What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 278 added, 182 removed, 958 unchanged (32% of the section changed)

4 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Investments in hotel properties, gross $ 2,043,950 $ 1,845,078

26 unchanged sentences

Commitments and contingencies (note 15)

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,078,017 shares issued and outstanding at March 31, 2022 and December 31, 2021

5.50 % Series B cumulative convertible preferred stock, $ 0.01 par value, 3,078,017 shares issued and outstanding at June 30, 2022 and December 31, 2021

65,426 65,426

Series E redeemable preferred stock, $ 0.01 par value, 3,191,495 and 1,710,399 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Series E redeemable preferred stock, $ 0.01 par value, 4,508,088 and 1,710,399 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

103,697 39,339

Series M redeemable preferred stock, $ 0.01 par value, 62,444 and 29,044 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Series M redeemable preferred stock, $ 0.01 par value, 395,945 and 29,044 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Redeemable noncontrolling interests in operating partnership 40,291 36,087

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 March 31, 2022 and December 31, 2021

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 71,269,799 and 65,365,470 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

8.25 % Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value, 250,000,000 shares authorized, 71,310,367 and 65,365,470 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 738,353 707,418

9 unchanged sentences

(unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

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

2022 2021 2022 2021

Rooms $ 112,527 $ 63,837 $ 217,719 $ 118,160

11 unchanged sentences

Advisory services fee 6,305 6,739 13,627 11,534

(Gain) loss on legal settlements ( 114 ) ( 989 ) ( 114 ) ( 989 )

Transaction costs — 296 — 296

Corporate general and administrative 3,438 2,383 5,933 3,983

27 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

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

2022 2021 2022 2021

NET INCOME (LOSS) $ 16,680 $ ( 11,364 ) $ 32,284 $ ( 22,398 )

18 unchanged sentences

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at March 31, 2022 1,600 $ 16 71,270 $ 712 $ 736,911 $ ( 303,323 ) $ ( 16,411 ) $ 417,905 3,078 $ 65,426 3,191 73,404 62 1,538 $ 42,291

Purchase of common stock — — — — 5 — — 5 — — — — — — —

Equity-based compensation — — — — 1,464 — — 1,464 — — — — — — 1,832

Common stock issuance costs — — — — ( 27 ) — — ( 27 ) — — — — — — —

Issuance of restricted shares/units — — 45 — — — — — — — — — — — —

Forfeiture of restricted common shares — — ( 5 ) — — — — — — — — — — — —

Issuance of preferred stock — — — — — — — — — — 1,319 29,392 334 8,003 —

Dividends declared – common stock ($ 0.01 /share)

— — — — — ( 720 ) — ( 720 ) — — — — — — —

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

— — — — — ( 1,058 ) — ( 1,058 ) — — — — — — —

Dividends declared – preferred stock - Series D ($ 0.52 /share)

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

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

— — — — — ( 2,053 ) — ( 2,053 ) — — — — — — —

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

— — — — — ( 128 ) — ( 128 ) — — — — — — —

Distributions to noncontrolling interests — — — — — — — — — — — — — — ( 84 )

Net income (loss) — — — — — 14,366 1,468 15,834 — — — — — — 846

Redemptions of preferred stock — — — — — — — — — — ( 2 ) ( 50 ) — — —

Redemption value adjustment - preferred stock — — — — — ( 1,160 ) — ( 1,160 ) — — — 951 — 209 —

Redemption value adjustment — — — — — 4,594 — 4,594 — — — — — — ( 4,594 )

Balance at June 30, 2022 1,600 $ 16 71,310 $ 712 $ 738,353 $ ( 290,307 ) $ ( 14,943 ) $ 433,831 3,078 $ 65,426 4,508 $ 103,697 396 $ 9,750 $ 40,291

8.25 % Series D Cumulative Preferred Stock

Common Stock Additional

Capital Accumulated Deficit Noncontrolling Interest in Consolidated Entities Total 5.50 % Series B Cumulative Convertible

Preferred Stock

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, 2021 1,600 $ 16 65,365 $ 653 $ 707,418 $ ( 309,240 ) $ ( 16,549 ) $ 382,298 3,078 $ 65,426 1,710 $ 39,339 29 $ 715 $ 36,087

3 unchanged sentences

Issuance of common stock — — 6,000 60 34,981 — — 35,041 — — — — — — —

Common stock issuance costs — — — — ( 27 ) — — ( 27 ) — — — — — — —

Issuance of preferred stock — — — — — — — — — — 2,800 62,485 367 8,805 —

Issuance of restricted shares/units — — 45 — — — — — — — — — — — —

Forfeiture of restricted common shares — — ( 7 ) — — — — — — — — — — — —

12 unchanged sentences

Net income (loss) — — — — — 29,029 1,442 30,471 — — — — — — 1,813

Redemptions of preferred stock — — — — — — — — — — ( 2 ) ( 50 ) — — —

Redemption value adjustment - preferred stock — — — — — ( 2,153 ) — ( 2,153 ) — — — 1,923 — 230 —

