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

OPERATIONS

As used in this Quarterly Report on Form 10-Q, unless the context otherwise
indicates, the references to "we," "us," "our," and the "Company" refer to
Ashford Inc., a Nevada corporation, and, as the context may require, its
consolidated subsidiaries, including Ashford Hospitality Advisors LLC, a
Delaware limited liability company, which we refer to as "Ashford LLC" or "our
operating company"; Ashford Hospitality Holdings LLC, a Delaware limited
liability company, which we refer to as "Ashford Holdings"; Ashford Hospitality
Services LLC, a Delaware limited liability company, which we refer to as
"Ashford Services"; Premier Project Management LLC, a Maryland limited liability
company, which we refer to as "Premier Project Management," or "Premier"; and
Remington Lodging & Hospitality, LLC, a Delaware limited liability company,
which we refer to as "Remington.""Braemar" refers to Braemar Hotels & Resorts
Inc., a Maryland corporation, and, as the context may require, its consolidated
subsidiaries, including Braemar Hospitality Limited Partnership, a Delaware
limited partnership, which we refer to as "Braemar OP." "Ashford Trust" or "AHT"
refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the
context may require, its consolidated subsidiaries, including Ashford
Hospitality Limited Partnership, a Delaware limited partnership and Ashford
Trust's operating partnership, which we refer to as "Ashford Trust OP."
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements that are subject to
risks and uncertainties. Forward-looking statements are generally identifiable
by use of forward-looking terminology such as "may," "will," "should,"
"potential," "intend," "expect," "anticipate," "estimate," "approximately,"
"believe," "could," "project," "predict," or other similar words or expressions.
Additionally, statements regarding the following subjects are forward-looking by
their nature:
•the impact of the COVID-19 pandemic and numerous governmental travel
restrictions and other orders 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, including the 2018 acquisition of
Premier and the 2019 acquisition of Remington;
•the future success of recent business initiatives with Ashford Trust and
Braemar;
•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, 2020, as filed with the U.S. Securities and Exchange Commission
(the "SEC") on March 16, 2021, 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;"
•adverse effects of the COVID-19 pandemic, including a significant reduction in
business and personal travel and potential travel restrictions in regions where
our clients' hotels are located, and one or more possible recurrences of
COVID-19 case surges causing a further reduction in business and personal travel
and potential reinstatement of travel restrictions by state or local
governments;
•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;
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•uncertainty associated with the ability of the Company to remain in compliance
with all covenants in our Term Loan Agreement (as defined below) 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;
•risks from climate change that impact our operations;
•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 timing and outcome of the SEC investigation;
•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 and the 2019 acquisition of Remington, 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, including the ERFP Agreement with Braemar;
•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.
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 November 10, 2021, 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 609,413 shares of our common stock, which
represented an approximately 20.2% 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 exercisable (at an exercise price of
$117.50 per share) into an additional approximate 3,991,191 shares of Ashford
Inc. common stock, which if exercised as of November 10, 2021 would have
increased Mr. Monty J. Bennett and Mr. Archie Bennett, Jr.'s ownership interest
in Ashford Inc. to 65.6%.
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 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.
Recent Developments
COVID-19, Management's Plans and Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, and subsequently
spread to other regions of the world, which has resulted in significant travel
restrictions and extended shutdown of numerous businesses throughout the United
States. In March 2020, the World Health Organization declared COVID-19 to be a
global pandemic. Our clients, Ashford Trust and Braemar, have reported that the
negative impact on room demand within their respective portfolios stemming from
COVID-19 is significant, which has resulted and is expected to result in
significantly reduced occupancy and RevPAR. Furthermore, the prolonged presence
of the virus has resulted in health and other government authorities imposing
widespread restrictions on travel and other businesses. The hotel industry has
experienced postponement or cancellation of a significant number of business
conferences and similar events. Following the government mandates and health
official orders, the Company dramatically reduced staffing and expenses at its
products and services businesses and at its corporate office. COVID-19 has had a
significant negative impact on the Company's operations and financial results to
date. In addition, one or more possible recurrences of COVID-19 case surges
could result in further reductions in business and personal travel and could
cause state and local governments to reinstate travel restrictions. The Company
expects that the COVID-19 pandemic will continue to have a significant negative
impact on the Company's results of operations, financial position and cash flow
in 2021 and potentially beyond. As a result, in March 2020, the Company amended
payment terms pursuant to certain hotel management agreements to better manage
corporate working capital, reduced planned capital expenditures, significantly
reduced operating expenses and reduced the cash compensation of its executive
officers and other employees, including an arrangement pursuant to which Mr.
Monty J. Bennett received his base salary in the form of common stock issued
under the Company's 2014 Incentive Plan, as amended. Additionally, the Company
did not declare dividends which were due with respect to its Series D
Convertible Preferred Stock for the second and fourth quarters of 2020 and the
second quarter of 2021. As of September 30, 2021, the Company had aggregate
undeclared preferred stock dividends of approximately $25.6 million, which
relates to the second and fourth quarters of 2020 and the second quarter of
2021.
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During the first quarter of 2021, base salaries for the Company's executive
officers and other employees were restored to pre-reduction levels and the
arrangement by which Mr. Monty J. Bennett received his base salary in the form
of common stock ended. Additionally, the Company declared $8.4 million in
dividends in each of the first and third quarters of 2021 which were due with
respect to its Series D Convertible Preferred Stock. The dividends were paid on
April 15 and October 15, 2021, respectively.
When preparing financial statements, management has the responsibility to
evaluate whether there are conditions or events, considered in the aggregate,
that create substantial doubt about the Company's ability to continue as a going
concern within one year after the date that the financial statements are issued.
In applying the accounting guidance, the Company considered its current
financial condition and liquidity sources, including current funds available,
forecasted future cash flows and its unconditional obligations due over the next
12 months.
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 September 30, 2021, our Term Loan 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. INSPIRE
executed the INSPIRE Amendment on December 31, 2020, which extended the maturity
date of the loan and includes a fixed charge coverage ratio covenant which
commences with the quarter ending March 31, 2023. On September 22, 2021, the
INSPIRE Amendment was further amended to reduce INSPIRE's requirement to fund an
operating reserve account from an initial amount of $3.0 million to
$1.0 million. Additionally, INSPIRE's results from operations exceeded
management's forecast for the third quarter of 2021. Primarily due to these
factors, management has determined that INSPIRE is not reliant on Ashford Inc.
to make contributions to cover INSPIRE's interest and upcoming principal
payments on its outstanding debt. All such contributions, if needed, are subject
to the discretion of Ashford Inc. As such, the Company reclassified
$19.3 million of INSPIRE's outstanding loans from current "notes payable, net"
to noncurrent "notes payable, net" in our condensed consolidated balance sheet
as of September 30, 2021.
We cannot predict when hotel operating levels at our clients, Ashford Trust and
Braemar, will return to normalized levels after the effects of the pandemic
subside, whether our clients' hotels will be forced to shut down operations
again or whether one or more governmental entities may impose additional travel
restrictions due to a resurgence of COVID-19 cases in the future. As a result of
these factors resulting from the impact of the pandemic, we are unable to
estimate future financial performance with certainty. However, based primarily
on our assessment of the ability of our key clients, Ashford Trust and Braemar,
to pay their obligations to the Company in accordance with the advisory
agreements, the Company has concluded that management's current plan alleviates
the substantial doubt about its ability to continue as a going concern.
Additional factors considered in our assessment include our completed loan
amendments, other agreements, our current cash on hand, our forecast of future
operating results for the next 12 months from the date of this report and the
actions we have taken to improve our liquidity. Facts and circumstances 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, additional
government mandates, health official orders, travel restrictions and extended
business shutdowns due to COVID-19, which could subsequently change our
assessment. See notes 5 and 13 to our condensed consolidated financial
statements.
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Other Developments
On August 10, 2021, the Company issued a press release announcing that on August
9, 2021 it had received a notification letter from the NYSE American that the
Company has regained compliance with all of the NYSE American continued listing
standards set forth in Part 10, Section 1003 of the NYSE American Company Guide
(the "Company Guide"). The Company previously received a notification letter
(the "Letter") from the NYSE American on August 26, 2020, which indicated that
the Company was not in compliance with the standards of Sections 1003(a)(i) and
1003(a)(ii) of the Company Guide. Pursuant to these Sections, the NYSE American
will normally consider suspending dealings in, or removing from the list,
securities of a listed company whose stockholders' equity is less than (i) $2.0
million if it has reported losses from continuing operations or net losses in
two of its three most recent fiscal years and (ii) $4.0 million if it has
reported losses from continuing operations or net losses in three of its four
most recent fiscal years (together, the "Stockholders' Equity Standards").
However, Section 1003(a) of the Company Guide also states that the NYSE American
will not normally consider suspending dealings in, or removing from the list,
the securities of a listed company that falls below the Stockholders' Equity
Standards if the listed company is in compliance with the following two
standards: (1) total value of market capitalization of at least $50 million or
total assets and revenue of $50 million each in its last fiscal year, or in two
of its last three fiscal years (the "First Standard"), and (2) the listed
company has at least 1.1 million shares publicly held, a market value of
publicly held shares of at least $15.0 million and 400 round lot shareholders
(the "Second Standard").
When the Company received the Letter, it was not in compliance with the
Stockholders' Equity Standards, but it was in compliance with the First Standard
because it had total assets and total revenue of at least $50 million in its
last fiscal year and was in compliance with the Second Standard, except that the
current market value of publicly held shares was below $15.0 million. On
September 24, 2020, the Company submitted to the NYSE American a compliance plan
which detailed how it intended to regain compliance with Section 1003(a) by
increasing the current market value of the publicly held shares above $15.0
million while maintaining compliance with all other requirements of the First
and Second Standards. As a result of management's efforts, the Company has come
into compliance with the First and Second Standards, and the NYSE American has
informed the Company that it has cured the previously cited deficiencies and is
in full compliance with the continued listing standards set forth in Part 10,
Section 1003 of the Company Guide. Effective at the start of trading on August
10, 2021, the ".BC" designation, signifying noncompliance with the NYSE
American's listing standards, was removed from the "AINC" trading symbol.
On October 1, 2021, the Company announced that JSAV completed a strategic
rebranding and is now named INSPIRE. INSPIRE is a global event solution company
specializing in audio-visual, staging and production.
On October 12, 2021, Ashford Trust entered into Amendment No. 1 to the Credit
Agreement ("Amendment No. 1") with certain funds and accounts managed by Oaktree
Capital Management, L.P., as lenders, and Oaktree, as administrative agent.
Amendment No. 1, subject to the conditions set forth therein, among other
things, suspends Ashford Trust's obligation to subordinate fees due under the
advisory agreement if at any point there is no accrued interest outstanding or
any accrued dividends on any of Ashford Trust's preferred stock and Ashford
Trust has sufficient unrestricted cash to repay in full all outstanding loans
under the Credit Agreement, as amended.
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 September 30, 2021 Compared to Three Months Ended September
30, 2020
The following table summarizes the changes in key line items from our condensed
consolidated statements of operations for the three months ended September 30,
2021 and 2020 (in thousands):
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                                                   Three Months Ended September
                                                                30,                              Favorable (Unfavorable)
                                                      2021               2020               $ Change                % Change
REVENUE
Advisory services fees                            $  10,143          $  10,832          $         (689)                   (6.4) %
Hotel management fees                                 7,750              3,777                   3,973                   105.2  %
Design and construction fees                          2,202              1,790                     412                    23.0  %
Audio visual                                         15,108              3,114                  11,994                   385.2  %
Other                                                13,104              8,222                   4,882                    59.4  %
Cost reimbursement revenue                           54,048             28,133                  25,915                    92.1  %
Total revenues                                      102,355             55,868                  46,487                    83.2  %
EXPENSES
Salaries and benefits                                13,793             13,820                      27                     0.2  %
Cost of revenues for design and construction          1,032                703                    (329)                  (46.8) %
Cost of revenues for audio visual                    11,353              3,126                  (8,227)                 (263.2) %
Depreciation and amortization                         8,056             10,094                   2,038                    20.2  %
General and administrative                            7,585              5,540                  (2,045)                  (36.9) %
Impairment                                            1,160                  -                  (1,160)
Other                                                 4,758              9,147                   4,389                    48.0  %
Reimbursed expenses                                  53,991             28,072                 (25,919)                  (92.3) %
Total expenses                                      101,728             70,502                 (31,226)                  (44.3) %
OPERATING INCOME (LOSS)                                 627            (14,634)                 15,261                   104.3  %

