UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 21, 2021 (February 4, 2021)
POWER REIT
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation)
001-36312
(Commission File Number)
45-3116572
(IRS Employer Identification No.)
301 Winding Road
Old Bethpage, NY 11804
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code: (212) 750-0371
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| Common Shares | PW | NYSE (American) |
| 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock, Liquidation Preference $25 per Share | PW.A | NYSE (American) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. [ ]
Explanatory Note
On February 4, 2021 Power REIT (“Power REIT” or the “Trust”), announced that on February 3, 2021, through a wholly-owned subsidiary of the Trust, it closed on the acquisition of a 37,000 square foot property located in Riverside County, CA (the “Property”) and received an assignment of a lease (the “Lease”) with Fiore Management LLC d.b.a. Canndescent (the “Tenant”).
This Current Report on Form 8-K/A amends Item 9.01 of the original Form 8-K filed on February 4, 2021 to present the audited historical financial statements and the unaudited pro forma financial information required to be filed by Item 9.01 (a) and (b), for the Trust’s acquisition of the Canndescent Property.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The audited statement of revenue and certain operating expenses of the greenhouse cultivation facility located in Riverside County, California (“the Property”) for the year ended December 31, 2020, along with the accompanying notes to the statement of revenue and certain operating expenses for the year presented, are filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated by reference herein.
(b) Unaudited Pro Forma Financial Information
This Current Report on Form 8-K/A includes the Trust’s unaudited pro forma consolidated balance sheet as of December 31, 2020, the Trust’s unaudited pro forma consolidated statement of operations for the year ended December 31, 2020, the notes to the unaudited pro forma consolidated financial statements for those periods, and the unaudited pro forma statement of taxable operating results and cash to be made available by operations for the year ended December 31, 2020. This unaudited consolidated financial information is filed as Exhibit 99.2 to this Current Report on Form 8-K/A and is incorporated herein by reference.
This unaudited pro forma financial information is not necessarily indicative of the expected financial position or results of the Trust’s operations for any future period. Differences could result from numerous factors, including future changes in the Trust’s portfolio of investments, changes in interest rates, changes in the Trust’s capital structure, changes in property level operating expenses, changes in property level revenues, including rents expected to be received from the Trust’s existing leases or leases the Trust may enter into during and after 2020, and for other reasons.
(d) Exhibits.
Forward-Looking Statements
Some of the information in this press release contains forward-looking statements and 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. When used in this press release, words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may,” “target,” or similar expressions, are intended to identify such forward-looking statements. Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements include those discussed under the caption “Risk Factors” included in our Annual Report on Form 10-K for our fiscal year ended December 31, 2020, which was filed with the U.S. Securities and Exchange Commission (“SEC”), as well as in other reports that we file with the SEC.
Forward-looking statements are based on beliefs, assumptions and expectations as of the date of this press release. We disclaim any obligation to publicly release the results of any revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this press release.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: April 21, 2021 | POWER REIT | |
| By | /s/ David H. Lesser | |
| David H. Lesser | ||
| Chairman of the Board and Chief Executive Officer | ||
Exhibit 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
Power REIT
Opinion on the Financial Statements
We have audited the accompanying statement of revenue and certain operating expenses of the greenhouse cultivation facility located in Riverside County, California (the “Property”) for the year ended December 31, 2020, and the related notes to the financial statements (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the results of operations of the Property for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements were prepared for the purpose of complying with the provisions of Article 3-14 of Regulation S-X (for inclusion in this Form 8-K/A of Power REIT) and is not intended to be a complete presentation of the Property’s revenues and expenses.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Property’s auditor since 2021.
Houston, Texas
April 21, 2021
THE PROPERTY IN RIVERSIDE COUNTY, CALIFORNIA
STATEMENT OF REVENUE AND CERTAIN OPERATING EXPENSES
For the Year Ended December 31, 2020
|
Year Ended December 31, 2020 |
||||
| Revenue | ||||
| Rental revenue | $ | 1,029,045 | ||
| Total revenue | $ | 1,029,045 | ||
| Expenses | ||||
| Total expenses | $ | - | ||
| Revenue in excess of certain operating expenses | $ | 1,029,045 | ||
See accompanying notes to statement of revenue and certain operating expenses.