Redemption value adjustment — — — — — 208 — 208 — — — — — — ( 208 )

Balance at June 30, 2022 1,600 $ 16 71,310 $ 712 $ 738,353 $ ( 290,307 ) $ ( 14,943 ) $ 433,831 3,078 $ 65,426 4,508 $ 103,697 396 $ 9,750 $ 40,291

8.25 % Series D Cumulative Preferred Stock

Common Stock Additional

Capital Accumulated Deficit Noncontrolling Interest in Consolidated Entities Total 5.50 % Series B Cumulative Convertible

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

Equity-based compensation — — — — 1,929 — — 1,929 — — 876

Issuance of common stock — — 7,959 80 47,188 — — 47,268 — — —

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

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

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

— — — — — ( 1,068 ) — ( 1,068 ) — — —

Dividends declared – preferred stock-Series D ($ 0.52 /share)

— — — — — ( 825 ) — ( 825 ) — — —

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

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

Net income (loss) — — — — — ( 9,233 ) ( 849 ) ( 10,082 ) — — ( 1,282 )

Extinguishment of preferred stock — — 5,636 56 34,900 ( 4,411 ) — 30,545 ( 1,437 ) ( 30,545 ) —

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

Redemption value adjustment — — — — — ( 1,659 ) — ( 1,659 ) — — 1,659

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

8.25 % Series D Cumulative Preferred Stock

13 unchanged sentences

— — — — — ( 1,650 ) — ( 1,650 ) — — —

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

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

Net income (loss) — — — — — ( 17,941 ) ( 2,096 ) ( 20,037 ) — — ( 2,361 )

Extinguishment of preferred stock — — 7,171 71 45,298 ( 4,484 ) — 40,885 ( 1,923 ) ( 40,885 ) —

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

Redemption value adjustment — — — — — ( 2,925 ) — ( 2,925 ) — — 2,925

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

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

See Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

(unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

21 unchanged sentences

Due to/from Ashford Inc.

1,703 ( 363 )

Operating lease liabilities ( 147 ) ( 120 )

2 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from property insurance 36 —

Net proceeds from disposition of assets — 1,816

Acquisition of hotel property, net of cash and restricted cash acquired ( 86,798 ) ( 3,000 )

Investment in unconsolidated entity ( 164 ) —

Improvements and additions to hotel properties ( 19,910 ) ( 9,094 )

11 unchanged sentences

Contributions from noncontrolling interest in consolidated entities 164 920

Redemption of preferred stock ( 50 ) —

Net cash provided by (used in) financing activities 62,774 80,708

5 unchanged sentences

Income taxes paid (refunded) ( 991 ) ( 41 )

Six Months Ended June 30,

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Dividends and distributions declared but not paid $ 3,535 $ 2,075

Three Months Ended March 31,

Common stock purchases accrued but not paid 552 348

Assumption of debt in hotel acquisition 58,601 —

2 unchanged sentences

Accrued common stock offering expense — 34

Unsettled common stock offering proceeds — 297

Accrued preferred stock offering expenses 105 —

14 unchanged sentences

High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S.

national average RevPAR for all hotels as determined by Smith Travel Research.

national average RevPAR for all hotels as determined by STR, LLC.

Braemar has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).

14 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 March 31, 2022, own 15 hotel properties in six states, the District of Columbia, Puerto Rico 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 June 30, 2022, own 15 hotel properties in six states, the District of Columbia, Puerto Rico and the U.S.

Virgin Islands (“USVI”).

2 unchanged sentences

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

As of March 31, 2022, 14 of our 15 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 June 30, 2022, 14 of our 15 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 March 31, 2022, 12 of the 15 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 June 30, 2022, 12 of the 15 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.

9 unchanged sentences

These condensed consolidated financial statements include the accounts of Braemar Hotels & Resorts Inc., its majority-owned subsidiaries, and its majority-owned entities in which it has a controlling interest.

All significant intercompany accounts and transactions between consolidated entities have been eliminated in these condensed consolidated financial statements.

All intercompany accounts and transactions between consolidated entities have been eliminated in these condensed consolidated financial statements.

We have condensed

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements.

or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements.

We believe the disclosures made herein are adequate to prevent the information presented from being misleading.

6 unchanged sentences

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

Consequently, operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022;

Consequently, operating results for the three and six months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022;

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

23 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The impact of adoption on our condensed consolidated statement of operations for the three months ended March 31, 2022 resulted in a decrease to net interest expense by $ 273,000 relating to the non-cash interest expense associated with amortization of the debt discount.

