UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D. C. 20549



FORM
10-K



ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE
SECURITIES EXCHANGE ACT OF 1934



For
the fiscal year ended December 31, 2015



Commission
File Number: 000-54560



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)



Registrant’s
telephone number, including area code (212)750-0371



Securities
registered pursuant to Section 12(b) of the Act:



|Title
    of each class                                                                                                                                                       |  | Name
    of each exchange on which registered
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------
|Shares
    of Beneficial Interest, $0.001 par value                                                                                                                           |  | NYSE
    MKT                                 
|                                                                                                                                                                              |  |                                              
|7.75%
                                         Series A Cumulative Redeemable
        Perpetual
        Preferred Stock,
        Liquidation
        Preference $25 per Share |  | NYSE
    MKT                                 





Securities
Registered Pursuant to Section 12(g) of the Act: None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ]
No [X]



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ]
No [X]



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 requirement 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.



|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 Act).

Yes
[  ] No [X]



The
aggregate market value of the voting common equity of the Registrant held by non-affiliates as of June 30, 2015, the Registrant’s
most recently completed second fiscal quarter, was approximately $5,700,000, computed by reference to the closing price of the
Registrant’s shares of beneficial interest (“common shares” or “common stock”) on June 30, 2015
of $5.80. For purposes of this calculation, common shares held by persons who hold more than 5% of the outstanding shares and
shares held by executive officers and trustees have been excluded. This is not a determination of affiliate or executive officer
status for any other purpose. The Registrant has no non-voting common equity.



As
of March 28, 2016, there were 1,742,688 common shares outstanding and 144,636 Series A $25 par value Preferred Stock outstanding.



DOCUMENTS
INCORPORATED BY REFERENCE



Part
III of this annual report on Form 10-K incorporates by reference information in Registrant’s definitive proxy statement
to be filed with the Securities and Exchange Commission (the “SEC” or the “Commission”) within 120 days
after December 31, 2015.






















TABLE
OF CONTENTS



POWER
REIT AND SUBSIDIARIES



|             |              |                                                                                                                  |    | Page
|------------ | ------------ | ---------------------------------------------------------------------------------------------------------------- | -- | ----
|             |              |                                                                                                                  |    |     
|PART
    I   | Item
    1.  | Business                                                                                                         |    | 3   
|             |              |                                                                                                                  |    |     
|             | Item
    1A. | Risk
    Factors                                                                                                 |    | 4   
|             |              |                                                                                                                  |    |     
|             | Item
    1B. | Unresolved
    Staff Comments                                                                                    |    | 19  
|             |              |                                                                                                                  |    |     
|             | Item
    2.  | Properties                                                                                                       |    | 19  
|             |              |                                                                                                                  |    |     
|             | Item
    3.  | Legal
    Proceedings                                                                                            |    | 21  
|             |              |                                                                                                                  |    |     
|             | Item
    4.  | Mine
    Safety Disclosures                                                                                      |    | 23  
|             |              |                                                                                                                  |    |     
|PART
    II  | Item
    5.  | Market
    for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |    | 23  
|             |              |                                                                                                                  |    |     
|             | Item
    6.  | Selected
    Financial Data                                                                                      |    | 24  
|             |              |                                                                                                                  |    |     
|             | Item
    7.  | Management’s
    Discussion and Analysis of Financial Condition and Results of Operations                        |    | 24  
|             |              |                                                                                                                  |    |     
|             | Item
    7A. | Quantitative
    and Qualitative Disclosures about Market Risk                                                   |    | 29  
|             |              |                                                                                                                  |    |     
|             | Item
    8.  | Financial
    Statements and Supplementary Data                                                                  |    | 30  
|             |              |                                                                                                                  |    |     
|             | Item
    9.  | Changes
    in and Disagreements with Accountants on Accounting and Financial Disclosure                         |    | 30  
|             |              |                                                                                                                  |    |     
|             | Item
    9A. | Controls
    And Procedures                                                                                      |    | 30  
|             |              |                                                                                                                  |    |     
|             | Item
    9B. | Other
    Information                                                                                            |    | 31  
|             |              |                                                                                                                  |    |     
|PART
    III | Item
    10. | Directors,
    Executive Officers and Corporate Governance                                                       |    | 31  
|             |              |                                                                                                                  |    |     
|             | Item
    11. | Executive
    Compensation                                                                                       |    | 31  
|             |              |                                                                                                                  |    |     
|             | Item
    12. | Security
    Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |    | 31  
|             |              |                                                                                                                  |    |     
|             | Item
    13. | Certain
    Relationships and Related Transactions, and Director Independence                                    |    | 32  
|             |              |                                                                                                                  |    |     
|             | Item
    14. | Principal
    Accounting Fees and Services                                                                       |    | 32  
|             |              |                                                                                                                  |    |     
|PART
    IV  | Item
    15. | Exhibits,
    Financial Statement Schedules                                                                      |    | 32  
|             |              |                                                                                                                  |    |     
|             | SIGNATURES   |                                                                                                                  | 33





2







PART
I



Item
1. Business.



Power
REIT (the “Registrant” or the “Trust”, and together with its consolidated subsidiaries, “we”,
“us”, the “Company” or “Power REIT”, unless the context requires otherwise) is a Maryland-domiciled
real estate investment trust (a “REIT”) that holds, develops, acquires and manages real estate assets related to transportation
and energy infrastructure in the United States. Within the transportation and energy infrastructure sectors, Power REIT is focused
on making new acquisitions of real estate that are or will be leased to renewable energy generation projects, such as utility-scale
solar farms and wind farms, that have low or minimal technology risk.



The
Trust is structured as a holding company and owns its assets through four wholly-owned, special purpose subsidiaries that have
been formed in order to hold real estate assets, obtain financing and generate lease revenue. During 2015, the Trust dissolved
its wholly owned subsidiary, Power REIT Financo LLC, which was necessitated by a credit facility that was retired during 2015.
As of December 31, 2015, 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”) and approximately
601 acres of fee simple land leased to a number of solar power generating projects with an aggregate generating capacity of approximately
108 Megawatts (“MW”). Power REIT is actively seeking to expand its portfolio of real estate related to renewable energy
generation projects and is pursuing investment opportunities that qualify for REIT ownership within solar, wind, hydroelectric,
geothermal, transmission and other infrastructure projects.



P&WV
is a business trust organized under the laws of Pennsylvania for the purpose of owning railroad assets that are currently leased
to Norfolk Southern Railway (“NSC”) pursuant to a 99-year lease that became effective in 1964 and is subject to an
unlimited number of 99-year renewal periods under the same terms and conditions, including annual rent payments, at the option
of NSC (the “Railroad Lease”). P&WV’s assets consist of a railroad line of approximately 112 miles in length,
extending through Connellsville, Washington and Allegheny Counties in the Commonwealth of Pennsylvania, through Brooke County
in the State of West Virginia and through Jefferson and Harrison Counties in the State of Ohio, to Pittsburgh Junction in Harrison
County, Ohio. There are also branch lines that total approximately 20 miles in length located in Washington and Allegheny Counties
in Pennsylvania and Brooke County in West Virginia. NSC pays P&WV base cash rent of $915,000 per year, payable in quarterly
installments. In addition, Power P&WV believes NSC is obligated to pay additional rent and other amounts, which is the subject
of litigation. (See Item 3, Legal Proceedings).



PW
Salisbury Solar, LLC (“PWSS”) is a Massachusetts limited liability company that owns approximately 54 acres of land
located in Salisbury, Massachusetts that is leased to a 5.7 MW operational solar farm. Pursuant to the lease agreement, PWSS’
tenant is required to pay PWSS rent of $80,800 cash for the year December 1, 2012 to November 30, 2013, with a 1.0% escalation
in each corresponding year thereafter. Rent is payable quarterly in advance and is recorded by Power REIT for accounting purposes
on a straight-line basis. For each of the twelve months ended December 31, 2015 and 2014 rent has been recorded in the amount
of $89,494. At the end of the 22-year lease period, which commenced on December 1, 2011 (prior to being assumed by PWSS), the
tenant has certain renewal options, with terms to be mutually agreed upon.



PW
Tulare Solar, LLC (“PWTS”) is a California limited liability company that owns approximately 100 acres of land leased
to a five (5) solar farms, with an aggregate generating capacity of approximately 20MW, located near Fresno, California. The solar
farm tenants pay PWTS an aggregate annual rent of $157,500 cash, payable in advance and without escalation during the 25-year
term of the leases. At the end of the 25-year term, which commenced in March 2013 (prior to being assumed by PWTS), the tenants
have certain renewal options, with terms to be mutually agreed upon. For the years ended December 31, 2015 and 2014, PWTS recorded
rental income of $157,500 and $167,603, respectively.





3







PW
Regulus Solar, LLC (“PWRS”) is a California limited liability company that owns approximately 447 acres of land leased
to an operating solar project with an aggregate generating capacity of approximately 82 Megawatts in Kern County, California near
Bakersfield. PWRS’s lease was structured to provide it with initial quarterly rental payments until the solar farm achieved
commercial operation which occurred in November 11, 2014. During the primary term of the lease which extends for 20 years from
achieving commercial operations, PWRS will receive an initial annual rent of approximately $735,000 per annum which grows at 1%
per annum. The lease is a “triple net” lease with all expenses to be paid by the tenant. At the end of the primary
term of the lease, the tenants have certain renewal options with rent calculated as the greater of a minimum stated rental amount
or a percentage of the total project-level gross revenue. The acquisition price, not including transaction and closing costs,
was approximately $9.2 million. For the twelve months ended December 31, 2015 and 2014, PWRS recorded rental income of $803,136
and $570,983 respectively. The 2014 rent recorded is from April 14, 2014 (the date of closing on the acquisition).



The
Company’s revenue is highly concentrated, with lease payments from the lessee of P&WV and PWRS assets representing approximately
47% and 41%, respectively, of the Company’s consolidated revenues for the year ended December 31, 2015.



Mr.
David H. Lesser serves as a member and Chairman of our Board of Trustees. He also serves as our Chief Executive Officer, Secretary
and Treasurer. Currently, Power REIT has no other officers or employees. As Power REIT’s business grows, the Company will
from time to time evaluate its staffing and third party service provision needs and adjust its staffing and third party service
arrangements as necessary.



During
the year ended December 31, 2015, the Trust paid a dividends of approximately $280,000 ($0.48375 per share per quarter for a total
of $1.935 per share total) on Power REIT’s 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.



Power
REIT was formed as part of a reorganization and reverse triangular merger of P&WV that closed on December 2, 2011. P&WV
survived the reorganization as a wholly-owned subsidiary of the Registrant.



Power
REIT 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 Power
REIT to maintain its REIT qualification, at least 90% of its ordinary taxable annual income must be distributed to shareholders.



Item
1A. Risk Factors.



An
investment in Power REIT’s securities involves significant risks. Anyone who is making an investment decision regarding
Power REIT’s securities should, before making that decision, carefully consider the following risk factors, together with
all of the other information included in, or incorporated by reference into, this document. Additional risks and uncertainties
not currently known to us or that we currently deem immaterial may also have a material adverse effect on our business, operations
and future performance. If any of the circumstances contemplated in the following risk factors were to occur, Power REIT’s
business, financial condition, results of operations and prospects could all be materially adversely affected. In any such case,
you could lose all or part of your investment.





4







Risks
Related to our Operations



Our
business strategy includes growth plans. Our financial condition and results of operations could be negatively affected if we
fail to grow or fail to manage our growth or investments effectively.



Power
REIT is pursuing a growth strategy focused on infrastructure properties that qualify as real estate for REIT purposes. Our prospects
must be considered in light of the risks, expenses and difficulties frequently encountered by companies in significant growth
stages of development. General and administrative expenses, including expenses related to tax, legal and audit have been high
and are expected to continue to be high, due to the complex organization of Power REIT, expenses related to growth and our litigation
matter more fully discussed below in this Risk Factors section and in Item 3, Legal Proceedings. We cannot assure you that we
will be able to expand our market presence in our existing markets or successfully enter new markets or that any such expansion
will not adversely affect our results of operations. Failure to manage potential transactions to successful conclusions, or failure
more generally to manage our growth effectively, could have a material adverse effect on our business, future prospects, financial
condition or results of operations and could adversely affect our ability to successfully implement our business strategy or pay
dividends.



Even
if we are able to execute our business strategy, that strategy may not be successful.



Even
if the Company is able to expand its business as it intends, its investments may not be successful due to a variety of factors,
including but not limited to asset under-performance, higher than forecast expenses, failure or delinquency on the part of the
Company’s lessees, changes in market conditions or other factors, any of which may result in lower returns than expected
and may adversely affect the Company’s financial condition, results of operations and ability to pay dividends.



We
operate in a highly competitive market for investment opportunities and we may be unable to identify and complete acquisitions
of real property assets.



We
compete with public and private funds, commercial and investment banks, commercial financing companies and public and private
REITs to make the types of investments that we plan to make in the U.S. infrastructure sector. Many of our competitors are substantially
larger and have considerably greater financial, technical and marketing resources than us. For example, some competitors may have
a lower cost of funds and access to funding sources that are currently not available to us. In addition, some of our competitors
may have higher risk tolerances or different risk assessments, allowing them to pay higher consideration, consider a wider variety
of investments and establish more effective relationships than us. Furthermore, many of our competitors are not subject to the
restrictions that our REIT status imposes on us. These competitive conditions could adversely affect our ability to make investments
in the infrastructure sector and could adversely affect our distributions to stockholders. Moreover, our ability to close transactions
will be subject to our ability to access financing within stipulated contractual time frames, and there is no assurance that we
will have access to such financing on terms that are favorable to us, if at all.





5







Because
we expect to distribute substantially all of our taxable income to our stockholders or lenders, we will continue to need additional
capital to make new investments. If additional funds are unavailable or not available on favorable terms, our ability to make
new investments will be impaired.



Because
we plan to distribute substantially all of our taxable income to our shareholders or lenders, our business will from time to time
require substantial amounts of new capital if we are to achieve our growth plans. We may acquire additional capital from the issuance
of securities senior to our common shares, including additional borrowings or other indebtedness, preferred shares (such as our
Series A Preferred Stock, which we have recently begun issuing) or the issuance of other securities. We may also acquire additional
capital through the issuance of additional common shares. However, we may not be able to raise additional capital in the future,
on favorable terms or at all. Unfavorable business, market or general economic conditions could increase our funding costs, limit
our access to capital markets or result in a decision by lenders not to extend credit to us.



To
the extent we issue debt securities, other instruments of indebtedness or additional preferred stock, or borrow additional money
from banks or other financial institutions, we will be additionally exposed to risks associated with leverage, including increased
risk of loss. If we issue additional preferred securities that rank senior to our common shares in our capital structure, the
holders of such preferred securities may have separate voting rights and other rights, preferences or privileges, economic and
otherwise, more favorable than those of our common shares, and the issuance of such preferred securities could have the effect
of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for common shareholders.



Any
inability to access additional financing on terms that are favorable to us may adversely affect our ability to grow and our business
generally.



The
Company’s investment portfolio is, and in the future may continue to be, concentrated in its exposure to a relatively few
number of investments, industries and lessees.



As
of December 31, 2015, the Company had four investments, consisting of its ownership of its four investment subsidiaries: P&WV,
PWSS, PWTS and PWRS. Payments from NSC to P&WV under the Railroad Lease represented approximately 47% and 52% of Power REIT’s
consolidated revenues in 2015 and 2014, respectively. Payments from PWRS’s tenant represented approximately 41% and 33%
of Power REIT’s consolidated revenues in 2015 and 2014. As the Company grows, its portfolio will likely still remain concentrated
in a limited number of investments for a substantial period of time.



The
Company is 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 the Company to a greater risk of loss than would
be the case if the Company were more diversified and holding numerous investments, and the underperformance or non-performance
of any of its assets may severely adversely affect the Company’s financial condition and results from operations. The Company’s
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 the Company’s cash flows. Furthermore, the Company intends to concentrate
its investment activities in the infrastructure sector, including energy and transportation, which will subject the Company to
more risks than if the Company 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.



In
addition, as more fully discussed below in this Risk Factors section and in Item 3, Legal Proceedings, P&WV and Power REIT
are currently in litigation with P&WV’s lessee, NSC, and NSC’s sub-lessee. The future outcome of this litigation
is uncertain. An unfavorable outcome could adversely affect the Company’s business.