THE PROPERTY IN RIVERSIDE COUNTY, CALIFORNIA
NOTES TO STATEMENT OF REVENUE AND CERTAIN OPERATING EXPENSES
For the Year Ended December 31, 2020
(1) Organization
On February 3, 2021, Power REIT (the “Trust,” “our,” “we”) acquired a property located in Riverside County, CA (the “Canndescent Property”) through a newly formed wholly owned subsidiary (“PW Canndescent”) from, 13310 LMR2A LLC (“13310 LMR2A”, the “Seller”). The purchase price was $7.685 million which was paid for with $2.685 million of cash on hand and the issuance of 192,308 shares of Power REIT’s Series A Preferred Stock. PW Canndescent received an assignment of a lease (the “Canndescent Lease”) to allow the tenant, Fiore Management LLC d.b.a. Canndescent (“Canndescent”) to operate the 37,000 square foot greenhouse cultivation facility on the Canndescent Property. The Canndescent Lease requires Canndescent to pay all property related expenses including maintenance, insurance and taxes. The Canndescent Lease has a remaining lease term of 4.75 years with two options to extend for a term of five years each.
(2) Basis of Presentation
The accompanying statement of revenue and certain operating expenses (the “Historical Summary”) has been prepared for the purpose of complying with the provisions of Article 3-14 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations be included with certain filings with the SEC. The Historical Summary includes the historical revenues and operating expenses of the Canndescent Property, exclusive of depreciation and amortization expense, and other nonrecurring owner specific expenses, which may not be comparable to the corresponding amounts reflected in the future operations of the Seller.
In the opinion of management, all adjustments necessary for a fair presentation of such Historical Summary have been included. Such adjustments consisted of normal recurring items. Management is not aware of any material factors during the year ended December 31, 2020 that would cause the reported financial information not to be indicative of future operating results.
(3) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(4) Significant Accounting Policies
Revenue Recognition
The Canndescent Property’s operations consist of rental revenue earned under the leases of the greenhouse building which provide for noncontingent annual rent escalations.
Rental revenue for the leases is recognized by amortizing the aggregate lease payments on a straight-line basis over the terms of the leases. The leases are accounted for as operating leases.
(5) Rental Revenue
The aggregate annual minimum cash to be received on the lease as of December 31, 2020, is as follows for the subsequent years ended December 31:
|
Future Minimum Base Rent Payments |
||||
|
As of December 31 |
||||
| 2021 | $ | 1,054,950 | ||
| 2022 | 1,076,049 | |||
| 2023 | 1,081,349 | |||
| 2024 | 1,081,349 | |||
| 2025 | 811,012 | |||
| $ | 5,104,709 | |||
Exhibit 99.2
Power REIT
Overview to Pro Forma Consolidated Financial Statements
Power REIT (the “Trust,” “our,” “we”) is a Maryland real estate investment trust that owns a portfolio of real estate assets related to transportation, energy infrastructure, and Controlled Environment Agriculture (“CEA”) that is engaged primarily in acquiring and investing in net lease CEA properties in the United States.
The accompanying unaudited pro forma consolidated financial statements have been derived from our historical audited consolidated financial statements. The unaudited pro forma consolidated balance sheet as of December 31, 2020 is presented to reflect pro forma adjustments as if the Trust’s acquisition on February 3, 2021 of the Canndescent Property was completed on December 31, 2020. The unaudited pro forma consolidated statement of operations for the twelve months ended December 31, 2020 are presented as if the Trust’s acquisition of the Canndescent Property on February 3, 2021 was completed on January 1, 2020.
The following unaudited pro forma consolidated financial statements should be read in conjunction with (i) our historical audited consolidated financial statements as of December 31, 2020 (ii) our audited consolidated financial statements for the twelve months ended December 31, 2020, (iii) the “Forward-Looking Statements” section contained in those filings, and (iv) the “Risk Factors” sections contained in those filings.
