10-Q

This Form 10-Q/A (Amendment No. 1) (the “Amended Report”) for Ashford Inc. is being filed to correct certain accounting errors related to certain deferred tax assets and the consolidated financial position and operating results of certain private investment funds managed by Ashford Investment Management, LLC in “Item 1. Financial Statements” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the period ended March 31, 2015, initially filed with the Securities and Exchange Commission on May 15, 2015 (the “Original Report”). These matters are further described in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 to our Condensed Financial Statements included herein.



	March 31, 2015			December 31, 2014
	As Restated (see Note 1)
Assets
Current assets:
Cash and cash equivalents	$	24,930		$	29,597
Restricted cash	5,934			3,337
Investments in securities	2,978			—
Prepaid expenses and other	1,152			1,360
Receivables	6			—
Due from Ashford Trust OP, net	9,185			8,202
Due from Ashford Prime OP	2,829			2,546
Deferred tax assets	61			—
Total current assets	47,075			45,042
Furniture, fixtures and equipment, net	4,525			4,188
Deferred tax assets	899			—
Total assets	$	52,499		$	49,230
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses	$	5,916		$	9,307
Due to affiliates	428			1,313
Liabilities associated with investments in securities	366			—
Deferred compensation plan	221			175
Other liabilities	5,979			3,337
Total current liabilities	12,910			14,132
Long-term accrued liabilities	—			—
Deferred compensation plan	24,990			19,780
Total liabilities	37,900			33,912
Commitments and contingencies (Note 6)
Redeemable noncontrolling interests in Ashford LLC	535			424
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series A cumulative preferred stock, no shares issued and outstanding at March 31, 2015 and December 31, 2014	—			—
Common stock, $0.01 par value, 100,000,000 shares authorized, 1,986,851 shares issued and 1,986,369 and 1,986,851 shares outstanding at March 31, 2015 and December 31, 2014, respectively	20			20
Additional paid-in capital	229,284			228,003
Accumulated deficit	(216,708		)	(213,042		)
Treasury stock, at cost, 482 shares at March 31, 2015	(64		)	—
Total stockholders’ equity of the Company	12,532			14,981
Noncontrolling interests in consolidated entities	1,532			(87		)
Total equity	14,064			14,894
Total liabilities and equity	$	52,499		$	49,230



	Three Months Ended March 31,
	2015			2014
	As Restated (see Note 1)
Revenue
Advisory services	$	12,923		$	2,312
Other	195			—
Total revenue	13,118			2,312
Expenses
Salaries and benefits	17,493			10,110
Depreciation	129			87
General and administrative	4,130			913
Total expenses	21,752			11,110
Operating loss	(8,634		)	(8,798		)
Interest income	1			—
Dividend income	6			—
Unrealized gain on investments	47			—
Realized loss on investments	(2		)	—
Loss before income taxes	(8,582		)	(8,798		)
Income tax expense	(231		)	(15		)
Net loss	(8,813		)	(8,813		)
Loss from consolidated entities attributable to noncontrolling interests	961			—
Net loss attributable to redeemable noncontrolling interests in Ashford LLC	18			—
Net loss attributable to the Company	$	(7,834	)	$	(8,813	)
Comprehensive loss attributable to the Company	$	(7,834	)	$	(8,813	)
Loss per share – basic and diluted:
Loss attributable to common stockholders	$	(3.95	)	$	(4.45	)
Weighted average common shares outstanding – basic and diluted	1,982			1,981



	Common Stock			Additional Paid-in Capital			Accumulated Deficit			Treasury Stock				Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interests in Ashford LLC
	Shares	Amounts		Additional Paid-in Capital			Accumulated Deficit			Shares	Amounts			Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interests in Ashford LLC
Balance at January 1, 2015	1,987	$	20	$	228,003		$	(213,042	)	—	$	—		$	(87	)	$	14,894		$	424
Purchase of treasury stock	—	—		—			—			—	(64		)	—			(64		)	—
Equity-based compensation	—	—		951			4,297			—	—			—			5,248			—
Contributions from noncontrolling interests in consolidated entities	—	—		—			—			—	—			2,580			2,580			—
Excess tax benefit on equity-based compensation	—	—		853			—			—	—			—			853			—
Employee advances	—	—		(523		)	—			—	—			—			(523		)	—
Redemption value adjustment	—	—		—			(129		)	—	—			—			(129		)	129
Net loss	—	—		—			(7,834		)	—	—			(961		)	(8,795		)	(18		)
Balance at March 31, 2015	1,987	$	20	$	229,284		$	(216,708	)	—	$	(64	)	$	1,532		$	14,064		$	535



	Three Months Ended March 31,
	2015			2014
	As Restated (see Note 1)
Cash Flows from Operating Activities
Net loss	$	(8,813	)	$	(8,813	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation	129			87
Straight-line rent amortization	—			(16		)
Non-cash deferred compensation expense	5,256			—
Equity-based compensation	5,248			4,527
Excess tax benefit on equity-based compensation	(853		)	—
Deferred tax benefit	(960		)	—
Realized and unrealized gain on investments	(45		)	—
Purchases of investments in securities	(3,895		)	—
Sales of investments in securities	1,005			—
Changes in operating assets and liabilities:
Restricted cash	(2,597		)	—
Prepaid expenses and other	(439		)	75
Receivables	(6		)	—
Due from Ashford Trust OP, net	(336		)	—
Due from Ashford Prime OP	(283		)	(1,255		)
Accounts payable and accrued expenses	(2,579		)	(4,338		)
Due to affiliates	(503		)	244
Other liabilities	2,642			—
Due to broker	323			—
Net cash used in operating activities	(6,706		)	(9,489		)
Cash Flows from Investing Activities
Additions to furniture, fixtures and equipment	(807		)	(475		)
Net cash used in investing activities	(807		)	(475		)
Cash Flows from Financing Activities
Excess tax benefit on equity-based compensation	853			—
Purchase of treasury shares	(64		)	—
Employee advances	(523		)	—
Contributions from noncontrolling interests in consolidated entities	2,580			—
Contributions from owner	—			10,962
Net cash provided by financing activities	2,846			10,962
Net change in cash	(4,667		)	998
Cash at beginning of period	29,597			600
Cash at end of period	$	24,930		$	1,598
Supplemental Cash Flow Information
Interest paid	$	—		$	—
Income taxes paid	534			—
Supplemental Disclosure of Non Cash Investing and Financing Activities
Contributions associated with non-cash compensation	$	—		$	4,527
Dividends associated with deferred compensation plan	—			183
Contributions associated with deferred compensation plan	—			180
Dividends declared but not paid	—			183
Capital expenditures accrued but not paid	189			387

Ashford Inc. is a Delaware corporation formed on April 2, 2014 that provides asset management and advisory services to Ashford Hospitality Trust, Inc. (“Ashford Trust”) and Ashford Hospitality Prime, Inc. (“Ashford Prime”). Ashford Trust commenced operating in August 2003 and is focused on investing in full service hotels in the upscale and upper-upscale segments in domestic and international markets that have revenue per available room (“RevPAR”) generally less than twice the national average, and in all methods including direct real estate, equity, securities and debt. Ashford Prime invests primarily in luxury, upper-upscale and upscale hotels with RevPAR of at least twice the then-current U.S. national average in gateway and resort locations. Ashford Prime became a publicly traded entity in November 2013 upon the completion of its spin-off from Ashford Trust. Each of Ashford Trust and Ashford Prime is a real estate investment trust (“REIT”) as defined in the Internal Revenue Code (“Code”), and the common stock of each of Ashford Trust and Ashford Prime is traded on the NYSE. The common stock of Ashford Inc. is listed on the NYSE MKT Exchange.

Ashford Inc. was formed through a spin-off of Ashford Trust’s asset management business in November 2014. The spin-off was completed by means of a distribution of common stock of Ashford Inc. and common units of Ashford Hospitality Advisors LLC (“Ashford LLC”), a Delaware limited liability company formed on April 5, 2013. Ashford LLC had no operations until November 19, 2013, the date of the Ashford Prime spin-off. As part of the Ashford Inc. spin-off from Ashford Trust, Ashford LLC became a subsidiary of Ashford Inc. on November 12, 2014. Ashford Inc. conducts its business and owns substantially all of its assets through Ashford LLC.

The spin-off of Ashford Inc. was completed on November 12, 2014, with a pro rata taxable distribution of Ashford Inc.’s common stock to Ashford Trust stockholders of record as of November 11, 2014. The distribution was comprised of one share of Ashford Inc. common stock for every 87 shares of Ashford Trust common stock held by the Ashford Trust common stockholders. In addition, for each common unit of Ashford Trust OP, the holder received one common unit of Ashford LLC. Each holder of common units of Ashford LLC could exchange up to 99% of those units for shares of Ashford Inc. stock at the rate of one share of Ashford Inc. common stock for every 55 common units. Immediately following the completion of the exchange offer, Ashford LLC effected a reverse split of its common units such that each common unit was automatically converted into 1/55 of a common unit. The distribution was completed on October 7, 2014, and the exchange and reverse split were completed on November 12, 2014. Following the spin-off, Ashford Trust continues to hold approximately 598,000 shares of Ashford Inc. common stock for the benefit of its common stockholders, which represented an approximate 30% ownership interest in Ashford Inc. at the time of the spin-off. In connection with the spin-off, we entered into a 20-year advisory agreement with Ashford Trust.

