022 period, respectively. The realized loss on investments for the 2023 period and the 2022 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 in our condensed consolidated financial statements.

Other Income (Expense). Other income (expense) was income of $334,000 and expense of $112,000 in the 2023 period and the 2022 period, respectively.

Income Tax (Expense) Benefit. Income tax expense decreased by $3.5 million from $5.4 million in the 2022 period to $1.8 million in the 2023 period. Current income tax expense decreased by $4.6 million from $7.8 million in the 2022 period to $3.2 million in the 2023 period. Deferred income tax benefit decreased by $1.1 million from $2.4 million in the 2022 period to $1.3 million in the 2023 period. The decrease in income tax expense is primarily due to a decrease in operating income and an increase in interest expense.

(Income) Loss from Consolidated Entities Attributable to Noncontrolling Interests. Noncontrolling interests in consolidated entities were allocated a loss of $502,000 in the 2023 period and $558,000 in the 2022 period. See notes 2 and 11 in 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 $288,000 in the 2023 period and $132,000 in the 2022 period. 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 in our condensed consolidated financial statements.

Preferred Dividends, Declared and Undeclared. Preferred dividends, declared and undeclared, decreased $315,000 to $18.1 million during the 2023 period compared to $18.4 million for the 2022 period. The decrease is due to the Company’s payment in April of 2022 of $17.8 million of accrued and outstanding Series D Convertible Preferred Stock dividends for the quarters ended June 30, 2020 and December 31, 2020.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity requirements consist primarily of funds necessary to pay for operating expenses primarily attributable to paying our employees, investments and other capital expenditures to grow our businesses, interest and principal payments on our Credit Facility and our subsidiaries’ borrowings and dividends on the Series D Convertible Preferred Stock. We expect to meet our liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, borrowings under our Credit Facility or other loans, which we believe will provide sufficient liquidity to meet our existing non-discretionary obligations and anticipated ordinary course operating expenses.

Loan Agreements—On March 31, 2023, the Company amended its Credit Agreement, previously entered into on April 1, 2022, with Mustang Lodging Funding LLC, as administrative agent, and the lenders from time to time party thereto. The amendment replaced the one-month LIBOR rate with Adjusted Term SOFR. 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. On April 18, 2022 and March 7, 2023, the Company drew an additional $20.0 million and $12.0 million on the Credit Facility, respectively. 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 Adjusted Term SOFR plus an applicable margin, or the Base Rate plus an applicable margin. The applicable margin for borrowings under the Credit Agreement for Adjusted Term SOFR 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% during the first 24 months of the term, payable on the last business day of each month.

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. 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, 2023, 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 the Leverage Ratio under our Credit Agreement to exceed 3.00 to 1.00 or debt held by our subsidiaries to violate any loan covenants within one year of the issuance of the financial statements.

On March 24, 2023, INSPIRE amended its credit agreement by entering into the INSPIRE Amendment. The INSPIRE Amendment increased the maximum borrowing capacity under INSPIRE’s Revolving Note from $3.0 million to $6.0 million, provides for a $20.0 million Term Note and an Equipment Note pursuant to which, until September 24, 2027, INSPIRE may request advances up to $4.0 million in the aggregate to purchase new machinery or equipment to be used in the ordinary course of business. The INSPIRE Amendment extended the maturity date of INSPIRE’s Notes from January 1, 2024 to March 24, 2028. Monthly principal payments commence on April 1, 2023 for the Term Note in the amount of approximately $167,000. Borrowings under the Revolving Note require monthly payments of interest only until the maturity date and borrowings under the Equipment Note require monthly principal payments at 1/60th of the original principal amount of each advance. The Notes bear interest at the BSBY Rate plus a margin of 2.75% and the undrawn balance of the Revolving Note and the Equipment Note are subject to an unused fee of 0.25% per annum. As of June 30, 2023, the amount unused under INSPIRE’s revolving credit facility was $4.3 million. As of June 30, 2023, no balances had been drawn on the Equipment Note.

