Equity and Stock-Based Compensation

9 Months Ended

Sep. 30, 2021

Equity and Stock-Based CompensationCommon Stock Dividends—The board of directors did not declare a quarterly common stock dividend for the three and nine months ended September 30, 2021 and 2020

Restricted Stock Units—We incur stock-based compensation expense in connection with restricted stock units awarded to certain employees of Ashford LLC and its affiliates. We also issue common stock to certain of our independent directors, which vests immediately upon issuance.

The Company issued equity awards in the first quarter of 2021, a substantial majority of which were issued subject to stockholder approval of an increase in the number of shares available for issuance under the Company’s 2013 Equity Incentive Plan. Under the applicable accounting literature, these awards are not accounted for until stockholder approval is obtained. In March 2021, approximately 504,000 restricted stock units with a fair value of approximately $3.5 million and a vesting period of three years were granted. Stockholder approval was obtained on May 11, 2021.

On May 11, 2021, approximately 215,000 restricted stock units with a fair value of approximately $1.5 million and a vesting period of three years were granted. Additionally, approximately 46,000 shares of common stock were issued to independent directors, with a fair value of approximately $322,000, which vested immediately upon grant.

Performance Stock Units—The compensation committee of the board of directors of the Company may authorize the issuance of grants of performance stock units (“PSUs”) to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date.

With respect to the 2019 and 2020 award agreements, the number of PSUs actually earned may range from 0% to 200% of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date. The performance criteria for the PSUs are based on market conditions under the relevant literature. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.

The Company issued equity awards in the first quarter of 2021, a substantial majority of which were issued subject to stockholder approval of an increase in the number of shares available for issuance under the Company’s Amended and Restated 2011 Stock Incentive Plan. Under the applicable accounting literature, these awards are not accounted for until shareholder approval is obtained. Stockholder approval was obtained on May 11, 2021.

With respect to the 2021 award agreements, the compensation committee shifted to a new performance metric, pursuant to which, the performance awards will be eligible to vest, from 0% to 200% of target, based on achievement of certain performance targets over the three-year performance period commencing on January 1, 2021 and ending on December 31, 2023. The performance criteria for the 2021 performance grants are based on performance conditions under the relevant literature, and the 2021 performance grants were issued to non-employees. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, which may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.

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

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

The following table summarizes dividends declared (in thousands):


	Three Months Ended September 30,			Nine Months Ended September 30,
	2021		2020	2021		2020
Series D Cumulative Preferred Stock	$	825	825	$	2,475	$	2,475

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

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

The issuance activity is summarized below (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Common shares issued	—		3,046		2,711		3,046
Gross proceeds received	$	—	$	7,715	$	16,119	$	7,715
Commissions and other expenses	—		97		202		97
Net proceeds	$	—	$	7,618	$	15,917	$	7,618

Standby Equity Distribution Agreement—On February 4, 2021, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd. (“YA”), pursuant to which the Company will be able to sell up to 7,780,786 shares of its common stock (the “Commitment Amount”) at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating on the earliest of (i) the first day of the month next following the 36-month anniversary of the SEDA or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”). Other than with respect to the Initial Advance (as defined below) the shares sold to YA pursuant to the SEDA would be purchased at 95% of the Market Price (as defined below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock. “Market Price” shall mean the lowest daily VWAP (as defined below) of the Company’s common stock during the five consecutive trading days commencing on the trading day following the date the Company submits an advance notice to YA. “VWAP” means, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the principal market as reported by Bloomberg L.P. during regular trading hours.

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

to issue and sell to YA (the “Advance Notice”). The Company may deliver an Advance Notice for an initial Advance for up to 1,200,000 Advance Shares (the “Initial Advance”). The preliminary purchase price per share for such shares shall be 100% of the average daily VWAP for the five consecutive trading days immediately prior to the date of the Advance Notice (the “Preliminary Purchase Price”).

Pursuant to the SEDA, we currently intend to use the net proceeds from any sale of the shares for working capital purposes, including the repayment of outstanding debt. There are no other restrictions on future financing transactions. The SEDA does not contain any right of first refusal, participation rights, penalties or liquidated damages. We are not required to pay any additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $10,000 structuring fee.

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



	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Common shares sold to YA	—		1,700
Proceeds received	$	—	$	10,000

Common Stock Resale Agreement—On April 21, 2021, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”), entered into a purchase agreement, pursuant to which the Company may issue or sell to Lincoln Park up to 8,893,565 shares of the Company’s common stock from time to time during the term of the purchase agreement. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln Park with certain registration rights related to the shares issued under the Purchase Agreement.

Upon entering into the purchase agreement, the Company issued 15,000 shares of the Company’s common stock as consideration for Lincoln Park’s execution and delivery of the purchase agreement. The issuance activity under the Lincoln Park agreement is summarized below (in thousands):



	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Common shares sold to Lincoln Park	—		766
Additional commitment shares	—		15
Total common shares issued to Lincoln Park	—		781

Proceeds received	$	—	$	4,217

At-the-Market Equity Distribution Agreement—On May 25, 2021, the Company entered into an equity distribution agreement with Virtu Americas LLC (“Virtu”), to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $50 million (the “Virtu May 2021 EDA”). We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.

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



	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Common shares issued	2,367		8,339
Gross proceeds received	$	13,421	$	50,000
Commissions and other expenses	134		500
Net proceeds	$	13,287	$	49,500

On July 12, 2021, the Company entered into a second equity distribution agreement with Virtu to sell from time to time shares of our common stock having an aggregate offering price of up to $100 million (the “Virtu July 2021 EDA”). We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.

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



	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Common shares issued	4,183		4,183
Gross proceeds received	$	21,363	$	21,363
Commissions and other expenses	214		214
Net proceeds	$	21,149	$	21,149

Stock Repurchases—On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share having an aggregate value of up to $50 million. The board of directors’ authorization replaced any previous repurchase authorizations. No shares were repurchased during the nine months ended September 30, 2021 and 2020. As of September 30, 2021, $50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.