What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-05 compared with 2021-08-06 · 426 added, 214 removed, 886 unchanged (42% of the section changed)

4 unchanged sentences

(unaudited, in thousands, except share and per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Investments in hotel properties, gross $ 1,847,755 $ 1,784,849

23 unchanged sentences

Other liabilities 20,699 18,077

Derivative liabilities 1,338 —

Total liabilities 1,349,562 1,278,247

Commitments and contingencies (note 15)

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,108,017 and 5,031,473 shares issued and outstanding at June 30, 2021 and December 31, 2020

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,078,017 and 5,031,473 shares issued and outstanding at September 30, 2021 and December 31, 2020

65,426 106,949

Series E redeemable preferred stock, $ 0.01 par value, 265,637 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020

Series M redeemable preferred stock, $ 0.01 par value, 14,644 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020

Redeemable noncontrolling interests in operating partnership 39,948 27,655

Preferred stock, $ 0.01 value, 80,000,000 shares authorized:

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 57,311,232 and 38,274,770 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at September 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 63,974,117 and 38,274,770 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 698,481 541,870

9 unchanged sentences

(unaudited, in thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

44 unchanged sentences

(unaudited, in thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

15 unchanged sentences

Preferred Stock

Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount

Balance at March 31, 2021 1,600 $ 16 43,466 $ 434 $ 571,288 $ ( 278,445 ) $ ( 16,335 ) $ 276,958 4,545 $ 96,609 $ 28,162

Series E Redeemable

Preferred Stock Series M Redeemable

Preferred Stock Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at June 30, 2021 1,600 $ 16 57,311 $ 573 $ 661,576 $ ( 295,641 ) $ ( 16,264 ) $ 350,260 3,108 $ 66,064 — — — — $ 29,398

Equity-based compensation — — — — 1,990 — — 1,990 — — — — — — 1,054

Issuance of common stock — — 6,550 66 34,166 — 34,232 — — — — — — —

Issuance of restricted shares/units — — 260 3 ( 3 ) — — — — — —

Forfeiture of restricted common shares — — ( 12 ) — — — — — — — —

Issuance of common units for hotel acquisition — — — — — — — — — — — — — — 13,175

Issuance of preferred stock — — — — — — — — — — 266 4,204 15 250 —

Dividends declared – preferred stock - Series B ($ 0.34 /share)

2 unchanged sentences

— — — — — ( 825 ) — ( 825 ) — — — — — — —

Contributions from noncontrolling interests — — — — — — 920 920 — — —

Redemption/conversion of operating partnership units — — 2 — 17 — — 17 — — ( 17 )

Dividends declared – preferred stock - Series E ($ 0.50 /share)

— — — — — ( 90 ) — ( 90 ) — — — — — — —

Dividends declared – preferred stock - Series M ($ 0.51 /share)

— — — — — ( 4 ) — ( 4 ) — — — — — — —

Net income (loss) — — — — — ( 6,946 ) ( 450 ) ( 7,396 ) — — — — — — ( 823 )

Extinguishment of preferred stock — — 120 — 749 ( 111 ) — 638 ( 30 ) ( 638 ) — — — — —

Equity component of Convertible Senior Notes — — 6,257 — — 6,257 — — —

Redemption value adjustment - preferred stock — — — — — ( 2,017 ) — ( 2,017 ) — — — 1,906 111 —

Redemption value adjustment — — — — — 2,856 — 2,856 — — — — — — ( 2,856 )

Balance at June 30, 2021 1,600 $ 16 57,311 $ 573 $ 661,576 $ ( 295,641 ) $ ( 16,264 ) $ 350,260 3,108 $ 66,064 $ 29,398

Balance at September 30, 2021 1,600 $ 16 63,974 $ 639 $ 698,481 $ ( 303,836 ) $ ( 16,714 ) $ 378,586 3,078 $ 65,426 266 $ 6,110 15 $ 361 $ 39,948

8.25 % Series D Cumulative Preferred Stock

2 unchanged sentences

Preferred Stock

Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount

Series E Redeemable

Preferred Stock Series M Redeemable

Preferred Stock Redeemable Noncontrolling Interests in Operating Partnership

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at December 31, 2020 1,600 $ 16 38,275 $ 382 $ 541,870 $ ( 266,010 ) $ ( 15,088 ) $ 261,170 5,031 $ 106,949 — $ — — $ — $ 27,655

4 unchanged sentences

Issuance of restricted shares/units — — 764 8 ( 8 ) — — — — — — — — — —

Issuance of common units for hotel acquisition — — — — — — — — — — — — — — 13,175

Forfeiture of restricted common shares — — ( 22 ) — — — — — — — — — — — —

3 unchanged sentences

— — — — — ( 2,475 ) — ( 2,475 ) — — — — — — —

Dividends declared – preferred stock - Series E ($ 0.50 /share)

— — — — — ( 90 ) — ( 90 ) — — — — — — —

Dividends declared – preferred stock - Series M ( 0.51 /share)

— — — — — ( 4 ) — ( 4 ) — — — — — — —

Contributions from noncontrolling interests — — — — — — 920 920 — — — — — — —

3 unchanged sentences

Equity component of Convertible Senior Notes — — — — 6,257 — — 6,257 — — — — — — —

Redemption value adjustment - preferred stock — — — — — ( 2,017 ) — ( 2,017 ) — — — 1,906 — 111 —

Redemption value adjustment — — — — — ( 69 ) — ( 69 ) — — — — — — 69

Balance at June 30, 2021 1,600 $ 16 57,311 $ 573 $ 661,576 $ ( 295,641 ) $ ( 16,264 ) $ 350,260 3,108 $ 66,064 $ 29,398

Balance at September 30, 2021 1,600 $ 16 63,974 $ 639 $ 698,481 $ ( 303,836 ) $ ( 16,714 ) $ 378,586 3,078 $ 65,426 266 $ 6,110 $0 15 $ 361 39,948

8.25 % Series D Cumulative Preferred Stock

4 unchanged sentences

Shares Amount Shares Amount Shares Amount

Balance at March 31, 2020 1,600 $ 16 33,511 $ 335 $ 524,341 $ ( 166,108 ) $ ( 9,224 ) $ 349,360 5,031 $ 107,352 $ 36,786

Balance at June 30, 2020 1,600 $ 16 33,528 $ 335 $ 525,846 $ ( 216,574 ) $ ( 11,628 ) $ 297,995 5,031 $ 107,352 $ 31,589

Purchase of common stock — — ( 1 ) — ( 2 ) — — ( 2 ) — — —

Equity-based compensation — — — — 1,465 — — 1,465 — — 541

Issuance of common stock — — 3,046 30 6,380 — — 6,410 — — —

Issuance of restricted shares/units — — 29 — ( 48 ) — — ( 48 ) — — ( 44 )

6 unchanged sentences

Redemption value adjustment — — — — — ( 8 ) — ( 8 ) — — 8

Balance at June 30, 2020 1,600 $ 16 33,528 $ 335 $ 525,846 $ ( 216,574 ) $ ( 11,628 ) $ 297,995 5,031 $ 107,352 $ 31,589

Balance at September 30, 2020 1,600 $ 16 36,600 $ 365 $ 533,641 $ ( 237,813 ) $ ( 13,627 ) $ 282,582 5,031 $ 107,352 $ 29,713

