What changed in this filing

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Item 9A. Controls and Procedures

2024-03-14 compared with 2023-03-10 · 42 added, 37 removed, 290 unchanged (21% of the section changed)

2 unchanged sentences

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, as a result of the material weakness in our internal control over financial reporting related to the accounting for earnings per share described below, and for which it was not possible for the Company to remediate during the fourth quarter of 2022 because there were no similar transactions to evaluate, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms;

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms;

and (ii) is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

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In making the assessment of the effectiveness of our internal control over financial reporting, management has utilized the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, (2013 framework) (“COSO”).

In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the fiscal year in which the acquisition occurred.

Management’s evaluation of internal control over financial reporting excluded the internal control activities of the Four Seasons Resort Scottsdale.

The Four Seasons Resort Scottsdale represented approximately 0.8% of consolidated revenues and approximately 4.8% of consolidated net income for the year ended December 31, 2022 and approximately 11.9% of total assets and approximately 20.8% of net assets as of December 31, 2022.

Based on management’s assessment of these criteria, we concluded that, as of December 31, 2022, our internal control over financial reporting is not effective.

During our financial statement close process for the period ended December 31, 2022, a material weakness was identified in the Company’s control over the evaluation of complex transactions as a result of the error identified in the treatment of deemed dividends on redeemable preferred stock in arriving at net income (loss) attributable to common stockholders, which impacted the calculation of earnings per share.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Company is evaluating remediation steps, which could include:

(1) arranging for additional training for our associates and (2) designing new or enhanced controls whereby management evaluates the nature of equity transactions and where appropriate engages third-party accounting experts to assist management in assessing the accounting in its consolidated financial statements.

The material weakness will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

We reviewed the results of management’s assessment with the audit committee of our board of directors.

Notwithstanding the material weakness described above, management has concluded that our consolidated financial statements included in this annual report are fairly stated in all material respects in accordance with GAAP.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K.

We previously identified a material weakness related to the review controls over accounting for treatment of deemed dividends on redeemable preferred stock in arriving at net income (loss) attributable to common stockholders as of December 31, 2022.

The Company implemented new controls whereby management evaluates the treatment of complex transactions including but not limited to deemed dividends on redeemable preferred stock in arriving at net income (loss) attributable to common stockholders, and where appropriate, engages third-party accounting experts to assist management in assessing the accounting in its consolidated financial statements.

The Company tested the controls that were implemented and concluded that the controls were operating effectively as of December 31, 2023.

As a result, management concluded that the material weakness was remediated as of December 31, 2023.

Based on management’s assessment of these criteria, we concluded that, as of December 31, 2023, our internal control over financial reporting is effective.

The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by BDO USA, P.C., an independent registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during our most recent fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Our management has evaluated, with the participation of our principal executive and principal financial officers, whether any changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter ended December 31, 2023 have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Based on the evaluation we conducted, other than remediation of the material weakness identified and discussed above, our management has concluded that no such changes have occurred.

Report of Independent Registered Public Accounting Firm

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We have audited Braemar Hotels & Resorts Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria .

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and schedule (collectively referred to as “the financial statements”) and our report dated March 10, 2023 expressed an unqualified opinion thereon.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and schedule and our report dated March 14, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

A material weakness was identified regarding management’s failure to design and maintain effective controls over the evaluation of complex transactions and is more fully described in management’s assessment.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 financial statements, and this report does not affect our report dated March 10, 2023 on those financial statements.

As described in Management’s Annual Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the Four Seasons Resort Scottsdale at Troon North, which was acquired on December 1, 2022, and which is included in the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the year then ended.

The Four Seasons Resort Scottsdale at Troon North constituted 11.9% and 20.8% of total assets and net assets, respectively, as of December 31, 2022, and 0.8% and 4.8% of revenues and net income (loss), respectively, for the year then ended.

Management did not assess the effectiveness of internal control over financial reporting of the Four Seasons Resort Scottsdale at Troon North because of the timing of the acquisition which was completed on December 1, 2022.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the Four Seasons Resort Scottsdale at Troon North.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures

that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

/s/ BDO USA, P.C.

Dallas, Texas

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Other Information

During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading agreement” or “non-Rule 10b5-1 trading agreement,” as each term is defined in Item 408(a) of Regulation S-K.

Entry into a Material Definitive Agreement.

Limited Waiver Under Advisory Agreement

On March 11, 2024, we entered into a Limited Waiver Under Advisory Agreement with Ashford Inc.

and Ashford LLC (the “Advisory Agreement Limited Waiver”).

Pursuant to the Advisory Agreement Limited Waiver, the Company, the Operating Partnership, TRS and the Advisor waive the operation of any provision in our advisory agreement that would otherwise limit the ability of the Company in its discretion, at the Company’s cost and expense, to award during calendar year 2024, cash incentive compensation to employees and other representatives of the Advisor.

The foregoing description of the Advisory Agreement Limited Waiver contained in this Item 9B does not purport to be complete and is subject to and qualified in its entirety by the full text of the agreement, a copy of which is attached hereto as Exhibit 10.38 and incorporated herein by reference.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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333-234663) filed with the SEC on January 24, 2020)

3.2 Fourth Amended and Restated Bylaws, as amended by Amendment No.

1 on March 17, 2022 and by Amendment No.

2 on February 23, 2023 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on February 23, 2023) (File No.

3.2 Fifth Amended and Restated Bylaws, as amended by Amendment No.

1 on February 27, 2024, adopted on February 27, 2024 (incorporated by reference to Exhibit 3.

2 to the Current Report on Form 8-K filed on March 1 , 2024) (File No.

3.3 Articles of Amendment of Ashford Hospitality Prime, Inc.

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2013 Equity Incentive Plan, as amended and restated through May 11, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form S-8 filed on May 12, 2022) (File No.

10.17.1†* Form of 2023 Deferred Cash Award Agreement

10.17.2†* Form of 2023 Performance Stock Unit Award Agreement

10.17.3†* Form of 2023 Performance LTIP Unit Award Agreement

Form of 2023 Deferred Cash Award Agreement (incorporated by reference to Exhibit 10.17.1 to the Annual Report on Form 10-K filed on March 10, 2023 (File No.

Form of 2023 Performance Stock Unit Award Agreement (incorporated by reference to Exhibit 10.17.2 to the Annual Report on Form 10-K filed on March 10, 2023 (File No.

Form of 2023 Performance LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.17.3 to the Annual Report on Form 10-K filed on March 10, 2023 (File No.

10.18† Form of 2021 Performance LTIP Unit Award Agreement (filed as Exhibit 10.7 to the Quarterly Report on Form 10-Q filed on May 7, 2021) (File No.

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(incorporated by reference to Exhibit 10.39 to the Annual Report on Form 10-K filed on March 10, 2022) (File No.

10.33* Purchase and Sale Agreement, dated as of October 31, 2022, by and between SHR FSST, LLC and STRS FSST and BHR Scottsdale LP

Purchase and Sale Agreement, dated as of October 31, 2022, by and between SHR FSST, LLC and STRS FSST and BHR Scottsdale LP (incorporated by reference to Exhibit 10.39 to the Annual Report on Form 10-K filed on March 10, 2022) (File No.

Limited Waiver Under Advisory Agreement, dated as of March 2, 2023, by and among Braemar Hotels & Resorts Inc., Braemar Hospitality Limited Partnership, Braemar TRS Corporation, Ashford Inc., and Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed March 3, 2023) (File No.

Amendment No.

4 to the Braemar Hotels & Resorts, Inc.

Second Amended and Restated 2013 Equity Incentive Plan (incorporated by reference to Annex B to the Company’s Proxy Statement on Schedule 14A filed March 28, 2023) (File No.

Credit Agreement, dated as of July 31, 2023, by and among Braemar Hospitality Limited Partnership, Braemar Hotels & Resorts Inc., the lenders party thereto and Bank of America, N.A.(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed August 1, 2023) (File No.

Am endment No.

2 to the Master Project Management Agreement, dated as of February 12, 2024, by and among Braemar TRS Corporation, CHH III Tenant Parent Corp., RC Hotels ( Virgin Islands), Inc., Premier Project Management LLC and Br aemar H ospitality Limited Partnership .

Limited Waiver Under Advisory Ag reement, dated as of March 1 1 , 2024, b y and among Braemar H otels & Resorts Inc., Br aemar Hospitality Limited Partnership, Braemar TRS Corporation, Ashford Inc., and Ashford Hospitality Advisors LLC .

F irst Amendment to Credit Agreement, dated as of February 21 , 2024, by and among Braemar Hospitality Limited Par t nership, B r aem ar Hotels & Resorts , I nc., the lenders party thereto and Ba nk of America, N.A.

21.1* List of Subsidiaries of Braemar Hotels & Resorts Inc.

21.2* List of Special Purpose Entities of Braemar Hotels & Resorts Inc.

23.1* Consent of BDO USA, LLP

23.1* Consent of BDO USA, P.

31.1* Certification of the Chief Executive Officer required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

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32.2** Certification of the Chief Financial Officer required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with SEC Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)

Policy relating to recovery of erroneously awarded compensation, as required by applicable listing standards adopted pursuant to 17 CFR 240.10D-1

99.1 Release and waiver, by and between, Ashford Hospitality Services, LLC and Jeremy Welter, dated April 15, 2022 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed on April 19, 2022)

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(Principal Financial Officer) March 14, 2024

/s/ JUSTIN R.

Chief Accounting Officer

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The Ritz-Carlton Lake Tahoe Truckee, CA 53,413 26,731 91,603 — 30,692 26,731 122,295 149,026 16,559 — January 2019 (1),(2),(3)

C Beverly Hills Hotel Beverly Hills, CA 30,000 29,346 45,078 — 820 29,346 45,898 75,244 3,424 — August 2021 (1),(2),(3)

Cameo Beverly Hills Beverly Hills, CA 30,000 29,346 45,078 — 1,688 29,346 46,766 76,112 4,916 — August 2021 (1),(2),(3)

The Ritz-Carlton Reserve Dorado Beach Dorado, Puerto Rico — 79,711 117,510 — 3,798 79,711 121,308 201,019 11,734 — March 2022 (1),(2),(3)

Four Seasons Resort Scottsdale Scottsdale, AZ 100,000 70,248 197,610 — 383 70,248 197,993 268,241 781 — December 2022 (1),(2),(3)

Four Seasons Resort Scottsdale

Scottsdale, AZ 140,000 70,248 197,610 — 4,285 70,248 201,895 272,143 10,406 — December 2022 (1),(2),(3)

Total $ 1,086,793 $ 634,603 $ 1,432,359 $ 353 $ 315,401 $ 634,956 $ 1,747,760 $ 2,382,716 $ 498,508

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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-K

Item 9A. Controls and Procedures