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 $39.1 million and $27.6 million as of June 30, 2023 and December 31, 2022, respectively. For further discussion see note 6 in our condensed consolidated financial statements.

Preferred stock dividends—As of June 30, 2023, the Company had aggregate undeclared preferred stock dividends of approximately $19.1 million, which remain in arrears for the second and fourth quarters of 2021. On April 14, 2023, 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 quarter of 2023. On June 8, 2023, the Board declared a cash dividend on the Company’s Series D Convertible Preferred Stock for the quarter ended June 30, 2023. The Company paid the dividend of $8.7 million, or $0.455 per share of Series D Convertible Preferred Stock, on July 12, 2023.

The Company does not currently expect to declare and pay the accrued and unpaid dividends on the Series D Convertible Preferred Stock for the quarters ended June 30, 2021 and December 31, 2021 during calendar year 2023. However, the Company remained current on the preferred dividend payments in 2022 and the first two quarters of 2023 and currently intends to remain current on future preferred dividend payments. The independent members of the Board plan to revisit the dividend payment policy with respect to the Series D Convertible Preferred Stock on an ongoing basis and will make decisions on such preferred dividend payments based on the ongoing liquidity and capital needs of the Company.

Each share of Series D Convertible Preferred Stock: (i) has a liquidation value of $25 per share plus the amount of all unpaid accrued and accumulated dividends on such share; (ii) accrues cumulative dividends at the rate of 7.28% per annum; (iii) participates in any dividend or distribution on the common stock in addition to the preferred dividends; (iv) is convertible, along with all unpaid accrued and accumulated dividends thereon, 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 beneficially 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.

Other liquidity considerations—On December 5, 2017, the Board approved a stock repurchase program pursuant to which the Board granted a repurchase authorization to acquire shares of the Company’s common stock, having an aggregate value of up to $20 million. No shares were repurchased under the stock repurchase program during the six months ended June 30, 2023.

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 2025. 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, 2023, the fair value of the DCP liability was $1.9 million.

The Company has commitments related to cash compensation for the departure of Mr. Welter which included a cash termination payment of $750,000, which was paid on August 5, 2022, and payments totaling approximately $6.4 million, which are payable in 24 substantially equal monthly installments of approximately $267,000 beginning in August 2022. As of June 30, 2023, the Company’s remaining commitment to Mr. Welter totaled approximately $3.5 million.

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, 2023 and December 31, 2022, we had $32.5 million and $44.4 million of cash and cash equivalents, respectively, and $36.1 million and $37.1 million of restricted cash, respectively. The majority of the Company’s cash and cash equivalents are owned by Ashford LLC and Ashford Services and are either invested in short-term U.S. Treasury securities with maturity dates of less than 90 days or held at commercial banks in insured cash sweep accounts, which are fully insured by the FDIC. 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, principal payments, acquisitions and key money payments to grow our products and services companies. 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 $2.6 million for the six months ended June 30, 2023 compared to net cash flows provided by operating activities of $16.0 million for the six months ended June 30, 2022. The decrease in cash flows from operating activities were primarily due to a decrease in earnings in the 2023 period and the timing of working capital cash flows such as collecting receivables, settling with vendors and settling with related parties, primarily our clients Ashford Trust and Braemar.

Net Cash Flows Provided by (Used in) Investing Activities. For the six months ended June 30, 2023, net cash flows used in investing activities were $18.1 million. These cash flows consisted of capital expenditures primarily for FF&E, audio visual equipment and marine vessels totaling $12.0 million, net cash paid to acquire Alii Nui of $6.7 million and issuance of notes receivable of $1.3 million. These were offset by cash inflows of $1.0 million from proceeds from a note receivable and $849,000 from the asset acquisition of RHC.

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 expenditure primarily for FF&E, audio visual equipment and marine vessels totaling $4.1 million and an investment in an unconsolidated entity of $400,000. These were offset by cash inflows of $406,000 in proceeds primarily received from the sale of FF&E to Ashford Trust and proceeds from a note receivable of $1.4 million.