8.25 % Series D Cumulative Preferred Stock

6 unchanged sentences

Equity-based compensation — — — — 4,388 — — 4,388 — — 1,651

Issuance of common stock — — 3,046 30 6,380 — — 6,410 — — —

Issuance of preferred stock — — — — — — — — 23 432 —

Issuance of restricted shares/units — — 375 3 ( 3 ) — — — — — —

Forfeiture of restricted common shares — — ( 9 ) — — — — — — — —

Issuance of preferred stock — — — — — — — — 23 432 —

Dividends declared – preferred stock - Series B ($ 1.03 /share)

6 unchanged sentences

Redemption value adjustment — — — — — 18 — 18 — — ( 18 )

Balance at June 30, 2020 1,600 $ 16 33,528 $ 335 $ 525,846 $ ( 216,574 ) $ ( 11,628 ) $ 297,995 5,031 $ 107,352 $ 31,589

Balance at September 30, 2020 1,600 $ 16 36,600 $ 365 $ 533,641 $ ( 237,813 ) $ ( 13,627 ) $ 282,582 5,031 $ 107,352 $ 29,713

See Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

(unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

14 unchanged sentences

Deferred income tax expense (benefit) ( 174 ) ( 844 )

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, exclusive of the effect of hotel acquisition:

Accounts receivable and inventories ( 4,079 ) 7,271

5 unchanged sentences

Due to/from Ashford Inc.

1,711 ( 971 )

Operating lease liabilities ( 184 ) ( 162 )

4 unchanged sentences

Net proceeds from disposition of assets 1,816 —

Deposit for acquisition of hotel property ( 3,000 ) —

Acquisition of hotel property, net of cash and restricted cash acquired ( 9,515 ) —

Investment in unconsolidated entity ( 117 ) ( 26 )

19 unchanged sentences

Income taxes paid (refunded) ( 20 ) 898

Six Months Ended June 30,

Nine Months Ended September 30,

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

1 unchanged sentence

Common stock purchases accrued but not paid — 2

Issuance of units for hotel acquisition 13,175 —

Issuance of warrants in hotel acquisition 1,528 —

Assumption of debt in hotel acquisition 49,815 —

Capital expenditures accrued but not paid 2,094 7,380

Accrued but unpaid financing costs — 2,229

Non-cash loan principal associated with default interest and late charges — 9,859

Accrued common stock offering expense 147 223

Unsettled common stock offering proceeds — 243

Accrued preferred stock offering expenses 132 —

25 unchanged sentences

instead we employ hotel management companies to operate them for us under management contracts.

Remington Hotels, a subsidiary of Ashford Inc., manages three of our thirteen hotel properties.

Remington Hotels, a subsidiary of Ashford Inc., manages four of our 14 hotel properties.

Third-party management companies manage the remaining hotel properties.

2 unchanged sentences

These products and services include, but are not limited to design and construction services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and mobile key technology.

The accompanying condensed consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of June 30, 2021, own thirteen hotel properties in six states, the District of Columbia and the U.S.

The accompanying condensed consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of September 30, 2021, own 14 hotel properties in six states, the District of Columbia and the U.S.

Virgin Islands (“USVI”).

The portfolio includes eleven wholly-owned hotel properties and two hotel properties that are owned through a partnership in which Braemar OP has a controlling interest.

The portfolio includes 12 wholly-owned hotel properties and two hotel properties that are owned through a partnership in which Braemar OP has a controlling interest.

These hotel properties represent 3,865 total rooms, or 3,630 net rooms, excluding those attributable to our partner.

As a REIT, Braemar is required to comply with limitations imposed by the Code related to operating hotels.

As of June 30, 2021, twelve of our thirteen hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Braemar TRS”).

As of September 30, 2021, 13 of our 14 hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Braemar TRS”).

One hotel property, located in the USVI, is owned by our USVI TRS.

1 unchanged sentence

Hotel operating results related to the hotel properties are included in the condensed consolidated statements of operations.

As of June 30, 2021, ten of the thirteen hotel properties were leased by Braemar’s wholly-owned TRS and the two hotel properties majority-owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership.

As of September 30, 2021, 11 of the 14 hotel properties were leased by Braemar’s wholly-owned TRS, and the two hotel properties majority-owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership.

Each leased hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues.

3 unchanged sentences

(“Accor”), Hyatt Corporation (“Hyatt”), Ritz-Carlton (Virgin Islands), Inc.

and The Ritz-Carlton Hotel Company, L.L.C., each of which are affiliates of Marriott (“Ritz-Carlton”) and Remington Hotels, which are eligible independent contractors under the Code.

COVID-19, Management’s Plans and Liquidity

and The Ritz-Carlton Hotel Company, L.L.C., each of which is an affiliate of Marriott (“Ritz-Carlton”) and Remington Hotels, which are eligible independent contractors under the Code.

In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has resulted in significant travel restrictions and extended shutdown of numerous businesses throughout the United States.

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

When preparing financial statements for each annual and interim reporting period 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 considers 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.

As of June 30, 2021, the Company maintained unrestricted cash of $ 157.7 million and restricted cash of $ 57.4 million.

The vast majority of the restricted cash is comprised of lender and manager held reserves.

During 2020, the Company worked with its property managers and lenders in order to utilize lender and manager held reserves to fund operating shortfalls.

As of June 30, 2021, there was also $ 21.5 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of its property managers which is also available to fund hotel operating costs.

As of September 30, 2021, the Company maintained unrestricted cash of $ 195.5 million and restricted cash of $ 44.8 million.

The vast majority of the restricted cash comprises lender and manager held reserves.

As of September 30, 2021, there was also $ 20.4 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of its property managers which is also available to fund hotel operating costs.

On December 10, 2020, the Company announced that it plans to continue its suspension of the common stock dividend into 2021 to protect liquidity and will evaluate future dividend declarations on a quarterly basis going forward.

We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully subside, whether our hotels will be forced to shut down operations or whether one or more possible recurrences of COVID-19 case surges could result in further reductions in business and personal travel or potentially cause state and local governments to reinstate travel restrictions.

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 on our completed Convertible Senior Notes transaction (as described below), the corresponding repayment of our secured term loan, which eliminated financial covenants associated with it, our current unrestricted and restricted cash on hand, our current cash utilization and 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, the Company has concluded that the facts and circumstances that previously gave rise to 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 have been resolved.

Facts and circumstances could change in the future that are outside of management’s control, such as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to COVID-19.

14 unchanged sentences

• historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results.

Consequently, operating results for the three and six months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Consequently, operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

• on August 5, 2021, we acquired the Mr.

C Beverly Hills Hotel and five adjacent luxury residences.

The operating results of the hotel property have been included in the results of operations from its acquisition date.

Use of Estimates —The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

1 unchanged sentence

Recently Adopted Accounting Standards —In January 2020, the Financial Accounting Standards Board’s (“FASB”) issued Accounting Standards Update (“ASU”) 2020-01, Investments – Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) (“ASU 2020-01”), which clarifies the interaction between the accounting for equity securities, equity method investments, and certain derivative instruments.

The ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures , for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

The ASU, among other

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures , for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years and should be applied prospectively.

