Global Self Storage, Inc.
Annual Report 2018

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ Annual 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 For the fiscal year ended December 31, 2018 or For the transition period from to Commission File Number: 001-12681 GLOBAL SELF STORAGE, INC. (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 13-3926714 (I.R.S. Employer Identification Number) Global Self Storage, Inc. 11 Hanover Square, 12th Floor New York, NY 10005 (212) 785-0900 (Address, including zip code, and telephone number, including area code, of Company’s principal executive offices) Donald Klimoski II, Esq. Global Self Storage, Inc. 11 Hanover Square, 12th Floor New York, NY 10005 (212) 785-0900 (Address of principal executive officers, including zip code, and telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, $0.01 par value Name of exchange on which registered or to be registered The Nasdaq Stock Market LLC Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Non-accelerated filer ☐ ☐ Accelerated filer Smaller reporting company Emerging growth company ☐ ☒ ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No The aggregate market value of the common stock held by non-affiliates of the registrant was $29,720,121.25 based upon the closing price on the Nasdaq Capital Market on June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter. This calculation does not reflect a determination that persons whose shares are excluded from the computation are affiliates for any other purpose. The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of March 15, 2019, was 7,692,624. Portions of the registrant’s definitive proxy statement to be issued in connection with the registrant’s annual stockholders’ meeting to be held in 2019 are incorporated by reference into Part III of this Annual Report on Form 10-K. Documents Incorporated by Reference  Table of Contents PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Item 6. Item 7. of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Item 9. Item 9A. Item 9B. PART III Item 10. Item 11. Item 12. Item 13. Item 14. PART IV Item 15. Item 16. SIGNATURES Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Exhibits, Financial Statement Schedules Form 10-K Summary 2 5 8 24 24 25 25 26 26 27 43 43 43 43 44 45 45 45 45 45 46 49 49  STATEMENT ON FORWARD-LOOKING INFORMATION Certain information presented in this annual report may contain “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the Company’s plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as “believes,” “plans,” “intends,” “expects,” “estimates,” “may,” “will,” “should,” or “anticipates,” or the negative of such terms or other comparable terminology, or by discussions of strategy. All forward-looking statements by the Company involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Company, which may cause the Company’s actual results to be materially different from those expressed or implied by such statements. The Company may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by the Company or on its behalf, are also expressly qualified by these cautionary statements. All forward-looking statements, including without limitation, the Company’s examination of historical operating trends and estimates of future earnings, are based upon the Company’s current expectations and various assumptions. The Company’s expectations, beliefs and projections are expressed in good faith and it believes there is a reasonable basis for them, but there can be no assurance that the Company’s expectations, beliefs and projections will result or be achieved. All forward-looking statements apply only as of the date made. Except as required by law, the Company undertakes no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this annual report. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks referenced in “Item 1A. Risk Factors” and in our other filings with the Securities and Exchange Commission (the “SEC”). Such factors include, but are not limited to: • • • • • • • • • general risks associated with the ownership and operation of real estate, including changes in demand, risks related to development of self storage properties, potential liability for environmental contamination, natural disasters and adverse changes in tax, real estate and zoning laws and regulations; risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our customers; the impact of competition from new and existing self storage and commercial properties and other storage alternatives; difficulties in our ability to successfully evaluate, finance, integrate into our existing operations, and manage acquired and developed properties; risks related to our development of new properties and/or participation in joint ventures; risks of ongoing litigation and other legal and regulatory actions, which may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing the environment, taxes and our tenant reinsurance business and real estate investment trusts (“REITs”), and risks related to the impact of new laws and regulations; risk of increased tax expense associated either with a possible failure by us to qualify as a REIT, or with challenges to intercompany transactions with our taxable REIT subsidiaries; changes in federal or state tax laws related to the taxation of REITs, which could impact our status as a REIT; 3 • • • • • • • • • • • • • • increases in taxes, fees and assessments from state and local jurisdictions; security breaches or a failure of our networks, systems or technology could adversely impact our business, customer and employee relationships; our ability to obtain and maintain financing arrangements on favorable terms; market trends in our industry, interest rates, the debt and lending markets or the general economy; the timing of acquisitions and our ability to execute on our acquisition pipeline; general volatility of the securities markets in which we participate; changes in the value of our assets; changes in interest rates and the degree to which our hedging strategies may or may not protect us from interest rate volatility; our ability to continue to qualify and maintain our qualification as a REIT for U.S. federal income tax purposes; availability of qualified personnel; difficulties in raising capital at a reasonable cost; fiscal policies or inaction at the U.S. federal government level, which may lead to federal government shutdowns or negative impacts on the U.S economy; estimates relating to our ability to make distributions to our stockholders in the future; and economic uncertainty due to the impact of terrorism or war. 4 Item 1. General Business. PART I Global Self Storage, Inc. (the “Company”) is a self-administered and self-managed real estate investment trust (“REIT”) that owns, operates, manages, acquires, develops and redevelops self storage properties (“stores” or “properties”) in the United States. Our stores are designed to offer affordable, easily accessible, and secure storage space for residential and commercial customers. The Company currently owns and operates, through its wholly owned subsidiaries, eleven stores located in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, and South Carolina. From September 1, 1983 to February 7, 1997, the Company was a diversified series of shares of Bull & Bear Incorporated, an open-end management investment company. On January 23, 1997, the Company (formerly known as Global Income Fund, Inc.) filed a Form N-8A Notification of Registration pursuant to Section 8(a) of the Investment Company Act of 1940, as amended (the “1940 Act”), registering the Company as an investment company thereunder, and a Registration Statement on Form N-2 for closed-end investment companies. The Company commenced operations as a closed-end management investment company on February 7, 1997. On February 29, 2012, the Company’s stockholders approved a proposal to change the Company’s business from an investment company to an operating company that owns, operates, manages, acquires, develops, and redevelops professionally managed self storage properties and seeks to qualify as a REIT for U.S. federal tax purposes (the “Business Proposal”). The Securities and Exchange Commission’s (“SEC”) order approving the Company’s application to deregister from the 1940 Act was granted on January 19, 2016. Accordingly, effective January 19, 2016 and in connection with the Business Proposal, the Company changed its name to Global Self Storage, Inc. from Self Storage Group, Inc., changed its SEC registration to an operating company reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from an investment company under the 1940 Act, and listed its common stock on the Nasdaq Capital Market (“NASDAQ”) under the symbol “SELF”. The Company’s fiscal/taxable year ends December 31. The Company was incorporated on December 12, 1996 under the laws of the state of Maryland. The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). To the extent the Company continues to qualify as a REIT, it will not generally be subject to U.S. federal i ncome tax, with certain limited exceptions, on its taxable income that is distributed to its stockholders. Business Activities As of December 31, 2018, the Company had 28 total employees and owns, operates and manages, through its wholly owned subsidiaries, eleven stores located in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, and South Carolina. As of December 31, 2018, these properties total 765,508 net leasable square feet and offer 5,624 storage units. In addition to traditional and climate-controlled units, many of the properties feature both covered and outside auto/RV/boat storage. The Company invests in stores by acquiring stores through its wholly owned subsidiaries and operates primarily in one segment: rental operations. We continue to evaluate and enact a range of new initiatives and opportunities in order to help enable us to maximize our stores’ financial performance and stockholder value. Our strategies in seeking to maximize our stores’ financial performance and stockholder value include, among others, the following: • • continue to implement and refine our move-in rate management systems in seeking to maximize occupancies and thus revenue derived from our store portfolio; continue to implement and refine our existing tenant revenue rate management systems in seeking to maximize revenue per leased square foot from our store portfolio; 5 • • continue to implement and refine our digital, drive-by, and referral marketing programs in seeking to attract more and higher quality (e.g. credit card paying) customers to our stores at a lower net cost; and continue to pursue the acquisition of single stores and small portfolios that we believe can add stockholder value. Our stores are generally located in densely populated and high traffic areas near major roads and highways. All of our stores display prominent road signage and most feature LED marquee boards describing the store features and move-in rent specials. Our stores are generally located in areas with strict zoning laws and attentive planning boards which make it difficult for our competition to develop new properties near ours. As we evaluate potential stores, we seek stores in areas with these high barriers to entry. Most of our stores compete with other well-managed and well-located competitors and we are subject to general economic conditions, particularly those that affect the spending habits of consumers and moving trends. Because we operate in competitive markets, often where self storage consumers have multiple stores from which to choose, such competition has affected and is likely to continue to affect our store results. We experience seasonal fluctuations in occupancy levels as well, with occupancy levels generally higher in the summer months due to increased moving activity. We believe that our centralized information networks, national telephone and online reservation system, the brand name “Global Self Storage,” and our economies of scale help enable us to meet such challenges effectively. In seeking to maximize the performance of our stores, we employ our proprietary revenue rate management systems which help us to analyze, adjust, and set our move-in and existing tenant rental rates on a real-time basis across our portfolio. Among other technologies, we employ internet data scraping of our local competitors’ move-in rental rates to help enable us to proactively respond and take advantage of changing market conditions across our portfolio of stores. Our operating results typically depend significantly on our ability to manage our storage units’ rental rates, to respond in a timely manner to prospective tenant inquiries, and to lease available storage units, and on the ability of our tenants to make required storage unit rental payments. We have registered the trademark and developed the brand “Global Self Storage.” We have developed a corporate logo and have incorporated it on all of our on- site signage, advertising and other marketing materials. This branding process has included the creation and development of the www.GlobalSelfStorage.us website, whereby prospective customers can rent a storage unit or learn about the features of any of our self storage properties in their various locations. We continue to develop the Global Self Storage internet presence through advertising and search engine optimization. We solicit tenant reviews for posting to the “Testimonials” section of our website and encourage others to view these reviews. We have found that a reliable source of new tenants is through referrals of current tenants. Existing self storage customers may also pay their storage unit rent online through www.GlobalSelfStorage.us. Attracting high quality, long-term tenants is a top priority for the Company and we strongly believe in tenant quality over tenant quantity. In our marketing efforts, we have seen success in our referral marketing program, through which our tenants may recommend Global Self Storage to their family, friends, and colleagues. We also believe our store managers’ attention to detail – maintaining security, cleanliness, and attentive customer service – is essential to attracting high quality tenants. Tenant leases at all of our stores are “month-to-month” leases. We seek to deliver at least 30 days’ written notice of any rental rate change. Lease rates at each store may be set monthly, semi-annually, annually, or at any other time on a case-by-case basis as determined in the discretion of management. Tenants may be assessed late, administrative, and/or other fees. To date, none of the Company’s stores have experienced any material delinquencies. Each of our stores features a rental and payment center kiosk available 24 hours a day, seven days a week, where prospective tenants can rent a unit and current tenants can pay their rent. All of our stores have on-site property managers who are committed to delivering the finest customer service. We utilize a customer call center to handle telephone inquiries from current and prospective tenants whenever our store managers are not available. They can respond to questions about our properties and storage features, and book reservations. We seek to deliver 6 convenience and high quality customer service to our tenants, as well as maintain clean and secure stores at all times. Please refer to Item 7 herein for further discussion of, among other things, competitive business conditions, the Company’s competitive position in the self storage industry, methods of competition, and the effect of existing or probable government regulations on the Company’s business. The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Additional information about the Company, not contained in this form or made a part hereof, may be found at www.GlobalSelfStorage.us. Our Acquisition Strategy In our store acquisition strategy, we will seek to continue to focus on secondary and tertiary cities in the Mid-West, Northeast and Mid-Atlantic parts of the country where we believe there is relatively less self storage space per capita available, generally resulting in greater demand for available self storage square feet; where new self storage development and permitting through the local planning and zoning boards is typically more difficult to secure thus creating barriers to entry for new self storage competition; and where local new supply through new development is generally less prevalent. We continue to review available acquisition opportunities with the awareness that, should interest rates increase, resulting store capitalization rates may also increase and store prices may begin to decrease. We will seek to continue to employ our strict acquisition underwriting standards and remain a disciplined buyer and only execute acquisitions where we believe that our management techniques and innovations can strengthen our portfolio and increase stockholder value. For future acquisitions, the Company may use various financing and capital raising alternatives including, but not limited to, debt and/or equity offerings, credit facilities, mortgage financing, and joint ventures with third parties. Our Financing Strategy Our financing strategy is to minimize the cost of our capital in order to maximize the returns generated for our stockholders. On June 24, 2016, certain of our wholly owned subsidiaries (“Term Loan Secured Subsidiaries”) entered into a loan agreement and certain other related agreements (collectively, the “Term Loan Agreement”) between the Term Loan Secured Subsidiaries and Insurance Strategy Funding IV, LLC (the “Term Loan Lender”). Under the Term Loan Agreement, the Term Loan Secured Subsidiaries borrowed from Term Loan Lender the principal amount of $20 million pursuant to a promissory note (the “Term Loan Promissory Note”). The Term Loan Promissory Note bears interest at a rate equal to 4.192% per annum and is due to mature on July 1, 2036. Pursuant to a security agreement (the “Term Loan Security Agreement”), the obligations under the Term Loan Agreement are secured by certain real estate assets owned by the Term Loan Secured Subsidiaries. J.P. Morgan Investment Management, Inc. acted as Special Purpose Vehicle Agent of the Term Loan Lender. We entered into a non-recourse guaranty (the “Term Loan Guaranty” and together with the Term Loan Agreement, the Term Loan Promissory Note and the Term Loan Security Agreement, the “Term Loan Documents”) on June 24, 2016 to guarantee the payment to Term Loan Lender of certain obligations of the Term Loan Secured Subsidiaries under the Term Loan Agreement. We have used some of the proceeds from the Term Loan Agreement to acquire four additional self storage properties. 7  On December 20, 2018, certain of our wholly owned subsidiaries (“Credit Facility Secured Subsidiaries”) entered into a revolving credit loan agreement (collectively, the “Credit Facility Loan Agreement”) between the Credit Facility Secured Subsidiaries and TCF National Bank (“Credit Facility Lender”). Under the Credit Facility Loan Agreement, the Credit Facility Secured Subsidiaries may borrow from the Credit Facility Lender in the principal amount of up to $10 million pursuant to a promissory note (the “Credit Facility Promissory Note”). The Credit Facility Promissory Note bears an interest rate equal to 3.00% over the One Month U.S. Dollar London Inter-Bank Offered Rate and is due to mature on December 20, 2021. The obligations under the Credit Facility Loan Agreement are secured by certain real estate assets owned by the Credit Facility Secured Subsidiaries. We entered into a guaranty of payment on December 20, 2018 (the “Credit Facility Guaranty,” and together with the Credit Facility Loan Agreement, the Credit Facility Promissory Note and related instruments, the “Credit Facility Loan Documents”) to guarantee the payment to Credit Facility Lender of certain obligations of the Credit Facility Secured Subsidiaries under the Credit Facility Loan Agreement. As of December 31, 2018, we have not withdrawn any proceeds available under the Credit Facility Loan Agreement. We currently intend to strategically withdraw proceeds available under the Credit Facility Loan Agreement to fund: (i) the acquisition of additional self storage properties, (ii) expansions at existing self storage properties in our portfolio, and/or (iii) joint ventures with third parties for the acquisition and expansion of self storage properties. Item 1A. Risk Factors. Investing in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the following risk factors, together with the other information contained in this Annual Report on Form 10-K. Any of these risks described could materially adversely affect our business, financial condition, liquidity, results of operations, tax status or ability to make distributions to our stockholders. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. If this were to happen, the price of our securities could decline significantly, and you could lose a part or all of your investment. Risks Related to our Self Storage Properties and our Business Adverse economic or other conditions in the markets in which we do business and more broadly could negatively affect our occupancy levels and rental rates and therefore our operating results. Our operating results are dependent upon our ability to achieve optimal occupancy levels and rental rates at our self storage properties. Adverse economic or other conditions, such as during a government shutdown, in the markets in which we do business, may lower our occupancy levels and limit our ability to maintain or increase rents or require us to offer rental discounts. No single customer represents a significant concentration of our revenues. The following adverse developments, among others, in the markets in which we do business may adversely affect the operating performance of our properties: • • • • perceptions by prospective tenants of our self storage properties of the safety, convenience, and attractiveness of such properties and the areas in which they are located; industry slowdowns, relocation of businesses and changing demographics may adversely impact the markets in which we invest and in which our self storage properties operate; periods of economic slowdown or recession, rising interest rates, or declining demand for self storage or the public perception that any of these events may occur could result in a general decline in rental rates or an increase in tenant defaults; and actual or perceived oversupply or declining demand for self storage in a particular area. Our storage leases are relatively short-term in nature, which exposes us to the risk that we may have to re-lease our units and we may be unable to do so on attractive terms, on a timely basis or at all. If we are unable to promptly re-let our units or if the rates upon such re-letting are significantly lower than expected, then our business and results of operations would be adversely affected. Any delay in re-letting units as 8 vacancies arise would reduce our revenues and harm our operating results. In addition, lower than expected rental rates upon re-letting could adversely affect our revenues and impede our growth. Increases in taxes and regulatory compliance costs may reduce our income and adversely impact our cash flows. Increases in income or other taxes generally are not passed through to tenants under leases and may reduce our net income, funds from operations (“FFO”), cash flows, financial condition, ability to pay or refinance our debt obligations, ability to make cash distributions to stockholders, and the trading price of our securities. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which could result in similar adverse effects. Our property taxes could increase due to various reasons, including a reassessment, which could adversely impact our operating results and cash flow. The value of our properties may be reassessed for property tax purposes by taxing authorities including as a result of the acquisition of new self storage properties. Accordingly, the amount of property taxes we pay in the future may increase substantially from what we have paid in the past. Increases in property or other taxes generally are not passed through to tenants under leases and may reduce our results of operations and cash flow, and could adversely affect our ability to pay any expected dividends to our stockholders. Increases in operating costs may adversely affect our results of operation and cash flow. Increases in operating costs, including insurance costs, labor costs, utilities, capital improvements, real estate assessments and other taxes and costs of compliance with REIT requirements and with other laws, regulations and governmental policies could adversely affect our results of operation and cash flow. We depend upon our on-site personnel to maximize tenant satisfaction at each of our properties, and any difficulties we encounter in hiring, training, and maintaining skilled field personnel may harm our operating performance. We depend upon our on-site personnel to maximize tenant satisfaction at each of our properties, and any difficulties we encounter in hiring, training and maintaining skilled field personnel may harm our operating performance. The general professionalism of a site’s managers and staff are contributing factors to a site’s ability to successfully secure rentals and retain tenants. If we are unable to successfully recruit, train and retain qualified field personnel, our quality of service could be adversely affected, which could lead to decreased occupancy levels and reduced operating performance. Store ownership through joint ventures may limit our ability to act exclusively in our interest. We may co-invest with third parties through joint ventures. In any such joint venture, we may not be in a position to exercise sole decision-making authority regarding the stores owned through joint ventures. Investments in joint ventures may, under certain circumstances, involve risks not present when a third party is not involved, including the possibility that joint venture partners might become bankrupt or fail to fund their share of required capital contributions. Joint venture partners may have business interests or goals that are inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives. Such investments also have the potential risk of impasse on strategic decisions, such as a sale, in cases where neither we nor the joint venture partner would have full control over the joint venture. In other circumstances, joint venture partners may have the ability without our agreement to make certain major decisions, including decisions about sales, capital expenditures, and/or financing. Any disputes that may arise between us and our joint venture partners could result in litigation or arbitration that could increase our expenses and distract our officers and/or directors from focusing their time and effort on our business. In addition, we might in certain circumstances be liable for the actions of our joint venture partners, and the activities of a joint venture could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture. 9  We face competition from other self storage properties, which may adversely impact the markets in which we invest and in which our self storage properties operate. Increased competition in the self storage business has led to both pricing and discount pressures. This increased competition could limit our ability to increase revenues in the markets in which we operate. While some markets may be able to absorb an increase in self storage properties due to superior demographics and density, other markets may not be able to absorb additional properties and may not perform as well. Rental revenues are significantly influenced by demand for self storage space generally, and a decrease in such demand would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio or if we owned a larger number of self storage properties. Because our portfolio of properties consists of only self storage properties, we are subject to risks inherent in investments in a single industry. A decrease in the demand for self storage space would have a greater adverse effect on our rental revenues than it would if we owned a more diversified real estate portfolio. Demand for self storage space has been and could be adversely affected by ongoing weakness in the national, regional and local economies, changes in supply of, or demand for, similar or competing self storage properties in an area and the excess amount of self storage space in a particular market. To the extent that any of these conditions occur, they are likely to affect market rents for self storage space, which could cause a decrease in our rental revenue. Any such decrease could impair our operating results, ability to satisfy debt service obligations and ability to make cash distributions to our stockholders. Further, currently we invest in a limited number of self storage properties. As a result, the potential effect on our financial condition, results of operations, and cash available for distribution to stockholders, resulting from poor performance at one or more of our self storage properties could be more pronounced than if we invested in a larger number of self storage properties. We may not be successful in identifying and consummating suitable acquisitions, or integrating and operating acquired properties, which may adversely impact our growth. We expect to make future acquisitions of self storage properties. We may not be successful in identifying and consummating suitable acquisitions that meet our criteria, which may impede our growth. We may encounter competition when we seek to acquire properties, especially for brokered portfolios. Aggressive bidding practices by prospective acquirers have been commonplace and this competition also may be a challenge for our growth strategy and potentially result in our paying higher prices for acquisitions including paying consideration for certain properties that may exceed the value of such properties. Should we pay higher prices for self storage properties or other assets, our potential profitability may be reduced. Also, when we acquire any self storage properties, we will be required to integrate them into our then existing portfolio. The acquired properties may turn out to be less compatible with our growth strategy than originally anticipated, may cause disruptions in our operations or may divert management’s attention away from day-to-day operations, which could impair our results of operations. Our ability to acquire or integrate properties may also be constrained by the following additional risks: • • • • the inability to achieve satisfactory completion of due diligence investigations and other customary closing conditions; spending more than the time and amounts budgeted to make necessary improvements or renovations to acquired properties; the inability to build a captive pipeline of target properties that meet our rigorous underwriting standards; the inability to accurately estimate occupancy levels, rental rates, operating costs or costs of improvements to bring an acquired property up to the standards established for our intended market position; and 10 • encountering delays in the selection, acquisition, development or redevelopment of self storage properties which could adversely affect returns to stockholders and stockholders could suffer delays in the distribution of cash dividends attributable to any such properties. We may not be able to develop a captive pipeline of acquisition targets without the use of non-refundable deposits. We may be required to use non-refundable deposits to develop a captive pipeline of acquisition targets. If we are unable to raise the capital necessary to consummate such acquisitions we may be forced to abandon all or some of the acquisitions and forfeit any non-refundable deposits. If this occurs, it could adversely impact our operating results and our ability to pay any expected dividends to our stockholders. We may acquire properties subject to liabilities which may adversely impact our operating results. We may acquire properties subject to liabilities without any recourse, or with only limited recourse, with respect to unknown liabilities such as liabilities for clean- up of undisclosed environmental contamination, claims by persons dealing with the former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties. The costs associated with these liabilities may adversely impact our operating results. Our investments in development and redevelopment projects may not yield anticipated returns which could adversely impact our economic performance. In deciding whether to develop or redevelop a particular property, we make certain assumptions regarding the expected future performance of that property. These assumptions are inherently uncertain, and, if they prove to be wrong, then we may be subject to certain risks including the following: • • • • • we may not complete development projects on schedule or within projected budgeted amounts; we may underestimate the costs necessary to bring a property up to the standards established for its intended market position; we may encounter delays or refusals in obtaining all necessary zoning, land use, building, occupancy and other required governmental permits and authorizations; we may be unable to increase occupancy at a newly acquired property as quickly as expected or at all; and we may be unable to obtain financing for these projects on favorable terms or at all. The occurrence of such events could adversely affect the investment returns from these development or redevelopment projects and may adversely impact our economic performance. Our performance is subject to risks associated with the real estate industry. An investment in us is closely linked to the performance of the real estate markets in which we own self storage properties and subject to the risks associated with the direct ownership of real estate, including fluctuations in interest rates, inflation or deflation; declines in the value of real estate; and competition from other real estate investors with significant capital. Prevailing economic conditions affecting the real estate industry may adversely affect our business, financial condition and results of operations. Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties. We may be unable to promptly sell one or more properties in response to changing economic, financial and investment conditions. We cannot predict whether we will be able to sell any property for the price or on the terms set by us or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We may 11 be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot give assurances that we will have funds available to correct those defects or to make those improvements. In acquiring a property, we may agree to transfer restrictions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These transfer restrictions may impede our ability to sell a property even if we deem it necessary or appropriate. We may also have joint venture investments in certain of our properties and, consequently, our ability to control decisions relating to such properties may be limited. Any negative perceptions of the self storage industry generally may result in a decline in our stock price. To the extent that the investing public has a negative perception of the self storage industry, the value of our securities may be negatively impacted. Costs associated with complying with the Americans with Disabilities Act of 1990 may result in unanticipated expenses. Our self storage properties also are subject to risks related to changes in, and changes in enforcement of, federal, state and local laws, regulations and governmental policies, including fire and safety requirements, health, zoning and tax laws, governmental fiscal policies and the Americans with Disabilities Act of 1990 (“ADA”). Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain approval from local officials or community standards organizations at any time with respect to our properties, including prior to acquiring a property or when undertaking renovations of any of our existing properties. Further, compliance with the ADA and other regulations may require us to make unanticipated expenditures that could significantly reduce cash available for distribution to stockholders. A failure to comply with the ADA or similar state laws could lead to government imposed fines on us and/or litigation, which could also involve an award of damages to individuals affected by the noncompliance. Such noncompliance also could result in an order to correct any noncomplying feature, which could result in substantial capital expenditures. Extensive environmental regulation to which we are subject creates uncertainty regarding future environmental expenditures and liabilities. Under environmental regulations such as the federal Comprehensive Environmental Response and Compensation Liability Act, owners and operators of real estate may be liable for the costs of investigating and remediating certain hazardous substances or other regulated materials on or in such property. Such laws often impose liability, without regard to knowledge or fault, for removal or remediation of hazardous substances or other regulated materials upon owners and operators of contaminated property, even after they no longer own or operate the property. Moreover, the past or present owner or operator of a property from which a release emanates could be liable for any personal injuries or property damages that may result from such releases, as well as any damages to natural resources that may arise from such releases. The presence of such substances or materials, or the failure to properly remediate such substances, may adversely affect the owner’s or operator’s ability to lease, sell or rent such property or to borrow using such property as collateral. We may become subject to litigation or threatened litigation or other claims that may divert management’s time and attention, require us to pay damages and expenses or restrict the operation of our business. We may become subject to disputes with commercial parties with whom we maintain relationships or other parties with whom we do business. Any such dispute could result in litigation between us and the other parties. Whether or not any dispute actually proceeds to litigation, we may be required to devote significant management time and attention to its successful resolution (through litigation, settlement or otherwise), which would detract from our management’s ability to focus on our business. Any such resolution could involve the payment of damages or expenses by us, which may be significant. In addition, any such resolution could involve our agreement with terms that restrict the operation of our business. From time to time we may be required to resolve tenant claims and litigation and employment-related claims and litigation by corporate level and field personnel which could result in substantial liabilities to us. We also 12 could be sued for personal injuries and/or property damage occurring at our properties. The liability insurance we maintain may not cover all costs and expenses arising from such lawsuits. Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and cash flow. We maintain comprehensive liability, fire, flood, earthquake, wind, extended coverage and rental loss insurance (as deemed necessary or as required by our lenders, if any) with respect to our properties. Certain types of losses, however, may be either uninsurable or not economically insurable, such as losses due to earthquakes, hurricanes, tornadoes, riots, acts of war or terrorism. Should an uninsured loss occur, we could lose both our investment in and anticipated profits and cash flow from a property. In addition, if any such loss is insured, we may be required to pay significant amounts on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss. To the extent we invest in publicly traded REITs, our performance may be subject to the risks of investment in such securities. The value of our investments in REITs may fluctuate, sometimes rapidly and unpredictably. Because REITs concentrate their assets in the real estate industry, the performance of REITs is closely linked to the performance of the real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, cultural or technological developments, rising interest rates, and rising capitalization rates. REIT prices also may drop because of the failure of borrowers to pay their loans and poor management. In addition, there are specific risks associated with particular sectors of real estate investments such as self storage, retail, office, hotel, healthcare, and multi-family properties. Many REITs utilize leverage, which increases investment risk and could adversely affect a REIT’s operations and market value in periods of rising interest rates as well as risks normally associated with debt financing. In addition, a REIT’s failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), or failure to maintain exemption from registration under the Investment Company Act could adversely affect our operations and our qualification as a REIT under the Code. The failure of these investments to perform as expected may have a significant effect on our performance and our ability to make distributions to stockholders. We may be unable to make distributions in the future, maintain our current level of distributions or increase distributions over time. There are many factors that can affect the availability and timing of cash distributions to stockholders and the determination to make distributions will fall within the discretion of our board of directors. Our board of directors’ decisions to pay distributions will depend on many factors, such as our historical and projected results of operations, financial condition, cash flows and liquidity, maintenance of our REIT qualification and other tax considerations, capital expenditure and other expense obligations, debt covenants, contractual prohibitions or other limitations and applicable law and such other matters as our board of directors may deem relevant from time to time. Actual cash available for distributions may vary substantially from estimates. We may not have sufficient available cash from operations to make a distribution required to qualify for or maintain our REIT status. We may be required to borrow or make distributions that would constitute a return of capital which may reduce the amount of capital we invest in self storage properties. We cannot assure stockholders that we will be able to make distributions in the future, be able to maintain our current level of distributions or that our distributions will increase over time, and our inability to make distributions, or to make distributions at expected levels, could result in a decrease in the market price of our common stock. We rely on information technology in our operations, and any material failure, inadequacy, interruption or security breach through cyber-attacks, cyber-intrusions, or other methods could disrupt our information technology networks and related systems and harm our business. We rely on information technology networks and systems, including the internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including, but not limited to, financial transactions and records, personally identifiable information, and tenant and lease data. In many cases, we rely significantly on third-party vendors to retain data, process transactions, and provide information technology and 13 other system services. Our networks and operations could be disrupted, and sensitive data could be compromised, by physical or electronic security breaches, targeted against us, our vendors or other organizations, including financial markets or institutions, including by way of or through cyber-attacks or cyber-intrusions over the internet, malware, computer viruses, attachments to e-mails, phishing, employee theft or misuse, or inadequate security controls. We rely on third-party vendors and co mmercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential tenant and other sensitive information. Although we make efforts to protect the security and integrity of our networks and systems, there can be no assurance that these efforts and measures will be effective or that attempted security breaches or disruptions would not be successful, as such attacks and breaches may be difficult to detect (or not detected at all) and are becoming more sophisticated. In such event, we may experience business interruptions or shutdowns; data loss, ransom, misappropriation, or corruption; theft or misuse of confidential or proprietary information; or litigation and investigation by tenants, governmental or regulatory agencies, or other third parties. Such events could also have other adverse impacts on us, including, but not limited to, regulatory penalties, breaches of debt covenants or other contractual or REIT compliance obligations, late or misstated financial reports, and significant diversion of management attention and resources. As a result, such events could have a material adverse effect on our financial condition, results of operations and cash flows and harm our business reputation. Privacy concerns could result in regulatory changes that may harm our business. Personal privacy has become a significant issue in the jurisdictions in which we operate. Many jurisdictions in which we operate have imposed restrictions and requirements on the use of personal information by those collecting such information. Changes to law or regulations affecting privacy, if applicable to our business, could impose additional costs and liability on us and could limit our use and disclosure of such information. Risks Related to Our Organization and Structure Management has limited prior experience operating a REIT and complying with the income, asset and other limitations imposed by the REIT provisions of the Code. Management has limited prior experience operating a REIT. The REIT provisions of the Code are complex and the failure to comply with those provisions could cause us to fail to qualify as a REIT or could force us to pay unexpected taxes and penalties. Managing a portfolio of self storage properties under such constraints may hinder our ability to achieve our objectives. We have elected to qualify as a REIT under the Code, commencing with our taxable year ended December 31, 2013, and intend to continue to qualify as a REIT in 2018. The ability of our Board of Directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders. Our board of directors may revoke or otherwise terminate our REIT election without the approval of stockholders if it determines that it is no longer in our best interests to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our net taxable income to stockholders, which may have adverse consequences on the total return to our stockholders. Our business could be harmed if key personnel with business experience in the self storage industry terminate their employment with us. Our officers have experience in the self storage industry and our success will depend, to a significant extent, on their services. There is no guarantee that any of them will remain employed with us. We do not generally maintain key person life insurance. The loss of services of one or more members of our senior management could harm our business. 14  Our management has limited experience operating a public company and therefore may have difficulty in successfully and profitably operating our business, or complying with regulatory requirements. Our management has had limited experience operating a public company. As a result, we cannot assure you that we will be able to successfully execute our business strategies as a public company or comply with regulatory requirements applicable to public companies. There may be conflicts of interest resulting from the relationships among us, our affiliates, and other related parties. The outside business interests of our officers may divert their time and attention away from us, and may result in a potential conflict with respect to the allocation of business opportunities, which could harm our business. Our board of directors has adopted policies and procedures designed to mitigate these conflicts of interest, such as allocation procedures for determining the appropriate allocation of such business opportunities. Specifically, if any of our officers or directors who also serves as an officer, director, or advisor of our affiliates becomes aware of a potential transaction related primarily to the self storage business that may represent a corporate opportunity for us and one or more of our affiliates, such officer or director has no duty to present that opportunity to such affiliates and we will have the sole right to pursue the transaction if our board of directors so determines. Notwithstanding the foregoing, our officers or directors are encouraged to notify our affiliates of such an opportunity. Certain provisions of Maryland law could inhibit changes in control of our company. Certain “business combination” and “control share acquisition” provisions of the Maryland General Corporation Law (“MGCL”), may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock. Pursuant to the MGCL, our board of directors has by resolution exempted business combinations between us and any other person. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. However, there can be no assurance that these exemptions will not be amended or eliminated at any time in the future. Our charter and bylaws and Maryland law also contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest. Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interest. Our charter limits the liability of our present and former directors and officers to us and our stockholders for money damages to the maximum extent permitted under Maryland law. Under current Maryland law, our present and former directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from: • • actual receipt of an improper benefit or profit in money, property or services; or active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action. 15 Our charter authorizes us to indemnify our present and former directors and officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law. Our bylaws require us to indemnify each present and former director or officer, to the maximum extent permitted by Maryland law, in connection with any proceeding to which he or she is made, or threatened to be made, a party to or witness in by reason of his or her service to us as a director or officer or in certain other capacities. In addition, we may be obligated to pay or reimburse the expenses incurred by our present and former directors and officers without requiring a preliminary determination of their ultimate entitlement to indemnification. As a result, we and our stockholders may have more limited rights against our present and former directors and officers than might otherwise exist absent the current provisions in our charter and bylaws or that might exist with other companies, which could limit your recourse in the event of actions not in your best interest. Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management. Our charter provides that, subject to the rights of holders of one or more classes or series of preferred shares, a director may be removed with cause, by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors. Vacancies on our board of directors generally may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change in our control that is in the best interests of our stockholders. We may change our investment and financing strategies and enter into new lines of business without stockholder consent, which may subject us to different risks. We may change our investment and financing strategies and enter into new lines of business at any time without the consent of our stockholders, which could result in our making investments and engaging in business activities that are different from, and possibly riskier than, the investments and businesses described in this document. A change in our investment strategy or our entry into new lines of business may increase our exposure to other risks or real estate market fluctuations. If other self storage companies convert to a REIT structure or if tax laws change, we may no longer have an advantage in competing for potential acquisitions. Because we are structured as a REIT, we are a more attractive acquirer of properties to tax-motivated sellers than our competitors that are not structured as REITs. However, if other self storage companies restructure their holdings to become REITs, this competitive advantage will disappear. In addition, new legislation may be enacted or new interpretations of existing legislation may be issued by the Internal Revenue Service (the “IRS”), or the U.S. Treasury Department that could affect the attractiveness of the REIT structure so that it may no longer assist us in competing for acquisitions. Our Board of Directors has the power to issue additional shares of our stock in a manner that may not be in the best interest of our stockholders. Our charter authorizes our board of directors to issue additional authorized but unissued shares of common stock or preferred stock and to increase the aggregate number of authorized shares or the number of shares of any class or series without stockholder approval. In addition, our board of directors may classify or reclassify any unissued shares of common stock or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. Our board of directors could issue additional shares of our common stock or establish a series of preferred stock that could have the effect of delaying, deferring or preventing a change in control or other transaction that might involve a premium price for our securities or otherwise not be in the best interests of our stockholders. Restrictions on ownership and transfer of our shares may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares. In order for us to qualify as a REIT for each taxable year after our taxable year ended December 31, 2013, no more than 50% in value of our outstanding shares may be owned, directly or constructively, by five or fewer individuals during the last half of any calendar year, and at least 100 persons must beneficially own our shares during at least 335 days of a taxable year of 12 months, or during a proportionate portion of a shorter taxable year. “Individuals” for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts. Our charter contains, among other things, such customary provisions related to our current operation as a REIT and such other provisions that are consistent with the corporate governance profile of our public peers, including certain customary ownership limitations that prohibit, among other limitations, any person from beneficially or constructively owning more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding share of our common stock or all classes and series of our capital stock. These 16 ownership limits and the other restrictions on ownership and transfer of our shares in our charter could have the effect of discouraging a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests. Risks Related to Our Debt Financings Disruptions in the financial markets could affect our ability to obtain debt financing on reasonable terms or at all and have other adverse effects. Uncertainty in the credit markets may negatively impact our ability to access additional debt financing or to refinance existing debt maturities on favorable terms (or at all), which may negatively affect our ability to make acquisitions. A downturn in the credit markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plans accordingly. In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing. We depend on external sources of capital that are outside of our control, which could adversely affect our ability to acquire or develop properties, satisfy our debt obligations and/or make distributions to stockholders. We depend on external sources of capital to acquire properties, to satisfy our debt obligations and to make distributions to our stockholders required to maintain our qualification as a REIT, and these sources of capital may not be available on favorable terms, or at all. Our access to external sources of capital depends on a number of factors, including the market’s perception of our growth potential and our current and potential future earnings and our ability to continue to qualify as a REIT for U.S. federal income tax purposes. If we are unable to obtain external sources of capital, we may not be able to acquire properties when strategic opportunities exist, satisfy our debt obligations or make cash distributions to our stockholders that would permit us to qualify as a REIT or avoid paying U.S. federal income tax on all of our net taxable income. The terms and covenants relating to our indebtedness could adversely impact our economic performance. The loan documentation for our credit facility and term loan contain (and any new or amended loan and/or facility we may enter into from time to time will likely contain) customary affirmative and negative covenants, including financial covenants that, among other things, require us to comply with a minimum net worth (as defined in our loan documentation) of at least the outstanding principal balance of the term loan and a minimum liquidity standard of at least 10% of the outstanding principal balance of the term loan (as defined in our loan documentation). In the event that we fail to satisfy our covenants, we would be in default under our loan documentation and may be required to repay such debt with capital from other sources. Under such circumstances, other sources of debt or equity capital may not be available to us, or may be available only on unattractive terms. Moreover, the presence of such covenants could cause us to operate our business with a view toward compliance with such covenants, which might not produce optimal returns for stockholders. Risks Related to Our Qualification as a REIT Our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of operating cash flow available for distribution to stockholders. We have elected, and believe that we have been qualified, to be taxed as a REIT commencing with the taxable year ended December 31, 2013. Qualification for treatment as a REIT involves the application of highly technical and extremely complex Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify for REIT treatment. To qualify as a REIT, we must meet, on an ongoing basis through actual operating results, various tests regarding the nature and diversification of our assets and our income, the ownership of our outstanding shares and the amount of our distributions. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis. Our ability to satisfy these asset tests depends upon an analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, 17 and for which we will not obtain independent appraisals. In addition, we have held and may continue to hold investments in other publicly traded REITs. If any such publicly traded REIT fails to qualify as a REIT with respect to any period during which we hold or have held shares of such REIT, or if our interests in these REITs a re otherwise not treated as equity in a REIT for U.S. federal income tax purposes, our ability to satisfy the REIT requirements could be adversely affected. Moreover, new legislation, court decisions or administrative guidance may, in each case possibly with retroactive effect, make it more difficult or impossible for us to qualify as a REIT. Thus, while we believe that we have been organized and operated and intend to operate so that we will continue to qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations and the possibility of future changes in our circumstances, no assurance can be given that we have qualified or will so qualify for any particular year. These considerations also might restrict the types of assets that we can acquire or services that we can provide in the future. We have not requested and do not plan to request a ruling from the IRS regarding our qualification as a REIT. In order to qualify as a REIT, among other requirements, we must ensure that at least 75% of our gross income for each taxable year, excluding certain amounts, is derived from certain real property-related sources, and at least 95% of our gross income for each taxable year, excluding certain amounts, is derived from certain real property-related sources and passive income such as dividends and interest. For purposes of these rules, income from the rental of real property is generally treated as qualifying income, whereas service income is generally treated as nonqualifying income. Furthermore, for purposes of these rules, services provided to tenants at a property could cause all income from the property to be nonqualifying if the income from such services, or the costs of providing those services, exceed certain thresholds. We have provided and may continue to provide certain services to our tenants, such as access to insurance. We believe that these services have been provided in a manner that does not cause our rental income to fail to be treated as qualifying income for purposes of the REIT gross income tests. However, if the IRS were to successfully challenge our characterization of these services, our qualification as a REIT could be adversely impacted. In addition, where we have provided services that may generate nonqualifying income, we believe the income attributable to these services and the costs of providing these services are sufficiently small so as not to cause us to fail to satisfy the REIT gross income tests. However, there is limited guidance regarding what costs are taken into account for this purpose. If the IRS were to successfully assert that these our income from these services or the costs of providing these services exceeded certain thresholds, we could fail to qualify as a REIT. If we fail to qualify for treatment as a REIT at any time and do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income, and possibly could be required to borrow money or sell assets to pay that tax, thus substantially reducing the funds available for distribution for each year involved. Unless entitled to relief under specific statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which we lost our qualification. In addition, all distributions to stockholders, including capital gain dividends, would be subject to tax as regular dividends to the extent of our earnings and profits. Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow. Even though we believe that we currently qualify for U.S. federal income tax purposes as a REIT, we may face tax liabilities that will reduce our cash flow, including taxes on any undistributed income, state or local income and property and transfer taxes, including real property transfer taxes. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT. Any of these taxes would decrease operating cash flow to our stockholders. In addition, in order to meet the REIT qualification requirements, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we hold some of our assets and provide certain services to our tenants through one or more taxable REIT subsidiaries (“TRSs”), or other subsidiary corporations that will be subject to corporate-level income tax at regular corporate rates. Any TRSs or other taxable corporations in which we invest will be subject to U.S. federal, state and local corporate taxes. Furthermore, if we acquire appreciated assets from a corporation that is or has been a subchapter C corporation in a transaction in which the adjusted tax basis of such assets in the our hands is less than the fair market value of the assets, determined at the time we acquired such assets, and if we subsequently dispose of any such assets during the 5-year period (or with respect to certain prior years the 10-year period) following the acquisition of the assets from the C corporation, we will be subject to tax at the highest corporate tax rates on any gain from the disposition of such assets to the extent of the excess of the fair market value of the assets on the date that we acquired such assets over the basis of such assets on such date, which are referred to as built-in gains. 18 Payment of these taxes generally could materially and adversely affect our income, cash flow, results of operations, financial condition, liquidity and prospects, and could adversely affect the value of our common stock and the ability to make distributions to stockholders. To maintain our REIT qualification, we may be forced to borrow funds during unfavorable market conditions. In order to maintain our REIT qualification and avoid the payment of income and excise taxes, we may need to borrow funds to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from, among other things, timing differences between the actual receipt of cash and inclusion of income for U.S. federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. These sources, however, may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of factors, including the market’s perception of our growth potential, current debt levels, the per share trading price of our common stock, and our current and potential future earnings. We cannot assure you that we will have access to such capital on favorable terms at the desired times, or at all, which may cause us to curtail investment activities and/or to dispose of assets at inopportune times, and could adversely affect our financial condition, results of operations, cash flows and our ability to pay distributions on, and the per share trading price of, our common stock. Failure to make required distributions would subject us to tax, which would reduce the operating cash flow available for distribution to stockholders. Failure to make required distributions would subject us to tax, which would reduce the operating cash flow to our stockholders. In order to qualify as a REIT, we must distribute to our stockholders each calendar year at least 90% of our net taxable income (excluding net capital gain). To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our net taxable income (including net capital gain), we would be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will incur a 4% non-deductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. Although we intend to distribute our net taxable income to our stockholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid the 4% non-deductible excise tax, it is possible that we, from time to time, may not have sufficient cash to distribute 100% of our net taxable income. There may be timing differences between our actual receipt of cash and the inclusion of items in our income for U.S. federal income tax purposes. Accordingly, there can be no assurance that we will be able to distribute net taxable income to stockholders in a manner that satisfies the REIT distribution requirements and avoids the 4% non-deductible excise tax. Complying with the REIT requirements may cause us to forgo and/or liquidate otherwise attractive investments. To qualify as a REIT for U.S. federal tax purposes, we must continually satisfy various requirements concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders, and the ownership of shares. Among other requirements, to qualify as a REIT, we must satisfy certain annual gross income tests and we must ensure that, at the end of each calendar quarter, at least 75% of the value of our total assets consists of cash, cash items, U.S. government securities and qualified real estate assets. The remainder of our investment in securities generally cannot include more than 10% of the outstanding voting securities of any one issuer (other than U.S. government securities, securities of corporations that are treated as TRSs and qualified real estate assets) or more than 10% of the total value of the outstanding securities of any one issuer (other than government securities, securities of corporations that are treated as TRSs and qualified real estate assets). In addition, in general, no more than 5% of the value of our assets can consist of the securities of any one issuer (other than U.S. government securities, securities of corporations that are treated as TRSs and qualified real estate assets), no more than 20% of the value of our total assets can be represented by securities of one or more TRSs and no more than 25% of the value of our assets can consist of debt instruments issued by publicly offered REITs that are not otherwise secured by real property. If we fail to comply with these asset requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. To meet these tests, we may be required to take or forgo taking actions that we would otherwise consider advantageous. For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we may be required to forgo investments that we otherwise would make. Furthermore, we may be required to liquidate from our portfolio otherwise attractive investments. In addition, we may be required to make distributions 19 to stockholders at disadvantageous times or when we do not have funds readily available for distribution. These actions could reduce our income and amounts available for distribution to stockholders. Thus, compliance with the REIT requirements may hinder our investment performance. We may be subject to a 100% tax on income from “prohibited transactions,” and this tax may limit our ability to sell assets or require us to restructure certain of our activities in order to avoid being subject to the tax. We are subject to a 100% tax on any income from a prohibited transaction. “Prohibited transactions” generally include sales or other dispositions of property (other than property treated as foreclosure property under the Code) that is held as inventory or primarily for sale to customers in the ordinary course of a trade or business by a REIT, either directly or indirectly through certain pass-through subsidiaries. The characterization of an asset sale as a prohibited transaction depends on the particular facts and circumstances. The 100% tax will not apply to gains from the sale of inventory that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate income tax rates. We have sold items such as locks, boxes, and packing materials to tenants and third parties directly rather than through a TRS, and as a result could be liable for this tax with respect to these sales. To the extent that we continue to sell such inventory items, other than through a TRS, we may be subject to this 100% tax. Our TRSs will be subject to U.S. federal income tax and will be required to pay a 100% penalty tax on certain income or deductions if transactions with such TRSs are not conducted on arm’s length terms. We conduct certain activities (such as selling packing supplies and locks and renting trucks or other moving equipment) through one or more TRSs. A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a TRS. If a TRS owns more than 35% of the total voting power or value of the outstanding securities of another corporation, such other corporation will also be treated as a TRS. Other than some activities relating to lodging and health care properties, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT. A TRS is subject to U.S. federal income tax as a regular C corporation. No more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs. This requirement limits the extent to which we can conduct our activities through TRSs. The values of some of our assets, including assets that we hold through TRSs, may not be subject to precise determination, and values are subject to change in the future. In addition, the Code imposes a 100% tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s length basis. We intend to structure transactions with any TRS on terms that we believe are arm’s length to avoid incurring the 100% excise tax described above. There can be no assurances, however, that we will be able to avoid application of the 100% tax. We may not have cash available to make distributions. Our taxable income may exceed our cash flow for a year, which could necessitate our borrowing funds and/or subject us to tax, thus reducing the cash available for distribution to our stockholders. We intend to make cash distributions each year sufficient to satisfy REIT distribution requirements and to avoid liability for the REIT excise tax. There can be no assurance, however, that we will be able to do so. Our taxable income may substantially exceed our net income as determined based on GAAP, as well as our cash flow, because, for example, realized capital losses will be deducted in determining GAAP net income but may not be deductible in computing taxable income or because we acquired assets that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets. Under the Tax Cuts and Jobs Act (“TCJA”), signed into law on December 22, 2017, we generally will be required to recognize certain amounts in income no later than the tim e such amounts are reflected on our financial statements. The application of this rule may require the accrual of income with respect to certain sources earlier than would be the case under the otherwise applicable tax rules, although the precise application of this rule is unclear at this time. This rule is generally effective with respect to tax years beginning after December 31, 2017 (and will be effective for debt instruments issued with original issue discount with respect to tax years beginning after December 31, 2018). Also, in certain circumstances our ability to deduct interest expenses for U.S. federal income tax purposes may be limited by provisions of the TCJA. If the cash flow we generate in a particular year is less than our taxable income, we may be required to use cash reserves, incur short-term, or possibly long-term, debt or liquidate non-cash assets at rates or at times that are unfavorable in order to make the necessary distributions. 20 Dividends paid by REITs generally do not qualify for the favorable tax rates available for some dividends. The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for these reduced qualified dividend rates. However, for taxable years beginning after December 31, 2017 and before January 1, 2026, under the TCJA, noncorporate taxpayers may deduct up to 20% of certain qualified business income, including “qualified REIT dividends” (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income. Although the reduced U.S. federal income tax rate applicable to qualified dividends from C corporations does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends, together with the recently reduced corporate tax rate (currently 21%), could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock. Dividends may also be subject to a 3.8% Medicare tax under certain circumstances. Our REIT qualification could be adversely affected by the REIT qualification of any REIT in which we hold an interest. In connection with our conversion from a regulated investment company (a “RIC”) to a REIT, we disposed of the majority of our assets and acquired government securities and shares of publicly traded REITs. As a result, the qualification of our as a REIT has depended on the REIT qualification of the publicly traded REITs in which we have invested. Furthermore, we may continue to hold interests in publicly traded REITs, and as a result our REIT qualification may continue to depend on the REIT qualification of any publicly traded REITs in which we continue to hold an interest. We do not generally independently investigate the REIT qualification of such REITs, but rather generally rely on statements made by such REITs in their public filings. In the event that one or more of the publicly traded REITs in which we invested was not properly treated as a REIT for U.S. federal income tax purposes, or if our interests in these REITs were otherwise not treated as equity in a REIT for U.S. federal income tax purposes, it is possible that we may not have met certain of the REIT asset and income requirements, in which case we could have failed to qualify as a REIT. Similarly, if we hold an interest in a publicly traded REIT in the future that fails to qualify as a REIT, such failure could adversely impact our REIT qualification. We could fail to qualify as a REIT if we have not distributed any earnings and profits attributable to a taxable year before we elected to be taxed as a REIT. A corporation does not qualify as a REIT for a given taxable year if, as of the final day of the taxable year, the corporation has any undistributed earnings and profits that accumulated during a period that the corporation was not treated as a REIT. Because we were not treated as a REIT for our entire existence (such period prior to our election to be taxed as a REIT, the “Pre-REIT period”), it is possible that we could have undistributed earnings and profits from the Pre-REIT period, in which case we would be required to pay a deficiency dividend in order to comply with this requirement or could fail to qualify as a REIT. We believe that, since December 31, 2013, we have not had any earnings and profits accumulated from the Pre-REIT period because all such earnings and profits were distributed prior to December 31, 2013. In particular, prior to December 31, 2013, we believe that we qualified as a RIC for U.S. federal income tax purposes, and as a RIC, we distributed our earnings on an annual basis in order to avoid being subject to U.S. federal income tax on our undistributed earnings. However, if it is determined that we have accumulated earnings and profits from the Pre-REIT period, we could be required to pay a deficiency dividend to stockholders after the relevant determination in order to maintain our qualification as a REIT, or we could fail to qualify as a REIT. We may not have satisfied requirements related to the ownership of our outstanding stock, which could cause us to fail to qualify as a REIT. In order to qualify as a REIT, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, through the application of certain attribution rules under the Code, by five or fewer individuals, as defined in the Code to include specified entities, during the last half of any taxable year other than the first taxable year during which we qualified as a REIT (the “5/50 Test”). Prior to October 20, 2017, our charter did not contain customary REIT ownership restrictions and therefore did not ensure that we satisfied the 5/50 Test. Effective as of October 20, 2017, our charter was revised to include, among other things, certain customary ownership limitations that prohibit, among other limitations, any person from beneficially or constructively owning more than 9.8% in 21 value or in number of shares, whichever is more restrictive, of the outstanding share of our common stock or all classes and series of our capital stock. These provisions are intended to assist us in satisfying the 5/50 Test. With respect to the period between January 1, 2013 and October 20, 2017, we monitored purchases and transfers of shares of our common stock by regularly reviewing, among other things, ownership filings required by the federal securities laws to monitor the beneficial ownership of our shares in an attempt to ensure that we met the 5/50 Test. However, the attribution rules under the Code are broad, and we may not have had the information necessary to ascertain with certainty whether or not we satisfied the 5/50 Test during such period. As a result, no assurance can be provided that we satisfied the 5/50 Test during such period. If it were determined that we failed to satisfy the 5/50 Test, we could fail to qualify as a REIT or, as suming we qualify for a statutory relief provision under the Code, be required to pay a penalty tax. Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities. The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if (i) the instrument (a) hedges interest rate risk on liabilities used to carry or acquire real estate assets or (b) hedges an instrument described in clause (a) for a period following the extinguishment of the liability or the disposition of the asset that was previously hedged by the hedged instrument, and (ii) the relevant instrument is properly identified under applicable Treasury regulations. Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our TRS will generally not provide any tax benefit, except for being carried back or forward against past or future taxable income in the TRS. Legislative or regulatory tax changes related to REITs could materially and adversely affect our business. The U.S. federal income tax laws and regulations governing REITs and their stockholders, as well as the administrative interpretations of those laws and regulations, are constantly under review and may be changed at any time, possibly with retroactive effect. No assurance can be given as to whether, when, or in what form, the U.S. federal income tax laws applicable to us and our stockholders may be enacted. Changes to the U.S. federal income tax laws and interpretations of U.S. federal tax laws could adversely affect an investment in our common stock. In addition, the TCJA, which was signed into law on December 22, 2017, significantly changes U.S. federal income tax laws applicable to businesses and their owners, including REITs and their stockholders, and may lessen the relative competitive advantage of operating as a REIT rather than as a C corporation. For additional discussion, see “Recent U.S. Federal Income Tax Legislation”. Risks Related to Our Common Stock The future sales of shares of our common stock may depress the price of our common stock and dilute stockholders’ beneficial ownership. We cannot predict whether future issuances of shares of our common stock or the availability of shares of our common stock for resale in the open market will decrease the market price of our common stock. Any sales of a substantial number of shares of our common stock in the public market or the perception that such sales might occur, may cause the market price of our common stock to decline. In addition, future issuances of our common stock may be dilutive to existing stockholders. Any future offerings of debt, which would be senior to our common stock upon liquidation, and/or preferred equity securities which may be senior to our common stock for purposes of dividend distributions or upon liquidation, may adversely affect the market price of our common stock. In the future, we may increase our capital resources by making offerings of debt or preferred equity securities, including trust preferred securities, senior or subordinated notes and preferred stock. Upon liquidation, 22 holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us. The market price and trading volume of our common stock may vary substantially. Our common stock is listed on NASDAQ under the symbol “SELF.” The stock markets, including NASDAQ, have experienced significant price and volume fluctuations over the past several years. As a result, the market price of our common stock is likely to be similarly volatile, and investors in our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. Accordingly, no assurance can be given as to the ability of our stockholders to sell their common stock or the price that our stockholders may obtain for their common stock. Some of the factors that could negatively affect the market price of our common stock include: • • • • • • • • • • • • • • our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects; actual or perceived conflicts of interest with our directors, officers and employees; equity issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur; the impact of accounting principles and policies on our financial positions and results; publication of research reports about us or the real estate industry; changes in market valuations of similar companies; adverse market reaction to any increased indebtedness we may incur in the future; additions to or departures of our key personnel; speculation in the press or investment community; our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock and would result in increased interest expenses on our debt; failure to maintain our REIT qualification or exclusion from registration under the Investment Company Act of 1940, as amended; price and volume fluctuations in the stock market generally; and general market and economic conditions, including the current state of the credit and capital markets. Market factors unrelated to our performance could also negatively impact the market price of our common stock. One of the factors that investors may consider in deciding whether to buy or sell our common stock is our distribution rate as a percentage of our stock price relative to market interest rates. If market interest rates increase, prospective investors may demand a higher distribution rate or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and conditions in capital markets can affect the market value of our 23 common stock. For instance, if interest rates rise, it is likely that the market price of our common stock will decrease as market rates on interest-bearing securities increase. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. GLOBAL SELF STORAGE STORES (As of December 31, 2018) Address 296 North Weber Road, Bolingbrook, IL 60440 6 Heritage Park Road, Clinton, CT 06413 14900 Woodlawn Avenue, Dolton, IL 60419 13942 East 96th Street, McCordsville, IN 46055 1910 West Robb Avenue, Lima, OH 60419 3814 Route 44, Millbrook, NY 12545 2255 Buffalo Road, Rochester, NY 14624 21 Aim Boulevard, Sadsburyville, PA 19369 1713 Old Trolley Road, Summerville, SC 29485 900 North Gum Street, Summerville, SC 29483 6590 Broadway, Merrillville, IN 46410 Property SSG BOLINGBROOK LLC SSG CLINTON LLC SSG DOLTON LLC SSG FISHERS LLC SSG LIMA LLC SSG MILLBROOK LLC SSG ROCHESTER LLC SSG SADSBURY LLC SSG SUMMERVILLE I LLC SSG SUMMERVILLE II LLC TOTAL/AVERAGE SAME-STORES SSG MERRILLVILLE LLC TOTAL/AVERAGE NON SAME-STORES TOTAL/AVERAGE ALL STORES Year Store Opened / Acquired Number of Units Net Leasable Square Feet December 31, 2018 Square Foot Occupancy % December 31, 2017 Square Foot Occupancy % 1997 / 2013 1996 / 2016 2007 / 2013 2007 / 2016 1996 / 2016 2008 / 2016 2010 / 2012 2006 / 2012 1990 / 2013 1997 / 2013 2005 / 2013 796 182 652 410 731 140 644 697 557 249 113,700 30,338 86,590 81,646 97,610 12,676 68,076 78,842 72,700 43,060 5,058 685,238 566 566 80,270 80,270 93.1 % 94.8 % 93.1 % 93.7 % 93.6 % 97.6 % 95.1 % 92.2 % 89.0 % 83.3 % 92.5 % 92.8 % 92.8 % 88.5 % 87.6 % 90.5 % 95.2 % 97.5 % 93.8 % 96.1 % 89.5 % 88.9 % 89.6 % 91.9 % 92.6 % 92.6 % 5,624 765,508 92.5 % 92.0 % Each property is directly owned by the Company’s wholly owned subsidiary listed in the table. Same-store occupancy does not include properties that have recently undergone significant expansion or redevelopment, such as our property in Merrillville, IN. The Merrillville, IN expansion was completed January 2018 and added 13,300 leasable square feet of traditional drive-up storage units. 24 In 2019, the Company expects to break ground on the Millbrook, NY expansion, which, when completed, will add approximately 16,500 of gross square feet of all- climate-controlled units. The planning for the Millbrook, NY expansion is underway and the Company is actively evaluating proposals for its construction. We currently anticipate that construction will proceed and that construction will be completed approximately six to nine months after construction commencement. However, there is no guarantee that we will commence construction or complete this project in this timeframe or at all. Certain stores’ leasable square feet in the chart above includes outside auto/RV/boat storage space: approximately 13,000 square feet at SSG Sadsbury LLC; 15,700 square feet at SSG Bolingbrook LLC; 9,000 square feet at SSG Dolton LLC; 1,000 square feet at SSG Merrillville LLC; 7,200 square feet at SSG Summerville II LLC; and 8,750 square feet at SSG Clinton LLC. For SSG Lima LLC, approximately 12,683 square feet of non-storage commercial and student housing space is included. Approximately 33% of our total available units are climate-controlled, 59% are traditional, and 8% are parking. Item 3. Legal Proceedings. From time to time, the Company or its subsidiaries may be named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. We are also subject to governmental or regulatory examinations or investigations. Examinations or investigations can result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. For any such matters, the Company will seek to include in its financial statements the necessary provisions for losses that it believes are probable and estimable. Furthermore, the Company will seek to evaluate whether there exist losses which may be reasonably possible and, if material, make the necessary disclosures. The Company currently does not have any material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. Item 4. Mine Safety Disclosures. Not applicable. 25  PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The Company’s shares of common stock are listed on NASDAQ under the ticker symbol SELF. Holders As of March 15, 2019, there were approximately 2,600 record and beneficial holders of the Company’s common stock. Item 6. Selected Financial Data. Not applicable. 26 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. CAUTIONARY LANGUAGE The following discussion and analysis should be read in conjunction with our selected consolidated historical financial data together with the consolidated pro forma financial data and historical financial statements and related notes thereto included elsewhere in this annual report. We make statements in this section that may be forward- looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this annual report entitled “Statement on Forward-looking Information.” CRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements contained elsewhere in this annual report, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). Our notes to the condensed consolidated financial statements contained elsewhere in this annual report describe the significant accounting policies essential to our condensed consolidated financial statements. Preparation of our financial statements requires estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions that we have used are appropriate and correct based on information available at the time they were made. These estimates, judgments and assumptions can affect our reported assets and liabilities as of the date of the financial statements, as well as the reported revenues and expenses during the period presented. If there are material differences between these estimates, judgments and assumptions and actual facts, our financial statements may be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require our judgment in its application. There are areas in which our judgment in selecting among available alternatives would not produce a materially different result, but there are some areas in which our judgment in selecting among available alternatives would produce a materially different result. See the notes to the condensed consolidated financial statements that contain additional information regarding our accounting policies and other disclosures. Management’s Discussion and Analysis Overview The Company is a self-administered and self-managed REIT that owns, operates, manages, acquires, develops and redevelops self storage properties (“stores” or “properties”) in the United States. Our stores are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers. The Company currently owns and operates, through its wholly owned subsidiaries, eleven stores located in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, and South Carolina. On January 19, 2016, the Company changed its name to Global Self Storage, Inc. from Self Storage Group, Inc., changed its SEC registration from an investment company to an operating company reporting under the Exchange Act, and listed its common stock on NASDAQ under the symbol “SELF”. Our store operations generated most of our net income for all periods presented herein. Accordingly, a significant portion of management’s time is devoted to seeking to maximize cash flows from our existing stores, as well as seeking investments in additional stores. The Company expects to continue to earn a majority of its gross income from its store operations as its current store operations continue to develop and as it makes additional store acquisitions. Over time, the Company expects to divest its remaining portfolio of investment securities and use the proceeds to acquire and operate additional stores. The Company expects its income from investment securities to continue to decrease as it continues to divest its holdings of investment securities. Financial Condition and Results of Operations Our financing strategy is to minimize the cost of our capital in order to maximize the returns generated for our stockholders. For future acquisitions, the Company may use various financing and capital raising alternatives including, but not limited to, debt and/or equity offerings, credit facilities, mortgage financing, and joint ventures with third parties. 27  On June 24, 2016, certain wholly owned subsidiaries (“Term Loan Secured Subsidiaries”) of the Company entered into a loan agreement and certain other related agreements (collectively, the “Term Loan Agreement”) between the Term Loan Secured Subsidiaries and Insurance Strategy Funding IV, LLC (the “Term Loan Lender”). Under the Term Loan Agreement, the Term Loan Secured Subsidiaries are borrowing from Term Loan Lender in the principa l amount of $20 million pursuant to a promissory note (the “Term Loan Promissory Note”). The Term Loan Promissory Note bears an interest rate equal to 4.192% per annum and is due to mature on July 1, 2036. Pursuant to a security agreement (the “Term Loan S ecurity Agreement”), the obligations under the Term Loan Agreement are secured by certain real estate assets owned by the Term Loan Secured Subsidiaries. J.P. Morgan Investment Management, Inc. acted as Special Purpose Vehicle Agent of the Term Loan Lender . The Company entered into a non-recourse guaranty on June 24, 2016 (the “Term Loan Guaranty,” and together with the Term Loan Agreement, the Term Loan Promissory Note and the Term Loan Security Agreement, the “Term Loan Documents”) to guarantee the payment to Lender of certain obligations of the Term Loan Secured Subsidiaries under the Term Loan Agreement. The Term Loan Documents require the Term Loan Secured Subsidiaries and the Company to comply with certain covenants, including, among others, a minimum net worth test and other customary covenants. The Term Loan Lender may accelerate amounts outstanding under the Term Loan Documents upon the occurrence of an Event of Default (as defined in the Term Loan Agreement) including, but not limited to, the failur e to pay amounts due or commencement of bankruptcy proceedings. The Company and the Term Loan Secured Subsidiaries paid customary fees and expenses in connection with their entry into the Term Loan Documents. There is no material relationship between the Company, its Term Loan Secured Subsidiaries, or its affiliates and the Term Loan Lender, other than in respect of the Term Loan Documents. The foregoing description is qualified in its entirety by the full terms and conditions of the Term Loan Documents, filed as Exhibits 10.1, 10.2, 10.3 and 10.4 to the Current Report on Form 8-K filed on June 30, 2016. We used the proceeds of such debt financing primarily in connection with store acquisitions and development. On December 20, 2018, certain wholly owned subsidiaries (“Credit Facility Secured Subsidiaries”) of the Company entered into a revolving credit loan agreement (collectively, the “Credit Facility Loan Agreement”) between the Credit Facility Secured Subsidiaries and TCF National Bank (“Credit Facility Lender”). Under the Credit Facility Loan Agreement, the Credit Facility Secured Subsidiaries may borrow from the Credit Facility Lender in the principal amount of up to $10 million pursuant to a promissory note (the “Credit Facility Promissory Note”). The Credit Facility Promissory Note bears an interest rate equal to 3.00% over the One Month U.S. Dollar London Inter-Bank Offered Rate and is due to mature on December 20, 2021. The obligations under the Credit Facility Loan Agreement are secured by certain real estate assets owned by the Credit Facility Secured Subsidiaries. The Company entered into a guaranty of payment on December 20, 2018 (the “Credit Facility Guaranty,” and together with the Credit Facility Loan Agreement, the Credit Facility Promissory Note and related instruments, the “Credit Facility Loan Documents”) to guarantee the payment to Credit Facility Lender of certain obligations of the Credit Facility Secured Subsidiaries under the Credit Facility Loan Agreement. The Company and the Credit Facility Secured Subsidiaries paid customary fees and expenses in connection with their entry into the Credit Facility Loan Documents. The Company also maintains a bank account at the Credit Facility Lender. The foregoing description is qualified in its entirety by the full terms and conditions of the Credit Facility Loan Documents, filed as Exhibits 10.1 and 10.2 to the Current Report on Form 8-K filed on December 21, 2018. As of December 31, 2018, we have not withdrawn any proceeds available under the Credit Facility Loan Agreement. We currently intend to strategically withdraw proceeds available under the Credit Facility Loan Agreement to fund: (i) the acquisition of additional self storage properties, (ii) expansions at existing self storage properties in our portfolio, and/or (iii) joint ventures with third parties for the acquisition and expansion of self storage properties. As of December 31, 2018, we had capital resources totaling approximately $3.1 million comprised of $1.5 million of cash and cash equivalents and $1.6 million of marketable securities. Capital resources derived from retained cash flow have been and are currently expected to continue to be negligible. Retained operating cash flow represents our expected cash flow provided by operating activities, less stockholder distributions and capital expenditures to maintain stores. We have been actively reviewing a number of store and store portfolio acquisition candidates and have been working to further develop and expand our current stores. We did not make any acquisitions in the year ended December 31, 2018. We may pursue third-party management opportunities and utilize such relationships with third-party owners as a source for future acquisitions and investment opportunities. 28  During the year ended December 31, 2017, we initiated construction of the expansion at our Merrillville, IN location. Construction was completed January 2018 and added 13,300 leasable square feet of traditional drive-up storage units. In 2019, the Company expects to break ground on the Millbrook, NY expansion, which, when completed, will add approximately 16,500 of gross square feet of all- climate-controlled units. The planning for the Millbrook, NY expansion is underway and the Company is actively evaluating proposals for its construction. We currently anticipate that construction will proceed and that construction will be completed approximately six to nine months after construction commencement. However, there is no guarantee that we will commence construction or complete this project in this timeframe or at all. Results of Operations for the Year Ended December 31, 2018 Compared with the Year Ended December 31, 2017 Revenues Total revenues increased from $7,472,793 during the year ended December 31, 2017 to $8,110,979 during the year ended December 31, 2018, an increase of $638,186, or 8.5%. Rental income increased from $7,238,819 during the year ended December 31, 2017 to $7,850,870 during the year ended December 31, 2018, an increase of $612,051, or 8.5%. The increase was attributable to the full year of 2018’s revenues of the expansion at the Merrillville, IN property as compared to 2017’s revenues, and the positive results of our revenue rate management program of raising existing tenant rates. The remaining increase in rental revenue was due primarily to an increase in rental and occupancy rates. Other store related income consists of customer insurance fees, sales of storage supplies, and other ancillary revenues. Other store related income increased from $233,974 in the year ended December 31, 2017 to $260,109 in the year ended December 31, 2018, an increase of $26,135, or 11.2%. This increase was primarily attributable to increased insurance fees due to the expansion at the Merrillville, IN property and increased insurance participation and higher average occupancy. Operating Expenses Total expenses decreased from $6,795,322 during the year ended December 31, 2017 to $6,685,407 during the year ended December 31, 2018, a decrease of $109,915, or 1.6%. Store operating expenses increased from $3,153,887 in the year ended December 31, 2017 to $3,262,603 in the year ended December 31, 2018, an increase of $108,716, or 3.4%, which was primarily attributable to increased employment and administrative expenses. Depreciation and amortization decreased from $1,699,555 in the year ended December 31, 2017 to $1,398,358 in the year ended December 31, 2018, a decrease of $301,197, or 17.7%. The decrease is primarily attributable to the amortization during 2017 of the in-place leases related to the stores acquired in 2016. General and administrative expenses decreased 5.2% or $101,139 for the year ended December 31, 2018 as compared to the year ended December 31, 2017. The change is primarily attributable to decreased legal, accounting, compliance, and investor relations consulting expenses for recurring business activities. Business development, capital raising, and store acquisition expenses increased from $14,295 to $198,000 during the year ended December 31, 2018 as compared to the year ended December 31, 2017. These costs primarily consisted of consulting costs in connection with business development, capital raising, and future potential store acquisitions. The increase is primarily attributable to the recording in the fourth quarter of 2018 of expenses related to capital raising activities. The majority of these expenses are non-recurring and fluctuate based on business development activity during the time period. 29  Operating Income Operating income increased from $677,471 during the year ended December 31, 2017 to $1,425,572 during the year ended December 31, 2018, an increase of $748,101 or 110.4%. Other income (expense) Interest expense on loans increased from $880,834 during the year ended December 31, 2017 to $897,937 during the year ended December 31, 2018. Dividend and interest income was $76,296 during the year ended December 31, 2018 compared to $57,073 during the year ended December 31, 2017. The increase was primarily attributable to higher dividend payments received from investments in equity securities and increased interest rates for cash deposits held in interest paying bank accounts. In accordance with the adoption of ASU 2016-01, the Company now recognizes changes in the fair value of its investments in equity securities with readily determinable fair values in net income and, as such, recorded an unrealized gain of $15,517 for the year ended December 31, 2018. Previously, changes in fair value of the Company’s investments in equity securities were recognized in accumulated other comprehensive income on the Company’s consolidated balance sheets. As such, the Company included an unrealized gain on its investments in equity securities of $78,140 in accumulated other comprehensive income in its balance sheet at December 31, 2017. Net income (loss) For the year ended December 31, 2018, net income was $619,448 or $0.08 per fully diluted share. For the year ended December 31, 2017, there was a net loss of $146,290 or $0.02 per fully diluted share. Non-GAAP Measures Funds from Operations (“FFO”) and FFO per share are non-GAAP measures defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and are considered helpful measures of REIT performance by REITs and many REIT analysts. NAREIT defines FFO as a REIT’s net income, excluding gains or losses from sales of property, and adding back real estate depreciation and amortization. FFO and FFO per share are not a substitute for net income or earnings per share. FFO is not a substitute for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because it excludes financing activities presented on our statements of cash flows. In addition, other REITs may compute these measures differently, so comparisons among REITs may not be helpful. However, the Company believes that to further understand the performance of its stores, FFO should be considered along with the net income and cash flows reported in accordance with GAAP and as presented in the Company’s financial statements. Adjusted FFO (“AFFO”) represents FFO excluding the effects of business development, capital raising, and acquisition related costs and non-recurring items, which we believe are not indicative of the Company’s operating results. We present AFFO because we believe it is a helpful measure in understanding our results of operations insofar as we believe that the items noted above that are included in FFO, but excluded from AFFO, are not indicative of our ongoing operating results. We also believe that the analyst community considers our AFFO (or similar measures using different terminology) when evaluating us. Because other REITs or real estate companies may not compute AFFO in the same manner as we do, and may use different terminology, our computation of AFFO may not be comparable to AFFO reported by other REITs or real estate companies. We believe net operating income or “NOI” is a meaningful measure of operating performance because we utilize NOI in making decisions with respect to, among other things, capital allocations, determining current store values, evaluating store performance, and in comparing period-to-period and market-to-market store operating results. In addition, we believe the investment community utilizes NOI in determining operating performance and real estate values, and does not consider depreciation expense because it is based upon historical cost. NOI is defined as net store earnings before general and administrative expenses, interest, taxes, depreciation, and amortization. 