6







The
Registrant and P&WV are in litigation with NSC, the lessee of P&WV’s assets, and with NSC’s sub-lessee. The
litigation involves various risks.



As
previously disclosed in its public filings with the SEC, the Trust and its wholly-owned subsidiary P&WV are in litigation
with NSC and NSC’s sub-lessee, Wheeling & Lake Erie Railroad (“WLE” and, together with NSC, the “Litigants”)
concerning matters arising under the Railroad Lease. The Litigants initiated the litigation against the Trust and P&WV in
December 2011, seeking, among other things, a declaratory judgment that NSC was not in default under the Railroad Lease.



On
January 26, 2016, Power REIT P&WV filed a Notice of Appeal to appeal the matter to the United States Court of Appeals for
the Third Circuit. We will incur significant costs related to pursuing the appeal. There can be no assurance that we will prevail
with respect to the appeal.



Furthermore,
the litigation constitutes a dispute with the Power REIT group’s highest-paying lessee. As of the fourth quarter of 2015,
NSC has continued to make its quarterly base rental payments ($228,750 per quarter), despite the pendency of the litigation. However,
there can be no assurance that NSC will continue to make its base rental payments.



In
addition to the foregoing risks, the perception of the litigation in the market or to Power REIT’s prospective business
or finance counterparties, whether or not accurate, could make it harder for us to source investment opportunities or obtain debt
or equity financing on terms that would otherwise be available, which in turn could constrain Power REIT’s ability to expand
its asset base, diversify its investments and grow and improve its business.



We
believe we have sufficient liquidity and access to financing to fund the litigation discussed above and our other operations and
expansion plans. However, if this were not to be the case, our business could be disrupted. We temporarily suspended dividend
payments on our common stock starting with the second quarter of 2013 which is likely to continue until the ongoing costs of the
litigation diminish. In order to fund the litigation, we could be required to continue this suspension for a substantial amount
of time, or reduce other cash outflows, or forego investment opportunities. Any such development could adversely affect our business
and our share prices.



We
may incur additional indebtedness, which may adversely affect our financial condition and limit our ability to pay dividends.



Our
governing documents do not limit us from incurring additional indebtedness and other liabilities. On a consolidated basis as of
December 31, 2015, we had approximately $11.1 million of indebtedness and other liabilities, a substantial portion of which is
secured. We may incur additional indebtedness and become more highly leveraged, which could harm our financial condition and potentially
limit our ability to pay dividends.



We
cannot assure you that we will be able to pay dividends regularly.



Our
ability to pay dividends is dependent on our available cash, our ability to operate profitably and our ability to generate sufficient
cash from our operations and distribute them up from our subsidiaries. We cannot guarantee that we will be able to pay dividends
on a regular basis.





7







If
our acquisitions or our overall business performance fail to meet expectations, the amount of cash available to us to pay dividends
may decrease.



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.



The
issuance of securities with claims that are senior to those of the common shares of the Company, including the Company’s
Series A Preferred Stock, may limit or prevent the Company from paying dividends on its common shares. There is no limitation
on the Company’s ability to issue securities senior to the Company’s common shares or incur indebtedness.



The
Company’s common shares are equity interests that rank junior to the Company’s indebtedness and other non-equity claims
with respect to assets available to satisfy claims against the Company, and junior to preferred securities of the Company that
by their terms rank senior to common shares in the Company’s capital structure, including the Series A Preferred Stock.
As of December 31, 2015, the Company has incurred debt in connection with its real estate acquisitions, and has issued approximately
$3.5 million of its Series A Preferred Stock. This debt and these preferred securities rank senior to the Company’s common
shares in the Company’s capital structure. The Company expects that in due course it may incur more debt, and issue additional
preferred securities, as it pursues its business strategy.



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 the Company’s 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 Company’s Board of Trustees and depend on, among other things, the Company’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 Company of additional debt, and the issuance by the Company
of additional preferred securities, may limit or eliminate the amounts available to the Company to pay dividends on its common
shares.



Our
ability to pay dividends is limited by the Maryland law.



Our
ability to pay dividends is limited by the laws of Maryland. Under applicable Maryland law, a Maryland real estate investment
trust generally may not make a distribution if, after giving effect to the distribution, the entity would not be able to pay its
debts as those debts come due in the usual course of business, or the entity’s total assets would be less than the sum of
its total liabilities plus (unless the entity’s charter provides otherwise) the amount that would be needed if the entity
were dissolved at the time of the distribution to satisfy the preferential rights upon dissolution of stockholders whose preferential
rights are superior to those receiving the distribution. Accordingly, we may not be able to make a distribution on our common
shares or Series A Preferred Stock if, after giving effect to the distribution, we would not be able to pay our debts as they
come due in the usual course of business or (in the case of our common shares) our total assets would be less than the sum of
our total liabilities plus the amount that would be needed to satisfy the preferential rights upon dissolution of the holders
of the Series A Preferred Stock, or (in the case of our Series A Preferred Stock), our total assets would be less than the sum
of our total liabilities plus the amount that would be needed to satisfy the preferential rights upon dissolution of the holders
of any outstanding securities with rights or preferences senior to those of the Series A Preferred Stock.





8







The
ability of the Registrant to service its obligations and pay dividends depends on the ability of its wholly-owned subsidiaries
to make distributions to it.



Because
the Registrant holds its assets through its wholly-owned subsidiaries, its ability to service its debt and other obligations,
and to pay dividends on its preferred and common shares, is dependent upon the earnings of those subsidiaries and their ability
to make distributions to the Registrant. To the extent any of the Registrant’s subsidiaries are ever unable, through operation
of law or otherwise, to make distributions to the Registrant, and as a result the Registrant is unable to service its debt or
other obligations or pay dividends, our business and the prices of our securities may be adversely affected. In addition, in such
circumstances, the Registrant may be forced to issue additional equity or debt, at unfavorable terms, in order to have the cash
on hand with which to maintain its compliance with Internal Revenue Service rules that require the Registrant to distribute 90%
of its taxable income to its shareholders or lose its REIT status. Or, if such equity or debt funding is unavailable, the Registrant
may lose its REIT status.



We
are dependent upon Mr. David H. Lesser for our success. On occasion, his interests may conflict with ours.



We
are dependent on the diligence, expertise and business relationships of our management team to implement our strategy of acquiring
and benefitting from the ownership of infrastructure-related real property assets. This is particularly true at the current time,
when we have only a single individual, David Lesser, comprising our management team. Were Mr. Lesser unable to function on behalf
of the Company, including in his roles as CEO and Chairman, the Company’s business and prospects would be adversely affected.
Moreover, Mr. Lesser has other business interests to which he dedicates a portion of his time that are unrelated to Power REIT.
Although Mr. Lesser is one of our major shareholders, on occasion, those other interests of his may conflict with his interests
in Power REIT, and such conflicts may be unfavorable to us.



In
addition, on occasion, Mr. Lesser may have financial interests that conflict, or appear to conflict, with the Company’s
interests. For example, an affiliate of Mr. Lesser’s has provided bridge funding for two of the Company’s acquisitions.
Although 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 Mr. Lesser
and his affiliates and interests on the other hand, and such conflicts may be unfavorable to us.



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 Company’s interests.



On
occasion, our management team may own interests in our lessees or other counterparties. Although our Declaration of Trust, as
amended, restated and supplemented (and which we occasionally refer to herein as our “charter”) permits this type
of business relationship and a majority of our disinterested trustees must approve any such transaction, in any such circumstance,
there may be conflicts of interest between Power REIT on one hand, and the relevant member or members of our management team on
the other hand, and these conflicts may be unfavorable to us.



Most
of our renewable energy lessees will likely be structured as special purpose vehicles, and therefore their ability to pay us is
expected to be dependent solely on the revenues of a specific project, without additional credit support.



Most
of our lessees will likely be structured as special purpose vehicles (“SPVs”), whose only source of cash flow will
be from the operations of a single energy facility. If the energy facility fails to perform as projected, the SPV lessee might
not have sufficient cash flow to make lease or interest payments to us. While we would expect the lenders or other parties connected
to such SPVs to step in and continue to make payments to us, there can be no assurance that such parties would do so, rather than,
for example, liquidating the facility. Further, if the facility materially underperforms or if energy supply contracts are cancelled,
there may be little value in such SPV lessees, and our investments in real estate relating to their facilities may become impaired.





9







Some
losses related to our real property assets may not be covered by insurance or indemnified by our lessees, and so could adversely
affect us.



Our
new leases will generally require our lessees to carry insurance on our properties against risks customarily insured against by
other companies engaged in similar businesses in the same geographic region, and to indemnify us against certain losses. However,
there are some types of losses, including catastrophic acts of nature, acts of war or riots, for which we or our lessees cannot
obtain insurance at an acceptable cost. If there is an uninsured loss or a loss in excess of insurance limits, we could lose the
revenues generated by the affected property and the capital we have invested in the property, assuming our lessee fails to pay
us the casualty value in excess of such insurance limit, if any, or to indemnify us for such loss. Nevertheless, in such a circumstance
we might still remain obligated to repay any secured indebtedness or other obligations related to the property. Any of the foregoing
could adversely affect our financial condition or results of operations.



Legislative,
regulatory, accounting or tax rules, and any changes to them or actions brought to enforce them, could adversely affect us.



We
and our lessees are subject to a wide range of legislative, regulatory, accounting and tax rules. The costs and efforts of compliance
with these laws, or of defending against actions brought to enforce them, could adversely affect us, either directly if we are
subject to such laws or actions, or indirectly if our lessees are subject to them.



In
addition, if there are changes to the laws, regulations or administrative decisions and actions that affect us, we may have to
incur significant expenses in order to comply, or we may have to restrict or change our operations. For example, changes to the
accounting treatment of leases by both lessors and lessees under accounting principles generally accepted in the United States
(“GAAP”) could change the presentation of information in our financial statements and as a result affect the perception
of our business and our growth plans. Changes to Internal Revenue Service interpretations of “real assets” or changes
to the REIT portion of the Internal Revenue Code could affect our plans, operations, financial condition and share price.



We
have invested, and expect to continue to invest, in real property assets, which are subject to laws and regulations relating to
the protection of the environment and human health and safety. These laws and regulations generally govern wastewater discharges,
noise levels, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment,
transportation and disposal of solid and hazardous materials and the remediation of contamination associated with disposals. Environmental
laws and regulations may impose joint and several liabilities on tenants, owners or operators for the costs to investigate and
remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. This liability
could be substantial. In addition, the presence of hazardous substances, or the failure to properly remediate these substances,
could adversely affect our ability to sell, rent or pledge an affected property as collateral for future borrowings. We intend
to take commercially reasonable steps when we can to protect ourselves from the risks of environmental law liability; however,
we will not obtain independent third-party environmental assessments for every property we acquire. In addition, any such assessments
that we do obtain may not reveal all environmental liabilities, or whether a prior owner of a property created a material environmental
condition not known to us. In addition, there are various local, state and federal fire, health, safety and similar regulations
with which we or our lessees may be required to comply, and that may subject us or them to liability in the form of fines or damages.
In all events, our lessees’ operations, the existing condition of land when we buy it, operations in the vicinity of our
properties or activities of unrelated third parties could all affect our properties in ways that lead to costs being imposed on
us.





10







Any
material expenditures, fines, damages or forced changes to our business or strategy resulting from any of the above could adversely
affect our financial condition and results of operations.



Changes
in interest rates may negatively affect the value of our assets, our access to debt financing and the trading price of our securities.



The
value of our investments in certain assets may decline if long-term interest rates increase. If interest rates were to rise from
their current historically low levels, it may affect the perceived or actual values of our assets and dividends, and consequently
the prices of our securities may decline.



Furthermore,
to the extent the Company has borrowed funds, a rise in interest rates may result in re-financing risk when those borrowings become
due, and the Company may be required to pay higher interest rates or issue additional equity to refinance its borrowings, which
could adversely affect the Company’s financial condition and results of operations.



Our
quarterly results may fluctuate.



We
could experience fluctuations in our quarterly operating results due to a number of factors, including variations in the returns
on our current and future investments, the interest rates payable on our debt, the level of our expenses, the levels and timing
of the recognition of our realized and unrealized gains and losses, the degree to which we encounter competition in our markets
and other business, market and general economic conditions. Consequently, our results of operations for any current or historical
period should not be relied upon as being indicative of performance in any future period.



We
may not be able to sell our real property assets when we desire. In particular, in order to maintain our status as a REIT, we
may be forced to borrow funds or sell assets during unfavorable market conditions.



Investments
in real property are relatively illiquid compared to other investments. Accordingly, we may not be able to sell real property
assets when we desire or at prices acceptable to us. This could substantially reduce the funds available for satisfying our obligations,
including any debt or preferred share obligations, and for distributions to our common shareholders.



As
a REIT, we must distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, to our shareholders.
To the extent that we satisfy the REIT distribution requirement but distribute less than 100% of our taxable income, we will be
subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible
excise tax if the actual amount that we pay to our shareholders in a calendar year is less than a minimum amount specified under
federal tax laws. In addition to applicable federal taxation, we may be subject to state taxation.



From
time to time, we may have taxable income greater than our cash flow available for distribution to our shareholders (for example,
due to substantial non-deductible cash outlays, such as capital expenditures or principal payments on debt). If we did not have
other funds available in these situations, we could be required to borrow funds, sell investments at disadvantageous prices or
find alternative sources of funds in order to make distributions sufficient to enable us to pay out enough of our taxable income
to satisfy the REIT distribution requirement and avoid income and excise taxes in a particular year. Any of these outcomes could
increase our operating costs and diminish our available cash flows or ability to grow.





11







We
may fail to remain qualified as a REIT, which would reduce the cash available for distribution to our shareholders and may have
other adverse consequences.



Qualification
as a REIT for federal income tax purposes is governed by highly technical and complex provisions of the Internal Revenue Code,
for which there are only limited judicial or administrative interpretations. Our qualification as a REIT also depends on various
facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative interpretations
and court decisions might all change the tax laws with respect to the requirements for qualification as a REIT or the federal
income tax consequences of qualification as a REIT.



If,
with respect to any taxable year, we were to fail to maintain our qualification as a REIT, we would not be able to deduct distributions
to our shareholders in computing our taxable income and would have to pay federal corporate income tax (including any applicable
alternative minimum tax) on our taxable income. If we had to pay federal income tax, the amount of money available to distribute
to our shareholders would be reduced for the year or years involved. In addition, we would be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification was lost and thus our cash available for distribution
to our shareholders would be reduced in each of those years, unless we were entitled to relief under relevant statutory provisions.
Failure to qualify as a REIT could result in additional expenses or additional adverse consequences, which may include the forced
liquidation of some or all of our investments.



Although
we currently intend to operate in a manner designed to allow us to continue to qualify as a REIT, future economic, market, legal,
tax or other considerations might cause us to lose our REIT status, which could have a material adverse effect on our business,
prospects, financial condition and results of operations, and could adversely affect our ability to successfully implement our
business strategy and pay dividends.



If
an investment that was initially believed to be a real property asset is later deemed not to have been a real property asset at
the time of investment, we could lose our status as a REIT or be precluded from investing according to our current business plan.



Power
REIT must meet income and asset tests to qualify as a REIT. If an investment that was originally believed to be a real asset is
later deemed not to have been a real asset at the time of investment, our status as a REIT could be jeopardized or we could be
precluded from investing according to our current business plan, either of which would have a material adverse effect on our business,
financial condition and results of operations. Further, we may not seek a private letter ruling from the Internal Revenue Service
with respect to some or all of our infrastructure investments. The lack of such private letter rulings may increase the risk that
an investment believed to be a real asset could later be deemed not to be a real asset. In the event that an investment is deemed
to not be a real asset, we may be required to dispose of such investment, which could have a material adverse effect on us, because
even if we were successful in finding a buyer, we might have difficulty finding a buyer on favorable terms or in a sufficient
time frame.





12







If
we were deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical
for us to continue our business as contemplated and could have a material adverse effect on the price of our securities.



A
company such as ours would be considered an investment company under the Investment Company Act of 1940, as amended (the “1940
Act”), if, among other things, it owned investment securities (including minority ownership interests in subsidiaries or
other entities) that have an aggregate value exceeding 40% of the value of its total assets on an unconsolidated basis, or it
failed to qualify under the exemption from investment company status available to companies primarily engaged in the business
of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.