The adoption had no effect on our basic and diluted net income per share of common stock attributable to common stockholders for the three months ended March 31, 2022.

The impact of adoption on our condensed consolidated statement of operations for the three and six months ended June 30, 2022 resulted in a decrease to net interest expense by $ 273,000 relating to the non-cash interest expense associated with amortization of the debt discount.

The adoption had no effect on our basic and diluted net income per share of common stock attributable to common stockholders for the three and six months ended June 30, 2022.

Recently Issued Accounting Standards —In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”).

6 unchanged sentences

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

10 unchanged sentences

Total 15 $ 112,527 $ 42,269 $ 20,098 $ 174,894

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

9 unchanged sentences

Total 13 $ 63,837 $ 19,853 $ 13,420 $ 97,110

Six Months Ended June 30, 2022

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

California 6 $ 65,284 $ 22,429 $ 9,169 $ 96,882

Puerto Rico 1 17,403 5,832 3,796 27,031

Colorado 1 14,483 8,846 4,764 28,093

Florida 2 44,714 19,264 13,632 77,610

Illinois 1 10,301 3,006 740 14,047

Pennsylvania 1 9,233 1,626 520 11,379

Washington 1 8,175 1,298 625 10,098

Washington, D.C.

1 13,600 5,733 992 20,325

USVI 1 34,526 10,942 5,841 51,309

Total 15 $ 217,719 $ 78,976 $ 40,079 $ 336,774

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Six Months Ended June 30, 2021

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

California 5 $ 32,097 $ 9,918 $ 4,981 $ 46,996

Colorado 1 7,935 4,192 3,890 16,017

Florida 2 34,226 13,348 10,730 58,304

Illinois 1 4,374 824 403 5,601

Pennsylvania 1 3,657 126 247 4,030

Washington 1 4,074 249 496 4,819

Washington, D.C.

1 3,235 255 495 3,985

USVI 1 28,562 7,570 5,074 41,206

Total 13 $ 118,160 $ 36,482 $ 26,316 $ 180,958

Investments in Hotel Properties, net

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Land $ 560,241 $ 480,530

7 unchanged sentences

Impairment Charges and Insurance Recoveries

For the three months ended March 31, 2021, we recognized a gain of $ 481,000 associated with proceeds received from an insurance claim.

There was no such gain recognized for the three months ended March 31, 2022.

During the three months ended March 31, 2022 and 2021, no impairment charges were recorded.

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.

There was no such gain recognized for the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2022 and 2021, no impairment charges were recorded.

The Ritz-Carlton Reserve Dorado Beach

On March 11, 2022, the Company acquired a 100 % interest in the 96 -room Dorado Beach, a Ritz-Carlton Reserve in Dorado, Puerto Rico.

On March 11, 2022, the Company acquired a 100 % interest in the 96 -room Ritz-Carlton Reserve Dorado Beach in Dorado, Puerto Rico.

The total consideration consisted of $ 104.0 million of cash and 6.0 million shares of the Company’s common stock with a fair value of approximately $ 35.0 million.

4 unchanged sentences

The cost of the acquisition including transaction costs of approximately $ 1.9 million, was allocated to the individual assets acquired and liabilities assumed on a relative fair value basis, which is considered a Level 3 valuation technique.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

8 unchanged sentences

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

The table below summarizes the total revenue and net income (loss) in our condensed consolidated statements of operations for the three months ended March 31, 2022:

Three Months Ended March 31, 2022

The table below summarizes the total revenue and net income (loss) in our condensed consolidated statements of operations for the three and six months ended June 30, 2022:

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

Total revenue $ 19,535 $ 27,031

Net income (loss) 3,018 6,510

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Investment in Unconsolidated Entity

2 unchanged sentences

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

As of March 31, 2022, the Company has made investments in OpenKey totaling $ 2.6 million.

On May 26, 2022, the Company made an additional investment in OpenKey of approximately $ 164,000 .

As of June 30, 2022, the Company has made investments in OpenKey totaling $ 2.8 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.

2 unchanged sentences

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

No such impairment was recorded for the three months ended March 31, 2022 and 2021.

No such impairment was recorded for the three and six months ended June 30, 2022 and 2021.

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Carrying value of the investment in OpenKey (in thousands) $ 1,707 $ 1,689

1 unchanged sentence

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

Three Months Ended March 31,

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

Line Item 2022 2021 2022 2021

6 unchanged sentences

Indebtedness Collateral Current Maturity Final

Interest Rate March 31, 2022 December 31, 2021

Interest Rate June 30, 2022 December 31, 2021

Mortgage loan (3)

1 unchanged sentence

Mortgage loan (4)

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

435,000 435,000

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

Mortgage loan (5)

The Ritz-Carlton St.