Net Cash Flows Provided by (Used in) Financing Activities. For the six months ended June 30, 2023, net cash flows provided by financing activities were $2.6 million. These cash flows consisted of $21.6 million of proceeds from borrowings on notes payable, $12.0 million of which related to the Company’s Credit Agreement, and $1.7 million of net borrowings on revolving credit facilities. These were offset by $17.4 million of dividend payments on the Series D Convertible Preferred Stock, $2.1 million of payments on notes payable, purchases of $359,000 of treasury stock, $344,000 of distributions to consolidating noncontrolling interests, $329,000 of loan cost payments and $207,000 of payments on finance leases.

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 primarily 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 previous term loan 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 and purchases of $241,000 of treasury stock.

Seasonality

Quarterly revenues may be adversely affected by events beyond our control, such as 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, 2022, 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 2022 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 2022 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, 2023, our total indebtedness of $122.4 million included $115.0 million of variable-rate debt. The impact on our results of operations of a 100 basis point change in interest rates on the outstanding balance of variable-rate debt at June 30, 2023 would be approximately $1.2 million annually. Interest rate changes have no impact on the remaining $7.4 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, 2023, 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, 2023 (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.

There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class, however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. The opt out period has been extended until such time that discovery has concluded. In May of 2023, the trial court requested additional briefing from the parties to determine whether the case should be maintained, dismissed, or the class decertified. The trial court set a due date of August 7, 2023 for the briefs. If this litigation goes to trial, we expect that the earliest the trial would occur is the last quarter of 2023, based on various extensions to which the parties have agreed. 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, 2023, no amounts have been accrued.

ITEM 1A.RISK FACTORS

The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, 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. Other than as set forth below, as of June 30, 2023, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022.

We may be a “controlled company” within the meaning of the rules of NYSE American and, as a result, would qualify for, and could rely on, exemptions from certain corporate governance requirements.

Following the expiration of certain time and voting restrictions in the Investor Rights Agreement on August 8, 2023, Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. could potentially control a majority of the voting power of our equity securities. For a period of five years after the effective date of the Investor Rights Agreement, the Bennetts have agreed not to elect, or to cause the Company to elect, to be exempt from the NYSE American’s corporate governance requirements on account of the Company’s status as a “controlled company.” As a result, we may become a “controlled company” within the meaning of the corporate governance standards of the NYSE American after such time. Currently, under the rules of the NYSE American, a company for which more than 50% of the outstanding voting power is held by an individual, group, or another company is a “controlled company” and may elect to be exempt from certain stock exchange corporate governance requirements, which, generally, include the following:

•the requirement that a majority of the board of directors consists of independent directors;

•the requirement that the Company’s nominating and corporate governance committee consists entirely of independent directors; and

•the requirement that the Company’s compensation committee consists entirely of independent directors.

Accordingly, in the event we become a “controlled company” and elect to be exempt from some or all of these corporate governance requirements, you may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE American corporate governance requirements.

Please see Item 5 of this Form 10-Q for more information regarding the expiration of such time and voting restrictions in the Investor Rights Agreement.

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 2023:


Period	Total Number of Shares Purchased		Average Price Paid Per Share			Total Number of Shares Purchased as Part of a Publicly Announced Plan (1)	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
Common stock:
April 1 to April 30	563	(2)	$	10.40	(3)	—	$	20,000,000
May 1 to May 31	1,578	(2)	$	9.71	(3)	—	$	20,000,000
June 1 to June 30	141	(2)	$	10.80	(3)	—	$	20,000,000
Total	2,282		$	9.81		—

________

(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, 2023.

(2) Includes 206, 1,527 and 33 shares that were withheld to cover tax-withholding requirements in April, 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 357, 51 and 108 restricted shares of our common stock in April, May and June, respectively.

ITEM 3.DEFAULT UPON SENIOR SECURITIES

As of June 30, 2023, the Company had aggregate undeclared preferred stock dividends of approximately $19.1 million, which remain in arrears for 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 $27.8 million and $27.1 million at June 30, 2023 and December 31, 2022, 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 accrues cumulative preferred dividends at the rate of 7.28% per annum and will participate in any dividend or distribution on the common stock in addition to the preferred dividends.