We have based the unaudited pro forma adjustments on available information and assumptions that we believe are reasonable. The following unaudited pro forma consolidated financial statements are presented for informational purposes only and are not necessarily indicative of what our actual consolidated financial position would have been as of December 31, 2020 assuming the transactions and adjustments reflected therein had been consummated on December 31, 2020 and what our actual consolidated results of operations would have been for the twelve months ended December 31, 2020 assuming the transactions and adjustments reflected therein had been completed on January 1, 2020, and additionally are not indicative of our consolidated future financial condition, results of operations, or cash flows, and should not be viewed as indicative of our future consolidated financial condition, results of operations, or cash flows.
Power REIT
Pro Forma Consolidated Balance Sheet
(unaudited)
| As of December 31, 2020 | ||||||||||||
|
Pro Forma Adjustments: |
||||||||||||
| Historical (a) | Canndescent Property | Pro Forma | ||||||||||
| ASSETS | ||||||||||||
| Land | $ | 8,333,040 | $ | 258,420 | (b) | $ | 8,591,460 | |||||
| Greenhouse cultivation and processing facilities, net of accumulated depreciation | 10,305,979 | 7,518,869 | (b) | 17,824,848 | ||||||||
| Greenhouse cultivation and processing facilities - construction in progress | 2,087,086 | - | 2,087,086 | |||||||||
| Net investment in direct financing lease - railroad | 9,150,000 | - | 9,150,000 | |||||||||
| Total real estate assets | 29,876,105 | 7,777,289 | 37,653,394 | |||||||||
| Cash and cash equivalents | 5,601,826 | (2,630,683 | )(c) | 2,971,143 | ||||||||
| Prepaid expenses | 89,345 | - | 89,345 | |||||||||
| Intangible assets, net of accumulated amortization | 3,352,313 | - | 3,352,313 | |||||||||
| Deferred rent receivable | 1,602,655 | - | 1,602,655 | |||||||||
| Other assets | 16,975 | - | 16,975 | |||||||||
| TOTAL ASSETS | $ | 40,539,219 | $ | 5,146,606 | $ | 45,685,825 | ||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Accounts payable | $ | 83,562 | $ | 46,598 | (b) | $ | 130,160 | |||||
| Accrued interest | 80,579 | - | 80,579 | |||||||||
| Deferred rent liability | 123,966 | - | 123,966 | |||||||||
| Tenant security deposits | 1,137,481 | 100,000 | 1,237,481 | |||||||||
| Accrued expenses and other liabilities | - | - | - | |||||||||
| Prepaid rent | 105,331 | - | 105,331 | |||||||||
| Current portion of long-term debt, net of unamortized discount | 605,272 | - | 605,272 | |||||||||
| Long-term debt, net of unamortized discount | 23,192,871 | - | 23,192,871 | |||||||||
| TOTAL LIABILITIES | 25,329,062 | 146,598 | 25,475,660 | |||||||||
| Series A 7.75% Cumulative Redeemable Perpetual Preferred Stock Par Value $25.00 (1,675,000 shares authorized; 144,636 issued and outstanding historical and 336,944 issued and outstanding pro forma) | 3,492,149 | 5,000,008 | (c) | 8,492,157 | ||||||||
| Commitments and Contingencies | - | - | - | |||||||||
| Equity: | ||||||||||||
| Common Shares, $0.001 par value (100,000,000 shares authorized; 1,916,139 shares issued and outstanding historical and pro forma) | 1,916 | - | 1,916 | |||||||||
| Additional paid-in capital | 12,077,054 | - | 12,077,054 | |||||||||
| Accumulated deficit | (360,962 | ) | - | (360,962 | ) | |||||||
| Total Equity | 11,718,008 | - | 11,718,008 | |||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 40,539,219 | $ | 5,146,606 | $ | 45,685,825 | ||||||
The accompanying notes are an integral part of this unaudited pro forma consolidated financial statement.