8 unchanged sentences

Mortgage loan (6)

The Notary Hotel June 2023 June 2025 LIBOR (1) + 2.16 %

435,000 435,000

Sofitel Chicago Magnificent Mile

Marriott Seattle Waterfront

Mortgage loan (5)

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

24 unchanged sentences

__________________

(1) LIBOR rates were 0.452 % and 0.101 % at March 31, 2022 and December 31, 2021, respectively.

(2) SOFR rate was 0.302 % at March 31, 2022.

(1) LIBOR rates were 1.787 % and 0.101 % at June 30, 2022 and December 31, 2021, respectively.

(2) SOFR rate was 1.686 % at June 30, 2022.

(3) On February 2, 2022, we refinanced this mortgage loan totaling $ 67.5 million with a new $ 70.5 million mortgage loan with a two-year initial term and three one-year extension options, subject to the satisfaction of certain conditions.

The new mortgage loan is interest only and bears interest at a rate of SOFR + 2.86 %.

(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.

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

1 unchanged sentence

(5) This mortgage loan has a LIBOR floor of 0.25 %.

(6) This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in June 2022.

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

3 unchanged sentences

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, Capital Hilton and Hilton La Jolla Torrey Pines.

As of March 31, 2022, no loans are in default.

As of June 30, 2022, no loans are in default.

The Company determined that all of the forbearance and other agreements evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges.

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 principal amortization for the three months ended March 31, 2022 and 2021 was $ 523,000 and $ 1.3 million, respectively.

The amount of principal amortization for the three and six months ended June 30, 2022 was $ 500,000 and $ 1.0 million, respectively.

For the three and six months ended June 30, 2021, the amount of principal amortization was approximately $ 1.0 million and $ 2.4 million, respectively.

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On February 2, 2022, the Company refinanced its mortgage loan secured by the Park Hyatt Beaver Creek Resort & Spa, which had a final maturity date in April 2022.

The new, non-recourse mortgage loan totals $ 70.5 million and has a two-year initial term with three one-year extension options, subject to the satisfaction of certain conditions.

The mortgage loan is interest only and provides for a floating interest rate of SOFR + 2.86 %.

In connection with the refinancing, the Company paid Lismore a fee of approximately $ 637,000 .

On March 11, 2022, in connection with the acquisition of The Ritz-Carlton Reserve Dorado Beach, the Company assumed a $ 54 million mortgage loan.

6 unchanged sentences

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

The Company recorded coupon interest expense of $ 970,000 for the three months ended March 31, 2022.

The Company recorded coupon interest expense of $ 970,000 and $ 1.9 million for the three and six months ended June 30, 2022, respectively.

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

Upon issuance of the Convertible Senior Notes, the Company separated the Convertible Senior Notes into liability and equity components.

4 unchanged sentences

The initial discount of $ 9.3 million was 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 $ 132,000 related to the initial purchase discount for the three months ended March 31, 2022, with the remaining discount balance to be amortized through June 2026.

The Company recorded discount amortization of $ 139,000 and $ 271,000 related to the initial purchase discount for the three and six months ended June 30, 2022, with the remaining discount balance to be amortized through June 2026.

For the three and six months ended June 30, 2021, the discount amortization was $ 185,000 .

As a result of the Company's adoption of ASU 2020-06 on January 1, 2022, the Convertible Senior Notes are now recorded as a single liability with no portion recorded in equity.

5 unchanged sentences

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 March 31, 2022, we were in compliance with all covenants.

As of June 30, 2022, we were in compliance with all covenants.

BRAEMAR HOTELS & RESORTS INC.

6 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

Interest rate caps:

2 unchanged sentences

Strike rate high end of range 4.00 % 4.00 %

Effective date range February 2022 January 2021 - March 2021

Termination date range February 2024 September 2021 - April 2022

Effective date range February 2022 - May 2022 January 2021 - May 2021

Termination date range May 2023 - February 2024 September 2021 - June 2022

Total cost of interest rate caps (in thousands) $ 1,145 $ 79

3 unchanged sentences

Interest rate caps:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Notional amount (in thousands) $ 860,500 $ 882,500

1 unchanged sentence

Strike rate high end of range 4.00 % 4.00 %

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

Termination date range August 2022 - August 2024 February 2022 - August 2024

Aggregate principal balance on corresponding mortgage loans (in thousands) $ 859,500 $ 857,000

4 unchanged sentences

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 March 31, 2022, no warrants have been exercised.

As of June 30, 2022, 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:

19 unchanged sentences

The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

Fair value of interest rate caps is determined using the net present value of expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties.

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

The fair value of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps.

Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (LIBOR forward curves) and volatilities (Level 2 inputs).

We also incorporate credit valuation adjustments (Level 3 inputs) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.

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.

1 unchanged sentence

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

In determining the fair values of our derivatives at March 31, 2022, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 0.452 % to 2.790 % for the remaining term of our derivatives.

In determining the fair values of our derivatives at June 30, 2022, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 1.787 % to 3.520 % 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.

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(Level 3) Total

March 31, 2022

June 30, 2022

Derivative assets:

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Gain (Loss) Recognized in Income

Three Months Ended March 31,

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

2022 2021 2022 2021

Derivative assets:

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Value Estimated

35 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 85.9 % to 95.0 % of the carrying value of $ 1.2 billion at March 31, 2022, and approximately 87.2 % to 96.4 % of the carrying value of $ 1.2 billion at December 31, 2021.

We estimated the fair value of the total indebtedness to be approximately 89.0 % to 98.4 % of the carrying value of $ 1.2 billion at June 30, 2022, and approximately 87.2 % to 96.4 % of the carrying value of $ 1.2 billion at December 31, 2021.

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

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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 March 31,

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

2022 2021 2022 2021

Net income (loss) attributable to common stockholders - basic and diluted:

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Net income (loss) allocated to common stockholders per share $ 0.12 $ ( 0.32 ) $ 0.27 $ ( 0.61 )

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 March 31,

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

2022 2021 2022 2021

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

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Loss on extinguishment of preferred stock - Series B — 4,411 — 4,484

Interest expense on Convertible Senior Notes — 649 — 649

Total $ 2,086 $ 4,846 $ 4,323 $ 5,403

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Effect of assumed conversion of exchanged preferred stock - Series B — 905 — 728

Effect of assumed conversion of Convertible Senior Notes — 6,580 — 3,290

Total 10,018 15,829 10,004 13,270

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Redeemable Noncontrolling Interests in Operating Partnership

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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.

More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of our operating partnership or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for our operating partnership.

More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of our operating partnership;

or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for our operating partnership.

The compensation committee of the board of directors of the Company may authorize the issuance of Performance LTIP units to certain executive officers and directors from time to time.

The award agreements provide for the grant of a target number of Performance LTIP units that will be settled in common units of Braemar OP, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date.

As of March 31, 2022, there were approximately 2.2 million Performance LTIP units, representing 200 % of the target, outstanding.

As of June 30, 2022, there were approximately 2.2 million Performance LTIP units, representing 200 % of the target, outstanding.

With respect to the 2020 award agreements, the number of Performance LTIP units actually earned may range from 0 % to 200 % of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date.

The performance criteria for the Performance LTIP units are based on market conditions under the relevant literature.

The performance criteria for the Performance LTIP units are based on

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market conditions under the relevant literature.

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.

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The grant date fair value of the award 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.

In March 2022, the Company granted approximately 1.2 million Performance LTIP units, representing 200 % of the target, with a grant date fair value of $ 5.89 per share and a vesting period of three years .

As of March 31, 2022 , the Company does not have sufficient shares of common stock available under its incentive stock plan to settle any future redemptions of the Performance LTIP units, upon reaching the conditions required for redemption.

As a result, the 2022 awards are classified as liability awards on the condensed consolidated balance sheet and are included in “due to Ashford Inc., net.” The 2022 awards are subject to remeasurement each reporting period.

As of March 31, 2022, we have issued a total of approximately 3.5 million LTIP and Performance LTIP units, net of Performance LTIP cancellations.

In March 2022, the Company granted approximately 1.2 million Performance LTIP units, representing 200 % of the target, with an initial grant date fair value of $ 5.89 per share and a vesting period of three years .

During the second quarter, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements as of June 30, 2022.

The 2022 awards, which were originally classified as liability awards, are now classified as equity awards, within temporary equity, which resulted in a remeasurement of the award at a new fair value of $ 5.63 per share.

On May 11, 2022, approximately 45,000 LTIP units were issued to independent directors, with a fair value of approximately $ 252,000 , which vested immediately upon grant.

As of June 30, 2022, we have issued a total of approximately 3.6 million LTIP and Performance LTIP units, net of Performance LTIP cancellations.

All LTIP and Performance LTIP units, other than approximately 569,000 LTIP units and 840,000 Performance LTIP units issued from March 2015 to May 2021, had reached full economic parity with, and are convertible into, common units.

BRAEMAR HOTELS & RESORTS INC.