Equity in earnings (loss) of unconsolidated
entities                                                 12                 48                     (36)                  (75.0) %
Interest expense                                     (1,290)            (1,259)                    (31)                   (2.5) %
Amortization of loan costs                              (78)               (86)                      8                     9.3  %
Interest income                                          72                  -                      72

Realized gain (loss) on investments                     370                  -                     370

Other income (expense)                                   29                (44)                     73                   165.9  %
INCOME (LOSS) BEFORE INCOME TAXES                      (258)           (15,975)                 15,717                    98.4  %
Income tax (expense) benefit                            (98)             1,835                  (1,933)                 (105.3) %
NET INCOME (LOSS)                                      (356)           (14,140)                 13,784                    97.5  %
(Income) loss from consolidated entities
attributable to noncontrolling interests                180                319                    (139)                  (43.6) %
Net (income) loss attributable to redeemable
noncontrolling interests                                 13                604                    (591)                  (97.8) %

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY (163) (13,217)

                 13,054                    98.8  %
Preferred dividends, declared and undeclared         (8,762)            (7,985)                   (777)                   (9.7) %
Amortization of preferred stock discount               (306)              (781)                    475                    60.8  %
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS                                      $  (9,231)         $ (21,983)         $       12,752                    58.0  %


Net Income (Loss) Attributable to Common Stockholders. Net income (loss)
attributable to common stockholders changed $12.8 million, or 58.0%, to a $9.2
million loss for the three months ended September 30, 2021 ("the 2021 quarter")
compared to the three months ended September 30, 2020 ("the 2020 quarter") as a
result of the factors discussed below.
Total Revenues. Total revenues increased $46.5 million, or 83.2%, to $102.4
million for the 2021 quarter compared to the 2020 quarter due to the following
(in thousands):
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                                            Three Months Ended September 30,                Favorable (Unfavorable)
                                                2021                2020               $ Change                 % Change
Advisory services fees:
Base advisory fees (1)                      $   10,012          $  11,040          $       (1,028)                    (9.3) %
Incentive advisory fees (2)                          -               (339)                    339                    100.0  %

Other advisory revenue (3)                         131                131                       -                        -  %
Total advisory services fees revenue            10,143             10,832                    (689)                    (6.4) %

Hotel management fees:
Base management fees                             6,166              3,777                   2,389                     63.3  %
Incentive management fees                        1,584                  -                   1,584
Total hotel management fees revenue (4)          7,750              3,777                   3,973                    105.2  %

Design and construction fees revenue (5)         2,202              1,790                     412                     23.0  %

Audio visual revenue (6)                        15,108              3,114                  11,994                    385.2  %

Other revenue:

Watersports, ferry and excursion services
(7)                                              6,738              2,513                   4,225                    168.1  %
Debt placement and related fees (8)              3,224              4,017                    (793)                   (19.7) %

Claims management services (9)                      28                 55                     (27)                   (49.1) %

Other services (10)                              3,114              1,637                   1,477                     90.2  %
Total other revenue                             13,104              8,222                   4,882                     59.4  %

Cost reimbursement revenue (11)                 54,048             28,133                  25,915                     92.1  %

Total revenues                              $  102,355          $  55,868          $       46,487                     83.2  %

