UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020

or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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

 

13-3926714

(State or other jurisdiction of

incorporation or organization)

 

(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

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common shares, $0.01 par value per share

 

SELF

 

NASDAQ

 

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

 

Large accelerated filer

 

Accelerated filer

Non-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 number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of October 30, 2020, was 9,356,202.

 

 

 

 


 

Table of Contents

 

STATEMENT ON FORWARD LOOKING INFORMATION

 

3

PART I – FINANCIAL INFORMATION

 

5

 

Item 1.

Financial Statements (Unaudited).

 

5

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

21

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

37

 

Item 4.

Controls and Procedures.

 

37

PART II – OTHER INFORMATION

 

38

 

Item 1.

Legal Proceedings.

 

38

 

Item 1A.

Risk Factors.

 

38

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

40

 

Item 3.

Defaults Upon Senior Securities.

 

40

 

Item 4.

Mine Safety Disclosures.

 

40

 

Item 5.

Other Information.

 

40

 

Item 6.

Exhibits.

 

40

Exhibit Index

 

41

SIGNATURES

 

42

 

2


 

STATEMENT ON FORWARD LOOKING INFORMATION

Certain information presented in this report may contain “forward-looking statements” within the meaning of the federal securities laws including, but not limited to, the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements concerning our 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. We may also make additional forward looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements. All forward-looking statements, including without limitation, management’s examination of historical operating trends and estimates of future earnings, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that management’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, we undertake 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 report. One of the most significant factors is the ongoing impact of the outbreak of the novel coronavirus (“COVID-19”) pandemic on the economy, the self storage industry and the broader financial markets. The Company is unable to predict whether the continuing effects of the COVID-19 pandemic will trigger a further economic slowdown and to what extent the Company will experience disruptions related to the COVID-19 pandemic in the fourth quarter or thereafter. The outbreak of COVID-19 has also impacted, and is likely to continue to impact, directly or indirectly, many of the other important factors below and the risks described in “Item 1A. Risk Factors” included in our most recent annual report on Form 10-K and in this quarterly report and in our subsequent 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 or redevelopment (including expansions) 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 expansions and related lease up at our existing 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;

 

increases in taxes, fees and assessments from state and local jurisdictions;

 

security breaches or a failure of our networks, systems or technology;

3


 

 

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 and the changes resulting from the COVID-19 pandemic;

 

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;

 

our ability to receive forgiveness for our proportionate share of the Paycheck Protection Program loan; and

 

economic uncertainty due to the impact of terrorism, infectious or contagious diseases or pandemics such as the COVID-19 pandemic, or war.

 

 

4


 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

GLOBAL SELF STORAGE, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Real estate assets, net

 

$

60,165,282

 

 

$

59,752,153

 

Cash and cash equivalents

 

 

1,596,158

 

 

 

3,990,160

 

Restricted cash

 

 

321,376

 

 

 

263,405

 

Investments in securities

 

 

1,788,714

 

 

 

1,761,312

 

Accounts receivable

 

 

69,072

 

 

 

164,078

 

Prepaid expenses and other assets

 

 

601,275

 

 

 

325,450

 

Line of credit issuance costs, net

 

 

192,374

 

 

 

311,869

 

Intangible assets, net

 

 

55,125

 

 

 

398,795

 

Goodwill

 

 

694,121

 

 

 

694,121

 

Total assets

 

$

65,483,497

 

 

$

67,661,343

 

Liabilities and equity

 

 

 

 

 

 

 

 

Note payable, net

 

$

18,503,860

 

 

$

18,839,787

 

Line of credit borrowing

 

 

5,144,000

 

 

 

4,914,000

 

Accounts payable and accrued expenses

 

 

1,534,179

 

 

 

1,841,640

 

Total liabilities

 

 

25,182,039

 

 

 

25,595,427

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

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, 9,356,202 and 9,330,297 issued and outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

93,562

 

 

 

93,303

 

Additional paid in capital

 

 

40,429,005

 

 

 

40,329,502

 

Retained earnings

 

 

(221,109

)

 

 

1,643,111

 

Total equity

 

 

40,301,458

 

 

 

42,065,916

 

Total liabilities and equity

 

$

65,483,497

 

 

$

67,661,343

 

 

 

See notes to unaudited consolidated financial statements.