Power REIT
Pro Forma Consolidated Statement of Operations
(unaudited)
| Twelve Months Ended December 31, 2020 | ||||||||||||||||||||
|
Historical (a) |
Previously Disclosed Acquisitions (b) |
Historical plus Previously Disclosed Acquisitions |
Canndescent Property Pro Forma |
Pro Forma | ||||||||||||||||
| REVENUE | ||||||||||||||||||||
| Lease income from direct financing lease – railroad | $ | 915,000 | - | $ | 915,000 | - | 915,000 | |||||||||||||
| Rental income | 3,283,324 | 1,634,595 | 4,917,919 | 1,075,306 | (c) | 5,993,225 | ||||||||||||||
| Other income | 74,385 | - | 74,385 | - | 74,385 | |||||||||||||||
| TOTAL REVENUE | 4,272,709 | 1,634,595 | 5,907,304 | 1,075,306 | 6,982,610 | |||||||||||||||
| EXPENSES | ||||||||||||||||||||
| Amortization of intangible assets | 237,140 | - | 237,140 | - | 237,140 | |||||||||||||||
| General and administrative | 527,818 | - | 527,818 | - | 527,818 | |||||||||||||||
| Property taxes | 27,515 | - | 27,515 | - | 27,515 | |||||||||||||||
| Depreciation expense | 141,720 | 5,699 | 147,419 | 371,329 | (d) | 518,748 | ||||||||||||||
| Interest expense | 1,166,642 | - | 1,166,642 | - | 1,166,642 | |||||||||||||||
| TOTAL EXPENSES | 2,100,835 | 5,699 | 2,106,534 | 371,329 | 2,477,863 | |||||||||||||||
| NET INCOME | $ | 2,171,874.00 | 1,628,896 | 3,800,770 | 703,977 | 4,504,747 | ||||||||||||||
| Preferred Stock Dividends | (280,230 | ) | - | (280,230 | ) | (372,597 | ) | (652,827 | ) | |||||||||||
| NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | 1,891,644 | $ | 1,628,896 | $ | 3,520,540 | $ | 331,380 | $ | 3,851,920 | ||||||||||
| Income Per Common Share: | ||||||||||||||||||||
| Basic | $ | 0.99 | $ | 2.02 | ||||||||||||||||
| Diluted | 0.96 | 1.95 | ||||||||||||||||||
| Weighted Average Number of Shares Outstanding: | ||||||||||||||||||||
| Basic | 1,910,898 | 1,910,898 | ||||||||||||||||||
| Diluted | 1,973,383 | 1,973,383 | ||||||||||||||||||
| Cash dividend per Series A Preferred Share | $ | 1.94 | $ | 1.94 | ||||||||||||||||
The accompanying notes are an integral part of this unaudited pro forma consolidated financial statement.
Note 1 - Overview of Unaudited Pro Forma Financial Statements
The accompanying unaudited pro forma consolidated balance sheet and unaudited pro forma consolidated statement of operations for the Trust presents the pro forma impact of the acquisition of the Canndescent Property. The unaudited pro forma consolidated statement of operations have also been adjusted to reflect the pro forma results of operations of the facilities that the Trust acquired during the year ended December 31, 2020 reflecting the pro forma operations of these acquisitions from the period January 1, 2020 through the respective dates of acquisition (refer to the ‘Previously Disclosed Acquisitions” columns). On February 3, 2021, the Trust, through a wholly owned subsidiary, acquired the Canndescent Property and assumed the sellers’ interest, as lessor, in the Canndescent Lease. The Lease has a remaining term of approximately 4.75 years with two options to extend for a term of five years. The purchase price for the Canndescent Property was approximately $7.685 million which was paid for with $2.685 million cash on hand and the issuance of 192,308 shares of Power REIT’s Series A Preferred Stock with a fair value of $5,000,008.
