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ASHFORD INC.

(AINC)
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ASHFORD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/12/2022 | 04:08pm EDT
As used in this Quarterly Report on Form 10-Q, unless the context otherwise
indicates, the references to "we," "us," "our," and the "Company" refer to
Ashford Inc., a Nevada corporation, and, as the context may require, its
consolidated subsidiaries, including Ashford Hospitality Advisors LLC, a
Delaware limited liability company, which we refer to as "Ashford LLC" or "our
operating company"; Ashford Hospitality Holdings LLC, a Delaware limited
liability company, which we refer to as "Ashford Holdings"; Ashford Hospitality
Services LLC, a Delaware limited liability company, which we refer to as
"Ashford Services"; Premier Project Management LLC, a Maryland limited liability
company, which we refer to as "Premier Project Management," or "Premier"; and
Remington Lodging & Hospitality, LLC, a Delaware limited liability company,
which we refer to as "Remington.""Braemar" refers to Braemar Hotels & Resorts
Inc., a Maryland corporation, and, as the context may require, its consolidated
subsidiaries, including Braemar Hospitality Limited Partnership, a Delaware
limited partnership, which we refer to as "Braemar OP." "Ashford Trust" or "AHT"
refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the
context may require, its consolidated subsidiaries, including Ashford
Hospitality Limited Partnership, a Delaware limited partnership and Ashford
Trust's operating partnership, which we refer to as "Ashford Trust OP."

FORWARD-LOOKING STATEMENTS


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

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

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

•our business and investment strategy;

•our projected operating results;

•our ability to obtain future financing arrangements;

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

•our understanding of our competition;

•market trends;

•the future success of recent acquisitions;

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

•projected capital expenditures; and

•the impact of technology on our operations and business.


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

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

•adverse effects of the COVID-19 pandemic, including a significant reduction in
business and personal travel and potential travel restrictions in regions where
our clients' hotels are located, and one or more possible recurrences of
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COVID-19 case surges causing a further reduction in business and personal travel
and potential reinstatement of travel restrictions by state or local
governments;
•extreme weather conditions may cause property damage or interrupt business;

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

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

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

•availability, terms and deployment of capital;

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

•the degree and nature of our competition;

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

•availability of qualified personnel;

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

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

•legislative and regulatory changes;

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


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

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


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

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

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


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

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Overview


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

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

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


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

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

Recent Developments


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

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

On April 15, 2022, the Company acquired privately held Chesapeake, a third-party
hotel management company. The Company paid to the sellers $6.3 million in cash,
subject to certain adjustments, and issued to the sellers 378,000 Series CHP
Convertible Preferred Units of Ashford Holdings (the "Series CHP Units") at $25
per Unit, for a total liquidation value of $9.45 million. The Series CHP Units
include a discount of $8.1 million resulting in a total fair value of
$1.4 million. The
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discount is due to the Company's ability to convert the Series CHP Units to
common units of Ashford Holdings at the preferred conversion price of $117.50.
Common units of Ashford Holdings are exchangeable into common stock of the
Company on a 1:1 ratio. The sellers also have the ability to earn up to
$10.25 million of additional consideration based on the base management fee
contribution from the acquired business for the trailing 12 month periods ending
March 2024 and March 2025, respectively, for a total potential consideration of
$18.1 million, subject to certain adjustments. The first $6.3 million of such
additional consideration is payable in cash and any amounts payable in excess of
such $6.3 million may be satisfied by the issuance of shares of common stock of
the Company, common units of Ashford Holdings or additional Series CHP Units, as
determined by the Company in its sole discretion. Each Series CHP Unit (i) has a
liquidation value of $25 plus all unpaid accrued and accumulated distributions
thereon; (ii) is entitled to cumulative dividends at the rate of 7.28% per
annum, payable quarterly in arrears; (iii) participates in any dividend or
distribution paid on all outstanding common units of Ashford Holdings in
addition to the preferred dividends; (iv) is convertible, along with the
aggregate accrued or accumulated and unpaid distributions thereon, into common
units of Ashford Holdings at the option of the holder or the issuer, which
common units of Ashford Holdings will then be redeemable by the holder thereof
into common stock of the Company on a 1:1 ratio or cash, at the Company's
discretion; and (v) provides for customary anti-dilution protections. The number
of common units of Ashford Holdings to be received upon conversion of Series of
CHP Units, along with the aggregate accrued or accumulated and unpaid
distributions thereon, is determined by: (i) multiplying the number of Series
CHP Units to be converted by the liquidation value thereof; and then (ii)
dividing the result by the preferred conversion price, which is $117.50 per
unit. In the event the Company fails to pay the required dividends on the Series
CHP Units for two consecutive quarterly periods (a "Preferred Unit Breach"),
then until such arrearage is paid in cash in full, the dividend rate on the
Series CHP Units will increase to 10.00% per annum until no Preferred Unit
Breach exists. Except with respect to certain protective provisions, no holder
of Series CHP Units will have voting rights in its capacity as such. As long as
any Series CHP Units are outstanding, the Company is prohibited from taking
specified actions without the consent of at least 50% of the holders of Series
CHP Units, including (i) modifying the terms, rights, preferences, privileges or
voting powers of the Series CHP Units or (ii) altering the rights, preferences
or privileges of any Units of Ashford Holdings so as to adversely affect the
Series CHP Units.

