UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September
30, 2012
333-177802
(Commission File Number)
POWER REIT
(Exact name of registrant as
specified in its charter)
Maryland
|
45-3116572
|
(State of Organization)
|
(I.R.S. Employer Identification
No.)
|
|
|
301 Winding Road, Old Bethpage,
NY
|
11804
|
(Address of principal executive
offices)
|
(Zip Code)
|
(212) 750-0373
(Registrant’s telephone number)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes
__X__ No _____
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site,
if any, every Interactive Data File required to be submitted and posted
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 and post such files).
Yes
__X__ No _____
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large
accelerated filer _____ Accelerated filer _____
Non-accelerated filer _____ Smaller reporting
company __X__
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
_____ No __X__
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
1,623,250
common shares of beneficial interest, $0.001 par value, outstanding at September
30, 2012.
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands)
(Unaudited)
|
|
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
Income
from Railroad Lease
|
|
$
229
|
|
$
229
|
|
$
686
|
|
$
686
|
General
& Administrative Expense
|
|
69
|
|
55
|
|
354
|
|
217
|
NSC
Litigation Expense
|
|
142
|
|
-
|
|
366
|
|
-
|
Net
Income
|
|
18
|
|
174
|
|
(33)
|
|
469
|
|
|
|
|
|
|
|
|
|
Earnings
Per Common Share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.01
|
|
$
0.11
|
|
$
(0.02)
|
|
$
0.29
|
Assuming
Dilution
|
|
0.01
|
|
0.11
|
|
(0.02)
|
|
0.29
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Shares Outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
1,623,250
|
|
1,623,250
|
|
1,623,250
|
|
1,592,137
|
Assuming
Dilution
|
|
1,628,321
|
|
1,623,250
|
|
1,635,660
|
|
1,592,137
|
|
|
|
|
|
|
|
|
|
Cash
dividend per common share
|
|
$0.10
|
|
$0.10
|
|
$0.30
|
|
$0.30
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
may not add due to rounding. The accompanying notes are an integral part of
these financial statements.
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
|
|
|
|
(Unaudited)
September 30,
2012
|
|
(Audited)
December 31,
2011
|
ASSETS
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
551
|
|
$
982
|
Deposits
|
|
40
|
|
-
|
Prepaid
Assets
|
|
89
|
|
3
|
Net
investment in railroad capital lease
|
|
9,150
|
|
9,150
|
TOTAL
ASSETS
|
|
$9,830
|
|
$
10,135
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Accounts
Payable
|
|
$
49
|
|
$
10
|
Dividends
Payable
|
|
165
|
|
|
Shareholders'
equity:
Shares
of beneficial interest, at $0.001 par value (1,623,250
shares
issued and outstanding as of 12/31/2011 and
9/30/2012,
respectively)
|
|
10,086
|
|
10,072
|
Retained
Earnings
|
|
(471)
|
|
53
|
Total
shareholders' equity
|
|
9,615
|
|
10,125
|
TOTAL
LIABILITIES AND
SHAREHOLDERS'
EQUITY
|
|
9,830
|
|
10,135
|
|
|
|
|
|
SHARES
OF BENEFICIAL INTEREST
|
|
|
|
|
Par
Value
|
|
$
0.001
|
|
$
0.001
|
Common
shares issued
|
|
1,623,250
|
|
1,623,250
|
Common
shares outstanding
|
|
1,623,250
|
|
1,623,250
|
|
|
|
|
|
|
Amounts
may not add due to rounding. The accompanying notes are an integral part of
these financial statements.