 

 

5


 

GLOBAL SELF STORAGE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS and COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

2,237,424

 

 

$

2,115,053

 

 

$

6,521,176

 

 

$

6,231,190

 

Other property related income

 

 

90,989

 

 

 

72,194

 

 

 

246,148

 

 

 

211,255

 

Management fees and other income

 

 

17,496

 

 

 

 

 

52,341

 

 

 

Total revenues

 

 

2,345,909

 

 

 

2,187,247

 

 

 

6,819,665

 

 

 

6,442,445

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operations

 

 

907,350

 

 

 

869,231

 

 

 

2,698,639

 

 

 

2,706,109

 

General and administrative

 

 

564,162

 

 

 

533,418

 

 

 

1,822,353

 

 

 

1,644,057

 

Depreciation and amortization

 

 

509,219

 

 

 

351,711

 

 

 

1,527,901

 

 

 

1,056,087

 

Business development

 

 

471

 

 

 

72,691

 

 

 

10,528

 

 

 

95,985

 

Total expenses

 

 

1,981,202

 

 

 

1,827,051

 

 

 

6,059,421

 

 

 

5,502,238

 

Operating income

 

 

364,707

 

 

 

360,196

 

 

 

760,244

 

 

 

940,207

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend and interest income

 

 

17,648

 

 

 

17,180

 

 

 

62,017

 

 

 

51,826

 

Unrealized gain on marketable equity securities

 

 

245,571

 

 

 

127,820

 

 

 

27,402

 

 

 

355,102

 

Interest expense

 

 

(290,802

)

 

 

(255,963

)

 

 

(891,107

)

 

 

(773,234

)

Total other (expense), net

 

 

(27,583

)

 

 

(110,963

)

 

 

(801,688

)

 

 

(366,306

)

Net income (loss) and comprehensive income (loss)

 

$

337,124

 

 

$

249,233

 

 

$

(41,444

)

 

$

573,901

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

0.03

 

 

$

(0.00

)

 

$

0.08

 

Diluted

 

$

0.04

 

 

$

0.03

 

 

$

(0.00

)

 

$

0.08

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

9,277,043

 

 

 

7,646,875

 

 

 

9,269,834

 

 

 

7,639,588

 

Diluted

 

 

9,290,984

 

 

 

7,652,257

 

 

 

9,269,834

 

 

 

7,640,874

 

 

See notes to unaudited consolidated financial statements.

 

 

 

 

 

 

6


 

GLOBAL SELF STORAGE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid in

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Earnings

 

 

Equity

 

Balances at December 31, 2019

 

 

9,330,297

 

 

$

93,303

 

 

$

40,329,502

 

 

$

1,643,111

 

 

$

42,065,916

 

Restricted stock grants issued

 

 

25,905

 

 

 

259

 

 

 

(259

)

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

29,162

 

 

 

 

 

29,162

 

Net loss

 

 

 

 

 

 

 

 

(356,424

)

 

 

(356,424

)

Dividends

 

 

 

 

 

 

 

 

(606,469

)

 

 

(606,469

)

Balances at March 31, 2020

 

 

9,356,202

 

 

 

93,562

 

 

 

40,358,405

 

 

 

680,218

 

 

 

41,132,185

 

Stock-based compensation

 

 

 

 

 

 

35,317

 

 

 

 

 

35,317

 

Net loss

 

 

 

 

 

 

 

 

(22,144

)

 

 

(22,144

)

Dividends

 

 

 

 

 

 

 

 

(608,154

)

 

 

(608,154

)