We
do not believe that we are, or are likely to become, an investment company under the 1940 Act. Nevertheless, if we were deemed
to be an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure, could make
it impractical for us to continue our business as contemplated and could have a material adverse effect on our operations and
the price of our common shares.



Net
leases may not result in fair market lease rates over time.



We
expect a portion of our future income to come from net leases, whereby the lessee is responsible for all the costs, insurance
and taxes of a property, including maintenance. Net leases typically have longer lease terms and, thus, there is an increased
risk that if market rental rates increase in future years, the rates under our net leases will be less than fair market rental
rates during those years. As a result, our income and distributions could be lower than they would otherwise be if we did not
enter into net leases. When appropriate, we will seek to include a clause in each lease that provides increases in rent over the
term of the lease, but there can be no assurance that we will be successful in securing such a clause. Some of our investments
may include “percentage of gross revenue” lease payments, which may result in positive or negative outcomes depending
on the performance of the acquired asset.



If
a sale-leaseback transaction is recharacterized in a lessee’s bankruptcy proceeding, our financial condition could be adversely
affected.



In
certain cases, we intend to enter into sale-leaseback transactions, whereby we would purchase a property and then simultaneously
lease the same property back to the seller. In the event of the bankruptcy of a lessee company, a transaction structured as a
sale-leaseback may be recharacterized as either a financing or a joint venture, either of which outcomes could adversely affect
our business. If the sale-leaseback were recharacterized as a financing, we might not be considered the owner of the property,
and as a result would have the status of a creditor in relation to the lessee company. In that event, we would no longer have
the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the lessee company
for the amounts owed under the lease, with the claim arguably secured by the property, and the lessee company/debtor might have
the ability to restructure the terms, interest rate and amortization schedule of its outstanding balance. If new terms were confirmed
by the bankruptcy court, we could be bound by them, and prevented from foreclosing on the property. If the sale-leaseback were
recharacterized as a joint venture, we and the lessee company could be treated as co-venturers with regard to the property. As
a result, we could be held liable, under some circumstances, for debts incurred by the lessee company relating to the property.
Either of these outcomes could adversely affect our financial condition and results of operations.



Provisions
of the Maryland General Corporation Law and our Declaration of Trust and Bylaws could deter takeover attempts and have an adverse
impact on the price of our common shares.



The
Maryland General Corporation Law and our Declaration of Trust and Bylaws contain provisions that may have the effect of discouraging,
delaying or making difficult a change in control of Power REIT. The business combination provisions of Maryland law (if our Board
of Trustees decides to make them applicable to us), the control share acquisition provisions of Maryland law (if the applicable
provisions in our Bylaws are rescinded), the limitations on removal of Trustees, the restrictions on the acquisition of our common
shares, the power to issue additional shares and the advance notice provisions of our Bylaws could have the effect of delaying,
deterring or preventing a transaction or a change in control that might involve a premium price for holders of the common shares
or might otherwise be in their best interests.





13







In
order to assist us in complying with limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue
Code, among other purposes, our charter provides that no natural person or entity may, directly or indirectly, beneficially or
constructively own more than 9.9% (in value or number of shares, whichever is more restrictive) of the aggregate amount of our
outstanding shares of all classes. In addition, our Board of Trustees may, without stockholder action, authorize the issuance
of shares of stock in one or more classes or series, including preferred stock. Our Board of Trustees may, without stockholder
action, amend our charter to increase the number of shares of stock of any class or series that we have authority to issue. The
existence of these provisions, among others, may have a negative impact on the price of our common shares and may discourage third
party bids for ownership of our Company. These provisions may prevent any premiums being offered to holders of common shares.



Risks
Related to Our Investment Strategy



Our
focus on the energy and transportation infrastructure sectors will subject us to more risks than if we were broadly diversified
to include other asset classes.



Because
we specifically focus on infrastructure assets, investments in our securities may present more risks than if we were broadly diversified
over numerous sectors of the economy. For example, a downturn in the U.S. energy or transportation infrastructure sectors would
have a larger impact on us than on a company that does not concentrate in one sector of the economy. Factors that may adversely
affect our investments include, but are not limited to, changes in supply and demand for infrastructure consumption, prices of
national and global commodities, government regulation, world and regional events and general economic conditions.



Renewable
energy resources are complex, and our investments in them rely on long-term projections of resource and equipment availability
and capital and operating costs; if our or our lessees’ projections are incorrect, we may suffer losses.



Although
the projection of renewable energy resource availability has been analyzed for decades across different geographies, technologies
and topologies, long-term projections of renewable resource availability at a particular site, the availability of generating
equipment and the operating costs of harvesting such renewable energy are subject to various uncertainties and in many cases must
rely on estimates at best. If any such projections are materially incorrect, our lessees could suffer financial losses, which
could adversely affect our investments. In addition, investments based on a percentage of gross revenue could under-perform our
investment projections, leading to adverse effects on our financial condition and results of operations.



Infrastructure
assets may be subject to the risk of fluctuations in commodity prices and in the supply of and demand for infrastructure consumption.



The
operations and financial performance of companies in the infrastructure sector may be directly or indirectly affected by commodity
prices and fluctuations in infrastructure supply and demand. Commodity prices and infrastructure demand fluctuate for several
reasons, including changes in market and economic conditions, the impact of weather on demand or supply, levels of domestic production
and imported commodities, energy conservation, domestic and foreign governmental regulation and taxation and the availability
of local, intrastate and interstate transportation systems. Fluctuations in commodity prices may increase costs for consumers
of energy-related infrastructure assets and therefore reduce demand for such infrastructure. Further, extreme price fluctuation
upwards or downwards could lead to the development of alternatives to existing energy-related infrastructure and could impair
the value of our investments.





14







Volatility
in commodity prices or in the supply of and demand for infrastructure assets may make it more difficult for companies in the infrastructure
sector to raise capital to the extent the market perceives that their performance may be tied directly or indirectly to commodity
prices. Historically, commodity prices have been cyclical and have exhibited significant volatility. Should infrastructure companies
experience variations in supply and demand, the resulting decline in operating or financial performance could adversely affect
the value or quality of our assets.



Infrastructure
investments are subject to obsolescence risks.



Infrastructure
assets are subject to obsolescence risks that could occur as a result of changing supply and demand, new types of construction,
changing demographics, changing weather patterns and new technologies. In any such event, there might be few alternative uses
for our investments, and our investments might drop in value.



Renewable
energy investments may be adversely affected by variations in weather patterns.



Renewable
energy investments may be adversely affected by variations in weather patterns, including shifting wind or solar resources and
including variations brought about by climate changes, which would cause earnings volatility for our lessees or borrowers and
which could affect their ability to make lease or other contractual payments to us. Lease payments that are structured as a percentage
of gross revenue typically fluctuate from period to period. Although we believe these fluctuations tend to average out over time,
to the extent that our projections are incorrect because weather patterns change significantly, our financial condition and results
of operations could be adversely affected.



If
the development of renewable energy projects slows, we may have a harder time sourcing investments.



Renewable
energy projects are dependent on a variety of factors, including government Renewable Portfolio Standards (RPS), equipment costs
and federal and state incentives. Changes in some or all of these factors could result in reduced construction of renewable projects
and may make it harder for us to source investments that are attractive to us, and this could have an adverse affect on our business.
Volatility in project development and construction may result in uneven growth and may make it hard to predict with certainty
our growth trends or patterns, which could make our securities less appealing to investors.



Investments
in renewable energy may be dependent on equipment or manufacturers that have limited operating histories or financial or other
challenges.



Although
most wind, solar and other renewable energy projects use technologies that are well understood by the market, many technologies
are undergoing rapid changes and improvements and many have not been tested in operating environments for the expected durations
of our investments. Some manufacturers are new or relatively new and may not have the financial ability to support their extended
warranties. As a result, if the future performance of equipment that is a basis for a lessee’s revenues is lower than projected,
such a lessee may have difficulty making its lease payments to us and our business could suffer.





15







Risks
Related to Our Securities



There
is a 9.9% limit on the amount of our equity securities that any one person or entity may own.



In
order to assist us in complying with limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue
Code, among other purposes, our charter provides that no natural person or entity may, directly or indirectly, beneficially or
constructively own more than 9.9% (in value or number of shares, whichever is more restrictive) of the aggregate amount of our
outstanding shares of all classes. If a person were found to own more than this amount, whether as a result of intentionally purchasing
our securities, developments outside such person’s control or otherwise – for example, as a result of changes in the
Company’s capital structure, the inheritance of securities, or otherwise – then, among other things, the transfers
leading to the violation of the 9.9% limit would be void and the Board of Trustees would be authorized to take such actions as
it deemed advisable to insure the undoing of the transfers.



Factors
could lead to the Company losing one or both of its NYSE MKT listings.



The
Company could lose its common shares listing or its Series A Preferred Stock listing, both on the NYSE MKT, depending on a number
of factors, including a failure by us to continue to qualify as a REIT, a failure to meet the NYSE MKT ongoing listing requirements,
including those relating to the number of shareholders, the price of the Company’s securities and the amount and composition
of the Company’s assets, changes in NYSE MKT ongoing listing requirements and other factors.



Low
trading volumes in the Company’s listed securities may adversely affect holders’ ability to resell their securities
at prices that are attractive, or at all.



Power
REIT’s common shares are traded on the NYSE MKT under the ticker “PW”. The average daily trading volume of Power
REIT’s common shares is less than that of the listed securities of many other companies, including larger companies. During
the 12 months ending December 31, 2015, the average daily trading volume for the Company’s common shares was approximately
7,773 shares. Power REIT’s Series A Preferred Stock is traded on the NYSE MKT under the ticker “PW PRA”. The
Series A Preferred Stock has been listed since March 18, 2014, it has not yet achieved significant trading volumes over a material
amount of time and even if an active and liquid trading market for the Series A Preferred Stock develops, it may not be sustained.
Nevertheless, because the Series A Preferred Stock has no maturity date, investors seeking liquidity may be limited to selling
their shares of Series A Preferred Stock in the secondary market. In part due to the relatively small trading volume of the Company’s
listed securities, any material sales of such securities by any person may place significant downward pressure on the market price
of the Company’s listed securities. In general, as a result of low trading volumes, it may be difficult for holders of the
Company’s listed securities to sell their securities at prices they find attractive, or at all.



The
price of the Company’s securities may fluctuate significantly and this may make it difficult for holders to sell the Company’s
securities when desired or at prices that are attractive.



The
market value of the Company’s securities will likely fluctuate in response to a number of factors, including factors that
are beyond the Company’s control. The market value of the Company’s securities may also be affected by conditions
affecting the financial markets generally, including the volatility of trading markets. These conditions may result in fluctuations
in the market prices of stocks generally and, in turn, the Company’s securities, as well as sales of substantial amounts
of the Company’s securities in the market, in each case to a degree that could be unrelated or disproportionate to any changes
in the Company’s operating performance. Such market fluctuations could adversely affect the market value of the Company’s
securities. A significant decline in the price or prices of Company securities could result in substantial losses for security
holders and could lead to costly and disruptive securities litigation.





16







Our
ability to issue preferred stock in the future could adversely affect the rights of existing holders of our equity securities.



Our
charter permits our Board of Trustees to increase the number of authorized shares of our capital stock without the approval of
holders of our common shares or Series A Preferred Stock. In addition, our charter permits our Board of Trustees to reclassify
any or all of our unissued authorized shares as shares of preferred stock in one or more new series on terms determinable by our
Board of Trustees, without the approval of holders of our common shares or Series A Preferred Stock. Future reclassifications
or issuances by us of preferred stock, whether Series A Preferred Stock or some new series of preferred stock, could effectively
diminish our ability to pay dividends or other distributions to existing equity security holders, including distributions upon
our liquidation, dissolution or winding up.



The
issuance of additional equity securities may dilute existing equity holders.



The
issuance of additional equity securities may result in the dilution of existing equity securities holders. Although the Company
expects to deploy additional equity capital principally for the purpose of making accretive transactions, and in such cases may
not dilute the economic value of equity securities held by existing holders, such additional issuances may dilute existing equity
securities holders’ percentage ownership of the Company, and the percentage of voting power they hold, depending on the
terms of the newly issued equity securities.



Our
preferred stock is subject to interest rate risk.



Distributions
payable on our Series A Preferred Stock are subject to interest rate risk. Because dividends on our Series A Preferred Stock are
fixed, our costs may increase upon maturity or redemption of the securities. This might require us to sell investments at a time
when we would otherwise not do so, which could affect adversely our ability to generate cash flow. To the extent that our Series
A Preferred Stock may have call or conversion provisions that are in our favor at a given time, such provisions may be detrimental
to the returns experienced by the holders of the securities.



Inflation
may negatively affect the value of our preferred stock and the dividends we pay.



Inflation
is the reduction in the purchasing power of money, resulting from an increase in the price of goods and services. Inflation risk
is the risk that the inflation-adjusted, or “real”, value of an investment will be worth less in the future. If and
when the economy experiences material rates of inflation, the real value of our Series A Preferred Stock and the dividends payable
to holders will decline.



Our
Series A Preferred Stock has not been rated and is junior to our existing and future debt, and the interests of holders of Series
A Preferred Stock could be diluted by the issuance of additional parity-preferred securities and by other transactions.



Our
Series A Preferred Stock has not been rated by any nationally recognized statistical rating organization, which may negatively
affect its market value and a holder’s ability to sell it. It is possible that one or more rating agencies might independently
determine to issue such a rating and that such a rating, if issued, could adversely affect the market price of our Series A Preferred
Stock. In addition, we may elect in the future to obtain a rating of our Series A Preferred Stock, which could adversely affect
its market price. Ratings reflect only the views of the rating agency or agencies issuing the ratings, and they could be revised
downward or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. Any
such downward revision or withdrawal of a rating could have an adverse effect on the market price of our Series A Preferred Stock.





17







The
payment of amounts due on the Series A Preferred Stock will be junior in payment preference to all of our existing and future
debt and any securities we may issue in the future that have rights or preferences senior to those of the Series A Preferred Stock.
We may issue additional shares of Series A Preferred Stock or additional shares of preferred stock in the future which are on
a parity with (or, upon the affirmative vote or consent of the holders of two-thirds of the outstanding shares of Series A Preferred
Stock, senior to) the Series A Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up. Additional issuance of preferred securities or other transactions could reduce the pro-rata assets
available for distribution upon liquidation and you may not receive your full liquidation preference if there are not sufficient
assets. In addition, issuance of additional preferred securities or other transactions could dilute your voting rights with respect
to certain matters that require votes or the consent of holders of our Series A Preferred Stock.



Holders
of Series A Preferred Stock have limited voting rights.



The
voting rights of a holder of Series A Preferred Stock are limited. Our common stock is the only class of our securities carrying
full voting rights. Voting rights for holders of Series A Preferred Stock exist only with respect to amendments to our charter
(whether by merger, consolidation or otherwise) that materially and adversely affect the terms of the Series A Preferred Stock,
the authorization or issuance of classes or series of equity securities that are senior to the Series A Preferred Stock and, if
we fail to pay dividends on the Series A Preferred Stock for six or more quarterly periods (whether or not consecutive), the election
of additional trustees. Holders would not, however, have any voting rights if we amend, alter or repeal the provisions of our
charter or the terms of the Series A Preferred Stock in connection with a merger, consolidation, transfer or conveyance of all
or substantially all of our assets or otherwise, so long as the Series A Preferred Stock remains outstanding and its terms remain
materially unchanged or holders receive stock of the successor entity with substantially identical rights, taking into account
that, upon the occurrence of an event described in this sentence, we may not be the surviving entity. Furthermore, if holders
receive the greater of the full trading price of the Series A Preferred Stock on the last date prior to the first public announcement
of an event described in the preceding sentence, or the $25.00 liquidation preference per share of Series A Preferred Stock plus
accrued and unpaid dividends (whether or not declared) to, but not including, the date of such event, pursuant to the occurrence
of any of the events described in the preceding sentence, then holders will not have any voting rights with respect to the events
described in the preceding sentence.



The
change of control conversion and delisting conversion features of our Series A Preferred Stock may not adequately compensate a
holder of such securities upon a Change of Control or Delisting Event (as such terms as defined in regard to our Series A Preferred
Stock), and the change of control conversion, delisting conversion and redemption features of our Series A Preferred Stock may
make it more difficult for a party to take over our company or may discourage a party from taking over our company.