CONSOLIDATED STATEMENT OF CASH
FLOWS
(Dollars in Thousands)
(Unaudited)
|
|
|
Nine Months Ended
September 30,
|
|
|
2012
|
|
2011
|
CASH
FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net
Income
|
|
$
(33)
|
|
$
469
|
Deposits
|
|
(40)
|
|
-
|
Change
in Prepaid Assets
|
|
(86)
|
|
(13)
|
Change
in Accounts Payable
|
|
39
|
|
-
|
Non-Cash
Equity Compensation Expense
|
|
14
|
|
-
|
NET
CASH PROVIDED BY OPERATING ACTIVITIES
|
|
$(
106)
|
|
$
456
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
Dividends
Paid
|
|
(325 )
|
|
(476 )
|
Net
Proceeds from Financing
|
|
-
|
|
950
|
NET
CASH PROVIDED BY (USED IN)
FINANCING
ACTIVITIES
|
|
$
(325)
|
|
$
474
|
|
|
|
|
|
Net
increase (decrease) in Cash
|
|
(431)
|
|
930
|
Cash,
beginning of period
|
|
982
|
|
49
|
Cash,
end of period
|
|
$
551
|
|
$979
|
Amounts
may not add due to rounding. The accompanying notes are an integral part of
these financial statements.
Notes
to unaudited financial statements:
1.
General
Information
The
foregoing interim consolidated financial statements are unaudited but, in the
opinion of management, reflect all adjustments necessary for a fair
presentation of the results of operations for the interim periods presented. Power
REIT ("Registrant" or "Trust") has elected to be treated
for tax purposes as a real estate investment trust (REIT). It is the Trust's
policy to distribute at least 90% of its ordinary taxable income to its
shareholders to maintain its REIT corporate status. All adjustments are of a
normal recurring nature.
Power
REIT’s only current income generating asset is its ownership of its
wholly-owned subsidiary, Pittsburgh & West Virginia Railroad (“P&WV”),
which has leased the entirety of its railroad property to Norfolk Southern
Corporation (“NSC”) pursuant to a 99-year lease (the “Lease”). Pursuant to
the Lease, NSC pays base cash rent of $915,000 annually, payable in quarterly
installments. In addition, in accordance with the terms of the Lease, NSC reimburses
P&WV, in the form of additional rent, for certain taxes, governmental
charges and other costs of P&WV. Currently, lease payments received by P&WV
provide Power REIT with its sole source of consolidated operating cash flow.
2.
Summary
of Significant Accounting Policies
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Consolidation
. The accompanying unaudited
consolidated financial statements include Power REIT and its wholly-owned
subsidiary, P&WV. The financial statements have been prepared as if Power
REIT had been historically consolidated with P&WV during the prior
reporting periods. All intercompany balances and transactions have been
eliminated in consolidation.
Net
Investment in Railroad Capital Lease
.
P&WV’s net investment in capital lease, recognizing renewal options in
perpetuity, was estimated to have a current value of $9,150,000 assuming an
implicit interest rate of 10%.
Fair Value
. Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Trust measures its financial assets and liabilities in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
·
Level 1—valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds.
·
Level 2—valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third party pricing services for identical or comparable assets or liabilities.
·
Level 3—valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
In determining fair value, the Trust utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
The
carrying amounts of the Trust’s financial instruments, including cash and cash
equivalents, approximate fair value because of their relatively short maturity
schedules. Financial assets and liabilities carried at fair value on a
recurring basis were as follows:
September
30, 2012
($
in Thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
Cash
Equivalents
(1)
|
|
$
551
|
|
$ -
|
|
$ -
|
|
$ 551
|
Total
Assets at Fair Value
|
|
$
551
|
|
$ -
|
|
$ -
|
|
$ 551
|
___________
(1)
Comprises money market funds, which are included in Cash & Cash Equivalents
in the accompanying balance sheet
December
31, 2011
($
in Thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
Cash
Equivalents
(1)
|
|
$
982
|
|
$ -
|
|
$ -
|
|
$ 982
|
Total
Assets at Fair Value
|
|
$
982
|
|
$ -
|
|
$ -
|
|
$ 982
|
___________
(1)
Comprises money market funds, which are included in Cash & Cash Equivalents
in the accompanying balance sheet
For
financial assets that utilize Level 1 inputs, the Trust utilizes both direct
and indirect observable price quotes, including quoted market prices (Level 1
inputs).
Prepaid
Assets.