Ashford Investment Management, LLC (“AIM”) is an indirect subsidiary of the Company, established as an investment adviser to any private securities funds sponsored by us or our affiliates (the “Funds”). AIM became a registered investment adviser with the Securities and Exchange Commission on January 5, 2015. AIM REHE Funds GP, LP (“AIM GP”), or an affiliate of AIM GP, serves as the general partner of any Funds. AIM Management Holdco, LLC (“Management Holdco”) owns 100% of AIM. We, through Ashford LLC, own approximately 60% of Management Holdco, and Mr. Monty J. Bennett, our chief executive officer and chairman of our board of directors, and Mr. J. Robison Hays, III, our chief strategy officer and a member of our board of directors, own, in the aggregate, 40% of Management Holdco. AIM Performance Holdco, LP (“Performance Holdco”) owns 99.99% of AIM GP with the remaining 0.01% general partner interest owned by our wholly owned subsidiary, AIM General Partner, LLC. We, through Ashford LLC and our 100% ownership interest in AIM General Partner, LLC, own approximately 60% of Performance Holdco, and Mr. Monty J. Bennett and Mr. J. Robison Hays, III own, in the aggregate, 40% of Performance Holdco. AIM, AIM GP, Management Holdco, Performance Holdco and AIM General Partner, LLC are all consolidated by Ashford Inc. as it has control.

AIM currently serves as investment adviser to AIM Real Estate Hedged Equity Master Fund, L.P. (the “Master Fund”), an investment partnership formed under the laws of the Cayman Islands and commenced operations on January 15, 2015. The Master Fund was organized for the purpose of purchasing, selling (including short sales), investing and trading in investments and engaging in financial transactions, including borrowing, financing, pledging, hedging and other derivative transactions. The Master Fund has two limited partners: AIM Real Estate Hedged Equity (U.S.) Fund, L.P. (the “U.S. Fund”), a U.S. investment limited partnership, and AIM Real Estate Hedged Equity (Cayman) Fund, Ltd. (the “Offshore Fund”), a Cayman Islands exempted investment company (collectively, the “Feeder Funds”). The Feeder Funds invest substantially all of their assets in the Master Fund. The Master Fund is managed by AIM GP and AIM.The Master Fund, the U.S. Fund and the Offshore Fund are collectively known as the “REHE Fund.” AIM is entitled to receive an investment management fee equal to 1.5% to 2.0% of the beginning quarterly capital account balance of certain limited partners. AIM GP serves as the general partner to the U.S. Fund and the Master Fund. As such, it is

The accompanying financial statements reflect the operations of our asset and investment management business and the REHE Fund. Our asset and investment management business provides asset and investment management, accounting and legal services to Ashford Trust, Ashford Prime and the REHE Fund. In this report, the terms the “Company,” “we,” “us” or “our” refers to Ashford Inc. and all entities included in its financial statements.

In connection with the closing of our financial records for the three and six months ended June 30, 2015, we identified accounting errors discussed below that affected our previously issued unaudited interim financial statements. In light of these errors, on August 6, 2015, Ashford Inc.’s Audit Committee of the Board of Directors determined that readers should no longer rely on our previously reported unaudited interim condensed financial statements for the three months ended March 31, 2015.

Ashford Inc. had recorded deferred tax assets of $10.5 million as of March 31, 2015, and had recorded a full valuation allowance against such assets. At the end of each quarter, we assess the need for a valuation allowance which involves consideration of both positive and negative evidence related to the likelihood of realization of the deferred tax assets. In performing this assessment as of March 31, 2015, carryback potential of certain deferred tax assets were not appropriately considered in determining whether it is more likely than not that we will utilize a portion of our deferred tax assets. As a result, income tax expense for the three months ended March 31, 2015, was overstated by $1.2 million, deferred tax assets as of March 31, 2015, were understated by $960,000 and accounts payable and accrued expensed were overstated by $263,000. Of the $1.2 million overstatement for the three months ended March 31, 2015, $520,000 related to the year ended December 31, 2014. We evaluated the impact of the adjustment and determined that the amount was immaterial to the financial statements for the current fiscal period and the prior fiscal year. This misstatement has been corrected in the unaudited interim condensed financial statements included in this Form 10-Q/A. The analysis utilized in determining the valuation allowance involves considerable judgment and assumptions.

Certain reconsideration events occurred during the three months ended March 31, 2015, that were not properly considered in concluding whether certain private investment funds managed by AIM (i) were variable interest entities (“VIEs”) deemed to be controlled by Ashford Inc. and (ii) should be consolidated as of March 31, 2015. Accordingly, the financial position and results of operations (along with the applicable noncontrolling interests of 100%) of the related private investment funds managed by AIM were not consolidated by Ashford Inc. and not included in our financial statements as of and for the three months ended March 31, 2015, included in our previously filed Form 10-Q. This misstatement has been corrected in the unaudited interim condensed financial statements included in this Form 10-Q/A. The analysis utilized in determining whether or not to consolidate an entity is considerably complex and involves significant judgment.

The following tables reconcile the “As Previously Reported” to the “As Restated” columns of the Condensed Balance Sheet as of March 31, 2015, the Condensed Statement of Operations and Comprehensive Loss for the three months ended March 31, 2015, the Condensed Statement of Equity for the three months ended March 31, 2015, and the Condensed Statement of Cash Flows for the three months ended March 31, 2015, to reflect the effect of the adjustments described above (in thousands, except share and per share amounts):



	March 31, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Assets
Current assets:
Cash and cash equivalents	$	24,916		$	14		$	24,930
Restricted cash	5,934			—			5,934
Investments in securities	—			2,978			2,978
Prepaid expenses and other	1,412			(260		)	1,152
Receivables	—			6			6
Due from Ashford Trust OP, net	9,185			—			9,185
Due from Ashford Prime OP	2,829			—			2,829
Deferred tax assets	—			61			61
Total current assets	44,276			2,799			47,075
Furniture, fixtures and equipment, net	4,525			—			4,525
Deferred tax assets	—			899			899
Total assets	$	48,801		$	3,698		$	52,499
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses	$	6,179		$	(263	)	$	5,916
Due to affiliates	483			(55		)	428
Liabilities associated with investments in securities	—			366			366
Deferred compensation plan	221			—			221
Other liabilities	5,934			45			5,979
Total current liabilities	12,817			93			12,910
Long-term accrued liabilities	—			—			—
Deferred compensation plan	24,990			—			24,990
Total liabilities	37,807			93			37,900
Commitments and contingencies (Note 5)
Redeemable noncontrolling interests in Ashford LLC	535			—			535
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series A cumulative preferred stock, no shares issued and outstanding at March 31, 2015 and December 31, 2014	—			—			—
Common stock, $0.01 par value, 100,000,000 shares authorized, 1,986,851 shares issued and 1,986,369 and 1,986,851 shares outstanding at March 31, 2015 and December 31, 2014, respectively	20			—			20
Additional paid-in capital	229,284			—			229,284
Accumulated deficit	(217,931		)	1,223			(216,708		)
Treasury stock, at cost, 482 shares at March 31, 2015	(64		)	—			(64		)
Total stockholders’ equity of the Company	11,309			1,223			12,532
Noncontrolling interests in consolidated entities	(850		)	2,382			1,532
Total equity	10,459			3,605			14,064
Total liabilities and equity	$	48,801		$	3,698		$	52,499



	Three Months Ended March 31, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Revenue
Advisory services	$	12,923		$	—		$	12,923
Other	195			—			195
Total revenue	13,118			—			13,118
Expenses
Salaries and benefits	17,493			—			17,493
Depreciation	129			—			129
General and administrative	3,880			250			4,130
Total expenses	21,502			250			21,752
Operating loss	(8,384		)	(250		)	(8,634		)
Interest income	—			1			1
Dividend income	—			6			6
Unrealized gain on investments	—			47			47
Realized loss on investments	—			(2		)	(2		)
Loss before income taxes	(8,384		)	(198		)	(8,582		)
Income tax expense	(1,454		)	1,223			(231		)
Net income (loss)	(9,838		)	1,025			(8,813		)
Loss from consolidated entities attributable to noncontrolling interests	763			198			961
Net (income) loss attributable to redeemable noncontrolling interests in Ashford LLC	21			(3		)	18
Net loss attributable to the Company	$	(9,054	)	$	1,220		$	(7,834	)
Comprehensive loss attributable to the Company	$	(9,054	)	$	1,220		$	(7,834	)
Loss per share – basic and diluted:
Income (loss) attributable to common stockholders	$	(4.57	)	$	0.62		$	(3.95	)
Weighted average common shares outstanding – basic and diluted	1,982			—			1,982



	Common Stock			Additional Paid-in Capital			Accumulated Deficit			Treasury Stock				Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interests in Ashford LLC
	Shares	Amounts		Additional Paid-in Capital			Accumulated Deficit			Shares	Amounts			Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interests in Ashford LLC
Balance at January 1, 2015	1,987	$	20	$	228,003		$	(213,042	)	—	$	—		$	(87	)	$	14,894		$	424
Purchase of treasury stock	—	—		—			—			—	(64		)	—			(64		)	—
Equity-based compensation	—	—		951			4,297			—	—			—			5,248			—
Contributions from noncontrolling interests in consolidated entities	—	—		—			—			—	—			—			—			—
Excess tax benefit on equity-based compensation	—	—		853			—			—	—			—			853			—
Employee advances	—	—		(523		)	—			—	—			—			(523		)	—
Redemption value adjustment	—	—		—			(132		)	—	—			—			(132		)	132
Net loss	—	—		—			(9,054		)	—	—			(763		)	(9,817		)	(21		)
Balance at March 31, 2015 (As Previously Reported)	1,987	$	20	$	229,284		$	(217,931	)	—	$	(64	)	$	(850	)	$	10,459		$	535
	(Restatement Adjustments)
Contributions from noncontrolling interests in consolidated entities	—	—		—			—			—	—			2,580			2,580			—
Redemption value adjustment	—	—		—			3			—	—			—			3			(3		)
Net income (loss)	—	—		—			1,220			—	—			(198		)	1,022			3
Balance at March 31, 2015 (As Restated)	1,987	$	20	$	229,284		$	(216,708	)	—	$	(64	)	$	1,532		$	14,064		$	535



	Three Months Ended March 31, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Cash Flows from Operating Activities
Net income (loss)	$	(9,838	)	$	1,025		$	(8,813	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation	129			—			129
Non-cash deferred compensation expense	5,256			—			5,256
Equity-based compensation	5,248			—			5,248
Excess tax benefit on equity-based compensation	(853		)	—			(853		)
Deferred tax benefit	—			(960		)	(960		)
Realized and unrealized gain on investments	—			(45		)	(45		)
Purchases of investments in securities	—			(3,895		)	(3,895		)
Sales of investments in securities	—			1,005			1,005
Changes in operating assets and liabilities:
Restricted cash	(2,597		)	—			(2,597		)
Prepaid expenses and other	(699		)	260			(439		)
Receivables	—			(6		)	(6		)
Due from Ashford Trust OP, net	(336		)	—			(336		)
Due from Ashford Prime OP	(283		)	—			(283		)
Accounts payable and accrued expenses	(2,316		)	(263		)	(2,579		)
Due to affiliates	(448		)	(55		)	(503		)
Other liabilities	2,597			45			2,642
Due to broker	—			323			323
Net cash used in operating activities	(4,140		)	(2,566		)	(6,706		)
Cash Flows from Investing Activities
Additions to furniture, fixtures and equipment	(807		)	—			(807		)
Net cash used in investing activities	(807		)	—			(807		)
Cash Flows from Financing Activities
Excess tax benefit on equity-based compensation	853			—			853
Purchase of treasury shares	(64		)	—			(64		)
Employee advances	(523		)	—			(523		)
Contributions from noncontrolling interests in consolidated entities	—			2,580			2,580
Net cash provided by financing activities	266			2,580			2,846
Net change in cash	(4,681		)	14			(4,667		)
Cash at beginning of period	29,597			—			29,597
Cash at end of period	$	24,916		$	14		$	24,930

Basis of Presentation and Principles of Consolidation and Combination—The accompanying consolidated financial statements, subsequent to our spin-off, include the accounts of Ashford Inc., its majority-owned subsidiaries and entities which it controls. All significant inter-company accounts and transactions between these entities have been eliminated in these historical consolidated financial statements. The REHE Funds are investment companies and follow the accounting and reporting guidance in Financial Accounting Standards Boards (“FASB”) Accounting Standards Codification (“ASC”) Topic 946.

For periods prior to the spin-off, the accompanying historical financial statements of Ashford Inc. have been “carved out” of Ashford Trust’s consolidated financial statements and reflect significant assumptions and allocations. These financial statements were prepared by combining the financial position and results of operations of Ashford LLC and certain assets, liabilities and operations of Ashford Trust OP (both Ashford LLC and Ashford Trust OP were under common control) related to certain activities that were historically accounted for by Ashford Trust. These activities include asset management, accounting and legal services

to Ashford Trust and Ashford Prime. In addition, the combined statements of operations and comprehensive loss include allocations of general and administrative expenses from Ashford Trust, which in the opinion of management, are reasonable. All significant inter-company accounts and transactions between combined entities were eliminated. The historical financial information is not necessarily indicative of the Company’s future results of operations, financial position and cash flows.

Since the Company was a consolidated subsidiary of Ashford Trust and there was no advisory agreement between Ashford Trust and the Company, the accompanying statements of operations and comprehensive loss do not report revenue associated with its management and advisory services provided to Ashford Trust for the historical periods presented prior to its spin-off on November 12, 2014. It does include revenue associated with the advisory services provided to Ashford Prime for all periods presented.

The accompanying historical unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The REHE Fund is considered to be a VIE, as defined by authoritative accounting guidance. All major decisions related to the REHE Fund that most significantly impact its economic performance, including but not limited to admittance of limited partners and purchasing, selling (including short sales), investing and trading in investments and engaging in financial transactions, including borrowing, financing, pledging, hedging and other derivative transactions are subject to the approval of our wholly-owned subsidiary, AIM GP. As such, we consolidate the REHE Fund. The REHE Fund holds approximately $3.0 million of total assets that primarily consists of investments in securities, cash and cash equivalents and receivables that can only be used to settle the obligations of the REHE Fund. Additionally, the REHE Fund has liabilities of $411,000 that primarily consists of liabilities associated with investments in securities for which creditors do not have recourse to Ashford Inc.

We hold a variable interest, in the form of a note receivable, in one of the consolidated entities in which the noncontrolling interest holder has a 100% interest. As we meet the conditions discussed above, we are considered the primary beneficiary of the entity and therefore we consolidate it. As of March 31, 2015 and December 31, 2014, the note receivable had an outstanding balance of $1.2 million and $420,000, respectively, which is eliminated in consolidation. This entity holds approximately $373,000 of total assets that primarily consists of cash and cash equivalents and other assets that can only be used to settle the obligations of that entity. Additionally, that entity has accounts payable and accrued expenses of $5,000 for which creditors do not have recourse to Ashford Inc.

Use of Estimates—The preparation of these 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. Actual results could differ from those estimates.

Restricted Cash—Restricted cash represents reserves for casualty insurance claims and the associated ancillary costs. At the beginning of each year, Ashford Inc.’s Risk Management department collects funds, from the Ashford Trust/Prime properties and their respective management companies, of an amount equal to the actuarial forecast of that year’s expected casualty claims and associated fees. These funds are deposited into restricted cash and used to pay casualty claims throughout the year as they are incurred. The offset to restricted cash amounts is included in other liabilities. For purposes of the statements of cash flows, changes in restricted cash caused by using such funds are shown as operating activities.

Noncontrolling Interests—The redeemable noncontrolling interests in Ashford LLC represent the members’ proportionate share of equity in earnings/losses of Ashford LLC, which is an allocation of net income/loss attributable to the common unit holders based on the weighted average ownership percentage of these members’ common unit holdings throughout the period. The redeemable noncontrolling interests in Ashford LLC is classified in the mezzanine section of the balance sheets as these redeemable operating units do not meet the requirements for equity classification prescribed by the authoritative accounting guidance because the redemption feature requires the delivery of cash or registered shares at our option. The carrying value of the noncontrolling interests in Ashford LLC is based on the greater of the accumulated historical cost or the redemption value.

Revenue Recognition—Revenues primarily consist of advisory and investment management fees and expense reimbursements that are recognized when services have been rendered. Advisory fees consist of base management fees and incentive fees. The quarterly base fee is equal to 0.70% per annum of the total market capitalization of Ashford Prime and Ashford Trust, as defined in the advisory agreements, subject to certain minimums. Reimbursements for overhead, travel expenses, risk management and internal audit services are recognized when services have been rendered. We also record advisory revenue for equity grants of Ashford Prime and Ashford Trust common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well an offsetting expense in an equal amount included in “salaries and benefits.” The incentive fee is earned annually in each year that Ashford Prime’s and/or Ashford Trust’s total stockholder return exceeds the total stockholder return for each company’s respective peer group, subject to the FCCR condition, as defined in the advisory agreements.

Salaries and Benefits—Salaries and benefits are expensed as incurred. Prior to the spin-off, salaries and benefits included an allocation of 100% of salaries and benefits of the employees of Ashford Trust and an allocation of 100% of employee equity-based compensation from Ashford Trust. All such expenses were allocated to Ashford Inc. because these expenses have historically been incurred by the asset management business of Ashford Trust. In the opinion of management, such allocations were considered reasonable. Salaries and benefits also includes expense for equity grants of Ashford Prime and Ashford Trust common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period. There is an offsetting amount, included in “advisory services” revenue.

General and Administrative Expense—General and administrative costs are expensed as incurred. Prior to the spin-off, general and administrative expense represents an allocation of certain Ashford Trust OP corporate general and administrative costs including rent expense, insurance expense, office expenses and other miscellaneous expenses either based upon specific identification or an allocation method determined by management to reflect the portion of the expenses related to Ashford Inc. With the exception of audit fees, these costs were allocated 100% to Ashford Inc. as management believes these costs were directly incurred by Ashford Trust in connection with its asset management business and will be ongoing costs of Ashford Inc. Audit fees were allocated based on management’s estimate of the audit costs incurred to audit the activities of Ashford Trust’s asset management business. In the opinion of management, such allocations were considered reasonable.

Depreciation—Our furniture, fixtures and equipment and computer software are depreciated over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the related assets. Presently, our furniture and equipment are depreciated using the straight-line method over a five year life and computer software placed into service is amortized on a straight-line basis over estimated useful lives ranging from three to five years. While we believe our estimates are reasonable, a change in estimated useful lives could affect depreciation expense and net loss as well as resulting gains or losses on potential sales.

Equity-Based Compensation—Equity-based compensation included in “salaries and benefits” is accounted for at fair value based on the market price of the shares/options on the date of grant in accordance with applicable authoritative accounting guidance. The fair value is charged to compensation expense on a straight-line basis over the vesting period of the shares/options. Grants of restricted stock to independent directors are recorded at fair value based on the market price of our shares at grant date and this amount is fully expensed in “general and administrative” expense as the grants of stock are fully vested on the date of grant. Our officers and employees can be granted common stock and LTIP units from Ashford Trust and Ashford Prime in connection with providing advisory services that result in expense, included in “salaries and benefits,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well as offsetting revenue in an equal amount included in “advisory services fee.”

Income (Loss) Per Share—For periods prior to the spin-off, basic income (loss) per share was calculated by dividing net loss attributable to the Company by the 2.0 million shares of common stock outstanding upon the completion of the distribution including 4,000 shares for initial grants to the five independent members of our board of directors (in the aggregate) and excluding 5,000 unvested restricted shares. For the three months ended March 31, 2014, the diluted loss per share was calculated by dividing the net loss attributable to the Company by 2.0 million shares which excludes 10,000 shares comprised of 5,000 unvested restricted shares and 5,000 shares issuable on the conversion of Ashford LLC common units held by Ashford LLC unit holders as the effect of including these shares would have been anti-dilutive.

For periods after the spin-off, basic income (loss) per common share is calculated by dividing net income (loss) attributable to the Company by the weighted average common shares outstanding during the period using the two-class method prescribed by applicable authoritative accounting guidance. Diluted income (loss) per common share is calculated using the two-class method, or the treasury stock method, if more dilutive. Diluted income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share.

Deferred Compensation Plan—Effective January 1, 2008, Ashford Trust established a nonqualified deferred compensation plan (“DCP”) for certain executive officers, which was assumed by the Company in connection with the separation from Ashford Trust. The plan allows participants to defer up to 100% of their base salary and bonus and select an investment fund for measurement of the deferred compensation obligation. In connection with our spin-off and the assumption of the DCP obligation by the Company, the DCP was modified to give the participants various investment options, including Ashford Inc. common stock, for measurement that can be changed by the participant at any time. These modifications resulted in the DCP obligation being recorded as a liability in accordance with the applicable authoritative accounting guidance. Distributions under the DCP are made in cash, unless the participant has elected Ashford Inc. common stock as the investment option, in which case any such distributions would be made in Ashford Inc. common stock. Additionally, the DCP obligation is carried at fair value with changes in fair value reflected in “salaries and benefits” in our statements of operations and comprehensive loss.

Investments in Securities—Investments in securities consist of publicly traded equity securities, U.S. treasury securities and put and call options on certain publicly traded securities. The fair value of equity securities and U.S. treasury securities is based on quoted market closing prices at the balance sheet date. This is considered a Level 1 valuation technique. Put and call options are considered derivative instruments. The fair value of put and call options is based on quoted market closing prices at the balance sheet dates in active markets, which is considered a Level 1 valuation technique and inactive markets, which is considered a Level 2 valuation technique. The fair value of these investments is reported as “investments in securities” and “liabilities associated with investments in securities.” The cost of securities sold is based on the first-in, first-out method. Investment transactions are accounted for on a trade-date basis. Dividends are recorded as income on the ex-dividend date and interest is recognized when earned on the accrual basis of accounting.

Due From/To Brokers—Due from/to brokers includes cash balances held with brokers, receivables and payables from unsettled trades, margin borrowings, and collateral on derivative transactions. Amounts due from brokers may be restricted to the extent that they serve as deposits for securities sold short. In addition, margin borrowings of $323,000 at March 31, 2015 are collateralized by certain securities and cash balances held by the REHE Fund. The REHE Fund is subject to interest on margin accounts based on daily margin borrowings. Due to brokers is included in “liabilities associated with investments in securities.”

In the normal course of business, substantially all of the REHE Fund’s securities transactions, money balances, and security positions are transacted with the REHE Fund’s broker: Goldman Sachs & Co. and ConvergEx Group. Accounts with ConvergEx Group are cleared by JP Morgan Chase and Co. The REHE Fund is subject to credit risk to the extent any broker with which it conducts business is unable to fulfill contractual obligations on its behalf. The REHE Fund’s management monitors the financial condition of such brokers and does not anticipate any losses from these counterparties.

Offsetting of Assets and Liabilities—Amounts due from and due to brokers are presented on a net basis, by counterparty, to the extent the REHE Fund has the legal right to offset the recognized amounts and intends to settle on a net basis. The REHE Fund presents on a net basis the fair value amounts recognized for over-the-counter (“OTC”) derivatives executed with the same counterparty under the same master netting agreement. Amounts due from brokers, net are included in “receivables” and due to brokers, net is included in “liabilities associated with investments in securities” on the balance sheet.

Income Taxes—The Company is subject to federal and state corporate income taxes. In accordance with authoritative accounting guidance, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The REHE Fund does not record a provision for U.S. federal, state, or local income taxes because as it is a partnership, and the REHE Fund partners report their share of the REHE Fund’s income or loss on their respective income tax returns. However, certain U.S. dividend income and interest income may be subject to a maximum 30% withholding tax for those limited partners that are foreign entities or foreign individuals.

Prior to the spin-off, the Company’s taxable income was “carved out” of Ashford Trust OP, a partnership, and Ashford LLC, its wholly-owned disregarded limited liability company, neither of which are subject to U.S. federal income taxes. Rather, the partnership’s revenues and expenses passed through and were taxed to the owners. Therefore, the Company did not provide for federal income taxes. Partnerships are subject to the Texas Margin Tax. In accordance with authoritative accounting guidance, we provided for the Texas Margin Tax. Income tax expense was calculated on a separate stand-alone basis, although the Company’s operations were historically included in the tax returns filed by Ashford Trust OP of which the Company’s business was a part.

The relationship of our income tax expense to book income results in a negative effective tax rate. The rate reflects the effects of permanent differences and the change in the valuation allowance on our deferred tax assets. The portion of equity-based compensation expense related to LTIP units granted to Ashford Trust employees prior to the spin-off is not deductible for income tax purposes and is accounted for as a permanent difference.

At the end of each quarter, we assess the need for a valuation allowance which involves consideration of both positive and negative evidence related to the likelihood of realization of the deferred tax assets. As of March 31, 2015, we recorded gross deferred tax assets of $10.3 million. After evaluating positive and negative evidence, including the generation of taxable income during the three months ended March 31, 2015, and the carryback potential of certain deferred tax assets, we determined that it is more likely than not that we will utilize a portion of our deferred tax assets. Accordingly, we recorded a valuation allowance of $9.3 million resulting in recognition of net deferred tax assets of $960,000 and a corresponding non-cash deferred tax benefit of $960,000 as of and for the three months ended March 31, 2015, respectively. The valuation allowance is primarily the result of uncertainties regarding the future realization of certain deductible temporary differences as well as the Company’s cumulative operating losses recorded from the date of the spin-off through March 31, 2015. The analysis utilized in determining the valuation allowance involves considerable judgment and assumptions.

The “Income Taxes” Topic of the FASB ASC addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance requires us to determine whether tax positions we have taken or expect to take in a tax return are more likely than not to be sustained upon examination by the appropriate taxing authority based on the technical merits of the positions. Tax positions that do not meet the more likely than not threshold would be recorded as additional tax expense in the current period. We analyze all open tax years, as defined by the statute of limitations for each jurisdiction, which includes the federal jurisdiction and various states. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and cities. Tax years 2013 through 2014 remain subject to potential examination by certain federal and state taxing authorities.

Recently Issued Accounting Standards—In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model, which requires a company to recognize revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The update will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 is effective in fiscal periods beginning after December 15, 2016. Early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our financial statements and related disclosures. We have not yet selected a transition method.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), to provide guidance on management’s responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure requirements. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We do not expect the adoption of this standard will have an impact on our financial position, results of operations or cash flows.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 amends the consolidation guidance for VIEs and general partners’ investments in limited partnerships and modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities. ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. We are currently evaluating the effect of the ASU on our financial statements and related disclosures.

•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.



	Quoted Market Prices (Level 1)			Total
March 31, 2015
Assets
Derivative assets:
Equity put options	$	36		$	36		⁽¹⁾
Equity call options	8			8			⁽¹⁾
Non-derivative assets:
Equity - American Depositary Receipt	35			35			⁽¹⁾
Equity securities	2,102			2,102			⁽¹⁾
U.S. treasury securities	797			797			⁽¹⁾
Total	2,978			2,978
Liabilities
Derivative liabilities:
Short equity put options	(15		)	(15		)	⁽²⁾
Short equity call options	(28		)	(28		)	⁽²⁾
Non-derivative liabilities:
Deferred compensation plan	(25,211		)	(25,211		)
Margin account balance	(323		)	(323		)	⁽²⁾
Total	(25,577		)	(25,577		)
Net	$	(22,599	)	$	(22,599	)



	Gain (Loss) Recognized
	Three Months Ended March 31,
	2015				2014
Assets
Derivative assets:
Equity put options	$	(21	)		$	—
Equity call options	2				—

Non-derivative assets:
Equity - American Depositary Receipt	(6		)		—
Equity securities	40				—
U.S. treasury securities	10				—
Total	25				—
Liabilities
Derivative liabilities:
Short equity put options	10				—
Short equity call options	(2		)		—

Non-derivative liabilities:
Equity securities	12				—
Deferred compensation plan	(5,256		)		—
Total	(5,236		)		—
Net	$	(5,211	)		$	—
Total combined
Unrealized gain on investment securities	$	47			$	—
Realized loss on investment securities	(2		)		—
Deferred compensation plan	(5,256		)	⁽¹⁾	—
Net	$	(5,211	)		$	—



	March 31, 2015				December 31, 2014
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:
Investments in securities	$	2,978	$	2,978	$	—	$	—
Financial liabilities measured at fair value:
Liabilities associated with investments in securities	$	366	366		—		—
Deferred compensation plan	25,211		25,211		19,955		19,955
Financial assets not measured at fair value:
Financial assets:
Cash and cash equivalents	$	24,930	$	24,930	$	29,597	$	29,597
Restricted cash	5,934		5,934		3,337		3,337
Receivables	6		6		—		—
Due from Ashford Trust OP, net	9,185		9,185		8,202		8,202
Due from Ashford Prime OP	2,829		2,829		2,546		2,546
Financial liabilities not measured at fair value:
Financial liabilities:
Accounts payable and accrued expenses	$	5,916	$	5,916	$	9,307	$	9,307
Due to affiliates	428		428		1,313		1,313
Other liabilities	5,979		5,979		3,337		3,337

Investments in securities and liabilities associated with investments in securities. Investment securities consist of U.S. treasury securities, publicly traded equity securities and equity put and call options on certain publicly traded equity securities. Liabilities associated with investments in securities consist of a margin account balance and short equity put and call options. The fair value of these investments is based on quoted market closing prices at the balance sheet dates. This is considered a Level 1 valuation technique. See Notes 2, 3 and 4 for a complete description of the methodology and assumptions utilized in determining fair values.

Litigation—The Company is engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect upon the financial position or results of operations of the Company. However, the final results of legal proceedings cannot be predicted with certainty and if the Company failed to prevail in one or more of these legal matters, and the associated realized losses were to exceed the Company’s current estimates of the range of potential losses, the Company’s financial position or results of operations could be materially adversely affected in future periods.

In connection with our spin-off from Ashford Trust on November 12, 2014, we entered into an advisory agreement with Ashford Trust OP. The quarterly base fee is equal to 0.70% per annum of the total market capitalization, as defined in the advisory agreement, of Ashford Trust, subject to a minimum quarterly base fee, as payment for managing its day-to-day operations in accordance with its investment guidelines. Reimbursement for overhead and internal audit, insurance claims advisory and asset management services, including compensation, benefits and travel expense reimbursements, are billed quarterly to Ashford Trust based on a pro rata allocation as determined by the ratio of Ashford Trust’s net investment in hotel properties in relation to the total net investment in hotel properties for both Ashford Trust and Ashford Prime. We will also record advisory revenue for equity grants of Ashford Trust common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well an offsetting expense in an equal amount included in “salaries and benefits.” We are also entitled to an incentive fee that is earned annually in each year that Ashford Trust’s total stockholder return exceeds the total stockholder return for Ashford Trust’s peer group, as defined in the advisory agreement.

For the three months ended March 31, 2015, we recorded advisory services revenue of $9.7 million from Ashford Trust OP. The advisory services revenue was comprised of a base advisory fee of $8.0 million, reimbursable overhead and internal audit, insurance claims advisory and asset management services of $1.5 million and equity-based compensation of $171,000 associated with equity grants of Ashford Trust’s common stock and LTIP units awarded to our officers and employees. No incentive management fee was earned for the three months ended March 31, 2015. We also recorded other revenue of $195,000 related to non-advisory expense reimbursements from Ashford Trust. At March 31, 2015 and December 31, 2014, we had a net receivable of $9.2 million and $8.2 million, respectively, from Ashford Trust OP associated with reimbursable expenses in connection with the spin-off and the advisory services fee discussed above.

On November 19, 2013, Ashford LLC entered into an advisory agreement with Ashford Prime OP. In connection with our separation from Ashford Trust, Ashford LLC became our operating company, and we assumed the advisory agreement with Ashford Prime OP. The quarterly base fee is equal to 0.70% per annum of the total market capitalization, as defined in the advisory agreement, of Ashford Prime, subject to a quarterly minimum base fee, as payment for managing its day-to-day operations in accordance with its investment guidelines. Reimbursement for overhead and internal audit, insurance claims advisory and asset management services, including compensation, benefits and travel expense reimbursements, are billed quarterly to Ashford Prime based on a pro rata allocation as determined by the ratio of Ashford Prime’s net investment in hotel properties in relation to the total net investment in hotel properties for both Ashford Trust and Ashford Prime.We also record advisory revenue for equity grants of Ashford Prime common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well an offsetting expense in an equal amount included in “salaries and benefits.” We are also entitled to an incentive fee that is earned annually in each year that Ashford Prime’s total stockholder return exceeds the total stockholder return for Ashford Prime’s peer group, as defined in the advisory agreement.

For the three months ended March 31, 2015 and 2014, we recorded revenues of $3.2 million and $2.3 million, respectively, from Ashford Prime. During the three months ended March 31, 2015, advisory services revenue was comprised of a base advisory fee of $2.2 million, reimbursable overhead and internal audit, insurance claims advisory and asset management services of $567,000 and equity-based compensation of $469,000 associated with equity grants of Ashford Prime’s common stock and LTIP units awarded to our officers and employees. During the three months ended March 31, 2014, advisory services revenue was comprised of a base advisory fee of $2.0 million and reimbursable overhead and internal audit reimbursements of $342,000. No incentive management fee was earned for the three months ended March 31, 2015 or 2014. At March 31, 2015 and December 31, 2014, we had receivables of $2.8 million and $2.5 million, respectively, from Ashford Prime OP associated with the advisory service fee discussed above.

Ashford Trust and Ashford Prime have management agreements with Remington, which is beneficially owned by our Chairman and Chief Executive Officer and Ashford Trust’s Chairman Emeritus. Transactions related to these agreements are included in the accompanying financial statements. Under the agreements, we pay Remington general and administrative expense reimbursements, approved by the independent directors of Ashford Trust and Ashford Prime, including rent, payroll, office supplies, travel and accounting. These charges are allocated based on various methodologies, including headcount and actual amounts incurred which are then rebilled to Ashford Trust and Ashford Prime. Prior to the spin-off, these costs were paid by Ashford Trust and were included in our carve-out financial statements. For the three months ended March 31, 2015 and 2014, these reimbursements totaled $1.0

Certain employees of Remington who perform work on behalf of Ashford Trust were granted shares of restricted stock under the Ashford Trust Stock Plan prior to our spin-off. These share grants were accounted for under the applicable accounting guidance related to share-based payments granted to non-employees and are recorded in “general and administrative” expense. Expense of $3,000 and $43,000 was recognized in the statements of operations and comprehensive loss for the three months ended March 31, 2015 and 2014, respectively.

For periods prior to the spin-off, the operations of the Company have been principally funded by Ashford Trust OP. Ashford Trust OP used a centralized approach to cash management and the financing of its operations. During the periods through November 12, 2014, Ashford Trust OP provided the capital to fund our operating and investing activities, which are presented as a component of additional paid-in capital. Amounts funded by Ashford Trust OP were $11.0 million for the three months ended March 31, 2014.

Equity-Based Compensation—Equity-based compensation expense of $5.2 million and $4.5 million was recognized for the three months ended March 31, 2015 and 2014, respectively. Equity-based compensation expense for the three months ended March 31, 2015, included $951,000 of expense attributable to our stock options. As of March 31, 2015, the Company had approximately $10.4 million of total unrecognized compensation expense related to stock options that will be recognized over the weighted average period of 2.7 years. Additionally, as a result of the spin-off, we assumed all of the unrecognized equity-based compensation associated with prior Ashford Trust equity grants. As a result, we will continue to recognize equity-based compensation expense related to these grants. For the three months ended March 31, 2015, we recognized equity-based compensation expense of $4.3 million related to these grants. As of March 31, 2015, the outstanding restricted stock/units related to the assumed Ashford Trust equity grants had vesting schedules between April 2015 and April 2017. As of March 31, 2015, the unrecognized cost of these unvested shares of restricted stock/units was $13.5 million, which will be amortized over a period of 2.1 years. There was also equity-based compensation associated with employees of an affiliate, included in “general and administrative” expense, of $3,000 and $43,000 for the three months ended March 31, 2015 and 2014, respectively, as described in Note 7. Prior to the spin-off, equity-based compensation, included in “salaries and benefits”, was allocated to the Company as described in Note 2.

Preferred Stock—In accordance with Ashford Inc.’s charter, we are authorized to issue 50 million shares of preferred stock which currently includes up to two million shares of series A cumulative preferred stock. The holders of series A cumulative preferred stock are entitled to receive dividends in preference to holders of shares of any class or series of stock ranking junior to it, equal to 1,000 multiplied by the aggregate per share amount of all dividends of common stock. Each share of series A cumulative preferred stock shall entitle the holder to 1,000 votes on all matters submitted to a vote of the stockholders of Ashford Inc. No shares of series A cumulative preferred stock are currently outstanding.

Shareholder Rights Plan—On November 16, 2014, our board of directors adopted a shareholder rights plan (the “2014 Rights Plan”). Pursuant to the 2014 Rights Plan, our board of directors declared a dividend of one preferred share purchase right (a “Right”) payable on November 27, 2014, for each outstanding share of common stock, par value $0.01 per share (the “Common Shares”), outstanding on November 27, 2014 (the “Record Date”) to the stockholders of record on that date. Each Right initially entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of the Company, at a price of $275 per one one-thousandth of a Preferred Share represented by a Right (the “Purchase Price”), subject to adjustment. The Rights become exercisable upon certain conditions, as defined in the rights agreement. At any time prior to the time any person or group becomes an Acquiring Person, as defined in the rights agreement, the board of directors of the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right. The value of the rights is de minimis. The 2014 Rights Plan is intended to improve the bargaining position of our board of directors in the event of an unsolicited offer to acquire our outstanding shares of common stock.

Noncontrolling Interests in Consolidated Entities—Noncontrolling interests in consolidated entities represents noncontrolling ownership interests of 40% in AIM, 100% in the REHE Fund and 100% in the entity in which we hold a variable interest in the form of a note receivable with a total carrying value of $1.5 million at March 31, 2015 and noncontrolling ownership interests of 40% in AIM and 100% in the entity in which we hold a variable interest, in the form of a note receivable with a total carrying value of $(87,000) at December 31, 2014. Loss from consolidated entities attributable to these noncontrolling interests was $961,000 for the three months ended March 31, 2015. There was no income/loss from consolidated entities attributable to noncontrolling interests for the three months ended March 31, 2014.

Effective January 1, 2008, Ashford Trust established a nonqualified DCP for certain executive officers, which was assumed by the Company in connection with the separation from Ashford Trust. The plan allows participants to defer up to 100% of their base salary and bonus and select an investment fund for measurement of the deferred compensation obligation. For the periods the DCP was administered by Ashford Trust, the participants elected Ashford Trust common stock as their investment option. In accordance with the applicable authoritative accounting guidance, the deferred amounts and any dividends earned received equity treatment and were included in additional paid-in capital. In connection with our spin-off and the assumption of the DCP obligation by the Company, the DCP was modified to give the participants various investment options, including Ashford Inc. common stock, for measurement that can be changed by the participant at any time. These modifications resulted in the DCP obligation being recorded as a liability in accordance with the applicable authoritative accounting guidance. Distributions under the DCP are made in cash, unless the participant has elected Ashford Inc. common stock as the investment option, in which case any such distributions would be made in Ashford Inc. common stock. Additionally, the DCP obligation is carried at fair value with changes in fair value reflected in “salaries and benefits” in our statements of operations and comprehensive loss. For the three months ended March 31, 2015, we recorded an unrealized loss of $5.3 million. No unrealized loss was recorded for the three months ended March 31, 2014.

Redeemable noncontrolling interests in Ashford LLC represents certain members’ proportionate share of equity and their allocable share of equity in earnings/loss of Ashford LLC, which is an allocation of net income/loss attributable to the members based on the weighted average ownership percentage of these members’ interest. Beginning one year after issuance, each common unit of membership interest may be redeemed by the holder, for either cash or, at our sole discretion, one share of our common stock.

In connection with our spin-off, Ashford Trust OP unit holders received one common unit in Ashford LLC for every 55 common units held in Ashford Trust OP. Each holder of common units of Ashford LLC could then exchange up to 99% of the Ashford LLC common units for shares of Ashford Inc. common stock. During the year ended December 31, 2014, approximately 356,000 common units were exchanged for shares of Ashford Inc. common stock at the rate of one share of Ashford Inc. common stock for every 55 Ashford LLC common units. Following the completion of the exchange offer, Ashford LLC effected a reverse stock split of its common units such that each common unit was automatically converted into 1/55 of a common unit. Redeemable noncontrolling interests in Ashford LLC as of March 31, 2015 and December 31, 2014, were $535,000 and $424,000, respectively, which represented ownership of approximately 0.2% for each period. The carrying value of redeemable noncontrolling interests as of March 31, 2015 and December 31, 2014 included adjustments of $498,000 and $369,000, respectively, to reflect the excess of redemption value over the accumulated historical cost. For the three months ended March 31, 2015, we allocated net loss of $18,000 to the redeemable noncontrolling interests. No net income/loss was allocated to redeemable noncontrolling interests for the three months ended March 31, 2014.



	Three Months Ended March 31,
	2015			2014
Net loss attributable to common stockholders – basic and diluted:
Net loss attributable to the Company	$	(7,834	)	$	(8,813	)

Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	1,982			1,981
Weighted average common shares outstanding – diluted	1,982			1,981

Loss per share – basic:
Net loss allocated to common stockholders per share	$	(3.95	)	$	(4.45	)
Loss per share – diluted:
Net loss allocated to common stockholders per share	$	(3.95	)	$	(4.45	)



	Three Months Ended March 31,
	2015			2014
Net loss allocated to common stockholders is not adjusted for:
Net loss attributable to redeemable noncontrolling interests in Ashford LLC	$	(18	)	$	—
Total	$	(18	)	$	—
Weighted average diluted shares are not adjusted for:
Effect of unvested restricted shares	3			5
Effect of assumed exercise of stock options	3			—
Effect of assumed conversion of Ashford LLC units	5			5
Total	11			10

As used in this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the references to “we,” “us,” “our”, the “Company” refer to Ashford Inc., a Delaware corporation and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Advisors LLC, a Delaware limited liability company, which we refer to as “Ashford LLC” or “our operating company.” “AIM” refers to Ashford Investment Management, LLC, a Delaware limited liability company. “Ashford Prime” or “AHP” refers to Ashford Hospitality Prime, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Prime Limited Partnership, a Delaware limited partnership, which we refer to as “Ashford Prime OP.” “Ashford Trust” or “AHT” refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership and Ashford Trust’s operating partnership, which we refer to as “Ashford Trust OP.” “Remington” refers to Remington Lodging and Hospitality LLC, a Delaware limited liability company, a property management company owned by Mr. Monty J. Bennett, our chief executive officer and chairman, and his father, Mr. Archie Bennett, Jr., chairman emeritus of Ashford Trust.

This Form 10-Q contains certain forward-looking statements that are subject to risks and uncertainties. Forward looking statements are generally identifiable by use of forward looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature:

Forward looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward looking statements are based on reasonable assumptions, taking into account all information currently available to us, our actual results and performance could differ materially from those set forth in our forward looking statements. Factors that could have a material adverse effect on our forward looking statements include, but are not limited to:

When considering forward looking statements, you should keep in mind the matters summarized under “Item 1A. Risk Factors” of our 2014 10-K and the discussion in this Management’s Discussion and Analysis of Financial Conditions and Results of Operations, which could cause our actual results and performance to differ significantly from those contained in our forward looking statements. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue

As discussed below and in the financial statements and related notes —Note 1: Organization and Description of Business, Restatement of Financial Data, and located elsewhere in this Form 10-Q/A, we have restated our previously issued unaudited interim condensed financial statements as of and for the three months ended March 31, 2015. Accordingly, Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth below reflect the effects of the restatement.

Certain reconsideration events occurred during the three months ended March 31, 2015, that were not properly considered in concluding whether certain private investment funds managed by AIM (i) were VIEs deemed to be controlled by Ashford Inc. and (ii) should be consolidated as of March 31, 2015. Accordingly, the financial position and results of operations (along with the applicable noncontrolling interests of 100%) of the related private investment funds managed by AIM were not consolidated by Ashford Inc. and not included in our financial statements as of and for the three months ended March 31, 2015, included in our previously filed Form 10-Q. This misstatement has been corrected in the unaudited interim condensed financial statements included in this Form 10-Q/A. The analysis utilized in determining whether or not to consolidate an entity is considerably complex and involves significant judgment.



	March 31, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Assets
Current assets:
Cash and cash equivalents	$	24,916		$	14		$	24,930
Restricted cash	5,934			—			5,934
Investments in securities	—			2,978			2,978
Prepaid expenses and other	1,412			(260		)	1,152
Receivables	—			6			6
Due from Ashford Trust OP, net	9,185			—			9,185
Due from Ashford Prime OP	2,829			—			2,829
Deferred tax assets	—			61			61
Total current assets	44,276			2,799			47,075
Furniture, fixtures and equipment, net	4,525			—			4,525
Deferred tax assets	—			899			899
Total assets	$	48,801		$	3,698		$	52,499
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses	$	6,179		$	(263	)	$	5,916
Due to affiliates	483			(55		)	428
Liabilities associated with investments in securities	—			366			366
Deferred compensation plan	221			—			221
Other liabilities	5,934			45			5,979
Total current liabilities	12,817			93			12,910
Deferred compensation plan	24,990			—			24,990
Total liabilities	37,807			93			37,900
Commitments and contingencies (Note 5)
Redeemable noncontrolling interests in Ashford LLC	535			—			535
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series A cumulative preferred stock, no shares issued and outstanding at March 31, 2015 and December 31, 2014	—			—			—
Common stock, $0.01 par value, 100,000,000 shares authorized, 1,986,851 shares issued and 1,986,369 and 1,986,851 shares outstanding at March 31, 2015 and December 31, 2014, respectively	20			—			20
Additional paid-in capital	229,284			—			229,284
Accumulated deficit	(217,931		)	1,223			(216,708		)
Treasury stock, at cost, 482 shares at March 31, 2015	(64		)	—			(64		)
Total stockholders’ equity of the Company	11,309			1,223			12,532
Noncontrolling interests in consolidated entities	(850		)	2,382			1,532
Total equity	10,459			3,605			14,064
Total liabilities and equity	$	48,801		$	3,698		$	52,499



	Three Months Ended March 31, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Revenue
Advisory services	$	12,923		$	—		$	12,923
Other	195			—			195
Total revenue	13,118			—			13,118
Expenses
Salaries and benefits	17,493			—			17,493
Depreciation	129			—			129
General and administrative	3,880			250			4,130
Total expenses	21,502			250			21,752
Operating loss	(8,384		)	(250		)	(8,634		)
Interest income	—			1			1
Dividend income	—			6			6
Unrealized gain on investments	—			47			47
Realized loss on investments	—			(2		)	(2		)
Loss before income taxes	(8,384		)	(198		)	(8,582		)
Income tax expense	(1,454		)	1,223			(231		)
Net income (loss)	(9,838		)	1,025			(8,813		)
Loss from consolidated entities attributable to noncontrolling interests	763			198			961
Net (income) loss attributable to redeemable noncontrolling interests in Ashford LLC	21			(3		)	18
Net loss attributable to the Company	$	(9,054	)	$	1,220		$	(7,834	)
Comprehensive loss attributable to the Company	$	(9,054	)	$	1,220		$	(7,834	)
Loss per share – basic and diluted:
Income (loss) attributable to common stockholders	$	(4.57	)	$	0.62		$	(3.95	)
Weighted average common shares outstanding – basic and diluted	1,982			—			1,982



	Common Stock			Additional Paid-in Capital			Accumulated Deficit			Treasury Stock				Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interests in Ashford LLC
	Shares	Amounts		Additional Paid-in Capital			Accumulated Deficit			Shares	Amounts			Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interests in Ashford LLC
Balance at January 1, 2015	1,987	$	20	$	228,003		$	(213,042	)	—	$	—		$	(87	)	$	14,894		$	424
Purchase of treasury stock	—	—		—			—			—	(64		)	—			(64		)	—
Equity-based compensation	—	—		951			4,297			—	—			—			5,248			—
Contributions from noncontrolling interests in consolidated entities	—	—		—			—			—	—			—			—			—
Excess tax benefit on equity-based compensation	—	—		853			—			—	—			—			853			—
Employee advances	—	—		(523		)	—			—	—			—			(523		)	—
Redemption value adjustment	—	—		—			(132		)	—	—			—			(132		)	132
Net loss	—	—		—			(9,054		)	—	—			(763		)	(9,817		)	(21		)
Balance at March 31, 2015 (As Previously Reported)	1,987	$	20	$	229,284		$	(217,931	)	—	$	(64	)	$	(850	)	$	10,459		$	535
	(Restatement Adjustments)
Contributions from noncontrolling interests in consolidated entities	—	—		—			—			—	—			2,580			2,580			—
Redemption value adjustment	—	—		—			3			—	—			—			3			(3		)
Net income (loss)	—	—		—			1,220			—	—			(198		)	1,022			3
Balance at March 31, 2015 (As Restated)	1,987	$	20	$	229,284		$	(216,708	)	—	$	(64	)	$	1,532		$	14,064		$	535



	Three Months Ended March 31, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Cash Flows from Operating Activities
Net income (loss)	$	(9,838	)	$	1,025		$	(8,813	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation	129			—			129
Non-cash deferred compensation expense	5,256			—			5,256
Equity-based compensation	5,248			—			5,248
Excess tax benefit on equity-based compensation	(853		)	—			(853		)
Deferred tax benefit	—			(960		)	(960		)
Realized and unrealized gain on investments	—			(45		)	(45		)
Purchases of investments in securities	—			(3,895		)	(3,895		)
Sales of investments in securities	—			1,005			1,005
Changes in operating assets and liabilities:
Restricted cash	(2,597		)	—			(2,597		)
Prepaid expenses and other	(699		)	260			(439		)
Receivables	—			(6		)	(6		)
Due from Ashford Trust OP, net	(336		)	—			(336		)
Due from Ashford Prime OP	(283		)	—			(283		)
Accounts payable and accrued expenses	(2,316		)	(263		)	(2,579		)
Due to affiliates	(448		)	(55		)	(503		)
Other liabilities	2,597			45			2,642
Due to broker	—			323			323
Net cash used in operating activities	(4,140		)	(2,566		)	(6,706		)
Cash Flows from Investing Activities
Additions to furniture, fixtures and equipment	(807		)	—			(807		)
Net cash used in investing activities	(807		)	—			(807		)
Cash Flows from Financing Activities
Excess tax benefit on equity-based compensation	853			—			853
Purchase of treasury shares	(64		)	—			(64		)
Employee advances	(523		)	—			(523		)
Contributions from noncontrolling interests in consolidated entities	—			2,580			2,580
Net cash provided by financing activities	266			2,580			2,846
Net change in cash	(4,681		)	14			(4,667		)
Cash at beginning of period	29,597			—			29,597
Cash at end of period	$	24,916		$	14		$	24,930

Our principal business objective is to provide asset management and other advisory services to other entities. Currently, we, through our operating subsidiary Ashford LLC, act as the advisor to Ashford Trust and Ashford Prime. In our capacity as the advisor to Ashford Trust and Ashford Prime, we are responsible for implementing the investment strategies and managing the day-to-day operations of Ashford Trust and Ashford Prime, in each case subject to the supervision and oversight of the respective board of directors of such entity. We provide the personnel and services necessary to allow each of Ashford Trust and Ashford Prime to conduct its respective business. We may also perform similar functions for new or additional platforms. We are not responsible for managing the day-to-day operations of the individual hotel properties owned by either Ashford Trust or Ashford Prime, which duties are, and will continue to be, the responsibility of the property management companies that operate the hotel properties owned by Ashford Trust and Ashford Prime.

On January 29, 2015, Ashford Trust announced that its board of directors had approved the formation of Ashford Hospitality Select, Inc. (“Ashford Select”), a company dedicated to investing primarily in existing premium branded, upscale and upper-midscale, select-service hotels. On February 18, 2015, Ashford Trust entered into certain contribution and purchase and sale agreements in anticipation of the imminent launch of Ashford Select, which have since been terminated. However, Ashford Trust has announced that it will continue to pursue the launch of the Ashford Select platform. At this time it is unclear whether the Ashford Select platform will be completed with an external capital source or through a wholly owned subsidiary of Ashford Trust. Depending on the structure of the Ashford Select Platform, we may enter into an advisory agreement with Ashford Select; however, no assurance can be given that we will enter into this or any other advisory agreement.

The discussion below relates to the financial condition and results of operations of Ashford Inc. and its majority-owned subsidiaries and entities which it controls. For periods prior to spin-off, the combined historical financial statements have been prepared on a “carve out” basis from Ashford Trust’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities and include allocations of income, expenses, assets and liabilities from Ashford Trust. These allocations reflect significant assumptions, and the financial statements do not fully reflect what our financial position, results of operations and cash flows would have been had the asset management business of Ashford Trust been operated exclusively within a stand-alone company during the periods presented. As a result, historical financial information is not necessarily indicative of our future results of operations, financial position and cash flows.

For purposes of our “carve out” presentation, general and administrative expense represents an allocation of certain Ashford Trust corporate general and administrative costs including salaries and benefits, equity-based compensation, legal and professional fees, rent expense, insurance expense, office expenses and other miscellaneous expenses either based upon specific identification or an allocation method determined by management to reflect the portion of the expenses related to the asset management business. In the opinion of management, such allocations were considered reasonable.

Net Cash Flows Used in Operating Activities. Net cash flows used in operating activities were $6.7 million and $9.5 million for the three months ended March 31, 2015 and 2014, respectively. The decrease in cash flows used in operating activities was primarily a result of the completion of our spin-off from Ashford Trust which resulted in additional advisory fees offset by additional general and administrative expenses as a result of becoming a public company. Cash flows from operations is also impacted by the timing of receipt of advisory fees from Ashford Trust and Ashford Prime, the timing of paying vendors and the activity of the REHE Fund.

Net Cash Flows Provided by Financing Activities. For the three months ended March 31, 2015, net cash flows provided by financing activities was $2.8 million. These cash inflows consisted of $2.6 million of contributions from noncontrolling interests in a consolidated entity, excess tax benefit associated with stock-based compensation of $853,000 partially offset by advances to employees of $523,000 associated with tax withholdings for restricted stock vestings and $64,000 for the purchase of our treasury



	Three Months Ended March 31,
	2015			2014			$ Change			% Change
	(As Restated)
Revenue
Advisory services	$	12,923		$	2,312		$	10,611		459.0	%
Other	195			—			195
Total revenue	13,118			2,312			10,806			467.4	%
Expenses
Salaries and benefits	17,493			10,110			7,383			73.0	%
Depreciation	129			87			42			48.3	%
General and administrative	4,130			913			3,217			352.4	%
Total expenses	21,752			11,110			10,642			95.8	%
Operating loss	(8,634		)	(8,798		)	(164		)	(1.9	)%
Interest income	1			—			1
Dividend income	6			—			6
Unrealized gain on investments	47			—			47
Realized loss on investments	(2		)	—			(2		)
Loss before income taxes	(8,582		)	(8,798		)	(216		)	(2.5	)%
Income tax expense	(231		)	(15		)	216			1,440.0	%
Net loss	(8,813		)	(8,813		)	—			—	%
Loss from consolidated entities attributable to noncontrolling interests	961			—			961
Net loss attributable to redeemable noncontrolling interests in Ashford LLC	18			—			18
Net loss attributable to the Company	$	(7,834	)	$	(8,813	)	$	(979	)	(11.1	)%

Advisory Services Revenue. Advisory services revenue increased $10.6 million, or 459.0%, to $12.9 million during the three months ended March 31, 2015, (the “2015 quarter”) compared to the three months ended March 31, 2014 (the “2014 quarter”). The increase is due to revenue from both Ashford Prime and Ashford Trust being included in the 2015 quarter, as a result of entering into an advisory agreement with Ashford Trust in November 2014 upon our spin-off. The 2014 quarter only included advisory services revenue from our advisory agreement with Ashford Prime.

During the 2015 quarter, advisory services revenue was comprised of a base advisory fee of $10.2 million and reimbursable overhead and internal audit, insurance claims advisory and asset management services of $2.1 million. Advisory services revenue also included $640,000 of equity-based compensation associated with equity grants of Ashford Trust’s and Ashford Prime’s common stock and LTIP units awarded to our officers and employees, and we recorded an offsetting expense in an equal amount in “salaries and benefits.” Neither Ashford Trust nor Ashford Prime granted any equity awards to our officers and employees in the 2014 quarter. During the 2014 quarter, advisory services revenue was comprised of a base advisory fee of $2.0 million, reimbursable overhead and internal audit reimbursements of $342,000. No incentive management fee was earned for the 2015 quarter or the 2014 quarter in connection with our advisory agreements with Ashford Prime or Ashford Trust.

In connection with our spin-off, we assumed the DCP obligation, which was modified to give the participants various investment options including Ashford Inc. common stock for measurement, which options can be changed by the participant at any time. These modifications resulted in the DCP obligation being recorded as a liability in accordance with the applicable authoritative accounting guidance. The DCP obligation is carried at fair value with changes in fair value reflected in earnings. Additionally, as a result of the spin-off, we assumed all of the unrecognized equity-based compensation associated with prior Ashford Trust equity grants. As a result, we will continue to recognize equity-based compensation expense related to these grants. Non-cash equity-based compensation consisted of $4.3 million associated with prior Ashford Trust equity grants, $951,000 in connection with stock option grants and $640,000 associated with equity grants of Ashford Trust’s and Ashford Prime’s common stock and LTIP units awarded to our officers and employees, in which we record offsetting revenue in an equal amount. During the 2014 quarter, the $10.1 million of salaries and benefits expense included $5.6 million of cash salaries and benefits and $4.5 million of non-cash equity-based compensation.

Income Tax Expense. Income tax expense increased $216,000, from $15,000 for the 2014 quarter, to $231,000 for the 2015 quarter. The increase in tax expense is due to the provision for federal and state income taxes for the 2015 quarter. For the 2014 quarter, the Company’s taxable income was “carved out” of Ashford Trust OP, a partnership, and its wholly-owned disregarded limited liability company which are not subject to U.S. federal income taxes. Rather, the partnership’s revenues and expenses passed through to and were taxed to the owners. Therefore, the Company did not provide for federal income taxes.The income tax expense in the 2014 quarter is related to Texas margin tax.

Net Loss Attributable to Redeemable Noncontrolling Interests in Ashford LLC. Noncontrolling interests in Ashford LLC were allocated net loss of $18,000 in the 2015 quarter. Redeemable noncontrolling interests represented ownership interests of 0.2% in Ashford LLC at March 31, 2015. No income was allocated during the 2014 quarter as there were no noncontrolling interests in the operating partnership prior to our spin-off from Ashford Trust.

There have been no material changes since December 31, 2014, outside the ordinary course of business, to contractual obligations specified in the table of contractual obligations included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2014 Form 10-K. Distributions under the deferred compensation plan are made in cash, unless the participant has elected Ashford Inc. common stock as the investment option, in which any such distributions would be made in Ashford Inc. common stock. The deferred compensation plan obligation is carried at fair value based on the underlying investment(s).

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 March 31, 2015. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses in our internal control over financial reporting, as of March 31, 2015, our disclosure controls and procedures were not effective to ensure that (i) information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. See “Risk Factors- We identified material weaknesses in our internal controls over financial reporting that existed for the three months ended March 31, 2015. If we fail to properly remediate the material weaknesses, or fail to properly identify or remediate any future weaknesses or deficiencies, or achieve and maintain effective internal control, our ability to produce accurate and timely financial statements could be impaired and investors could lose confidence in our financial statements.”

The discussion of our business and operations and risk factors discussed in this report should be read together with the risk factors contained in “Item 1A. Risk Factors” of our 2014 Form 10-K, as filed with the SEC on March 24, 2015, which describes various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner.

We identified material weaknesses in our internal controls over financial reporting that existed for the three months ended March 31, 2015. If we fail to properly remediate the material weaknesses, or fail to properly identify or remediate any future weaknesses or deficiencies, or achieve and maintain effective internal control, our ability to produce accurate and timely financial statements could be impaired and investors could lose confidence in our financial statements.

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 in accordance with GAAP. In August 2015, we became aware of deficiencies in the effectiveness of our controls that led to the following errors in our financial statements: (i) a misstatement related to income tax expense and deferred tax assets resulting from improper consideration of carryback potential of certain deferred tax assets in assessing whether it is more likely than not that a portion of our deferred tax assets will be realized, and (ii) a misstatement relating to the consolidation of certain private investment funds managed by AIM. These errors indicate design deficiencies in our controls surrounding management’s preparation and review of (i) our interim income tax provision and (ii) analysis supporting VIE consolidation. We corrected these errors and restated our historical unaudited interim condensed financial statements as of March 31, 2015; however the lack of proper controls resulted in material weaknesses in internal control over financial reporting as defined in Public Company Accounting Oversight Board Auditing Standard No. 5. As of the date of filing this Form 10-Q/A, we are still remediating the material weaknesses.

There can be no assurance that our remedial measures will be sufficient to address the material weaknesses or that our internal control over financial reporting will not be subject to additional material weaknesses in the future. If the remedial measures that we take are insufficient to address the material weaknesses or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results. Additionally, we may encounter problems or delays in implementing any changes necessary for management to make a favorable assessment of our internal control over financial reporting. If we cannot favorably assess the effectiveness of our internal control over financial reporting, investors could lose confidence in our financial information and the price of our common stock could decline.



Exhibit	Description
31.1*	Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
31.2*	Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The following materials from the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2015, are formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Statements of Operations and Comprehensive Loss; (iii) Condensed Consolidated Statement of Equity; (iv) Condensed Statements of Cash Flows; and (v) Notes to the Condensed Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

101.INS	XBRL Instance Document	Submitted electronically with this report.
101.SCH	XBRL Taxonomy Extension Schema Document	Submitted electronically with this report.
101.CAL	XBRL Taxonomy Calculation Linkbase Document	Submitted electronically with this report.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically with this report.
101.LAB	XBRL Taxonomy Label Linkbase Document.	Submitted electronically with this report.
101.PRE	XBRL Taxonomy Presentation Linkbase Document.	Submitted electronically with this report.



Delaware		46-5292553
(State or other jurisdiction of incorporation or organization)		(IRS employer identification number)

14185 Dallas Parkway, Suite 1100
Dallas, Texas		75254
(Address of principal executive offices)		(Zip code)



Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	þ	Smaller reporting company	¨



Common Stock, $0.01 par value per share		1,989,770
(Class)		Outstanding at August 12, 2015



PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Balance Sheets as of March 31, 2015 and December 31, 2014	2
Condensed Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2015 and 2014	3
Condensed Statement of Equity for the Three Months Ended March 31, 2015	4
Condensed Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	5
Notes to Condensed Financial Statements	6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23
ITEM 4. CONTROLS AND PROCEDURES	31
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS	32
ITEM 6. EXHIBITS	32
SIGNATURES	34



Date:	August 14, 2015	By:	/s/ MONTY J. BENNETT
			Monty J. Bennett
			Chief Executive Officer

Date:	August 14, 2015	By:	/s/ DERIC S. EUBANKS
			Deric S. Eubanks
			Chief Financial Officer



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


⁽¹⁾	Reported as “investments in securities” in the balance sheets.


⁽²⁾	Reported as “liabilities associated with investments in securities” in the balance sheets.


⁽¹⁾	Reported as a component of “salaries and benefits” in the statement of operations and comprehensive loss.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


•	general volatility of the capital markets, the general economy or the hospitality industry, whether the result of market events or otherwise, and the market price of our common stock;


•	changes in our industry and the market in which we operate, interest rates or the general economy;


•	actual and potential conflicts of interest with or between Remington, Ashford Prime and Ashford Trust, our executive officers and our non-independent directors;


•	changes in governmental regulations, accounting rules, tax rates and similar matters; and


•	availability, terms and deployment of capital;