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";
Remington Lodging & Hospitality, LLC, a Delaware limited liability company,
which we refer to as "Remington"; and Marietta Leasehold, L.P.
("Marietta")."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 cases 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 regain 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 cases 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 and our subsidiaries to remain in
compliance with the covenants of their debt and related agreements;
•general volatility of the capital markets, the general economy or the
hospitality industry, whether the result of market events or otherwise, and the
market price of our common stock;
•availability, terms and deployment of capital;
•changes in our industry and the market in which we operate, interest rates or
the general economy;
•the degree and nature of our competition;
•actual and potential conflicts of interest with or between Ashford Trust and
Braemar, our executive officers and our non-independent directors;
•availability of qualified personnel;
•changes in governmental regulations, accounting rules, tax rates and similar
matters;
•legislative and regulatory changes;
•the 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 May 7, 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 607,743 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 May 7, 2021 would have increased Mr.
Monty J. Bennett and Mr. Archie Bennett, Jr.'s ownership interest in Ashford
Inc. to 65.7%.
We provide: (i) advisory services; (ii) asset management services; (iii) hotel
management services; (iv) project management 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 U.S. 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.
As required for disclosure under the Enhanced Return Funding Program Agreement
and Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement, for
the trailing twelve months ended March 31, 2021, the total incremental expenses
incurred (including all reimbursable expenses), as reasonably determined, in
connection with providing services to Braemar under the agreement was $10.5
million.
Recent Developments
COVID-19, Management's Plans and Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, which subsequently
spread to other regions of the world, and has resulted in significant travel
restrictions and extended shutdown of numerous businesses in every state in 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 our 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 cases 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.
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. As of March 31,
2021, the Company had aggregate undeclared preferred stock dividends of
approximately $16.5 million which relates to the second and fourth quarters of
2020.
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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. Bennett received his base salary in the form of common
stock ended. Additionally, on March 25, 2021, the Company declared $8.4 million
in dividends which were due with respect to its Series D Convertible Preferred
Stock for the first quarter of 2021.
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 March 31, 2021, our Term Loan Agreement was in
compliance with all covenants or other requirements. Debt held by our
subsidiaries was in compliance with all covenants or other requirements.
Additionally, JSAV executed a credit agreement amendment on December 31, 2020,
which extended the maturity date of the loan and includes a covenant which
commences with the quarter ending March 31, 2023. As a result of the impact of
COVID-19, JSAV is reliant on Ashford Inc. to make contributions to cover JSAV's
projected operating shortfall and amortization and interest payments on its
outstanding debt within one year of the issuance of the financial statements.
All such contributions are subject to the discretion of Ashford Inc. As such,
all of JSAV's outstanding debt balance has been classified as a current
liability within our condensed consolidated balance sheet as of March 31, 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 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 customers, 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. See notes 5 and 13 to our condensed
consolidated financial statements.
Other Developments
On January 4, 2021, the independent members of the Board agreed to: (i) defer
Ashford Trust's payment of the base advisory fees that were previously deferred
for the months of October 2020, November 2020 and December 2020; (ii) defer
approximately $2.8 million in base advisory fees with respect to the month of
January 2021; (iii) defer Ashford Trust's payment of Lismore success fees that
were previously deferred for the months of October 2020, November 2020 and
December 2020; (iv) defer payment of Ashford Trust's Lismore success fees for
the month of January 2021. As a result, the foregoing payments became due on
January 11, 2021. Additionally, the independent members of the board of
directors of Ashford Inc. waived any claim against Ashford Trust and Ashford
Trust's affiliates and each of their officers and directors for breach of the
advisory agreement and Ashford Trust Agreement or any damages that may have
arisen in absence of such fee deferrals.
On January 11, 2021, the independent members of the Board provided Ashford Trust
an additional deferral of the base advisory fees and any Lismore success fees
for the months of October 2020, November 2020, December 2020 and January 2021
that were previously deferred such that all such fees would be due and payable
on the earlier of (x) January 18, 2021 and (y) immediately prior to the closing
of Credit Agreement between Ashford Trust and Oaktree. Additionally, the Board
waived any claim against Ashford Trust and Ashford Trust's affiliates and each
of their officers and directors for breach of the advisory agreement and Ashford
Trust Agreement or any damages that may have arisen in absence of such fee
deferral. In accordance with the terms of the previously disclosed deferrals,
Ashford Trust paid the Company $14.4 million on January 15, 2021.
On January 14, 2021, the Company entered into the Second Amended and Restated
Advisory Agreement with Ashford Trust. The Second Amended and Restated Advisory
Agreement amends and restates the terms of the Amended and Restated Advisory
Agreement, dated June 10, 2015, as amended by the Enhanced Return Funding
Program Agreement and Amendment No. 1 to the Amended and Restated Advisory
Agreement, dated as of June 26, 2018 to, among other items (i) revise the term
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and termination rights; (ii) fix the percentage used to calculate the base fee
thereunder at 0.70% per annum; (iii) update the list of peer group members; (iv)
suspend the requirement that the Company maintain a minimum Consolidated
Tangible Net Worth until the first fiscal quarter beginning after June 30, 2023;
and (v) revise the criteria that would constitute a Company Change of Control in
order to provide the Company additional flexibility to dispose of
underperforming assets negatively impacted by COVID-19. In connection with the
transactions contemplated by the Credit Agreement, dated as of January 15, 2021
(the "Credit Agreement"), by and among Ashford Trust, Oaktree and the lenders
party thereto, on January 15, 2021, the Company entered into the Subordination
and Non-Disturbance Agreement ("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
80% of such fees paid during the fiscal year ended December 31, 2019, (the
"Advisory Fee Cap") (2) any termination fee or liquidated damages amounts under
the 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 in
connection with the transactions contemplated by the Credit Agreement. See
further discussion in note 13 to our condensed consolidated financial
statements.
In January 2021, Remington executed two new hotel management contracts with a
third-party hotel owner. In conjunction, Remington loaned approximately
$2.9 million to the hotel owner. The loan requires interest only payments at an
annual rate of 10% commencing on March 31, 2021. The principal balance and all
accrued interest on the loan shall be due and payable to Remington in full on
December 31, 2022. The note receivable is recorded with "other assets" in our
condensed consolidated balance sheet.
On February 1, 2021, the base salaries for the Company's executive officers
(other than Mr. Bennett) and other employees were restored to their
pre-reduction levels, and on February 3, 2021, the independent members of the
Board of Directors of the Company restored Mr. Bennett's salary to its
pre-reduction level, effective as of February 1, 2021. In addition, and also
effective as of February 1, 2021, the independent members of the Board of
Directors ended the arrangement pursuant to which Mr. Bennett had been receiving
his base salary in the form of common stock issued under the Company's 2014
Incentive Plan, as amended, such that Mr. Bennett's base salary will again be
paid in cash.
On March 9, 2021, we acquired all of the redeemable noncontrolling interests in
OpenKey for a purchase price of approximately $1.9 million. Pursuant to the
agreement, the purchase price will be paid to the seller in equal monthly
installments over a seven year term and will include interest in arrears at an
annualized rate of 4.0%. The purchase price is payable in Ashford Inc. common
stock including a 10% premium or cash at our sole discretion. As a result of the
acquisition, our ownership in OpenKey increased to 74.76% with the remainder
held by noncontrolling interest holders, including 17.07% and 7.97% owned by
Ashford Trust and Braemar, respectively.
On May 3, 2021, we increased our ownership of RED from 84.21% to 96.0% for a
total purchase price of $200,000. The purchase price will be paid in the
Company's common stock delivered in quarterly share distributions valued at
$25,000 beginning on the closing date and ending November 15, 2022.
Discussion of Presentation
The discussion below relates to the financial condition and results of
operations of Ashford Inc. and entities which it controls. The historical
financial information is not necessarily indicative of our future results of
operations, financial position and cash flows.
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RESULTS OF OPERATIONS
Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
The following table summarizes the changes in key line items from our condensed
consolidated statements of operations for the three months ended March 31, 2021
and 2020 (in thousands):
                                                  Three Months Ended March 31,                           Favorable (Unfavorable)
                                                    2021                  2020                      $ Change                 % Change
REVENUE
Advisory services                             $        9,927          $   11,836                $       (1,909)                   (16.1) %
Hotel management fees                                  4,472               6,124                        (1,652)                   (27.0) %
Project management fees                                1,542               3,938                        (2,396)                   (60.8) %
Audio visual                                           3,611              29,674                       (26,063)                   (87.8) %
Other                                                 10,629               6,691                         3,938                     58.9  %
Cost reimbursement revenue                            33,752              75,579                       (41,827)                   (55.3) %
Total revenues                                        63,933             133,842                       (69,909)                   (52.2) %
EXPENSES
Salaries and benefits                                 15,776              16,310                           534                      3.3  %
Cost of revenues for project management                  758               1,451                           693                     47.8  %
Cost of revenues for audio visual                      4,386              20,430                        16,044                     78.5  %
Depreciation and amortization                          8,139               9,969                         1,830                     18.4  %
General and administrative                             5,268               6,183                           915                     14.8  %
Impairment                                                 -             178,213                       178,213                    100.0  %
Other                                                  3,611               4,226                           615                     14.6  %
Reimbursed expenses                                   33,680              75,511                        41,831                     55.4  %
Total expenses                                        71,618             312,293                       240,675                     77.1  %
OPERATING INCOME (LOSS)                               (7,685)           (178,451)                      170,766                     95.7  %
Equity in earnings (loss) of unconsolidated
entities                                                (114)                236                          (350)                  (148.3) %

Interest expense                                      (1,267)             (1,176)                          (91)                    (7.7) %
Amortization of loan costs                               (86)                (66)                          (20)                   (30.3) %
Interest income                                           63                  28                            35                    125.0  %

Realized gain (loss) on investments                     (194)               (375)                          181                     48.3  %

Other income (expense)                                  (113)               (521)                          408                     78.3  %
INCOME (LOSS) BEFORE INCOME TAXES                     (9,396)           (180,325)                      170,929                     94.8  %
Income tax (expense) benefit                             951               2,085                        (1,134)                   (54.4) %
NET INCOME (LOSS)                                     (8,445)           (178,240)                      169,795                     95.3  %
(Income) loss from consolidated entities
attributable to noncontrolling interests                  95                 160                           (65)                   (40.6) %
Net (income) loss attributable to redeemable
noncontrolling interests                                 176                 440                          (264)                   (60.0) %

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY (8,174) (177,640)

                      169,466                     95.4  %
Preferred dividends, declared and undeclared          (8,606)             (7,875)                         (731)                    (9.3) %
Amortization of preferred stock discount                (316)               (810)                          494                     61.0  %
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS                                  $      (17,096)         $ (186,325)               $      169,229                     90.8  %


Net Income (Loss) Attributable to Common Stockholders. Net loss attributable to
common stockholders decreased $169.2 million to a $17.1 million loss for the
three months ended March 31, 2021 ("the 2021 quarter") compared to the three
months ended March 31, 2020 ("the 2020 quarter") as a result of the factors
discussed below.
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Total Revenues. Total revenues decreased by $69.9 million, or 52.2%, to $63.9
million for the 2021 quarter compared to the 2020 quarter due to the following
(in thousands):
                                               Three Months Ended March 31,                           Favorable (Unfavorable)
                                                 2021                  2020                      $ Change                 % Change

Advisory services revenue:
Base advisory fee (1)                      $        9,799          $   11,537                $       (1,738)                   (15.1) %
Incentive advisory fee (2)                              -                 170                          (170)                  (100.0) %

Other advisory revenue (3)                            128                 129                            (1)                    (0.8) %
Total advisory services revenue                     9,927              11,836                        (1,909)                   (16.1) %

Hotel management:
Base management fees                                3,857               6,124                        (2,267)                   (37.0) %
Incentive management fees                             615                   -                           615
Total hotel management revenue (4)                  4,472               6,124                        (1,652)                   (27.0) %

Project management revenue (5)                      1,542               3,938                        (2,396)                   (60.8) %

Audio visual revenue (6)                            3,611              29,674                       (26,063)                   (87.8) %

Other revenue:

Debt placement and related fees (7)                 4,288                 128                         4,160                  3,250.0  %

Claims management services (8)                         17                  57                           (40)                   (70.2) %

Other services (9)                                  6,324               6,506                          (182)                    (2.8) %
Total other revenue                                10,629               6,691                         3,938                     58.9  %

Cost reimbursement revenue (10)                    33,752              75,579                       (41,827)                   (55.3) %

Total revenues                             $       63,933          $  133,842                $      (69,909)                   (52.2) %

REVENUES BY SEGMENT (11)
REIT advisory                              $       15,068          $   20,957                $       (5,889)                   (28.1) %
Remington                                          32,374              70,456                       (38,082)                   (54.1) %
Premier                                             1,944               5,152                        (3,208)                   (62.3) %
JSAV                                                3,611              29,674                       (26,063)                   (87.8) %
OpenKey                                               454                 522                           (68)                   (13.0) %
Corporate and other                                10,482               7,081                         3,401                     48.0  %
Total revenues                             $       63,933          $  133,842                $      (69,909)                   (52.2) %


________
(1)The decrease in base advisory fee is primarily due to lower revenue of $1.7
million from Ashford Trust and lower revenue of $75,000 from Braemar. Advisory
fees earned from Ashford Trust during the three months ended March 31, 2021,
excluded $1.5 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 revenue in our condensed consolidated balance sheet. See
note 3 of our condensed consolidated financial statements for discussion of the
advisory services revenue recognition policy.
(2)  The incentive advisory fee for the 2020 quarter includes the pro-rata
portion of the third year installment of the Braemar 2018 incentive advisory fee
in the amount of $170,000. 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 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.
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(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 decrease in hotel management revenue is due lower base management fees
from Ashford Trust and Braemar of $2.3 million and $24,000, respectively, due to
COVID-19 partially offset by incentive management fees of $536,000 and $79,000
from Ashford Trust and Braemar, respectively.
(5)   The decrease in project management revenue is due to lower revenue from
Ashford Trust and Braemar of $2.7 million and $472,000, respectively, due to
reduced capital expenditures by our clients as a result of COVID-19, offset by
an increase in project management revenue from third parties of $755,000.
(6)   The $26.1 million decrease in audio visual revenue is the result of
COVID-19.
(7)   The increase in debt placement and related fee revenue is due to higher
revenue of $3.3 million from Ashford Trust and higher revenue of $853,000 from
Braemar. Debt placement and related fees are earned by Lismore for providing
debt placement, modification, forbearance and refinancing services. The increase
is primarily due to Lismore's respective agreements with Ashford Trust and
Braemar for providing modifications, forbearances or refinancings of Ashford
Trust and Braemar's loans in the 2021 period due to the financial impact from
COVID-19.
(8)  Claims management services include revenue earned from providing insurance
claim assessment and administration services to Ashford Trust and Braemar.
(9)   The decrease in other services revenue is primarily due to decreased
revenue from Marietta of $1.4 million from a decrease in operations due to
COVID-19 partially offset by increased revenue from RED of $1.2 million during
the 2021 quarter. Other services revenue primarily relates to other hotel
services provided by our consolidated subsidiaries, OpenKey, RED and Pure
Wellness to Ashford Trust, Braemar and other third-parties, and Marietta.
(10)   The decrease in cost reimbursement revenue is primarily due to a decrease
in Remington's cost reimbursement revenue of $36.5 million in the 2021 quarter
as a result of declines in hotel operations due to COVID-19 and a decrease of
$3.9 million in cost reimbursement revenue in the 2021 quarter related to
reimbursable advisory expenses for Ashford Trust and Braemar due to management's
cost reductions in response to COVID-19.
(11)   See note 15 to our condensed consolidated financial statements for
discussion of segment reporting.
Salaries and Benefits Expense. Salaries and benefits expense decreased by
$534,000, or 3.3%, to $15.8 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
                                                                      March 31,
                                                                           2021                2020                  $ Change
Cash salaries and benefits:
Salary expense                                                         $    8,706          $  11,387                $ (2,681)
Bonus expense                                                               4,271              3,600                     671
Benefits related expenses                                                   1,503              2,706                  (1,203)
Total cash salaries and benefits (1)                                       14,480             17,693                  (3,213)
Non-cash equity-based compensation:
Stock option grants (2)                                                     1,006              2,089                  (1,083)
Employee equity grant expense                                                 232                105                     127

Total non-cash equity-based compensation                                    1,238              2,194                    (956)
Non-cash (gain) loss in deferred compensation plan
(3)                                                                            58             (3,577)                  3,635
Total salaries and benefits                                            $   15,776          $  16,310                $   (534)


________
(1)The decrease in cash salaries and benefits in the 2021 quarter is primarily
due to management significantly reducing operating expenses in response to
COVID-19 in March of 2020.
(2)The decrease in stock option grant related expense in the 2021 quarter
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 year 2020 (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 loss in the
                                       54
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2021 quarter and the gain in the 2020 quarter 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 Project Management. Cost of revenues for project management
decreased $693,000, or 47.8% to $758,000 during the 2021 quarter compared to
$1.5 million for the 2020 quarter 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
$16.0 million, or 78.5%, to $4.4 million during the 2021 quarter compared to
$20.4 million for the 2020 quarter, primarily due to a significant decline in
business and cost control initiatives implemented by JSAV in the United States,
Mexico and the Dominican Republic as a result of COVID-19.
Depreciation and Amortization Expense. Depreciation and amortization expense
decreased by $1.8 million, or 18.4%, to $8.1 million for the 2021 quarter
compared to the 2020 quarter, 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 quarter and the 2020 quarter excludes
depreciation expense related to audio visual equipment of $1.3 million and
$1.2 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 $220,000 and $200,000,
respectively, which are included in "other" operating expense.
General and Administrative Expense. General and administrative expenses
decreased by $0.9 million, or 14.8%, to $5.3 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 March 31,
                                                                               2021         2020              $ Change
Professional fees                                                            $ 1,778      $ 1,342            $     436
Office expense                                                                 1,834        2,470                 (636)
Public company costs                                                             170          102                   68
Director costs                                                                   447          109                  338
Travel and other expense (1)                                                     961        2,065               (1,104)
Non-capitalizable - software costs                                                78           95                  (17)
Total general and administrative                                             $ 5,268      $ 6,183            $    (915)

________


(1)  The decrease in travel and other expense in the 2021 quarter is primarily
from decreased travel due to COVID-19.
Impairment. In the 2020 quarter, 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. There
were $178.2 million impairment charges for the 2020 quarter. No impairment
charges were recorded during the 2021 quarter. See notes 4 and 6 to our
condensed consolidated financial statements.
Other. Other operating expense was $3.6 million and $4.2 million for the 2021
quarter and the 2020 quarter, respectively. Other operating expense includes
cost of goods sold, depreciation, and royalties associated with OpenKey, RED and
Pure Wellness and costs related to Marietta. Other operating expense for the
2021 quarter additionally includes a loss on sale of FF&E previously leased to
Ashford Trust of $352,000. See note 13 to our condensed consolidated financial
statements.
Reimbursed Expenses. Reimbursed expenses decreased $41.8 million to $33.7
million during the 2021 quarter compared to $75.5 million for the 2020 quarter
primarily due to a decrease in hotel management expenses incurred by Remington
due to management's curtailing expenses and declines in hotel operations in
response to COVID-19.
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):
                                       55
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                                         Three Months Ended March 31,
                                              2021                    2020        $ Change
    Cost reimbursement revenue    $        33,752                  $ 75,579      $ (41,827)
    Reimbursed expenses                    33,680                    75,511        (41,831)
    Net total                     $            72                  $     68      $       4


Equity in Earnings (Loss) of Unconsolidated Entities. Equity in earnings (loss)
of unconsolidated entities was a loss of $114,000 and earnings of $236,000 for
the 2021 quarter and the 2020 quarter, 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 $1.3 million from $1.2 million
for the 2021 quarter and the 2020 quarter, 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 $86,000 and $66,000
for the 2021 quarter and the 2020 quarter, 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 $63,000 and $28,000 for the 2021 quarter
and the 2020 quarter, respectively.
Realized Gain (Loss) on Investments. Realized loss on investments was $194,000
and $375,000 for the 2021 quarter and the 2020 quarter, respectively. The
realized loss on investments relates to losses on shares of common stock of
Ashford Trust and Braemar purchased by Remington on the open market and held for
the purpose of providing compensation to certain employees.
Other Income (Expense). Other expense was expense of $113,000 and $521,000 in
the 2021 quarter and the 2020 quarter, respectively.
Income Tax (Expense) Benefit. Income tax (expense) benefit changed by $1.1
million, from a $2.1 million benefit in the 2020 quarter to a $951,000 benefit
in the 2021 quarter. Current tax expense changed by $1.5 million, from $1.2
million in expense in the 2020 quarter to a $308,000 benefit in the 2021
quarter. Deferred tax (expense) benefit changed by $2.7 million from a $3.3
million benefit in the 2020 quarter to a $607,000 benefit in the 2021 quarter.
The difference in income tax (expense) benefit is related to a decrease in
operations and non-taxable or 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 $95,000 in the 2021 quarter and a loss of $160,000 in the 2020
quarter. 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 $176,000 in the
2021 quarter and loss of $440,000 in the 2020 quarter. 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 $731,000 to $8.6 million during the 2021 quarter compared
to $7.9 million 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% and due to $253,000 of accumulating and compounding
dividends related to the undeclared preferred stock for the second and fourth
quarters of 2020. See note 10 to our condensed consolidated financial
statements.
Amortization of Preferred Stock Discount. The amortization of preferred stock
discount decreased $494,000 to $316,000 during the 2021 quarter compared to
$810,000 from 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.
                                       56
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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, which subsequently
spread to other regions of the world, and has resulted in significant travel
restrictions and extended shutdown of numerous businesses in every state in 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 our 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 cases 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.
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. As of March 31,
2021, the Company had aggregate undeclared preferred stock dividends of
approximately $16.5 million which relates to the second and fourth quarters of
2020.
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. Bennett received his base salary in the form of common
stock ended. Additionally, on March 25, 2021, the Company declared $8.4 million
in dividends which were due with respect to its Series D Convertible Preferred
Stock for the first quarter of 2021.
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 March 31, 2021, our Term Loan Agreement was in
compliance with all covenants or other requirements. Debt held by our
subsidiaries was in compliance with all covenants or other requirements.
Additionally, JSAV executed a credit agreement amendment on December 31, 2020,
which extended the maturity date of the loan and includes a covenant which
commences with the quarter ending March 31, 2023. As a result of the impact of
COVID-19, JSAV is reliant on Ashford Inc. to make contributions to cover JSAV's
projected operating shortfall and amortization and interest payments on its
outstanding debt within one year of the issuance of the financial statements.
All such contributions are subject to the discretion of Ashford Inc. As such,
all of JSAV's outstanding debt balance has been classified as a current
liability within our condensed consolidated balance sheet as of March 31, 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 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 customers, 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. See notes 5 and 13 to our condensed
consolidated financial statements.
                                       57
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Loan Agreements-On March 29, 2021, the Company amended our Term Loan Agreement
with Bank of America, N.A. 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 March 31, 2021, our Term Loan
Agreement was in compliance with all covenants or other requirements. 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, outside of our consideration of JSAV. See discussion
regarding JSAV's outstanding debt 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 $28.9 million and $29.1 million as of
March 31, 2021 and December 31, 2020, respectively. For further discussion see
note 5 to our condensed consolidated financial statements.
Preferred stock dividends-On March 25, 2021, the Company declared dividends
which were due with respect to its Series D Convertible Preferred Stock for the
first quarter of 2021. The declared $8.4 million of dividends were paid on April
15, 2021. As of March 31, 2021, the Company had aggregate undeclared preferred
stock dividends of approximately $16.5 million which relates to the second and
fourth quarters of 2020. 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 $24.9
million at March 31, 2021, are recorded as a liability in our condensed
consolidated balance sheets as "dividends payable".
The Board plans to revisit the dividend payment policy with respect to the
Series D Convertible Preferred Stock on an ongoing basis. The Board believes
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.
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
                                       58
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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 March 31, 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 will terminate in accordance with its
terms at the end of the current term on June 26, 2021. The expiration of the
Ashford Trust ERFP Agreement will have no impact on the Extension Agreement,
which will continue in full force and effect in accordance with its terms.
Following expiration of the Ashford Trust ERFP Agreement, we intend to amend the
Second Amended and Restated Advisory Agreement, dated January 14, 2021, to
reflect certain changes necessary in connection with the expiration of the
Ashford Trust ERFP Agreement.
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 three months ended March 31, 2021.
During the first quarter of 2020, we paid the remainder of contingent
consideration due to the BAV Sellers 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 amount 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, dated
as of January 15, 2021 (the "Credit Agreement"), by and among Ashford Trust,
Oaktree and the lenders party thereto, on January 15, 2021, the Company entered
into the Subordination and Non-Disturbance Agreement (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 80% of such fees paid during the fiscal year
ended December 31, 2019, (the "Advisory Fee Cap") (2) any termination fee or
liquidated damages amounts under the 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 in connection with the transactions contemplated by
the Credit Agreement. See additional discussion in notes 3 and 13 to our
condensed consolidated financial statements.
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 March 31, 2021 and December 31, 2020, we had $34.0 million and $45.3
million of cash and cash equivalents, respectively, and $35.0 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, existing cash
balances and borrowing on 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:
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Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows used
in operating activities were $5.4 million for the three months ended March 31,
2021 compared to net cash flows provided by operating activities of $4.3 million
for the three months ended March 31, 2020. The decrease in cash flows from
operating activities in the three months ended March 31, 2021 was primarily due
to a decrease in earnings due to COVID-19 and decreases in cash flows due to the
timing of receipt of our receivables from Braemar and payments of accounts
payable offset by the timing of receipt of our receivables from Ashford Trust
and third parties in the three months ended March 31, 2021.
Net Cash Flows Provided by (Used in) Investing Activities. For the three months
ended March 31, 2021, net cash flows used in investing activities were $3.0
million. These cash flows consisted of 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, capital expenditures of
$637,000 for RED's marine vessels and capital expenditures of FF&E of $491,000,
offset by cash inflows of $1.9 million primarily from proceeds received in 2021
from the sale of FF&E to Braemar in the fourth quarter of 2020.
For the three months ended March 31, 2020, net cash flows used in investing
activities were $3.4 million. These cash flows consisted of capital expenditures
of $2.0 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 $147,000 for RED's marine vessels offset by cash inflows
of $57,000 for proceeds from disposals of audio visual equipment.
Net Cash Flows Provided by (Used in) Financing Activities. For the three months
ended March 31, 2021, net cash flows used in financing activities were $5.1
million. These cash flows consisted of $5.1 million of payments on notes
payable, $332,000 of payments on our revolving credit facilities, purchases of
$102,000 of treasury stock and $61,000 of payments on finance leases. These were
offset by $325,000 of proceeds from borrowings on notes payable and employee
advances of $245,000 associated with tax withholdings for restricted stock
vesting.
For the three months ended March 31, 2020, net cash flows provided by financing
activities were $21.2 million. These cash flows consisted of $29.5 million of
proceeds from borrowings on notes payable, $77,000 of contributions from
noncontrolling interests in a consolidated entity, and employee advances of
$124,000 associated with tax withholdings for restricted stock vesting. These
were offset by $4.7 million of payments for dividends on our preferred stock,
$2.3 million of net payments on our revolving credit facilities, $819,000 of
payments on notes payable, $282,000 of payments on finance leases and $290,000
of loan cost payments.
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
$1.2 million and $134,000 as of March 31, 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" included in our 2020 Form 10-K.
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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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