30  NOI is not a substitute for net income, net operating cash flow, or other related GAAP financial measures, in evaluating our operating results. Same-Store Self Storage Operations We consider our same-store portfolio to consist of only those stores owned and operated on a stabilized basis at the beginning and at the end of the applicable periods presented. We consider a store to be stabilized once it has achieved an occupancy rate that we believe, based on our assessment of market-specific data, is representative of similar self storage assets in the applicable market for a full year measured as of the most recent January 1 and has not been significantly damaged by natural disaster or undergone significant renovation or expansion. We believe that same-store results are useful to investors in evaluating our performance because they provide information relating to changes in store-level operating performance without taking into account the effects of acquisitions, dispositions or new ground-up developments. At December 31, 2018, we owned ten same-store properties and one non-same-store property. The Company believes that by providing same-store results from a stabilized pool of stores, with accompanying operating metrics including, but not limited to, variances in occupancy, rental revenue, operating expenses, NOI, etc., stockholders and potential investors are able to evaluate operating performance without the effects of non-stabilized occupancy levels, rent levels, expense levels, acquisitions or completed developments. Same-store results should not be used as a basis for future same-store performance or for the performance of the Company’s stores as a whole. Same-store occupancy for the three months and year ended December 31, 2018 increased by 0.6% to 92.5% from 91.9% for the same period in 2017. This does not include the impact from the Merrillville, IN expansion project completed in January 2018. Including the Merrillville, IN property in the definition of same-store would result in ending same-store occupancy of 92.5%, an increase of 0.5% compared to the same period in 2017. We grew our top-line results by increasing same-store revenues by 5.3% for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and by 7.7% for the year ended December 31, 2018 versus the year ended December 31, 2017. Same-store cost of operations decreased by 16.5% for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased by 2.6% for the twelve months ended December 31, 2018 versus the twelve months ended December 31, 2017. Same-store NOI increased by 28.4% for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased by 11.7% for the twelve months ended December 31, 2018 versus the twelve months ended December 31, 2017. As described in the section titled “Property Tax Expenses at Dolton, IL,” the decrease in same-store cost of operations and increase in same-store NOI for the three months ended December 31, 2018, was attributable in part to the loss of our Class 8 tax incentive and subsequent property tax increase at SSG Dolton LLC, which was recorded during the fourth quarter of 2017. We believe that our results were driven by, among other things, our internet and digital marketing initiatives which helped our overall average occupancy maintain in the low 90% range as of December 31, 2018. Also, contributing to our results were our customer service efforts which we believe were essential in building local brand loyalty resulting in powerful referral and word-of-mouth market demand for our storage units and services. Another significant contributing factor to our results was our revenue rate management program which helped increase our total annualized revenue per leased square foot by 4.1% for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and by 6.5% for the twelve months ended December 31, 2018 versus the twelve months ended December 31, 2017. 31  These results are summarized as follows: Twelve Months Ended December 31, Revenues Cost of operations Net operating income Depreciation and amortization Net leasable square footage at period end* Net leased square footage at period end Overall square foot occupancy at period end Total annualized revenue per leased square foot Total available leasable storage units* Number of leased storage units* Three Months Ended December 31, Revenues Cost of operations Net operating income Depreciation and amortization Net leasable square footage at period end* Net leased square footage at period end* Overall square foot occupancy at period end Total annualized revenue per leased square foot Total available leasable storage units* Number of leased storage units* SAME - STORE PROPERTIES $ $ $ $ $ 2018 7,281,766 3,012,511 4,269,255 1,071,584 685,238 633,559 $ $ $ $ 92.5 % 11.49 $ 5,058 4,550 2017 6,759,337 2,936,049 3,823,288 1,379,313 681,393 626,141 $ $ $ $ 91.9 % 10.80 $ 5,039 4,539 Variance % Change 522,429 76,462 445,967 (307,729 ) 3,845 7,418 0.6 % 0.70 19 11 7.7 % 2.6 % 11.7 % -22.3 % 0.6 % 1.2 % 0.6 % 6.5 % 0.4 % 0.2 % SAME - STORE PROPERTIES $ $ $ $ $ 2018 1,853,477 755,106 1,098,371 268,637 685,238 633,559 $ $ $ $ 92.5 % 11.70 $ 5,058 4,550 2017 1,759,530 904,403 855,127 300,116 681,393 626,141 $ $ $ $ 91.9 % 11.24 $ 5,039 4,539 Variance % Change 93,947 (149,297 ) 243,244 (31,479 ) 3,845 7,418 0.6 % 0.46 19 11 5.3 % -16.5 % 28.4 % -10.5 % 0.6 % 1.2 % 0.7 % 4.1 % 0.4 % 0.2 % * From time to time, as guided by market conditions, net leasable square footage, net leased square footage and total available storage units at our properties may increase or decrease as a result of consolidation, division or reconfiguration of storage units. Similarly, leasable square footage may increase or decrease due to expansion or redevelopment of our properties. The following table presents a reconciliation of same-store net operating income to net income as presented on our consolidated statements of operations for the periods indicated: 32 Net income (loss) Adjustments: General and administrative Depreciation and amortization Business development, capital raising, and property acquisition costs Dividend and interest income Unrealized gain on marketable equity securities Interest expense Non same-store revenues Non same-store cost of operations Other real estate expenses Total same-store net operating income Same-store revenues Same-store cost of operations Total same-store net operating income Analysis of Same-Store Revenue For the Three Months Ended December 31, 2018 2017 For the Twelve Months Ended December 31, 2018 2017 $ 75,480 $ (20,766 ) $ 619,448 $ (146,290 ) 460,605 350,805 173,000 (17,352 ) (20,096 ) 237,729 (218,881 ) 56,994 87 $ 1,098,371 $ 438,019 358,294 — (15,108 ) — 220,208 (184,048 ) 56,563 1,965 855,127 $ 1,826,446 1,398,358 198,000 (76,296 ) (15,517 ) 897,937 (829,458 ) 250,095 242 4,269,255 $ 1,927,585 1,699,555 14,295 (57,073 ) — 880,834 (712,095 ) 204,605 11,872 3,823,288 For the Three Months Ended December 31, For the Twelve Months Ended December 31, 2018 1,853,477 $ 755,106 1,098,371 $ 2017 1,759,530 $ 904,403 855,127 $ $ $ 2018 7,281,766 $ 3,012,511 4,269,255 $ 2017 6,759,337 2,936,049 3,823,288 For the three months ended December 31, 2018, the 5.3% revenue increase was due primarily to a 4.1% increase in total annualized revenue per leased square foot. For the twelve months ended December 31, 2018, the 7.7% revenue increase was due primarily to a 6.5% increase in total annualized revenue per leased square foot. The increase in total annualized revenue per leased square foot was due primarily to existing tenant rent increases, an increase in available traditional and climate-controlled leasable square feet compared to available leasable parking square feet, and, to a lesser extent, increased move-in rental rates and decreased move-in rent “specials” discounting. Same store average overall square foot occupancy for all of the Company’s stores combined increased to 92.5% in the twelve months ended December 31, 2018 from 91.9% in the twelve months ended December 31, 2017. We believe that high occupancies help maximize our rental income. We seek to maintain an average square foot occupancy level at about 90% by regularly adjusting the rental rates and promotions offered to attract new tenants as well as adjusting our online marketing efforts in order to generate sufficient move-in volume to replace tenants that vacate. Demand fluctuates due to various local and regional factors, including the overall economy. Demand is generally higher in the summer months than in the winter months and, as a result, rental rates charged to new tenants are typically higher in the summer months than in the winter months. We currently expect rental income growth, if any, to come from a combination of the following: (i) continued existing tenant rent increases, (ii) higher rental rates charged to new tenants, (iii) lower promotional discounts, and (iv) higher occupancies. Our future rental income growth will also be dependent upon many factors for each market that we operate in including, among other things, demand for self storage space, the level of competitor supply of self storage space, and the average length of stay of our tenants. Increasing existing tenant rental rates, generally on an annual basis, is a key component of our revenue growth. We typically determine the level of rental increases based upon our expectations regarding the impact of existing tenant rate increases on incremental move-outs. We currently expect existing tenant rent increases in 2019 to be about the same or lower than in 2018. 33  We believe that the current trends in move-in, move-out, in place contractual rents, and occupancy levels are consistent with our current expectation of continued revenue growth. However, such trends, when viewed in the short-term, are volatile and not necessarily predictive of our revenues going forward because they may be subject to many short-term factors. Such factors include, among others, initial move-in rates, seasonal factors, the unit size and geographical mix of the specific tenants moving in or moving out, the length of stay of the tenants moving in or moving out, changes in our pricing strategies, and the degree and timing of rate increases previously passed to existing tenants. Importantly, we continue to refine our ongoing revenue management program which includes regular internet data scraping of local competitors’ prices. We do this in order to maintain our competitive market price advantage for our various sized storage units at our stores. This program helps us maximize each store’s occupancies and our self storage revenue and NOI. We believe that, through our various marketing initiatives, we can continue to attract high quality, long term tenants who we expect will be storing with us for years. Currently, our average tenant duration of stay is approximately 3.0 years, up from approximately 2.8 years for the same period in 2017. One of the results of our initiative to build a higher quality tenant base is a greater percentage of credit card paying customers. We believe that credit card payers rent for longer periods and accept greater rental rate increases. Analysis of Same-Store Cost of Operations Same-store cost of operations decreased 16.5% or $149,297 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 2.6% or $76,462 for the twelve months ended December 31, 2018 versus the twelve months ended December 31, 2017. The year over year increase in same-store cost of operations was due to increased store level expenses relating to employment, utilities, landscaping and merchant fees. As described in the section titled “Property Tax Expenses at Dolton, IL,” the decrease in same-store cost of operations for the three months ended December 31, 2018, was primarily attributable to the loss of our Class 8 tax incentive and subsequent property tax increase at SSG Dolton LLC, which was recorded during the fourth quarter of 2017. On-site store manager, regional manager and district payroll expense increased 0.2% or $423 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 4.3% or $40,401 for the twelve months ended December 31, 2018 as compared to the same period in 2017. This increase was due primarily to an increase in the number of store managers, wage increases, and higher employee health plan expenses. We currently expect inflationary increases in compensation rates for existing employees and other increases in compensation costs as we potentially add new stores as well as district, regional, and store managers. Store property tax expense decreased 35.9% or $129,889 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and decreased 0.7% or $6,770 for the twelve months ended December 31, 2018 as compared to the same period in 2017. The decrease in property tax expense during the fourth quarter of 2018 versus 2017 is primarily due to an increase in property tax expense at our Dolton, IL property during the fourth quarter of 2017, which is described in the section titled “Property Tax Expenses at Dolton, IL”. We currently expect same-store property tax expenses to increase during 2019, primarily due to an expected phaseout of the Class 8 tax incentive granted to SSG Dolton LLC. Repairs and maintenance expense decreased 37.0% or $18,097 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and decreased 7.8% or $10,029 for the twelve months ended December 31, 2018 as compared to the same period in 2017 due primarily to certain one-time repairs completed during the year ended 2017. We anticipate continued progress on our LED light replacement program throughout 2019. At our stores fully converted to LED lighting, we have realized utilities expense savings year-over-year of approximately 10% to 40%, depending on the store, due to lower kilowatt per hour usage. Our utility expenses are currently comprised of electricity, oil, and gas costs, which vary by store and are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Also, affecting our utilities expenses over time is our aforementioned ongoing LED light replacement program at all of our stores which has already resulted in lower electricity usage. Utility expense increased 9.3% or $4,106 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 15.0% or $28,200 for the twelve months ended December 31, 2018 as compared to the same period in 2017 primarily due to temperature and weather-related conditions. It is difficult to estimate future utility costs 34 because weather, temperature, and energy prices are volatile and unpredictable. However, based upon current trends and expectations regarding commercial electricity rates, we currently expect inflationary increases in rates combined with lower usage resulting in slightly lower net utility costs in 2019. Landscaping expenses, which include snow removal costs, increased 0.2% or $54 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 24.5% or $21,516 in the twelve months ended December 31, 2018 compared to the same period in 2017. Landscaping expense levels are dependent upon many factors such as weather conditions, which can impact landscaping needs including, among other things, snow removal, inflation in material and labor costs, and random events. We currently expect inflationary increases in landscaping expense in 2019, excluding snow removal expense, which is primarily weather dependent and unpredictable. Marketing expense is comprised principally of internet advertising and the operating costs of our 24/7 kiosk and telephone call and reservation center. Marketing expense varies based upon demand, occupancy levels, and other factors. Internet advertising, in particular, can increase or decrease significantly in the short term in response to these factors. Marketing expense decreased 5.7% or $2,973 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and decreased 8.3% or $19,169 for the twelve months ended December 31, 2018 as compared to the same period in 2017 primarily due to lower internet advertising and promotion expenses during the year ended 2018. Based upon current trends in move-ins, move-outs, and occupancies, we currently expect marketing expense to increase in 2019. Other direct store costs include general and administrative expenses incurred at the stores. General expenses include items such as store insurance, business license costs, and the cost of operating each store’s rental office including supplies and telephone and data communication lines. We classify administrative expenses as bank charges related to processing the stores’ cash receipts, credit card fees, repairs and maintenance, utilities, landscaping, alarm monitoring and trash removal. General expenses increased 12.1% or $7,341 in the three months ended December 31, 2018 as compared to the same period in 2017, and increased 3.7% or $9,051 in the twelve months ended December 31, 2018 as compared to the same period in 2017, primarily due to increased expenses for travel and internet related services. Administrative expenses decreased 13.8% or $21,658 in the three months ended December 31, 2018 as compared to the same period in 2017, and increased 10.9% or $59,727 in the twelve months ended December 31, 2018 as compared to the same period in 2017. We experienced a decrease in administrative expenses in the fourth quarter of 2018 due primarily to lower repair and maintenance expense and our successful efforts to obtain more competitive credit card fee pricing. Increased expenses for utilities, landscaping and credit card fees for the year ended 2018 contributed to the increase in administrative expenses as compared with the same period in 2017. Credit card fees increased for the year due to a higher proportion of rental payments being received through credit cards, which is one of the results of our initiatives in building a higher quality overall tenant base. We currently expect moderate increases in other direct store costs in 2019. Lien administration expenses decreased 0.8% or $41 in the three months ended December 31, 2018 as compared to the same period in 2017, and decreased 25.8% or $7,230 in the twelve months ended December 31, 2018 as compared to the same period in 2017.Decreased tenants’ stored items auctions contributed to the decreased expenses, which were partially offset by increases in our credit card or merchant fees. Credit card fees increased due to a higher proportion of rental payments being received through credit cards, which is one of the results of our initiatives in building a higher quality overall tenant base. We currently expect moderate increases in other direct store costs in 2019. Combined Same-Store and Non Same-Store Self Storage Operations At December 31, 2018, we owned ten same-store properties and one non same-store property. The non same-store property is SSG Merrillville LLC. Combined same-store and non same-store average overall square foot occupancy at the end of the three months and year ended December 31, 2018 increased by 0.5% to 92.5% from 92.0% for the same period in 2017. Combined same-store and non same-store occupancy includes all of our properties, including those that have recently undergone significant expansion or redevelopment, such as our property in Merrillville, IN. 35  We grew our top-line results by increasing combined same-store and non same-store (“Combined store”) revenues by 6.6% for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and by 8.6% for the twelve months ended December 31, 2018 versus the twelve months ended December 31, 2017. Combined store cost of operations decreased by 15.5% for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased by 3.9% for the twelve months ended December 31, 2018 versus the twelve months ended December 31, 2017. Combined store NOI increased by 28.3% for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and by 12.0% for the twelve months ended December 31, 2018 versus the twelve months ended December 31, 2017. As described in the section titled “Property Tax Expenses at Dolton, IL,” the decrease in combined same-store and non same-store cost of operations and increase in combined same-store and non same-store NOI for the three months ended December 31, 2018, was attributable in part to the loss of our Class 8 tax incentive and subsequent property tax increase at SSG Dolton LLC, which was recorded during the fourth quarter of 2017. We believe that our results were driven by, among other things, our internet and digital marketing initiatives which helped our overall average occupancy maintain in the low 90% range as of December 31, 2018. Also, contributing to our strong results were our customer service efforts which we believe were essential in building local brand loyalty resulting in referral and word-of-mouth market demand for our storage units and services. These results are summarized as follows: COMBINED SAME - STORE AND NON SAME - STORE PROPERTIES Twelve Months Ended December 31, Revenues Cost of operations Net operating income Depreciation and amortization Net leasable square footage at period end* Net leased square footage at period end Overall square foot occupancy at period end Total annualized revenue per leased square foot Total available leasable storage units Number of leased storage units* $ $ $ $ $ 2018 8,111,226 3,262,601 4,848,625 1,193,787 765,508 708,024 $ $ $ $ 92.5 % 11.46 $ 5,624 5,079 2017 7,471,433 3,140,650 4,330,783 1,495,606 748,213 688,031 $ $ $ $ 92.0 % 10.86 $ 5,530 4,997 Variance % Change 639,793 121,951 517,842 (301,819 ) 17,295 19,993 0.5 % 0.60 94 82 8.6 % 3.9 % 12.0 % -20.2 % 2.3 % 2.9 % 0.5 % 5.5 % 1.7 % 1.6 % COMBINED SAME - STORE AND NON SAME - STORE PROPERTIES Three Months Ended December 31, Revenues Cost of operations Net operating income Depreciation and amortization Net leasable square footage at period end* Net leased square footage at period end Overall square foot occupancy at period end Total annualized revenue per leased square foot Total available leasable storage units Number of leased storage units* $ $ $ $ $ 2018 2,072,359 812,099 1,260,260 299,662 765,508 708,024 $ $ $ $ 92.5 % 11.71 $ 5,624 5,079 2017 1,943,578 960,963 982,615 328,130 748,213 688,031 $ $ $ $ 92.0 % 11.30 $ 5,530 4,997 Variance % Change 128,781 (148,864 ) 277,645 (28,468 ) 17,295 19,993 0.5 % 0.41 94 82 6.6 % -15.5 % 28.3 % -8.7 % 2.3 % 2.9 % 0.5 % 3.6 % 1.7 % 1.6 % * From time to time, as guided by market conditions, net leasable square footage, net leased square footage and total available storage units at our properties may increase or decrease as a result of consolidation, division or reconfiguration of storage units. Similarly, leasable square footage may increase or decrease due to expansion or redevelopment of our properties. 36  The following table presents a reconciliation of combined same-store and non same-store net operating income to net income as presented on our consolidated statements of operations for the periods indicated: Net income (loss) Adjustments: General and administrative Depreciation and amortization Business development, capital raising, and property acquisition costs Dividend and interest income Unrealized gain on marketable equity securities Interest expense Other real estate expenses Total combined same-store and non same- store net operating income Combined same-store and non same-store revenues Combined same-store and non same-store cost of operations Total combined same-store and non same-store net operating income Analysis of Combined Same-Store and Non Same-Store Revenue For the Three Months Ended December 31, 2018 2017 For the Twelve Months Ended December 31, 2018 2017 $ 75,480 $ (20,766 ) $ 619,448 $ (146,290 ) 460,605 350,805 173,000 (17,352 ) (20,096 ) 237,729 89 438,019 358,294 — (15,108 ) — 220,208 1,968 1,826,446 1,398,358 1,927,585 1,699,555 198,000 (76,296 ) (15,517 ) 897,937 249 14,295 (57,073 ) — 880,834 11,877 $ 1,260,260 $ 982,615 $ 4,848,625 $ 4,330,783 For the Three Months Ended December 31, For the Twelve Months Ended December 31, $ 2018 2,072,359 $ 812,099 2017 1,943,578 $ 960,963 2018 8,111,226 $ 3,262,601 2017 7,471,433 3,140,650 $ 1,260,260 $ 982,615 $ 4,848,625 $ 4,330,783 Combined same-store and non same-store average overall square foot occupancy at the end of the three months and year ended December 31, 2018 increased by 0.5% to 92.5% from 92.0% for the same period in 2017. For the three months ended December 31, 2018, the 6.6% revenue increase as compared to the same period in 2017 was due primarily to including the full fourth quarter 2018 revenues from our expansion at the Merrillville, IN property (the expansion was completed in January of 2018), a 2.9% increase in net leased square footage, and the results of our revenue rate management program of raising existing tenant rates. This increase in net leased square feet, which is the result of our Merrillville, IN expansion is expected to positively affect combined revenues in 2019. For the twelve months ended December 31, 2018, revenue increased 8.6%, as compared to the twelve months ended December 31, 2017, due primarily to the additional revenues generated by the expansion at the Merrillville, IN property, and the positive results of our revenue rate management program of raising existing tenant rates. Combined revenues benefited from existing tenant rent increases, an increase in available climate-controlled leasable square feet compared to available leasable parking square feet, and, to a lesser extent, increased move-in rental rates, and decreased move-in rent “specials” discounting. We believe that high occupancies help maximize our rental income. We seek to maintain an average square foot occupancy level at or above 90% by regularly adjusting the rental rates and promotions offered to attract new tenants as well as adjusting our marketing efforts on the internet in order to generate sufficient move-in volume to replace tenants that vacate. Demand fluctuates due to various local and regional factors, including the overall economy. Demand is typically higher in the summer months than in the winter months and, as a result, rental rates charged to new tenants are typically higher in the summer months than in the winter months. 37  We currently expect rental income growth, if any, to come from a combination of the following: (i) continued existing tenant rent increases, (ii) higher rental rates charged to new tenants, (iii) lower promotional discounts and (iv) higher occupancies. Our future rental income growth will likely also be dependent upon many factors for each market that we operate in, including demand for self storage space, the level of competitor supply of self storage space, and the average length of stay of our tenants. Increasing existing tenant rental rates, generally on an annual basis, is a key component of our revenue growth. We typically determine the level of rental increases based upon our expectations regarding the impact of existing tenant rate increases on incremental move-outs. We currently expect existing tenant rent increases in 2019 to be about the same or lower than in 2018. We believe that the current trends in move-in, move-out, in place contractual rents and occupancy levels are consistent with our current expectation of continued revenue growth. However, such trends, when viewed in the short-term, are volatile and not necessarily be predictive of our revenues going forward because they are subject to many short-term factors. Such factors include, among others, initial move-in rates, seasonal factors, the unit size and geographical mix of the specific tenants moving in or moving out, the length of stay of the tenants moving in or moving out, changes in our pricing strategies, and the degree and timing of rate increases previously passed to existing tenants. Importantly, we continue to refine our ongoing revenue management program which includes regular internet data scraping of local competitors’ prices. We do this in order to maintain our competitive market price advantage for our various sized storage units at our stores. This program helps us seek to maximize each store’s occupancies and our self storage revenue and NOI. We believe that through our various marketing initiatives, we can seek to continue to attract high quality, long term tenants who we expect will be storing with us for years. Currently, our average tenant duration of stay is approximately 3.0 years, up from approximately 2.8 years for the same period in 2017. One of the results of our initiative to build a higher quality tenant base is a greater percentage of credit card paying customers. We believe that credit card payers rent for longer periods and accept greater rental rate increases. Analysis of Combined Same-Store and Non Same-Store Cost of Operations Combined same-store and non same-store cost of operations decreased 15.5% or $148,864 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 3.9% or $121,951 for the twelve months ended December 31, 2018 versus the twelve months ended December 31, 2017. The year over year increase in combined same-store and non same-store cost of operations was due primarily to increased store level expenses relating to employment, utilities, landscaping and merchant fees. As described in the section titled “Property Tax Expenses at Dolton, IL,” the decrease in combined same-store and non same-store cost of operations for the three months ended December 31, 2018, was primarily attributable to the loss of our Class 8 tax incentive and subsequent property tax increase at SSG Dolton LLC, which was recorded during the fourth quarter of 2017. On-site store manager payroll expense increased 2.0% or $5,506 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 6.4% or $63,516 for the twelve months ended December 31, 2018 as compared to the same period in 2017. This increase was due primarily to an increase in the number of store level employees, wage increases, and higher employee health plan expenses. We currently expect inflationary increases in compensation rates for existing employees and other increases in compensation costs as we potentially add new stores as well as district and regional managers. Store property tax expense decreased 34.2% or $128,390 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 0.4% or $3,978 in the twelve months ended December 31, 2018 as compared to the same period in 2017. The decrease in property tax expense during the fourth quarter of 2018 versus 2017 is primarily due to an increase in property tax expense at our Dolton, IL property during the fourth quarter of 2017, which is described in the section titled “Property Tax Expenses at Dolton, IL”. We currently expect store property tax expenses to increase during 2019, primarily due to an expected phaseout of the Class 8 tax incentive granted to SSG Dolton LLC and higher assessed values due to the completed expansion at our Merrillville, IN property. Repairs and maintenance expense decreased 40.6% or $21,872 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and decreased 11.4% or $16,071 for the twelve months ended 38 December 31, 2018 as compared to the same period in 2017. Contributing to the decrease in repair and maintenance expense is certain one-time repairs completed during the year ended 2017. We anticipate continued progress on our LED light replacement program throughout 2019. At our stores fully converted to LED lighting, we have realized utilities expense savings year-over-year of approximately 10% to 40% depending on the store due to lower kilowatt per hour usage. Our utility expenses are currently comprised of electricity, oil, and gas costs, which vary by store and are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Also, affecting our utilities expenses over time is our aforementioned ongoing LED light replacement program at all of our stores which has already resulted in lower electricity usage. Utility expense increased 7.5% or $3,682 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 11.5% or $24,626 for the twelve months ended December 31, 2018 as compared to the same period in 2017 primarily due to temperature and weather-related conditions and increased costs associated with our expansion at Merrillville, IN. It is difficult to estimate future utility costs because weather, temperature, and energy prices are volatile and unpredictable. However, based upon current trends and expectations regarding commercial electricity rates, we currently expect inflationary increases in rates combined with lower usage resulting in slightly lower net utility costs in 2019. Landscaping expenses, which include snow removal costs, decreased 6.3% or $1,500 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and increased 31.3% or $28,491 in the twelve months ended December 31, 2018 compared to the same period in 2017 primarily due to increased snow removal costs in 2018 as compared to 2017. Landscaping expense levels are dependent upon many factors such as weather conditions, which can impact landscaping needs including, among other things, snow removal, inflation in material and labor costs, and random events. We currently expect inflationary increases in landscaping expense in 2019, excluding snow removal expense, which is primarily weather dependent and unpredictable. Marketing expense is comprised principally of internet advertising and the operating costs of our 24/7 kiosk and telephone call and reservation center. Marketing expense varies based upon demand, occupancy levels, and other factors. Internet advertising, in particular, can increase or decrease significantly in the short term in response to these factors. Marketing expense decreased 6.4% or $3,627 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and decreased 4.3% or $10,856 for the twelve months ended December 31, 2018 as compared to the same period in 2017 primarily due to lower internet advertising and promotion expenses. Based upon current trends in move-ins, move-outs, and occupancies, we currently expect marketing expense to increase in 2019. Other direct store costs include general and administrative expenses incurred at the stores. General expenses include items such as store insurance, business license costs, and the cost of operating each store’s rental office including supplies and telephone and data communication lines. We classify administrative expenses as bank charges related to processing the stores’ cash receipts, credit card fees, repairs and maintenance, utilities, landscaping, alarm monitoring and trash removal. General expenses increased 11.6% or $7,725 in the three months ended December 31, 2018 as compared to the same period in 2017, and increased 4.4% or $11,773 in the twelve months ended December 31, 2018 as compared to the same period in 2017, primarily due to increased expenses for travel and internet related services. Administrative expenses decreased 16.3% or $28,010 in the three months ended December 31, 2018 as compared to the same period in 2017, and increased 10.0% or $60,432 in the twelve months ended December 31, 2018 as compared to the same period in 2017. We experienced a decrease in administrative expenses in the fourth quarter of 2018 due primarily to lower repair and maintenance expense and our successful efforts to obtain more competitive credit card fee pricing. Increased expenses for utilities, landscaping and credit card fees for the year ended 2018 contributed to the increase in administrative expenses as compared with the same period in 2017. Credit card fees increased for the year due to a higher proportion of rental payments being received through credit cards, which is one of the results of our initiatives in building a higher quality overall tenant base. We currently expect moderate increases in other direct store costs in 2019. Property Tax Expenses at Dolton, IL Late in the third quarter of 2017, our Dolton, IL property was reassessed by the municipality and separately, our Class 8 tax incentive renewal hearing was held. As a result of those two events, our Dolton, IL property was reassessed at approximately 52% higher and the Class 8 tax incentive was not renewed. These events were applied retroactively to take effect on January 1, 2017. The combined impact was an increase in property tax 39 expenses from $105,000 during 2016 to $210,000 during 2017 and $240,000 during 2018. Due to the timing and retroactive effect of these events in 2017, we recorded the entire $105,000 increase, during the fourth quarter of calendar year 2017. The Class 8 tax incentive phases out over the years 2017, 2018 and 2019, and during such 2019 period we currently expect the property tax expenses at our Dolton, IL property to increase by approximately 20%. Both the property tax reassessment and our Class 8 tax incentive renewal status are currently under appeal. However, there is no guarantee that either the assessment will be reduced or our Class 8 tax incentive status will be reinstated. Analysis of General and Administrative Expenses General and administrative expenses represent direct and allocated expenses for shared general corporate functions, which are allocated to store operations to the extent they are related to store operations. Such functions include, among other things, data processing, human resources, legal, corporate and operational accounting and finance, marketing, and compensation of senior executives. General and administrative General and administrative For the Three Months Ended December 31, 2018 2017 Variance % Change $ 460,605 $ 438,019 $ 22,586 5.2 % For the Twelve Months Ended December 31, 2018 1,826,446 $ 2017 1,927,585 $ $ Variance % Change (101,139 ) -5.2 % General and administrative expenses increased 5.2% or $22,586 for the three months ended December 31, 2018 versus the three months ended December 31, 2017, and decreased 5.2% or $101,139 for the twelve months ended December 31, 2018 as compared to the year ended December 31, 2017. The year over year change is primarily attributable to decreased legal, accounting, compliance, and investor relations consulting expenses for recurring business activities. Analysis of Business Development, Capital Raising, and Store Acquisition Expenses Business development, capital raising, and store acquisition expenses were $0 during the three months ended December 31, 2017 and $173,000 during the three months ended December 31, 2018. During the twelve months ended December 31, 2018 these expenses increased from $14,295 to $198,000 as compared to the same period in 2017. These costs primarily consisted of consulting costs in connection with business development, capital raising, and future potential store acquisitions. The increase in the fourth quarter of 2018 is primarily attributable to the recording of expenses related to capital raising activities. The majority of these expenses are non-recurring and fluctuate based on business development activity during the time period. Analysis of Loan Interest and Amortization Expense Loan interest expense payments relating to the aforementioned $20 million loan increased from $220,208 to 237,729 for the three months ended December 31, 2018 as compared to the same period in 2017 and for the twelve months ended December 31, 2018 increased to $897,937 from $880,834 for the year ended December 31, 2017. Going forward the cash payments for this expense will remain the same amount every month until June 2036, except upon the occurrence of certain events. 40  Analysis of Global Self Storage Funds from Operations (“FFO”) and Funds from Operations as Adjusted (“AFFO”) The following tables present a reconciliation and computation of net income to FFO and AFFO and earnings per share to FFO and AFFO per share: Net income (loss) Eliminate items excluded from FFO: Unrealized gain on marketable equity securities Depreciation and amortization FFO attributable to common stockholders Adjustments: Compensation expense related to stock-based awards Business development, capital raising, and property acquisition costs Severance related to the departure of a company officer AFFO attributable to common stockholders Earnings per share attributable to common stockholders - basic Earnings per share attributable to common stockholders - diluted FFO per share - diluted AFFO per share - diluted Three Months Ended December 31, 2018 Three Months Ended December 31, 2017 Twelve Months Ended December 31, 2018 Twelve Months Ended December 31, 2017 $ 75,480 $ (20,766 ) $ 619,448 $ (146,290 ) (20,096 ) 350,805 406,189 26,730 173,000 — 605,919 0.01 0.01 0.05 0.08 $ $ $ $ $ — 358,294 337,528 — — — 337,528 $ (0.00 ) $ (0.00 ) $ 0.04 $ 0.04 $ (15,517 ) 1,398,358 2,002,289 80,771 198,000 — 2,281,060 0.08 0.08 0.26 0.30 $ $ $ $ $ — 1,699,555 1,553,265 — 14,295 66,347 1,633,907 (0.02 ) (0.02 ) 0.20 0.21 $ $ $ $ $ Weighted average shares outstanding - basic (1) Weighted average shares outstanding - diluted 7,626,856 7,626,856 7,619,469 7,619,469 7,622,287 7,624,122 7,619,469 7,619,469 (1) For purposes of calculating FFO and AFFO per share, unvested restricted stock is not included. Analysis of Global Self Storage Store Expansions In addition to actively reviewing a number of store and portfolio acquisition candidates, we have been working to further develop and expand our current stores. At our Merrillville, IN store in January 2018 we completed construction of an additional 13,300 leasable square feet of traditional drive-up storage units. In 2019 the Company expects to break ground on the SSG Millbrook LLC expansion, which, when completed, will add approximately 16,500 of gross square feet of all-climate-controlled units. The planning for the 41 Millbrook, NY expansion is underway and the Company is actively evaluating proposals for its construction. We currently anticipate that construction will proceed and that construction will be completed approximately six to nine months after construction commencement. However, there is no guarantee that we will commence or complete this project in this timeframe or at all. Analysis of Realized and Unrealized Gains (Losses) Unrealized gains on the Company’s investment in marketable equity securities for the twelve months ended December 31, 2018 and December 31, 2017 were $15,517 and $78,140, respectively. In accordance with the adoption of ASU 2016-01, as of January 1, 2018, the Company recognizes changes in the fair value of its investments in equity securities with readily determinable fair values in net income. Previously, changes in fair value of the Company’s investments in equity securities were recognized in accumulated other comprehensive income on the Company’s consolidated balance sheets. As we continue to acquire and/or develop additional stores, as part of the funding for such activities, we plan to liquidate our investment in marketable equity securities and potentially realize gains or losses. As of December 31, 2018, our unrealized gain on marketable equity securities was $812,120. There were no realized gains or losses for the twelve months ended December 31, 2018 and December 31, 2017, respectively. Distributions and Closing Market Prices Distributions for the three months ended December 31, 2018 totaled $0.065 per share and for the twelve months ended December 31, 2018 totaled $0.26 per share. The Company’s closing market price as of December 31, 2018 was $3.92 and as of December 31, 2017 was $4.61. Past performance does not guarantee future results. Recent U.S. Federal Income Tax Legislation On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1, the “TCJA”) was signed into law. The TCJA makes significant changes to U.S. federal income tax laws applicable to businesses and their owners, including REITs and their stockholders. Certain key provisions of the TCJA that could impact the Company and its stockholders, include the following: • • • Reduced Tax Rates. The highest individual U.S. federal income tax rate on ordinary income is reduced from 39.6% to 37% (through taxable years ending in 2025), and the maximum corporate income tax rate is reduced from 35% to 21%. In addition, individuals, trust, and estates that own the Company’s stock are permitted to deduct up to 20% of dividends received from the Company (other than dividends that are designated as capital gain dividends or qualified dividend income), generally resulting in an effective maximum U.S. federal income tax rate of 29.6% on such dividends (through taxable years ending in 2025). Furthermore, the amount that the Company is required to withhold on distributions to non-U.S. stockholders that are treated as attributable to gains from the Company’s sale or exchange of U.S. real property interests is reduced from 35% to 21%. Net Operating Losses. The Company may not use net operating losses generated beginning in 2018 to offset more than 80% of the Company’s taxable income (prior to the application of the dividends paid deduction). Net operating losses generated beginning in 2018 can be carried forward indefinitely but can no longer be carried back. Limitation on Interest Deductions. The amount of interest expense that certain taxpayers, including the Company and its TRSs, may deduct for a taxable year is limited to the sum of (i) the taxpayer’s business interest income for the taxable year, and (ii) 30% of the taxpayer’s “adjusted taxable income” for the taxable year. For taxable years beginning before January 1, 2022, adjusted taxable income means earnings before interest, taxes, depreciation, and amortization (“EBITDA”); for taxable years beginning on or after January 1, 2022, adjusted taxable income is limited to earnings before interest and taxes (“EBIT”). Taxpayers engaged in certain real estate businesses, including real estate rental, operation, and management, can generally elect to be treated as an “electing real property trade or business,” in which case the limitation described above generally will not apply. It is expected that the Company would be entitled to make this election. An electing real property trade or business is required to use the alternative depreciation system, which generally results in longer 42 • • depreciation periods and therefore lower depreciation deductions for certain categories of tangible property. Alternative Minimum Tax. The corporate alternative minimum tax is eliminated. Income Accrual. The Company is required to recognize certain items of income for U.S. federal income tax purposes no later than the Company would report such items on its financial statements. This provision may override many of the U.S. federal income tax rules relating to the timing of income inclusions. The provision is generally effective with respect to taxable years beginning after December 31, 2017, but applies with respect to income from a debt instrument having “original issue discount” for U.S. federal income tax purposes only for taxable years beginning after December 31, 2018. Prospective investors are urged to consult with their tax advisors regarding the potential effects of the TCJA or other legislative, regulatory or administrative developments on an investment in the Company’s common stock. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 8. Financial Statements and Supplementary Data. The financial statements are included in this annual report beginning on page F-3. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There were no changes in or disagreements with our accountants on accounting and financial disclosures during the last two fiscal years. Item 9A. Controls and Procedures. Disclosure Controls and Procedures We maintain disclosure controls and procedures to ensure that information required to be disclosed in the reports we file pursuant to the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e) of the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide a reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have a disclosure controls and procedures committee, comprised of the Chief Executive Officer and Chief Financial Officer, which meets as necessary and is responsible for considering the materiality of information and determining our disclosure obligations on a timely basis. The disclosure controls and procedures committee carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under 43 the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, audit committee, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: • • • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, our management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, our management believes that, as of December 31, 2018, our internal control over financial reporting was effective based on those criteria. Changes in Control Over Financial Reporting There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during our fiscal fourth quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. Not applicable. 44 Item 10. Directors, Executive Officers and Corporate Governance. PART III The information regarding our executive officers and certain other matters required by Item 401 of Regulation S-K is incorporated herein by reference to our definitive proxy statement relating to our annual meeting of stockholders (the “Proxy Statement”), to be filed with the SEC within 120 days after December 31, 2018. The information regarding compliance with Section 16(a) of the Exchange Act required by Item 405 of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2018. The information regarding our Code of Business Conduct and Ethics required by Item 406 of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2018. The information regarding certain matters pertaining to our corporate governance required by Item 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is incorporated by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2018. Item 11. Executive Compensation. The information regarding executive compensation and other compensation related matters required by Items 402 and 407(e)(4) and (e)(5) of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2018. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The tables on equity compensation plan information and beneficial ownership of the Company required by Items 201(d) and 403 of Regulation S-K are incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2018. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information regarding transactions with related persons, promoters and certain control persons and trustee independence required by Items 404 and 407(a) of Regulation S-K is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2018. Item 14. Principal Accounting Fees and Services. The information concerning principal accounting fees and services and the Audit Committee’s pre-approval policies and procedures required by Item 14 is incorporated herein by reference to the Proxy Statement to be filed with the SEC within 120 days after December 31, 2018. 45 Item 15. Exhibits, Financial Statement Schedules. (a) Documents filed as part of this report: 1. Financial Statements. PART IV (1) and (2). All Financial Statements and Financial Statement Schedules filed as part of this Annual Report on 10-K are included in Part II, Item 8 —”Financial Statements and Supplementary Data” of this Annual Report on 10-K and reference is made thereto. (3) The list of exhibits filed with this annual report is set forth in response to Item 15(b). (b) Exhibits. The following documents are filed or incorporated by references as exhibits to this report: Exhibit Item Number and Description Incorporated by Reference Filed Herewith 3.1.1. Articles Supplementary of Global Self Storage, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 20, 2017 and incorporated herein by reference) 3.1.2. Articles of Amendment and Restatement of Global Self Storage, Inc. (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 20, 2017 and incorporated herein by reference) 3.2. 4.1 4.2 4.3 10.1 10.2 10.3 Second Amended and Restated Bylaws of Global Self Storage, Inc. (filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on October 20, 2017 and incorporated herein by reference) Rights Agreement (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 2, 2016 and incorporated herein by reference) First Amendment, dated October 20, 2017, to Rights Agreement, dated as of January 29, 2016, between Global Self Storage, Inc. and American Stock Transfer & Trust Company, LLC (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 20, 2017 and incorporated herein by reference) Form of Registration Rights Agreement by and between the Company and Tuxis (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on November 30, 2016 and incorporated herein by reference) Guaranty dated June 24, 2016 by Global Self Storage, Inc. in favor of Insurance Strategy Funding IV, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 30, 2016 and incorporated herein by reference) Loan Agreement dated June 24, 2016 between certain subsidiaries of Global Self Storage, Inc. and Insurance Strategy Funding IV, LLC (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 30, 2016 and incorporated herein by reference) Promissory Note dated June 24, 2016 between certain subsidiaries of Global Self Storage, Inc. and Insurance Strategy Funding IV, LLC (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 30, 2016 and incorporated herein by reference) 46 X X X X X X X X X Exhibit Item Number and Description Incorporated by Reference Filed Herewith X X X X X X X 10.4 10.5 Form of Mortgage, Assignment of Leases and Rents and Security Agreement (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 30, 2016 and incorporated herein by reference) Employment Agreement between Mark C. Winmill and the Company dated March 29, 2018 (filed as Exhibit 10.5 to the Company’s Annual Report on Form 10-K filed on April 2, 2018 and incorporated herein by reference) 10.6 Global Self Storage, Inc. 2017 Equity Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 20, 2017 and incorporated herein by reference) 10.7 Form of Restricted Share Award Agreement (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed on March 28, 2018 and incorporated herein by reference) 10.8 Form of Performance Share Award Agreement (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-8 filed on March 28, 2018 and incorporated herein by reference) 10.9 10.10 21.1 23.1 24.1 31.1 31.2 32.1 Loan Agreement dated December 20, 2018 between certain subsidiaries of Global Self Storage, Inc. and TCF National Bank (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 21, 2018 and incorporated herein by reference) Guaranty dated December 20, 2018 by Global Self Storage, Inc. in favor of TCF National Bank (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 21, 2018 and incorporated herein by reference) Subsidiaries of the Company Consent of Tait, Weller & Baker LLP for Global Self Storage, Inc. Powers of Attorney (included as part of the signature pages hereto) Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 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 47 X X X X X X Exhibit Item Number and Description Incorporated by Reference Filed Herewith 101. The following materials from Global Self Storage, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018, are formatted in XBRL (eXtensible Business Reporting Language): (1) consolidated balance sheets; (2) consolidated statements of operations; (3) consolidated statements of comprehensive income (loss); (4) consolidated statement of changes in equity; (5) consolidated statements of cash flows; (6) notes to consolidated financial statements; and (7) financial statement schedule III. X 48 Item 16. Form 10-K Summary. Not applicable. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 1, 2019 GLOBAL SELF STORAGE, INC. /s/ Mark C. Winmill By: Mark C. Winmill Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark C. Winmill, Donald Klimoski II, and Russell Kamerman, and each of them, with full power to act without the other, such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this Form 10-K and any and all amendments thereto, and to file the same, with exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: April 1, 2019 Date: April 1, 2019 Date: April 1, 2019 Date: April 1, 2019 Date: April 1, 2019 /s/ Mark C. Winmill By: Mark C. Winmill Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer) /s/ Thomas O’Malley By: Thomas O’Malley Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) /s/ Thomas B. Winmill By: Thomas B. Winmill Director /s/ Russell E. Burke III By: Russell E. Burke III Director /s/ George B. Langa By: George B. Langa Director 49  Date: April 1, 2019 /s/ William C. Zachary By: William C. Zachary Director 50  Global Self Storage, Inc. Financial Statements` Table of Contents Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2018 and 2017 Consolidated Statements of Operations for the years ended December 31, 2018 and 2017 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017 Consolidated Statement of Stockholders’ Equity Consolidated Statements of Cash Flows for the years ended December 31,2018 and 2017 Notes to consolidated financial statements F-1 F-2 F-3 F-4 F-5 F-6 F-7 F-8  Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Global Self Storage, Inc. New York, New York Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Global Self Storage, Inc. (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes and financial statement Schedule III (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Company’s auditor since 1974. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Philadelphia, Pennsylvania April 1, 2019 F-2 TAIT, WELLER & BAKER LLP GLOBAL SELF STORAGE, INC. CONSOLIDATED BALANCE SHEETS Assets Real estate assets, net Cash and cash equivalents Restricted cash Investments in securities Accounts receivable Prepaid expenses and other assets Line of credit issuance costs Goodwill Total assets Liabilities and equity Note payable Accounts payable and accrued expenses Total liabilities Commitments and contingencies Equity December 31, 2018 December 31, 2017 $ $ $ 53,811,737 $ 1,526,203 186,063 1,567,607 67,604 263,767 471,196 694,121 58,588,298 $ 19,269,250 $ 2,113,172 21,382,422 55,045,563 2,147,460 108,955 1,552,090 103,289 221,830 — 694,121 59,873,308 19,417,405 1,954,919 21,372,324 Preferred stock, $0.01 par value: 50,000,000 shares authorized, no shares outstanding Common stock, $0.01 par value: 450,000,000 shares authorized, 7,692,624 and 7,619,469 issued and outstanding at December 31, 2018 and 2017, respectively Additional paid in capital Accumulated comprehensive income Retained earnings Total equity Total liabilities and equity $ — — 76,926 33,961,903 — 3,167,047 37,205,876 58,588,298 $ 76,195 33,881,863 796,603 3,746,323 38,500,984 59,873,308 See notes to consolidated financial statements. F-3 GLOBAL SELF STORAGE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Revenues Rental income Other property related income Total revenues Expenses Property operations General and administrative Depreciation and amortization Business development Total expenses Operating income Other income (expense) Dividend and interest income Unrealized gain on marketable equity securities Interest expense Total other income (expense), net Net income (loss) Earnings per share Basic Diluted Weighted average shares outstanding Basic Diluted See notes to consolidated financial statements. Year Ended December 31, 2018 Year Ended December 31, 2017 $ 7,850,870 $ 260,109 7,238,819 233,974 8,110,979 7,472,793 3,262,603 1,826,446 1,398,358 198,000 3,153,887 1,927,585 1,699,555 14,295 6,685,407 6,795,322 1,425,572 677,471 76,296 15,517 (897,937 ) (806,124 ) 57,073 — (880,834 ) (823,761 ) 619,448 $ (146,290 ) 0.08 $ 0.08 $ 7,622,287 7,624,122 (0.02 ) (0.02 ) 7,619,469 7,619,469 $ $ $ F-4  GLOBAL SELF STORAGE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Net income (loss) Other comprehensive income Unrealized gain on investment securities available-for-sale Comprehensive income (loss) See notes to consolidated financial statements. F-5 Year Ended December 31, 2018 Year Ended December 31, 2017 $ $ 619,448 — 619,448 $ $ (146,290 ) 78,140 (68,150 )  GLOBAL SELF STORAGE, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY Common Stock Paid in Par Value Capital Shares Accumulated Other Comprehensive Income Retained Earnings Total Stockholders’ Equity Balance at December 31, 2016 Net loss Unrealized gain on available-for-sale securities Dividends Balance at December 31, 2017 Adjustment from financial instruments update ASU 2016-01 (Note 2) Net income Restricted stock grants issued Compensation related to stock-based awards Dividends Balance at December 31, 2018 See notes to consolidated financial statements. 7,619,469 $ — $ — — 7,619,469 $ — — 73,155 — — 7,692,624 $ 76,926 76,195 $ 33,881,863 $ — $ — — — $ — — 76,195 $ 33,881,863 $ — — (731 ) 80,771 — — — 731 — — — $ 78,140 718,463 $ 5,873,675 $ 40,550,196 (146,290 ) (146,290 ) 78,140 — (1,981,062 ) — (1,981,062 ) 796,603 $ 3,746,323 $ 38,500,984 796,603 (796,603 ) — 619,448 — $ 619,448 — — — 80,771 — — (1,995,327 ) — (1,995,327 ) $ 33,961,903 $ - $ 3,167,047 $ 37,205,876 F-6  GLOBAL SELF STORAGE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Cash flows from operating activities Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation and amortization Unrealized gain on marketable equity securities Amortization of loan procurement costs Compensation expense related to stock-based awards Changes in operating assets and liabilities: Accounts receivable Prepaid expenses and other assets Accounts payable and accrued expenses Net cash provided by operating activities Cash flows from investing activities Construction Improvements and equipment additions Net cash used in investing activities Cash flows from financing activities Line of credit issuance costs Principal payments on note payable Dividends paid Net cash used in financing activities Net decrease in cash and cash equivalents Cash, cash equivalents, and restricted cash, beginning of period Cash, cash equivalents, and restricted cash, end of period Supplemental schedule of cash flow information Interest paid See notes to consolidated financial statements. F-7 Year Ended December 31, 2018 Year Ended December 31, 2017 $ 619,448 $ (146,290 ) 1,398,358 (15,517 ) 49,118 80,771 35,685 (41,937 ) 155,323 2,281,249 (70,703 ) (93,829 ) (164,532 ) (477,981 ) (190,488 ) (1,992,397 ) (2,660,866 ) (544,149 ) 2,256,415 1,712,266 $ 1,699,555 — 42,434 — 54,318 43,215 231,461 1,924,693 (393,832 ) (259,078 ) (652,910 ) — — (1,981,062 ) (1,981,062 ) (709,279 ) 2,965,694 2,256,415 837,074 $ 838,400 $ $  GLOBAL SELF STORAGE, INC. NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION Global Self Storage, Inc. (the “Company”) is a self-administered and self-managed REIT that owns, operates, manages, acquires, develops and redevelops self storage properties (“stores” or “properties”) in the United States. Our stores are designed to offer affordable, easily accessible, and secure storage space for residential and commercial customers. The Company currently owns and operates, through its wholly owned subsidiaries, eleven stores located in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, and South Carolina. The Company was formerly registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, closed end management investment company. The Securities and Exchange Commission’s (“SEC”) order approving the Company’s application to deregister from the 1940 Act was granted on January 19, 2016. Accordingly, effective January 19, 2016, the Company changed its name to Global Self Storage, Inc. from Self Storage Group, Inc., changed its SEC registration to an operating company reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from an investment company under the 1940 Act, and listed its common stock on the Nasdaq Capital Market (“NASDAQ”) under the symbol “SELF”. The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended (the “IRC”). To the extent the Company continues to qualify as a REIT, it will not generally be subject to U.S. federal income tax, with certain limited exceptions, on its taxable income that is distributed to its stockholders. The Company invests in self storage properties by acquiring stores through its wholly owned subsidiaries. At December 31, 2018, the Company owned and operated 11 stores. The Company operates primarily in one segment: rental operations. Disclosure of the square footage of the self storage properties is unaudited and outside the scope of our independent registered public accounting firm’s audit of our financial statements in accordance with the standards of the Public Company Accounting Oversight Board (U.S.). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Upon deregistration as an investment company, the Company’s status changed to an operating company from an investment company since it no longer met the assessment of an investment company under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 (“ASC 946”). The Company discontinued applying the guidance in ASC 946 and began to account for the change in status prospectively by accounting for its investments in accordance with other U.S. generally accepted accounting principles (“GAAP”) topics as of the date of the change in status. The consolidated financial statements of the Company are presented on the accrual basis of accounting in accordance with GAAP and include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Reclassifications Certain amounts from the prior year have been reclassified to conform to current year presentation as described below. On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2016-18: Statement of Cash Flows (Topic 230) – Restricted Cash, which requires restricted cash to be included with cash and cash equivalents as part of the reconciliation of beginning and end of period balances within the consolidated statements of cash flows. As a result of adopting the new guidance, $108,955 of restricted cash, which was previously included as operating cash outflows and investing cash inflows within the consolidated statements of cash flows for the year ended December 31, 2017 has been removed and is now included in the cash, cash equivalents, and restricted cash line items at the beginning and the end of the period. F-8  Accounting Standards Adopted As required, in the first quarter of 2018 the Company adopted ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires changes to the accounting for financial instruments that affect the Company’s equity investments and the presentation and disclosure for such instruments. Marketable equity securities previously classified as available-for-sale equity investments are now measured and recorded at fair value with changes in fair value recorded in the consolidated statement of operations. The Company utilized a modified retrospective approach through a cumulative effect adjustment to retained earnings for the year beginning on January 1, 2018. The following table summarizes the effects of adopting ASU 2016-01 on the Company’s financial statements for the year beginning January 1, 2018 as an adjustment to the opening balance: Assets: Investments in securities Marketable equity securities Equity: Accumulated other comprehensive income Retained earnings Cash, Cash Equivalents, and Restricted Cash Balance at December 31, 2017 As Previously Reported Adjustments from Financial Instruments Update ASU 2016-01 Balance at January 1, 2018 As Adjusted $ $ $ $ 1,552,090 $ — $ (1,552,090 ) $ 1,552,090 $ 796,603 $ 3,746,323 $ (796,603 ) $ 796,603 $ — 1,552,090 — 4,542,926 The Company’s cash is deposited with financial institutions located throughout the United States and at times may exceed federally insured limits. The Company considers all highly liquid investments, which may include money market fund shares, with a maturity of three months or less to be cash equivalents. Restricted cash is comprised of escrowed funds deposited with a bank relating to capital expenditures. The carrying amount reported on the balance sheet for cash, cash equivalents, and restricted cash approximates fair value. Income Taxes The Company has elected to be treated as a REIT under the IRC. In order to maintain its qualification as a REIT, among other things, the Company is required to distribute at least 90% of its REIT taxable income to its stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income tax with respect to that portion of its income which meets certain criteria and is distributed annually to stockholders. The Company plans to continue to operate so that it meets the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. If the Company were to fail to meet these requirements, it would be subject to federal income tax. In managements opinion, the requirements to maintain these elections are being met. The Company is subject to certain state and local taxes. The Company has elected to treat its corporate subsidiary, SSG TRS LLC, as a taxable REIT subsidiary (“TRS”). In general, the Company’s TRS may perform additional services for tenants and may engage in any real estate or non-real estate related business. A TRS is subject to federal corporate income tax. The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Company has reviewed its tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on federal, state, and local income tax returns for open tax years (2015 – 2017), or is expected to be taken in the Company’s 2018 tax returns. F-9  Legislation, commonly known as the Tax Cuts and Jobs Act (“TCJA”) was signed into law on December 22, 2017. The TCJA makes significant changes to the U.S. federal income tax rates for taxation of individuals and corporations (including REITs), generally effective for taxable years beginning after December 31, 2017. Marketable Equity Securities Investments in equity securities that have readily determinable fair values are accounted for equity securities measured at fair value. Gains or losses from changes in the fair value of equity securities are recorded in net income, until the investment is sold or otherwise disposed of, or until the investment is determined to be other-than- temporarily impaired. The specific identification method is used to determine the realized gain or loss on investments sold or otherwise disposed. Fair value is determined using a valuation hierarchy generally by reference to an active trading market, using quoted closing or bid prices. Judgment is used to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. Real Estate Assets Real estate assets are carried at the appreciated value as of January 19, 2016, the effective date of the change in status to an operating company, less accumulated depreciation from that date. Purchases subsequent to the effective date of the change in status are carried at cost, less accumulated depreciation and impairment losses. Direct and allowable internal costs associated with the development, construction, renovation, and improvement of real estate assets are capitalized. Property taxes and other costs associated with development incurred during the construction period are capitalized. The construction period begins when expenditures for the real estate assets have been made and activities that are necessary to prepare the asset for its intended use are in progress. The construction period ends when the asset is substantially complete and ready for its intended use. Acquisition costs are accounted for in accordance with Accounting Standard Update ("ASU") No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business, which was adopted on January I, 2018 (see section entitled Recent Accounting Pronouncements") and are generally capitalized. When stores are acquired, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values. Allocations to land, building and improvements, and equipment are recorded based upon their respective fair values as estimated by management. In allocating the purchase price for an acquisition, the Company determines whether the acquisition includes intangible assets or liabilities. The Company allocates a portion of the purchase price to an intangible asset attributed to the value of in-place leases. This intangible is generally amortized to expense over the expected remaining term of the respective leases. Substantially all of the leases in place at acquired stores are at market rates, as the majority of the leases are month-to-month contracts. Internal and external transaction costs associated with acquisitions or dispositions of real estate, as well as repairs and maintenance costs, are charged to expense as incurred. Major replacements and betterments that improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives. Depreciation is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between 5 and 39 years. Derivative Financial Instruments The Company carries all derivative financial instruments on the balance sheet at fair value. Fair value of derivatives is determined by reference to observable prices that are based on inputs not quoted on active markets, but corroborated by market data. The accounting for changes in the fair value of a derivative instrument depends on whether the derivative has been designated and qualifies as part of a hedging relationship. The Company’s use of F-10 derivative instruments has been limited to interest cap agreements. The fair values of derivative instruments are included in prepaid expenses and other assets in the accompanying balance sheets. For derivative instruments not designated as cash flow hedges, the unrealized gains and losses are included in interest expense in the accompanying statements of operations. For derivatives designated as cash flow hedges, the effective portion of the changes in the fair value of the derivatives is initially reported in accumulated other comprehensive income (loss) in the Company’s balance sheets and subsequently reclassified into earnings when the hedged transaction affects earnings. The valuation of interest rate cap agreements is determined using widely accepted valuation techniques. This analysis reflects the contractual terms of derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses primarily consist of property tax accruals, unearned rental income, and trade payables. At December 31, 2018 and 2017, accounts payable and accrued expenses included a $900,000 contingent payment in connection with the purchase of a property made in 2016. Revenue and Expense Recognition Revenues from stores, which are primarily composed of rental income earned pursuant to month-to-month leases for storage space, as well as associated late charges and administrative fees, are recognized as earned. Promotional discounts reduce rental income over the promotional period. Ancillary revenues from sales of merchandise and tenant insurance and other income are recognized when earned. The Company accrues for property tax expense based upon actual amounts billed and, in some circumstances, estimates and historical trends when bills or assessments have not been received from the taxing authorities or such bills and assessments are in dispute. Cost of operations and general and administrative expense are expensed as incurred. Credit Risk Financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and certain portions of accounts receivable including rents receivable from our tenants. Cash and cash equivalents are on deposit with highly rated commercial banks. Evaluation of Asset Impairment The Company evaluates its real estate assets, intangible assets consisting of in-place lease, and goodwill for impairment annually. If there are indicators of impairment and we determine that the asset is not recoverable from future undiscounted cash flows to be received through the asset’s remaining life (or, if earlier, the expected disposal date), we record an impairment charge to the extent the carrying amount exceeds the asset’s estimated fair value or net proceeds from expected disposal. Stock-based Compensation The measurement and recognition of compensation expense for all stock-based payment awards to employees are based on estimated fair values. Awards granted are valued at fair value and any compensation expense is recognized over the service periods of each award. Loan Procurement Costs In accordance with ASU No. 2015-03, Loan procurement costs, net are presented as a direct deduction from the carrying amount of the related debt liability. Jf there is not an associated debt liability recorded on the consolidated balance sheets, the costs are recorded as an asset net of accumulated amortization. Loan procurement costs associated with the Company's revolving credit facility remain in Line of credit issuance costs, net of amortization on the Company's consolidated balance sheets. The costs are amortized over the estimated life of the related debt. F-11  Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from management’s estimates. Recently Issued Accounting Standards In May 2017, the FASB issued ASU 2017-09, Stock Compensation: Scope of Modification Accounting, to increase clarity and consistency of practice and reduce cost and complexity when modifying the terms of share-based awards. The Company prospectively adopted this guidance effective January 1, 2018, with no material impact on our financial statements. In February 2017, as part of the new revenue standard, the FASB issued ASU No. 2017-05 – Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance, which focuses on recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. Specifically, the new guidance defines “in substance nonfinancial asset,” unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing sales of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint ventures. The new guidance became effective on January 1, 2018 when the Company adopted the new revenue standard. Upon adoption, the majority of the Company’s sale transactions are now treated as dispositions of nonfinancial assets rather than dispositions of a business given the FASB’s recently revised definition of a business (see ASU No. 2017-01 below). Additionally, in partial sale transactions where the Company sells a controlling interest in real estate but retains a noncontrolling interest, the Company will now fully recognize a gain or loss on the fair value measurement of the retained interest as the new guidance eliminates the partial profit recognition model. The adoption of the standard did not have an impact on the Company’s consolidated financial position or results of operations. In January 2017, the FASB issued ASU 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business, which changes the definition of a business to include an input and a substantive process that provide goods or services to customers, other revenue, or investment income. The standard became effective on January 1, 2018. Upon adoption of the new guidance, the Company expects that the majority of future property acquisitions will now be considered asset acquisitions, resulting in the capitalization of acquisition related costs incurred in connection with these transactions and the allocation of purchase price and acquisition related costs to the assets acquired based on their relative fair values. The adoption of the standard did not have an impact on the Company’s consolidated financial position or results of operations. In November 2016, the FASB issued ASU No. 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash, which requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The new guidance also requires entities to reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. The standard became effective on January 1, 2018 and requires the use of the retrospective transition method. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements as the update relates to financial statement presentation and disclosures as discussed in “Reclassifications” above. F-12  In August 2016, the FASB issued ASU No. 2016-15 - Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The eight items that the ASU provides classification guidance on include (1) debt prepayment and extinguishment costs, (2) settlement of zero-coupon debt instruments, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (6) distributions received from equity method investments, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The standard became effective on January 1, 2018. The standard requires the use of the retrospective transition method. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements as the update relates to financial statement presentation and disclosures. In February 2016, the FASB issued ASU No. 2016-02 - Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The standard became effective on January 1, 2019. This standard will not have a material impact on operating results of financial condition, because all lease revenues are derived from month to month self storage leases and the Company does not incur a material amount of lease expense. In May 2014, the FASB issued ASU No. 2014-09 - Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new guidance outlines a five-step process for customer contract revenue recognition that focuses on transfer of control as opposed to transfer of risk and rewards. The new guidance also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. In May 2016, the FASB issued ASU 2016-12 - Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which amends ASU 2014-09 and is intended to address implementation issues that were raised by stakeholders. ASU 2016-12 provides practical expedients on collectability, noncash consideration, presentation of sales tax and contract modifications and completed contracts in transition. Both standards became effective on January 1, 2018. The standards did not have a material impact on the Company’s consolidated statements of financial position or results of operations primarily because the majority of its revenue is derived from lease contracts, which are excluded from the scope of the new guidance. The Company’s insurance fee revenue, and merchandise sale revenue are included in the scope of the new guidance, however, the Company identified similar performance obligations under this standard as compared with deliverables and separate units of account identified under its previous revenue recognition methodology. Accordingly, revenue recognized under the new guidance does not differ materially from revenue recognized under previous guidance and there is no material prior year impact. F-13 3. MARKETABLE EQUITY SECURITIES Investments in securities as of December 31, 2018 and 2017 consisted of the following: December 31, 2018 Investment in marketable equity securities Common stocks Total investment in marketable equity securities December 31, 2017 Investment in marketable equity securities Common stocks Total investment in marketable equity securities Cost Basis Gains Losses Value Gross Unrealized $ $ 755,487 $ 755,487 $ 812,120 $ 812,120 $ — $ — $ 1,567,607 1,567,607 Cost Basis Gains Losses Value Gross Unrealized $ $ 755,487 $ 755,487 $ 718,463 $ 718,463 $ — $ — $ 1,473,950 1,473,950 . 4. REAL ESTATE ASSETS The carrying value of the Company’s real estate assets is summarized as follows: Buildings, improvements, and equipment, at cost: Beginning balance Improvements and equipment additions Newly developed facilities opened for operation Ending balance Land: Beginning balance Ending balance Accumulated depreciation: Beginning balance Depreciation expense Ending balance Construction in progress: Beginning balance Current development Newly developed facilities opened for operation Ending balance Total real estate assets December 31, 2018 December 31, 2017 $ $ 51,415,779 $ 93,829 369,719 51,879,327 5,493,814 5,493,814 (2,257,862 ) (1,398,358 ) (3,656,220 ) 393,832 70,703 (369,719 ) 94,816 53,811,737 $ 51,156,701 259,078 — 51,415,779 5,493,814 5,493,814 (875,447 ) (1,382,415 ) (2,257,862 ) — 393,832 — 393,832 55,045,563 The Merrillville, IN expansion was completed in January 2018 and added 13,300 leasable square feet of traditional drive-up storage units. In 2019 the Company expects to break ground on the Millbrook, NY expansion, which, when completed, will add approximately 16,500 of gross square feet of all-climate-controlled units. The planning for the Millbrook, NY expansion is underway and the Company is actively evaluating proposals for its construction. As of December 31, 2018, development costs for these projects have been capitalized while the F-14 projects that are under construction and are reflected in real estate assets, net on the Company’s consolidated balance sheet. 5. FAIR VALUE MEASUREMENTS GAAP establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2018 and December 31, 2017: December 31, 2018 Assets Marketable equity securities Interest rate cap Total assets at fair value December 31, 2017 Assets Marketable equity securities Total assets at fair value Level 1 Level 2 Level 3 Total $ $ 1,567,607 — 1,567,607 $ $ — 4,889 4,889 $ $ — — — $ $ 1,567,607 4,889 1,572,496 Level 1 Level 2 Level 3 Total $ $ 1,552,090 1,552,090 $ $ — — $ $ — — $ $ 1,552,090 1,552,090 There were no assets transferred from level 1 to level 2 as of December 31, 2018 or December 31, 2017. The Company did not have any assets or liabilities that are re- measured on a recurring basis using significant unobservable inputs as of December 31, 2018 or December 31, 2017. The fair values of financial instruments including cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximated their respective carrying values as of December 31, 2018 and 2017, respectively. The aggregate carrying value of the Company’s debt was $18,877,333 and $18,970,317 as of December 31, 2018 and 2017, respectively. These estimates were based on market interest rates for comparable obligations, general market conditions and maturity. The Company’s debt is classified as level 2 in the fair value hierarchy. 6. DERIVATIVES The Company’s objective in using an interest rate derivative is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses an interest rate cap to manage interest rate risk. The Company carries the premium paid for the interest rate cap as an asset on the balance sheet at fair value. The change in the unrealized gain or loss of the premium is recorded as an increase or decrease to interest expense. The following table summarizes the terms of the Company’s derivative financial instrument as of December 31, 2018: Product Cap Agreement December 31, 2018 December 31, 2017 Strike Notional Amount Effective Date Maturity Date $ 7,500,000 $ — 3.50 % - 4.00% 12/24/2018 12/20/2021 F-15 7. NOTE PAYABLE AND REVOLVING LINE OF CREDIT Note Payable On June 24, 2016, certain wholly owned subsidiaries (the “Secured Subsidiaries”) of the Company entered into a loan agreement (the “Loan Agreement”) borrowing the principal amount of $20 million pursuant to a promissory note (the “Promissory Note”). The Promissory Note bears an interest rate equal to 4.192% per annum (effective interest rate 4.40%) and is due to mature on July 1, 2036. Pursuant to a security agreement (the “Security Agreement”), the obligations under the Loan Agreement are secured by certain real estate assets owned by the Secured Subsidiaries. The Company entered into a non-recourse guaranty on June 24, 2016 (the “Guaranty,” and together with the Loan Agreement, the Promissory Note and the Security Agreement, the “Loan Documents”) to guarantee the payment to Lender of certain obligations of the Secured Subsidiaries under the Loan Agreement. The Loan Documents require the Secured Subsidiaries and the Company to comply with certain covenants, including, among others, a minimum net worth test and other customary covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of an Event of Default (as defined in the Loan Agreement) including, but not limited to, the failure to pay amounts due or commencement of bankruptcy proceedings. As of December 31, 2018 and 2017, the Company was in compliance with these covenants. The Company incurred loan procurement costs of $646,246 and such costs have been recorded net of the note payable on the consolidated balance sheet and are amortized as an adjustment to interest expense over the term of the loan. As of December 31, 2018 and 2017 the carrying value of the Company’s note payable is summarized as follows: Note Payable Principal balance outstanding Less: Loan procurement costs, net Total note payable, net December 31, 2018 December 31, 2017 $ 19,809,511 $ 20,000,000 (282,595 ) (540,261 ) $ 19,269,250 $ 19,717,405 As of December 31, 2018, the note payable was secured by certain of its self storage properties with an aggregate net book value of approximately $34.6 million. The note payable paid interest only from August 1, 2016 through June 30, 2018. The following table represents the future principal payment requirements on the note payable as of December 31, 2018: 2019 2020 2021 2022 2023 2024 and thereafter Total principal payments Less: Loan procurement costs, net Total note payable $ $ 511,098 492,797 513,857 535,816 558,714 17,197,229 19,809,511 (540,261 ) 19,269,250 Revolving Line of Credit F-16  On December 20, 2018, certain wholly owned subsidiaries (the “Subsidiaries”) of the Company entered into a revolving credit loan agreement (the “Agreement”) between the Subsidiaries and TCF National Bank (the “Lender”). Under the Agreement, the Subsidiaries are borrowing from the Lender in the principal amount of up to $10 million pursuant to a promissory note (the “Note”). The Note bears an interest rate equal to 3.00% over the One Month U.S. Dollar London Inter-Bank Offered Rate and is due to mature on December 20, 2021. The obligations under the Agreement are secured by certain real estate assets owned by the Subsidiaries. The Company entered into a guaranty of payment on December 20, 2018 (the “Guaranty,” and together with the Agreement, the Note and related instruments, the “Revolver”) to guarantee the payment to Lender of certain obligations of the Subsidiaries under the Agreement. The Revolver requires the Subsidiaries and the Company to comply with certain covenants, including, among others, customary financial covenants. The Lender may accelerate amounts outstanding under the Loan Documents upon the occurrence of an Event of Default (as defined in the Agreement) including, but not limited to, the failure to pay amounts due to the Lender or commencement of bankruptcy proceedings. The Company incurred issuance costs of $477,981 and such costs are amortized as an adjustment to interest expense over the term of the loan. As of December 31, 2018, there were no outstanding borrowings under the Revolver. 8. EARNINGS PER SHARE Basic earnings per share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to potentially diluted securities. The following table sets forth the computation of basic and diluted earnings per share: Net income (loss) Weighted average common shares outstanding: Average number of common shares outstanding - basic Net effect of dilutive unvested restricted stock awards included for treasury stock method Average number of common shares outstanding - diluted Earnings per common share Basic Diluted $ $ $ For the Year Ended December 31, 2018 619,448 $ For the Year Ended December 31, 2017 (146,290 ) 7,622,287 7,619,469 1,835 7,624,122 — 7,619,469 0.08 $ 0.08 $ (0.02 ) (0.02 ) Common stock dividends paid in cash totaled $1,995,327 ($0.26 per share) and $1,981,062 ($0.26 per share) for the years ended December 31, 2018 and 2017, respectively. 9. RELATED PARTY TRANSACTIONS Certain officers and directors of the Company also serve as officers and directors of Winmill & Co. Incorporated (“Winco”), Bexil, Tuxis, and their affiliates (collectively with the Company, the “Affiliates”). As of December 31, 2018, certain of the Affiliates owned approximately 5% of the Company’s outstanding common stock. Pursuant to an arrangement between a professional employer organization (“PEO”) and the Affiliates, the F-17 PEO provides payroll, benefits, compliance, and related services for employees of the Affiliates in accordance with applicable rules and regulations under the IRC and, in connection therewith, Midas Management Corporation (“MMC”), a subsidiary of Winco, acts as a conduit payer of compensation and benefits to the Affiliates’ employees including those who are concurrently employed by the Company and its Affiliates. Rent expense of concurrently used office space and overhead expenses for various concurrently used administrative and support functions incurred by the Affiliates are allocated at cost among them. The Affiliates participate in a 401(k) retirement savings plan for substantially all qualified employees. A matching expense based upon a percentage of contributions to the plan by eligible employees is incurred and allocated among the Affiliates. The matching expense is accrued and funded on a current basis and may not exceed the amount permitted as a deductible expense under the IRC. The aggregate rent and overhead accrued and paid by the Company to Winco for the years ended December 31, 2018 and 2017 was $53,969 and $54,483, respectively. The Company had reimbursements payable to MMC and Winco for compensation and benefits and rent and overhead of $20,885 and $13,447 as of December 31, 2018 and 2017, respectively. The Company currently reimburses monthly automobile expenses of $1,000 per month to its President, Mark C. Winmill. To the extent that the monthly payment under the Company’s automobile lease exceeds the current monthly reimbursement amount, Mr. Winmill voluntarily reimburses the Company for the excess amount. In this regard, Mr. Winm ill has reimbursed the Company $3,228 and $3,228 for the years ended December 31, 2018 and 2017, respectively. The Company leases office space to Tuxis under a rental agreement. The terms of occupancy are month to month and automatically renew unless terminated by either party on ten days’ written notice. The monthly rental charges is $667 per month due and payable on the first day of each month. The Company earned rental income of $8,004 and $8,004 for the years ended December 31, 2018 and 2017 10. CAPITAL STOCK As of December 31, 2018, the Company was authorized to issue 450,000,000 shares of $0.01 par value common stock of which 7,692,624 had been issued and was outstanding. The Company was also authorized to issue 50,000,000 shares of preferred stock, $0.01 par value, authorized, of which none has been issued. 11. STOCK-BASED COMPENSATION On October 16, 2017 (“Effective Date”), the Company’s stockholders approved the Company’s 2017 Equity Incentive Plan (the “Plan”). The Plan is designed to provide equity-based incentives to certain eligible persons, as defined in the Plan, in the form of options, share appreciation rights, restricted stock, restricted stock units, dividend equivalent rights or other forms of equity-based compensation as determined in the discretion of the Board of Directors, the Compensation Committee of the Board of Directors, or other designee thereof. The total number of shares of common stock reserved and available for issuance under the Plan on the Effective Date was 760,000. On March 29, 2018, the Company approved restricted stock awards under the Plan to certain of its officers and employees in the aggregate amount of 73,155 shares, of which 15,025 shares are performance-based grants and 58,130 shares are time-based grants. The Company recorded $80,771 of expense in general and administrative expense in its statement of operations related to restricted stock awards granted to certain officers and employees for the year ended December 31, 2018. At December 31, 2018, there was $242,574 of total unrecognized compensation expense related to unvested restricted stock awards under the Plan. That cost is expected to be recognized over a weighted—average period of 3.1 years. The fair value of common stock awards is determined based on the closing trading price of the Company’s common stock on the grant date. Time-Based Restricted Stock Grants These time-based grants vest solely based on continued employment, with 6.25% of the shares eligible to vest on each three- month anniversary of the grant date during the remaining four-year time vesting period. Time-based restricted stock cannot be transferred during the vesting period. Grants of time-based restricted stock entitle the holder to dividends paid by the Company on shares of its common stock. F-18  A summary of the Company’s time-based restricted stock grant activity is as follows: Time-Based Restricted Stock Grants Unvested at December 31, 2017 Granted Vested Unvested at December 31, 2018 Performance-Based Restricted Stock Grants Stock — 58,130 (10,902 ) 47,228 $ $ $ $ Weighted-Average Grant-Date Fair Value — 4.42 4.42 4.42 Performance-based restricted stock grants vest based on continued employment and the achievement of certain Funds from Operations, as adjusted (“AFFO”) and same store revenue growth (“SSRG”) goals by the Company during 2018. Between 0% and 200% of these shares will be earned based on achievement of the AFFO and SSRG goals in 2018, and the shares which are earned will remain subject to quarterly vesting during the remaining four-year time vesting period. Dividends paid by the Company prior to the determination of how many shares are earned will be retained by the Company and released only with respect to earned shares. If a Change in Control (as defined in the Plan) occurs during 2018, the number of shares earned will equal the greater of the number of shares granted and the number of shares which would have been earned based on the AFFO and SSRG through the date of the Change in Control. If following a Change in Control, a grantee is terminated by the Company without Cause or by the grantee with Good Reason (as each is defined in the Plan), all unvested restricted stock will fully vest. A summary of the Company’s performance-based restricted stock grant activity is as follows: Performance-based Stock Grants Unvested at December 31, 2017 Granted Unvested at December 31, 2018 Stock — 15,025 15,025 $ $ $ Weighted-Average Grant-Date Fair Value — 4.42 4.42 Forfeitures are accounted for as they occur, compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service or performance condition is reversed in the period of the forfeiture. 12. COMMITMENTS AND CONTINGENCIES The Company enters into contracts that contain a variety of representations and warranties and which may provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown as it involves future claims that may be made against the Company under circumstances that have not occurred. The Company leases an automobile under a lease expiring on January 3, 2020. The future minimum lease payments under the lease is $15,288 for the year ending December 31, 2019. Upon the satisfaction of certain conditions described in the 2016 Purchase Agreement with Tuxis, in connection with expanding the Company’s Millbrook, New York store, an additional $900,000 cash payment is due to Tuxis from the Company. On May 2, 2017, the Company received approval from the local municipality for the Millbrook expansion project and, upon commencement of construction, the additional cash payment is expected to be made by the Company to Tuxis. As of December 31, 2018, construction has not started, however, the Company has incurred development costs and is actively evaluating proposals for the construction of the expansion project. F-19  13. SUBSEQUENT EVENTS On March 27, 2019, the Company approved restricted share awards under the Plan to certain of its officers and employees in the aggregate amount of 28,755 shares, of which 15,025 shares are performance-based grants and the remainder of the shares are time-based grants. Mark Winmill, our Chief Executive Officer and President, received 8,025 shares. Thomas O’Malley, our Chief Financial Officer and Donald Klimoski II, our General Counsel, each received 3,500 shares. With respect to the grants made to Messrs. Winmill, O’Malley and Klimoski, 8,025 of the shares for Mr. Winmill and 3,500 of shares for each of Messrs. O’Malley and Klimoski vest based on continued employment and the achievement of certain AFFO and SSRG goals by the Company during 2019. Between 0% and 200% of these shares will be earned based on achievement of the AFFO and SSRG goals in 2019, and the shares which are earned will remain subject to quarterly vesting during the remaining four-year time vesting period. Dividends paid by the Company prior to the determination of how many shares are earned will be retained by the Company and released only with respect to earned shares. If a Change in Control (as defined in the Plan) occurs during 2019, the number of shares earned will equal the greater of the number of shares granted and the number of shares which would have been earned based on the AFFO and SSRG through the date of the Change in Control. If following a Change in Control, a grantee is terminated by the Company without Cause or by the grantee with Good Reason (as each is defined in the Plan), all unvested restricted shares will fully vest. F-20  GLOBAL SELF STORAGE, INC. SCHEDULE III REAL ESTATE AND RELATED DEPRECIATION December 31, 2018 Description Clinton, CT (B) Bolingbrook, IL (A) Dolton, IL (A) McCordsville, IN (B) Merrillville, IN (A) Millbrook, NY (B) Rochester, NY (A) Lima, OH (B) Sadsburyville, PA (A) Summerville, SC (A) Summerville, SC (A) Initial cost Square Footage Land Buildings & Improvements 30,338 113,700 86,590 81,646 80,270 12,676 68,076 97,610 78,842 72,700 43,060 765,508 $ (1) (2) $ 356,040 633,914 614,413 770,000 597,229 423,960 571,583 530,000 462,749 345,160 188,766 5,493,814 $ $ 3,108,285 5,491,409 5,227,313 6,776,000 5,104,011 2,900,895 5,227,630 4,664,000 5,146,579 2,989,159 1,605,405 48,240,686 $ $ Costs Subsequent to Acquisition 14,197 2,439,850 9,611 46,578 464,324 36,213 — 96,417 23,729 5,475 14,725 3,151,119 $ $ Gross Carrying Amount at December 31, 2018 Land Buildings & Improvements 356,040 633,914 614,413 770,000 597,229 423,960 571,583 530,000 462,749 345,160 188,766 5,493,814 $ $ 3,122,482 7,931,259 5,236,924 6,822,578 5,568,335 2,937,108 5,227,630 4,760,417 5,170,308 2,994,634 1,620,130 51,391,805 $ $ Total 3,478,522 8,565,173 5,851,337 7,592,578 6,165,564 3,361,068 5,799,213 5,290,417 5,633,057 3,339,794 1,808,896 56,885,619 $ $ Accumulated Depreciation 154,983 591,922 419,280 385,529 418,979 135,170 379,069 276,488 406,432 221,342 120,549 3,509,743 (A) (B) (1) (2) This property is part of the Loan Agreement with a balance of $19,809,511 as of December 31, 2018. This property is part of the Revolver as of December 31, 2018 SSG Summerville I LLC. SSG Summerville II LLC Activity in storage properties during the years ended December 31, 2018 and 2017 is as follows: Storage properties * Balance at beginning of period Acquisitions and improvements Balance at end of period Accumulated depreciation Balance at beginning of period Depreciation expense Balance at end of period Storage properties, net 2018 2017 $ 57,303,425 $ 56,650,515 652,910 $ 57,467,957 $ 57,303,425 164,532 $ (2,257,862 ) $ (1,398,358 ) (3,656,220 ) $ (875,447 ) (1,382,415 ) (2,257,862 ) $ $ 53,811,737 $ 55,045,563 * These amounts include equipment that is housed at the Company’s properties and construction in progress which is excluded from Schedule III above. F-21 EXHIBIT 21.1 Subsidiaries of the Company Name SSG Bolingbrook LLC SSG Dolton LLC SSG Fishers LLC SSG Lima LLC SSG Merrillville LLC SSG Operations LLC SSG Rochester LLC SSG Sadsbury LLC SSG Summerville I LLC SSG Summerville II LLC SSG Clinton LLC SSG Millbrook LLC SSG TRS LLC Jurisdiction of Formation or Incorporation Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware New York New York Delaware Doing Business As Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage Global Self Storage CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM EXHIBIT 23.1 We consent to the incorporation by reference in the registration statements on Form S-3 (No. 333-227879) and on Form S-8 (No. 333- 223991) of Global Self Storage, Inc. of our report dated April 1, 2019, with respect to the consolidated balance sheets of Global Self Storage, Inc. as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018 and related notes and financial statement schedule III (collectively, the “consolidated financial statements”) included in its 2018 annual report on Form 10-K; and to our reports dated October 19, 2017 with respect to the Historical Summaries of Revenue and Direct Operating Expenses of the Tuxis properties for the years ended December 31, 2015 and 2014 included in its Amended Form 8-K, and to the Historical Summary of Revenue and Direct Operating Expenses of the Fishers property for the year ended December 31, 2015 included in its Amended Form 8-K. /s/ TAIT, WELLER & BAKER LLP Philadelphia, Pennsylvania April 1, 2019 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 EXHIBIT 31.1 I, Mark C. Winmill, certify that: 1. 2. 3. 4. I have reviewed this annual report on Form 10-K of Global Self Storage, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) b) c) d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Intentionally omitted. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) b) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: April 1, 2019 /s/ Mark C. Winmill Mark C. Winmill President and Chief Executive Officer CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 EXHIBIT 31.2 I, Thomas O’Malley, certify that: 1. 2. 3. 4. I have reviewed this annual report on Form 10-K of Global Self Storage, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) b) c) d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Intentionally omitted. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) b) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: April 1, 2019 /s/ Thomas O’Malley Thomas O’Malley Chief Financial Officer, Treasurer and Vice President (Principal Financial Officer) 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 EXHIBIT 32.1 I, Mark C. Winmill, Chief Executive Officer of Global Self Storage, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the knowledge of the undersigned: 1. 2. The Annual Report on Form 10-K for the year ended December 31, 2018 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Global Self Storage, Inc. Date: April 1, 2019 /s/ Mark C. Winmill Mark C. Winmill President and Chief Executive Officer This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed as filed by Global Self Storage, Inc. for purposes of Securities Exchange Act of 1934. 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 EXHIBIT 32.2 I, Thomas O’Malley, Chief Financial Officer, Treasurer and Vice President of Global Self Storage, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the knowledge of the undersigned: 1. 2. The Annual Report on Form 10-K for the year ended December 31, 2018 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Global Self Storage, Inc. Date: April 1, 2019 /s/ Thomas O’Malley Thomas O’Malley Chief Financial Officer, Treasurer and Vice President (Principal Financial Officer) This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed as filed by Global Self Storage, Inc. for purposes of Securities Exchange Act of 1934. 

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