Upon
a Change of Control or Delisting Event, holders of our Series A Preferred Stock will have the right (subject to our special optional
redemption rights) to convert all or part of their Series A Preferred Stock into shares of our common stock (or equivalent value
of alternative consideration). If our common stock price were less than $5.00 (which is approximately 61% of the per-share closing
sale price of our common stock on March 24, 2014), subject to adjustment, holders will receive a maximum of 5 shares of our common
stock per share of Series A Preferred Stock, which may result in a holder receiving value that is less than the liquidation preference
of the Series A Preferred Stock. In addition, the foregoing features of our Series A Preferred Stock may have the effect of inhibiting
a third party from making an acquisition proposal for our company or of delaying, deferring or preventing a change in control
of our company under circumstances that otherwise could provide the holders of shares of our common stock and Series A Preferred
Stock with the opportunity to realize a premium over the then current market prices of those securities, or that holders may otherwise
believe is in their best interests.





18







We
may issue additional Series A Preferred Stock at a discount to liquidation value or at a discount to the issuance value of shares
of Series A Preferred Stock already issued.



We
may offer additional Series A Preferred Stock at prices or yields that represent a discount to liquidation value, or that represent
a discount to the price paid for or the yield applicable to shares of Series A Preferred Stock previously issued and sold. Such
sales could adversely affect the market price of the Series A Preferred Stock.



Item
1B. Unresolved Staff Comments.



None



Item
2. Properties.



Registrant’s
property consists of its four wholly-owned subsidiaries:



|1. | Pittsburgh
    & West Virginia Railroad. P&WV was organized in Pennsylvania in 1967 as a real estate investment trust. P&WV
    leases the entirety of its railroad property to NSC pursuant to the Railroad Lease. The property consists of approximately
    112 miles of main railroad extending from Connellsville, Pennsylvania through parts of West Virginia to Pittsburgh Junction,
    Ohio, and approximately 20 miles of branch lines and other related property. The railroad was leased to Norfolk and Western
    Railway Company, now known as Norfolk Southern Corporation (“NSC”), effective in 1964, by P&WV’s predecessor
    company, for 99 years, and is subject to an unlimited number of 99-year renewal periods under the same terms and conditions,
    including annual rent payments, at the option of NSC. The more significant provisions of the Railroad Lease include:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Annual
    Base Cash Rent. P&WV currently receives annual base cash rent of $915,000 per year, paid quarterly, which amount is
    fixed and unvarying for the life of the Railroad Lease, including any renewal periods. In addition to annual base cash rent,
    NSC is responsible for additional rent as described in the Railroad Lease. The payment and amount of additional rent due is
    in dispute. See Item 3, Legal Proceedings.     
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ● | Triple
    Net Lease. NSC, at its own expense and without deduction from the rent, maintains, manages and operates the leased property
    and makes such improvements thereto as it considers desirable. Such part of the leased property as is, in the opinion of NSC,
    not necessary may be disposed of. Pursuant to the Railroad Lease, the proceeds of dispositions may be held by NSC and treated
    as indebtedness owed to P&WV by NSC.





19







| | ● | Amount
    Owed to P&WV. According to records maintained by NSC pursuant to the Railroad Lease and provided by NSC to P&WV,
    as of December 31, 2012 the indebtedness owed to P&WV was approximately $16,600,000. NSC has not provided a more recent
    update of the indebtedness amount. P&WV believes that the indebtedness amount is understated. This amount results primarily
    from rent payments from NSC under Section 4(b)(1) of the Railroad Lease, which NSC has historically elected to treat as indebtedness
    rather than pay in cash. Section 4(b)(1) rent is calculated based on the annual amount of tax depreciation and amortization
    of P&WV’s assets that are leased to NSC. The indebtedness amount also includes the gross amount of sales transactions
    in which NSC sells portions of P&WV’s real estate and has the option to retain the proceeds from such sales and
    treat it as indebtedness to P&WV. The payment and amount of these items is in dispute. Due to ongoing litigation, for
    financial reporting purposes, the receivable existing from the additional rent amounts and the indebtedness amounts have been
    fully reserved on the Registrant’s consolidated balance sheets and consolidated statements of operations. Although the
    Company has not recorded a net receivable for financial reporting purposes, the Company has historically recognized taxable
    income from Section 4(b)(1) rent. See Item 3, Legal Proceedings.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ● | Indemnification.
    Under the terms of the Railroad Lease, NSC must indemnify P&WV for taxes, charges, damages and other losses imposed on
    it by virtue of its operation of the Railroad Lease.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



|2. | PW
    Salisbury Solar, LLC. PWSS owns approximately 54 acres of fee simple land located in Salisbury, Massachusetts that is
    leased to an operational solar farm. Pursuant to the lease agreement, PWSS’ tenant is required to pay PWSS rent of $80,800
    cash for the year December 1, 2012 to November 30, 2013, with a 1.0% escalation in each corresponding year thereafter. Rent
    for the year December 1, 2013 to November 30, 2014 is $81,608. Rent is payable quarterly in advance and is recorded by Power
    REIT for accounting purposes on a straight-line basis, with $89,494 having been recorded during the fiscal year ended December
    31, 2015. At the end of the 22-year lease period, which commenced on December 1, 2011 (prior to being assumed by PWSS), the
    tenant has certain renewal options, with terms to be mutually agreed upon.                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3. | PW
    Tulare Solar, LLC. PWTS owns approximately 100 acres of fee simple land located in Tulare County, California, that is
    leased to five (5) operational solar farms. Pursuant to the lease agreements, the tenants are required to pay annual cash
    rent totaling $157,500. Rent is paid annually in advance in March of each year. At the end of the 25-year terms of the leases,
    which began running in March 2013, the tenants have certain renewal options, with terms to be mutually agreed upon.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4. | PW
    Regulus Solar, LLC. PWRS owns approximately 447 acres of fee simple leased to an operational solar project with an aggregate
    generating capacity of approximately 82 Megawatts located in Kern County, California near Bakersfield. During the primary
    term of the lease which extends for 20 years from achieving commercial operations (November 11, 2014), PWRS receives an initial
    annual rent of approximately $735,000 per annum which grows at 1% per annum. Rent is payable quarterly in advance and is recorded
    by Power REIT for accounting purposes on a straight-line basis, with $803,136 having been recorded during the fiscal year
    ended December 31, 2015. The lease is a “triple net” lease with all expenses to be paid by the tenant. At the
    end of the primary term of the lease, the tenants have certain renewal options with rent calculated as the greater of a minimum
    stated rental amount or a percentage of the total project-level gross revenue.



During
2015, the Trust dissolved its wholly owned subsidiary, Power REIT Financo, which was necessitated by a credit facility that was
retired during 2015.



The
Company’s revenue is highly concentrated, with lease payments from the lessee of P&WV and PWRS assets representing approximately
47% and 41%, respectively, of the Company’s consolidated revenues for the year ended December 31, 2015. PWV’s tenant
is NSC which is a Class I railroad and, as reported in its Form 10-K filed with the SEC on February 8, 2016, had approximately
$12.2 billion of total stockholders’ equity as of December 31, 2015, and earned approximately $1.6 billion of net income
during its fiscal year ended December 31, 2015.





20







Item
3. Legal Proceedings.



As
previously disclosed in its public filings with the SEC, the Trust and its wholly-owned subsidiary P&WV are in litigation
with NSC and NSC’s sub-lessee, Wheeling & Lake Erie Railroad (“WLE” and, together with NSC, the “Litigants”)
concerning matters arising under the Railroad Lease. The case is pending in Federal trial court in Pittsburgh (the “Court”).
The Litigants initiated the litigation against the Trust and P&WV in December 2011, seeking, among other things, a declaratory
judgment that NSC was not in default under the Railroad Lease.



P&WV,
as lessor, has asserted counterclaims, seeking determinations that NSC is in default under the Railroad Lease for, among other
things, failing to reimburse P&WV for certain legal fees incurred by P&WV, failing to permit P&WV to inspect NSC’s
books and records as called for under the terms of the Railroad Lease and failing to pay other amounts that P&WV believes
are due and owing. P&WV also seeks declarations from the Court (a) that NSC’s obligation to repay the indebtedness owed
under the Railroad Lease is not indefinite in duration, and (b) that the indebtedness owed to P&WV is due on demand with interest.
If P&WV is successful with certain of its counterclaims, it can terminate the Railroad Lease and demand from NSC payment of
the indebtedness.



The
indebtedness is the cumulative result of amounts received by NSC from its dispositions of P&WV property, additional rental
amounts due and other sums that NSC owes to P&WV but which NSC has elected, under its interpretation of the Railroad Lease,
to pay by increasing its indebtedness to P&WV rather than by providing P&WV with cash. According to records maintained
by NSC pursuant to the Railroad Lease and provided by NSC to P&WV, as of December 31, 2012 the indebtedness owed to P&WV
was approximately $16,600,000. NSC has not provided a more recent update of the indebtedness amount. P&WV believes that the
indebtedness amount is understated. The indebtedness has not been included in P&WV’s balance sheets prepared under GAAP,
because of the dispute as to when it is due. Similarly, certain additional rental amounts that NSC disputes are due on a current
basis, and which have historically been treated as indebtedness, have not been included in P&WV’s income statements
or balance sheets prepared under GAAP; however, these additional rent amounts have historically been recorded as taxable income
on P&WV’s tax returns.



The
Litigants have alleged that the Trust is a successor in interest in respect of the Railroad Lease. If that allegation were to
be decided against us in a fact-finding stage of the litigation, it could lead to liability and expenses. The Trust believes that
it is not a successor in interest in respect of the Railroad Lease and is not constrained by any of the Railroad Lease restrictions.



The
parties have made certain supplements to their respective claims and counterclaims. In August 2013, P&WV filed a second supplement
to its counterclaims following the Litigants’ disclosure of previously undisclosed dispositions of P&WV property. P&WV
believes that additional amounts are owed to it as a result of these dispositions and, accordingly, asserted new counterclaims,
including claims of fraud and conversion. Based on the information available at the time P&WV supplemented its claims, P&WV
has estimated that the additional amounts owed to it exceed $8 million, not including potential interest and damages. P&WV
also supplemented its counterclaim for additional rental amounts due in order to include the reimbursement of its legal expenses
related to the litigation. In response to P&WV’s second supplement to its counterclaims, in January 2014 the Litigants
amended their pleadings to add additional claims against both P&WV and the Trust. The Litigants’ new claims seek additional
declarations from the Court that the Litigants have not defaulted on or violated the terms of the Railroad Lease.





21







On
September 13, 2013, the Trust filed a motion for summary judgment seeking dismissal of all of the claims against it primarily
based on the fact that the Trust is not a party to the Lease. On January 15, 2014, the Court heard oral arguments from the parties
on the Trust’s motion. On October 16, 2013, the Litigants filed a motion seeking leave to supplement their claims to include:
(i) nominal damages, (ii) enjoinment of Power REIT from taking actions in breach of the Lease Agreement, (iii) the withdrawal
of NSC’s consent to the additional share by PWV; and (iv) the undoing of the reverse triangular merger. On June 19, 2014,
the court denied the Trust’s motion but also denied Plaintiff’s motion seeking leave to supplement their claims with
the exception of granting the motion to seek nominal damages.



The
fact and expert discovery phases of the litigation have been completed. On September 8, 2014, P&WV filed a Motion for Summary
Judgment and on October 22, 2014, the Litigants filed an opposition to such motion and on November 5 2014, P&WV filed a Reply
to NSC and WLE’s opposition to such motion. On September 8, 2014, the Litigants filed a Motion for Summary Judgment and
on October 22, 2014, P&WV filed an opposition to such motion and on November 5, 2014, the Litigants filed a reply to P&WV’s
opposition to such motion. On December 16, 2014, the court held oral argument on both of the pending motions for Summary Judgment.



On
April 22, 2015, the court denied P&WV’s motion for summary judgment and granted the Litigants’ summary judgment
motion thereby dismissing all of P&WV’s claims. During the week of August 3, 2015, a trial was conducted on the two
remaining claims of the Litigants against P&WV and Power REIT. On December 29, 2015, the Court issued a ruling with respect
to the remaining claims that were the subject of the trial. In the ruling, the Court found in favor of Power REIT on all claims
brought against it by NSC and WLE. In addition, the Court also found in favor of P&WV with respect to claims brought against
P&WV by WLE. However, the Court did find in favor of NSC against P&WV for certain of its claims (fraud and breach of contract)
and awarded nominal damages of $1.00. In connection with NSC’s demand for punitive damages, the Court ruled that NSC was
not entitled to punitive damages.



On
January 26, 2016, Power REIT and P&WV filed a Notice of Appeal to appeal the matter to the United States Court of Appeals
for the Third Circuit. Power REIT and P&WV’s appellate brief is currently scheduled to be filed on April 28, 2016. Power
REIT and P&WV have retained the firm of Keker & Van Nest LLP as lead counsel related to the appeal.



P&WV
has provided key court filings in the litigation on its website (www.pwreit.com) under a tab called “P&WV Litigation
Update” which is under the “Investor Relations” tab. The provided documents and accompanying supporting documents
are not comprehensive or complete and the full case docket is available from the Public Access to Court Records (PACER) website.
Power REIT encourages interested parties to review all the public filings available on PACER and to review the risks and disclosures
in Power REIT’s Annual Report filed on Form 10-k and other documents filed from time to time with the Securities and Exchange
Commission (SEC).



During
the year December 31, 2015 and 2014, P&WV incurred litigation related expenses of approximately $359,000 and $1,050,000, respectively.
As of December 31, 2015, P&WV had incurred a total of approximately $3.1 million of cumulative expenses related to the litigation,
of which approximately $2,000 is in accounts payable. P&WV believes that the costs associated with the litigation are reimbursable
by NSC under the Railroad Lease as additional rent, but NSC has refused to pay such amounts. At this point, in order to collect
such amounts, P&WV would need to prevail on the appeal. There can be no assurance that P&WV will prevail in collecting
its litigation expenses from NSC; accordingly, the expenses of the litigation are accrued and expensed as incurred.





22







As
of the date of this filing, NSC has continued to make its quarterly base rental payments ($228,750 per quarter) despite the pendency
of the litigation. However, there can be no assurance that NSC will continue to make its base rental payments.



See
“Risk Factors” under Item 1A of this document for a discussion of risks related to the litigation.



Item
4. Mine Safety Disclosures.



Not
Applicable



PART
II



Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.



Our
common shares of $0.001 par value are listed for trading on the NYSE MKT under the symbol “PW”. As of March 28, 2016,
there were approximately 437 registered holders of registrant’s common shares.



The
following table sets forth the high and low sales price per common share reported on the NYSE MKT as traded and the dividends
paid per common share for each of the quarters indicated:



|               |  | Quarters
                                         Ended, 2015 |     
|-------------- |  | ------------------------------------------------------------- | ----
|               |  | March 31                                                      |     
|Closing Price: |  |                                                               |     
|High           |  | $                                                             | 9.96
|Low            |  |                                                               | 7.80
|Dividends Paid |  |                                                               | 0.00





|               |  | Quarters Ended, 2014 |     
|-------------- |  | -------------------- | ----
|               |  | March 31             |     
|Closing Price: |  |                      |     
|High           |  | $                    | 9.50
|Low            |  |                      | 8.80
|Dividends Paid |  |                      | 0.00



During
the first quarter of 2016 through March 25, 2016, the NYSE MKT price per share of our common shares hit a high of $4.60 and a
low of $4.02.



Distributions



U.S.
federal income tax law generally requires that a REIT distribute annually to its shareholders at least 90% of its REIT taxable
income, without regard to any deduction for dividends paid and excluding net capital gains, and pay tax at regular corporate rates
on any taxable income that it does not distribute.





23







The
timing and frequency of our distributions are authorized and declared by our Board of Trustees based upon a number of factors,
including:



| | ● | our
    funds from operations;                                                                                      
| | - | --------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                     
| | ● | our
    debt service requirements;                                                                                  
| |   |                                                                                                                     
| | ● | our
    taxable income, combined with the annual distribution requirements necessary to maintain REIT qualification;
| |   |                                                                                                                     
| | ● | requirements
    of Maryland law;                                                                                   
| |   |                                                                                                                     
| | ● | our
    overall financial condition; and                                                                            
| |   |                                                                                                                     
| | ● | other
    factors deemed relevant by our Board of Trustees.                                                         



Any
distributions that we make will be at the discretion of our Board of Trustees, and there can be no assurance that dividends will
be paid in any particular period or at any particular level, or sustained in future periods based on past timing of payments and
payments levels.



The
Company temporarily suspended its dividend payments on our common shares starting with the second quarter of 2013 which is likely
to continue at least until the ongoing costs of the litigation with NSC diminish. See Item 3, Legal Proceedings. During 2015,
the Company paid approximately $280,000 of dividends on its Series A Preferred Stock.



Item
6. Selected Financial Data.



Not
applicable.



Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.



Forward-Looking
Statements



This
document contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act
of 1934. 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 by the use of words such as “believe,” “expect,”
“will,” “anticipate,” “intend,” “estimate,” “would,” “should,”
“project,” “plan,” “assume” or other similar words or expressions, or negatives of such words
or expressions, although not all forward-looking statements can be identified in this way. All statements contained in this document
regarding strategy, plans, future operations, projected financial condition or results of operations, prospects, the future of
Power REIT’s industries and markets, outcomes that might be obtained by pursuing management’s plans and objectives,
and similar subjects, are forward-looking statements. Over time, Power REIT’s actual performance, results, financial condition
and achievements may differ from the anticipated performance, results, financial condition and achievements that are expressed
or implied by Power REIT’s forward-looking statements, and such differences may be significant and materially adverse to
Power REIT and its security holders.



All
forward-looking statements reflect Power REIT’s good-faith beliefs, assumptions and expectations, but they are not guarantees
of future performance. Furthermore, Power REIT disclaims any obligation to publicly update or revise any forward-looking statements
to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes. For
a further discussion of factors that could cause Power REIT’s future performance, results, financial condition or achievements
to differ materially from that which is expressed or implied in Power REIT’s forward-looking statements, see “Risk
Factors” under Item 1A of this document.





24







Overview



Power
REIT is a Maryland-domiciled REIT that holds, develops, acquires and manages real estate assets related to transportation and
energy infrastructure in the United States. Within the transportation and energy infrastructure sectors, Power REIT is focused
on making new acquisitions of real estate that are or will be leased to renewable energy generation projects, such as utility-scale
solar farms and wind farms, that have low or minimal technology risk.



Power
REIT was formed as part of a reorganization and reverse triangular merger of P&WV that closed on December 2, 2011. P&WV
survived the reorganization as a wholly-owned subsidiary of the Registrant. The Company’s investment strategy, which is
focused on transportation and energy infrastructure-related real estate, builds upon its subsidiary P&WV’s historical
ownership of railroad real estate assets, which are currently triple-net leased to NSC.



The
Trust is structured as a holding company and owns its assets through four wholly-owned, special purpose subsidiaries that have
been formed in order to hold real estate assets, obtain financing and generate lease revenue. As of December 31, 2015, 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”) and approximately 601 acres of fee simple land leased to a number
of solar power generating projects with an aggregate generating capacity of approximately 108 Megawatts (“MW”). Power
REIT is actively seeking to expand its portfolio of real estate related to renewable energy generation projects and is pursuing
investment opportunities that qualify for REIT ownership within solar, wind, hydroelectric, geothermal, transmission and other
infrastructure projects.



Results
of Operations



Power
REIT’s consolidated revenue in fiscal years 2015 and 2014 was approximately $1,970,000 and $1,743,000, respectively. Consolidated
net loss in fiscal years 2015 and in 2014 was approximately $(451,000) and $(1,557,000), respectively. The difference between
our 2015 and 2014 consolidated results was principally attributable to the following: increases in rent revenue resulting from
the acquisition of real property by PWRS in 2014; a decrease in Property Acquisition Expenses of approximately $365,000 in 2014
to $0 in 2015; a decrease in unrealized loss on interest rate swap from approximately $528,000 in 2014 compared to a loss on interest
rate swap of approximately $189,000 in 2015; an increase in interest expense from approximately $715,000 in 2014 to approximately
$849,000 in 2015 and a loss on debt extinguishment in 2015 of approximately $353,000 compared to $0 in 2014.



The
Company’s cash outlays, other than dividend payments on its Series A Preferred Stock, are for general and administrative
(“G&A”) expenses, which consist principally of legal and other professional fees, consultant fees, trustees’
fees, NYSE MKT listing fees, shareholder service company fees and auditing costs (although in presenting our expenses in our consolidated
statements of operations, in both 2015 and 2014 we have broken out legal and other professional fees relating to our litigation
with NSC into the separate line item “litigation expenses”). It is hard to project the level of expenses the Company
will incur in 2016 related to the P&WV litigation which will relate to the appeal process. The Company further expects that
the remainder of its G&A expenses will continue to increase in 2016 and beyond as it further implements its business plan.



For
Fiscal year 2015, P&WV and PWRS contributed approximately 47% and 41% of consolidated revenue, respectively. For the fiscal
year 2014, P&WV and PWRS accounted for contributed approximately 52% and 33% of the Company’s consolidated revenue,
respectively. If Power REIT is successful in pursuing its business plan and acquisition strategies, the contribution to its consolidated
revenues from renewable generation-related real estate and other infrastructure real estate is expected to increase over time
as a percentage of the Company’s total consolidated revenue.





25







Liquidity
and Capital Resources



To
meet its working capital and longer-term capital needs, Power REIT relies on cash provided by its operating activities, proceeds
received from the issuance of equity securities and proceeds received from borrowings, which are typically secured by liens on
acquired assets.



Cash
Flows



During
the year ended December 31, 2015, the Company’s net cash used by operating activities was approximately $225,000. During
the year ended December 31, 2014, the Company’s net cash used in operating activities was approximately $108,000.



During
the year ended December 31, 2015, the Company’s net cash used in investing activities was approximately $0 as the Company
did not make any new acquisitions. During the year ended December 31, 2014, the Company’s net cash used in investing activities
was approximately $2,242,000 due to the land acquisitions made in 2014.



During
the year ended December 31, 2015, the Company’s net cash provided by financing activities was approximately $6,500, comprised
principally of borrowing on long term debt of approximately $2,300,000 from the offering of $10,150,000 of bonds, offset by principal
payments on the loan to a related party of $1,650,000, principal payment on debt of approximately 273,000, and dividends on the
Preferred Stock of approximately $280,000. During the year ended December 31, 2014, the Company’s net cash provided by financing
activities was approximately $2,925,000, due principally to the net proceeds from the issuance of its Series A Preferred Stock
of approximately $3,492,000 and the sale of commons shares as a result of the exercise of options of approximately $159,000, offset
by payments in capitalized debt costs of approximately $505,000 and the payment of dividends on the Series A Preferred Stock of
approximately $191,000 and payments on debt of approximately 30,000.



Preferred
Stock



During
2014, the Company expanded its equity financing activities by offering a series of preferred shares to the public. The Series
A Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution or winding up, senior to the Company’s
common shares. Voting rights for holders of Series A Preferred Stock exist only with respect to amendments to the Company’s
charter that materially and adversely affect the terms of the Series A Preferred Stock, the authorization or issuance of equity
securities that are senior to the Series A Preferred Stock and, if the Company fails to pay dividends on the Series A Preferred
Stock for six or more quarterly periods (whether or not consecutive), the election of two additional trustees to our Board of
Trustees. No Series A Preferred Stock was issued during 2015 As of December 31, 2015, the Company had closed on the sale of approximately
$3,492,000 of its Series A $25 Par Value Preferred Stock, and the offering, being conducted pursuant to a public offering prospectus
supplement dated January 23, 2014. As of March 28, 2016 no additional no shares of preferred stock have been sold.





26







Borrowings



In
December 2012, PWSS acquired the approximately 54 acres of land in Salisbury, Massachusetts that it leases to a 5.7 MW operational
solar farm. That acquisition was financed in part by a bridge loan extended by Hudson Bay Partners, LP (“HBP”), an
affiliate of our Chairman and CEO, Mr. David Lesser. In July 2013, PWSS borrowed $750,000 from a regional bank (the “PWSS
Term Loan”) to refinance the bridge 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 Company. The balance of the PWSS Term Loan as of December 31, 2015 was approximately $693,000. As part
of the land acquisition, PWSS also assumed certain existing municipal financing, the balance of which on December 31, 2015 was
approximately $103,000.



In
July 2013, PWTS borrowed bridge financing of $1,650,000 from HBP to fund the acquisition of the approximately 100 acres of land
near Fresno, California that it owns and leases to a number of solar farms. On November 6, 2015, PWTS repaid the bridge financing
in full with proceeds available from the refinancing of its loan secured by the real property owned by PWRS.



On
April 14, 2014, PWRS borrowed approximately $6,900,000 in connection with PWRS’ acquisition of leased property and establishment
of its approximately $26 million credit facility. The credit facility carried a floating rate calculated as based on a spread
of 350 basis points over LIBOR. On November 6, 2015, PWRS repaid the entire balance of the credit facility with proceeds from
a new financing secured by the real property owned by PWRS (the “PWRS Bonds”) and terminated the credit facility.



The
PWRS Bonds are secured by land owned by PWRS and generated gross proceeds of $10,150,000. The PWRS Bonds carry a fixed interest
rate of 4.34 and fully amortize over the life of the financing which matures in 2034. The use of proceeds from the PWRS Bonds
was to retire approximately $6.65 million of existing indebtedness and the associated swap that was entered which are secured
by the PWRS property; retire the $1.65 million loan to PW Tulare Solar, LLC (a wholly owned subsidiary of Power REIT) from Hudson
Bay Partners, LP (an affiliate of David H. Lesser - Chairman and CEO of Power REIT) including accrued interest; and, to pay other
accounts payable of Power REIT and its subsidiaries. Upon completion of the refinancing, PWTS now owns its assets free and clear
of any indebtedness.



In
the case of each of the bridge financings from HBP described above, the independent members of the Company’s Board of Trustees
approved the borrowings in advance.



The
approximate amount of principal payments remaining on Power REIT’s long-term debt as of December 31, 2015 is as follows:



|               |  | Total debt |           
|-------------- |  | ---------- | ----------
|2016           |  |            | 323,000   
|2017           |  |            | 343,000   
|2018           |  |            | 367,000   
|2019           |  |            | 390,000   
|2020           |  |            | 415,000   
|Thereafter     |  |            | 9,108,000 
|Long-term Debt |  | $          | 10,623,000





27







Related
Party Transactions



For
information concerning loans extended to the Company by Hudson Bay Partners, LP, an affiliate of our Chairman and CEO, see “—Borrowings”,
above. For information concerning other related party transactions, see Note 9 to the consolidated financial statements appearing
following Item 15 of this document, which is incorporated herein by reference.



Critical
Accounting Policies



The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make significant
judgments and estimates to develop certain amounts reflected and disclosed. In many cases, there are alternative policies or estimation
techniques that could be used. We regularly review the application of our accounting policies and evaluate the appropriateness
of the estimates that are required to be made in order to prepare our consolidated financial statements. Typically, estimates
may require adjustments from time to time based on, among other things, changing circumstances and new or better information.



The
accounting policies that we consider to be our “critical accounting policies” are those that we believe are either
the most judgmental or involve the selection or application of alternative accounting policies, and that in each case are material
to our consolidated financial statements. We believe that our revenue recognition policies meet these criteria. These policies
are as follows:



| | ● | Railroad
    Lease. The Railroad Lease is treated as a capital lease, and income to P&WV under the Railroad Lease is recognized
    as earned based on an implicit rate of 10% over the life of the lease, which is assumed to be perpetual for the purposes of
    revenue recognition and recording the leased assets on the balance sheet. During 2013, PWV sent a letter to NSC requesting
    payment of additional rent in the amount of $341,768, which was not paid. Such amount has been included in revenue, but an
    allowance has been taken against it since the amount is in dispute as part of ongoing litigation. See Item 3, Legal Proceedings.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ● | Operating
    lease with rent escalation. Lease revenue from land that is subject to an operating lease with rent escalation provisions
    is recorded on a straight-line basis when the amount of escalation in lease payments is known at the time we enter into the
    lease agreement, or known at the time we assume an existing lease agreement as part of a land acquisition (e.g., an annual
    fixed percentage escalation).                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ● | Operating
    lease without rent escalation. Lease revenue from land that is subject to an operating lease without rent escalation provisions
    is recorded on a straight-line basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



For
further information, see Note 1 to the consolidated financial statements appearing following Item 15 of this document, which is
incorporated herein by reference.



Non
GAAP Financial Measures – Funds From Operations



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. This report contains supplemental
financial measures that are not calculated pursuant to U.S. generally accepted accounting principles (“GAAP”), including
the measure identified by us as Core FFO. 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.



Core
FFO: Management believes that Core FFO is a useful supplemental measure of the Company’s operating performance. 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 the Company’s asset portfolio and inappropriately
affect the comparability of the Company’s period-over-period performance. These items include non-recurring expenses, such
as those incurred in connection with litigation, 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. Management believes that, for the foregoing reasons,
these adjustments to net income are appropriate. The Company believes that Core FFO is a useful supplemental measure for the investing
community to employ, including when comparing the Company to other REITs that disclose similarly adjusted FFO figures, and when
analyzing changes in the Company’s performance over time. Readers are cautioned that other REITs may use different adjustments
to their GAAP financial measures than we do, and that as a result, the Company’s 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.





28







CORE
FUNDS FROM OPERATIONS (FFO)

(Unaudited)



|                                            |  | 2015 |           |   | 2014 |  
|------------------------------------------- |  | ---- | --------- | - | ---- | -
|                                            |  |      |           |   |      |  
|Core FFO Attributable to Common Shares      |  | $    | 978,926   |   |      | $
|Growth - Core FFO                           |  |      | 18        | % |      |  
|                                            |  |      |           |   |      |  
|Core FFO per common share                   |  |      | 0.56      |   |      |  
|Growth - Core FFO per common share          |  |      | 14        | % |      |  
|                                            |  |      |           |   |      |  
|Weighted Average shares outstanding (basic) |  |      | 1,735,119 |   |      |  



RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES

(Unaudited)



|                                                |  | 2015 |          |   | 2014 |  
|----------------------------------------------- |  | ---- | -------- | - | ---- | -
|Net income (loss) Attributable to Common Shares |  | $    | (730,626 | ) |      | $
|Litigation expense                              |  |      | 359,015  |   |      |  
|Property acquisition expenses                   |  |      | -        |   |      |  
|Stock-based compensation                        |  |      | 185,965  |   |      |  
|Interest Expense - Unused facility fee          |  |      | 16,911   |   |      |  
|Interest Expense - Amortization of Debt Costs   |  |      | 368,871  |   |      |  
|Amortization of Intangible Asset                |  |      | 237,141  |   |      |  
|Loss on debt extinguishment                     |  |      | 352,539  |   |      |  
|Loss on interest rate swap                      |  |      | 189,110  |   |      |  
|Core FFO Available to Common Shares             |  | $    | 978,926  |   |      | $



Item
7A. Quantitative and Qualitative Disclosures about Market Risk.



Not
applicable.





29







Item
8. Financial Statements and Supplementary Data.



This
information appears following Item 15 of this document and is incorporated herein by reference.



Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.



None



Item
9A. Controls And Procedures.



Evaluation
of Disclosure Controls and Procedures



Management
is responsible for establishing and maintaining adequate disclosure controls and procedures (as defined in Rules 13a- 15(f) of
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. 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 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 December 31, 2015 were effective. Management understands that there
are weaknesses in our disclosure controls and procedures given that our CEO is primarily responsible for all aspects of financial
reporting and there is no effective separation of duties for financial reporting. Management and the Audit Committee believe that
that they have established appropriate mechanisms for oversight of its financial affairs and do not believe it is appropriate
to add additional layers of management to mitigate such potential weaknesses at this time.



There
have been no significant changes in the Company’s internal controls or in other factors that could significantly affect
internal controls subsequent to the date the Company carried out its evaluation.



Changes
in Internal Control over Financial Reporting



Power
REIT maintains a system of internal accounting controls that is designed to provide reasonable assurance that its books and records
accurately reflect its transactions and that its policies and procedures are followed. There have been no changes in our internal
control during fiscal year 2015 or thereafter through the date of filing of this document that have materially affected, or are
reasonably likely to materially affect, such controls.



Management’s
Annual Report on Internal Control over Financial Reporting



This
document does not include an attestation report of the Registrant’s independent registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation by the Registrant’s
independent registered public accounting firm pursuant to rules of the Commission that permit the Registrant to provide only management’s
report in this document.





30







The
management of Power REIT is responsible for establishing and maintaining adequate internal control over financial reporting. The
Registrant’s internal control system was designed to provide reasonable assurance to management and the trustees regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.