REVENUES BY SEGMENT (12)
REIT advisory                               $   17,936          $  16,790          $        1,146                      6.8  %
Remington                                       52,324             24,800                  27,524                    111.0  %
Premier                                          3,047              2,277                     770                     33.8  %
INSPIRE                                         15,108              3,114                  11,994                    385.2  %
OpenKey                                            505                341                     164                     48.1  %
Corporate and other                             13,435              8,546                   4,889                     57.2  %
Total revenues                              $  102,355          $  55,868          $       46,487                     83.2  %


________
(1)The decrease in base advisory fee is primarily due to lower revenue of $1.4
million from Ashford Trust partially offset by higher revenue of $371,000 from
Braemar. Advisory fees earned from Ashford Trust excluded $2.2 million of
advisory fees that were constrained and deferred as a result of the
$29.0 million annual Advisory Fee Cap. The deferred fees are included in
deferred income in our condensed consolidated balance sheet. See note 3 of our
condensed consolidated financial statements for discussion of the advisory
services fees revenue recognition policy.
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(2)  In the third quarter of 2020, the Company determined it was no longer
probable Braemar would meet the minimum FCCR Condition requirement as stated in
the Braemar advisory agreement. As such, the Company did not recognize any
incentive fee revenue related to Braemar in the three months ended September 30,
2020 for the 2018 measurement period. The three months ended September 30, 2020
additionally included a reversal of $339,000 of incentive fee revenue recognized
in the first two quarters of 2020 which the Company did not collect due to
Braemar no longer meeting the FCCR Condition. Incentive fee payments are subject
to meeting the December 31 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 subsequent to the 2016 measurement period.
Braemar's annual total stockholder return did not meet the relevant incentive
fee thresholds during the 2020 and 2019 measurement periods.
(3)   Other advisory revenue remained steady. 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 on a quarterly basis over the initial
ten-year term of the agreement.
(4)   The increase in hotel management fees revenue is due to higher base
management fees from Ashford Trust and Braemar of $1.5 million and $419,000,
respectively, and incentive management fees of $1.4 million and $168,000 from
Ashford Trust and Braemar, respectively, due to increased room demand within
their respective portfolios compared to the 2020 quarter as the industry
recovers from COVID-19.
(5)   The increase in design and construction fees revenue is due to higher
revenue from Ashford Trust and Braemar of $88,000 and $146,000, respectively.
Design and construction fees revenue additionally includes an increase in
revenue from third parties of $178,000.
(6)   The $12.0 million increase in audio visual revenue is due to increased
demand for event technology services at hotels and convention centers as the
U.S. travel and hospitality industry continues to recover from COVID-19.
(7)   The $4.2 million increase in watersports, ferry and excursion services
revenue is due to $572,000 in revenue from RED's expansion in the Turks and
Caicos Islands in the 2021 quarter and increased demand for RED's recreational
services as the U.S. travel and hospitality industry continues to recover from
COVID-19.
(8)   The decrease in debt placement and related fee revenue is due to higher
revenue of $117,000 from Ashford Trust offset by lower revenue of $910,000 from
Braemar. Debt placement and related fees are earned by Lismore for providing
debt placement, modification, forbearance and refinancing services. The change
is primarily 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. Lismore's agreement with Braemar expired
in March 2021.
(9)   Claims management services include revenue earned from providing insurance
claim assessment and administration services to Ashford Trust and Braemar.
(10)   The increase in other services revenue is primarily due to higher revenue
from Marietta of $1.1 million due to increased room demand. Other services
revenue primarily relates to other hotel services provided by our consolidated
subsidiaries; OpenKey, PRE Opco, LLC ("Pure Wellness") and Marietta, to Ashford
Trust, Braemar and other third parties.
(11)   The increase in cost reimbursement revenue is primarily due to increased
cost reimbursement revenue in the 2021 quarter of $23.6 million from Remington
due to increased room demand within the hotel industry compared to the 2020
quarter and increased cost reimbursement revenue of $1.9 million from our REIT
Advisory segment related to reimbursable advisory expenses for Ashford Trust and
Braemar compared to the 2020 quarter.
(12)   See note 15 to our condensed consolidated financial statements for
discussion of segment reporting.
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Salaries and Benefits Expense. Salaries and benefits expense decreased $27,000,
or 0.2%, to $13.8 million for the 2021 quarter compared to the 2020 quarter. The
change in salaries and benefits expense consisted of the following (in
thousands):
                                                      Three Months Ended September 30,
                                                          2021                2020             $ Change
Cash salaries and benefits:
Salary expense                                        $    9,479          $   7,582          $   1,897
Bonus expense                                              3,665              4,296               (631)
Benefits related expenses                                  1,345              1,136                209
Total cash salaries and benefits (1)                      14,489             13,014              1,475
Non-cash equity-based compensation:
Stock option grants (2)                                      552              1,454               (902)
Employee equity grant expense                                363                221                142

Total non-cash equity-based compensation                     915              1,675               (760)
Non-cash (gain) loss in deferred compensation plan
(3)                                                       (1,611)              (869)              (742)
Total salaries and benefits                           $   13,793          $  13,820          $     (27)


________
(1)The change in cash salaries and benefits expense is primarily due to
fluctuations in the number of employees, salary and bonus awards, group
insurance costs, payroll taxes and employee participation in the benefits
offered which were reduced as a result of cost control efforts in the 2020
quarter due to COVID-19.
(2)The decrease in stock option grant related expense in the 2021 quarter
primarily relates to the Company not issuing any stock option grants during
fiscal years 2020 and 2021 (when the Company began to issue restricted stock in
lieu of stock options under its equity incentive program).
(3)  The DCP obligation is recorded as a liability at fair value with changes in
fair value reflected in earnings. The gain in both the 2021 quarter and the 2020
quarter are primarily attributable to a decrease in the fair value of the DCP
obligation. See note 12 to our condensed consolidated financial statements.
Cost of Revenues for Design and Construction. Cost of revenues for design and
construction increased $329,000, or 46.8%, to $1.0 million during the 2021
quarter compared to $703,000 for the 2020 quarter. See the discussion of design
and construction fees revenue above.
Cost of Revenues for Audio Visual. Cost of revenues for audio visual increased
$8.2 million, or 263.2%, to $11.4 million during the 2021 quarter compared to
$3.1 million for the 2020 quarter, primarily due to increased demand for event
technology services at hotels and convention centers as the U.S. travel and
hospitality industry continues to recover from COVID-19.
Depreciation and Amortization Expense. Depreciation and amortization expense
decreased $2.0 million, or 20.2%, to $8.1 million for the 2021 quarter compared
to the 2020 quarter, primarily due to the write-off of $6.4 million of
furniture, fixtures and equipment ("FF&E") in the third quarter of 2020 related
to FF&E formerly leased to Ashford Trust under the Ashford Trust ERFP Agreement
upon Ashford Trust's sale of the Embassy Suites New York Manhattan Times Square
and the sale of FF&E in the fourth quarter of 2020 to Braemar for FF&E formerly
leased to Braemar under the Braemar ERFP Agreement at the expiration of the
lease. Depreciation and amortization expense for the 2021 quarter and the 2020
quarter excludes depreciation expense related to audio visual equipment of $1.2
million and $1.3 million, respectively, which is included in "cost of revenues
for audio visual", and also excludes depreciation expense for the 2021 quarter
and the 2020 quarter related to marine vessels in the amount of $262,000 and
$201,000, respectively, which are included in "other" operating expense.
                                       60
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General and Administrative Expense. General and administrative expenses
increased $2.0 million, or 36.9%, to $7.6 million for the 2021 quarter compared
to the 2020 quarter. The change in general and administrative expense consisted
of the following (in thousands):
                                                          Three Months 