Balances at June 30, 2020

 

 

9,356,202

 

 

 

93,562

 

 

 

40,393,722

 

 

 

49,920

 

 

 

40,537,204

 

Stock-based compensation

 

 

 

 

 

 

35,283

 

 

 

 

 

35,283

 

Net income

 

 

 

 

 

 

 

 

337,124

 

 

 

337,124

 

Dividends

 

 

 

 

 

 

 

 

(608,153

)

 

 

(608,153

)

Balances at September 30, 2020

 

 

9,356,202

 

 

$

93,562

 

 

$

40,429,005

 

 

$

(221,109

)

 

$

40,301,458

 

 

See notes to unaudited consolidated financial statements.

 

 

7


 

GLOBAL SELF STORAGE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid in

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Earnings

 

 

Equity

 

Balances at December 31, 2018

 

 

7,692,624

 

 

$

76,926

 

 

$

33,961,903

 

 

$

3,167,047

 

 

$

37,205,876

 

Restricted stock grants issued

 

 

41,343

 

 

 

414

 

 

 

(414

)

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

54,160

 

 

 

 

 

54,160

 

Net income

 

 

 

 

 

 

 

 

187,823

 

 

 

187,823

 

Dividends

 

 

 

 

 

 

 

 

(503,294

)

 

 

(503,294

)

Balances at March 31, 2019

 

 

7,733,967

 

 

 

77,340

 

 

 

34,015,649

 

 

 

2,851,576

 

 

 

36,944,565

 

Restricted stock grant forfeitures

 

 

(4,637

)

 

 

(47

)

 

 

47

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

51,730

 

 

 

 

 

51,730

 

Net income

 

 

 

 

 

 

 

 

136,845

 

 

 

136,845

 

Dividends

 

 

 

 

 

 

 

 

(502,407

)

 

 

(502,407

)

Balances at June 30, 2019

 

 

7,729,330

 

 

 

77,293

 

 

 

34,067,426

 

 

 

2,486,014

 

 

 

36,630,733

 

Restricted stock grant forfeitures

 

 

(324

)

 

 

(3

)

 

 

3

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

29,430

 

 

 

 

 

29,430

 

Net income

 

 

 

 

 

 

 

 

249,233

 

 

 

249,233

 

Dividends

 

 

 

 

 

 

 

 

(502,385

)

 

 

(502,385

)

Balances at September 30, 2019

 

 

7,729,006

 

 

$

77,290

 

 

$

34,096,859

 

 

$

2,232,862

 

 

$

36,407,011

 

 

See notes to unaudited consolidated financial statements.

8


 

GLOBAL SELF STORAGE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(41,444

)

 

$

573,901

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,527,901

 

 

 

1,056,087

 

Unrealized gain on marketable equity securities

 

 

(27,402

)

 

 

(355,102

)

Amortization of loan procurement costs

 

 

149,946

 

 

 

150,708

 

Stock-based compensation

 

 

99,762

 

 

 

135,320

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

95,006

 

 

 

(34,479

)

Prepaid expenses and other assets

 

 

(275,825

)

 

 

(193,262

)

Accounts payable and accrued expenses

 

 

(310,392

)

 

 

265,957

 

Net cash provided by operating activities

 

 

1,217,552

 

 

 

1,599,130

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Construction

 

 

(1,402,573

)

 

 

(424,382

)

Improvements and equipment additions

 

 

(194,787

)

 

 

(53,710

)

Net cash used in investing activities

 

 

(1,597,360

)

 

 

(478,092

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Principal payments on note payable

 

 

(366,378

)

 

 

(351,362

)

Line of credit borrowing

 

 

230,000

 

 

 

380,000

 

Dividends paid

 

 

(1,819,845

)

 

 

(1,501,883

)

Net cash used in financing activities

 

 

(1,956,223

)

 

 

(1,473,245

)

Net decrease in cash and cash equivalents

 

 

(2,336,031

)

 

 

(352,207

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

4,253,565

 

 

 

1,712,266

 

Cash, cash equivalents, and restricted cash, end of period

 

$

1,917,534

 

 

$

1,360,059

 

Supplemental schedule of cash flow information

 

 

 

 

 

 

 

 

Interest paid

 

$

757,537

 

 

$

618,344

 

 

See notes to unaudited consolidated financial statements.