All
internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement presentation and preparation. Further, because of changes
in conditions, the effectiveness of internal control may vary over time.



Management
conducted an evaluation of the effectiveness of the Registrant’s internal control over financial reporting based on the
framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective
as of December 31, 2015.



This
Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant Section 989G of the Dodd-Frank Wall Street and Consumer Protection Act and Section 404(c) of the
Sarbanes-Oxley Act of 2002, as adopted and amended by the SEC, which provides that Section 404(b) of the Sarbanes-Oxley Act is
not applicable with respect to any audit report prepared for an issuer that is neither an accelerated filer nor a large accelerated
filer as defined in Rule 12b-2 under the Exchange Act. Pursuant to Rule 12b-2 the Company is a smaller reporting company and not
subject to the internal control over financial reporting attestation requirements by the Company’s registered independent
public accounting firm.



Item
9B. Other Information.



None



PART
III



Item
10. Directors, Executive Officers and Corporate Governance.



Information
in response to this item is incorporated by reference to the Registrant’s definitive proxy statement to be filed with the
Commission within 120 days after December 31, 2015.



Item
11. Executive Compensation.



Information
in response to this item is incorporated by reference to the Registrant’s definitive proxy statement to be filed with the
Commission within 120 days after December 31, 2015.



Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.



Information
in response to this item is incorporated by reference to the Registrant’s definitive proxy statement to be filed with the
Commission within 120 days after December 31, 2015.





31







Item
13. Certain Relationships and Related Transactions, and Director Independence.



Information
in response to this item is incorporated by reference to the Registrant’s definitive proxy statement to be filed with the
Commission within 120 days after December 31, 2015.



Item
14. Principal Accounting Fees and Services.



Information
in response to this item is incorporated by reference to the Registrant’s definitive proxy statement to be filed with the
Commission within 120 days after December 31, 2015.



PART
IV



Item
15. Exhibits, Financial Statement Schedules.



A
list of all financial statements, financial statement schedules and related information filed as part of this document is set
forth starting on page F-1 hereof.



A
list of all exhibits that are filed as a part of this document is set forth below:



|Exhibit
    2.1    |  | Agreement
    and Plan of Merger by and among Pittsburgh & West Virginia Railroad, Power REIT and Power REIT PA, LLC, dated December
    1, 2011, incorporated herein by reference to such exhibit to the Registrant’s current report on Form 8-K filed with
    the Commission as of December 5, 2011.                                               
|------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    3.1    |  | Declaration
    of Trust of Power REIT, dated August 25, 2011, as amended and restated November 28, 2011 and as supplemented effective February
    12, 2014, incorporated herein by reference to such exhibit to the Registrants Form 10-K filed with the Commission as of April
    1, 2014.                                                        
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    3.2    |  | Bylaws
    of Power REIT, dated October 20, 2011, incorporated herein by reference to the Registrant’s registration statement on
    Form S-4 filed with the Commission as of November 8, 2011.                                                                                                                                                       
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    10.1   |  | Lease
    Agreement between Pittsburgh & West Virginia Railway Company and Norfolk & Western Railway Company, dated July 12,
    1962, incorporated herein by reference to such exhibit to the Registrant’s current report on Form 8-K filed with the
    Commission as of April 2, 2013.                                                             
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    10.2.1 |  | Promissory
    Note A from PW Tulare Solar, LLC to Hudson Bay Partners, LP, relating to the acquisition of real property in Tulare County,
    California, incorporated herein by reference to such exhibit to the Registrant’s current report on Form 8-K filed with
    the Commission as of July 15, 2013.                                         
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    10.2.2 |  | Promissory
    Note B from PW Tulare Solar, LLC to Hudson Bay Partners, LP, relating to the acquisition of real property in Tulare County,
    California, incorporated herein by reference to such exhibit to the Registrant’s current report on Form 8-K filed with
    the Commission as of July 15, 2013.                                         
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    10.2.3 |  | Deed
    of Trust between PW Tulare Solar, LLC and Hudson Bay Partners, LP, relating to the acquisition of real property in Tulare
    County, California, incorporated herein by reference to such exhibit to the Registrant’s current report on Form 8-K
    filed with the Commission as of July 15, 2013.                                         
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    10.2.4 |  | Guaranty
    from Power REIT to Hudson Bay Partners, LP, relating to the acquisition of real property in Tulare County, California, incorporated
    herein by reference to such exhibit to the Registrant’s current report on Form 8-K filed with the Commission as of July
    15, 2013.                                                            
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    10.3   |  | At
    Market Issuance Sales Agreement between Power REIT and MLV & Co. LLC, dated March 28, 2013, incorporated herein by reference
    to such exhibit to the Registrant’s current report on Form 8-K filed with the Commission as of March 29, 2013.                                                                                                
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    10.4   |  | Power
    REIT 2012 Equity Incentive Plan, incorporated herein by reference to such exhibit to the Registrant’s current report
    on Form 8-K filed with the Commission as of March 29, 2013.                                                                                                                                                        
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    14.1   |  | Code
    of Business Conduct and Ethics, incorporated herein by reference to such exhibit to the Registrant’s annual report on
    Form 10-K filed with the Commission as of March 28, 2012.                                                                                                                                                          
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    21.1   |  | Subsidiaries
    of the Registrant, filed herewith.*                                                                                                                                                                                                                                                                                                  
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    23.1   |  | Consent
    of MaloneBailey, LLP, filed herewith.*                                                                                                                                                                                                                                                                                                    
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    31.1   |  | Sarbanes-Oxley
    Act Section 302 Certification of David H. Lesser, filed herewith.*                                                                                                                                                                                                                                                                 
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    32.1   |  | Sarbanes-Oxley
    Act Section 906 Certification of David H. Lesser, filed herewith.*                                                                                                                                                                                                                                                                 
|                   |  |                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
    101    |  | Interactive
    data files pursuant to Rule 405 of Regulation S-T, as of and for the year ended December 31, 2015: (i) Consolidated Balance
    Sheet, (ii) Consolidated Statement of Operations, (iii) Consolidated Statement of Changes in Equity, Consolidated Statement
    of Cash Flows and (iv) Notes to the Consolidated Financial Statements.








* Filed herewith





32









SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) 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
| | --------------
| |               
| | By:           
| |               
| |               
| |               
| |               
| |               
| |               



Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, in the
capacities and on the dates indicated.



|Name                                                           |  | Title                                      |  | Date              
|-------------------------------------------------------------- |  | ------------------------------------------ |  | ------------------
|                                                               |  |                                            |  |                   
|/s/
    David H. Lesser                                        |  | Trustee
    and Chairman of the Board of   |  | March
    30, 2016
|David
    H. Lesse                                             |  | Trustees,
    CEO, Secretary and Treasurer |  |                   
|                                                               |  |                                            |  |                   
|/s/
    Virgil E. Wenger                                       |  | Trustee                                    |  | March
    30, 2016
|Virgil
    E. Wenger                                           |  |                                            |  |                   
|                                                               |  |                                            |  |                   
|/s/
                                         William S. Susman |  | Trustee                                    |  | March
    30, 2016
|William
    S. Susman                                          |  |                                            |  |                   
|                                                               |  |                                            |  |                   
|/s/
    Patrick R. Haynes, III                                 |  | Trustee                                    |  | March
    30, 2016
|Patrick
    R. Haynes, III                                     |  |                                            |  |                   





33







Power
REIT AND SUBSIDIARIES



TABLE
OF CONTENTS



|                                                                                                       |  | Page
|------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                       |  |     
|Reports
    of Independent Registered Public Accounting Firm                                           |  | F-2 
|                                                                                                       |  |     
|Consolidated
    Financial Statements:                                                                 |  |     
|                                                                                                       |  |     
|Consolidated
    Balance Sheets, December 31, 2015 and 2014                                            |  | F-3 
|                                                                                                       |  |     
|Consolidated
    Statements of Operations, years ended December 31, 2015 and 2014                      |  | F-4 
|                                                                                                       |  |     
|Consolidated
    Statements of Changes in Shareholders’ Equity, years ended December 31, 2015 and 2014 |  | F-5 
|                                                                                                       |  |     
|Consolidated
    Statements of Cash Flows, years ended December 31, 2015 and 2014                      |  | F-6 
|                                                                                                       |  |     
|Notes
    to Consolidated Financial Statements                                                         |  | F-7 





F-1









REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To
the Board of Trustees and Shareholders of Power REIT



We
have audited the accompanying consolidated balance sheets of Power REIT and its subsidiaries (collectively, the Company) as of
December 31, 2015 and 2014 and the related consolidated statements of operations, changes in shareholders’ equity, and cash
flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audit.



We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, 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. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.



In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Power REIT and its subsidiaries as of December 31, 2015 and 2014 and the results of their operations and
their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of
America.



|/s/
    MaloneBailey LLP | 
|------------------------ | 
|www.malone-bailey.com    | 
|Houston,
    Texas       | 
|                         | 
|March
    30, 2016       | 





F-2









POWER
REIT AND SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS

As
of December 31, 2015 and 2014



|                                                                                                                                                                                              |  | 2015 |            |   | 2014 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|ASSETS                                                                                                                                                                                        |  |      |            |   |      |  
|Land                                                                                                                                                                                          |  | $    | 6,788,067  |   |      | $
|Net investment in capital lease - railroad                                                                                                                                                    |  |      | 9,150,000  |   |      |  
|Total real estate assets                                                                                                                                                                      |  |      | 15,938,067 |   |      |  
|                                                                                                                                                                                              |  |      |            |   |      |  
|Cash and cash equivalents                                                                                                                                                                     |  |      | 435,870    |   |      |  
|Other receivables                                                                                                                                                                             |  |      | 6,142      |   |      |  
|Prepaid expenses                                                                                                                                                                              |  |      | 55,356     |   |      |  
|Intangible assets, net of accumulated amortization                                                                                                                                            |  |      | 4,538,020  |   |      |  
|Other assets                                                                                                                                                                                  |  |      | 775,031    |   |      |  
|TOTAL ASSETS                                                                                                                                                                                  |  | $    | 21,748,486 |   |      | $
|                                                                                                                                                                                              |  |      |            |   |      |  
|LIABILITIES AND EQUITY                                                                                                                                                                        |  |      |            |   |      |  
|Deferred revenue                                                                                                                                                                              |  | $    | 18,513     |   |      | $
|Accounts payable                                                                                                                                                                              |  |      | 96,022     |   |      |  
|Accounts payable, related party                                                                                                                                                               |  |      | 1,773      |   |      |  
|Accrued interest                                                                                                                                                                              |  |      | 74,243     |   |      |  
|Current portion of long-term debt                                                                                                                                                             |  |      | 322,874    |   |      |  
|Long-term debt                                                                                                                                                                                |  |      | 10,623,088 |   |      |  
|Long term debt, related party                                                                                                                                                                 |  |      | -          |   |      |  
|Interest rate swap                                                                                                                                                                            |  |      | -          |   |      |  
|TOTAL LIABILITIES                                                                                                                                                                             |  |      | 11,136,513 |   |      |  
|                                                                                                                                                                                              |  |      |            |   |      |  
|Series A 7.75% Cumulative Redeemable Perpetual Preferred Stock Par Value
    $25.00 (175,000 shares authorized; 144,636 issued and outstanding as of December 31, 2015 and December 31, 2014) |  |      | 3,492,149  |   |      |  
|                                                                                                                                                                                              |  |      | -          |   |      |  
|Commitments and Contingencies                                                                                                                                                                 |  |      |            |   |      |  
|                                                                                                                                                                                              |  |      |            |   |      |  
|Equity:                                                                                                                                                                                       |  |      |            |   |      |  
|Common Shares, $0.001 par value (100,000,000 shares authorized; 1,742,688 and 1,731,788 shares issued and outstanding
    as of December 31, 2015 and December 31, 2014)                      |  |      | 1,743      |   |      |  
|Additional paid-in capital                                                                                                                                                                    |  |      | 11,001,843 |   |      |  
|Accumulated deficit                                                                                                                                                                           |  |      | (3,883,762 | ) |      |  
|Total
    Equity                                                                                                                                                                              |  |      | 7,119,824  |   |      |  
|                                                                                                                                                                                              |  |      |            |   |      |  
|TOTAL LIABILITIES AND EQUITY                                                                                                                                                                  |  | $    | 21,748,486 |   |      | $



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





F-3







POWER
REIT AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS

For
the years ended December 31, 2015 and 2014



|                                                |  | 2015 |           |   | 2014 |  
|----------------------------------------------- |  | ---- | --------- | - | ---- | -
|REVENUE                                         |  |      |           |   |      |  
|Lease income from capital lease – railroad, net |  | $    | 915,000   |   |      | $
|Rental income                                   |  |      | 1,050,130 |   |      |  
|Misc. Income                                    |  |      | 4,985     |   |      |  
|TOTAL REVENUE                                   |  |      | 1,970,115 |   |      |  
|                                                |  |      |           |   |      |  
|EXPENSES                                        |  |      |           |   |      |  
|Amortization of intangible assets               |  |      | 237,141   |   |      |  
|General and administrative                      |  |      | 226,391   |   |      |  
|Stock-based compensation                        |  |      | 185,965   |   |      |  
|Property tax                                    |  |      | 21,929    |   |      |  
|Property acquisition expenses                   |  |      | -         |   |      |  
|Litigation expenses (see note 12)               |  |      | 359,015   |   |      |  
|Unrealized loss on interest rate swap           |  |      | -         |   |      |  
|Loss on interest rate swap                      |  |      | 189,110   |   |      |  
|Loss on debt extinguishment                     |  |      | 352,539   |   |      |  
|Interest expense                                |  |      | 848,780   |   |      |  
|TOTAL EXPENSES                                  |  |      | 2,420,870 |   |      |  
|                                                |  |      |           |   |      |  
|NET LOSS                                        |  |      | (450,755  | ) |      |  
|                                                |  |      |           |   |      |  
|Preferred Stock Dividends                       |  |      | 279,871   |   |      |  
|                                                |  |      |           |   |      |  
|NET LOSS ATTRIBUTABLE TO COMMON SHARES          |  | $    | (730,626  | ) |      | $
|                                                |  |      |           |   |      |  
|Loss Per Common Share:                          |  |      |           |   |      |  
|Basic and diluted                               |  | $    | (0.42     | ) |      | $
|                                                |  |      |           |   |      |  
|Weighted Average Number of Shares Outstanding:  |  |      |           |   |      |  
|Basic and diluted                               |  |      | 1,735,119 |   |      |  
|                                                |  |      |           |   |      |  
|Cash dividend per Series A Preferred Share      |  | $    | 1.94      |   |      | $



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





F-4







POWER
REIT AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY

For
the Years Ended December 31, 2015 and 2014



|                                                   |  |               |           |  |         |   |       |             |  |   | Retained     |  |  |        |           
|-------------------------------------------------- |  | ------------- | --------- |  | ------- | - | ----- | ----------- |  | - | ------------ |  |  | ------ | ----------
|                                                   |  |               |           |  |         |   |       | Additional  |  |   | Earnings/    |  |  | Total  |           
|                                                   |  | Common Shares |           |  | Paid-in |   |       | Accumulated |  |   | Shareholders | 
|                                                   |  | Shares        |           |  | Amount  |   |       | Capital     |  |   | Deficit      |  |  | Equity |           
|                                                   |  |               |           |  |         |   |       |             |  |   |              |  |  |        |           
|Balance at December 31, 2013                       |  |               | 1,676,955 |  |         | $ | 1,677 |             |  | $ | 10,476,098   |  |  | $      | (1,405,666
|Net loss                                           |  |               | -         |  |         |   | -     |             |  |   | -            |  |  |        | (1,556,489
|Issuance of Common Shares from exercise of options |  |               | 20,000    |  |         |   | 20    |             |  |   | 159,180      |  |  |        |           
|Cash dividends on Preferred Stock                  |  |               | -         |  |         |   | -     |             |  |   | -            |  |  |        | (190,981  
|Stock-based compensation                           |  |               | 34,833    |  |         |   | 35    |             |  |   | 180,611      |  |  |        | -         
|Balance at December 31, 2014                       |  |               | 1,731,788 |  |         |   | 1,732 |             |  |   | 10,815,889   |  |  |        | (3,153,136
|                                                   |  |               |           |  |         |   |       |             |  |   |              |  |  |        |           
|Net loss                                           |  |               | -         |  |         |   | -     |             |  |   | -            |  |  |        | (450,755  
|Cash dividends on Preferred Stock                  |  |               | -         |  |         |   | -     |             |  |   | -            |  |  |        | (279,871  
|Stock-based compensation                           |  |               | 10,900    |  |         |   | 11    |             |  |   | 185,954      |  |  |        | -         
|Balance at December 31, 2015                       |  |               | 1,742,688 |  |         | $ | 1,743 |             |  | $ | 11,001,843   |  |  | $      | (3,883,762