The Trust
records a prepaid asset for expenses that are expect to provide the Trust with
benefits over a period of one year or longer. During the second quarter, the
Trust recorded a prepaid asset of approximately $45,000 related to its shelf-offering
on Form S-3 and a prepaid asset of $30,000 related to capitalization of
expenses related to a potential line of credit agreement. The costs related to
the line of credit, if consummated, will be amortized using the straight-line method,
which approximates the effective interest method. The Trust expects to
amortize the shelf-offering expenses proportionately upon each draw upon the
Form S-3 registration statement (See Footnote 3).
Deposits.
During the first
quarter of 2012, Power REIT placed a $15,000 deposit on a parcel of land that
is intended to be developed as an energy park. If acquired and fully
developed, the energy park is expected to increase cash-flow
available
to the Registrant through additional lease payments. In addition, Power REIT
has placed a $25,000 deposit with a bank to finance acquisitions. Power REIT
is in the process of negotiating the final terms and documentation of the line
of credit and there can be no assurance that the financing will be consummated.
3.
Shelf
Offering on Form S-3
On May 11, 2012 the Securities and Exchange Commission (SEC) declared effective Power REIT’s $100 million shelf registration statement on Form S-3. Under the Form S-3, the Company may from time to time issue any combination of common equity or common equity linked securities (warrants, options or units) in any amounts up to an aggregate of $100 million. The net proceeds of offerings are intended to be used to fund working capital and expenses of Power REIT and new acquisitions consistent with Power REIT’s business plan. As of the date of this report, the Company has not issued any securities and does not have any immediate plans to issue securities pursuant to the Form S-3. The terms of any offering of securities made pursuant to the shelf registration statement will be determined at the time of the offering and disclosed in a prospectus supplement filed with the SEC and distributed to prospectus investors.
4.
Long-term Compensation
The company grants awards pursuant to its 2012 Equity Incentive Plan (“Plan”), which was approved at the company’s 2012 annual shareholder meeting. The Plan provides for grants of stock options, restricted stock, stock appreciation rights (“SARs”) and other equity incentive awards to employees, officers and other persons providing services to us and our subsidiaries, including outside directors. Common stock may be awarded under the Plan until it is terminated or until the ten-year anniversary of the Plan. During the third quarter, 30,000 shares of restricted common stock and options to acquire 166,000 shares of common stock were granted. As of September 30, 2012, 4,000 common shares remain authorized and available for issuance.
Summary of Activity
The summary of Plan activity for the nine months ended September 30, 2012, with respect to our stock options, was as follows:
|
|
Options Outstanding
|
|
|
Number of
Options
|
|
Weighted Average
Exercise Price
|
Balance at December 31, 2011
|
|
-
|
|
-
|
Plan Awards
|
|
166,000
|
|
7.96
|
Exercised
|
|
-
|
|
-
|
Forfeited
|
|
-
|
|
-
|
Balance as of September 30, 2012
|
|
166,000
|
|
7.96
|
Options Exercisable as of September 30, 2012
|
|
0
|
|
-
|
The summary of Plan activity for the nine months ended September 30, 2012, with respect to our restricted stock, was as follows:
|
|
Number of
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
Balance at December 31, 2011
|
|
-
|
|
-
|
Plan Awards
|
|
30,000
|
|
$7.96
|
Vested
|
|
-
|
|
-
|
Forfeited
|
|
-
|
|
-
|
Balance as of September 30, 2012
|
|
30,000
|
|
7.96
|
The term of each option granted during the third quarter is 10 years. Both the restricted stock and options vest over the service period as follows: 33 1/3% on the first-year anniversary of the grant, 33 1/3% on the second-year anniversary of the grant and 33 1/3% on the third-year anniversary of the grant. The company recognizes share-based payment expenses based on grant date fair values and market closing price. Restricted stock is valued based on the market price of common stock on the grant date. Options are valued using the binomial option pricing model using the following assumptions to estimate fair value:
Expected Volatility
|
|
21.38%
|
Expected Dividend Yield
|
|
4.99%
|
Expected Term (in years)
|
|
6.0
|
Risk Free Rate
|
|
0.79%
|
Estimate of Forfeiture Rate
|
|
10.0%
|
The company uses historical data to estimate dividend yield and volatility and the “simplified approach” as described in the SEC Staff Accounting Bulletin #107 and #110 to determine the expected term. 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 company does not have historical data of forfeiture, and as a policy, has used an estimate of the forfeiture rate in calculating unrecognized share-based compensation expense. Compensation expenses may be adjusted if the actual forfeiture rate differs from this assumption.