Unaudited Pro Forma Consolidated Balance Sheet
The accompanying unaudited pro forma consolidated balance sheet assumes the acquisition was completed on December 31, 2020. Pro forma adjustments include only adjustments that give effect to events that are (1) directly attributable to the transaction and (2) factually supportable regardless of whether they have a continuing impact or are nonrecurring.
All pro forma adjustments are presented on the face of the accompanying unaudited pro forma consolidated balance sheet.
Unaudited Pro Forma Consolidated Statements of Operations
The accompanying unaudited pro forma consolidated statement of operations for the year ended December 31, 2020, assumes the acquisition of the Canndescent Property and all “Previously Disclosed Acquisitions” were completed on January 1, 2020 and the effect of all adjustments are computed through the end of the twelve-month period presented. Pro forma adjustments include only adjustments that give effect to events that are (1) directly attributable to the transaction, (2) expected to have a continuing impact on the registrant, and (3) factually supportable.
All pro forma adjustments are presented on the face of the accompanying unaudited pro forma consolidated statement of operations for the period presented.
Note 2 – Unaudited Pro Forma Consolidated Balance Sheet Adjustments
| (a) | This column represents the historical amounts contained in the Trust’s audited consolidated balance sheet as of December 31, 2020 as presented in its Form 10-K as of December 31, 2020. |
| (b) | Represents the preliminary fair value purchase price allocation of the assets acquired in connection with the acquisition of the Canndescent Property. This preliminary allocation of fair value can be subject to adjustment for recording an intangible associated with the assumed Lease. Included are capitalized acquisition costs of $92,289 related to the purchase. |
| (c) | Represents the following funding sources for the acquisition of the Canndescent Property: (1) $2,630,683 of cash available (2) 192,308 shares of the Trust’s Series A Preferred Stock (“PW.PRA”) based on the closing price at $26.00 per share on the date the property was acquired. |
Note 3 – Unaudited Pro Forma Consolidated Statement of Operations Adjustments
| (a) | This column represents the historical amounts contained in the Trust’s audited consolidated statement of operations for the year ended December 31, 2020 as presented in its Form 10-K for the year ended December 31, 2020. |
| (b) | This column presents the results of operations for acquisitions that were completed during the year ended December 31, 2020 as if the acquisitions occurred on January 1, 2020. The properties and facilities acquired and the related acquisition completion dates are listed in the table below: |
2020 Acquisitions:
| Land / Facility | Date Acquired | |
| Mav 14 Property | January 31, 2020 | |
| Sherm 6 Property | February 20, 2020 | |
| Mav 5 Property | March 19, 2020 | |
| Sweet Dirt 495 Property | May 15, 2020 | |
| Sweet Dirt 505 Property | September 17, 2020 | |
| Tam 7 Property | September 18, 2020 | |
| Monte Fiore Property | October 15, 2020 | |
| Tam 19 Property | December 4, 2020 |
| (c) | Represents rental revenue earned on the Canndescent Lease using the straight-line basis over the term of the lease. |
| (d) | Represents depreciation expense incurred on the greenhouse using an estimated remaining useful life of 20 years. |
Power REIT
Pro Forma Statement of Taxable Operating Results and Cash to
be Made Available by Operations
(unaudited)
The following represents an estimate of the taxable operating results and cash to be made available by operations of the Trust based upon the unaudited pro forma consolidated statement of operations for the year ended December 31, 2020. These estimated results do not purport to represent the results of operations for the Trust in the future and were prepared based on the assumptions outlined in the unaudited pro forma consolidated statement of operations, which should be read in conjunction with this statement.
| Net income attributable to common stockholders | $ | 3,851,920 | ||
| Net tax depreciation in excess of book depreciation | - | |||
| Net tax amortization in excess of book amortization | (59,784 | ) | ||
| Estimated taxable operating income | 3,792,136 | |||
| Adjustments: | ||||
| Depreciation expense | 518,748 | |||
| Amortization of intangible assets | 237,140 | |||
| Net tax amortization in excess of book amortization | 59,784 | |||
| Estimated cash to be made available from operations | $ | 4,607,808 |