 

 

 

 

 

9


 

GLOBAL SELF STORAGE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

 

1. ORGANIZATION

Global Self Storage, Inc. (the “Company,” “we,” “our,” “us”) is a self-administered and self-managed Maryland real estate investment trust (“REIT”) that owns, operates, manages, acquires, develops and redevelops self storage properties (“stores” or “properties”) in the United States. Through its wholly owned subsidiaries, the Company owns and/or manages 13 self-storage properties in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, South Carolina, and Oklahoma. The Company operates primarily in one segment: rental operations.

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

Upon deregistration as an investment company, effective January 19, 2016, 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 accompanying unaudited consolidated financial statements of the Company are presented on the accrual basis of accounting in accordance with GAAP for interim financial information, and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The consolidated balance sheet as of December 31, 2019 has been derived from the Company’s audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2019.

Risks and Uncertainties — The outbreak of the novel coronavirus pandemic (“COVID-19”) around the globe continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by, among other things, instituting quarantines, mandating business and school closures, requiring restrictions on travel and issuing “shelter-in-place” and/or “stay-at-home” orders, and imposing restrictions on the types of businesses that may continue to operate. While some of these restrictions have been relaxed or phased out, many of these or similar restrictions remain in place, continue to be implemented, or additional restrictions are being considered. Such actions are creating significant disruption in global supply chains, and adversely impacting a number of industries, such as transportation, hospitality and entertainment.

The major disruption caused by COVID-19 significantly reduced economic activity in most of the United States resulting in a significant increase in unemployment claims.

COVID-19 has had a continued and prolonged adverse impact on economic and market conditions and has triggered a period of economic slowdown which could have a material adverse effect on the Company’s results and financial condition.

The full impact of COVID-19 on the real estate industry, the credit markets and consequently on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity and duration of the outbreak, (ii) the effectiveness of the United States public health response, (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic, (v) the timing and speed of economic recovery, including the availability of a treatment or vaccination for COVID-19, and (vi) the negative impact on our properties.

 

Cash, Cash Equivalents, and Restricted Cash

The Company’s cash is deposited with financial institutions located throughout the United States and at times may exceed federally insured limits. Cash equivalents consists of money market fund shares and may include, among other things, highly liquid

10


 

investments purchased with an original maturity of three months or less. 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.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash in our unaudited consolidated balance sheets to the total amount shown in our consolidated statements of cash flows:

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Cash and cash equivalents

 

$

1,596,158

 

 

$

3,990,160

 

Restricted cash

 

 

321,376

 

 

 

263,405

 

Total cash, cash equivalents, and restricted cash as shown in our unaudited consolidated statements of cash flows

 

$

1,917,534

 

 

$

4,253,565

 

 

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 fulfilled. 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 (2017 – 2019), or is expected to be taken in the Company’s 2020 tax returns.

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. 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 Company’s 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. 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 a construction period are capitalized. A construction period begins when expenditures for a real estate asset have been made and activities that are necessary to prepare the asset for its intended use are in progress. A construction period ends when an 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 1, 2018 and are generally capitalized for acquisitions that qualify as asset acquisitions. When properties 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.

 

11


 

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 properties 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 derivative instruments has been limited to an interest rate cap agreement. 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 analysis of the interest rate cap 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 generally consist of property tax accruals, unearned rental income, and trade payables. 