Ended September 30,

                                                               2021                2020             $ Change
Professional fees (1)                                     $     2,972          $   1,981          $      991
Office expense                                                  2,186              1,545                 641
Public company costs                                               87                 51                  36
Director costs                                                    337                306                  31
Travel and other expense                                        1,986              1,626                 360
Non-capitalizable - software costs                                 17                 31                 (14)
Total general and administrative                          $     7,585

$ 5,540 $ 2,045

________

(1)  The increase in professional fees in the 2021 quarter is primarily due to
$541,000 of expenses related to Ashford Securities to raise capital in order to
grow the Company's existing and future platforms. Expenses are allocated to the
Company per the Amended and Restated Contribution Agreement entered into on
December 31, 2020. See note 13 in our condensed consolidated financial
statements.
Impairment. During the 2021 quarter, as a result of the strategic rebranding of
our segment formerly known as JSAV to INSPIRE, we performed an impairment test
and calculated the fair value of our indefinite-lived JSAV trademarks using the
relief-from-royalty method which includes unobservable inputs including royalty
rates and projected revenues for the time period that the Company is expected to
benefit from the trademark. As a result of the evaluation, we recognized
intangible asset impairment charges of $1.2 million, which was the full
impairment of the indefinite-lived JSAV trademarks within the INSPIRE segment
for the 2021 quarter.
Other. Other operating expense decreased $4.4 million, or 48.0%, to $4.8 million
for the 2021 quarter compared to the 2020 quarter. The decrease was primarily
driven by a loss of $6.4 million due to the write-off of FF&E in the 2020
quarter related to FF&E formerly leased to Ashford Trust under the Ashford Trust
ERFP Agreement upon Ashford Trust's sale of the Embassy Suites New York
Manhattan Times Square. The decrease in other operating expense in the 2021
quarter was offset by an increase in operating expenses from RED of $1.8 million
compared to the 2020 quarter due to increased demand for RED's recreational
services. Other operating expense includes cost of goods sold, royalties and
operating expenses associated with OpenKey, RED, Pure Wellness and Marietta.
Reimbursed Expenses. Reimbursed expenses increased $25.9 million to $54.0
million during the 2021 quarter compared to $28.1 million for the 2020 quarter
primarily due to increased hotel management expenses incurred by Remington due
to the increase in hotel room demand.
Reimbursed expenses recorded 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
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 September 30,
                                               2021                      2020        $ Change
  Cost reimbursement revenue    $         54,048                      $ 28,133      $ 25,915
  Reimbursed expenses                     53,991                        28,072        25,919
  Net total                     $             57                      $     61      $     (4)


Equity in Earnings (Loss) of Unconsolidated Entities. Equity in earnings (loss)
of unconsolidated entities changed $36,000 for the 2021 quarter. See notes 1 and
2 to our condensed consolidated financial statements.
Interest Expense. Interest expense was $1.3 million and $1.3 million for the
2021 quarter and the 2020 quarter, respectively. Interest expense includes
interest for the Company's balances outstanding on our Term Loan Agreement and
notes
                                       61
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payable, lines of credit and finance leases held by our consolidated
subsidiaries. See notes 2 and 5 to our condensed consolidated financial
statements.
Amortization of Loan Costs. Amortization of loan costs was $78,000 and $86,000
for the 2021 quarter and the 2020 quarter, respectively, related to the notes
payable and lines of credit held by our consolidated subsidiaries. See notes 2
and 5 to our condensed consolidated financial statements.
Interest Income. Interest income was $72,000 and $0 for the 2021 quarter and the
2020 quarter, respectively. The increase in the 2021 quarter is primarily due to
interest income from Remington's note receivable from a third party hotel owner.
See note 1 to our condensed consolidated financial statements.
Realized Gain (Loss) on Investments. Realized gain on investments was $370,000
and $0 for the 2021 quarter and the 2020 quarter, respectively. The realized
gain on investments relates to the sale of an unconsolidated equity investment
previously held by Remington accounted for under the equity method.
Other Income (Expense). Other income (expense) was $29,000 of income in the 2021
quarter and $44,000 of expense in the 2020 quarter.
Income Tax (Expense) Benefit. Income tax (expense) benefit changed by $1.9
million, from a benefit of $1.8 million in the 2020 quarter to an expense of
$98,000 in the 2021 quarter. Current income tax expense changed by $75,000, from
$3.0 million of expense in the 2020 quarter to $3.1 million of expense in the
2021 quarter. Deferred income tax benefit changed by $1.9 million from a
$4.8 million benefit in the 2020 quarter to a $2.9 million benefit in the 2021
quarter. The difference in income tax (expense) benefit is related to a change
in accrued liabilities and an increase in operations.
(Income) Loss from Consolidated Entities Attributable to Noncontrolling
Interests. The noncontrolling interests in consolidated entities were allocated
a loss of $180,000 in the 2021 quarter and a loss of $319,000 in the 2020
quarter. See notes 2, 9 and 13 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 a loss of $13,000 in the 2021
quarter and a loss of $604,000 in the 2020 quarter. Redeemable noncontrolling
interests represented ownership interests in Ashford Holdings and certain of our
consolidated subsidiaries. See note 1 to our condensed consolidated financial
statements. For a summary of ownership interests, carrying values and
allocations, see notes 2, 10, and 13 to our condensed consolidated financial
statements.
Preferred Dividends, Declared and Undeclared. Preferred dividends increased
$777,000, or 9.7%, to $8.8 million during the 2021 quarter compared to $8.0
million for the 2020 quarter, due to the increase in the dividend rate of the
Series D Convertible Preferred Stock on November 6, 2020, from 6.59% to 6.99%
and due to accumulating and compounding dividends related to undeclared
preferred stock dividends. See note 10 to our condensed consolidated financial
statements.
Amortization of Preferred Stock Discount. The amortization of preferred stock
discount decreased $475,000, or 60.8%, to $306,000 during the 2021 quarter
compared to $781,000 for the 2020 quarter, primarily due to the increase in the
dividend rate of the Series D Convertible Preferred Stock on November 6, 2020,
from 6.59% to 6.99%. See note 10 to our condensed consolidated financial
statements.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30,
2020
The following table summarizes the changes in key line items from our condensed
consolidated statements of operations for the nine months ended September 30,
2021 and 2020 (in thousands):
                                       62
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                                                 Nine Months Ended September 30,                       Favorable (Unfavorable)
                                                    2021                2020                      $ Change                % Change
REVENUE
Advisory services fees                          $   30,132          $   34,098                $       (3,966)                  (11.6) %
Hotel management fees                               18,737              13,592                         5,145                    37.9  %
Design and construction fees                         5,611               7,780                        (2,169)                  (27.9) %
Audio visual                                        28,170              33,758                        (5,588)                  (16.6) %
Other                                               35,899              18,250                        17,649                    96.7  %
Cost reimbursement revenue                         136,079             127,830                         8,249                     6.5  %
Total revenues                                     254,628             235,308                        19,320                     8.2  %
EXPENSES
Salaries and benefits                               46,961              43,807                        (3,154)                   (7.2) %
Cost of revenues for design and construction         2,812               3,032                           220                     7.3  %
Cost of revenues for audio visual                   22,611              25,872                         3,261                    12.6  %
Depreciation and amortization                       24,454              30,172                         5,718                    19.0  %
General and administrative                          19,444              16,064                        (3,380)                  (21.0) %
Impairment                                           1,160             178,213                       177,053                    99.3  %
Other                                               13,428              14,734                         1,306                     8.9  %
Reimbursed expenses                                135,816             127,638                        (8,178)                   (6.4) %
Total expenses                                     266,686             439,532                       172,846                    39.3  %
OPERATING INCOME (LOSS)                            (12,058)           (204,224)                      192,166                    94.1  %
Equity in earnings (loss) of unconsolidated
entities                                              (160)                301                          (461)                 (153.2) %

Interest expense                                    (3,845)             (3,681)                         (164)                   (4.5) %
Amortization of loan costs                            (209)               (242)                           33                    13.6  %
Interest income                                        207                  29                           178                   613.8  %