On April 15, 2022, the Company and Ashford Services agreed with Jeremy Welter,
the Chief Operating Officer of the Company, that, effective on July 15, 2022,
Mr. Welter would terminate employment with and service to the Company, Ashford
Services and their affiliates. Mr. Welter was also the Chief Operating Officer
of Ashford Trust and Braemar and accordingly his service as Chief Operating
Officer of each of Ashford Trust and Braemar also ended on July 15, 2022.

Discussion of Presentation

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

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RESULTS OF OPERATIONS


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

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


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

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

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

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

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


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

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

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

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

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

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

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

Other revenue:

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

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

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

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

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

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


________

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

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


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

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

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


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

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

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


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

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

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

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

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

Total equity-based compensation                                  516                851               (335)

Non-cash (gain) loss in deferred compensation plan (4)

                                                             (600)             2,743             (3,343)
Total salaries and benefits                           $       16,603          $  17,392          $    (789)


________

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

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

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

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

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

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

Depreciation and Amortization Expense. Depreciation and amortization expense
decreased $240,000, or 2.9%, to $8.0 million for the 2022 quarter compared to
the 2021 quarter, primarily due to a decrease in FF&E related to the respective
ERFP agreements with Ashford Trust and Braemar compared to the 2021 quarter.
Depreciation and amortization expense for the 2022 quarter and the 2021 quarter
excludes depreciation expense related to audio visual equipment of $1.2 million
and $1.2 million, respectively, which is included in "cost of revenues for audio
visual" and also excludes depreciation expense for the 2022 quarter and the 2021
quarter related to marine vessels in the amount of $280,000 and $247,000,
respectively, which are included in "other" operating expense.
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General and Administrative Expense. General and administrative expenses
increased $3.6 million, or 54.3%, to $10.2 million for the 2022 quarter compared
to the 2021 quarter. The change in general and administrative expense consisted
of the following (in thousands):

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


________

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


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

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

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

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

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


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

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

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

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

                                       61
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Realized Gain (Loss) on Investments. Realized loss on investments was $0 and
$179,000 for the 2022 quarter and the 2021 quarter, respectively. The realized
loss on investments for the 2021 quarter primarily relates to realized losses on
shares of common stock of Ashford Trust and Braemar purchased by Remington on
the open market and held for the purpose of providing compensation to certain
employees. See note 7 to our condensed consolidated financial statements.