During the third quarter of 2012, the Trust recorded approximately $14,000 of non-cash expense related to restricted stock and options granted under the Plan. As of September 30, 2012 there was approximately $308,000 of total unrecognized share-based compensation expense, which expense will be recognized through August 2015, equating to a weighted average amortization period of 2.0 years from the issuance date.
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.
5.
Litigation
with Norfolk Southern Corporation and
Additional Rent owed to P&WV
Power
REIT and its wholly-owned subsidiary, P&WV, are currently in litigation
with NSC (and its sub-lessee) regarding, among other things, the treatment of sale
of P&WV property, reimbursement of P&WV’s legal expenses (as additional
rent under the lease), the interpretation of several lease provisions and
whether or not NSC is in default pursuant to the terms of the lease. P&WV
is actively seeking to protect its contractual rights under the lease including
the right to amounts owed to it from NSC. NSC has continued to make the base
rent payment during the pendency of the litigation. P&WV believes that its
primary exposure to the litigation is the cost of the litigation which P&WV
believes is recoverable under the terms of the lease.
P&WV
believes NSC is required to pay additional rent to P&WV, which additional
rent includes, among other things, P&WV’s legal expenses during the first
nine months of 2012 incurred in defending its contractual rights under the
lease. This amount is in addition to other amounts that are in dispute with NSC
related to the interpretation of the lease. Due to the uncertainty of the
current litigation, P&WV has expensed the litigation costs and has not
recorded other amounts that P&WV believes may be recoverable pending a
resolution of the litigation. Due to the uncertainties and risk related to
litigation, there can be no assurance that the litigation will result in a
favorable outcome to P&WV. The litigation was previously disclosed on
Power REIT’s annual report filed on Form 10-K with the SEC on March 28, 2012
and on current report filed on Form 8-K with the SEC on February 16, 2012.
Item
2. Management’s Discussion and Analysis of Financial Condition and Result of
Operations
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
Quarterly Report on Form 10-Q 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. 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 or achievements will likely differ from the anticipated results,
performance or achievements that are expressed or implied by our
forward-looking statements, and such difference might 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
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Power
REIT (the “Trust”) is a Maryland real-estate investment trust that is seeking
to acquire real-estate related to energy and transportation infrastructure.
Its business plan builds upon its current ownership of its wholly-owned
subsidiary, the Pittsburgh & West Virginia Railroad (“P&WV”).
P&WV
owns railroad property in Pennsylvania, West Virginia and Ohio that is leased
to Norfolk Southern Corporation (“NSC”) with a 99-year lease term, with
unlimited renewals on the same terms, absent a default by NSC. Base cash
rental is a fixed amount of $915,000 per year, paid quarterly, with no
provision for increase in such base rent during the term of the lease and any
renewal periods. Under the terms of the lease, NSC is obligated to pay
additional rent, some of which has historically been booked by NSC as an
indebtedness obligation to P&WV. Historically, this additional rent has
mostly consisted of an amount equal to the amount of deductions allowable to
P&WV, for tax purposes, for depreciation and amortization of P&WV’s
railroad property. In addition, NSC can elect to retain proceeds from its
sales of P&WV’s excess property that is no longer necessary or useful. Amounts
that are retained by NSC are booked as additional indebtedness to P&WV. The
amount, term and character of additional rent payments and the indebtedness
owed to P&WV is in dispute (See Part II, Item 1. Legal Proceedings).
