Ashford Inc. (NYSE:AINC) Q4 2022 Earnings Conference Call February 23, 2023 12:00 PM ET Company Participants Jordan Jennings - Investor Relations Deric Eubanks - Chief Financial Officer Eric Batis - Executive Vice President, Operations Conference Call Participants Bryan Maher - B. Riley Securities Operator Greetings and welcome to the Ashford Inc. Fourth Quarter 2022 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your hos ...

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(unaudited)) The unaudited financial statements for the period ended September 30, 2022, reflect asset growth, a widened equity deficit, and strong revenue performance [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets increased, total liabilities rose, and the total equity deficit widened compared to year-end 2021 Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Items | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$525,199** | **$514,796** | | Cash and cash equivalents | $44,071 | $37,571 | | Goodwill | $58,675 | $56,622 | | Intangible assets, net | $233,031 | $244,726 | | **Total Liabilities** | **$306,806** | **$278,492** | | Notes payable, net (Current & Non-current) | $94,007 | $59,394 | | Dividends payable | $26,777 | $34,574 | | **Total Mezzanine Equity** | **$479,732** | **$478,069** | | **Total Equity (Deficit)** | **($261,339)** | **($241,765)** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q3 and the nine months ended September 30, 2022, the company experienced significant revenue growth, leading to improved operating income and a narrowed net loss for the nine-month period Q3 2022 vs Q3 2021 Performance (in thousands, except per share) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | **Total Revenues** | **$164,608** | **$108,186** | | Operating Income | $2,795 | $627 | | Net Income (Loss) | ($1,103) | ($356) | | **Net Loss Attributable to Common Stockholders** | **($10,018)** | **($9,231)** | | Basic & Diluted Loss Per Share | ($3.38) | ($3.31) & ($3.64) | Nine Months 2022 vs 2021 Performance (in thousands, except per share) | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | **Total Revenues** | **$466,020** | **$255,966** | | Operating Income (Loss) | $18,080 | ($12,058) | | Net Income (Loss) | $4,901 | ($14,774) | | **Net Loss Attributable to Common Stockholders** | **($21,981)** | **($40,991)** | | Basic & Diluted Loss Per Share | ($7.59) & ($7.64) | ($14.93) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2022, operating cash flow significantly increased, while investing activities rose due to acquisitions, and financing cash outflow decreased Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | **$24,087** | **$12,362** | | **Net Cash from Investing Activities** | **($12,967)** | **($6,993)** | | **Net Cash from Financing Activities** | **($2,379)** | **($13,308)** | | Net Change in Cash | $8,736 | ($7,902) | | **Cash, Cash Equivalents & Restricted Cash at End of Period** | **$81,185** | **$74,764** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed information on the company's business, accounting policies, key financial transactions, and segment performance, including recent acquisitions and financing activities [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses significant revenue growth driven by hospitality recovery and acquisitions, improved operating income, and key liquidity events including a new credit facility and dividend plans - The company's growth strategy focuses on two main areas: increasing assets under management and expanding its other products and services businesses through third-party clients[592](index=592&type=chunk) - In Q3 2022, the company initiated a Cash Management Strategy to invest excess cash from Ashford Trust and Braemar in short-term U.S. Treasury securities, earning a fee for this service[242](index=242&type=chunk)[391](index=391&type=chunk) - On August 30, 2022, the company adopted a shareholder rights plan to protect against hostile takeovers, which becomes exercisable if a party acquires **10%** or more of common stock without board approval[243](index=243&type=chunk)[384](index=384&type=chunk)[596](index=596&type=chunk) [Results of Operations](index=59&type=section&id=Results%20of%20Operations) The company experienced significant revenue growth in Q3 and the nine-month period, driven by various service fees, which improved operating income despite increased expenses Revenue Growth by Category (Q3 2022 vs Q3 2021) | Revenue Category | Q3 2022 (in thousands) | Q3 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Advisory services fees | $12,255 | $10,143 | 20.8% | | Hotel management fees | $12,876 | $7,750 | 66.1% | | Design and construction fees | $6,276 | $2,202 | 185.0% | | Audio visual | $26,159 | $15,108 | 73.1% | | **Total Revenues** | **$164,608** | **$108,186** | **52.2%** | Revenue Growth by Category (Nine Months 2022 vs 2021) | Revenue Category | 9M 2022 (in thousands) | 9M 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Advisory services fees | $36,026 | $30,132 | 19.6% | | Hotel management fees | $33,474 | $18,737 | 78.7% | | Design and construction fees | $15,538 | $5,611 | 176.9% | | Audio visual | $87,101 | $28,170 | 209.2% | | **Total Revenues** | **$466,020** | **$255,966** | **82.1%** | - Salaries and benefits expense increased **54.6%** in Q3 2022 YoY, primarily due to more corporate employees, reinstatement of the 401(k) match, and expenses related to the COO's termination agreement[257](index=257&type=chunk)[258](index=258&type=chunk) [Liquidity and Capital Resources](index=72&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by operating cash and a new credit facility, with plans to address preferred dividend arrears and fulfill a purchase commitment by year-end 2022 - On April 1, 2022, the company secured a new **$100 million** senior secured term loan facility, drawing **$70 million** to refinance existing debt and pay preferred dividends[298](index=298&type=chunk)[651](index=651&type=chunk) - The company has undeclared preferred stock dividends of approximately **$18.1 million** for Q2 and Q4 2021, which it intends to pay during calendar year 2023[300](index=300&type=chunk)[653](index=653&type=chunk) - A remaining purchase commitment of **$11.4 million** exists under the Enhanced Return Funding Program (ERFP) with Ashford Trust, which must be fulfilled by December 31, 2022[307](index=307&type=chunk)[500](index=500&type=chunk)[660](index=660&type=chunk) Cash Position (in millions) | Category | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $44.1 | $37.6 | | Restricted cash | $37.1 | $34.9 | [Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks primarily from interest rate fluctuations on its variable-rate debt and unhedged foreign currency exchange rates from international operations - The company is exposed to interest rate risk, with **$94.2 million** of its **$98.4 million** total debt being variable-rate. A **100 basis point** change would result in an approximate annual impact of **$942,000**[322](index=322&type=chunk)[675](index=675&type=chunk) - Foreign exchange risk exists due to INSPIRE's operations in Mexico and the Dominican Republic. The company does not currently use financial instruments to hedge this risk[323](index=323&type=chunk)[676](index=676&type=chunk) [Controls and Procedures](index=76&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal controls during the quarter - As of September 30, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[325](index=325&type=chunk)[678](index=678&type=chunk) - No material changes were made to the company's internal controls over financial reporting during the third quarter of 2022[326](index=326&type=chunk)[679](index=679&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=77&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in ongoing legal proceedings, including a class-action employment lawsuit and a personal injury claim, none of which are expected to materially impact its financial position - A class-action lawsuit in California alleges violations of employment laws regarding rest breaks. The company believes a potential loss is not reasonably estimable at this time[328](index=328&type=chunk)[502](index=502&type=chunk)[681](index=681&type=chunk) - A lawsuit in the U.S. Virgin Islands alleges negligence and gross negligence related to personal injuries. The company intends to vigorously defend against the claims and believes any potential loss is immaterial[329](index=329&type=chunk)[503](index=503&type=chunk)[682](index=682&type=chunk) [Risk Factors](index=77&type=section&id=ITEM%201A.%20RISK%20FACTORS) Key risks include challenges in integrating acquired businesses, the deterrent effect of the shareholder rights plan, and adverse impacts from uncertain U.S. economic conditions - The company faces risks related to the acquisition and integration of businesses, such as the recent Chesapeake purchase, which could disrupt business and dilute stockholder value[333](index=333&type=chunk)[334](index=334&type=chunk)[686](index=686&type=chunk) - A shareholder rights plan has been adopted, which could make a third-party acquisition more difficult while it is in effect[335](index=335&type=chunk)[336](index=336&type=chunk)[688](index=688&type=chunk) - Uncertain economic conditions in the U.S., including recessionary concerns, rising inflation, and increasing interest rates, pose a material risk to the company's earnings and financial condition[337](index=337&type=chunk)[339](index=339&type=chunk)[690](index=690&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=80&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During Q3 2022, the company did not repurchase shares under its stock repurchase program, with only minor share acquisitions for employee tax withholding - No shares were repurchased under the company's **$20 million** stock repurchase program during the three months ended September 30, 2022[341](index=341&type=chunk)[694](index=694&type=chunk) [Defaults Upon Senior Securities](index=80&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company is in arrears on approximately **$18.1 million** in Series D Convertible Preferred Stock dividends for two quarters of 2021, which constitutes a 'Preferred Stock Breach' with potential implications - As of November 7, 2022, the company had approximately **$18.1 million** in undeclared and unpaid dividends for its Series D Convertible Preferred Stock, related to the second and fourth quarters of 2021[343](index=343&type=chunk)[696](index=696&type=chunk) - The company paid previously declared dividends for Q1 and Q2 2022, as well as a dividend for Q3 2022 subsequent to the quarter's end[344](index=344&type=chunk)[697](index=697&type=chunk) [Exhibits](index=82&type=section&id=ITEM%206.%20EXHIBITS) This section provides a comprehensive list of all exhibits filed with the Form 10-Q, including key agreements and certifications

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited financial statements, management's discussion, market risk disclosures, and internal controls for the period [ITEM 1. FINANCIAL STATEMENTS (unaudited)](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(unaudited)) The unaudited financial statements for Q3 2020 show a significant financial deterioration, with a $201.3 million net loss and a $180.5 million equity deficit, driven by impairment charges and COVID-19 impacts [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets highlight a significant decline in total assets and a shift to a substantial total equity deficit by September 30, 2020 Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2020 | Dec 31, 2019 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$601,841** | **$782,500** | **($180,659)** | | Cash and cash equivalents | $68,623 | $35,349 | $33,274 | | Goodwill | $66,834 | $205,606 | ($138,772) | | Intangible assets, net | $278,777 | $347,961 | ($69,184) | | **Total Liabilities** | **$302,894** | **$262,285** | **$40,609** | | Notes payable, net (Current) | $57,719 | $3,550 | $54,169 | | **Total Equity (Deficit)** | **($180,461)** | **$42,024** | **($222,485)** | | Accumulated deficit | ($469,651) | ($244,084) | ($225,567) | - The company's financial position significantly weakened, with total equity shifting from **$42.0 million** to a deficit of **$180.5 million** This was primarily driven by a substantial increase in the accumulated deficit and a large reduction in goodwill and intangible assets[9](index=9&type=chunk)[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations reveal a substantial net loss for the nine-month period, primarily due to a significant impairment charge Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$55,868** | **$56,889** | **$235,308** | **$183,675** | | Impairment | $0 | $0 | $178,213 | $0 | | **Operating Income (Loss)** | **($14,634)** | **($6,801)** | **($204,224)** | **($3,316)** | | **Net Income (Loss)** | **($14,140)** | **($6,591)** | **($201,298)** | **($6,352)** | | Net Loss Attributable to Common Stockholders | ($21,983) | ($9,428) | ($225,039) | ($15,164) | | **Loss Per Share (Basic & Diluted)** | **($9.53)** | **($3.65)** | **($99.62)** | **($6.09)** | - For the nine months ended September 30, 2020, the company recorded a massive operating loss of **$204.2 million**, primarily due to a **$178.2 million impairment charge** This resulted in a net loss attributable to common stockholders of **$225.0 million**, or **($99.62) per share**[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statements show positive operating cash flow despite net losses, driven by non-cash adjustments and reduced investing activities Cash Flow Summary for Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $44,700 | $22,748 | | Net cash used in investing activities | ($4,842) | ($38,740) | | Net cash provided by financing activities | $11,522 | $4,919 | | **Net change in cash, cash equivalents and restricted cash** | **$51,951** | **($11,065)** | - Despite a significant net loss, cash from operations increased to **$44.7 million** for the nine-month period, largely due to non-cash charges like the **$178.2 million impairment** Investing activities decreased significantly due to fewer acquisitions compared to 2019 Financing activities provided cash primarily from new notes payable[25](index=25&type=chunk)[27](index=27&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant going concern doubts, COVID-19 responses, substantial impairment charges, and debt covenant non-compliance - The company has determined there is substantial doubt about its ability to continue as a going concern for at least one year This is due to the impact of COVID-19, uncertainty regarding future advisory fees from its key client Ashford Trust (which also has going concern issues), and the potential inability to comply with loan covenants[43](index=43&type=chunk) - In response to the COVID-19 pandemic, the company reduced executive compensation, partially deferred preferred stock dividends, and amended payment terms with clients to manage working capital[40](index=40&type=chunk)[47](index=47&type=chunk) - During the first quarter of 2020, the company recorded significant impairment charges totaling **$178.2 million** (**$170.6 million** for goodwill and **$7.6 million** for intangible assets) due to reduced cash flow projections and a decline in market capitalization caused by the pandemic[138](index=138&type=chunk) - As of September 30, 2020, the company's subsidiary JSAV was not in compliance with certain debt covenants, constituting an 'Event of Default' This led to its **$20.6 million** debt balance being reclassified as a current liability[41](index=41&type=chunk)[151](index=151&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=67&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the severe COVID-19 impact, leading to liquidity preservation measures, covenant breaches, and substantial doubt about the company's going concern status [Results of Operations](index=75&type=section&id=Results%20of%20Operations) Results of operations show significant revenue declines in project management and audio-visual, partially offset by new hotel management fees and cost reimbursements Revenue Changes - Q3 2020 vs Q3 2019 (in thousands) | Revenue Stream | Q3 2020 | Q3 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Project management fees | $1,790 | $6,660 | ($4,870) | (73.1)% | | Audio visual | $3,114 | $22,430 | ($19,316) | (86.1)% | | Hotel management fees | $3,777 | $0 | $3,777 | N/A | | Cost reimbursement revenue | $28,133 | $11,301 | $16,832 | 148.9% | | **Total Revenues** | **$55,868** | **$56,889** | **($1,021)** | **(1.8)%** | Expense Changes - Q3 2020 vs Q3 2019 (in thousands) | Expense Line | Q3 2020 | Q3 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of revenues for audio visual | $3,126 | $17,732 | $14,606 | 82.4% | | Depreciation and amortization | $10,094 | $8,048 | ($2,046) | (25.4)% | | Other | $9,147 | $4,849 | ($4,298) | (88.6)% | | **Total Expenses** | **$70,502** | **$63,690** | **($6,812)** | **(10.7)%** | - For the nine months ended Sep 30, 2020, the company recorded a goodwill impairment of **$170.6 million** and an intangible asset impairment of **$7.6 million**, which were the primary drivers of the significant operating and net losses for the period[346](index=346&type=chunk) - The decrease in project management and audio-visual revenues was directly attributed to the impact of COVID-19 The inclusion of hotel management fees from the Remington acquisition (Nov 2019) and a large increase in cost reimbursement revenue partially offset these declines[316](index=316&type=chunk) [Liquidity and Capital Resources](index=88&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity analysis reveals substantial doubt about going concern, reclassification of debt as current, and undeclared preferred stock dividends - Management has concluded there is substantial doubt about the company's ability to continue as a going concern due to the impact of COVID-19, uncertainty of fee collection from Ashford Trust, and potential non-compliance with loan covenants[359](index=359&type=chunk) - The company's **$34.1 million** Term Loan has been classified as a current liability due to uncertainty about its ability to remain in compliance with financial covenants over the next twelve months[357](index=357&type=chunk) - The company did not declare dividends on its Series D Convertible Preferred Stock for the second quarter of 2020 As of September 30, 2020, aggregate undeclared preferred dividends were approximately **$7.9 million**[363](index=363&type=chunk) - The company has a remaining purchase commitment of **$11.4 million** under its Enhanced Return Funding Program (ERFP) with Ashford Trust, with the deadline extended to December 31, 2022[369](index=369&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=94&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces interest rate risk from variable-rate debt and foreign currency risk from international operations, without current hedging strategies - The company is exposed to interest rate risk, with **$60.2 million** of its total **$62.8 million** in debt being variable-rate A **100 basis point** change in interest rates would impact results by approximately **$602,000** annually[391](index=391&type=chunk) - Foreign exchange risk exists due to the operations of its subsidiary JSAV in Mexico and the Dominican Republic The company does not currently use financial instruments to hedge this risk[393](index=393&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=94&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of September 30, 2020, and concluded they were effective - Management concluded that as of September 30, 2020, the company's disclosure controls and procedures were effective[394](index=394&type=chunk) - No material changes were made to the internal controls over financial reporting during the quarter ended September 30, 2020[395](index=395&type=chunk) [PART II. OTHER INFORMATION](index=95&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, significant risk factors, unregistered equity sales, and defaults on senior securities [ITEM 1. LEGAL PROCEEDINGS](index=95&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in an SEC investigation regarding related-party transactions and a subsidiary faces an employment law class-action lawsuit - In June 2020, the company received an administrative subpoena from the SEC requesting documents and information related to related-party transactions since January 1, 2018[397](index=397&type=chunk) - A subsidiary is facing a class-action lawsuit in California alleging violations of employment laws concerning rest breaks The potential loss is not reasonably estimable at this time[398](index=398&type=chunk) [ITEM 1A. RISK FACTORS](index=96&type=section&id=ITEM%201A.%20RISK%20FACTORS) Significant risks include the COVID-19 pandemic's impact, going concern doubts, potential delisting, Ashford Trust's bankruptcy risk, and an ongoing SEC investigation - The COVID-19 pandemic continues to significantly and adversely affect the business, leading to goodwill impairments and a substantial doubt about the company's ability to continue as a going concern[402](index=402&type=chunk)[403](index=403&type=chunk) - The company is not in compliance with NYSE American's continued listing standards regarding stockholders' equity and faces a risk of delisting if it cannot regain compliance by February 26, 2022[409](index=409&type=chunk)[410](index=410&type=chunk) - There is a substantial risk that key client Ashford Trust may need to seek Chapter 11 bankruptcy protection, which would likely terminate agreements and materially harm Ashford Inc.'s business, potentially causing it to also seek bankruptcy protection[453](index=453&type=chunk)[455](index=455&type=chunk) - The company is under investigation by the SEC regarding related-party transactions, which could result in significant legal expenses and penalties[451](index=451&type=chunk)[452](index=452&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=105&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the third quarter of 2020, the company did not repurchase any shares under its $20 million stock repurchase program, but issued 7,439 restricted shares in a private placement - No shares were repurchased under the company's **$20 million** stock repurchase program during the third quarter of 2020[459](index=459&type=chunk) - The company issued **7,439 restricted shares** in a private placement to a consultant as compensation for strategic business outreach services[460](index=460&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=105&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company defaulted on its Series D Convertible Preferred Stock dividend for Q2 2020, resulting in approximately $7.9 million in undeclared preferred dividends - The company did not declare dividends for its Series D Convertible Preferred Stock for the second quarter of 2020[461](index=461&type=chunk) - As of September 30, 2020, the company had approximately **$7.9 million** in undeclared preferred stock dividends related to Q2 2020 The total unpaid dividend liability, including declared but unpaid amounts, was **$15.9 million**[462](index=462&type=chunk)