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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:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Redeemable noncontrolling interests in Braemar OP $ 40,291 $ 36,087

Adjustments to redeemable noncontrolling interests (1)

$ 4,661 $ 275

Ownership percentage of operating partnership 7.59 % 8.83 %

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership $ ( 846 ) $ 1,282 $ ( 1,813 ) $ 2,361

Distributions declared to holders of common units, LTIP units and Performance LTIP units 84 — 167 —

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,

2022 2021 2022 2021

Common units converted to common stock — 2 — 2

Fair value of common units converted $ — $ 15 $ — $ 15

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Equity and Stock-Based Compensation

Common Stock Dividends —The following table summarizes the common stock dividends declared during the period (in thousands):

Three Months Ended March 31,

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

2022 2021 2022 2021

Common stock dividends declared $ 720 $ — $ 1,440 $ —

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We also issue common stock to certain of our independent directors, which vests immediately upon issuance.

In May 2022, approximately 45,000 shares of common stock were issued to independent directors with a fair value of approximately $ 252,000 , which vested immediately upon grant and have been expensed during the three and six months ended June 30, 2022 .

Performance Stock Units —The compensation committee of the board of directors of the Company may authorize the issuance of grants of performance stock units (“PSUs”) to certain executive officers and directors from time to time.

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The 2022 awards may be settled in cash or shares of the Company’s common stock solely at the option of the Company.

As of March 31, 2022 , the Company does not have sufficient shares available under its incentive stock plan to settle the 2022 awards in shares of the Company’s common stock.

With respect to the 2020 award agreements, the number of PSUs actually earned may range from 0 % to 200 % of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date.

The performance criteria for the PSUs are based on market conditions under the relevant literature.

During the second quarter, the Company’s stockholders approved an increase to the stock incentive plan, which is sufficient to cover the expected settlements as of June 30, 2022.

The 2022 awards, which were originally classified as liability awards, are now classified as equity awards, which resulted in a remeasurement of the award at a new fair value of $ 229,000 .

With respect to the 2021 and 2022 award agreements, the compensation committee shifted to a new performance metric, pursuant to which, the performance awards will be eligible to vest, from 0 % to 200 % of target, based on achievement of certain performance targets over the three-year performance period.

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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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 March 31,

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

2022 2021 2022 2021

Series D Cumulative Preferred Stock $ 825 825 $ 1,650 $ 1,650

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

No shares were repurchased during the three months ended March 31, 2022 and 2021.

As of March 31, 2022, $ 50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.

No shares were repurchased during the six months ended June 30, 2022 and 2021.

As of June 30, 2022, $ 50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Standby Equity Distribution Agreement —On February 4, 2021, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd.

(“YA”), pursuant to which the Company will be able to sell up to 7,780,786 shares of its common stock (the “Commitment Amount”) at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating on the earliest of (i) the first day of the month next following the 36 -month anniversary of the SEDA or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”).

(i) the first day of the month next following the 36 -month anniversary of the SEDA;

or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”).

Other than with respect to the Initial Advance (as defined below) the shares sold to YA pursuant to the SEDA would be purchased at 95 % of the Market Price (as defined below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99 % of the Company’s common stock.

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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.

As of March 31, 2022, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $ 10.0 million under the SEDA.

As of June 30, 2022, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $ 10.0 million under the SEDA.

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Common shares sold to YA — 500 — 1,700

2 unchanged sentences

Upon entering into the Lincoln Park Purchase Agreement, the Company issued 15,000 shares of the Company’s common stock as consideration for Lincoln Park’s execution and delivery of the Lincoln Park Purchase Agreement.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of March 31, 2022, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $ 4.2 million under the Lincoln Park Purchase Agreement.

As of June 30, 2022, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $ 4.2 million under the Lincoln Park Purchase Agreement.

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Common shares sold to Lincoln Park — 766 — 766

2 unchanged sentences

Proceeds received $ — $ 4,217 $ — $ 4,217

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

1 unchanged sentence

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.

As of March 31, 2022, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $ 24.0 million.

As of June 30, 2022, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $ 24.0 million.

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

Three Months Ended March 31,

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

Common shares issued — —

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2) a special optional redemption, in which on or prior to the occurrence of a Change of Control (as defined in the Articles Supplementary), the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $ 25.00 per share;

and 3) a “REIT Termination Event” and “Listing Event Redemption,” in which at any time (i) a REIT Termination Event (as defined below) occurs or (ii) the Company’s common stock fails to be listed on the NYSE, NYSE American, or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor thereto (each a “National Exchange”), the holder of Series B Convertible Preferred Stock shall have the right to require the Company to

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redeem any or all shares of Series B Convertible Preferred Stock at 103 % of the liquidation preference ($ 25.00 per share, plus any accumulated, accrued, and unpaid dividends) in cash.

A “REIT Termination Event,” shall mean the earliest of:

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(v) determination within the meaning of Section 1313(a) of the Code to cease to be qualified as a REIT.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Series B Convertible 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 our control.