On April 14, 2023, 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 quarter of 2023. On June 8, 2023, the Board declared a cash dividend on the Company’s Series D Convertible Preferred Stock for the quarter ended June 30, 2023. The Company paid the dividend of $8.7 million, or $0.455 per share of Series D Convertible Preferred Stock, on July 12, 2023.

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 beneficially 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

Mr. Archie Bennett, Jr. and Mr. Monty J. Bennett, as the direct or indirect beneficial holders of approximately 98% of the Series D Convertible Preferred Stock of Ashford Inc., may be deemed to have acquired control of the Company on August 8, 2023, after the expiration of the 40% voting cap under the Investor Rights Agreement, dated November 6, 2019, entered into by and among the Company, the Bennetts and other holders of the Company’s Series D Convertible Preferred Stock. Holders of shares of our Series D Convertible Preferred Stock vote, on an as-converted basis, with the holders of shares of our common stock on all matters submitted to a vote of the holders of voting securities of the Company.

Pursuant to the Investor Rights Agreement, the Bennetts and the other Covered Investors (as defined in the Investor Rights Agreement) agreed to be subject to a 40% voting cap and, on all matters submitted to a vote of the holders of voting securities of the Company, vote shares in excess of such cap in the same proportion as the other shareholders of the Company, exclusive of the shares voted by the Covered Investors. The 40% voting cap expired on August 8, 2023 and the Bennetts and the other Covered Investors may now vote all of their voting securities of the Company as they determine in their sole discretion.

Currently, under the rules of the NYSE American, a company for which more than 50% of the outstanding voting power is held by an individual, group or another company is a “controlled company.” The Bennetts, collectively, currently beneficially hold 18,758,600 shares of our Series D Convertible Preferred Stock, which equates to 4,152,301 shares of our common stock on an as-converted basis, and which together with their existing beneficial ownership of 610,261 shares of our common stock, represents beneficial ownership of approximately 64.6% of the outstanding voting power in the Company.

Accordingly, as of August 8, 2023, the Bennetts may be deemed to have control of the Company under the rules of the NYSE American.