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





F-5







POWER
REIT AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS

For
the Years Ended December 31, 2015 and 2014



|                                                                                              |  | 2015 |            |   | 2014 |  
|--------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Operating activities                                                                          |  |      |            |   |      |  
|Net loss                                                                                      |  | $    | (450,755   | ) |      | $
|                                                                                              |  |      |            |   |      |  
|Adjustments to reconcile net loss to net cash provided by (used in) operating
    activities: |  |      |            |   |      |  
|Amortization of intangible assets                                                             |  |      | 237,141    |   |      |  
|(Gain) Loss on debt extinguishment                                                            |  |      | 352,539    |   |      |  
|Loss on MTM hedge liability                                                                   |  |      | 189,110    |   |      |  
|Amortization of debt costs                                                                    |  |      | 345,130    |   |      |  
|Stock-based compensation                                                                      |  |      | 185,965    |   |      |  
|                                                                                              |  |      |            |   |      |  
|Changes in operating assets and liabilities                                                   |  |      |            |   |      |  
|(Increase) decrease in other receivables                                                      |  |      | (5,088     | ) |      |  
|(Increase) in prepaid expense                                                                 |  |      | (41,780    | ) |      |  
|(Increase) decrease in other assets                                                           |  |      | -          |   |      |  
|Increase (decrease) in deferred revenue                                                       |  |      | (7,069     | ) |      |  
|Increase (decrease) in prepaid rent                                                           |  |      | (120,861   | ) |      |  
|Increase (decrease) in accounts payable                                                       |  |      | (296,850   | ) |      |  
|Increase (decrease) in accounts payable, related party                                        |  |      | (639,855   | ) |      |  
|Increase in accrued interest                                                                  |  |      | 27,370     |   |      |  
|Net cash provided by (used in) operating activities                                           |  |      | (225,003   | ) |      |  
|                                                                                              |  |      |            |   |      |  
|Investing Activities                                                                          |  |      |            |   |      |  
|Acquisition of land, net                                                                      |  |      | -          |   |      |  
|Net cash used in investing activities                                                         |  |      | -          |   |      |  
|                                                                                              |  |      |            |   |      |  
|Financing Activities                                                                          |  |      |            |   |      |  
|Principal payment on long-term debt                                                           |  |      | (272,702   | ) |      |  
|Borrowings on long-term debt                                                                  |  |      | 2,306,148  |   |      |  
|Principal payments on related party debt                                                      |  |      | (1,650,000 | ) |      |  
|Net proceeds from issuance of preferred stock                                                 |  |      | -          |   |      |  
|Payment of deferred finance costs                                                             |  |      | (97,083    | ) |      |  
|Proceeds from exercise of stock options                                                       |  |      | -          |   |      |  
|Cash dividends paid on preferred stock                                                        |  |      | (279,871   | ) |      |  
|Net cash provided by (used in) financing activities                                           |  |      | 6,492      |   |      |  
|                                                                                              |  |      |            |   |      |  
|Net increase (decrease) in cash and cash equivalents                                          |  |      | (218,511   | ) |      |  
|                                                                                              |  |      |            |   |      |  
|Cash and cash equivalents, beginning of period                                                |  |      | 654,381    |   |      |  
|                                                                                              |  |      |            |   |      |  
|Cash and cash equivalents, end of period                                                      |  | $    | 435,870    |   |      | $
|                                                                                              |  |      |            |   |      |  
|Non cash investing and financing activities                                                   |  |      |            |   |      |  
|Purchase of land and intangibles with debt                                                    |  | $    | -          |   |      | $
|                                                                                              |  | $    | -          |   |      | $
|Debt issue costs paid through issuance of debt                                                |  | $    | 344,675    |   |      | $
|Account payable settled through issuance of debt                                              |  | $    | 180,300    |   |      | $
|Derivative liability settled through issuance of debt                                         |  | $    | 670,000    |   |      | $
|Supplemental disclosure of cash flow information:                                             |  |      |            |   |      |  
|Interest paid                                                                                 |  | $    | 486,982    |   |      | $



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





F-6







POWER
REIT AND SUBSIDIARIES



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS, continued



1
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Nature
of Operations



Power
REIT (the “Registrant” or the “Trust”, and together with its consolidated subsidiaries, “we”,
“us”, the “Company” or “Power REIT”, unless the context requires otherwise) is a Maryland-domiciled
real estate investment trust (a “REIT”) that holds, develops, acquires and manages real estate assets related to transportation
and energy infrastructure in the United States. Within the transportation and energy infrastructure sectors, Power REIT is focused
on making new acquisitions of real estate that are or will be leased to renewable energy generation projects, such as utility-scale
solar farms and wind farms, that have low or minimal technology risk.



The
Trust is structured as a holding company and owns its assets through five wholly-owned, special purpose subsidiaries, with one
subsidiary owning another subsidiary, that have been formed in order to hold real estate assets, obtain financing and generate
lease revenue. As of December 31, 2014, 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”) and
approximately 601 acres of fee simple land leased to a number of solar power generating projects with an aggregate generating
capacity of approximately 108 Megawatts (“MW”). Power REIT is actively seeking to expand its portfolio of real estate
related to renewable energy generation projects and is pursuing investment opportunities that qualify for REIT ownership within
solar, wind, hydroelectric, geothermal, transmission and other infrastructure projects.



P&WV
is a business trust organized under the laws of Pennsylvania for the purpose of owning railroad assets that are currently leased
to Norfolk Southern Railway (“NSC”) pursuant to a 99-year lease that became effective in 1964 and is subject to an
unlimited number of 99-year renewal periods under the same terms and conditions, including annual rent payments, at the option
of NSC (the “Railroad Lease”). P&WV’s assets consist of a railroad line of approximately 112 miles in length,
extending through Connellsville, Washington and Allegheny Counties in the Commonwealth of Pennsylvania, through Brooke County
in the State of West Virginia and through Jefferson and Harrison Counties in the State of Ohio, to Pittsburgh Junction in Harrison
County, Ohio. There are also branch lines that total approximately 20 miles in length located in Washington and Allegheny Counties
in Pennsylvania and Brooke County in West Virginia. NSC pays P&WV base cash rent of $915,000 per year, payable in quarterly
installments. In addition, Power P&WV believes NSC is obligated to pay additional rent and other amounts, which is currently
the subject of litigation. (See Note 12).



PW
Salisbury Solar, LLC (“PWSS”) is a Massachusetts limited liability company that owns approximately 54 acres of land
located in Salisbury, Massachusetts that is leased to a 5.7 MW operational solar farm. Pursuant to the lease agreement, PWSS’
tenant is required to pay PWSS rent of $80,800 cash for the year December 1, 2012 to November 30, 2013, with a 1.0% escalation
in each corresponding year thereafter. Rent is payable quarterly in advance and is recorded by Power REIT for accounting purposes
on a straight-line basis. For each of the twelve months ended December 31, 2015 and 2014 rent has been recorded in the amount
of $89,494. At the end of the 22-year lease period, which commenced on December 1, 2011 (prior to being assumed by PWSS), the
tenant has certain renewal options, with terms to be mutually agreed upon.



PW
Tulare Solar, LLC (“PWTS”) is a California limited liability company that owns approximately 100 acres of land leased
to a five (5) solar farms, with an aggregate generating capacity of approximately 20MW, located near Fresno, California. The solar
farm tenants pay PWTS an aggregate annual rent of $157,500 cash, payable in advance and without escalation during the 25-year
term of the leases. At the end of the 25-year term, which commenced in March 2013 (prior to being assumed by PWTS), the tenants
have certain renewal options, with terms to be mutually agreed upon. For the years ended December 31, 2015 and 2014, PWTS recorded
rental income of $157,500 and $167,603, respectively.





F-7







PW
Regulus Solar, LLC (“PWRS”) is a California limited liability company that owns approximately 447 acres of land leased
to an operating solar project with an aggregate generating capacity of approximately 82 Megawatts in Kern County, California near
Bakersfield. PWRS’s lease was structured to provide it with initial quarterly rental payments until the solar farm achieved
commercial operation which occurred in November 11, 2014. During the primary term of the lease which extends for 20 years from
achieving commercial operations, PWRS will receive an initial annual rent of approximately $735,000 per annum which grows at 1%
per annum. The lease is a “triple net” lease with all expenses to be paid by the tenant. At the end of the primary
term of the lease, the tenants have certain renewal options with rent calculated as the greater of a minimum stated rental amount
or a percentage of the total project-level gross revenue. The acquisition price, not including transaction and closing costs,
was approximately $9.2 million. For the years ended December 31, 2015 and 2014, PWRS recorded rental income of $803,136 and $570,983
respectively. The 2014 rent recorded is from April 14, 2014 (the date of closing on the acquisition).



The
Company’s revenue is highly concentrated, with lease payments from the lessee of P&WV and PWRS assets representing approximately
47% and 41%, respectively, of the Company’s consolidated revenues for the year ended December 31, 2015.



Power
REIT 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 Power
REIT to maintain its REIT qualification, at least 90% of its ordinary taxable annual income must be distributed to shareholders.



Basis
of Presentation



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



Use
of Estimates



The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.



Principles
of Consolidation



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



Cash
and Cash Equivalents



The
Trust considers all highly liquid investments with original maturity of three months or less to be cash equivalents. Cash equivalents
consist of a money market fund reported in the consolidated balance sheet at amortized cost, which approximates fair value.





F-8







Revenue
Recognition



The
Railroad Lease is treated as a capital lease, and income to P&WV under the Railroad Lease is recognized as earned based on
an implicit rate of 10% over the life of the lease, which is assumed to be perpetual for the purposes of revenue recognition and
recording the leased assets on the consolidated balance sheet. During 2013, PWV sent a letter to NSC requesting payment of additional
rent in the amount of $341,768, which was not paid. Such amount has been included in revenue, but an allowance has been taken
against it since the amount is in dispute as part of ongoing litigation (See Note 12).



Lease
revenue from land that is subject to an operating lease with rent escalation provisions is 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 a land acquisition (e.g., an annual fixed percentage escalation).



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



Reclassifications



Certain
amounts in the 2014 consolidated financial statements have been reclassified to conform to the 2015 presentation.



Other
Assets



The
Trust records an asset for prepaid expenses and capitalizes other expenses that are expected to provide Power REIT with benefits
over a period of one year or longer.



As
of December 31, 2015, the Trust has a net capitalized asset related to its shelf-offering which totals approximately $43,000.
The Trust expects to amortize the remaining capitalized shelf-offering expenses proportionately upon each draw. (See Note 6, Shelf
Offering on Form S-3).



During
2013, the Trust capitalized expenses of approximately $96,000 related to its At-The-Market Offering of Common Stock (“ATM”)
and approximately $36,000 related to its offering of Series A Preferred Stock respectively. During 2014, the Trust capitalized
an additional approximately $102,000 related to its offering of Series A Preferred Stock. As of December 31, 2015, the Trust has
a net capitalized asset related to its ATM and Series A Preferred Stock Offering of approximately $105,000 and $24,000 respectively.
The ATM and Preferred Stock related assets will be amortized pro-rata across the offering proceeds. There were no sales of stock
related to the ATM or Series A Preferred Stock Offering during 2015.



During
2014, the Trust capitalized expenses related to establishing its $26.2 million credit facility totaling approximately $891,000
of which $524,000 relates to a commitment fee and $367,000 relates to other expenses. These deferred financing costs are amortized
using the straight-line method over the term of the credit facility, which approximates the effective interest method. Amortization
of deferred financing costs for the years ended December 31, 2015 and 2014 were approximately $345,000 and $178,000, respectively.
The amount of amortization for 2015 includes writing off all capitalized expenses related to the credit facility which was repaid
in its entirety and terminated on November 6, 2015.



On
November 6, 2015, PWRS borrowed $10,150,000 pursuant to a bond offering (the “PWRS Bonds”). During 2015, the Trust
capitalized an approximately $441,758 of expenses related to the PWRS Bonds of which approximately 97,000 was paid in cash and
approximately 344,000 was incurred through issuance of debt. As of December 31, 2015, the Trust has a net capitalized asset related
to the PWRS Bonds of approximately $415,000. During 2015, the Trust amortized approximately $27,000 of this capitalized debt cost
which is included in the amortization of deferred financing costs on the statement of cash flows. The ATM and Preferred Stock
related assets will be amortized over the life of the PWRS Bonds.





F-9







Intangibles



A
portion of the acquisition price of the assets acquired by PWTS have been allocated on The Trust’s consolidated balance
sheet between Land and Intangibles’ fair values at the date of acquisition. The total amount of intangibles established
approximately $237,000, which will be amortized over a 24.6-year period. In 2015 and 2014, approximately $10,000 and $10,000,
respectively, of the intangibles was amortized.



A
portion of the acquisition price of the assets acquired by PWRS have been allocated on The Trust’s consolidated balance
sheet between Land and Intangibles’ fair values at the date of acquisition. The total amount of intangibles established
was approximately $4,714,000, which will be amortized over a 20.7-year period. In 2015 and 2014, approximately $227,000 and $161,000,
respectively, of the intangibles was amortized.



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 years ended December 31, 2015 and 2014.



The
following table provides a summary of the Intangible Assets:



|                   |  | December 31, 2015 |           |  | December 31, 2014 |  
|------------------ |  | ----------------- | --------- |  | ----------------- | -
|                   |  |                   |           |  | Accumulated       |  
|                   |  | Cost              |           |  | amortization      |  
|Intangibles - PWSS |  | $                 | 237,471   |  |                   | $
|Intangibles - PWRS |  |                   | 4,713,548 |  |                   |  
|Total              |  | $                 | 4,951,019 |  |                   | $



The
following table provides a summary of the current estimate of future amortization of Intangible Assets:



|2016       |  | $ | 237,141   | 
|---------- |  | - | --------- | 
|2017       |  |   | 237,141   | 
|2018       |  |   | 237,141   | 
|2019       |  |   | 237,141   | 
|2020       |  |   | 237,141   | 
|Thereafter |  |   | 3,352,315 | 
|Total      |  | $ | 4,538,020 | 



Land



Land
is carried at cost. Newly acquired investments in land with in-place leases are accounted for as business combinations in accordance
with Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations.” Upon the acquisition
of land, management assesses the fair value of acquired assets (including land, improvements and identified intangibles such as
above- and below-market leases and acquired in-place leases) and acquired and assumed liabilities (if any), and allocates the
acquisition price based on these assessments. Newly acquired investments in land without in-place leases are recorded at cost
(including costs related to the acquisition of the land).





F-10







Net
Investment in Capital Lease – Railroad



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



Fair
Value



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



| | ● | Level
    1 – valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that
    allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily
    available pricing sources for market transactions involving identical assets, liabilities or funds.                                                                                   
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ● | Level
    2 – valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for
    similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government
    and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third party pricing services
    for identical or comparable assets or liabilities.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ● | Level
    3 – valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing
    models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions.
    Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or
    liabilities.                                    



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



The
carrying amounts of Power REIT’s financial instruments, including cash and cash equivalents, deposits, and accounts payable
approximate fair value because of their relatively short maturity. Financial assets and liabilities carried at fair value on a
recurring basis were as follows:



December 31, 2014

($ in thousands)



|                   |  | Level 1 |   |  | Level 2 |   |     | Level 3 |  |   | Total | 
|------------------ |  | ------- | - |  | ------- | - | --- | ------- |  | - | ----- | 
|                   |  |         |   |  |         |   |     |         |  |   |       | 
|Liabilities        |  |         |   |  |         |   |     |         |  |   |       | 
|Interest rate swap |  | $       | - |  |         | $ | 528 |         |  | $ | -     | 





F-11







The
Trust has entered into swap agreements to hedge interest rate exposure on floating rate debt associated with its Credit Facility.
The interest Rate swap is designated as a Level 2 instrument. The fair value of the interest rate swap is determined using observable
market inputs such as current interest rates and considered non-performance risk of the Trust and its counterparties. The liability
indicates that interest rates have declined since the inception of the swap which represents an unrealized loss at December, 2014.
The Company has not designated the interest rate swaps as hedging instruments. Consequently, changes in the fair value are immediately
recognized in earnings.



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).



2
– CONCENTRATIONS



The
Company’s revenue is highly concentrated, with lease payments from the lessee of P&WV and PWRS assets representing approximately
47% and 41%, respectively, of the Company’s consolidated revenues for the year ended December 31, 2015. PWV’s tenant
is NSC which is a Class I railroad and, as reported in its Form 10-K filed with the SEC on February 8, 2016, had approximately
$12.2 billion of total stockholders’ equity as of December 31, 2015, and earned approximately $1.6 billion of net income
during its fiscal year ended December 31, 2015.



Power
REIT places its cash and cash equivalents with a single, high-credit quality financial institution; however amounts are not insured
or guaranteed by the FDIC.



3
– ACQUISITIONS



Power
REIT is actively seeking to expand its portfolio of real estate related to renewable energy generation projects, and is pursuing
investment opportunities that qualify for REIT ownership within solar, wind, hydroelectric, geothermal, transmission and other
infrastructure projects.



As
of April 14, 2014, the Trust’s wholly-owned subsidiary PWRS acquired approximately 447 acres of land located Kern County,
California near Bakersfield for approximately $9.2 million, not including transaction costs. The land is leased to an approximately
82 megawatts operating utility scale solar project with long-term power purchase agreements with Southern California Edison. Pursuant
to the lease agreement, the lessees are required to pay annual cash rent totaling $735,000 which grows at 1% per annum on a “triple
net” basis with all expenses to be paid by the tenant. Rent is paid quarterly in advance. At the end of the term which is
20 years from the date the project achieved commercial operations (November 11, 2014), the tenant has certain renewal options,
with rent calculated as the greater of a minimum stated rental amount or a percentage of the total project-level gross revenue.



The
following table summarizes the fair values of the assets acquired as of April 14, 2014:



|Land                                       |  | $ | 4,470,000 | 
|------------------------------------------ |  | - | --------- | 
|Intangible assets subject to amortization: |  |   |           | 
|Leases in-place                            |  |   | 4,713,548 | 
|Total assets
    acquired                  |  | $ | 9,183,548 | 







F-12







4
– CAPITAL LEASES AND OPERATING LEASES



Capital
Leases



The
Railroad Lease provides for a base cash rental of $915,000 per annum, payable quarterly, for the current 99-year lease period.
The leased properties are maintained entirely at the lessee’s expense. Under the terms of the Railroad Lease, which became
effective October 16, 1964, NSC (formerly Norfolk and Western Railway Company) leased all of P&WV’s real properties,
including its railroad lines, for a term of 99 years, renewable by the lessee upon the same terms for additional 99-year terms
in perpetuity.



Prior
to 1983, the Railroad Lease was accounted for as an operating lease in accordance with the Financial Accounting Standards Board
[FASB] ASC 840,Leases, because the railroad assets as accounted for under “betterment accounting” were considered
similar to land. Effective January 1, 1983, the Interstate Commerce Commission (ICC) changed the method of accounting for railroad
companies from “betterment accounting” (which was previously used by the P&WV and most railroads) to “depreciation
accounting”. The leased assets, under “depreciation accounting,” are no longer similar to land; and, effective
January 1, 1983, under the provisions of ASC 840, the Railroad Lease is considered a capital lease and the property deemed sold
in exchange for rentals receivable under GAAP accounting.



The
Railroad Lease may be terminated by the lessee at the expiration of the initial term or any renewal term, or by default of NSC.
In the event of termination, NSC is obligated to return to P&WV all properties covered by the Railroad Lease, together with
sufficient cash and other assets to permit operation of the railroad for a period of one year. In addition, NSC would be obligated
upon default or termination, to the extent NSC has not previously paid indebtedness due to P&WV, to settle remaining indebtedness
owed to P&WV. The existing indebtedness owed to P&WV, including the ability of P&WV to make an immediate demand for
payment of such amounts, is part of the subject of litigation. See Note 12, Legal Proceedings.



P&WV
has determined that the lease term is perpetual (for GAAP accounting purposes only) because it is perceived that it would be un-economic
for the lessee to terminate and the Lessee has control over its actions with respect to default and has unlimited renewal options.
Accordingly, as of January 1, 1983, the rentals receivable of $915,000 per annum, recognizing renewal options by the lessee in
perpetuity, were estimated to have a present value of $9,150,000, assuming an implicit interest rate of 10% as of the date FASB
ASC 840 was implemented.



Operating
Leases



PWSS’
land is subject to a lease agreement with a special purpose entity that owns a solar farm with an original 22-year initial term
with two five-year extension options on economic terms to be mutually agreed to between PWSS and the lessee. The lease commenced
on December 1, 2011 and has approximately twenty years left on the initial term. The initial term is due to expire December 1,
2033, with two five-year extension options at the lessee’s option at fair market rates to be mutually determined. PWSS assumed
the existing lease upon its acquisition of the Salisbury land. Pursuant to the lease, the lessee will pay PWSS $80,800 of annual
cash rent during December 1, 2012 to November 30, 2013. Rent is paid quarterly in advance with a 1.0% annual escalation. Rent
from the lease will be recorded on a straight-line basis, with $89,494 recorded during the years ended 2015 and 2014.





F-13







PWTS’
land is subject to lease agreements with special purpose entities that own solar farms with an original 25-year initial term (the
“PWTS Leases”). The PWTS Leases include two five-year extension options on economic terms to be mutually agreed to
between PWTS and the lessees. The PWTS Leases commenced in March 2013 (prior to being assumed by PWTS). PWTS assumed the existing
PWTS Leases upon its acquisition of the Tulare land. Pursuant to the PWTS Leases, the lessee will pay PWTS $157,500 of annual
cash rent paid annually in advance in March of each year after the projects reach commercial operations. As of the date of the
filing of this document, all of the PWTS solar farms have achieved commercial operations. Prior to achieving commercial operations,
PWTS is paid monthly rent in advance. A total of approximately $157,500 and $168,000 of rent paid to PWTS was recorded in 2015
and 2014 respectively.



PWRS’
land is subject to a lease agreement with a special purpose entity that owns a solar farms with an initial term that expires 20
years from the project commencing operations which occurred on November 11, 2014 (the “PWRS Lease”). At the end of
the initial lease term, the tenant has certain renewal options, with rent calculated as the greater of a minimum stated rental
amount or a percentage of the total project-level gross revenues. Pursuant to the PWTS Leases, the lessee will pay PWTS $735,000
in its first year after achieving commercial operations which grows at 1% per annum on a “triple net” basis with all
expenses to be paid by the tenant. Rent from the lease will be recorded on a straight-line basis, with $803,136 and $570,983 recorded
during the years ended 2015 and 2014, respectively.



The
following is a schedule by years of minimum future rentals on non-cancelable operating leases as of December 31, 2015:



|2016       |  |  | 983,730    | 
|---------- |  |  | ---------- | 
|2017       |  |  | 991,949    | 
|2018       |  |  | 1,000,249  | 
|2019       |  |  | 1,008,631  | 
|2020       |  |  | 1,017,097  | 
|Thereafter |  |  | 15,484,079 | 
|Total      |  |  | 20,485,735 | 



5
– LONG-TERM DEBT



On
April 14, 2014, PWRS borrowed approximately $6,900,000 in connection with PWRS’ acquisition of leased property and establishment
of its approximately $26 million credit facility. The credit facility carried a floating rate calculated as based on a spread
of 350 basis points over LIBOR. On November 6, 2015, PWRS repaid the entire balance of the credit facility with proceeds from
a new financing secured by the real property owned by PWRS (the “PWRS Bonds”) and terminated the credit facility.
In connection with the loan related to the PWRS acquisition, PWRS entered into two interest rate swap arrangements. One swap fixed
the rate on approximately $4.5 million at 4.19% commencing on March 31, 2019 and expires on December 31, 2033 and the other fixed
the rate on approximately $3.4 million at 1.92% commencing on April 14, 2014 and expires on March 31, 2019. The impact on net
interest income for the years ended December 31, 2015 and 2014 from the interest expense on the indebtedness was approximately
$49,000 and $44,000 respectively. At December 31, 2014, the Trust had a net unrealized loss related to the two swaps of approximately
$528,000 resulting from a drop in interest rates since establishing the swaps. Upon repayment of the credit facility the two interest
rate swaps were retired for a total swap settlement amount of $670,000. During 2015, the Trust realized a loss on interest rate
swaps of approximately $189,000. The termination of the credit facility resulted in a loss on debt extinguishment of $353,000.





F-14







The
PWRS Bonds are secured by land owned by PWRS and have a total obligation of $10,150,000. The PWRS Bonds carry a fixed interest
rate of 4.34% and matures in 2034. The use of proceeds from the PWRS Bonds was to retire approximately $6,650,000 of existing
indebtedness and the associated swap that was entered which are secured by the PWRS property; retire the $1,650,000 million loan
to PW Tulare Solar, LLC (a wholly owned subsidiary of Power REIT) from Hudson Bay Partners, LP (an affiliate of David H. Lesser
- Chairman and CEO of Power REIT) including accrued interest; pay deferred financing costs of approximately $441,000; pay interest
rate swaps of approximately $670,000; pay approximately $180,000 of unpaid fees; and, to pay other accounts payable of Power REIT
and its subsidiaries. Upon completion of the refinancing, PWTS now owns its assets free and clear of any indebtedness.



In
July 2013, PWTS borrowed bridge financing of $1,650,000 from HBP to fund the acquisition of the approximately 100 acres of land
near Fresno, California that it owns and leases to a number of solar farms. The balance on the loan from HBP was $0 and $1,650,000
at December 31, 2015 and 2014, respectively. On November 6, 2015, PWTS repaid the bridge financing in full with proceeds available
from the refinancing of its loan secured by the real property owned by PWRS.



On
July 5, 2013, PWSS borrowed $750,000 from a regional bank (the “PWSS Term Loan”) to refinance a bridge loan that had
been extended by HBP in connection with PWSS’ acquisition of leased property in December 2012. The PWSS Term Loan carries
a fixed interest rate of 5.0%, a term of 10-years and amortizes based on a twenty-year principal amortization schedule. In addition
to being secured by PWSS’ real estate assets, the term loan is secured by a parent guarantee from the Trust. The balance
of the PWSS Term Loan as of December 31, 2015 and 2014 is approximately $693,000 and $718,000 respectively.



On
December 31, 2012, as part of the Salisbury land acquisition, PWSS assumed existing municipal financing (“Municipal Debt”).
The Municipal Debt has approximately 16 years remaining. The Municipal Debt has a simple interest rate of 5.0% that is paid annually,
with the next payment due February 1, 2016. The balance of the Municipal Debt as of December 31, 2015 and 2014 is approximately
$103,000 and $109,000 respectively.



The
approximate amount of principal payments remaining on Power REIT’s long-term debt as of December 31, 2015 is described below:



|               |  | Total debt |           
|-------------- |  | ---------- | ----------
|2016           |  |            | 323,000   
|2017           |  |            | 343,000   
|2018           |  |            | 367,000   
|2019           |  |            | 390,000   
|2020           |  |            | 415,000   
|Thereafter     |  |            | 9,108,000 
|Long-term Debt |  | $          | 10,623,000





F-15







6
– SHELF REGISTRATION STATEMENT, ATM EQUITY OFFERING AND PREFERRED STOCK OFFERING



In
May 2012, the U.S. Securities and Exchange Commission (the “SEC”) declared effective The Trust’s $100 million
shelf registration statement on Form S-3. Under the registration statement, the Trust may from time to time publicly issue any
combination of common or preferred equity or equity-linked securities (warrants, options or units) in any amounts up to an aggregate
of $100 million.



On
March 28, 2013, the Trust entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with MLV &
Co. LLC (“MLV”) as its agent, and filed a prospectus supplement to its shelf registration statement, pursuant to which
the Trust may, through MLV, offer and sell, from time to time, up to $5.4 million of its common shares through “at-the-market”
offerings. Under the terms of the ATM Agreement, the Trust pays MLV fees equal to 3% of the gross proceeds of any such sales.
The offering is being conducted as a “takedown” from the Trust’s shelf registration statement.



The
Trust has been offering up to 175,000 shares of its 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock, Liquidation
Preference $25 per Share (the “Series A Preferred Stock”) on a continuous basis, pursuant to a public offering prospectus
supplement dated January 23, 2014 and an accompanying prospectus. The offering is being conducted as a “takedown”
from the Trust’s $100 million shelf registration statement on Form S-3, which was declared effective by the SEC in May 2012.
The Series A Preferred Stock is the first issuance by the Trust of equity securities other than its common shares. The Series
A Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution or winding up, senior to our common shares.
The Series A Preferred Stock has no maturity and is redeemable at par by the Trust commencing on November 30, 2018. As of December
31, 2015, the Trust had closed on the sale of 144,636 shares of its Series A Preferred Stock for net proceeds of approximately
$3,492,000. Due to the Series A Preferred Stock’s redemption feature, this is classified as temporary equity in the consolidated
balance sheets.



During
the years ended December 31, 2015 and 2014, Power REIT paid approximately $280,000 and $191,000 of dividends on its Series A Preferred
Stock.



7
– LONG-TERM COMPENSATION



The
Trust grants awards pursuant to its 2012 Equity Incentive Plan (“Plan”), which was approved at the Trust’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 the Trust and its subsidiaries,
including outside directors. Compensation may be awarded under the Plan until it is terminated or until the ten-year anniversary
of the Plan.



The
initial number of shares of stock available for issuance under the Plan was 200,000 shares. During the third quarter of 2012,
30,000 shares of restricted common stock, and options to acquire 166,000 shares of common stock, were granted. During the second
quarter of 2013, 1,600 shares of restricted common stock were granted to the trustees in lieu of cash compensation. As of December
31, 2014, 10,900 common shares remain authorized and available for issuance. The Plan contains an “evergreen” provision
that automatically adjusts the number of shares available for future issuance, as provided in Section 4 of the Plan (subject to
certain adjustments) as follows: “the number of shares of Stock which shall be made available for issuance under the Plan
shall be increased by the positive number of shares equal to the lesser of: (i) (A) 10% of the Company’s outstanding shares
of Stock, calculated on a fully diluted and consolidated basis (including the OP Units of our Operating Partnership, if any),
less (B) the sum of (1) the aggregate number of shares remaining available for issuance under the Plan as of such date, plus (2)
the aggregate number of shares subject to outstanding Awards and unvested shares of Restricted Stock or other unvested equity
compensation granted under the Plan as of such date, or (ii) a lesser amount determined by the Compensation Committee. For clarity,
if the amount determined in the formula in the preceding sentence is negative, the number of shares available for issuance shall
neither be increased nor decreased.”





F-16







Summary
of Plan Activity – Options



The
summary of Plan activity for the year ended December 31, 2015, with respect to the Trust’s stock options, was as follows:



|                                              |  |           |         |  | Weighted       |   |      | Aggregate | 
|--------------------------------------------- |  | --------- | ------- |  | -------------- | - | ---- | --------- | 
|                                              |  | Number of |         |  | Average        |   |      | Intrinsic | 
|                                              |  | Options   |         |  | Exercise Price |   |      | Value     | 
|Balance at December 31, 2014                  |  |           | 106,000 |  |                | $ | 7.96 |           | 
|Plan Awards                                   |  |           | -       |  |                |   |      |           | 
|Options Exercised                             |  |           | -       |  |                |   | 7.96 |           | 
|Balance as of December 31, 2015               |  |           | 106,000 |  |                |   | 7.96 |           | 
|Options expected to vest at December 31, 2015 |  |           | -       |  |                |   | 7.96 |           | 
|Options exercisable as of December 31, 2015   |  |           | 106,000 |  |                |   | 7.96 |           | 



For
the year ended December 31, 2015, the weighted average fair value of options vested, not vested and granted is $0.96 per share.
The Aggregate Intrinsic Value is based on the difference between the option exercise price and its closing price of $4.37 at December
31, 2015 but is zero since the exercise price is below the price.



The
summary of Plan activity for the year ended December 31, 2014, with respect to the Trust’s stock options, was as follows:



|                                              |  |           |         |   | Weighted       |  |      | Aggregate | 
|--------------------------------------------- |  | --------- | ------- | - | -------------- |  | ---- | --------- | 
|                                              |  | Number of |         |   | Average        |  |      | