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, 2023

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

For the transition period from __________to__________

001-36312

(Commission File Number)

POWER REIT

(Exact name of registrant as specified in its charter)

Maryland		45-3116572
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

301 Winding Road, Old Bethpage, NY		11804
(Address of principal executive offices)		(Zip Code)

(212) 750-0371

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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	PW	NYSE American, LLC

7.75% Series A Cumulative Redeemable Perpetual Preferred Stock, Liquidation Preference $25 per Share	PW.A	NYSE American, LLC

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, 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.

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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

3,389,661 common shares, $0.001 par value, outstanding at November 14, 2023.

TABLE OF CONTENTS

		Page No.

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements (Unaudited)		3
	Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	4
	Consolidated Statements of Changes in Shareholders’ Equity for the quarters ended September 30, 2023 and 2022	5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	6
	Notes to Unaudited Consolidated Financial Statements	7

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		26

Item 4 – Controls and Procedures		26

PART II – OTHER INFORMATION

	Item 1 – Legal Proceedings	27

	Item 1A – Risk Factors	27

	Item 2 – Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	29

	Item 3 – Defaults Upon Senior Securities	29

	Item 4 – Mine Safety Disclosures	29

	Item 5 – Other Information	30

	Item 6 – Exhibits	30

SIGNATURE		31

POWER REIT AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2023			December 31, 2022
ASSETS
Land	$	7,373,635		$	7,423,635
Greenhouse cultivation and processing facilities, net of accumulated depreciation		37,535,652			43,386,734
Net investment in direct financing lease - railroad		9,150,000			9,150,000

Total real estate assets		54,059,287			59,960,369

Cash and cash equivalents		2,605,689			2,847,871
Restricted cash		1,000,000			1,000,000
Accounts receivable		-			62,198
Prepaid expenses and deposits		133,087			6,580
Intangible lease asset, net of accumulated amortization		2,561,293			2,731,909
Deferred debt issuance cost, net of amortization		-			46,023
Deferred rent receivable		345,080			445,058
Assets held for sale		13,201,128			19,096,915
Other assets		74,048			-
TOTAL ASSETS	$	73,979,612		$	86,196,923

LIABILITIES AND EQUITY
Accounts payable	$	983,015		$	1,416,085
Accrued expenses		729,009			381,427
Tenant security deposits		881,724			881,724
Other liabilities		57,675			-
Liabilities held for sale		1,237,081			929,782
Current portion of long-term debt, net of unamortized discount		16,867,313			1,119,821
Long-term debt, net of unamortized discount		20,857,933			37,217,841
TOTAL LIABILITIES		41,613,750			41,946,680

Series A 7.75% Cumulative Redeemable Perpetual Preferred Stock Par Value $25.00 (1,675,000 shares authorized; 336,944 issued and outstanding as of September 30, 2023 and December 31, 2022)		9,142,780			8,653,159

Equity:
Common Shares, $0.001 par value (98,325,000 shares authorized; 3,389,661 shares issued and outstanding as of September 30, 2023 and December 31, 2022)		3,389			3,389
Additional paid-in capital		47,038,151			46,369,311
Accumulated deficit		(23,818,458	)		(10,775,616	)
Total Equity		23,223,082			35,597,084

TOTAL LIABILITIES AND EQUITY	$	73,979,612		$	86,196,923

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POWER REIT AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2023			2022			2023			2022
	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
REVENUE
Lease income from direct financing lease – railroad	$	228,750		$	228,750		$	686,250		$	686,250
Rental income		233,152			1,843,174			857,459			4,960,798
Rental income - related parties		-			(64,335	)		-			578,991
Other income		26,629			56			167,452			75
TOTAL REVENUE		488,531			2,007,645			1,711,161			6,226,114

EXPENSES
Amortization of intangible assets		56,872			104,173			170,616			312,519
General and administrative		439,046			426,576			1,330,834			1,053,688
Property maintenance		405,886			-			1,441,382			-
Property taxes		141,495			6,328			335,664			18,950
Depreciation expense		565,742			398,298			1,775,160			1,075,355
Impairment expense		8,235,136			-			8,235,136			-
Interest expense		667,090			489,300			1,856,042			1,239,824
TOTAL EXPENSES		10,511,267			1,424,675			15,144,834			3,700,336

OTHER INCOME (EXPENSE)
Gain on sale of property		-			-			1,040,452			-
Lease modification expense		-			-			(160,000	)		-
TOTAL OTHER INCOME (EXPENSE)		-			-			880,452			-

NET (LOSS) / INCOME		(10,022,736	)		582,970			(12,553,221	)		2,525,778

Preferred Stock Dividends		(163,207	)		(163,208	)		(489,621	)		(489,621	)

NET (LOSS) / INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(10,185,943	)	$	419,762		$	(13,042,842	)	$	2,036,157

Income (Loss) Per Common Share:
Basic	$	(3.01	)	$	0.12		$	(3.85	)	$	0.60
Diluted		(3.01	)		0.12			(3.85	)		0.58

Weighted Average Number of Shares Outstanding:
Basic		3,389,661			3,386,252			3,389,661			3,373,681
Diluted		3,389,661			3,405,723			3,389,661			3,492,446

Cash dividend per Series A Preferred Share	$	-		$	0.48		$	-		$	1.45
Accumulated dividend accrued per Series A Preferred Shares:		0.48			-			1.45			-

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POWER REIT AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Quarters Ended September 30, 2023 and 2022

(Unaudited)

	Shares			Amount		Capital		Deficit)			Equity
	Common Shares					Additional Paid-in		Retained Earnings (Accumulated			Total Shareholders’
	Shares			Amount		Capital		Deficit)			Equity

Balance at December 31, 2022		3,389,661		$	3,389	$	46,369,311	$	(10,775,616	)	$	35,597,084
Net Loss		-			-		-		(339,046	)		(339,046	)
Accrued Dividends on Preferred Stock		-			-		-		(163,207	)		(163,207	)
Stock-Based Compensation		-			-		227,009		-			227,009
Balance at March 31, 2023		3,389,661		$	3,389	$	46,596,320	$	(11,277,869	)	$	35,321,840
Net Loss		-			-		-		(2,191,439	)		(2,191,439	)
Accrued Dividends on Preferred Stock		-			-		-		(163,207	)		(163,207	)
Stock-Based Compensation		-			-		225,357		-			225,357
Balance at June 30, 2023		3,389,661		$	3,389	$	46,821,677	$	(13,632,515	)	$	33,192,551
Net Loss		-			-		-		(10,022,736	)		(10,022,736	)
Accrued Dividends on Preferred Stock		-			-		-		(163,207	)		(163,207	)
Stock-Based Compensation		-			-		216,474		-			216,474
Balance at September 30, 2023		3,389,661		$	3,389	$	47,038,151	$	(23,818,458	)	$	23,223,082

Balance at December 31, 2021		3,367,561		$	3,367	$	45,687,074	$	4,130,694		$	49,821,135
Net Income		-			-		-		997,880			997,880
Cash Dividends on Preferred Stock		-			-		-		(163,207	)		(163,207	)
Stock-Based Compensation		(300	)		-		109,100		-			109,100
Balance at March 31, 2022		3,367,261		$	3,367	$	45,796,174	$	4,965,367		$	50,764,908
Net Income		-			-		-		944,928			944,928
Cash Dividends on Preferred Stock		-			-		-		(163,206	)		(163,206	)
Stock-Based Compensation		-			-		109,100		-			109,100
Balance at June 30, 2022		3,367,261		$	3,367	$	45,905,274	$	5,747,089		$	51,655,730
Balance		3,367,261		$	3,367	$	45,905,274	$	5,747,089		$	51,655,730
Net Income		-			-		-		582,970			582,970
Net Income (Loss)		-			-		-		582,970			582,970
Cash Dividends on Preferred Stock		-			-		-		(163,208	)		(163,208	)
Stock-Based Compensation		22,400			22		205,688		-			205,710
Balance at September 30, 2022		3,389,661		$	3,389	$	46,110,962	$	6,166,851		$	52,281,202
Balance		3,389,661		$	3,389	$	46,110,962	$	6,166,851		$	52,281,202

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POWER REIT AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2023			2022
	Nine Months Ended September 30,
	2023			2022
Operating activities
Net (loss) income	$	(12,553,221	)	$	2,525,778

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Amortization of intangible lease asset		170,616			312,519
Amortization of debt costs		63,746			65,611
Amortization of below market lease		-			(29,776	)
Loan modification expense		160,000			-
Stock-based compensation		668,840			423,910
Impairment on asset		8,235,136			-
Depreciation		1,775,160			1,075,355
Sale of property		(1,040,452	)		-

Changes in operating assets and liabilities
Accounts receivable		62,198			(135,168	)
Accounts receivable - related party		-			(40,277	)
Deferred rent receivable		427,901			944,288
Deferred rent liability		-			303,956
Prepaid expenses and deposits		(43,257	)		473,840
Other assets		(1,373	)		50,000
Accounts payable		(505,395	)		925,662
Tenant security deposits		300,000			(460,000	)
Accrued expenses		311,041			68,696
Prepaid rent		(37,161	)		48,620
Net cash (used in) provided by operating activities		(2,006,221	)		6,553,014

Investing activities
Cash received for sale of property		2,409,178			-
Cash paid for land, greenhouse cultivation and processing facilities		-			(11,193,345	)
Cash paid for greenhouse cultivation and processing facilities - construction in progress		-			(9,167,971	)
Cash paid for purchase of equipment		(15,000	)		-
Net cash provided (used in) investing activities		2,394,178			(20,361,316	)

Financing Activities
Payment of debt issuance costs		-			(43,958	)
Proceeds from long-term debt		-			16,000,000
Principal payment on long-term debt		(630,139	)		(607,438	)
Cash dividends paid on preferred stock		-			(489,621	)
Net cash provided by (used in) financing activities		(630,139	)		14,858,983

Net increase (decrease) in cash and cash equivalents		(242,182	)		1,050,681

Cash and cash equivalents, beginning of period	$	3,847,871		$	3,171,301

Cash and cash equivalents, end of period	$	3,605,689		$	4,221,982

Supplemental disclosure of cash flow information:
Interest paid	$	1,737,442		$	1,105,517
Reclass of deferred debt issuance costs to liability upon reduction of total loan commitment		46,023			255,165
Dividends accrued on preferred stock		489,621			-
Financed equipment purchase		57,675

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Notes to Unaudited Consolidated Financial Statements

1 – GENERAL INFORMATION

Power REIT (the “Registrant” or the “Trust”, and together with its consolidated subsidiaries, “Power REIT”, unless the context requires otherwise) is a Maryland-domiciled, internally-managed real estate investment trust (a “REIT”) that owns a portfolio of real estate assets related to transportation, energy infrastructure and Controlled Environment Agriculture (“CEA”) in the United States.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Trust, as defined below, these unaudited consolidated financial statements include all adjustments necessary to present fairly the information set forth herein. All such adjustments are of a normal recurring nature. Results for interim periods are not necessarily indicative of results to be expected for a full year.

These unaudited consolidated financial statements should be read in conjunction with the Trust’s audited consolidated financial statements and notes included in the Trust’s latest Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 31, 2023.

The Trust is structured as a holding company and owns its assets through twenty-four direct and indirect wholly-owned, special purpose subsidiaries that have been formed in order to hold real estate assets, obtain financing and generate lease revenue. As of September 30, 2023, the Trust’s assets consisted of approximately 112 miles of railroad infrastructure and related real estate which is owned by its subsidiary Pittsburgh & West Virginia Railroad (“P&WV”), approximately 501 acres of fee simple land leased to a number of utility scale solar power generating projects with an aggregate generating capacity of approximately 88 Megawatts (“MW”) and approximately 263 acres of land with approximately 2,211,000 square feet of CEA properties in the form of greenhouses.

On January 6, 2023, a wholly owned subsidiary of Power REIT, sold its interest in five ground leases related to utility scale solar farms located in Tulare County, California for gross proceeds of $2,500,000. The purchaser was an unaffiliated third party and the price was established based on an arm’s length negotiation. The properties were acquired by Power REIT in 2013 for $1,550,000.

During the nine months ended September 30, 2023, the Trust accrued quarterly dividends of approximately $490,000 ($0.484375 per share per quarter) on Power REIT’s 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.

The Trust has elected to be treated for tax purposes as a REIT, which means that it is exempt from U.S. federal income tax if a sufficient portion of its annual income is distributed to its shareholders, and if certain other requirements are met. In order for the Trust to maintain its REIT qualification, at least 90% of its ordinary taxable annual income must be distributed to shareholders. As of December 31, 2022, the last tax return completed to date, the Trust has a net operating loss of $24.5 million, which may reduce or eliminate this requirement.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash

The Trust considers all highly liquid investments with original maturity of three months or less to be cash equivalents. Power REIT places its cash and cash equivalents with high-credit quality financial institutions; however, amounts are not insured or guaranteed by the FDIC. Amounts included in restricted cash represents funds held by the Trust related to debt service payment reserve required by the Debt Facility. See Note 6 for further discussion of the debt service payment reserve requirement. The following table provides a reconciliation of the Trust’s cash and cash equivalents and restricted cash that sums to the total of those amounts at the end of the periods presented on the Trust’s accompanying Consolidated Statements of Cash Flow:

	September 30, 2023		December 31, 2022

Cash and cash equivalents	$	2,605,689	$	2,847,871
Restricted cash		1,000,000		1,000,000
Cash and cash equivalents and restricted cash	$	3,605,689	$	3,847,871

Basis of Presentation

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements include Power REIT and its wholly-owned subsidiaries. All intercompany balances have been eliminated in consolidation.

Income (Loss) per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted net income (loss) per common share is computed similar to basic net income (loss) per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The dilutive effect of the Trust’s options is computed using the treasury stock method.

The following table sets forth the computation of basic and diluted income (loss) per share:

	2023			2022			2023			2022
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022

Numerator:

Net income (loss)	$	(10,022,736	)	$	582,970		$	(12,553,221	)	$	2,525,778
Preferred Stock Dividends		(163,207	)		(163,208	)		(489,621	)		(489,621	)
Numerator for basic and diluted EPS - income (loss) available to common shareholders	$	(10,185,943	)	$	419,762		$	(13,042,842	)	$	2,036,157

Denominator:
Denominator for basic EPS - Weighted average shares		3,389,661			3,386,252			3,389,661			3,373,681
Dilutive effect of options		-			19,471			-			118,765
Denominator for dilutive EPS - Adjusted weighted average shares		3,389,661			3,405,723			3,389,661			3,492,446

Basic income (loss) per common share	$	(3.01	)	$	0.12		$	(3.85	)	$	0.60
Dilutive income (loss) per common share	$	(3.01	)	$	0.12		$	(3.85	)	$	0.58

Real Estate Assets and Depreciation of Investment in Real Estate

The Trust expects that most of its transactions will be accounted for as asset acquisitions. In an asset acquisition, the Trust is required to capitalize closing costs and allocates the purchase price on a relative fair value basis. For the nine months ended September 30, 2022, the Trust acquired one property and the acquisition is accounted for as an asset acquisition. There were no acquisitions during the nine months ended September 30, 2023. In making estimates of relative fair values for purposes of allocating purchase price, the Trust utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, its own analysis of recently acquired and existing comparable properties in the Trust’s portfolio and other market data. The Trust also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible acquired. The Trust allocates the purchase price of acquired real estate to various components as follows:

	●	Land – Based on actual purchase if acquired as raw land. When property is acquired with improvements, the land price is established based on market comparables and market research to establish a value with the balance allocated to improvements for the land.

	●	Improvements – When a property is acquired with improvements, the land price is established based on market comparables and market research to establish a value with the balance allocated to improvements for the land. The Trust also evaluates the improvements in terms of replacement cost and condition to confirm that the valuation assigned to improvements is reasonable. Depreciation is calculated on a straight-line method over the useful life of the improvements.

	●	Lease Intangibles – The Trust recognizes lease intangibles when there’s an existing lease assumed with the property acquisitions. In determining the fair value of in-place leases (the avoided cost associated with existing in-place leases) management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes reimbursable (based on market lease terms) real estate taxes, insurance, other operating expenses, as well as estimates of lost market rental revenue during the expected lease-up periods. The values assigned to in-place leases are amortized over the remaining term of the lease. The fair value of above-or-below market leases is estimated based on the present value (using an interest rate which reflected the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. An above market lease is classified as an intangible asset and a below market lease is classified as an intangible liability. The capitalized above-market or below-market lease intangibles are amortized as a reduction of, or an addition to, rental income over the estimated remaining term of the respective leases. Intangible assets related to leasing costs consist of leasing commissions and legal fees. Leasing commissions are estimated by multiplying the remaining contract rent associated with each lease by a market leasing commission. Legal fees represent legal costs associated with writing, reviewing, and sometimes negotiating various lease terms. Leasing costs are amortized over the remaining useful life of the respective leases.

	●	Construction in Progress (CIP) - The Trust classifies greenhouses or buildings under development and/or expansion as construction-in-progress until construction has been completed and certificates of occupancy permits have been obtained upon which the asset is then classified as an Improvement. The value of CIP is based on actual costs incurred.

Depreciation

Depreciation is computed using the straight-line method over the estimated useful lives of 20 years for greenhouses and 39 years for auxiliary buildings, except for PW CA Canndescent, LLC which was determined the buildings have a useful life of 37 years. For each of the nine months ended September 30, 2023 and 2022, approximately $1,775,000 and $1,075,000 depreciation expense was recorded, respectively.

Assets Held for Sale

Assets held for sale are measured at the lower of their carrying amount or estimated fair value less cost to sell. As of September 30, 2023, the Trust has seven properties and as of December 31, 2022, the Trust had four properties that are considered assets held for sale. See Note 7 for discussion of the Trust’s assets held for sale.

Impairment of Long-Lived Assets

Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” A property to be held and used is considered impaired only if management’s estimate of the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges, are less than the carrying value of the property. This estimate takes into consideration factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors.

If there is a triggering event in relation to a property to be held and used, the Trust will estimate the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.

The determination of undiscounted cash flows requires significant estimates by management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could impact the determination of whether an impairment exists and whether the effects could materially affect the Trust’s net income. To the extent estimated undiscounted cash flows are less than the carrying value of the property, the loss will be measured as the excess of the carrying amount of the property over the estimated fair value of the property.

While the Trust believes its estimates of future cash flows are reasonable, different assumptions regarding a number of factors, including market rents, economic conditions, and occupancies, could significantly affect these estimates. When impairment exists, the long-lived asset is adjusted to an estimate of fair value. In estimating fair value, the Trust uses the sales comparable, income or cost approach methodology where applicable within appraisal reports. The Trust will record an impairment charge if it believes that there is other than temporary decline in market value below the carrying value of the investment. For the nine months ending September 30, 2023 and 2022, the Trust recorded a non-cash impairment charge of approximately $4,000,000 of assets held for sale and approximately $4,200,000 of asset not held for sale, and $0, respectively.

Revenue Recognition

The Railroad Lease (“P&WV Lease”) is treated as a direct financing lease. As such, income to P&WV under the Railroad Lease is recognized when received.

Lease revenue from solar land and CEA properties are accounted for as operating leases. Any such leases with rent escalation provisions are recorded on a straight-line basis when the amount of escalation in lease payments is known at the time Power REIT enters into the lease agreement, or known at the time Power REIT assumes an existing lease agreement as part of an acquisition (e.g., an annual fixed percentage escalation) over the initial lease term, subject to a collectability assessment, with the difference between the contractual rent receipts and the straight-line amounts recorded as “deferred rent receivable” or “deferred rent liability”. Collectability is assessed at quarter-end for each tenant receivable using various criteria including past collection issues, the current economic and business environment affecting the tenant and guarantees. If collectability of the contractual rent stream is not deemed probable, revenue will only be recognized upon receipt of cash from the tenant. During the nine months ended September 30, 2023 and 2022, the Trust wrote off a net amount of approximately $315,000 and $17,200, respectively, in straight-line rent receivable against rental income based on its current assessment of collecting all remaining contractual rent on the greenhouse property leases. These tenants rent payments will be recorded as rental revenue on a cash basis. Expenses for which tenants are contractually obligated to pay, such as maintenance, property taxes and insurance expenses are not reflected in the Trust’s consolidated financial statements unless paid by the Trust.

Lease revenue from land that is subject to an operating lease without rent escalation provisions is recorded on a straight-line basis.

Intangibles

A portion of the acquisition price of the assets acquired by PW Tulare Solar, LLC (“PWTS”) have been allocated on the Trust’s consolidated balance sheets between Land and Intangibles fair values at the date of acquisition. The total amount of in-place lease intangible assets established was approximately $237,000, which was being amortized over a 24.6-year period prior to its sale during the first quarter of 2023. For each of the nine months ended September 30, 2023 and 2022, approximately $0 and $7,200 of the intangibles were amortized.

A portion of the acquisition price of the assets acquired by PW Regulus Solar, LLC (“PWRS”) have been allocated on The Trust’s consolidated balance sheets between Land and Intangibles’ fair values at the date of acquisition. The total amount of in-place lease intangible assets established was approximately $4,714,000, which is amortized over a 20.7-year period. For each of the nine months ended September 30, 2023 and 2022, approximately $170,600 of the intangibles was amortized.

A portion of the acquisition price of the assets acquired by PW CA Canndescent, LLC (“PW Canndescent”) have been allocated on the Trust’s consolidated balance sheets between Land, Improvements and Intangibles, fair values at the date of acquisition. The amount of in-place lease intangible assets established was approximately $808,000, which was to be amortized over a 4.5-year period. For the nine months ended September 30, 2023 and 2022, approximately $0 and $134,700 of amortization expense was recognized. A below-market lease intangible liability was recorded upon acquisition in the amount of approximately $179,000 and was to be amortized over a 4.5-year period. Addition to revenue for the amortization of the liability in the amount of approximately $0 and $29,800 was recognized for the nine months ended September 30, 2023 and 2022, respectively. The lease intangibles for PW Canndescent were fully impaired during the last quarter of 2022 based upon tenant default.

Intangible assets are evaluated whenever events or circumstances indicate the carrying value of these assets may not be recoverable. There were no impairment charges recorded for the nine months ended September 30, 2023 and 2022.

The following table provides a summary of the Intangible Assets and Liabilities:

SCHEDULE OF INTANGIBLE ASSETS

	For the Nine Months Ended September 30, 2023

			Accumulated Amortization		Accumulated
	Cost		Through 12/31/22		Amortization 1/1/23 - 9/30/23		Net Book Value

Asset Intangibles - PWRS	$	4,713,548	$	1,981,639	$	170,616	$	2,561,293

The following table provides a summary of the current estimate of future amortization of Intangible Assets for the subsequent years ending December 31:


2023 (3 months remaining)	$	56,872
2024	$	227,488
2025	$	227,488
2026	$	227,488
2027	$	227,488
Thereafter		1,594,469
Total	$	2,561,293

Net Investment in Direct Financing Lease – Railroad

P&WV’s net investment in its leased railroad property, recognizing the lessee’s perpetual renewal options, was estimated to have a current value of $9,150,000, assuming an implicit interest rate of 10%.

Fair Value

Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Trust measures its financial assets and liabilities in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

	○	Level 1 – valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds.

	○	Level 2 – valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third party pricing services for identical or comparable assets or liabilities.

	○	Level 3 – valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

In determining fair value, the Trust utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considering counterparty credit risk.

The carrying amounts of Power REIT’s financial instruments, including cash and cash equivalents, prepaid expenses, and accounts payable approximate fair value because of their relatively short-term maturities. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates. There are no financial assets and liabilities carried at fair value on a recurring basis as of September 30, 2023 and December 31, 2022.

Other Income

Other income for the nine months ended September 30, 2023 and 2022 is $167,452 and $75, respectively which consists of interest income and forgiveness of accounts payable.

Other Assets

Other assets as of September 30, 2023 and December 31, 2022 is $74,048 and $0, respectively, which represents a tractor purchased by PW MillPro NE on August 21, 2023 for use at the Nebraska greenhouse.

Other Liabilities

Other liabilities as of September 30, 2023 and December 31, 2022, is $57,675 and $0, respectively, which refers to the finance loan agreement for the tractor used at the Nebraska greenhouse. The loan is payable annually over five years with a 1.9% interest rate and matures on August 21, 2028.

3 – GOING CONCERN

The Trust’s objectives when managing its capital are to ensure that there are adequate capital resources to safeguard the Trust’s ability to continue operating and maintain adequate levels of funding to support its ongoing operations and development such that it can continue to provide returns to shareholders. The Trust’s management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the financial statements are issued.

For the nine months ended September 30, 2023, the Trust determined that there was substantial doubt as to its ability to continue as a going concern as a result of net losses incurred, expected reduced revenue and increased property maintenance expenses. As of September 30, 2023, the Trust had approximately $2.6 million of non-restricted cash available and with the potential sale of certain assets, the Trust believes these resources will be sufficient to fund its operations and commitments for the next twelve months. The focus on selling properties, the potential to enter into new leases and improve collections from existing tenants and the potential to raise capital in the form of debt or equity, should alleviate the substantial doubt about the Trust’s ability to continue as a going concern. However, the Trust cannot predict, with certainty, the outcome of its actions to generate liquidity, including its ability to sell properties, and the failure to do so could negatively impact its future operations.

4 – ACQUISITION AND DISPOSITION

2023 Disposition

On January 6, 2023, a wholly owned subsidiary of Power REIT, sold its interest in five ground leases related to utility scale solar farms located in Tulare County, California for gross proceeds of $2,500,000. The purchaser is an unaffiliated third party and the price was established based on an arm’s length negotiation. The properties were acquired by Power REIT in 2013 for $1,550,000 and recognized a gain on sale of approximately $1,040,000.


Land	1,312,529
Acquired lease intangible assets	237,471
Total real estate investments	1,550,000
Less acquired lease intangible amortization	(91,349	)
Net book value of property upon sale	1,458,651

2022 Acquisitions

On March 31, 2022, Power REIT completed its first acquisition with the focus of cultivation of food crops, through a newly formed wholly owned indirect subsidiary, PW MillPro NE LLC, (“PW MillPro”), and acquired a 1,121,513 square foot greenhouse cultivation facility (the “MillPro Facility”) on an approximately 86-acre property and a separate approximately 4.88-acre property with a 21-room employee housing building (the “Housing Facility”) for $9,350,000 and closing costs of approximately $91,000 located in O’Neill, Nebraska. As part of the transaction, the Trust agreed to fund $534,430 to upgrade the facility but as of September 30, 2023, $0 construction in progress has been funded, and the tenant has ceased operations at the property.

The following table summarizes the allocation of the purchase consideration for the PW MillPro properties based on the relative fair values of the assets when acquired:

	Greenhouse		Housing Facility
Land	$	344,000	$	19,520
Assets subject to depreciation:
Improvements (Greenhouses /Processing Facilities)		8,794,445		283,399

Total Assets Acquired	$	9,138,445	$	302,919

5 – DIRECT FINANCING LEASES AND OPERATING LEASES

Information as Lessor Under ASC Topic 842

To generate positive cash flow, as a lessor, the Trust leases its facilities to tenants in exchange for payments. The Trust’s leases for its railroad, solar farms and greenhouse cultivation facilities have lease terms ranging between 5 and 99 years. Payments from the Trust’s leases are recognized on a straight-line basis over the terms of the respective leases or on a cash basis for tenants with collectability issues. During the nine months ended September 30, 2023 and 2022, the Trust wrote off a net amount of approximately $315,000 and $17,200, respectively, in straight-line rent receivable against rental income. Total revenue from its leases recognized for the nine months ended September 30, 2023 and 2022 is approximately $1,544,000 and $6,226,000, respectively.

Due to significant price compression in the wholesale cannabis market, many of the Trust’s cannabis related tenants are experiencing significant financial challenges including an inability to pay rent. The Trust has offered certain of its cannabis tenants’ relief by amending leases whereby monthly cash payments are restructured over the course of the lease to lower near term rent payments and increase rent payments in the future.

Historically, the Trust’s revenue has been concentrated to a relatively limited number of investments, industries and lessees. During the nine months ended September 30, 2023, Power REIT collected approximately 83% of its consolidated revenue from two properties. The tenants were Norfolk Southern Railway and Regulus Solar, LLC, which represent 44%, and 39% of consolidated revenue respectively. Comparatively, during the nine months ended September 30, 2022, Power REIT collected approximately 56% of its consolidated revenue from four properties. The tenants were Sweet Dirt, Fiore Management LLC (“Canndescent”), Norfolk Southern Railway and Regulus Solar, LLC which represent 22%, 13%, 11% and 10% of consolidated revenue respectively.

The following is a schedule by years of minimum future rentals on non-cancelable operating leases as of September 30, 2023 for assets and assets held for sale where revenue recognition is considered on a straight-line basis:

	Assets		Assets Held for Sale
2023 (3 months left)	$	116,071	$	-
2024		894,312		-
2025		903,077		-
2026		912,192		-
2027		921,265		-
Thereafter		6,545,296		-
Total	$	10,292,213	$	-

6 – LONG-TERM DEBT

On December 31, 2012, as part of the Salisbury land acquisition, PW Salisbury Solar, LLC (“PWSS”) assumed existing municipal financing (“Municipal Debt”). The Municipal Debt has approximately 9 years remaining. The Municipal Debt has a simple interest rate of 5.0% that is paid annually, due on February 1 of each year. The balance of the Municipal Debt as of September 30, 2023 and December 31, 2022 is approximately $51,000 and $58,000 respectively.

In July 2013, PWSS borrowed $750,000 from a regional bank (the “PWSS Term Loan”). The PWSS Term Loan carries a fixed interest rate of 5.0% for a term of 10 years and amortizes based on a 20-year principal amortization schedule. The loan is secured by PWSS’ real estate assets and a parent guarantee from the Trust. The balance of the PWSS Term Loan as of September 30, 2023 and December 31, 2022 is approximately $465,000 (net of approximately $0 of capitalized debt costs) and $490,000 (net of approximately $2,100 of capitalized debt costs), respectively. The PWSS Term Loan matured on August 1, 2023 and the bank has agreed to provide a 6-month extension of the maturity.

On November 6, 2015, PWRS entered into a loan agreement (the “2015 PWRS Loan Agreement”) with a certain lender for $10,150,000 (the “2015 PWRS Loan”). The 2015 PWRS Loan is secured by land and intangibles owned by PWRS. PWRS issued a note to the benefit of the lender dated November 6, 2015 with a maturity date of October 14, 2034 and a 4.34% interest rate. The 2015 PWRS Loan is non-recourse to Power REIT. As of September 30, 2023 and December 31, 2022, the balance of the 2015 PWRS Loan was approximately $6,965,000 (net of unamortized debt costs of approximately $241,000) and $7,393,000 (net of unamortized debt costs of approximately $258,000), respectively.

On November 25, 2019, Power REIT, through a newly formed subsidiary, PW PWV Holdings LLC (“PW PWV”), entered into a loan agreement (the “PW PWV Loan Agreement”) with a certain lender for $15,500,000 (the “PW PWV Loan”). The PW PWV Loan is secured by pledge of PW PWV’s equity interest in P&WV, its interest in the Railroad Lease and a security interest in a deposit account (the “Deposit Account”) pursuant to a Deposit Account Control Agreement dated November 25, 2019 into which the P&WV rental proceeds are deposited. Pursuant to the Deposit Account Control Agreement, P&WV has instructed its bank to transfer all monies deposited in the Deposit Account to the escrow agent as a dividend/distribution payment pursuant to the terms of the PW PWV Loan Agreement. The PW PWV Loan is evidenced by a note issued by PW PWV to the benefit of the lender for $15,500,000, with a fixed interest rate of 4.62% and fully amortizes over the life of the financing which matures in 2054 (35 years). The PW PWV Loan is non-recourse to Power REIT. The balance of the loan as of September 30, 2023 and December 31, 2022 is $14,463,000 (net of approximately $278,000 of capitalized debt costs) and $14,615,000 (net of approximately $285,000 of capitalized debt costs).

On December 21, 2021, a wholly-owned subsidiary of Power REIT (“PW CanRE Holdings”) entered into a debt facility with initial availability of $20 million (the “Debt Facility”). The facility is non-recourse to Power REIT and has perfected liens against all of Power REIT CEA portfolio properties except for the property located in Vinita, OK. The Debt Facility had a 12 month draw period and then converts to a term loan that is fully amortizing over five years. The interest rate on the Debt Facility was 5.52% and throughout the term of the loan, a debt service coverage ratio of equal to or greater than 2.00 to 1.00 must be maintained. On October 28, 2022, the terms of the Debt Facility were amended such that the amortization period was extended from 5 years to 10 years for the calculation of debt service coverage ratio and a 6-month debt service payment reserve requirement of $1 million was established. On March 13, 2023 the Debt Facility entered into an additional modification of which the terms are summarized as follows:

-	The total commitment is reduced from $20 million to $16 million.
-	The interest rate is changed to the greater of: (i) 1% above the Prime rate and (ii) 8.75%.
-	Monthly payments on the Debt Facility will be interest only until maturity.
-	A portion of the proceeds from the sale of assets within the Borrowing Base for the Debt Facility will be required to pay the outstanding loan amount.
-	The maturity date of the Debt Facility is changed to December 21, 2025.
-	The Debt Service Coverage ratio will be 1.50 to 1.00 and the test will be performed on an annual basis and is eliminated until the calendar year 2024.
-	The definition of assets included in the Borrowing Base for the Debt Facility no longer eliminates assets where tenants are in default for failure to make timely rent payments.
-	An agreed upon minimum liquidity amount shall be maintained in the amount of $1 million.
-	A $160,000 fee will be charged by the bank for the modification.

As of September 30, 2023, $16,000,000 has been drawn against this Debt Facility. Debt issuance expenses of approximately $0 and $44,000 have been capitalized during the nine months ended September 30, 2023 and 2022, respectively. Amortization of approximately $39,000 and $41,000 has been recognized for the nine months ended September 30, 2023 and 2022, respectively and approximately $46,000 deferred debt issuance costs were re-classed as contra liability upon the loan commitment reduction for the nine months ended September 30, 2023; approximately $255,165 deferred debt issuance costs were re-classed as contra liability upon the loan draw for the nine months ended September 30, 2022. The balance of the loan as of September 30, 2023 and December 31, 2022 is approximately $15,781,000 (net of approximately $219,000 of unamortized debt costs) and approximately $15,735,000 (net of approximately $265,000 of unamortized debt costs). During the nine months ended September 30, 2023, the Trust also recognized $160,000 loan modification expense in connection with the March 13, 2023 modification.

As of November 13, 2023, PW CanRe Holdings, LLC has an outstanding balance on the Debt Facility of $14,357,812.50. As of the date of this filing, the Debt Facility is current with respect to the payment of principal and interest. The Debt Facility is not in compliance with loan covenants including primarily the non-performance of tenants. PW CanRe Holdings, LLC is in active discussion with the lender regarding formalizing a loan modification. The lender has not declared a default which would allow for the acceleration of the Debt Facility. There can be no assurance that PW CanRe, LLC Holdings will be able to satisfy the requirements of the lender which could result in the acceleration of the Debt Facility as well as foreclosure of collateral. Although the Debt Facility is non-recourse to Power REIT, foreclosure on the property, would result in a decrease in potential revenue to Power REIT.

The amount of principal payments remaining on Power REIT’s long-term debt as of September 30, 2023 including the modified repayment schedule for the Debt Facility is as follows:

SCHEDULE OF LONG TERM DEBT

	Total Debt

2023 (3 months remaining)*		16,082,081
2024		1,165,932
2025		755,634
2026		797,628
2027		841,452
Thereafter		18,820,400
Long term debt	$	38,463,127

*	Of the 16,082,081, $16,000,000 represents the Debt Facility which has not been, but could be accelerated by the lender as described above.

7 – IMPAIRMENT AND ASSET HELD FOR SALE

During the third quarter of 2023, the Trust concluded that an impairment of value of certain assets within its greenhouse portfolio was appropriate based on market conditions. The impairment also takes into account assets held for sale, and the write off of any associated lease intangible. On September 30, 2023, the Trust recorded approximately $8.2 million in non-cash impairment charges and on December 31, 2022, the Trust recorded approximately $16.7 million in non-cash impairment charges. Any further decline in the estimated fair values the Trust’s assets could result in impairment charges in the future. It is possible that such impairments, if required, could be material.

A summary of the Trust’s impairment expense for the nine months ended September 30, 2023 is below:

SUMMARY OF TRUSTS IMPAIRMENT EXPENSES

		Impairment Expense

Assets Held for Sale

SEC Form 10-Q filed by Power REIT (MD)