ITEM 6.EXHIBITS


Exhibit						Description
3.1						Amended and Restated Certificate of Incorporation of Ashford Inc. (incorporated by reference to Exhibit 3.1 of Form 8-K, filed on November 6, 2019) (File No. 001-36400)
3.2						Articles of Amendment to the Certificate of Incorporation of Ashford Inc. (incorporated by reference to Exhibit 3.3 of Form 8-K, filed on November 6, 2019) (File No. 001-36400)
3.3						Articles Supplementary establishing the Series B Convertible Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.3 of Form 8-K, filed on August 8, 2018) (File No. 001-36400)
3.4						Certificate of Correction, filed on November 4, 2019, to Articles Supplementary establishing the Series B Convertible Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.4 of Form 10-Q, filed on November 7, 2019) (File No. 001-36400)
3.5						Articles Supplementary establishing the Series C Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.4 of Form 8-K, filed on August 8, 2018) (File No. 001-36400)
3.6						Amended and Restated Bylaws of Ashford Inc. (incorporated by reference to Exhibit 3.4 of Form 8-K, filed on November 6, 2019) (File No. 001-36400)
3.7						Certificate of Designation of the Series D Convertible Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.2 of Form 8-K, filed on November 6, 2019) (File No. 001-36400)
3.8						Certificate of Designation of Series E Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.1 of Form 8-K, filed on March 16, 2020) (File No. 001-36400)
3.9						Certificate of Designation of Series F Preferred Stock of Ashford Inc. (incorporated by reference to Exhibit 3.1 of Form 8-K, filed on August 31, 2022) (File No. 001-36400)
3.10						Certificate of Withdrawal of Certificate of Designation of Series E Preferred Stock of Ashford Inc., as filed with the Secretary of State of the State of Nevada on August 30, 2022 (incorporated by reference to Exhibit 3.2 of Form 8-K, filed on August 31, 2022) (File No. 001-36400)
10.1						Amended and Restated Credit Agreement by and between Inspire Event Technologies Holdings, LLC and Comerica Bank, dated March 24, 2023 (composite version, reflects all amendments through March 24, 2023) (incorporated by reference to Exhibit 10.1 of Form 8-K, filed on March 28, 2023) (File No. 001-36400)
10.2						Third Amended and Restated Master Term Note, dated March 24, 2023, made by Inspire Event Technologies Holdings, LLC in favor of Comerica Bank (incorporated by reference to Exhibit 10.2 of Form 8-K, filed on March 28, 2023) (File No. 001-36400)
10.3						Third Amended and Restated Master Revolving Note, dated March 24, 2023, made by Inspire Event Technologies Holdings, LLC in favor of Comerica Bank (incorporated by reference to Exhibit 10.3 of Form 8-K, filed on March 28, 2023) (File No. 001-36400)
10.4						Equipment Note Agreement, dated March 24, 2023, made by Inspire Event Technologies Holdings, LLC in favor of Comerica Bank (incorporated by reference to Exhibit 10.4 of Form 8-K, filed on March 28, 2023) (File No. 001-36400)
10.5						Limited Waiver Under Advisory Agreement, dated as of March 2, 2023, by and among Ashford Hospitality Trust, Inc., Ashford Hospitality Limited Partnership, Ashford TRS Corporation, Ashford Inc., and Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 10.1 of Form 8-K, filed on March 3, 2023) (File No. 001-36400)
10.6						Limited Waiver Under Advisory Agreement, dated as of March 2, 2023, by and among Braemar Hotels & Resorts Inc., Braemar Hospitality Limited Partnership, Braemar TRS Corporation, Ashford Inc., and Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 10.2 of Form 8-K, filed on March 3, 2023) (File No. 001-36400)
10.7						Rights Agreement, dated August 30, 2022, between Ashford Inc. and Computershare Trust Company, N.A, as Rights Agent (incorporated by reference to Exhibit 4.5 of Ashford Inc.’s Annual Report on Form 10-K filed on March 17, 2023) (File No. 001-36400)
10.8						Amendment No. 1 to the Rights Agreement, dated May 15, 2023, between Ashford Inc. and Computershare Trust Company, N.A, as Rights Agent (incorporated by reference to Exhibit 4.2 of Form 8-K filed on May 15, 2023) (File No. 001-36400)
31.1*						Certifications of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
31.2*						Certifications of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended


32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following materials from the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2023, are formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iv) Condensed Consolidated Statements of Equity (Deficit); (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

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

___________________________________

* Filed herewith.

**Furnished herewith.

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 10, 2023

By:

/s/ MONTY J. BENNETT

Monty J. Bennett

Chief Executive Officer

Date:

August 10, 2023

By:

/s/ DERIC S. EUBANKS

Deric S. Eubanks

Chief Financial Officer

EX-31.1 2 ainc2023q210-qxex311.htm EX-31.1 Document

EXHIBIT 31.1

CERTIFICATION

I, Monty J. Bennett, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Ashford Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2023


/s/ MONTY J. BENNETT
Monty J. Bennett
Chief Executive Officer

EX-31.2 3 ainc2023q210-qxex312.htm EX-31.2 Document

EXHIBIT 31.2

CERTIFICATION

I, Deric S. Eubanks, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Ashford Inc.;

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2023


/s/ DERIC S. EUBANKS
Deric S. Eubanks
Chief Financial Officer

EX-32.1 4 ainc2023q210-qxex321.htm EX-32.1 Document

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ashford Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Monty J. Bennett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 10, 2023


/s/ MONTY J. BENNETT
Monty J. Bennett
Chief Executive Officer

EX-32.2 5 ainc2023q210-qxex322.htm EX-32.2 Document

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ashford Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deric S. Eubanks, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 10, 2023


/s/ DERIC S. EUBANKS
Deric S. Eubanks
Chief Financial Officer