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The following table summarizes dividends declared (in thousands):

Three Months Ended March 31,

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

2022 2021 2022 2021

Series B Convertible Preferred Stock $ 1,058 $ 1,068 $ 2,116 $ 2,631

1 unchanged sentence

The table below summarizes the activity (in thousands):

Three Months Ended March 31, 2021

Preferred Shares Tendered Common Shares Issued

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

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

Series B Convertible Preferred Stock

1,437 5,636 1,923 7,171

There were no preferred stock exchanges for the three and six months ended June 30, 2022.

Series E Redeemable Preferred Stock

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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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

events constituting a change of control.

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

3 unchanged sentences

• 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.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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

Three Months Ended March 31,

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

Series E Preferred Stock shares issued (1)

7 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Series E Preferred Stock $ 103,697 $ 39,339

2 unchanged sentences

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

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes dividends declared (in thousands):

Three Months Ended March 31,

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

Series E Preferred Stock $ 2,053 $ 3,452

During the three months ended June 30, 2022, the Company, upon the death of a holder, redeemed 2,000 shares of Series E Preferred Stock for $ 50,000 in cash.

Series M Redeemable Preferred Stock

2 unchanged sentences

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.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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

Three Months Ended March 31,

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

Series M Preferred Stock shares issued (1)

Net proceeds $ 8,087 $ 8,897

BRAEMAR HOTELS & RESORTS INC.

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__________________

(1) Exclusive of shares issued under the dividend reinvestment plan.

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.

2 unchanged sentences

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

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Series M Preferred Stock $ 9,750 $ 715

2 unchanged sentences

The following table summarizes dividends declared (in thousands):

Three Months Ended March 31,

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

Series M Preferred Stock $ 128 $ 149

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Advisory services fee

1 unchanged sentence

Reimbursable expenses (1)

1,173 510 2,269 1,002

Equity-based compensation (2)

2,637 2,285 4,947 3,672

Incentive fee ( 731 ) 1,266 246 1,637

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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 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.

As of March 31, 2022 and 2021, due from related parties, net included a $ 365,000 security deposit paid to Remington Hotel Corporation, an entity indirectly owned by Mr.

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.

As of June 30, 2022 and December 31, 2021, due from related parties, net included a $ 365,000 security deposit paid to Remington Hotel Corporation, an entity indirectly owned by Mr.

Bennett and Mr.

2 unchanged sentences

If unused it will be returned to us upon lease expiration or earlier termination.

In connection with the refinancing of the Park Hyatt Beaver Creek mortgage loan in February 2022, the Company paid an affiliate of Lismore Capital II LLC (“Lismore”) a fee of approximately $ 637,000 .

Lismore is a subsidiary of Ashford Inc.

Ashford Securities

On September 25, 2019, Ashford Inc.

announced the formation of Ashford Securities LLC (“Ashford Securities”) to raise retail capital in order to grow its existing and future platforms.

In conjunction with the formation of Ashford Securities, Braemar has entered into a contribution agreement (the “Initial Contribution Agreement”) with Ashford Inc.

pursuant to which Braemar has agreed to contribute, with Ashford Trust, up to $ 15.0 million to fund the operations of Ashford Securities.

Costs for all operating expenses of Ashford Securities that were contributed by Ashford Trust and Braemar will be expensed as incurred.

These costs were allocated initially to Ashford Trust and Braemar based on an allocation percentage of 75 % to Ashford Trust and 25 % Braemar.

Upon reaching the earlier of $ 400 million in aggregate non-listed preferred equity offerings raised or June 10, 2023, there will be a true up (the “Initial True-Up Date”) between Ashford Trust and Braemar, whereby the actual capital contributions contributed by each company will be based on the actual amount of capital raised by Ashford Trust and Braemar, respectively.

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.

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.

The Initial True-Up Date was not met prior to the Amended and Restated Contribution was entered into.

(“Ashford Securities”).

Beginning on the effective date of the Amended and Restated Contribution Agreement, costs will be allocated based upon an allocation percentage of 50 % to Ashford Inc., 50 % to Braemar and 0 % to Ashford Trust.

1 unchanged sentence

After the Amended and Restated True-Up Date, the expense reimbursements will be allocated among Ashford Inc., Ashford Trust and Braemar quarterly based on the actual capital raised through Ashford Securities.

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.

On January 27, 2022, Ashford Trust, Braemar and Ashford Inc.

entered into a Second Amended and Restated

entered into a Second Amended and Restated Contribution Agreement which provided for an additional $ 18 million in expenses to be reimbursed with all expenses allocated 45 % to Ashford Trust, 45 % to Braemar and 10 % to Ashford Inc.

As of June 30, 2022, Braemar has funded approximately $ 4.9 million.

Additionally, as of June 30, 2022 and December 31, 2021 , $ 143,000 and $ 338,000 , respectively, of the pre-funded amounts were included in “other assets” on our condensed consolidated balance sheets.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Contribution Agreement which provided for an additional $ 18 million in expenses to be reimbursed with all expenses allocated 45 % to Ashford Trust, 45 % to Braemar and 10 % to Ashford Inc.

As of March 31, 2022, Braemar has funded approximately $ 4.1 million.

Additionally, as of March 31, 2022 and December 31, 2021 , $ 131,000 and $ 338,000 , respectively, of the pre-funded amounts were 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 March 31,

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

Line Item 2022 2021 2022 2021

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Hotel Management Services

At March 31, 2022, Remington Hotels managed four of our 15 hotel properties.

At June 30, 2022, Remington Hotels managed four of our 15 hotel properties.

We pay monthly hotel management fees equal to the greater of approximately $ 15,000 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

BRAEMAR HOTELS & RESORTS INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

monthly basis.

The Hotel Management Letter Agreement went into effect on March 13, 2020 and will continue until terminated by us.

9 unchanged sentences

In January 2022, the City of San Francisco remitted payment to Ashford Trust, which subsequently remitted payment to Braemar.

During the second quarter of 2022 the Company received an additional payment of approximately $ 114,000 related to accrued interest on the initial settlement amount, which is included in “(gain) loss on legal settlements” on the condensed consolidated statements of operations for the three and six months ended June 30, 2022.

Commitments and Contingencies

Restricted Cash —Under certain management and debt agreements for our hotel properties existing at March 31, 2022, 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 June 30, 2022, 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.

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

The agreement expires on August 4, 2022.

The agreement expires on August 5, 2022 and we intend to renew it for a one year term.

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

Three Months Ended March 31,

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

Line Item 2022 2022

Other hotel expenses $ 189 $ 291

Management Fees —Under hotel management agreements for our hotel properties existing at March 31, 2022, 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 3.0 % to 5.0 % of gross revenues, as well as annual incentive management fees, if applicable.

Management Fees —Under hotel management agreements for our hotel properties existing at June 30, 2022, 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 3.0 % 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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Litigation —On October 24, 2019, the Company provided notice to Accor of the material breach of Accor’s responsibilities under the Accor management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago, Illinois.

On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York County, seeking a declaratory judgment that no breach under the Accor management agreement has occurred and an injunction to prevent Ashford TRS Chicago II from terminating the Accor management agreement.

BRAEMAR HOTELS & RESORTS INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

occurred and an injunction to prevent Ashford TRS Chicago II from terminating the Accor management agreement.

Accor’s complaint was dismissed on or about February 27, 2020.

complaint was dismissed on or about February 27, 2020.

On January 6, 2020, Ashford TRS Chicago II filed a complaint against Accor in the Supreme Court of the State of New York, New York County, alleging breach of the Accor management agreement and seeking damages and a declaration of its right to terminate the Accor management agreement.

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As a result of the settlement related to the 2018 performance test failure, the Company recorded a gain of approximately $ 868,000 for the three months ended March 31, 2022, that is recorded as a reduction of management fees and included in “management fees” on the Company’s condensed consolidated statements of operations.

As of March 31, 2022, 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.

On January 28, 2022, the Court approved a settlement of this litigation.

The resulting loss to the Company was approximately $ 448,000 ;

although it was entitled to indemnification in the amount of approximately $ 291,000 , based on the respective periods of ownership of the Company’s hotel.

As of March 31, 2022, approximately $ 500,000 was accrued.

The settlement amount was paid subsequent to March 31, 2022, and the matter is now closed.

On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company.

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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 March 31, 2022, no amounts have been accrued.

As of June 30, 2022, 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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If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.

BRAEMAR HOTELS & RESORTS INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment Reporting

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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 March 31, 2022 and December 31, 2021, all of our hotel properties were in the U.S.

As of June 30, 2022 and December 31, 2021, all of our hotel properties were in the U.S.

and its territories.

Subsequent Event

On April 15, 2022, Ashford Inc.

and Ashford Services, agreed with Jeremy Welter, the Chief Operating Officer of Ashford Inc., that, effective on the Resignation Date, Mr.

Welter would terminate employment with and service to Ashford Inc., Ashford Services and their affiliates.

Welter is also the Chief Operating Officer of the Company and Braemar and accordingly his service as Chief Operating Officer of each of the Company and Braemar will also end effective as of the Resignation Date.

Subsequent Events

From July 1, 2022 through August 3, 2022, the Company issued approximately 2.0 million shares of Series E Preferred Stock and received net proceeds of approximately $ 44.1 million and issued approximately 270,000 shares of Series M Preferred Stock and received net proceeds of approximately $ 6.5 million.

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