According to records maintained by NSC that have been provided to P&WV, at
December 31, 2011 and 2010, the principal balance of indebtedness owed to
P&WV by Norfolk Southern was $16,249, 380 and $15,882,651, respectively,
not including any accrual of interest. Due to the pending litigation, which
should lead to a resolution of the amount, term and character of the
indebtedness, no values have been reported in the accompanying financial
statement.
Although
Power REIT currently derives 100% of its consolidated revenue and cash-flow
from its ownership of P&WV, Power REIT is seeking to diversify its investment
portfolio and is actively seeking to acquire additional investments. During
the first quarter of 2012, Power REIT placed a $15,000 deposit on a parcel of
land that is intended to be developed as an energy park. If acquired and fully
developed, the energy park is expected to increase cash-flow available to the Registrant.
In addition, Power REIT placed a $25,000 deposit with a bank related to a line
of credit, which could be used to finance additional acquisitions. There can
be no assurance that such financing will be consummated.
In comparing
the third quarter of 2012 with the preceding second quarter of 2012 and the third
quarter of 2011, revenues totaled $229,000, $229,000, and $229,000,
respectively. Net income was $18,000, (98,000) and $174,000 respectively. P&WV
incurred approximately $142,000 of litigation expenses related to the NSC
litigation during the third quarter and approximately $366,000 during the first
nine months of 2012. Although, P&WV may incur additional litigation
expenses in subsequent periods, which will impact GAAP results in those future
periods, management believes that the litigation expenses are reimbursable
under the lease as additional rent (See Part II, Item 1: LEGAL PROCEEDINGS).
The Trust's
cash outlays, other than dividend payments, are for general and administrative (G&A)
expenses, which includes, among other things, professional accounting and legal
fees, consultants, and trustee’s fees. P&WV’s property is maintained
entirely at NSC's expense pursuant to the lease. The Trust’s expenses
increased during the third quarter of 2012 compared to the second quarter of
2012 and third quarter of 2011 primarily due to litigation expenses of $142,000
in the third quarter and increased G&A and expenses related to the
expansion of the Trust’s business, including $14,000 of non-cash expenses
related to long-term, equity-based compensation.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
As a
smaller reporting company, we are not required to provide the information
required by this Item.
Item
4. Controls and Procedures
Management
is responsible for establishing and maintaining effective disclosure controls
and procedures. As of the end of the period covered by this report, the
Registrant carried out an evaluation under the supervision and with the
participation of the Registrant's management, including the Chief Executive
Officer and Secretary-Treasurer, of the effectiveness of the design and
operation of the disclosure controls and procedures pursuant to Rule 13a-15
under the Securities and Exchange Act of 1934, as amended. Based on that
evaluation, the Chief Executive Officer and Secretary-Treasurer have concluded
that the Registrant's disclosure controls and procedures are adequate and
effective to ensure that information required to be disclosed in the Registrant's
required SEC filings is recorded, processed, summarized and reported within the
time periods specified in the Commission's rules and forms.
There
have been no significant changes in the Registrant's internal controls or in
other factors that that could significantly affect internal controls subsequent
to the date the Registrant carried out its evaluation.
We
maintain a system of internal control over financial reporting that is designed
to provide reasonable assurance that our books and records accurately reflect
the transactions of the Registrant and that our policies and procedures are
followed. There have been no changes in our internal control over financial
reporting during the period covered by this report that have materially
affected, or are reasonable likely to materially affect such controls.
PART
II. OTHER INFORMATION
Item
1.
L
egal Proceedings
As
previously disclosed, Power REIT and its wholly-owned subsidiary, P&WV, are
currently in litigation with NSC, and its sub-lessee, Wheeling & Lake Erie
Railroad (“WLE”, and together with NSC, the “Litigants”). The case is pending
in Federal Court in Pittsburgh, PA. The Litigants initiated the litigation in
December 2011, seeking, among other things, a declaratory judgment that NSC was
not in default on the 99-year lease. The
litigation is currently in the active discovery phase. At this stage, limited
guidance on the outcome of the litigation can be provided by management,
although P&WV believes its
primary exposure to the litigation is the cost of the litigation.