10 unchanged sentences

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in Accounting Standards Codification (“ASC”) 470-20, Debt:

(1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in Accounting Standards Codification (“ASC”) 470-20, Debt:

Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock;

10 unchanged sentences

The following tables present our revenue disaggregated by geographical areas (dollars in thousands):

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total

9 unchanged sentences

Total 14 $ 77,560 $ 24,494 $ 14,123 $ 116,177

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total

9 unchanged sentences

Total 13 $ 28,118 $ 8,537 $ 8,099 $ 44,754

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total

9 unchanged sentences

Total 14 $ 195,720 $ 60,976 $ 40,439 $ 297,135

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Primary Geographical Market Number of Hotels Rooms Food and Beverage Other Hotel Total

12 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the three and six months ended June 30, 2020, the Company recorded revenue from business interruption losses associated with lost profits from Hurricane Irma of $ 390,000 and $ 4.0 million, respectively.

For the three and nine months ended September 30, 2020, the Company recorded revenue from business interruption losses associated with lost profits from Hurricane Irma of $ 0 and $ 4.0 million, respectively.

This revenue is included in “other” hotel revenue in our condensed consolidated statement of operations.

There was no such revenue recorded for the three and six months ended June 30, 2021 as the insurance claim was fully settled in 2020.

There was no such revenue recorded for the three and nine months ended September 30, 2021 as the insurance claim was fully settled in 2020.

Investments in Hotel Properties, net

Investments in hotel properties, net consisted of the following (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Land $ 480,530 $ 455,298

2 unchanged sentences

Construction in progress 9,136 11,422

Residences 12,746 —

Total cost 1,847,755 1,784,849

2 unchanged sentences

Impairment Charges and Insurance Recoveries

For the three and six months ended June 30, 2021, we recognized a $ 0 and $ 481,000 gain associated with proceeds received from an insurance claim.

For the three and six months ended June 30, 2020, the Company received proceeds of $ 5.4 million and $ 7.4 million from our insurance carriers for property damage and business interruption from Hurricane Irma.

There were no proceeds for the three and six months ended June 30, 2021 as the claim was fully settled in September 2020.

During the three and six months ended June 30, 2021 and 2020, no impairment charges were recorded.

For the three and nine months ended September 30, 2021, we recognized a gain of $ 0 and $ 481,000 , respectively.

associated with proceeds received from an insurance claim.

For the three and nine months ended September 30, 2020, the Company received proceeds of $ 650,000 and $ 8.0 million, respectively, from our insurance carriers for property damage and business interruption from Hurricane Irma.

There were no proceeds for the three and nine months ended September 30, 2021 as the claim was fully settled in September 2020.

During the three and nine months ended September 30, 2021 and 2020, no impairment charges were recorded.

In September 2020, the Company reached a final settlement with its insurance carriers related to Hurricane Irma.

Upon settlement, the Company recorded a gain of $ 10.1 million as the proceeds received exceeded the carrying value of the hotel property at the time of the loss.

C Beverly Hills Hotel

On August 5, 2021, the Company acquired a 100 % interest in the 138 -room Mr.

C Beverly Hills Hotel and five luxury residences adjacent to the hotel.

The total consideration consisted of $ 10.0 million of cash, 2.5 million Braemar OP common units with a fair value of approximately $ 13.2 million and 500,000 warrants for the purchase of Braemar common stock with a $ 6.00 strike price and a fair value of approximately $ 1.5 million.

Additionally the Company assumed a $ 50.0 million mortgage loan, with a fair value of approximately $ 49.8 million .

Upon closing, the Company repaid $ 20.0 million of the assumed mortgage loan.

See notes 6, 7 and 11 for further discussion regarding the mortgage loan, common units and warrants.

The acquisition of the Mr.

C Beverly Hills Hotel included the hotel and the adjacent luxury residences (the “residences”).

We have accounted for the transaction as a business combination under Accounting Standards Codification (“ASC”) 805- Business Combinations.

We are in the process of evaluating the values assigned to investment in hotel property, property level working capital balances and the residences.

This valuation is considered a Level 3 valuation technique.

Thus, the balances reflected below are subject to change, and any such changes could result in adjustments to the allocation.

Any change to the amounts recorded within the investments in hotel properties will also impact depreciation and amortization expense.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed in the acquisition (in thousands):

Land $ 25,232

Buildings and improvements 35,689

Furniture, fixtures and equipment 758

Investments in hotel properties 74,425

Inventories 94

Mortgage loan ( 49,815 )

Net other assets (liabilities) $ ( 486 )

The results of operations of the hotel property have been included in our results of operations as of the acquisition date.

The table below summarizes the total revenue and net income (loss) in our condensed consolidated statements of operations for the three and nine months ended September 30, 2021:

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Total revenue $ 2,272 $ 2,272

Net income (loss) ( 1,203 ) ( 1,203 )

Pro Forma Financial Results

The following table reflects the unaudited pro forma results of operations as if the acquisitions had occurred and the applicable indebtedness was incurred on January 1, 2020, and the removal of $ 275,000 and $ 571,000 of non-recurring transaction costs directly attributable to the acquisition for the three and nine months ended September 30, 2021 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Total revenue $ 117,808 $ 46,409 $ 303,406 $ 181,121

Net income (loss) $ ( 7,114 ) $ ( 23,939 ) $ ( 30,418 ) $ ( 97,449 )

Net income (loss) attributable to common stockholders $ ( 7,898 ) $ ( 20,675 ) $ ( 34,082 ) $ ( 84,203 )

Pro Forma income per share;

Basic $ ( 0.13 ) $ ( 0.61 ) $ ( 0.70 ) $ ( 2.54 )

Diluted $ ( 0.13 ) $ ( 0.61 ) $ ( 0.70 ) $ ( 2.54 )

Weighted average common shares outstanding (in thousands):

Basic 59,207 33,923 48,954 33,103

Diluted 59,207 33,923 48,954 33,103

Investment in Unconsolidated Entity

1 unchanged sentence

In 2018, the Company made an initial investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an initial 8.2 % ownership interest.

On July 12, 2021, the Company made an additional investment in OpenKey of approximately $ 117,000 .

All investments were recommended by our Related Party Transactions Committee and unanimously approved by the independent members of our board of directors.

As of June 30, 2021, the Company has made investments in OpenKey totaling $ 2.4 million.

Our investment is recorded as “investment in unconsolidated entity” in our condensed consolidated balance sheets and is accounted for under the equity method of accounting as we have been deemed to have significant influence over the entity under the applicable accounting guidance.

As of September 30, 2021, the Company has made investments in OpenKey totaling $ 2.5 million.

Our investment is recorded as “investment in unconsolidated entity” in our condensed consolidated balance sheets and is accounted for under the equity method of accounting as we have significant influence over the entity under the applicable accounting guidance.

We review our investment in OpenKey for impairment in each reporting period pursuant to the applicable authoritative accounting guidance.

An investment is impaired when its estimated fair value is less than the carrying amount of the investment.

An investment is impaired when its estimated fair value is less than the carrying amount of

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

the investment.

Any impairment is recorded in equity in earnings (loss) of unconsolidated entity.

No such impairment was recorded for the three and six months ended June 30, 2021 and 2020.

No such impairment was recorded for the three and nine months ended September 30, 2021 and 2020.

The following table summarizes our carrying value and ownership interest in OpenKey:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Carrying value of the investment in OpenKey (in thousands) $ 1,627 $ 1,708

Ownership interest in OpenKey 7.8 % 8.2 %

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Line Item 2021 2020 2021 2020

4 unchanged sentences

Maturity (12)

Interest Rate June 30, 2021 December 31, 2020

Mortgage loan (3)

The Ritz-Carlton St.

