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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Principles of Consolidation

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

Income per Common Share

Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed similar to basic net income 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 Company’s options is computed using the treasury stock method.

The following table sets forth the computation of basic and diluted Income per Share:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019

Numerator:
Net Income	$	576,064		$	273,693		$	1,307,904		$	684,396
Preferred Stock Dividends		(70,058	)		(70,058	)		(210,174	)		(210,174	)
Numerator for basic and diluted EPS - income available to common Shareholders	$	506,006		$	203,635		$	1,097,730		$	474,222

Denominator:
Denominator for basic EPS - Weighted average shares		1,915,200			1,872,939			1,909,151			1,871,093
Dilutive effect of options		69,527			12,549			58,330			-
Denominator for diluted EPS - Adjusted weighted average shares		1,984,727			1,885,488			1,967,481			1,871,093

Basic income per common share	$	0.26		$	0.11		$	0.57		$	0.25
Diluted income per common share	$	0.25		$	0.11		$	0.56		$	0.25

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.

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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, deposits, 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, 2020 and December 31, 2019.