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 in accordance with ASC Topic 842, Leases. 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's management fees are earned subject to the terms of the related property management services agreements (“PSAs”). These PSAs provide that the Company will perform management services, which include leasing and operating the property and providing accounting, marketing, banking, maintenance and other services. These services are provided in exchange for monthly management fees, which are based on a percentage of revenues collected from stores owned by third parties. PSAs generally have original terms of three years, after which management services are provided on a month-to-month basis unless terminated. Management fees are due on the last day of each calendar month that management services are provided.

The Company accounts for the management services provided to a customer as a single performance obligation which are rendered over time each month in accordance with ASC Topic 606, Revenue from Contracts with Customers. The total amount of consideration from the contract is variable as it is based on monthly revenues, which are influenced by multiple factors, some of which are outside the Company's control. Therefore, the Company recognizes the revenue at the end of each month once the uncertainty is resolved. No disaggregated information relating to PSAs is presented as the Company currently has only one contract.

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

12


 

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.

The Company evaluates goodwill for impairment annually and whenever relevant events, circumstances, and other related factors indicate that fair value may be less that carrying amounts. If it is determined that the carrying amount of goodwill exceeds the amount that would be allocated to goodwill if the reporting unit were acquired for estimated fair value, an impairment charge is recorded.

No impairment was recorded in any of our evaluations for any periods presented herein.

 

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. For awards granted which contain a graded vesting schedule and the only condition for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award was, in substance, a single award. For awards granted for which vesting is subject to a performance condition, compensation cost is recognized over the requisite service period if and when the Company concludes it is probable that the performance condition will be achieved.

 

Loan Procurement Costs

 

Loan procurement costs, net are presented as a direct deduction from the carrying amount of the related debt liability. If 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.

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. The effects of the COVID-19 pandemic may negatively and materially impact significant estimates and assumptions used by the Company including, but not limited to estimates of expected credit losses and the fair value estimates of the Company’s assets and liabilities. Actual results could materially differ from management’s estimates.

Recently Issued Accounting Standards

In August 2017, the FASB issued ASU No. 2017-12 – Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The Company adopted this guidance on January 1, 2020, with no material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13 – Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance changes how entities measure credit losses for most financial assets. This standard requires an entity to estimate its lifetime expected credit loss and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. In November 2018, the FASB issued ASU No. 2018-19 – Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are within the scope of the leasing standard (ASU No. 2016-02), and not within the scope of ASU No. 2016-13. The Company adopted this standard on January 1, 2020, with no material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)." ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

 

 

13


 

 

 

 

 

 

3. REAL ESTATE ASSETS

The carrying value of the Company’s real estate assets is summarized as follows

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Land

 

$

6,122,065

 

 

$

6,122,065

 

Buildings, improvements, and equipment

 

 

60,307,933

 

 

 

57,178,338

 

Construction in progress

 

 

 

 

1,532,235

 

Self storage properties

 

 

66,429,998

 

 

 

64,832,638

 

Less: Accumulated depreciation

 

 

(6,264,716

)

 

 

(5,080,485

)

Real estate assets, net

 

$

60,165,282

 

 

$

59,752,153

 

 

In June 2020, the Company completed the conversion of certain commercially-leased space to all-climate-controlled units at McCordsville, IN which added approximately 13,713 leasable square feet to the property.

 

In February 2020, the Company completed the expansion at Millbrook, NY which added approximately 11,800 of leasable square feet of all-climate-controlled units to the property.

 

During the second quarter of 2020, the Company began construction on an expansion at its West Henrietta, NY property. The expansion was subsequently completed in August 2020, which added approximately 7,300 leasable square feet of drive-up storage units to the property.  