Thomas August 2021 August 2024 LIBOR (1) + 3.95 %

$ 42,500 $ 42,500

Interest Rate September 30, 2021 December 31, 2020

Mortgage loan (3)

2 unchanged sentences

Mortgage loan (4)

Hotel Yountville May 2022 May 2022 LIBOR (1) + 2.55 %

51,000 51,000

Mortgage loan (6)

The Notary Hotel June 2022 June 2025 LIBOR (1) + 2.16 %

3 unchanged sentences

Mortgage loan (5)

Bardessono Hotel and Spa August 2022 August 2022 LIBOR (1) + 2.55 %

The Ritz-Carlton St.

Thomas August 2022 August 2024 LIBOR (1) + 3.95 %

42,500 42,500

5 unchanged sentences

Mortgage loan (7) (8)

Hotel Yountville May 2023 May 2023 LIBOR (1) + 2.55 %

51,000 51,000

Mortgage loan (7) (8)

Bardessono Hotel and Spa August 2023 August 2023 LIBOR (1) + 2.55 %

40,000 40,000

Mortgage loan (7)

The Ritz-Carlton Lake Tahoe January 2024 January 2024 LIBOR (1) + 2.10 %

5 unchanged sentences

Mortgage loan (10)

C Beverly Hills Hotel August 2024 August 2024 LIBOR (1) + 3.60 %

Mortgage loan (7)

Pier House Resort & Spa September 2024 September 2024 LIBOR (1) + 1.85 %

8 unchanged sentences

__________________

(1) LIBOR rates were 0.101 % and 0.144 % at June 30, 2021 and December 31, 2020, respectively.

(1) LIBOR rates were 0.080 % and 0.144 % at September 30, 2021 and December 31, 2020, respectively.

(2) Base Rate, as defined in the secured term loan agreement, is the greater of (i) the prime rate set by Bank of America, or (ii) federal funds rate + 0.5 %, or (iii) LIBOR + 1.0 %.

(3) This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions.

(3) Effective January 9, 2021, we amended this mortgage loan.

1 unchanged sentence

This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in April 2021.

(5) Effective December 31, 2020, we amended this mortgage loan.

Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through December 2021.

(4) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in June 2021.

(5) This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in August 2021.

This mortgage loan has a LIBOR floor of 1.00 %.

(6) Effective February 22, 2021, we amended this term loan.

1 unchanged sentence

On May 18, 2021, we repaid this term loan in full.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(7) Effective December 31, 2020, we amended this mortgage loan.

Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through December 2021.

This mortgage loan has a LIBOR floor of 0.25 %.

(8) On September 23, 2021, we amended this mortgage loan.

Terms of the agreement included extending the current and final maturity dates by one year.

(9) Effective March 5, 2021, we amended this mortgage loan.

Terms of the agreement included monthly FF&E escrow deposits waived through July 1, 2021.

(10) This mortgage loan has a LIBOR floor of 1.50 %.

(11) On May 18, 2021, we executed a purchase agreement to sell convertible senior notes in a private offering.

1 unchanged sentence

(12) The final maturity date assumes all available extensions options will be exercised.

During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront,

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Capital Hilton and Hilton La Jolla Torrey Pines.

As of June 30, 2021, no loans are in default.

As of September 30, 2021, no loans are in default.

See note 14 for discussion of the loan modification agreement with Lismore Capital LLC (“Lismore”).

2 unchanged sentences

Additionally, as a result of the troubled debt restructurings all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method.

The amount of non-cash principal amortization associated with the default interest and late charges during the three and six months ended June 30, 2021 was approximately $ 1.0 million and $ 2.4 million, respectively.

The amount of non-cash principal amortization associated with the default interest and late charges during the three and nine months ended September 30, 2021 was approximately $ 519,000 and $ 2.9 million, respectively.

The amount of principal amortization during the three and nine months ended September 30, 2020 was $ 937,000 and $ 1.2 million, respectively.

On August 5, 2021, in connection with the acquisition of the Mr.

C Beverly Hills Hotel and the adjacent residences in Los Angeles, California, the Company assumed a $ 50 million mortgage loan and repaid $ 20 million upon closing.

This mortgage loan provides for an interest rate of LIBOR + 3.60 %.

The mortgage loan is interest only with the stated maturity in August 2024.

Convertible Senior Notes

6 unchanged sentences

The Convertible Senior Notes will mature on June 1, 2026.

The Company recorded coupon interest expense of $ 464,000 for the three and six months ended June 30, 2021.

The Company recorded coupon interest expense of $ 970,000 and $ 1.4 million, respectively, for the three and nine months ended September 30, 2021.

The Company separated the Convertible Senior Notes into liability and equity components.

4 unchanged sentences

The initial discount of $ 9.3 million is accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Senior Notes.

The Company recorded discount amortization of $ 185,000 for the three and six months ended June 30, 2021.

The Company recorded discount amortization of $ 391,000 and $ 576,000 , respectively, for the three and nine months ended September 30, 2021.

The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $ 6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances.

In addition, following the occurrence of certain corporate events, if the Company provides notice of redemption or if it exercises its option to convert the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be.

The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100 % of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.

If we violate covenants in any debt 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.

The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group.

As of June 30, 2021, we were in compliance with all covenants.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be.

The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group.

As of September 30, 2021, we were in compliance with all covenants.

Derivative Instruments

4 unchanged sentences

The following table summarizes the interest rate derivatives we entered into over the applicable periods:

Six Months Ended June 30,

Nine Months Ended September 30,

Interest rate caps:

2 unchanged sentences

Strike rate high end of range 4.00 % 4.00 %

Effective date range January 2021- May 2021 March 2020 - June 2020

Termination date range September 2021- June 2022 April 2021 - June 2021

Effective date range January 2021- September 2021 March 2020 - June 2020

Termination date range February 2022- August 2024 April 2021 - June 2021

Total cost of interest rate caps (in thousands) $ 200 $ 92

3 unchanged sentences

Interest rate caps:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Notional amount (in thousands) $ 962,500 $ 779,000

1 unchanged sentence

Strike rate high end of range 4.00 % 4.00 %

Termination date range August 2021 - June 2022 February 2021 - October 2021

Termination date range October 2021 - August 2024 February 2021 - October 2021

Aggregate principal balance on corresponding mortgage loans (in thousands) $ 857,250 $ 779,000

1 unchanged sentence

(1) No instruments were designated as cash flow hedges.

Warrants —On August 5, 2021, as part of the consideration paid to acquire the Mr.

C Beverly Hills Hotel and five adjacent luxury residences, the Company issued 500,000 warrants for the purchase of Braemar common stock with a $ 6.00 strike price on or after the August 5, 2021 until August 5, 2024.

The holder can choose to exercise the warrant by cash or by net issue exercise, in which event the Company shall issue to the holder a number of warrant shares which reflects the fair market value of the Company’s common stock.

As of September 30, 2021, no warrants have been exercised.

The initial fair value of the warrant was calculated using a Black-Scholes option pricing model with the following assumptions:

three -year contractual term;

97.93 % volatility;

0 % dividend rate;

and a risk-free interest rate of 0.38 %.

The estimated fair value of the warrants was approximately $ 1.5 million on the date of issuance.

The warrants are re-valued at each reporting period with the change in fair value recorded through earnings.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

In applying the guidance in ASC 815, it was determined that the warrants should be classified as a liability as a result of certain settlement provisions.

The warrants are included in derivative liabilities on the condensed consolidated balance sheet and changes in value are reported as a component of unrealized gain (loss) on derivatives on the condensed consolidated statements of operations.

This is a Level 2 valuation technique.

Fair Value Measurements

10 unchanged sentences

Fair value of interest rate floors is calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor.

The fair value of warrants is determined by using the Black-Scholes option pricing model.

When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

However, when the valuation adjustments

However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties, which we consider significant ( 10 % or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy.

Transfers of inputs between levels are determined at the end of each reporting period.

In determining the fair values of our derivatives at September 30, 2021, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 0.080 % to 1.188 % for the remaining term of our derivatives.

Credit spreads (Level 3 inputs) used in determining the fair values derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties, which we consider significant ( 10 % or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy.

Transfers of inputs between levels are determined at the end of each reporting period.

In determining the fair values of our derivatives at June 30, 2021, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 0.101 % to 0.372 % for the remaining term of our derivatives.

Credit spreads (Level 3 inputs) used in determining the fair values derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value of interest rate caps as of June 30, 2021 and December 31, 2020 was immaterial.

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

Quoted Market Prices (Level 1) Significant Other

Observable Inputs

(Level 2) Significant Unobservable Inputs

(Level 3) Total

September 30, 2021

Derivative assets:

Interest rate derivatives - caps $ — $ 74 $ — $ 74

Total $ — $ 74 $ — $ 74 (1)

Derivative liabilities:

Warrants — ( 1,338 ) $ — ( 1,338 ) (2)

Net $ — $ ( 1,264 ) $ — $ ( 1,264 )

__________________

(1) Reported as “derivative assets” in our condensed consolidated balance sheet.

(2) Reported as “derivative liabilities” in our condensed consolidated balance sheet.

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

1 unchanged sentence

Gain (Loss) Recognized in Income

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

4 unchanged sentences

Total $ ( 48 ) $ 21 $ ( 126 ) $ 133

Derivative liabilities:

Warrants 190 — 190 —

Net $ 142 $ 21 $ 64 $ 133

Total combined

2 unchanged sentences

Credit default swaps — 51 — 226

Warrants 190 — 190 —

Unrealized gain (loss) on derivatives 142 3,561 64 3,748

Realized gain (loss) on interest rate floors — ( 3,540 ) (2)

— ( 3,615 ) (2)

Net $ 142 $ 21 $ 64 $ 133

_______________

(1) Excludes costs associated with credit default swaps of $ 0 and $ 64 for the three months ended June 30, 2021 and 2020, respectively, as well as $ 0 and $ 127 for the six months ended June 30, 2021 and 2020, respectively, which is included in “other income (expense)” in our condensed consolidated statements of operations.

(1) Excludes costs associated with credit default swaps of $ 0 and $ 64 for the three months ended September 30, 2021 and 2020, respectively, as well as $ 0 and $ 191 for the nine months ended September 30, 2021 and 2020, respectively, which is included in “other income (expense)” in our condensed consolidated statements of operations.

(2) Included in “other income (expense)” in our condensed consolidated statements of operations .

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Summary of Fair Value of Financial Instruments

2 unchanged sentences

Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Value Estimated

3 unchanged sentences

Derivative assets $ 74 $ 74 $ — $ —

Derivative liabilities 1,338 1,338 — —

Financial assets not measured at fair value:

20 unchanged sentences

This is considered a Level 1 valuation technique.

Derivative assets .

Derivative assets and derivative liabilities .

See notes 7 and 8 for a complete description of the methodology and assumptions utilized in determining fair values.

5 unchanged sentences

Credit spreads take into consideration general market conditions, maturity and collateral.

We estimated the fair value of the total indebtedness to be approximately 77.8 % to 86.0 % of the carrying value of $ 1.1 billion at June 30, 2021, and approximately 78.3 % to 86.6 % of the carrying value of $ 1.1 billion at December 31, 2020.

We estimated the fair value of the total indebtedness to be approximately 82.6 % to 91.3 % of the carrying value of $ 1.2 billion at September 30, 2021, and approximately 78.3 % to 86.6 % of the carrying value of $ 1.1 billion at December 31, 2020.

These fair value estimates are considered a Level 2 valuation technique.

4 unchanged sentences

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

12 unchanged sentences

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

4 unchanged sentences

Interest expense on Convertible Senior Notes 1,361 — 2,010 —

Dividends on preferred stock - Series E 90 — 90 —

Dividends on preferred stock - Series M 4 — 4 —

Total $ 1,801 $ ( 652 ) $ 7,204 $ ( 4,847 )

4 unchanged sentences

Effect of assumed conversion of exchanged preferred stock - Series B — 269 485 288

Effect of contingently issuable shares — 10 — 3

Effect of assumed conversion of Convertible Senior Notes 13,609 — 6,730 —

Effect of assumed conversion of preferred stock - Series E 700 — 233 —

Effect of assumed conversion of preferred stock - Series M 32 — 11 —

Total 24,109 10,870 16,883 10,984

2 unchanged sentences

Each common unit may be redeemed, by the holder, for either cash or, at our sole discretion, up to one share of our REIT common stock, which is either:

(i) issued pursuant to an effective registration statement;

(i) issued pursuant to an effective registration

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(ii) included in an effective registration statement providing for the resale of such common stock;

2 unchanged sentences

Additionally, certain independent members of the board of directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant.

Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election,

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

settled in our common stock.

Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election, settled in our common stock.

An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of our operating partnership at a time when our stock is trading at a level in excess of the price it was trading on the date of the LTIP issuance.

16 unchanged sentences

On May 11, 2021, approximately 840,000 Performance LTIP units with a fair value of approximately $ 5.7 million and a vesting period of three years were granted.

As of June 30, 2021, we have issued a total of approximately 2.4 million LTIP units (including Performance LTIP units), net of cancellations, all of which, other than approximately 572,000 LTIP units and 900,000 Performance LTIP units issued from March 2015 to May 2021, had reached full economic parity with, and are convertible into, common units.

As of September 30, 2021, we have issued a total of approximately 2.4 million LTIP units (including Performance LTIP units), net of cancellations, all of which, other than approximately 572,000 LTIP units and 900,000 Performance LTIP units issued from March 2015 to May 2021, had reached full economic parity with, and are convertible into, common units.

On August 5, 2021, we issued 2.5 million common units in our operating partnership in conjunction with the acquisition of the Mr.

C Beverly Hills Hotel.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding approximate ownership percentage of our operating partnership:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Redeemable noncontrolling interests in Braemar OP $ 39,948 $ 27,655

Adjustments to redeemable noncontrolling interests (1)

$ 3,093 $ 167

Ownership percentage of operating partnership 8.35 % 9.43 %

2 unchanged sentences

We allocated net income (loss) to the redeemable noncontrolling interests as illustrated in the table below (in thousands):

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

1 unchanged sentence

The following table presents the common units redeemed and the fair value at redemption (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

5 unchanged sentences

Equity and Stock-Based Compensation

Common Stock Dividends —The board of directors did no t declare a quarterly common stock dividend for the three and six months ended June 30, 2021 and 2020 .

Common Stock Dividends —The board of directors did no t declare a quarterly common stock dividend for the three and nine months ended September 30, 2021 and 2020 .

Restricted Stock Units —We incur stock-based compensation expense in connection with restricted stock units awarded to certain employees of Ashford LLC and its affiliates.

11 unchanged sentences

The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company issued equity awards in the first quarter of 2021, a substantial majority of which were issued subject to stockholder approval of an increase in the number of shares available for issuance under the Company’s Amended and Restated 2011 Stock Incentive Plan.

4 unchanged sentences

The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, which may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On May 11, 2021, approximately 446,000 PSUs with a fair value of approximately $ 6.0 million and vesting period of three years were issued.

8.25 % Series D Cumulative Preferred Stock —The Series D Cumulative Preferred Stock dividend for all issued and outstanding shares is set at $ 2.0625 per annum per share.

8.25 % Series D Cumulative Preferred Stock —The dividend for all issued and outstanding shares of the Company’s Series D Cumulative Preferred Stock (the “Series D Preferred Stock”) is set at $ 2.0625 per annum per share.

The following table summarizes dividends declared (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

1 unchanged sentence

At-the-Market Common Stock Equity Distribution Program —On December 11, 2017, the Company established an “at-the-market” equity distribution program pursuant to which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $ 50 million.

As of June 30, 2021, the Company has sold approximately 7.4 million shares of common stock and received net proceeds of approximately $ 30.5 million under this program.

As of September 30, 2021, the Company has sold approximately 7.4 million shares of common stock and received net proceeds of approximately $ 30.5 million under this program.

The issuance activity is summarized below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

9 unchanged sentences

during regular trading hours.

At any time during the Commitment Period the Company may require YA to purchase shares of the Company’s common stock by delivering a written notice to YA setting forth the Advance Shares (as defined in the SEDA) that the Company desires to issue and sell to YA (the “Advance Notice”).

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

to issue and sell to YA (the “Advance Notice”).

The Company may deliver an Advance Notice for an initial Advance for up to 1,200,000 Advance Shares (the “Initial Advance”).

4 unchanged sentences

We are not required to pay any additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $ 10,000 structuring fee.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The issuance activity under the SEDA is summarized below (in thousands):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Common shares sold to YA — 1,700

4 unchanged sentences

The issuance activity under the Lincoln Park agreement is summarized below (in thousands):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Common shares sold to Lincoln Park — 766

2 unchanged sentences

Proceeds received $ — $ 4,217

At-the-Market Equity Distribution Agreement —On May 25, 2021, the Company entered into an equity distribution agreement with Virtu Americas LLC (“Virtu”), to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $ 50,000,000 (the “Virtu May 2021 EDA”).

We will pay Virtu a commission of approximately 1.0 % of the gross sales price of the shares of our common stock sold.

1 unchanged sentence

The issuance activity under the Virtu May 2021 EDA is summarized below (in thousands):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Common shares issued 2,367 8,339

2 unchanged sentences

Net proceeds $ 13,287 $ 49,500

On July 12, 2021, the Company entered into a second equity distribution agreement with Virtu to sell from time to time shares of our common stock having an aggregate offering price of up to $ 100 million (the “Virtu July 2021 EDA”).

We will pay Virtu a commission of approximately 1.0 % of the gross sales price of the shares of our common stock sold.

The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The issuance activity under the Virtu July 2021 EDA is summarized below (in thousands):

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Common shares issued 4,183 4,183

Gross proceeds received $ 21,363 $ 21,363

Commissions and other expenses 214 214

Net proceeds $ 21,149 $ 21,149

Stock Repurchases —On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $ 0.01 per share having an aggregate value of up to $ 50 million.

The board of directors’ authorization replaced any previous repurchase authorizations.

No shares were repurchased during the six months ended June 30, 2021 and 2020.

As of June 30, 2021, $ 50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.

No shares were repurchased during the nine months ended September 30, 2021 and 2020.

As of September 30, 2021, $ 50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.

Preferred Stock

5.50 % Series B Cumulative Convertible Preferred Stock

3 unchanged sentences

The Series B Convertible Preferred Stock dividend for all issued and outstanding shares is set at $ 1.375 per annum per share.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110 % of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion.

The Company may, at its option, cause the Series B Convertible Preferred Stock to be converted in whole or in part, on a pro-rata basis, into fully paid and nonassessable shares of the Company’s common stock at the conversion price, provided that the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110 % of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion.

Additionally, the Series B Convertible Preferred Stock contains cash redemption features that consist of:

10 unchanged sentences

Sales of shares of our Series B Convertible Preferred Stock may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the NYSE, the existing trading market for our Series B Convertible Preferred Stock, or sales made to or through a market maker other than on an exchange or through an electronic communications network.

We will pay each of the sales agents a commission, which in each case shall not be more than 2.0 % of the gross sales price of the shares of our Series B Convertible Preferred Stock sold through such sales agents.

As of June 30, 2021, we have sold approximately 65,000 shares of our Series B Convertible Preferred Stock and received proceeds of approximately $ 1.2 million under this program.

We will pay each of the sales

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

agents a commission, which in each case shall not be more than 2.0 % of the gross sales price of the shares of our Series B Convertible Preferred Stock sold through such sales agents.

As of September 30, 2021, we have sold approximately 65,000 shares of our Series B Convertible Preferred Stock and received proceeds of approximately $ 1.2 million under this program.

The issuance activity is summarized below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

6 unchanged sentences

The following table summarizes dividends declared (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Series B Convertible Preferred Stock $ 1,058 $ 1,729 $ 3,689 $ 5,189

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

During 2021, Braemar entered into privately negotiated exchange agreements with certain holders of its 5.50 % Series B Cumulative Convertible Preferred Stock, par value $ 0.01 per share in reliance on Section 3(a)(9) of the Securities Act.

During 2021, Braemar entered into privately negotiated exchange agreements with certain holders of the Series B Convertible Preferred Stock, in reliance on Section 3(a)(9) of the Securities Act.

The table below summarizes the activity (in thousands):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Preferred Shares Tendered Common Shares Issued Preferred Shares Tendered Common Shares Issued

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30 120 1,953 7,291

Series E Redeemable Preferred Stock

On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell from time-to-time shares of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”).

Pursuant to such equity distribution agreements, the Company is offering a maximum of 20,000,000 shares of Series E Preferred Stock in a primary offering price of $ 25.00 per share.

The Company is also offering a maximum of 8,000,000 shares of the Series E Preferred Stock pursuant to a dividend reinvestment plan (the “DRIP”) at $ 25.00 per share (the “Stated Value”).

The Series E Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred stock, the Series D Preferred Stock and the Series M Preferred Stock (as defined below)) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.

Holders of the Series E Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class.

If and whenever dividends on any shares of the Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive the number of directors then constituting the Board shall be increased by two and the holders of such shares of Series E Preferred Stock shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

Each share is redeemable at any time, at the option of the holder, at a redemption price of $ 25.00 per share, plus any accumulated, accrued, and unpaid dividends, less a redemption fee.

Starting on the second anniversary, each share is redeemable at any time, at the option of the Company, at a redemption price of $ 25.00 per share, plus any accumulated, accrued, and unpaid dividends (with no redemption fee).