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


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

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

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

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

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

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


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

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

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

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

Other income (expense)                                  (112)              (285)                          173                    60.7  %
INCOME (LOSS) BEFORE INCOME TAXES                     11,358            (16,066)                       27,424                   170.7  %
Income tax (expense) benefit                          (5,354)             1,648                        (7,002)                 (424.9) %
NET INCOME (LOSS)                                      6,004            (14,418)                       20,422                   141.6  %
(Income) loss from consolidated entities
attributable to noncontrolling interests                 558                329                           229                    69.6  %
Net (income) loss attributable to redeemable
noncontrolling interests                                (132)               195                          (327)                 (167.7) %
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY          6,430            (13,894)                       20,324                   146.3  %

Preferred dividends, declared and undeclared (18,393) (17,239)

                       (1,154)                   (6.7) %
Amortization of preferred stock discount                   -               (627)                          627                   100.0  %
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS                                  $      (11,963)         $ (31,760)               $       19,797                    62.3  %


Net Income (Loss) Attributable to Common Stockholders. Net loss attributable to
common stockholders changed $19.8 million to a $12.0 million loss for the six
months ended June 30, 2022 ("the 2022 period") compared to the six months ended
June 30, 2021 ("the 2021 period") as a result of the factors discussed below.
                                       63
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Total Revenues. Total revenues increased by $153.6 million, or 104.0%, to $301.4
million for the 2022 period compared to the 2021 period due to the following (in
thousands):

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

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

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

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

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

Other revenue:

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

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

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

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

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

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


________

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

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

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

                                       64
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third-parties of $3.7 million, $580,000 and $2.2 million, respectively,
incentive management fees of $1.1 million, $243,000 and $703,000 from Ashford
Trust, Braemar and third-parties, respectively and other management fees of $1.1
million from third-parties. The increase from Ashford Trust and Braemar are due
to increased demand compared to the 2021 period as the industry recovers from
COVID-19. The increase in third-party revenue is primarily due to Remington's
acquisition of Chesapeake in the 2022 period.

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

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


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

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

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


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

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

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

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

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

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


________

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

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

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

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

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

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

Depreciation and Amortization Expense. Depreciation and amortization expense
decreased by $754,000, or 4.6%, to $15.6 million for the 2022 period compared to
the 2021 period, primarily due to a decrease in FF&E related to the respective
ERFP agreements with Ashford Trust and Braemar compared to the 2021 period.
Depreciation and amortization expense for the 2022 period and the 2021 period
excludes depreciation expense related to audio visual equipment of $2.4 million
and $2.5 million, respectively, which is included in "cost of revenues for audio
visual" and also excludes depreciation expense for the 2022 period and the 2021
period related to marine vessels in the amount of $567,000 and $466,000,
respectively, which are included in "other" operating expense.
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General and Administrative Expense. General and administrative expenses increased by $5.7 million, or 47.9%, to $17.5 million for the 2022 period compared to the 2021 period. The change in general and administrative expense consisted of the following (in thousands):

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


________

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

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


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

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

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

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

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


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

Interest Expense. Interest expense was $3.8 million and $2.6 million for the
2022 period and the 2021 period, respectively. The increase is primarily due to
the Company's Credit Facility entered into in the 2022 period. Interest expense
relates to our Credit Facility and notes payable, lines of credit and finance
leases held by our consolidated subsidiaries. See note 6 to our condensed
consolidated financial statements.
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Amortization of Loan Costs. Amortization of loan costs was $305,000 and $131,000
for the 2022 period and the 2021 period, respectively. The increase is primarily
due to the Company's Credit Facility entered into in the 2022 period.
Amortization of loan costs relates to our Credit Facility and notes payable held
by our consolidated subsidiaries. See note 6 to our condensed consolidated
financial statements.