Realized gain (loss) on investments                     (3)               (386)                          383                    99.2  %

Other income (expense)                                (256)               (499)                          243                    48.7  %
INCOME (LOSS) BEFORE INCOME TAXES                  (16,324)           (208,702)                      192,378                    92.2  %
Income tax (expense) benefit                         1,550               7,404                        (5,854)                  (79.1) %
NET INCOME (LOSS)                                  (14,774)           (201,298)                      186,524                    92.7  %
(Income) loss from consolidated entities
attributable to noncontrolling interests               509                 757                          (248)                  (32.8) %
Net (income) loss attributable to redeemable
noncontrolling interests                               208               1,688                        (1,480)                  (87.7) %

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY (14,057) (198,853)

                      184,796                    92.9  %
Preferred dividends, declared and undeclared       (26,001)            (23,800)                       (2,201)                   (9.2) %
Amortization of preferred stock discount              (933)             (2,386)                        1,453                    60.9  %
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS                                    $  (40,991)         $ (225,039)               $      184,048                    81.8  %


Net Income (Loss) Attributable to Common Stockholders. Net loss attributable to
common stockholders decreased $184.0 million to a $41.0 million loss for the
nine months ended September 30, 2021 ("the 2021 period") compared to the nine
months ended September 30, 2020 ("the 2020 period") as a result of the factors
discussed below.
                                       63
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Total Revenues. Total revenues increased by $19.3 million, or 8.2%, to $254.6
million for the 2021 period compared to the 2020 period due to the following (in
thousands):
                                             Nine Months Ended September 30,                       Favorable (Unfavorable)
                                                 2021                2020                     $ Change                % Change
Advisory services fees:
Base advisory fees (1)                       $   29,743          $  33,707                $       (3,964)                  (11.8) %
Incentive advisory fees (2)                           -                  -                             -

Other advisory revenue (3)                          389                391                            (2)                   (0.5) %
Total advisory services fees revenue             30,132             34,098                        (3,966)                  (11.6) %

Hotel management fees:
Base management fees                             15,331             13,592                         1,739                    12.8  %
Incentive management fees                         3,406                  -                         3,406
Total hotel management fees revenue (4)          18,737             13,592                         5,145                    37.9  %

Design and construction fees revenue (5)          5,611              7,780                        (2,169)                  (27.9) %

Audio visual revenue (6)                         28,170             33,758                        (5,588)                  (16.6) %

Other revenue:

Watersports, ferry and excursion services
(7)                                              18,159              6,734                        11,425                   169.7  %
Debt placement and related fees (8)               9,802              5,480                         4,322                    78.9  %

Claims management services (9)                       61                184                          (123)                  (66.8) %

Other services (10)                               7,877              5,852                         2,025                    34.6  %
Total other revenue                              35,899             18,250                        17,649                    96.7  %

Cost reimbursement revenue (11)                 136,079            127,830                         8,249                     6.5  %

Total revenues                               $  254,628          $ 235,308                $       19,320                     8.2  %

REVENUES BY SEGMENT (12)
REIT advisory                                $   49,749          $  53,297                $       (3,548)                   (6.7) %
Remington                                       131,709            117,715                        13,994                    11.9  %
Premier                                           7,421             10,173                        (2,752)                  (27.1) %
INSPIRE                                          28,170             33,758                        (5,588)                  (16.6) %
OpenKey                                           1,436              1,155                           281                    24.3  %
Corporate and other                              36,143             19,210                        16,933                    88.1  %
Total revenues                               $  254,628          $ 235,308                $       19,320                     8.2  %


________
(1)The decrease in base advisory fee is primarily due to lower revenue of $4.4
million from Ashford Trust offset by higher revenue of $401,000 from Braemar.
Advisory fees earned from Ashford Trust excluded $5.4 million of advisory fees
that were constrained and deferred as a result of the $29.0 million annual
Advisory Fee Cap. The deferred fees are included in deferred income in our
condensed consolidated balance sheet. See note 3 of our condensed consolidated
financial statements for discussion of the advisory services fees revenue
recognition policy.
(2)  In the third quarter of 2020, the Company determined it was no longer
probable Braemar would meet the minimum FCCR Condition requirement as stated in
the Braemar advisory agreement. As such, the Company did not recognize any
incentive fee revenue related to Braemar in the three months ended September 30,
2020 for the 2018 incentive period. The three months ended September 30, 2020
additionally includes a reversal of $339,000 of incentive fee revenue recognized
in the first two quarters of 2020 which the Company was no longer able to
collect due to Braemar no longer meeting the FCCR
                                       64
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Condition. Ashford Trust's annual total stockholder return has not met the
incentive fee threshold in any of the annual measurement periods subsequent to
the 2016 measurement period. Braemar's annual total stockholder return did not
meet the relevant incentive fee thresholds during the 2020 and 2019 measurement
periods.
(3)   Other advisory revenue remained steady. 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
increases in incentive management fees of $3.0 million and $389,000 from Ashford
Trust and Braemar, respectively, and higher base management fees from Ashford
Trust and Braemar of $186,000 and $825,000, respectively due to increased room
demand within their respective portfolios compared to the 2020 period as the
industry recovers from COVID-19.
(5)   The decrease in design and construction fees revenue is due to lower
revenue from Ashford Trust and Braemar of $2.8 million and $688,000,
respectively, due to reduced capital expenditures as a result of COVID-19,
offset by an increase in design and construction fees revenue from third parties
of $1.3 million.
(6)   The $5.6 million decrease in audio visual revenue is due to the timing of
the arrival of COVID-19 in March 2020 partially offset by a recovery in
operations in the second and third quarters of 2021 compared to the second and
third quarters of 2020.
(7)   The $11.4 million increase in watersports, ferry and excursion services
revenue is due to $572,000 in revenue from RED's expansion in the Turks and
Caicos Islands in the third quarter of 2021 and increased demand 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.
(8)   The increase in debt placement and related fee revenue is due to higher
revenue of $5.0 million from Ashford Trust and lower revenue of $703,000 from
Braemar. Debt placement and related fees are earned by Lismore for providing
debt placement, modification, forbearance and refinancing services. The change
is primarily due to Lismore's agreement with Ashford Trust for providing
modifications, forbearances or refinancing of Ashford Trust's loans due to the
financial impact from COVID-19. Lismore's agreement with Braemar expired in
March 2021.
(9)  Claims management services include revenue earned from providing insurance
claim assessment and administration services to Ashford Trust and Braemar.
(10)   The increase in other services revenue is primarily due to higher revenue
of $1.1 million and $664,000 in the 2021 period from Marietta and Pure Wellness,
respectively, due to a recovery in operations in the second and third quarters
of 2021 compared to the second and third quarters of 2020. Other services
revenue primarily relates to other hotel services provided by our consolidated
subsidiaries, OpenKey, Pure Wellness and Marietta, to Ashford Trust, Braemar and
other third parties.
(11)   The increase in cost reimbursement revenue is primarily due to a increase
in Remington's cost reimbursement revenue of $8.8 million in the 2021 period due
a recovery in operations in the second and third quarters of 2021 compared to
the second and third quarters of 2020 and an increase of $552,000 in cost
reimbursement revenue in the 2021 period related to reimbursable advisory
expenses for Ashford Trust and Braemar. These increases were partially offset by
decreases in the 2021 period in our Premier and Corporate and Other segments.
(12)   See note 15 to our condensed consolidated financial statements for
discussion of segment reporting.
                                       65
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Salaries and Benefits Expense. Salaries and benefits expense increased by $3.2
million, or 7.2%, to $47.0 million for the 2021 period compared to the 2020
period. The change in salaries and benefits expense consisted of the following
(in thousands):
                                                                   Nine Months Ended
                                                                     September 30,
                                                                             2021               2020                   $ Change
Cash salaries and benefits:
Salary expense                                                           $  27,302          $  26,872                $     430
Bonus expense                                                               11,496             11,874                     (378)
Benefits related expenses                                                    3,968              4,908                     (940)
Total cash salaries and benefits                                            42,766             43,654                     (888)
Non-cash equity-based compensation:
Stock option grants (1)                                                      2,101              3,146                   (1,045)
Employee equity grant expense                                                  904                573                      331

Total non-cash equity-based compensation                                     3,005              3,719                     (714)
Non-cash (gain) loss in deferred compensation plan
(2)                                                                          1,190             (3,566)                   4,756
Total salaries and benefits                                              $  46,961          $  43,807                $   3,154


________
(1)The decrease in stock option grant related expense in the 2021 period
primarily relates to the forfeiture of 98,603 options from the voluntary
resignation of Douglas A. Kessler, Senior Managing Director of the Company, in
May of 2020 and due to the Company not issuing any stock option grants during
fiscal years 2020 and 2021 (when the Company began to issue restricted stock in
lieu of stock options under its equity incentive program).
(2)  The DCP obligation is recorded as a liability at fair value with changes in
fair value reflected in earnings. The loss in the 2021 period and the gain in
the 2020 period are primarily attributable to increases and decreases in the
fair value of the DCP obligation, respectively. See note 12 to our condensed
consolidated financial statements.
Cost of Revenues for Design and Construction. Cost of revenues for design and
construction decreased $220,000, or 7.3% to $2.8 million during the 2021 period
compared to $3.0 million for the 2020 period due to reduced capital expenditures
by our clients as a result of COVID-19.
Cost of Revenues for Audio Visual. Cost of revenues for audio visual decreased
$3.3 million, or 12.6%, to $22.6 million during the 2021 period compared to
$25.9 million for the 2020 period, primarily due to the timing of the onset of
COVID-19 in March 2020 partially offset by a recovery in operations in the
second and third quarters of 2021 compared to the second and third quarters of
2020.
Depreciation and Amortization Expense. Depreciation and amortization expense
decreased by $5.7 million, or 19.0%, to $24.5 million for the 2021 period
compared to the 2020 period, primarily due to the write-off of $6.4 million of
FF&E in the third quarter of 2020 related to FF&E formerly leased to Ashford
Trust under the Ashford Trust ERFP Agreement upon Ashford Trust's sale of the
Embassy Suites New York Manhattan Times Square and the sale of FF&E in the
fourth quarter of 2020 to Braemar for FF&E formerly leased to Braemar under the
Braemar ERFP Agreement at the expiration of the lease. Depreciation and
amortization expense for the 2021 period and the 2020 period excludes
depreciation expense related to audio visual equipment of $3.7 million and
$3.7 million, respectively, which is included in "cost of revenues for audio
visual" and also excludes depreciation expense for the 2021 period and the 2020
period related to marine vessels in the amount of $728,000 and $453,000,
respectively, which are included in "other" operating expense.
                                       66
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General and Administrative Expense. General and administrative expenses increased by $3.4 million, or 21.0%, to $19.4 million for the 2021 period compared to the 2020 period. The change in general and administrative expense consisted of the following (in thousands):

                                                                       Nine Months Ended
                                                                         September 30,
                                                                                 2021               2020                   $ Change
Professional fees (1)                                                        $   6,984          $   4,345                $   2,639
Office expense                                                                   6,048              5,490                      558
Public company costs                                                               503                253                      250
Director costs                                                                   1,611              1,033                      578
Travel and other expense                                                         4,158              4,779                     (621)
Non-capitalizable - software costs                                                 140                164                      (24)
Total general and administrative                                             $  19,444          $  16,064                $   3,380

________

(1)  The increase in professional fees in the 2021 period is primarily due to
$1.5 million of expenses related to Ashford Securities to raise capital in order
to grow the Company's existing and future platforms. Expenses are allocated to
the Company per the Amended and Restated Contribution Agreement entered into on
December 31, 2020. See note 13 in our condensed consolidated financial
statements.
Impairment. During the 2021 period, as a result of the strategic rebranding of
our segment formerly known as JSAV to INSPIRE, we performed an impairment test
and calculated the fair value of our indefinite-lived JSAV trademarks using the
relief-from-royalty method which includes unobservable inputs including royalty
rates and projected revenues for the time period that the Company is expected to
benefit from the trademark. As a result of the evaluation, we recognized
intangible asset impairment charges of $1.2 million, which was the full
impairment of the indefinite-lived JSAV trademarks within the INSPIRE segment
for the 2021 period. In the first quarter of 2020, as a result of our reduced
cash flow projections and the significant decline in our market capitalization
as a result of the COVID-19 pandemic, we concluded that sufficient indicators
existed to require us to perform an interim quantitative assessment of goodwill
and intangible assets. As a result, we recorded goodwill impairment charges of
$170.6 million and intangible asset impairment charges of $7.6 million. In
total, there were $178.2 million in impairment charges for the 2020 period. See
notes 4 and 6 to our condensed consolidated financial statements.
Other. Other operating expense decreased $1.3 million, or 8.9%, to $13.4 million
for the 2021 period compared to the 2020 period. The decrease was primarily
driven by a loss of $6.4 million due to the write-off of FF&E in the third
quarter of 2020 related to FF&E formerly leased to Ashford Trust under the
Ashford Trust ERFP Agreement upon Ashford Trust's sale of the Embassy Suites New
York Manhattan Times Square. The decrease in other operating expense in the 2021
period was offset by an increase in operating expenses from RED of $4.9 million
compared to the 2020 period due to increased demand for RED's recreational
services. Other operating expense includes cost of goods sold, royalties and
operating expenses associated with OpenKey, RED, Pure Wellness and Marietta.
Reimbursed Expenses. Reimbursed expenses increased $8.2 million to $135.8
million during the 2021 period compared to $127.6 million for the 2020 period
primarily due to an increase in hotel management expenses incurred by Remington
due to a recovery in hotel operations in the second and third quarters of 2021
compared to the second and third quarters of 2020.
Reimbursed expenses recorded 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
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):
                                        Nine Months Ended September 30,
                                              2021                     2020         $ Change
   Cost reimbursement revenue    $        136,079                   $ 127,830      $  8,249
   Reimbursed expenses                    135,816                     127,638         8,178
   Net total                     $            263                   $     192      $     71


                                       67

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Equity in Earnings (Loss) of Unconsolidated Entities. Equity in earnings (loss)
of unconsolidated entities was a loss of $160,000 and earnings of $301,000 for
the 2021 period and the 2020 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 increased to $3.8 million from $3.7 million
for the 2021 period and the 2020 period, respectively, related to increases in
our Term Loan Agreement and notes payable, lines of credit and finance leases
held by our consolidated subsidiaries. See notes 2 and 5 to our condensed
consolidated financial statements.
Amortization of Loan Costs. Amortization of loan costs was $209,000 and $242,000
for the 2021 period and the 2020 period, respectively, related to our Term Loan
Agreement and notes payable held by our consolidated subsidiaries. See notes 2
and 5 to our condensed consolidated financial statements.
Interest Income. Interest income was $207,000 and $29,000 for the 2021 period
and the 2020 period, respectively. The increase in the 2021 period is primarily
due to interest income from Remington's note receivable from a third party hotel
owner. See note 1 to our condensed consolidated financial statements.
Realized Gain (Loss) on Investments. Realized loss on investments was $3,000 and
$386,000 for the 2021 period and the 2020 period, respectively. The realized
loss on investments for the 2021 period and the 2020 period primarily relates to
losses of $378,000 and $386,000, respectively, 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. The realized loss on
investments for the 2021 period was offset by a gain of $375,000 on the sale of
an unconsolidated investment previously held by Remington accounted for under
the equity method.
Other Income (Expense). Other expense was $256,000 and $499,000 in the 2021
period and the 2020 period, respectively.
Income Tax (Expense) Benefit. Income tax (expense) benefit changed by $5.9
million, from a $7.4 million benefit in the 2020 period to a $1.6 million
benefit in the 2021 period. Current income tax expense changed by $1.9 million,
from $5.5 million in expense in the 2020 period to $3.6 million in expense in
the 2021 period. Deferred income tax benefit changed by $7.7 million from a
$12.9 million benefit in the 2020 period to a $5.2 million benefit in the 2021
period. The difference in income tax (expense) benefit is related to a change in
accrued liabilities, increase in operations and a decrease in non-deductible
GAAP items, primarily impairment.
(Income) Loss from Consolidated Entities Attributable to Noncontrolling
Interests. The noncontrolling interests in consolidated entities were allocated
a loss of $509,000 in the 2021 period and a loss of $757,000 in the 2020 period.
See notes 2 and 9 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 a loss of $208,000 in the
2021 period and loss of $1.7 million in the 2020 period. Redeemable
noncontrolling interests represented ownership interests in Ashford Holdings and
certain of our consolidated subsidiaries. For a summary of ownership interests,
carrying values and allocations, see notes 2 and 10 to our condensed
consolidated financial statements.
Preferred Dividends, Declared and Undeclared. Preferred dividends, declared and
undeclared increased $2.2 million to $26.0 million during the 2021 period
compared to $23.8 million for the 2020 period, due to the increase in the
dividend rate of the Series D Convertible Preferred Stock on November 6, 2020,
from 6.59% to 6.99% and due to accumulating and compounding dividends related to
undeclared preferred stock dividends. See note 10 to our condensed consolidated
financial statements.
Amortization of Preferred Stock Discount. The amortization of preferred stock
discount decreased $1.5 million to $933,000 during the 2021 period compared to
$2.4 million from the 2020 period, primarily due to the increase in the dividend
rate of the Series D Convertible Preferred Stock on November 6, 2020, from 6.59%
to 6.99%. See note 10 to our condensed consolidated financial statements.
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LIQUIDITY AND CAPITAL RESOURCES
COVID-19, Management's Plans and Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, and subsequently
spread to other regions of the world, which has resulted in significant travel
restrictions and extended shutdown of numerous businesses throughout the United
States. In March 2020, the World Health Organization declared COVID-19 to be a
global pandemic. Our clients, Ashford Trust and Braemar, have reported that the
negative impact on room demand within their respective portfolios stemming from
COVID-19 is significant, which has resulted and is expected to result in
significantly reduced occupancy and RevPAR. Furthermore, the prolonged presence
of the virus has resulted in health and other government authorities imposing
widespread restrictions on travel and other businesses. The hotel industry has
experienced postponement or cancellation of a significant number of business
conferences and similar events. Following the government mandates and health
official orders, the Company dramatically reduced staffing and expenses at its
products and services businesses and at its corporate office. COVID-19 has had a
significant negative impact on the Company's operations and financial results to
date. In addition, one or more possible recurrences of COVID-19 case surges
could result in further reductions in business and personal travel and could
cause state and local governments to reinstate travel restrictions. The Company
expects that the COVID-19 pandemic will continue to have a significant negative
impact on the Company's results of operations, financial position and cash flow
in 2021 and potentially beyond. As a result, in March 2020, the Company amended
payment terms pursuant to certain hotel management agreements to better manage
corporate working capital, reduced planned capital expenditures, significantly
reduced operating expenses and reduced the cash compensation of its executive
officers and other employees, including an arrangement pursuant to which Mr.
Monty J. Bennett received his base salary in the form of common stock issued
under the Company's 2014 Incentive Plan, as amended. Additionally, the Company
did not declare dividends which were due with respect to its Series D
Convertible Preferred Stock for the second and fourth quarters of 2020 and the
second quarter of 2021. As of September 30, 2021, the Company had aggregate
undeclared preferred stock dividends of approximately $25.6 million, which
relates to the second and fourth quarters of 2020 and the second quarter of
2021.
During the first quarter of 2021, base salaries for the Company's executive
officers and other employees were restored to pre-reduction levels and the
arrangement by which Mr. Monty J. Bennett received his base salary in the form
of common stock ended. Additionally, the Company declared $8.4 million in
dividends in each of the first and third quarters of 2021 which were due with
respect to its Series D Convertible Preferred Stock. The dividends were paid on
April 15 and October 15, 2021, respectively.
When preparing financial statements, management has the responsibility to
evaluate whether there are conditions or events, considered in the aggregate,
that create substantial doubt about the Company's ability to continue as a going
concern within one year after the date that the financial statements are issued.
In applying the accounting guidance, the Company considered its current
financial condition and liquidity sources, including current funds available,
forecasted future cash flows and its unconditional obligations due over the next
12 months.
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 September 30, 2021, our Term Loan 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. INSPIRE
executed the INSPIRE Amendment on December 31, 2020, which extended the maturity
date of the loan and includes a fixed charge coverage ratio covenant which
commences with the quarter ending March 31, 2023. On September 22, 2021, the
INSPIRE Amendment was further amended to reduce INSPIRE's requirement to fund an
operating reserve account from an initial amount of $3.0 million to
$1.0 million. Additionally, INSPIRE's results from operations exceeded
management's forecast for the third quarter of 2021. Primarily due to these
factors, management has determined that INSPIRE is not reliant on Ashford Inc.
to make contributions to cover INSPIRE's interest and upcoming principal
payments on its outstanding debt. All such contributions, if needed, are subject
to the discretion of Ashford Inc. As such, the Company reclassified
$19.3 million of INSPIRE's outstanding loans from current "notes payable, net"
to noncurrent "notes payable, net" in our condensed consolidated balance sheet
as of September 30, 2021.
We cannot predict when hotel operating levels at our clients, Ashford Trust and
Braemar, will return to normalized levels after the effects of the pandemic
subside, whether our clients' hotels will be forced to shut down operations
again or whether one or more governmental entities may impose additional travel
restrictions due to a resurgence of COVID-19 cases in the future. As a result of
these factors resulting from the impact of the pandemic, we are unable to
estimate future financial performance with certainty. However, based primarily
on our assessment of the ability of our key clients, Ashford Trust and Braemar,
to pay their obligations to the Company in accordance with the advisory
agreements, the Company has concluded that management's current plan alleviates
the substantial doubt about its ability to continue as a going concern.
Additional factors considered in our assessment include our completed loan
amendments, other agreements, our current cash on hand, our forecast
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of future operating results for the next 12 months from the date of this report
and the actions we have taken to improve our liquidity. Facts and circumstances
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,
additional government mandates, health official orders, travel restrictions and
extended business shutdowns due to COVID-19, which could subsequently change our
assessment. See notes 5 and 13 to our condensed consolidated financial
statements.
Loan Agreements-On March 29, 2021, the Company amended its Term Loan Agreement
(the "Term Loan Agreement") with Bank of America, N.A. (as so amended, the
"Seventh Amendment"). The Seventh Amendment (a) increases the required
amortization rate from 1.25% to 2.50% each quarter commencing July 1, 2021, (b)
requires the Company to maintain a minimum liquidity of $15.0 million at all
times, including pro forma for preferred dividends, and (c) restricts dividends
and stock repurchases, other than preferred dividends, so long as there is no
default under the Term Loan Agreement. Principal payment amounts are subject to
maintaining a fixed charge coverage ratio below specified thresholds, which if
not met, increase the principal payment due each quarter from 2.50% to 5.0% of
the outstanding principal balance. Upon signing the Seventh Amendment, the
Company made a $5.0 million prepayment to Bank of America, N.A. as consideration
for their execution and delivery of the Seventh Amendment. The Company is also
subject to certain financial covenants. As of September 30, 2021, our Term Loan
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 Term Loan Agreement and debt held
by our subsidiaries to violate any loan covenants within one year of the
issuance of the financial statements. See discussion in "COVID-19, Management's
Plans and Liquidity" above.
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 was $29.9 million and $29.1 million as of
September 30, 2021 and December 31, 2020, respectively. For further discussion
see notes 5 and 16 to our condensed consolidated financial statements.
Preferred stock dividends-The Company declared dividends which were due with
respect to its Series D Convertible Preferred Stock of $8.4 million for each of
the first and third quarters of 2021 which were paid on April 15, 2021 and
October 15, 2021, respectively. As of September 30, 2021, the Company had
aggregate undeclared preferred stock dividends of approximately $25.6 million,
which relates to the second and fourth quarters of 2020 and the second quarter
of 2021. All dividends, declared and undeclared, are recorded as a reduction in
net income (loss) 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
dividends, declared and undeclared, totaling $33.9 million at September 30,
2021, are recorded as a liability in our condensed consolidated balance sheets
as "dividends payable."
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.
The independent members of the Board believe that the deferral of certain
preferred dividends will provide the Company with additional funds to meet its
ongoing liquidity needs.
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
pursuant hereto or converted to common shares. See also note 10 to our condensed
consolidated financial statements.
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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 will pay each
REIT 10% of each acquired hotel's purchase price in exchange for FF&E at a
property owned by such REIT, which will be 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 require 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
recognizes the related depreciation tax deduction at the time such FF&E is
purchased by the Company and placed into service at the respective REIT's hotel
properties. However, the timing of the FF&E being purchased and placed into
service is 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 the 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 September 30, 2021, the Company has no remaining ERFP commitment to
Braemar under the Braemar ERFP Agreement. See note 8 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 will have
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 will terminate in accordance with its terms at the end of
the current term on January 15, 2022 (the "Expiration Date"). Following the
Expiration Date, Braemar and the Company will continue to be parties to the
Fifth Amended and Restated Advisory Agreement, dated April 23, 2018, as amended,
and the Company will continue to serve as advisor to Braemar.
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 nine months ended September 30, 2021.
During the first quarter of 2021, we paid the remainder of contingent
consideration due to the sellers of BAV in connection with the acquisition of
BAV, including $350,000 related to the earn-out which was paid on January 11,
2021, and the final stock collar consideration payments in the amounts of
$870,000 and $888,000 which were paid on February 1, 2021 and March 4, 2021,
respectively.
In connection with the transactions contemplated by the Credit Agreement, the
Company entered into the SNDA with Ashford Trust and Oaktree pursuant to which
the Company agreed to subordinate to the prior repayment in full of all
obligations under the Credit Agreement, (1) prior to the later of (i) the second
anniversary of the Credit Agreement and (ii) the date accrued interest "in kind"
is paid in full, advisory fees (other than reimbursable expenses) in excess of
the Advisory Fee Cap, (2) any termination fee or liquidated damages amounts
under the advisory agreement, or any amount owed under any enhanced return
funding program in connection with the termination of the advisory agreement or
sale or foreclosure of assets financed thereunder, and (3) any payments to
Lismore Capital II LLC (formerly known as Lismore Capital LLC) ("Lismore") in
connection with the transactions contemplated by the Credit Agreement. See
additional discussion in notes 3 and 13 to our condensed consolidated financial
statements.
On October 12, 2021, Ashford Trust entered into Amendment No. 1 to the Credit
Agreement ("Amendment No. 1") with certain funds and accounts managed by Oaktree
Capital Management, L.P., as lenders, and Oaktree, as administrative agent.
Amendment No. 1, subject to the conditions set forth therein, among other
things, suspends Ashford Trust's obligation to subordinate fees due under the
advisory agreement if at any point there is no accrued interest outstanding or
any accrued
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dividends on any of Ashford Trust's preferred stock and Ashford Trust has
sufficient unrestricted cash to repay in full all outstanding loans under the
Credit Agreement, as amended.
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 September 30, 2021 and December 31, 2020, we had $40.2 million and $45.3
million of cash and cash equivalents, respectively, and $34.6 million and $37.4
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 and 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 $12.4 million for the nine months ended
September 30, 2021 compared to net cash flows provided by operating activities
of $44.7 million for the nine months ended September 30, 2020. The decrease in
cash flows from operating activities in the nine months ended September 30, 2021
was primarily due to an increase in current "other liabilities" in the nine
months ended September 30, 2020 as a result of the transfer of cash from Ashford
Trust into a Company escrow account for insurance claims and increased cash
payments received as deferred income in the nine months ended September 30, 2020
due to Ashford Trust and Braemar's respective agreements with Lismore to seek
modifications, forbearances or refinancing. The decrease in cash flows from
operating activities was also due to the timing of receipt of our receivables
from Braemar and third parties and the timing of payments of accounts payable.
These decreases in cash flows provided by operating activities were offset by an
increase in earnings due to a recovery in operations in the second and third
quarters of 2021 and the timing of receipt of our receivables from Ashford Trust
in the nine months ended September 30, 2021.
Net Cash Flows Provided by (Used in) Investing Activities. For the nine months
ended September 30, 2021, net cash flows used in investing activities were $7.0
million. These cash flows consisted of capital expenditures of FF&E of $3.4
million, capital expenditures of $2.3 million for RED's marine vessels, the
issuance of a note receivable of $2.9 million, purchases of Ashford Trust and
Braemar common stock related to Remington's employee compensation plan of
$873,000 and an investment in an unconsolidated entity of $250,000. These were
offset by cash inflows of $2.2 million in proceeds received in 2021 from the
sale of FF&E to Ashford Trust and Braemar and cash inflows of $535,000 from
Remington's sale of an equity method investment during the period.
For the nine months ended September 30, 2020, net cash flows used in investing
activities were $4.8 million. These cash flows consisted of capital expenditures
of $2.4 million primarily for audio visual equipment, a $1.3 million working
capital payment to the sellers of Remington Lodging related to the acquisition
in November of 2019 and $1.2 million of capital expenditures related to marine
vessels for RED.
Net Cash Flows Provided by (Used in) Financing Activities. For the nine months
ended September 30, 2021, net cash flows used in financing activities were $13.3
million. These cash flows consisted of $8.4 million of payments for dividends on
our preferred stock, $7.8 million of payments on notes payable, $255,000 of
payments on finance leases, $151,000 of net payments on our revolving credit
facilities, purchases of $121,000 of treasury stock and $116,000 of loan cost
payments. These were offset by $2.9 million of proceeds from borrowings on notes
payable, $367,000 of contributions from noncontrolling interests in a
consolidated entity and employee advances of $190,000 associated with tax
withholdings for restricted stock vesting.
For the nine months ended September 30, 2020, net cash flows provided by
financing activities were $11.5 million. These cash flows consisted of $44.8
million of proceeds from borrowings on notes payable, $457,000 of contributions
from noncontrolling interests in a consolidated entity, and employee advances of
$79,000 associated with tax withholdings for restricted stock vesting. These
were offset by $17.0 million of payments on notes payable, $12.7 million of
payments for dividends on our preferred stock, $1.8 million of net payments on
our revolving credit facilities, $1.4 million of contingent consideration paid
to the sellers of BAV, $637,000 of payments on finance leases, and $290,000 of
loan cost payments.
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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 hospitality
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.
Off-Balance Sheet Arrangements
In the normal course of business, we may form or invest in partnerships or joint
ventures. We evaluate each partnership and joint venture to determine whether
the entity is a VIE. If the entity is determined to be a VIE, we assess whether
we are the primary beneficiary and need to consolidate the entity. For further
discussion, see note 2 to our condensed consolidated financial statements.
Long-term liability of our subsidiary compensation plan
We do not record on the balance sheet the long-term liability portion of the
Ashford Trust and Braemar shares purchased by Remington Lodging on the open
market and held for the purpose of providing compensation to certain employees
as granted under our subsidiary compensation plan. The long-term liability was
$772,000 and $134,000 as of September 30, 2021 and December 31, 2020,
respectively.
Contractual Obligations and Commitments
There have been no material changes since December 31, 2020, 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 2020 Form 10-K.
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 2020 Form 10-K. There
have been no material changes in these critical accounting policies.

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