The Series E Preferred Stock is also subject to conversion upon certain

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

events constituting a change of control.

Upon such change of control events, holders have the option to convert their shares of Series E Preferred Stock into a maximum of 5.69476 shares of our common stock.

The redemption fee shall be an amount equal to:

• 8.0 % of the stated value of $ 25.00 per share (the “Stated Value”) beginning on the Original Issue Date (as defined in the Articles Supplementary) of the shares of the Series E Preferred Stock to be redeemed;

• 5.0 % of the Stated Value beginning on the second anniversary from the Original Issue Date of the shares of the Series E Preferred Stock to be redeemed;

• 0 % of the Stated Value beginning on the third anniversary from the Original Issue Date of the shares of the Series E Preferred Stock to be redeemed.

The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption.

The Series E Preferred Stock cash dividends are as follows:

• 8.0 % per annum of the Stated Value beginning on the date of the first settlement of the Series E Preferred Stock (the “Date of Initial Closing”);

• 7.75 % per annum of the Stated Value beginning on the first anniversary from the Date of Initial Closing;

• 7.5 % per annum of the Stated Value beginning on the second anniversary from the Date of Initial Closing.

Dividends will be authorized and declared on a monthly basis and payable in arrears on the 15th of each month to holders of record at the close of business on the last business day of each month immediately preceding the applicable thereafter dividend payment date.

Dividends will be computed on the basis of twelve 30-day months and a 360-day year.

The Company has a DRIP that allows for participating holders to have their Series E Preferred Stock dividend distributions automatically reinvested in additional shares of the Series E Preferred Stock at a price of $ 25.00 per share.

The issuance activity of the Series E Preferred Stock is summarized below (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Series E Preferred Stock shares issued 266 266

Net proceeds $ 5,976 $ 5,976

The Series E Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside of the Company’s control.

As such, the Series E Preferred Stock is classified outside of permanent equity.

At the date of issuance, the carrying amount of the Series E Preferred Stock was less than the redemption value.

As a result of the Company’s determination that redemption is probable the carrying value will be increased to the redemption amount each reporting period.

The redemption value adjustment of Series E Preferred Stock is summarized below (in thousands):

September 30, 2021 December 31, 2020

Series E Preferred Stock $ 6,110 $ —

Adjustments to Series E Preferred Stock (1)

(1) Reflects the excess of the redemption value over the accumulated carrying value.

The following table summarizes dividends declared (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Series E Preferred Stock 90 90

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Series M Redeemable Preferred Stock

On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell from time-to-time shares of the Series M Redeemable Preferred Stock (the “Series M Preferred Stock”).

Pursuant to such equity distribution agreements, the Company is offering a maximum of 20,000,000 shares of the Series M Preferred Stock (par value $ 0.01 ) in a primary offering price of $ 25.00 per share (or “Stated Value”).

The Company is also offering a maximum of 8,000,000 shares of Series M Preferred Stock pursuant to the DRIP at $ 25.00 per share.

The Series M Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.

Holders of the Series M Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class.

If and whenever dividends on any shares of Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive the number of directors then constituting the Board shall be increased by two and the holders of such shares of Series M Preferred Stock shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.

The redemption fee shall be an amount equal to:

• 1.5 % of the Stated Value of $ 25.00 per share beginning on the Series M Original Issue Date (as defined below) of the shares of Series M Preferred Stock to be redeemed;

• 0 % of the Stated Value beginning on the first anniversary from the Original Issue Date of the shares of Series M Preferred Stock to be redeemed.

Holders of Series M Preferred Stock are entitled to receive cumulative cash dividends at the initial rate of 8.2 % per annum of the Stated Value of $ 25.00 per share (equivalent to an annual dividend rate of $ 2.05 per share).

Beginning one year from the date of original issuance of each share of Series M Preferred Stock (the “Series M Original Issue Date of Series M”) and on each one-year anniversary thereafter for such share of Series M Preferred Stock, the dividend rate shall increase by 0.10 % per annum;

provided, however, that the dividend rate for any share of Series M Preferred Stock shall not exceed 8.7 % per annum of the Stated Value.

Dividends will be computed on the basis of twelve 30-day months and a 360-day year.

The Company has a DRIP that allows for participating holders to have their Series M Preferred Stock dividend distributions automatically reinvested in additional shares of the Series M Preferred Stock at a price of $ 25.00 per share.

The issuance activity of Series M Preferred Stock is summarized below (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Series M Preferred Stock shares issued 15 15

Net proceeds $ 355 $ 355

The Series M Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside the Company’s control.

As such, the Series M Preferred Stock is classified outside of permanent equity.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

At the date of issuance, the carrying amount of the Series M Preferred Stock was less than the redemption value.

As a result of the Company’s determination that redemption is probable the carrying value will be increased to the redemption amount each reporting period.

The redemption value adjustment of Series M Preferred stock is summarized below (in thousands):

September 30, 2021 December 31, 2020

Series M Preferred Stock $ 361 $ —

Adjustments to Series M Preferred Stock (1)

(1) Reflects the excess of the redemption value over the accumulated carrying value.

The following table summarizes dividends declared (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Series M Preferred Stock $ 4 $ 4

Related Party Transactions

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We also recorded equity-based compensation expense for equity grants of common stock and LTIP units awarded to officers and employees of Ashford LLC in connection with providing advisory services.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the advisory services fees incurred (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Ashford Inc.'s risk management department manages the casualty insurance program.

At the beginning of each year, Ashford Inc.'s risk

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

management department collects funds from Braemar, Ashford Trust and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.

At the beginning of each year, Ashford Inc.'s risk management department collects funds from Braemar, Ashford Trust and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.

On March 20, 2020, the Company entered into an agreement with Lismore, a subsidiary of Ashford Inc., to engage Lismore to seek modifications, forbearances or refinancings of the Company’s loans (the “Lismore Agreement”).

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In total, the Company paid approximately $ 4.1 million under the Lismore Agreement.

For the three and six months ended June 30, 2021, the Company recognized expense of $ 0 and $ 341,000 , respectively.

For the three and six months ended June 30, 2020, the Company recognized expense of $ 1.6 million.

For the three and nine months ended September 30, 2021, the Company recognized expense of $ 0 and $ 341,000 , respectively.

For the three and nine months ended September 30, 2020, the Company recognized expense of $ 1.2 million and $ 2.7 million, respectively.

These expenses are included in “write-off of loan costs and exit fees” in the condensed consolidated statements of operations.

The Company engaged Lismore to negotiate, on the Company’s behalf, one or more modifications to the terms of the mortgage loan assumed in connection with the acquisition of the Mr.

C Beverly Hills Hotel.

Upon closing of the hotel, the Company paid Lismore a debt placement fee of $ 150,000 .

Ashford Securities

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After the Initial True-Up Date, the capital contributions will be allocated between Ashford Trust and Braemar quarterly based on the actual capital raised through Ashford Securities.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by Ashford Inc., Ashford Trust and Braemar with respect to expenses to be reimbursed by Ashford Securities.

3 unchanged sentences

Additionally, Braemar’s aggregate Capital Contributions under the Initial Contribution Agreement and the Amended and Restated Contribution Agreement shall not exceed $ 3.75 million unless otherwise agreed to in writing by Braemar.

As of June 30, 2021, Braemar has funded approximately $ 1.9 million.