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


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

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


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

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

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

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

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


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

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

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

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

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

The Company currently intends to declare and pay the accrued and unpaid
dividends on the Series D Convertible Preferred Stock for the quarters ending
June 30, 2021 and December 31, 2021 during calendar year 2023 and to keep
current on future preferred dividend payments. However, the independent members
of the Board plan to revisit the dividend payment policy with respect to the
Series D Convertible Preferred Stock on an ongoing basis and will make decisions
on such preferred dividend payments based on the ongoing liquidity and capital
needs of the Company.
                                       69
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Each share of Series D Convertible Preferred Stock: (i) has a liquidation value
of $25 per share; (ii) accrues cumulative dividends at the rate of: (a) 6.59%
per annum until November 6, 2020; (b) 6.99% per annum from November 6, 2020
until November 6, 2021; and (c) 7.28% per annum thereafter; (iii) participates
in any dividend or distribution on the common stock in addition to the preferred
dividends; (iv) is convertible into voting common stock at $117.50 per share;
and (v) provides for customary anti-dilution protections. In the event the
Company fails to pay the dividends on the Series D Convertible Preferred Stock
for two consecutive quarterly periods (a "Preferred Stock Breach"), then until
such arrearage is paid in cash in full: (A) the dividend rate on the Series D
Convertible Preferred Stock will increase to 10.00% per annum until no Preferred
Stock Breach exists; (B) no dividends on the Company's common stock may be
declared or paid, and no other distributions or redemptions may be made, on the
Company's common stock; and (C) the Board will be increased by two seats and the
holders of 55% of the outstanding Series D Convertible Preferred Stock will be
entitled to fill such newly created seats. The Series D Convertible Preferred
Stock is held primarily by Mr. Monty J. Bennett, the Chairman of our Board and
our Chief Executive Officer, Mr. Archie Bennett, Jr., who is Mr. Monty J.
Bennett's father, one of our other executive officers and several other
individuals.

To the extent not paid on April 15, July 15, October 15 and January 15 of each
calendar year in respect of the quarterly periods ending on March 31, June 30,
September 30 and December 31, respectively (each such date, a "Dividend Payment
Date"), all accrued dividends on any share shall accumulate and compound on the
applicable Dividend Payment Date whether or not declared by the Board and
whether or not funds are legally available for the payment thereof. All accrued
dividends shall remain accumulated, compounding dividends until paid in cash or
converted to common shares. See also note 12 to our condensed consolidated
financial statements.

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

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

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

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

Other liquidity considerations-On December 5, 2017, the Board approved a stock
repurchase program pursuant to which the Board granted a repurchase
authorization to acquire shares of the Company's common stock, having an
aggregate value of up to $20 million. No shares were repurchased under the stock
repurchase program during the six months ended June 30, 2022.
                                       70
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Our deferred compensation plan currently has only one participant, Mr. Monty J.
Bennett, our Chairman and Chief Executive Officer. Mr. Monty J. Bennett has
elected to invest his deferred compensation account in our common stock. As a
result, we have an obligation to issue approximately 196,000 shares of our
common stock to Mr. Monty J. Bennett in quarterly installments over five years
beginning in 2024. Mr. Monty J. Bennett may postpone all or a portion of the
distributions, for a minimum of 5 years, if he notifies the Company 12 months
prior to the scheduled distributions. As of June 30, 2022, the fair value of the
DCP liability was $2.8 million.

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

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

Sources and Uses of Cash


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

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

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

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

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

For the six months ended June 30, 2021, net cash flows used in financing
activities were $14.2 million. These cash flows consisted of $8.4 million of
payments for dividends on preferred stock, $5.3 million of payments on notes
payable, $620,000 of payments on our revolving credit facilities, purchases of
$121,000 of treasury stock and $91,000 of payments on finance leases. These were
offset by $325,000 of proceeds from borrowings on notes payable and employee
advances of $49,000 associated with tax withholdings for restricted stock
vesting.
                                       71
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Seasonality


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

Contractual Obligations and Commitments


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

Critical Accounting Policies and Estimates


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

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