 

 

4. MARKETABLE EQUITY SECURITIES

Investments in marketable equity securities consisted of the following:

 

 

 

 

 

 

 

Gross Unrealized

 

 

 

 

 

September 30, 2020

 

Cost Basis

 

 

Gains

 

 

Losses

 

 

Value

 

Investment in marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

$

755,487

 

 

$

1,033,227

 

 

$

 

 

$

1,788,714

 

Total investment in marketable equity securities

 

$

755,487

 

 

$

1,033,227

 

 

$

 

 

$

1,788,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Unrealized

 

 

 

 

 

December 31, 2019

 

Cost Basis

 

 

Gains

 

 

Losses

 

 

Value

 

Investment in marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

$

755,487

 

 

$

1,005,825

 

 

$

 

 

$

1,761,312

 

Total investment in marketable equity securities

 

$

755,487

 

 

$

1,005,825

 

 

$

 

 

$

1,761,312

 

 

 

 

5. FAIR VALUE MEASUREMENTS

The use of fair value to measure the financial instruments held by the Company and its subsidiaries is fundamental to its consolidated financial statements and is a critical accounting estimate because a substantial portion of its assets and liabilities are recorded at estimated fair value. The application of fair value measurements may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability or whether management has elected to carry the item at its estimated fair value.

The hierarchy of valuation techniques is based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 — Quoted prices in active markets for identical instruments or liabilities.

14


 

Level 2 — Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, and market-corroborated inputs.

Level 3 — Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Company’s own assumptions about the factors that market participants use in pricing an asset or liability and are based on the best information available in the circumstances.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when estimating fair value. The valuation method used to estimate fair value may produce a fair value measurement that may not be indicative of ultimate realizable value. Furthermore, while management believes its valuation methods are appropriate and consistent with those used by other market participants, the use of different methods or assumptions to estimate the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Those estimated values may differ significantly from the values that would have been used had a readily available market for such loans or investments existed, or had such loans or investments been liquidated, and those differences could be material to the financial statements.

 

Fair valued assets consist of shares of equity securities and an interest rate cap. The value of the equity securities is based on a traded market price and is considered to be a level 1 measurement, and the value of the interest rate cap is based on its maturity, observable market-based inputs including interest rate curves and is considered to be a level 2 measurement.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis:

 

September 30, 2020

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities

 

$

1,788,714

 

 

$

 

 

$

 

 

$

1,788,714

 

Interest rate cap derivative

 

 

 

 

14

 

 

 

 

 

 

14

 

Total assets at fair value

 

$

1,788,714

 

 

$

14

 

 

$

 

 

$

1,788,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities

 

$

1,761,312

 

 

$

 

 

$

 

 

$

1,761,312

 

Interest rate cap derivative

 

 

 

 

51

 

 

 

 

 

 

51

 

Total assets at fair value

 

$

1,761,312

 

 

$

51

 

 

$

 

 

$

1,761,363

 

 

 

There were no assets transferred from level 1 to level 2 as of September 30, 2020. The Company did not have any assets or liabilities that are re-measured on a recurring basis using significant unobservable inputs as of September 30, 2020.

 

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 September 30, 2020. The estimated fair value of the Company’s combined debt was approximately $24,710,325 as of September 30, 2020. This estimate was based on market interest rates for comparable obligations, general market conditions, and maturity. The Company’s debt is classified as level 2 of 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:

 

 

 

 

Notional Amount

 

 

 

 

Effective

 

Maturity

Product

 

September 30, 2020

 

 

December 31, 2019

 

 

Strike

 

Date

 

Date

Cap Agreement

 

$

7,500,000

 

 

$

7,500,000

 

 

3.50 % - 4.00%

 

12/24/2018

 

12/20/2021

15


 

The counterparty to this arrangement is SMBC Capital Markets. The Company is potentially exposed to credit loss in the event of non-performance by the counterparty. The Company does not anticipate the counterparty to fail to meet its obligations as they become due.

 

7. NOTE PAYABLE

On June 24, 2016, certain wholly-owned subsidiaries (“Secured Subsidiaries”) of the Company entered into a loan agreement and certain other related agreements (collectively, the “Loan Agreement”) between the Secured Subsidiaries and Insurance Strategy Funding IV, LLC (the “Lender”). Under the Loan Agreement, the Secured Subsidiaries are borrowing from the Lender in 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 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.

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. The Company recorded amortization expense of $10,085 and $10,342 for the three months ended September 30, 2020 and 2019, respectively and $30,451 and $31,213 for the nine months ended September 30, 2020 and 2019.

The carrying value of the Company’s note payable is summarized as follows:

 

Note Payable

 

September 30, 2020

 

 

December 31, 2019

 

Principal balance outstanding

 

$

18,972,178

 

 

$

19,338,556

 

Less: Loan procurement costs, net

 

 

(468,318

)

 

 

(498,769

)

Total note payable, net

 

$

18,503,860

 

 

$

18,839,787

 

 

As of September 30, 2020, the note payable was secured by certain of its stores with an aggregate net book value of approximately $34.3 million. The following table represents the future principal payment requirements on the note payable as of September 30, 2020:

 

2020 (3 months)

 

$

166,562

 

2021

 

 

513,857

 

2022

 

 

535,816

 

2023

 

 

558,714

 

2024

 

 

582,591

 

2025 and thereafter

 

 

16,614,638

 

Total principal payments

 

$

18,972,178

 

 

 

Revolving Line of Credit

 

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 (effective rate 6.46%) 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.

 

16


 

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. The Company recorded amortization expense of $39,832 and $39,832 for the three months ended September 30, 2020 and 2019, respectively, and $119,495 and $119,495 for the nine months ended September 30, 2020 and 2019. The outstanding loan balance under the Revolver was $5,144,000 and $4,914,000 as of September 30, 2020 and December 31, 2019, respectively.

 

 

8. LEASES

Global Self Storage as Lessor

The Company's property rental revenue is primarily related to rents received from tenants at its operating stores. The Company's leases with its self storage tenants are generally on month-to-month terms, include automatic monthly renewals, allow flexibility to increase rental rates over time as market conditions permit, and provide for the collection of contingent fees such as late fees. These leases do not include any terms or conditions that allow the tenants to purchase the leased space. All self-storage leases for which the Company acts as lessor have been classified as operating leases. The real estate assets related to the Company's stores are included in "Real estate assets, net" on the Company's consolidated balance sheets and are presented at historical cost less accumulated depreciation and impairment, if any. Rental income related to these operating leases is included in Property rental revenue on the Company's consolidated statements of operations, and is recognized each month during the month-to-month terms at the rental rate in place during each month.

 

Global Self Storage as Lessee

 

The Company is a lessee in a lease agreement for an automobile entered into November 2019 with a lease term of three years. The lease agreement does not contain any material residual value guarantees or material restrictive covenants. As a result of the Company’s election of the package of practical expedients permitted within ASC Topic 842, which among other things, allows for the carryforward of historical lease classification, all of the Company’s lease agreements have been classified as operating leases. Lease expense for payments related to the Company’s operating leases is recognized on a straight-line basis over the lease term.

 

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments as specified in the lease. Right-of-use assets and lease liabilities related to the Company’s operating leases are recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available surrounding the Company’s secured borrowing rates and implied secured spread at the lease commencement date in determining the present value of lease payments. The right-of-use asset also includes any lease payments made at or before lease commencement less any lease incentives. The Company had no right-of-use assets and lease liabilities related to its operating leases as of September 30, 2019. As of September 30, 2020, the Company had right-of-use assets and lease liabilities related to its operating leases of $28,211 and $28,211, which are included in Prepaid expenses and other assets and Accounts payable and accrued expenses on the Company’s consolidated balance sheets, respectively, and amortization expense is included in General and administrative expenses in the Company’s consolidated statements of operations. As of September 30, 2020, the Company’s weighted average remaining lease term and weighted average discount rate related to its operating leases were approximately 2.1 years and 4.78%, respectively.

The future minimum lease payments under the automobile lease are $3,563 for the three months ending December 31, 2020, and $14,254, and $11,878 for the years ending December 31, 2021, and 2022, respectively.

 

 

17


 

9. 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2020