Additionally, as of June 30, 2021, the Company has a payable of $ 17,000 , included in “due to Ashford Inc.” on our condensed consolidated balance sheet that represents unfunded reimbursable expenses.

As of September 30, 2021, Braemar has funded approximately $ 2.8 million.

Additionally, as of September 30, 2021, $ 144,000 of the pre-funded amount was included in “other assets” on our condensed consolidated balance sheets.

The table below summarizes the amount Braemar has expensed related to reimbursed operating expenses of Ashford Securities (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Line Item 2021 2020 2021 2020

Corporate, general and administrative $ 642 $ 228 $ 1,505 $ 558

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Enhanced Return Funding Program

16 unchanged sentences

In accordance with ASC 842, the Company evaluated the transactions and concluded that the transactions qualified as sales.

As a result, the Company recorded an aggregate gain of $ 197,000 for the three and six months ended June 30, 2021.

As a result, the Company recorded an aggregate gain of $ 0 and $ 197,000 for the three and nine months ended September 30, 2021, respectively.

The gains are recorded in “gain (loss) on insurance settlement, disposition of assets and sale of hotel properties” in our condensed consolidated statements of operations.

In the second quarter of 2021, upon expiration of an ERFP lease, the Company purchased the underlying FF&E from Ashford Inc.

for $ 144,000 .

As of June 30, 2021, the Company has recorded a payable of $ 144,000 included in "due to Ashford Inc." on the condensed consolidated balance sheet.

at fair value for $ 144,000 , which was paid during the third quarter of 2021.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Design and Construction Services

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Following the acquisition, hotel management services are provided by Remington Hotels, a subsidiary of Ashford Inc., under the respective hotel management agreement with each customer, including Ashford Trust and Braemar.

At June 30, 2021, Remington Hotels managed three of our thirteen hotel properties.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

At September 30, 2021, Remington Hotels managed four of our 14 hotel properties.

We pay monthly hotel management fees equal to the greater of approximately $ 14,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues as well as annual incentive management fees, if certain operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.

Pursuant to the terms of the Letter Agreement dated March 13, 2020 (the “Hotel Management Letter Agreement”), in order to allow Remington Hotels to better manage its corporate working capital and to ensure the continued efficient operation of our hotels, we agreed to pay the base fee and to reimburse all expenses on a weekly basis for the preceding week, rather than on a monthly basis.

7 unchanged sentences

Ashford Trust

As of June 30, 2021, the Company has an $ 800,000 receivable from Ashford Trust, included in Due from related parties, net.

The receivable relates to a legal settlement between Ashford Trust and the City of San Francisco regarding a transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off from Ashford Trust.

As of September 30, 2021, the Company has an $ 800,000 receivable from Ashford Trust, included in “due from related parties, net.” The receivable relates to a legal settlement between Ashford Trust and the City of San Francisco regarding a transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off from Ashford Trust.

The transfer taxes were initially paid by Braemar at the time of the spin-off.

The $ 800,000 gain is included in “(gain) loss on legal settlements” on the condensed consolidated statements of operations.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Commitments and Contingencies

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at June 30, 2021, escrow payments are required for insurance, real estate taxes and debt service.

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at September 30, 2021, escrow payments are required for insurance, real estate taxes and debt service.

In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4 % to 5 % of gross revenues for capital improvements.

Management Fees —Under hotel management agreements for our hotel properties existing at June 30, 2021, we pay a monthly hotel management fee equal to the greater of approximately $ 14,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, or in some cases 2.5 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

Licensing Fees —In conjunction with the Mr.

C Beverly Hills Hotel acquisition on August 5, 2021, we entered into an Intellectual Property Sublease Agreement, which allows us to continue to use certain proprietary marks associated with the Mr.

C brand name.

In return, we pay licensing fees of:

(i) 1 % of total operating revenue;

(ii) 2 % of gross food and beverage revenues;

and (iii) 25 % of food and beverage profits.

The agreement expires on August 4, 2022.

The table below summarizes the licensing fees incurred (in thousands):

Line Item Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Other hotel expenses $ 53 $ 53

Management Fees —Under hotel management agreements for our hotel properties existing at September 30, 2021, we pay a monthly hotel management fee equal to the greater of approximately $ 15,000 per hotel (increased annually based on consumer price index adjustments) or 3 % of gross revenues, or in some cases 2.5 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

These management agreements expire from December 2023 through December 2065, with renewal options.

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Second, Accor asserts a counterclaim for breach of contract on the basis that Ashford TRS Chicago II breached the management agreement by wrongfully maintaining that the Cure Amount for the 2018 and 2019 Performance Test failure is $ 1,031,549 instead of $ 535,120 .

As of June 30, 2021, no amounts have been accrued.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of September 30, 2021, no amounts have been accrued.

One of the Company’s hotel management companies is currently involved in litigation regarding its employment policies and practices at multiple California hotels, including one of the Company’s hotels.

1 unchanged sentence

however, it is entitled to indemnification for a portion of such loss.

As of June 30, 2021, approximately $ 500,000 has been accrued.

As of September 30, 2021, approximately $ 500,000 has been accrued.

In June 2020, each of the Company, Ashford Trust, Ashford Inc., and Lismore, a subsidiary of Ashford Inc.

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In addition, in October 2020, Mr.

Bennett, chairman of our board of directors, received an administrative subpoena from the SEC requiring testimony and the production of documents and other information substantially similar to the requests in the subpoenas received by the Ashford Companies.

Bennett, chairman of our board of directors, received an administrative subpoena from the SEC requiring testimony and the

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

production of documents and other information substantially similar to the requests in the subpoenas received by the Ashford Companies.

The Company and Mr.

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Notices to potential class members were sent out on February 2, 2021.

Potential class members had until April 4, 2021 to opt out of the class, however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery.

Potential class members had until April 4, 2021 to opt out of the class;

however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery.

While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe any potential loss to the Company is reasonably estimable at this time.

As of June 30, 2021, no amounts have been accrued.

As of September 30, 2021, no amounts have been accrued.

We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated.

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We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics and exhibit similar long-term financial performance.

As of June 30, 2021 and December 31, 2020, all of our hotel properties were in the U.S.

As of September 30, 2021 and December 31, 2020, all of our hotel properties were in the U.S.

and its territories.

Subsequent Events

We will pay Virtu a commission of approximately 1.0 % of the gross sales price of the shares of our common stock sold.

The Company may

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.

As of August 4, 2021, the Company has not sold any shares of common stock under the Virtu July 2021 EDA.

On July 12, 2021, the Company made an additional investment in OpenKey of approximately $ 117,000 .

Subsequent to June 30, 2021, the Company has sold approximately 86,000 shares of Series E Preferred Stock and received net proceeds of approximately $ 1.9 million.

On August 5, 2021, the Company acquired a 100 % interest in the 138 -room Mr.

C Beverly Hills Hotel and five luxury condominium residences adjacent to the hotel for total consideration of approximately $ 74 million, subject to adjustments.

The consideration consisted of $ 10 million of cash, 2.5 million Braemar OP common units, 500,000 warrants for the purchase of Braemar common stock with a $ 6.00 strike price and the assumption of a $ 50 million mortgage loan.

Upon closing, the Company repaid $ 20 million of the assumed mortgage loan.

As a result of the recent date of the transaction, it is impractical to provide the pro forma results of operations that include the impact of the acquisition.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements