UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from __________to__________
(Commission File Number)
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(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 | ||
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.
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).
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 | ☐ |
| ☒ | 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
☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
common shares, $0.001 par value, outstanding at November 14, 2023.
TABLE OF CONTENTS
| 2 |
POWER REIT AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Land | $ | $ | ||||||
| Greenhouse cultivation and processing facilities, net of accumulated depreciation | ||||||||
| Net investment in direct financing lease - railroad | ||||||||
| Total real estate assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and deposits | ||||||||
| Intangible lease asset, net of accumulated amortization | ||||||||
| Deferred debt issuance cost, net of amortization | ||||||||
| Deferred rent receivable | ||||||||
| Assets held for sale | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Tenant security deposits | ||||||||
| Other liabilities | ||||||||
| Liabilities held for sale | ||||||||
| Current portion of long-term debt, net of unamortized discount | ||||||||
| Long-term debt, net of unamortized discount | ||||||||
| TOTAL LIABILITIES | ||||||||
| Series
A | ||||||||
| Equity: | ||||||||
| Common Shares, $ par value ( shares authorized; shares issued and outstanding as of September 30, 2023 and December 31, 2022) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Equity | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 3 |
POWER REIT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| REVENUE | ||||||||||||||||
| Lease income from direct financing lease – railroad | $ | $ | $ | $ | ||||||||||||
| Rental income | ||||||||||||||||
| Rental income - related parties | ( | ) | ||||||||||||||
| Other income | ||||||||||||||||
| TOTAL REVENUE | ||||||||||||||||
| EXPENSES | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Property maintenance | ||||||||||||||||
| Property taxes | ||||||||||||||||
| Depreciation expense | ||||||||||||||||
| Impairment expense | ||||||||||||||||
| Interest expense | ||||||||||||||||
| TOTAL EXPENSES | ||||||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Gain on sale of property | ||||||||||||||||
| Lease modification expense | ( | ) | ||||||||||||||
| TOTAL OTHER INCOME (EXPENSE) | ||||||||||||||||
| NET (LOSS) / INCOME | ( | ) | ( | ) | ||||||||||||
| Preferred Stock Dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET (LOSS) / INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Income (Loss) Per Common Share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Diluted | ( | ) | ( | ) | ||||||||||||
| Weighted Average Number of Shares Outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Cash dividend per Series A Preferred Share | $ | $ | $ | $ | ||||||||||||
| Accumulated dividend accrued per Series A Preferred Shares: | ||||||||||||||||
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
POWER REIT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Quarters Ended September 30, 2023 and 2022
(Unaudited)
| Common Shares | Additional Paid-in | Retained Earnings (Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit) | Equity | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Accrued Dividends on Preferred Stock | - | ( | ) | ( | ) | |||||||||||||||
| Stock-Based Compensation | - | |||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Accrued Dividends on Preferred Stock | - | ( | ) | ( | ) | |||||||||||||||
| Stock-Based Compensation | - | |||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Accrued Dividends on Preferred Stock | - | ( | ) | ( | ) | |||||||||||||||
| Stock-Based Compensation | - | |||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Net Income | - | |||||||||||||||||||
| Cash Dividends on Preferred Stock | - | ( | ) | ( | ) | |||||||||||||||
| Stock-Based Compensation | ( | ) | ||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ||||||||||||||||
| Net Income | - | |||||||||||||||||||
| Cash Dividends on Preferred Stock | - | ( | ) | ( | ) | |||||||||||||||
| Stock-Based Compensation | - | |||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ||||||||||||||||
| Net Income | - | |||||||||||||||||||
| Cash Dividends on Preferred Stock | - | ( | ) | ( | ) | |||||||||||||||
| Stock-Based Compensation | ||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
POWER REIT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating activities | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
| Amortization of intangible lease asset | ||||||||
| Amortization of debt costs | ||||||||
| Amortization of below market lease | ( | ) | ||||||
| Loan modification expense | ||||||||
| Stock-based compensation | ||||||||
| Impairment on asset | ||||||||
| Depreciation | ||||||||
| Sale of property | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Accounts receivable - related party | ( | ) | ||||||
| Deferred rent receivable | ||||||||
| Deferred rent liability | ||||||||
| Prepaid expenses and deposits | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Tenant security deposits | ( | ) | ||||||
| Accrued expenses | ||||||||
| Prepaid rent | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Investing activities | ||||||||
| Cash received for sale of property | ||||||||
| Cash paid for land, greenhouse cultivation and processing facilities | ( | ) | ||||||
| Cash paid for greenhouse cultivation and processing facilities - construction in progress | ( | ) | ||||||
| Cash paid for purchase of equipment | ( | ) | ||||||
| Net cash provided (used in) investing activities | ( | ) | ||||||
| Financing Activities | ||||||||
| Payment of debt issuance costs | ( | ) | ||||||
| Proceeds from long-term debt | ||||||||
| Principal payment on long-term debt | ( | ) | ( | ) | ||||
| Cash dividends paid on preferred stock | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | $ | $ | ||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Reclass of deferred debt issuance costs to liability upon reduction of total loan commitment | ||||||||
| Dividends accrued on preferred stock | ||||||||
| Financed equipment purchase | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
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
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 $
During
the nine months ended September 30, 2023, the Trust accrued quarterly dividends of approximately $
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 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 $
| 7 |
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 | $ | $ | ||||||
| Restricted cash | ||||||||
| Cash and cash equivalents and restricted cash | $ | $ | ||||||
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.
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.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Preferred Stock Dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Numerator for basic and diluted EPS - income (loss) available to common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Denominator: | ||||||||||||||||
| Denominator for basic EPS - Weighted average shares | ||||||||||||||||
| Dilutive effect of options | ||||||||||||||||
| Denominator for dilutive EPS - Adjusted weighted average shares | ||||||||||||||||
| Basic income (loss) per common share | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Dilutive income (loss) per common share | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| 8 |
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
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.
| 9 |
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 $
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 $
| 10 |
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 $
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 $
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 $
Intangible
assets are evaluated whenever events or circumstances indicate the carrying value of these assets may not be recoverable. There were
The following table provides a summary of the Intangible Assets and Liabilities:
| 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 | $ | $ | $ | $ | ||||||||||||
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) | $ | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| Thereafter | ||||
| Total | $ |
| 11 |
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 $
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 $
Other Assets
Other
assets as of September 30, 2023 and December 31, 2022 is $
Other Liabilities
Other
liabilities as of September 30, 2023 and December 31, 2022, is $
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.
| 12 |
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 $
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 $
| Land | ||||
| Acquired lease intangible assets | ||||
| Total real estate investments | ||||
| Less acquired lease intangible amortization | ( |
) | ||
| Net book value of property upon sale |
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
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 | $ | $ | ||||||
| Assets subject to depreciation: | ||||||||
| Improvements (Greenhouses /Processing Facilities) | ||||||||
| Total Assets Acquired | $ | $ | ||||||
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
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.
| 13 |
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
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) | $ | $ | ||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total | $ | $ | ||||||
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
In
July 2013, PWSS borrowed $
On
November 6, 2015, PWRS entered into a loan agreement (the “2015 PWRS Loan Agreement”) with a certain lender for $
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 $
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On
December 21, 2021, a wholly-owned subsidiary of Power REIT (“PW CanRE Holdings”) entered into a debt facility with initial
availability of $
| - | The
total commitment is reduced from $ |
| - | |
| - | 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 |
| - | The
Debt Service Coverage ratio will be |
| - | 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 $ |
| - |
As
of September 30, 2023, $
As
of November 13, 2023, PW CanRe Holdings, LLC has an outstanding balance on the Debt Facility of $
| 15 |
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:
| Total Debt | ||||
| 2023 (3 months remaining)* | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Long term debt | $ | |||
| * |
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 $
A summary of the Trust’s impairment expense for the nine months ended September 30, 2023 is below:
| Impairment Expense | ||||
| Assets Held for Sale | $ | |||
| Long-Lived Assets | ||||
| $ | ||||
The Trust has aggregated and classified the assets and liabilities of seven properties (Canndescent, Walsenburg, Sweet Dirt, Vinita, Mav 14, Tam 4 and 5, Tam 13) as held for sale in the Trust’s Consolidated Balance Sheets as of September 30, 2023 and prior period comparative balance sheet as of as of December 31, 2022 and is recast to achieve comparability. The balance sheet as of December 31, 2022 also included the Tulare property which was sold during 2023 and therefore removed from the September 30, 2023 column. The assets and liabilities of assets held for sale were as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Land | ||||||||
| Greenhouse cultivation and processing facilities, net of accumulated depreciation | ||||||||
| Intangible lease asset, net of accumulated amortization | ||||||||
| Deferred rent receivable | ||||||||
| TOTAL ASSETS - Held for sale | ||||||||
| LIABILITIES | ||||||||
| Accounts payable | ||||||||
| Tenant security deposits | ||||||||
| Prepaid rent | ||||||||
| Accrued Property Tax | ||||||||
| TOTAL LIABILITIES - Held for sale | ||||||||
| 16 |
Summary of Stock Based Compensation Activity
Power REIT’s 2020 Equity Incentive Plan (the “Plan”), which superseded the 2012 Equity Incentive Plan, was adopted by the Board on May 27, 2020 and approved by shareholders on June 24, 2020. It provides for the grant of the following awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) SARs; (iv) Restricted Stock Awards; (v) RSU Awards; (vi) Performance Awards; and (vii) Other Awards. The Plan’s purpose is to secure and retain the services of Employees, Directors and Consultants, to provide incentives for such persons to exert maximum efforts for the success of the Trust and to provide a means by which such persons may be given an opportunity to benefit from increases in value of the common stock through the granting of awards. As of September 30, 2023, the aggregate number of shares of common stock that may be issued pursuant to outstanding awards is currently which is subject to adjustment per the Plan.
Summary of Stock Based Compensation Activity – Options
On
July 15, 2022, the Trust granted non-qualified stock options (“options”) to acquire shares of common stock at a price
of $ to its independent trustees, officers and an employee. The term of each option is
The Trust accounts for share-based payments using the fair value method. The Trust recognizes all share-based payments in its financial statements based on their grant date fair values and market closing price, calculated using the Black-Scholes option valuation model.
| Expected Volatility | % | |||
| Expected Dividend Yield | % | |||
| Expected Term (in years) | ||||
| Risk Free Rate | % | |||
| Estimate of Forfeiture Rate | % |
The Trust uses historical data to estimate dividend yield and volatility and the “simplified method” as described in the SEC Staff Accounting Bulletin #110 to determine the expected term of the option grants. The risk-free interest rate for the expected term of the options is based on the U.S. treasury yield curve on the grant date. The Trust does not have historical data of forfeiture and used a 0% forfeiture rate in calculating unrecognized share-based compensation expense and will account for forfeitures as they occur. On January 31, 2023, options and on April 30, 2023, options were forfeited by an employee who is no longer employed by the Trust.
| 17 |
The summary of stock-based compensation activity for the nine months ended September 30, 2023, with respect to the Trust’s stock options, is as follows:
Summary of Activity – Options
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
| Balance as of December 31, 2022 | $ | |||||||||||
| Options Forfeited | ( | ) | ||||||||||
| Balance as of Setpember 30, 2023 | ||||||||||||
| Options exercisable as of September 30, 2023 | $ | |||||||||||
The weighted average remaining term of the options is years.
Summary of Stock Based Compensation Activity – Restricted Stock
On July 15, 2022, the Trust granted shares of restricted stock to its officer ( shares) and independent trustees ( shares each). The restricted stock vests over months for the officer and quarterly over four quarters for the trustees and is valued based on the market price of the common stock on the grant date.
Summary of Activity - Restricted Stock
| Number of Shares of Restricted Stock | Weighted Average Grant Date Fair Value | |||||||
| Balance as of December 31, 2022 | ||||||||
| Plan Awards | ||||||||
| Restricted Stock Forfeited | ||||||||
| Restricted Stock Vested | ( | ) | ||||||
| Balance as of September 30, 2023 | ||||||||
Stock-based Compensation
During the nine months ended September 30, 2023, the Trust recorded approximately $ of non-cash expense related to restricted stock and approximately $ of non-cash expense related to options granted compared to approximately $ of non-cash expense related to restricted stock and approximately $ of non-cash expense related to options for the nine months ended September 30, 2022. As of September 30, 2023, there was approximately $ of total unrecognized share-based compensation expense for restricted stock and approximately $ of total unrecognized share-based expense for options, which expense will be recognized through the third quarter of 2025. The Trust does not currently have a policy regarding the repurchase of shares on the open market related to equity awards and does not currently intend to acquire shares on the open market.
Preferred Stock Dividends
During
the nine months ended September 30, 2023, the Trust accrued a total of approximately $
| 18 |
9 – RELATED PARTY TRANSACTIONS
A
wholly-owned subsidiary of Hudson Bay Partners, LP (“HBP”), an entity associated with the Trust’s CEO and Chairman
of the Trust, David Lesser, provided the Trust and its subsidiaries with office space at no cost. Effective September 2016, the Board
of Trustees approved reimbursing an affiliate of HBP $
Power
REIT has a relationship with Millennium Sustainable Ventures Corp., formerly Millennium Investment and Acquisition Company Inc. (“MILC’).
David H. Lesser, Power REIT’s Chairman and CEO, is also Chairman and CEO of MILC. MILC, through subsidiaries or affiliates, established
cannabis and food crop cultivation projects and entered into leases related to the Trust’s Oklahoma, Michigan and Nebraska properties
and MILC is a lender to the tenant of one of the Trust’s Colorado properties. As of September 30, 2023, these properties are currently
not operational and the Trust is evaluating alternatives related thereto. Total rental income recognized for the nine months ended September
30, 2023 from the tenants that are affiliated with MILC in Colorado, Oklahoma, Michigan and Nebraska was $
Effective
March 1, 2022, the Sweet Dirt Lease was amended (the “Sweet Dirt Lease Second Amendment”) to provide funding in the amount
of $
Under the Trust’s Declaration of Trust, the Trust may enter into transactions in which trustees, officers or employees have a financial interest, provided however, that in the case of a material financial interest, the transaction is disclosed to the Board of Trustees or the transaction shall be fair and reasonable. After consideration of the terms and conditions of the transaction with Hudson Bay Partners, IntelliGen Power Systems LLC and the lease transactions with subsidiaries and affiliates of MILC, the independent trustees approved such arrangements having determined such arrangement are fair and reasonable and in the interest of the Trust.
10 – CONTINGENCIES
The Trust’s wholly-owned subsidiary, P&WV, is subject to various restrictions imposed by the Railroad Lease with NSC, including restrictions on share and debt issuance, including guarantees.
11 – SUBSEQUENT EVENTS
On
November 1, 2023, a wholly owned subsidiary of Power REIT (“PW SD”) sold its interest in a cannabis related greenhouse cultivation
facility located in Maine to an affiliate of its tenant. As previously announced, PW SD had entered into a Purchase and Sale Agreement
related to this property that has been renegotiated based on current circumstances as part of proceeding towards closing. The total consideration
was $
On
October 2, 2023, PW CA CanRE Canndescent LLC (“PW Canndescent”) entered into a new -year
lease with San Fernando Valley Patients Cooperative, LLC for the property in Desert Hot Springs, CA. The lease is personally
guaranteed by the principals of the tenant. Upon execution of the lease, the tenant paid a non-refundable $
| 19 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “believe,” “expect,” “will,” “anticipate,” “intend,” “estimate,” “project,” “plan,” “assume” or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words. All statements contained in this Report regarding our future strategy, future operations, projected financial position, estimated future revenues, projected costs, future prospects, the future of our industries and results that might be obtained by pursuing management’s current or future plans and objectives are forward-looking statements.
You should not place undue reliance on any forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control, including those identified below, under Part II, Item 1A. “Risk Factors” and elsewhere in this Report, and those identified under Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2022 that we filed with the Securities and Exchange Commission on March 31, 2023 (the “2022 10-K”). Our forward-looking statements are based on the information currently available to us and speak only as of the date of the filing of this Report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these matters or how they may affect us. Over time, our actual results, performance, financial condition or achievements may differ from the anticipated results, performance, financial condition or achievements that are expressed or implied by our forward-looking statements, and such differences may be significant and materially adverse to our security holders. Our forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Power REIT (the “Registrant” or the “Trust”, and together with its consolidated subsidiaries, “we”, “us”, or “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.
We are structured as a holding company and owns our 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 existing or under construction CEA properties in the form of greenhouses.
During the nine months ended September 30, 2023, the Trust accrued a quarterly dividend of approximately $490,000 ($0.484375 per share per quarter) on Power REIT’s 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.
| 20 |
Recent Developments
In 2019, we expanded the focus of our real estate activities to include CEA properties in the form of greenhouses in the United States. CEA is an innovative method of growing plants that involves creating optimized growing environments for a given crop indoors. Power REIT is focused on CEA in the form of a greenhouse which use approximately 70% less energy than indoor growing, 95% less water usage than outdoor growing, and does not have any agricultural runoff of fertilizers or pesticides. We believe greenhouse cultivation represents a sustainable solution from both a business and environmental perspective. Certain of our greenhouse properties are operated for the cultivation of cannabis by state-licensed operators. During 2022, we acquired a greenhouse focused on the cultivation of tomatoes. We typically enter into long-term “triple net” leases where our tenants are responsible for all costs related to the property, including insurance, taxes and maintenance.
Our primary objective is to maximize the long-term value of the Trust for our shareholders. To that end, our business goals are to obtain the best possible rental income at our properties in order to maximize our cash flows, net operating income, funds from operations, funds available for distribution to shareholders and other operating measures and results, and ultimately to maximize the values of our properties.
To achieve this primary goal, we have developed a business strategy focused on increasing the values of our properties, and ultimately of the Trust, which includes:
● Raising capital by monetizing the embedded value in our portfolio to enhance our liquidity position and, as appropriate reducing debt levels to strengthen our balance sheet;
● Selling off non-core properties and underperforming assets;
● Seeking to re-lease properties that are vacant or have non-performing tenants
● Raising the overall level of quality of our portfolio and of individual properties in our portfolio;
● Improving the operating results of our properties; and
● Taking steps to position the Company for future growth opportunities.
Improving Our Balance Sheet by Reducing Debt and Leverage; Maintaining Liquidity
Leverage
We continue to seek ways to reduce our leverage by improving our operating performance and through a variety of other means available to us. These means might include selling properties, raising capital or through other actions.
Recent Events
On November 1, 2023, a wholly owned subsidiary of Power REIT (“PW SD”) sold its interest in a cannabis related greenhouse cultivation facility located in Maine to an affiliate of its tenant. As previously announced, PW SD had entered into a Purchase and Sale Agreement related to this property that has been renegotiated based on current circumstances as part of proceeding towards closing. The total consideration was $4,787,000, of which $3,400,000 was paid in cash, $537,000 was paid in the form of the release of the security deposit held by PW SD and seller financing in the form of an $850,000 note with an 8.5% interest rate that will accrue until maturity on October 30, 2025. The note is secured by a second mortgage on the property and certain corporate and personal guarantees. Of the cash proceeds received from the Sweet Dirt sale, $1,642,187.50 was used to pay down the Debt Facility.
Liquidity
For the nine months ended September 30, 2023, we determined that there was substantial doubt as to our 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, our consolidated balance sheet reflected $3.6 million of cash and cash equivalents which includes $1 million of restricted cash related to a Debt Facility. We believe that this amount and future net cash provided by operations, property sales, and other sources of capital, should provide sufficient liquidity to meet our liquidity requirements in the short term, including for one year from the filing of this Report. Our ability to meet our liquidity requirements beyond one year from the filing of this Report is subject to our ability to sell properties, the potential to enter into new leases and improve collections from existing tenants and raise capital in the form of debt or equity, which if successful 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 and lease properties, its ability to and the failure to do so could negatively impact its future operations. In addition, any foreclosure on any property held by any of Power REIT’s subsidiaries, such as the Debt Facility that PW CanRe, LLC Holdings entered into that is currently in default, will result in a loss of revenue from such foreclosed property and negatively impact our liquidity.
| 21 |
Capital Recycling
In the later part of 2022, we commenced property reviews to establish a plan for the portfolio and, if appropriate, will seek to dispose of properties that we do not believe meet financial and strategic criteria given economic, market and other circumstances. Disposing of these properties can enable us to redeploy our capital to other uses, such as to repay debt, to reinvest in other real estate assets and development and redevelopment projects, and for other corporate purposes. Along these lines, in early 2023 we completed sales of assets for total gross proceeds of $2.5 million. We also have several properties that we are seeking to sell and/or lease which have been classified as “Assets Held for Sale.”
Improving Our Portfolio
We are currently seeking to refine our property holdings by selling properties and/or re-leasing them in an effort to improve the overall performance going forward.
Taking Steps to Position the Company for Future Growth Opportunities
We are taking steps designed to position the Trust to create shareholder value. In connection therewith, we have implemented processes designed to ensure strong internal discipline in the use, harvesting and recycling of our capital, and these processes will be applied in connection with seeking to reposition properties.
We may continue to seek to acquire, in an opportunistic, selective and disciplined manner, properties that have operating metrics that are better than or equal to our existing portfolio averages, and that we believe have potential to generate cash flow and/or appreciation in value. Taking advantage of any acquisition opportunities would likely involve some use of debt or equity capital. We will pursue transactions that we expect can meet the financial and strategic criteria we apply, given economic, market and other circumstances. In addition, we are exploring the potential to use our existing corporate structure for strategic transactions including potentially merging assets or companies with the Trust.
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.
| 22 |
The following table is a summary of the Trust’s properties as of November 2023:
| Property Type/Name | Acres | Size1 | Lease Start | Term (yrs)2 | Gross Book Value3 | Gross Book Value Per SF | ||||||||||||||||
| Railroad Property | ||||||||||||||||||||||
| P&WV - Norfolk Southern | 112 miles | Oct-64 | 99 | $ | 9,150,000 | $ | - | |||||||||||||||
| Solar Farm Land | ||||||||||||||||||||||
| Massachusetts | ||||||||||||||||||||||
| PWSS | 54 | 5.7 | Dec-11 | 22 | 1,005,538 | - | ||||||||||||||||
| California | ||||||||||||||||||||||
| PWRS | 447 | 82.0 | Apr-14 | 20 | 9,183,548 | - | ||||||||||||||||
| Solar Total | 501 | 87.7 | $ | 10,189,086 | $ | - | ||||||||||||||||
| Greenhouse - Cannabis | ||||||||||||||||||||||
| Colorado | ||||||||||||||||||||||
| JAB - Mav 14,5,6 | 5.20 | 16,416 | Jul-19 | 20 | 1,594,582 | 97 | ||||||||||||||||
| Jackson Farms - Tam 184,5,6 | 2.11 | 12,996 | Jul-19 | 20 | 1,075,000 | 83 | ||||||||||||||||
| Mav 144,5,6,7 | 5.54 | 26,940 | Feb-20 | 20 | 1,908,400 | 71 | ||||||||||||||||
| Green Street (Chronic) - Sherman 65,6 | 5.00 | 26,416 | Feb-20 | 20 | 1,995,101 | 76 | ||||||||||||||||
| Fifth Ace - Tam 74,5,6 | 4.32 | 18,000 | Sep-20 | 20 | 1,364,585 | 76 | ||||||||||||||||
| Tam 194,5,6 | 2.11 | 18,528 | Dec-20 | 20 | 1,311,116 | 71 | ||||||||||||||||
| Apotheke - Tam 85,6 | 4.31 | 21,548 | Jan-21 | 20 | 2,061,542 | 96 | ||||||||||||||||
| Tam 144,5,6 | 2.09 | 24,360 | Oct-20 | 20 | 2,252,187 | 92 | ||||||||||||||||
| Elevate & Bloom - Tam 134,5,6,7 | 2.37 | 9,384 | May-22 | 20 | 1,031,712 | 110 | ||||||||||||||||
| Gas Station - Tam 34,5,6 | 2.20 | 24,512 | Feb-21 | 20 | 2,080,414 | 85 | ||||||||||||||||
| Tam 27 and 284,5,6 | 4.00 | 38,440 | Apr-21 | 20 | 1,872,340 | 49 | ||||||||||||||||
| Walsenburg Cannabis (Greenhouse)4,5,6,7 | 35.00 | 102,800 | May-21 | 20 | 4,219,170 | 41 | ||||||||||||||||
| Walsenburg Cannabis (MIP)5,6 | Jan-22 | 10 | 636,351 | |||||||||||||||||||
| Sherman 21 and 224,5,6 | 10.00 | 24,880 | Jun-21 | 20 | 1,782,136 | 72 | ||||||||||||||||
| Jackson Farms - Mav 55,6 | 5.20 | 15,000 | Nov-21 | 20 | 1,358,634 | 91 | ||||||||||||||||
| Tam 4 and 54,5,6,7 | 4.41 | 27,988 | Jan-22 | 20 | 2,239,870 | 80 | ||||||||||||||||
| California4,6,7 | 0.85 | 37,000 | Jan-21 | 5 | 7,685,000 | 208 | ||||||||||||||||
| Oklahoma4,6,7 | 9.35 | 40,000 | Jun-21 | 20 | 2,593,313 | 65 | ||||||||||||||||
| Michigan4,6 | 61.14 | 556,146 | Sep-21 | 20 | 24,171,151 | 46 | ||||||||||||||||
| Greenhouse - Produce | ||||||||||||||||||||||
| Nebraska4 | 90.88 | 1,121,153 | Apr-22 | 10 | 9,350,000 | 8 | ||||||||||||||||
| Greenhouse Total | 256.08 | 2,162,507 | $ | 72,582,604 | $ | 34 | ||||||||||||||||
| Total Portfolio | $ | 91,921,690 | ||||||||||||||||||||
| Impairment | 21,070,978 | |||||||||||||||||||||
| Depreciation and Amortization | 5,802,532 | |||||||||||||||||||||
| Net Book Value Net of Impairment, Depreciation and Amortization | $ | 65,048,180 | ||||||||||||||||||||
| 1 Solar Farm Land size represents Megawatts and CEA property size represents greenhouse square feet | |
| 2 Not including renewal options | |
| 3 Gross Book Value for our Greenhouse Portfolio represents purchase price (excluding capitalized acquisition costs) plus improvements costs - does not include outstanding capital commitments | |
| 4Property is vacant | |
| 5Tenant is not current on rent/in default | |
| 6An impairment has been taken against this asset | |
| 7Asset held for sale |
Critical Accounting Estimates
The consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods. The critical accounting estimates that affect the consolidated financial statements and the judgments and assumptions used are consistent with those described under Part II, Item 7 of the 2022 10-K.
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Results of Operations
Three Months Ended September 30, 2023 and 2022
Revenue during the three months ended September 30, 2023 and 2022 was $488,531 and $2,007,645, respectively. Revenue during the three months ended September 30, 2023, consisted of revenue from direct financing lease of $228,750, total rental income of 233,152, and other income of $26,629. The decrease in total revenue was primarily related to a decrease of $1,610,022 in rental income from unrelated parties due to defaulted leases related to the challenges within the cannabis industry and an increase of $64,335 in rental income from related parties due to adjustments in 2022 of leases from straight-line to a cash basis. Other income increased $26,573 due to the increase in interest income. Expenses for the three months ended September 30, 2023 compared to 2022 increased by $9,086,592 due primarily to a non-cash impairment charge of $8,235,136, as well as an increase in property maintenance expense of $405,886 and increase in property tax of $135,167 as a result of tenant defaults, an increase in general and administrative expenses of $12,470, an increase in interest expense of $177,790 due to the current interest rate environment, and an increase in depreciation expense of $167,444 offset by a decrease in amortization of intangible assets of $47,301. Net (loss)/income attributable to common shareholders during the three months ended September 30, 2023 and 2022 was ($10,185,943) and $419,762 respectively. Net income attributable to common shares decreased by $10,605,705.
For the three months ended September 30, 2023 and 2022, we accrued a dividend to our holders of Series A Preferred Stock of $163,207 and paid a cash dividend of $163,208, respectively.
Nine Months Ended September 30, 2023 and 2022
Revenue during the nine months ended September 30, 2023 and 2022 was $1,711,161 and $6,226,114, respectively. Revenue during the nine months ended September 30, 2023, consisted of rental income of $857,459, direct financing lease income of $686,250 and other income of $167,452. The decrease in total revenue was primarily related to a decrease of $4,103,339 in rental income from unrelated parties and to a lesser extent a decrease in rental income of $578,991 from transactions with related parties due to defaulted leases related to the challenges within the cannabis industry, offset by an increase in other income of $167,377. Expenses for the nine months ended September 30, 2023 increased $11,444,498 as compared to total expenses for the nine months ended September 30, 2022 primarily due to a non-cash impairment charge of $8,235,136, as well as an increase in property maintenance expense of $1,441,382 and an increase in property tax of $316,714 as a result of tenant defaults, an increase in general and administrative expenses of $277,146, an increase in depreciation expense of $699,805, an increase in interest expense of $616,218 and a decrease in amortization of intangible assets of $141,903. Other income increased by $880,452 due to a gain on disposal of the Tulare property netted with debt modification expense of $160,000. Net (loss)/income attributable to common shareholders during the nine months ended September 30, 2023 and 2022 was ($13,042,842) and $2,036,157, respectively. Net income attributable to common shareholders decreased by $15,078,999.
For the nine months ended September 30, 2023 and 2022, we accrued a dividend to our holders of Series A Preferred Stock of $489,621 and paid a cash dividend to our holders of Series A Preferred Stock of $489,621, respectively.
Liquidity and Capital Resources
Our cash and cash equivalents and restricted cash totaled $3,605,689 as of September 30, 2023, a decrease of $242,182 from December 31, 2022. During the nine months ended September 30, 2023, the decrease in cash was primarily due increased property expenses due to tenant defaults offset by the proceeds of $2,409,178 from the sale of the solar land property.
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, we believe these resources will be sufficient to fund our operations and commitments. 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, we cannot predict, with certainty, the outcome of our actions to generate liquidity and the failure to do so could negatively impact our future operations.
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With the cash available as of November, 2023 and the sale and potential sale of certain assets, we believe these resources will be sufficient to fund our operations and commitments; however, there can be no assurance that we will be able to sell properties when anticipated and for prices anticipated, if at all. Our cash outlays, other than acquisitions, property improvements, dividend payments and interest expense, are for property maintenance, property taxes and general and administrative (“G&A”) expenses, which consist principally of professional fees, consultant fees, NYSE American listing fees, insurance, shareholder service company fees and auditing costs as well as property related expenses that are not covered by tenants. To the extent we need to raise additional capital to meet our obligations, there can be no assurance that financing will be available when needed on favorable terms. If we are unable to sell certain assets when anticipated at prices anticipated, we may not have sufficient cash to fund operations and commitments.
The Trust’s objectives when managing its capital are to seek 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. Our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
FUNDS FROM OPERATIONS – NON-GAAP FINANCIAL MEASURES
We assess and measure our overall operating results based upon an industry performance measure referred to as Core Funds From Operations (“Core FFO”) which management believes is a useful indicator of our operating performance. Core FFO is a non-GAAP financial measure. Core FFO should not be construed as a substitute for net income (loss) (as determined in accordance with GAAP) for the purpose of analyzing our operating performance or financial position, as Core FFO is not defined by GAAP. The following is a definition of this measure, an explanation as to why we present it and, at the end of this section, a reconciliation of Core FFO to the most directly comparable GAAP financial measure. Management believes that alternative measures of performance, such as net income computed under GAAP, or Funds From Operations computed in accordance with the definition used by the National Association of Real Estate Investment Trusts (“NAREIT”), include certain financial items that are not indicative of the results provided by our asset portfolio and inappropriately affect the comparability of the Trust’s period-over-period performance. These items include non-recurring expenses, such as one-time upfront acquisition expenses that are not capitalized under ASC-805 and certain non-cash expenses, including stock-based compensation expense, amortization and certain up front financing costs. Therefore, management uses Core FFO and defines it as net income excluding such items. We believe that Core FFO is a useful supplemental measure for the investing community to employ, including when comparing us to other REITs that disclose similarly Core FFO figures, and when analyzing changes in our performance over time. Readers are cautioned that other REITs may use different adjustments to their GAAP financial measures than we use, and that as a result, our Core FFO may not be comparable to the FFO measures used by other REITs or to other non-GAAP or GAAP financial measures used by REITs or other companies.
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A reconciliation of our Core FFO to net income for the three and nine months ended September 30, 2023 and 2022 is included in the table below:
CORE FUNDS FROM OPERATIONS (FFO)
(Unaudited)
| Three Months ended September 30, | Nine Months ending September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | 488,531 | $ | 2,007,645 | $ | 1,711,161 | $ | 6,226,114 | ||||||||
| Net Income (Loss) | $ | (10,022,736 | ) | $ | 582,970 | $ | (12,553,221 | ) | $ | 2,525,778 | ||||||
| Stock-Based Compensation | 216,474 | 205,710 | 668,840 | 423,910 | ||||||||||||
| Interest Expense - Amortization of Debt Costs | 20,795 | 21,817 | 63,746 | 65,611 | ||||||||||||
| Amortization of Intangible Lease Asset | 56,872 | 104,173 | 170,616 | 312,519 | ||||||||||||
| Amortization of Intangible Lease Liability | - | (9,925 | ) | - | (29,776 | ) | ||||||||||
| Depreciation on Land Improvements | 565,742 | 398,298 | 1,775,160 | 1,075,355 | ||||||||||||
| Impairment Expense | 8,235,136 | - | 8,235,136 | - | ||||||||||||
| Gain on sale of property | - | - | (1,040,452 | ) | - | |||||||||||
| Core FFO Available to Preferred and Common Stock | (927,717 | ) | 1,303,043 | (2,680,175 | ) | 4,373,397 | ||||||||||
| Preferred Stock Dividends | (163,207 | ) | (163,208 | ) | (489,621 | ) | (489,621 | ) | ||||||||
| Core FFO Available to Common Shares | $ | (1,090,924 | ) | $ | 1,139,835 | $ | (3,169,796 | ) | $ | 3,883,776 | ||||||
| Weighted Average Shares Outstanding (basic) | 3,389,661 | 3,386,252 | 3,389,661 | 3,373,681 | ||||||||||||
| Core FFO per Common Share | (0.32 | ) | 0.34 | (0.94 | ) | 1.15 | ||||||||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate disclosure controls and procedures (as defined Rules 13a-15(e) and 15d-15(e) under the Exchange Act) (to provide reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. A control system, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Because of the inherent limitations in all control systems, internal controls over financial reporting may not prevent or detect misstatements. The design and operation of a control system must also reflect that there are resource constraints and management is necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls.
Our management, including our principal executive officer who is also our principal financial officer, assessed the effectiveness of the design and operation of our disclosure controls and procedures. Based on our evaluation, we believe that our disclosure controls and procedures as of September 30, 2023 were effective.
Changes in Internal Control over Financial Reporting:
During the fiscal quarter ended September 30, 2023, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are, from time to time, the subject of claims and suits arising out of matters related to our business. In general, litigation claims can be expensive, and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution of the current litigation to which we are party to, and the impact of certain of these matters on our business, results of operations, and financial condition could be material. Regardless of the outcome, litigation has adversely impacted our business because of defense costs, diversion of management resources and other factors.
On July 31, 2023, Engineered Protection Systems Inc. (“EPS”) filed a complaint (the “Complaint”) in the Michigan Court for the County of Calhoun (Case Number: 23-2018-CH) against Power REIT and PW MI CanRe Marengo, LLC. EPS is seeking to collect amounts related to work done at the greenhouse property located in Marengo Township, Michigan as well as monthly service fees. The work performed by EPS included surveillance, access control, security and fire alarms. The total amount sought in the Complaint is $304,244.40 plus interest, costs and attorneys’ fees. The case is subject to a mandatory mediation followed by a trial which would be scheduled in the event of an unsuccessful mediation or other settlement efforts.
Item 1A. Risk Factors.
The Trust’s results of operations and financial condition are subject to numerous risks and uncertainties as described in the 2022 10-K, which risk factors are incorporated herein by reference. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, “Risk Factors,” contained in the 2022 10-K. You should carefully consider the risks set forth in the 2022 10-K and the following risks, together with all the other information in this Report, including our consolidated financial statements and notes thereto. If any of the risks actually materialize, our operating results, financial condition and liquidity could be materially adversely affected. Except as disclosed below, there have been no material changes from the risk factors disclosed in the 2022 10-K.
The investment portfolio is, and in the future may continue to be, concentrated in its exposure to a relatively few numbers of investments, industries and lessees.
As of September 30, 2023, we owned twenty-four property investments, through our ownership of our twenty-four subsidiaries: Pittsburgh & West Virginia Railroad, PW PWV Holdings LLC, PW Salisbury Solar, LLC, PW Regulus Solar, LLC, PW CO CanRE JAB LLC, PW CanRE of Colorado Holdings LLC, PW CO CanRE Mav 5 LLC, PW CO CanRE Mav 14 LLC, PW CO CanRE Sherm 6 LLC, PW ME CanRE SD LLC, PW CO CanRE Tam 7 LLC, PW CO CanRE MF LLC, PW CO CanRE Tam 19 LLC, PW CO CanRE Grail LLC, PW CO CanRE Apotheke LLC, PW CA CanRE Canndescent LLC, PW CO CanRE Gas Station LLC, PW CO CanRE Cloud Nine LLC, PW CO CanRE Walsenburg LLC, PW CanRE OK Vinita LLC, PW CO CanRE JKL LLC, PW MI CanRE Marengo LLC, PW CanRE Holdings LLC, and PW MillPro NE LLC.
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.
We are exposed to risks inherent in this sort of investment concentration. Financial difficulty or poor business performance on the part of any single lessee or a default on any single lease will expose us to a greater risk of loss than would be the case if we were more diversified and holding numerous investments, and the underperformance or non-performance of any of its assets may severely adversely affect our financial condition and results from operations. Our lessees could seek the protection of bankruptcy, insolvency or similar laws, which could result in the rejection and termination of our lease agreements and could cause a reduction in our cash flows. Furthermore, we intend to concentrate our investment activities in the CEA sector, which will subject us to more risks than if we were diversified across many sectors. At times, the performance of the infrastructure sector may lag the performance of other sectors or the broader market as a whole.
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If our acquisitions or our overall business performance fail to meet expectations, the amount of cash available to us to pay dividends may decrease and we could default on our loans, which are secured by collateral in our properties and assets.
We may not be able to achieve operating results that will allow us to pay dividends at a specific level or to increase the amount of these dividends from time to time. Also, restrictions and provisions in any credit facilities we enter into or any debt securities we issue may limit our ability to pay dividends. We cannot assure you that you will receive dividends at a particular time, or at a particular level, or at all.
PW Regulus Solar, LLC (“PWRS”), one of our subsidiaries, entered into the 2015 PWRS Loan Agreement (as defined below) that is secured by all of PWRS’ interest in the land and intangibles. As of September 30, 2023, the balance of the 2015 PWRS Loan was approximately $6,965,000 (net of unamortized debt costs of approximately $241,000). PWSS, one of our subsidiaries, borrowed $750,000 from a regional bank which loan is secured by PWSS’ real estate assets and is secured by a parent guarantee from the Trust. The balance of the PWSS term loan as of September 30, 2023 is approximately $465,000 (net of approximately $0 of capitalized debt costs which are being amortized over the life of the financing). PW PWV Holdings LLC (“PWV”), one of our subsidiaries, entered into a Loan Agreement in the amount of $15,500,000 that is secured by our equity interest in our subsidiary PWV which is pledged as collateral. The balance of the loan as of September 30, 2023 is $14,463,000 (net of approximately $278,000 of capitalized debt costs). PW CanRE entered into a Debt Facility with initial availability of $20 million. The facility is non-recourse to Power REIT and is structured without initial collateral but has springing liens to provide security against a significant number of Power REIT CEA portfolio properties in the event of default. A modification occurred on March 13, 2023 (see Note 6). As of September 30, 2023, $16,000,000 was drawn on the Debt Facility. As of September 30, 2023, PW CanRE Holdings is not in compliance with all loan covenants and is current with respect to required payments. If we should fail to generate sufficient revenue to pay our outstanding secured debt obligations, the lenders could foreclose on the security pledged. In addition, Maryland law prohibits the payment of dividends if we are unable to pay our debts as they come due.
We must raise additional capital or sell or lease additional properties to fund our operations in order to continue as a going concern.
As of September 30, 2023, we had an accumulated deficit of $23.8 million. For the nine months ended September 30, 2023, we had a net loss of $12.6 million. Although we believe we will have sufficient cash on hand to fund our ongoing operations in the short term, including for one year from the filing of this Report, we need to raise further capital through the sale of additional equity or debt securities or other debt instruments, strategic relationships or grants, or sell additional properties, enter into new leases and improve collections from existing tenants to support our future operations and to meet our liquidity requirements beyond one year from the filing of this Report. Our ability to continue as a going concern is dependent upon our ability to generate revenue and raise capital from financing transactions or sell properties. In addition, any foreclosure on any property held by any of our subsidiaries, such as the Debt Facility that PW CanRe, LLC Holdings entered into that is currently in default, will result in a loss of revenue from such foreclosed property and negatively impact our liquidity.
The issuance of securities with claims that are senior to those of our common shares, including our Series A Preferred Stock, may limit or prevent us from paying dividends on its common shares. There is no limitation on our ability to issue securities senior to the Trust’s common shares or incur indebtedness.
Our common shares are equity interests that rank junior to our indebtedness and other non-equity claims with respect to assets available to satisfy claims against us, and junior to our preferred securities that by their terms rank senior to our common shares in our capital structure, including our Series A Preferred Stock. As of September 30, 2023, we had outstanding debt in the principal amount of $38.4 million and have raised approximately $9 million from sales of our Series A Preferred Stock. This debt and these preferred securities rank senior to the Trust’s common shares in our capital structure. We expect that in due course we may incur more debt, and issue additional preferred securities as we pursue our business strategy.
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In the case of indebtedness, specified amounts of principal and interest are customarily payable on specified due dates. In the case of preferred securities, such as our Series A Preferred Stock, holders are provided with a senior claim to distributions, according to the specific terms of the securities. In contrast, however, in the case of common shares, dividends are payable only when, as and if declared by the Trust’s board of trustees and depend on, among other things, the Trust’s results of operations, financial condition, debt service requirements, obligations to pay distributions to holders of preferred securities, such as the Series A Preferred Stock, other cash needs and any other factors that the board of trustees may deem relevant or that they are required to consider as a matter of law. The incurrence by the Trust of additional debt, and the issuance by the Trust of additional preferred securities, may limit or eliminate the amounts available to the Trust to pay dividends on our Series A Preferred Stock and common shares.
From time to time, our management team may own interests in our lessees or other counterparties, and may thereby have interests that conflict or appear to conflict with the Trust’s interests.
On occasion, our management may have financial interests that conflict, or appear to conflict with the Trust’s interests. For example, four of Power REIT’s properties were leased by tenants in which Millennium Sustainable Ventures Corp., formerly Millennium Investment & Acquisition Company (ticker: MILC) has controlling interests. David H. Lesser, Power REIT’s Chairman and CEO, is also Chairman and CEO of MILC. MILC established cannabis cultivation projects in Colorado (through a loan), Oklahoma, and Michigan which are related to our May 21, 2021, June 11, 2021, and September 3, 2021 acquisitions and a food crop cultivation project in Nebraska related to our March 31, 2022 acquisition. Total rental income recognized for the nine months ended September 30, 2023 from the affiliated tenants in Colorado, Oklahoma, Michigan and Nebraska was $0. The above leases are currently in default and the Trust is evaluating the best path forward related thereto. Also, a portion of the property improvement budget for Sweet Dirt Lease Second Amendment, amounting to $2,205,000, would be supplied by IntelliGen Power Systems LLC which is owned by HBP, an affiliate of David Lesser, Power REIT’s Chairman and CEO. On January 23, 2023, the Sweet Dirt lease was amended to restructure the timing of rent payments but maintain the same overall yield and eliminate the funding of remaining capital improvements for the cogeneration project, which includes eliminating payments that were expected to be paid to IntelliGen, a related party. As of September 30, 2023, $1,102,500 had been paid to IntelliGen for equipment supplied.
Although our Declaration of Trust permits this type of business relationship and a majority of our disinterested trustees must approve, and in those instances did approve, Power REIT’s involvement in such transactions, in any such circumstance, there may be conflicts of interest between Power REIT on one hand, and MILC, IntelliGen, Mr. Lesser and his affiliates and interests on the other hand, and such conflicts may be unfavorable to us.
We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation, the loss of such assets would have a severe negative affect on our operations and liquidity.
We may maintain our cash assets at certain financial institutions in the U.S. in amounts that may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000. In the event of a failure of any financial institutions where we maintain our deposits or other assets, we may incur a loss to the extent such loss exceeds the FDIC insurance limitation, which could have a material adverse effect upon our liquidity, financial condition and our results of operations.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
None.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Mine Safety Disclosures.
Not Applicable.
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Item 5. Other Information.
None.
Item 6. Exhibits.
*Filed herewith
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-Q for the quarter ended September 30, 2023 to be signed on its behalf by the undersigned thereunto duly authorized.
| POWER REIT | |
| /s/ David H. Lesser | |
| David H. Lesser | |
| Chairman, CEO, CFO, Secretary and Treasurer | |
| Date: November 14, 2023 |
| 31 |
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14 AND 15d-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David H. Lesser, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q (this “Report”) of the registrant, Power REIT;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 14, 2023 | /s/ David H. Lesser |
| David H. Lesser | |
| Chairman of the Board, CEO, CFO, Secretary and Treasurer | |
| (Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. §1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Power REIT (the “registrant”) on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David H. Lesser, Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
| /s/ David H. Lesser | |
| David H. Lesser | |
| Chairman of the Board, CEO, CFO, Secretary and Treasurer | |
| (Principal Executive Officer and Principal Financial Officer) | |
| Date: November 14, 2023 |
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Statement of Financial Position [Abstract] | ||
| Preferred stock cumulative redeemable percentage | 7.75% | 7.75% |
| Temporary equity, par value | $ 25.00 | $ 25.00 |
| Temporary equity, shares authorized | 1,675,000 | 1,675,000 |
| Temporary equity, shares issued | 336,944 | 336,944 |
| Temporary equity, shares outstanding | 336,944 | 336,944 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 98,325,000 | 98,325,000 |
| Common stock, shares issued | 3,389,661 | 3,389,661 |
| Common stock, shares outstanding | 3,389,661 | 3,389,661 |
Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 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 | ||
GENERAL INFORMATION |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GENERAL INFORMATION | 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 $490,000 ($ 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 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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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:
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.
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.
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:
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 $, 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:
The following table provides a summary of the current estimate of future amortization of Intangible Assets for the subsequent years ending December 31:
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.
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.
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GOING CONCERN |
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Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | 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.
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ACQUISITION AND DISPOSITION |
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| Business Combination and Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACQUISITION AND DISPOSITION | 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.
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:
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DIRECT FINANCING LEASES AND OPERATING LEASES |
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| DIRECT FINANCING LEASES AND OPERATING LEASES | 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:
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LONG-TERM DEBT |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LONG-TERM DEBT | 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:
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:
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| IMPAIRMENT AND ASSET HELD FOR SALE | 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:
The Trust has aggregated and classified the assets and liabilities of seven properties (Canndescent, Walsenburg, Sweet Dirt, Vinita, Mav 14, Tam 4 and 5, Tam 13) as held for sale in the Trust’s Consolidated Balance Sheets as of September 30, 2023 and prior period comparative balance sheet as of as of December 31, 2022 and is recast to achieve comparability. The balance sheet as of December 31, 2022 also included the Tulare property which was sold during 2023 and therefore removed from the September 30, 2023 column. The assets and liabilities of assets held for sale were as follows:
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EQUITY AND LONG-TERM COMPENSATION |
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| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EQUITY AND LONG-TERM COMPENSATION |
Summary of Stock Based Compensation Activity
Power REIT’s 2020 Equity Incentive Plan (the “Plan”), which superseded the 2012 Equity Incentive Plan, was adopted by the Board on May 27, 2020 and approved by shareholders on June 24, 2020. It provides for the grant of the following awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) SARs; (iv) Restricted Stock Awards; (v) RSU Awards; (vi) Performance Awards; and (vii) Other Awards. The Plan’s purpose is to secure and retain the services of Employees, Directors and Consultants, to provide incentives for such persons to exert maximum efforts for the success of the Trust and to provide a means by which such persons may be given an opportunity to benefit from increases in value of the common stock through the granting of awards. As of September 30, 2023, the aggregate number of shares of common stock that may be issued pursuant to outstanding awards is currently which is subject to adjustment per the Plan.
Summary of Stock Based Compensation Activity – Options
On July 15, 2022, the Trust granted non-qualified stock options (“options”) to acquire shares of common stock at a price of $ to its independent trustees, officers and an employee. The term of each option is 10 years. The options vest over three years as follows: in a series of thirty-six (36) equal monthly installments measured from the Vesting Commencement Date on the same date of the month as the Vesting Commencement Date which is August 1, 2022.
The Trust accounts for share-based payments using the fair value method. The Trust recognizes all share-based payments in its financial statements based on their grant date fair values and market closing price, calculated using the Black-Scholes option valuation model.
The Trust uses historical data to estimate dividend yield and volatility and the “simplified method” as described in the SEC Staff Accounting Bulletin #110 to determine the expected term of the option grants. The risk-free interest rate for the expected term of the options is based on the U.S. treasury yield curve on the grant date. The Trust does not have historical data of forfeiture and used a 0% forfeiture rate in calculating unrecognized share-based compensation expense and will account for forfeitures as they occur. On January 31, 2023, options and on April 30, 2023, options were forfeited by an employee who is no longer employed by the Trust.
The summary of stock-based compensation activity for the nine months ended September 30, 2023, with respect to the Trust’s stock options, is as follows:
Summary of Activity – Options
The weighted average remaining term of the options is years.
Summary of Stock Based Compensation Activity – Restricted Stock
On July 15, 2022, the Trust granted shares of restricted stock to its officer ( shares) and independent trustees ( shares each). The restricted stock vests over months for the officer and quarterly over four quarters for the trustees and is valued based on the market price of the common stock on the grant date.
Summary of Activity - Restricted Stock
Stock-based Compensation
During the nine months ended September 30, 2023, the Trust recorded approximately $ of non-cash expense related to restricted stock and approximately $ of non-cash expense related to options granted compared to approximately $ of non-cash expense related to restricted stock and approximately $ of non-cash expense related to options for the nine months ended September 30, 2022. As of September 30, 2023, there was approximately $ of total unrecognized share-based compensation expense for restricted stock and approximately $ of total unrecognized share-based expense for options, which expense will be recognized through the third quarter of 2025. The Trust does not currently have a policy regarding the repurchase of shares on the open market related to equity awards and does not currently intend to acquire shares on the open market.
Preferred Stock Dividends
During the nine months ended September 30, 2023, the Trust accrued a total of approximately $490,000 of dividends to holders of Power REIT’s Series A Preferred Stock.
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RELATED PARTY TRANSACTIONS |
9 Months Ended |
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Sep. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | 9 – RELATED PARTY TRANSACTIONS
A wholly-owned subsidiary of Hudson Bay Partners, LP (“HBP”), an entity associated with the Trust’s CEO and Chairman of the Trust, David Lesser, provided the Trust and its subsidiaries with office space at no cost. Effective September 2016, the Board of Trustees approved reimbursing an affiliate of HBP $1,000 per month for administrative and accounting support based on a conclusion that it would pay more for such support from a third party. The amount paid was increased over time with the approval of the independent members of the Board of Trustees. Effective February 23, 2021, the monthly amount paid to the affiliate of HBP increased to $4,000. A total of $8,000 was paid pursuant to this arrangement during the nine months ended September 30, 2022 compared to $0 paid during the nine months ended September 30, 2023. During the first quarter of 2022, the Trust eliminated this recurring related party transaction and implemented payroll through Power REIT.
Power REIT has a relationship with Millennium Sustainable Ventures Corp., formerly Millennium Investment and Acquisition Company Inc. (“MILC’). David H. Lesser, Power REIT’s Chairman and CEO, is also Chairman and CEO of MILC. MILC, through subsidiaries or affiliates, established cannabis and food crop cultivation projects and entered into leases related to the Trust’s Oklahoma, Michigan and Nebraska properties and MILC is a lender to the tenant of one of the Trust’s Colorado properties. As of September 30, 2023, these properties are currently not operational and the Trust is evaluating alternatives related thereto. Total rental income recognized for the nine months ended September 30, 2023 from the tenants that are affiliated with MILC in Colorado, Oklahoma, Michigan and Nebraska was $0 compared to total rental income recognized for the nine months ended September 30, 2022 from the affiliated tenants in Colorado, Oklahoma, Michigan and Nebraska of $260,296, $125,695, $0 and $193,000 respectively.
Effective March 1, 2022, the Sweet Dirt Lease was amended (the “Sweet Dirt Lease Second Amendment”) to provide funding in the amount of $3,508,000 to add additional items to the property improvement budget for the construction of a Cogeneration / Absorption Chiller project to the Sweet Dirt Property. A portion of the property improvement budget, amounting to $2,205,000, will be supplied by IntelliGen Power Systems LLC (“IntelliGen”) which is owned by Hudson Bay Partners, LLC, an affiliate of David Lesser, Power REIT’s Chairman and CEO. On January 23, 2023, the Sweet Dirt lease was amended to restructure the timing of rent payments but maintain the same overall yield and eliminate the funding of remaining capital improvements for the cogeneration project, which includes eliminating payments that were expected to be paid to IntelliGen, a related party. As of September 30, 2023, $1,102,500 had been paid to IntelliGen for equipment supplied.
Under the Trust’s Declaration of Trust, the Trust may enter into transactions in which trustees, officers or employees have a financial interest, provided however, that in the case of a material financial interest, the transaction is disclosed to the Board of Trustees or the transaction shall be fair and reasonable. After consideration of the terms and conditions of the transaction with Hudson Bay Partners, IntelliGen Power Systems LLC and the lease transactions with subsidiaries and affiliates of MILC, the independent trustees approved such arrangements having determined such arrangement are fair and reasonable and in the interest of the Trust.
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CONTINGENCIES |
9 Months Ended |
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Sep. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| CONTINGENCIES | 10 – CONTINGENCIES
The Trust’s wholly-owned subsidiary, P&WV, is subject to various restrictions imposed by the Railroad Lease with NSC, including restrictions on share and debt issuance, including guarantees.
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SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 11 – SUBSEQUENT EVENTS
On November 1, 2023, a wholly owned subsidiary of Power REIT (“PW SD”) sold its interest in a cannabis related greenhouse cultivation facility located in Maine to an affiliate of its tenant. As previously announced, PW SD had entered into a Purchase and Sale Agreement related to this property that has been renegotiated based on current circumstances as part of proceeding towards closing. The total consideration was $4,787,000, of which $3,400,000 was paid in cash, $537,000 was paid in the form of the release of the security deposit held by PW SD and seller financing in the form of an $850,000 note with an 8.5% interest rate that will accrue until maturity on October 30, 2025. The note is secured by a second mortgage on the property and certain corporate and personal guarantees. Of the cash proceeds received from the Sweet Dirt sale, $1,642,187.50 was used to pay down the Debt Facility.
On October 2, 2023, PW CA CanRE Canndescent LLC (“PW Canndescent”) entered into a new -year lease with San Fernando Valley Patients Cooperative, LLC for the property in Desert Hot Springs, CA. The lease is personally guaranteed by the principals of the tenant. Upon execution of the lease, the tenant paid a non-refundable $25,000 to PW Canndescent for a 30-day due diligence period which allowed for the termination of the lease. The due diligence contingencies were waived and an additional $85,057 was received on November 2, 2023. Of the amount received, $67,492 represents a security deposit and the balance represents prepaid rent and other charges. The lease is a triple-net lease whereby the tenant is responsible for the common area expenses, insurance, property taxes and maintenance costs. The monthly rent is $18,476 beginning December 1, 2023 which increases to $45,721 on April 1, 2024 with annual 3% escalations. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash | 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:
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| Basis of Presentation | Basis of Presentation
These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
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| Principles of Consolidation | Principles of Consolidation
The accompanying consolidated financial statements include Power REIT and its wholly-owned subsidiaries. All intercompany balances have been eliminated in consolidation.
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| 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.
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| Real Estate Assets and Depreciation of Investment in Real Estate | 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:
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| Depreciation | 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.
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| Assets Held for Sale | 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.
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| Impairment of Long-Lived Assets | 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 $, respectively.
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| Revenue Recognition | 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.
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| Intangibles | 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:
The following table provides a summary of the current estimate of future amortization of Intangible Assets for the subsequent years ending December 31:
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| Net Investment in Direct Financing Lease – Railroad | 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%.
|
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| Fair Value | 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.
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.
|
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| Other Income | 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.
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| Other Assets | 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.
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| Other Liabilities | 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. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
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| SCHEDULE OF COMPUTATION OF BASIC AND DILUTED INCOME PER COMMON SHARE |
|
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| SCHEDULE OF INTANGIBLE ASSETS | The following table provides a summary of the Intangible Assets and Liabilities:
|
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| SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS | The following table provides a summary of the current estimate of future amortization of Intangible Assets for the subsequent years ending December 31:
|
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ACQUISITION AND DISPOSITION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE OF ASSETS DISPOSITION |
|
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| SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED | 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:
|
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DIRECT FINANCING LEASES AND OPERATING LEASES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct Financing Leases And Operating Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF MINIMUM FUTURE RENTALS ON NON- CANCELABLE OPERATION LEASES | 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:
|
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LONG-TERM DEBT (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LONG TERM DEBT | 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:
|
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IMPAIRMENT AND ASSET HELD FOR SALE (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF TRUSTS IMPAIRMENT EXPENSES | A summary of the Trust’s impairment expense for the nine months ended September 30, 2023 is below:
|
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| SCHEDULE OF ASSETS AND LIABILITIES OF ASSETS HELD FOR SALE |
|
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EQUITY AND LONG-TERM COMPENSATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF STOCK BASED COMPENSATION VALUATION ASSUMPTION OF ACTIVITY OPTIONS |
|
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| SCHEDULE OF SHARE BASED COMPENSATION STOCK OPTION ACTIVITY |
|
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| SCHEDULE OF SHARE BASED COMPENSATION RESTRICTED STOCK UNITS AWARD ACTIVITY |
Summary of Activity - Restricted Stock
|
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GENERAL INFORMATION (Details Narrative) |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
|
Jan. 06, 2023
USD ($)
|
Sep. 30, 2023
USD ($)
ft²
$ / shares
|
Dec. 31, 2022
USD ($)
|
|
| Area of land acquired | ft² | 2,211,000 | ||
| Gross proceeds | $ 2,500,000 | ||
| Property improvement | $ 1,550,000 | ||
| Percentage of redeemble perpetual preferred stock | 7.75% | 7.75% | |
| Minimum percentage of taxable income to be distributed to shareholders | 90.00% | ||
| Net operating loss | $ 24,500,000 | ||
| Series A Cumulative Redeemable Perpetual Preferred Stock [Member] | |||
| Redeemable preferred stock dividends | $ 490,000 | ||
| Dividends payable, amount per share | $ / shares | $ 0.484375 | ||
| Percentage of redeemble perpetual preferred stock | 7.75% |
SCHEDULE OF CONSOLIDATED STATEMENTS OF CASH FLOWS (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| 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 |
SCHEDULE OF COMPUTATION OF BASIC AND DILUTED INCOME PER COMMON SHARE (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Accounting Policies [Abstract] | ||||||||
| Net income (loss) | $ (10,022,736) | $ (2,191,439) | $ (339,046) | $ 582,970 | $ 944,928 | $ 997,880 | $ (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 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 | ||||
SCHEDULE OF INTANGIBLE ASSETS (Details) - PW Regulus Solar LLC [Member] - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Cost | $ 4,713,548 | |
| Accumulated Amortization 1/1/23 - 9/30/23 | 170,616 | $ 1,981,639 |
| Net Book Value | $ 2,561,293 |
SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS (Details) |
Sep. 30, 2023
USD ($)
|
|---|---|
| Accounting Policies [Abstract] | |
| 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 |
GOING CONCERN (Details Narrative) $ in Millions |
Sep. 30, 2023
USD ($)
|
|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Non-restricted cash available | $ 2.6 |
SCHEDULE OF FAIR VALUE OF ASSETS DISPOSITION (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of Equity Method Investments [Line Items] | ||
| Total real estate investments | $ 54,059,287 | $ 59,960,369 |
| Discontinued Operations, Disposed of by Sale [Member] | ||
| Schedule of Equity Method Investments [Line Items] | ||
| 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 |
SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED (Details) - PW MillPro NELLC [Member] |
Mar. 31, 2022
USD ($)
|
|---|---|
| Greenhouse [Member] | |
| Business Acquisition [Line Items] | |
| Land | $ 344,000 |
| Improvements (Greenhouses /Processing Facilities) | 8,794,445 |
| Total Assets Acquired | 9,138,445 |
| Housing Facility [Member] | |
| Business Acquisition [Line Items] | |
| Land | 19,520 |
| Improvements (Greenhouses /Processing Facilities) | 283,399 |
| Total Assets Acquired | $ 302,919 |
SCHEDULE OF MINIMUM FUTURE RENTALS ON NON- CANCELABLE OPERATION LEASES (Details) |
Sep. 30, 2023
USD ($)
|
|---|---|
| Land [Member] | |
| Property, Plant and Equipment [Line Items] | |
| 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 |
| Land Improvements [Member] | |
| Property, Plant and Equipment [Line Items] | |
| 2023 (3 months left) | |
| 2024 | |
| 2025 | |
| 2026 | |
| 2027 | |
| Thereafter | |
| Total |
SCHEDULE OF LONG TERM DEBT (Details) |
Sep. 30, 2023
USD ($)
|
|||
|---|---|---|---|---|
| Debt Disclosure [Abstract] | ||||
| 2023 (3 months remaining)* | $ 16,082,081 | [1] | ||
| 2024 | 1,165,932 | |||
| 2025 | 755,634 | |||
| 2026 | 797,628 | |||
| 2027 | 841,452 | |||
| Thereafter | 18,820,400 | |||
| Long term debt | $ 38,463,127 | |||
| ||||
SCHEDULE OF LONG TERM DEBT (Details) (Parenthetical) |
Sep. 30, 2023
USD ($)
|
|||
|---|---|---|---|---|
| Debt Disclosure [Abstract] | ||||
| Debt facility | $ 16,082,081 | [1] | ||
| Debt facility | $ 16,000,000 | |||
| ||||
SUMMARY OF TRUSTS IMPAIRMENT EXPENSES (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Long-Lived Assets Held-for-Sale [Line Items] | |||||
| Long-Lived Assets | $ 8,200,000 | $ 16,700,000 | |||
| Impairment Expense | $ 8,235,136 | 8,235,136 | |||
| Assets Held For Sale [Member] | |||||
| Long-Lived Assets Held-for-Sale [Line Items] | |||||
| Assets Held for Sale | 4,031,282 | ||||
| Long-Lived Assets | 4,203,854 | ||||
| Impairment Expense | $ 8,235,136 | ||||
SCHEDULE OF ASSETS AND LIABILITIES OF ASSETS HELD FOR SALE (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Land | $ 1,567,648 | $ 2,890,177 |
| Greenhouse cultivation and processing facilities, net of accumulated depreciation | 11,633,480 | 15,732,694 |
| Intangible lease asset, net of accumulated amortization | 146,121 | |
| Deferred rent receivable | 327,923 | |
| TOTAL ASSETS - Held for sale | 13,201,128 | 19,096,915 |
| Accounts payable | 71,502 | 143,827 |
| Tenant security deposits | 880,000 | 580,000 |
| Prepaid rent | 37,161 | |
| Accrued Property Tax | 285,579 | 168,794 |
| TOTAL LIABILITIES - Held for sale | $ 1,237,081 | $ 929,782 |
IMPAIRMENT AND ASSET HELD FOR SALE (Details Narrative) - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Non-cash impairment charges | $ 8.2 | $ 16.7 |
SCHEDULE OF STOCK BASED COMPENSATION VALUATION ASSUMPTION OF ACTIVITY OPTIONS (Details) |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Share-Based Payment Arrangement [Abstract] | |
| Expected Volatility | 63.00% |
| Expected Dividend Yield | 0.00% |
| Expected Term (in years) | 5 years 9 months 18 days |
| Risk Free Rate | 3.05% |
| Estimate of Forfeiture Rate | 0.00% |
SCHEDULE OF SHARE BASED COMPENSATION STOCK OPTION ACTIVITY (Details) - Share-Based Payment Arrangement [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
$ / shares
shares
| |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Number of Options, Beginning balance | shares | 205,000 |
| Weighted Average Exercise Price, Beginning balance | $ / shares | $ 13.44 |
| Aggregate intrinsic value, Beginning balance | $ | |
| Number of Options, Options Forfeited | shares | (7,500) |
| Weighted Average Exercise Price, Options Forfeited | $ / shares | $ 13.44 |
| Number of Options, Ending balance | shares | 197,500 |
| Weighted Average Exercise Price, Ending balance | $ / shares | $ 13.44 |
| Aggregate intrinsic value, Ending balance | $ | |
| Number of Options, Ending balance | shares | 76,806 |
| Weighted Average Exercise Price, Ending balance | $ / shares | $ 13.44 |
| Aggregate intrinsic value, Ending balance | $ |
SCHEDULE OF SHARE BASED COMPENSATION RESTRICTED STOCK UNITS AWARD ACTIVITY (Details) - Restricted Stock [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Number of Shares Restricted Stock, Beginning balance | shares | 28,182 |
| Weighted Average Grant Date Fair Value, Beginning balance | $ / shares | $ 21.64 |
| Number of Shares Restricted Stock, Plan Awards | shares | |
| Weighted Average Grant Date Fair Value, Plan Awards | $ / shares | |
| Number of Shares Restricted Stock, Restricted Stock Forfeited | shares | |
| Weighted Average Grant Date Fair Value, Restricted Stock Forfeited | $ / shares | |
| Number of Shares Restricted Stock, Restricted Stock Vested | shares | (11,425) |
| Weighted Average Grant Date Fair Value, Restricted Stock Vested | $ / shares | $ 24.19 |
| Number of Shares Restricted Stock, Ending balance | shares | 16,757 |
| Weighted Average Grant Date Fair Value, Ending balance | $ / shares | $ 19.90 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
Apr. 01, 2024 |
Dec. 01, 2023 |
Nov. 02, 2023 |
Nov. 01, 2023 |
Oct. 02, 2023 |
Mar. 13, 2023 |
Sep. 30, 2023 |
|---|---|---|---|---|---|---|---|
| Subsequent Event [Line Items] | |||||||
| Interest rate | 1.90% | ||||||
| Maturity date | Dec. 21, 2025 | ||||||
| PW CA Canndescent, LLC [Member] | Forecast [Member] | |||||||
| Subsequent Event [Line Items] | |||||||
| Payments for Rent | $ 45,721 | $ 18,476 | |||||
| Rental payments annual increased percentage | 3.00% | ||||||
| Subsequent Event [Member] | PW CA Canndescent, LLC [Member] | |||||||
| Subsequent Event [Line Items] | |||||||
| Lessee, Operating Lease, Term of Contract | 5 years | ||||||
| Non refundable deposit | $ 85,057 | $ 25,000 | |||||
| Lessee operating lease due diligence period | 30 days | ||||||
| Subsequent Event [Member] | Purchase and Sale Agreement [Member] | |||||||
| Subsequent Event [Line Items] | |||||||
| Total consideration | $ 4,787,000 | ||||||
| Paid in cash | 3,400,000 | ||||||
| Security deposit | 537,000 | ||||||
| Note | $ 850,000 | ||||||
| Interest rate | 8.50% | ||||||
| Maturity date | Oct. 30, 2025 | ||||||
| Cash proceeds from sale of assets | $ 1,642,187.50 |
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