The
litigation relates to, among other things, the treatment of sales of P&WV
property by NSC, the terms associated with payment of indebtedness owed to P&WV
by NSC, payment of additional rent pursuant to the lease (including legal
expenses related to P&WV’s enforcement of the lease terms), the
interpretation of several lease provisions and whether or not the lease is in
default.
In
addition to its answer to the Litigant’s claims, P&WV filed various counter
claims, including that the lease is in default and demands for various amounts
owed to P&WV by NSC. According to records maintained by NSC and P&WV’s
historical tax returns prepared by NSC, NSC owes P&WV more than $16
million. NSC has historically prepared P&WV’s tax returns (the last P&WV
tax return prepared by NSC was the 2010 tax return). P&WV retained an
independent accounting firm to prepare its 2011 tax returns. P&WV
believes the amount of indebtedness owed to P&WV is valid debt, and that
such debt is understated and does not include any accrual of interest, other rent
payments (not including the base rent) or other amounts owed pursuant to
provisions of the lease. Although the debt owed to P&WV is an asset and has
historically been recorded on P&WV’s tax returns as an asset by NSC, it has
not been included in P&WV’s GAAP financial statements. Due to the
uncertainty of the current litigation, including term of debt and amounts owed,
P&WV has expensed the litigation costs and has not recorded the amounts owed
to P&WV or other amounts that P&WV believes may be recoverable upon a
resolution of the litigation.
Although
the litigation is resulting in elevated legal expenses, management believes the
litigation is necessary to protect P&WV’s interest in its railroad asset and
in the substantial indebtedness owed to it and that continued pursuit of
P&WV’s counterclaims against NSC are in the best interests of P&WV.
There can be no assurance that P&WV will be successful in its
counterclaims.
The
litigation was previously disclosed on Power REIT’s annual report filed on Form
10-K with the SEC on March 28, 2012 and on current report filed on Form 8-K
with the SEC on February 16, 2012.
Item
1A. Risk Factors
The
Registrant's results of operations and financial condition are subject to
numerous risks and uncertainties described in its registration statement on Form
S-3/A dated May11, 2012, which risk factors are incorporated herein by
reference. You should carefully consider these risk factors in conjunction with
the other information contained in this report. Should any of these risks
materialize, the Registrant's business, financial condition and future
prospects could be negatively impacted.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3. Defaults Upon Senior Securities
Not
Applicable.
Item
4. Mine Safety Disclosures
Not
Applicable.
Item
5. Other Information
Not
Applicable.
Item
6. Exhibits
Exhibit
Number
Exhibit 1.1 The
Trust’s Reports on Form 8-K filed on February 16, 2012, March 9, 2012, April
13, 2012, May 7, 2012, May 15, 2012, June 14, 2012 and September 13, 2012 are
incorporated by reference.
Exhibit 1.2 The
Trust’s Annual Report on Form 10-K filed on March 28, 2012 is incorporated by
reference.
Exhibit 1.3 The
Trust’s Form S-3/A filed with the SEC on May 11, 2012 is incorporated by
reference.
Exhibit 31.1 Section
302 Certification for David H. Lesser
Exhibit 31.2 Section
302 Certification for Arun Mittal
Exhibit 32.1 Section
906 Certification for David H. Lesser and Arun Mittal.
Exhibit 101 Interactive
data files pursuant to Rule 405 of Regulation S-T, for the quarter ended September
30, 2012: (i) Consolidated Statement of Income, (ii) Consolidated Balance Sheet,
(iii) Consolidated Statement of Cash Flows, and (iv) Notes to the unaudited Consolidated
Financial Statements.
SIGNATURES
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 thereunto
duly authorized.
POWER
REIT
/s/David
H. Lesser
David
H. Lesser
Chairman
of the Board &
Chief
Executive Officer
Date:
November 14, 2012
/s/Arun
Mittal
Arun
Mittal
VP
Business Development,
Secretary
& Treasurer
Date:
November 14, 2012
Grafico Azioni Power REIT (AMEX:PW)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Power REIT (AMEX:PW)
Storico
Da Lug 2023 a Lug 2024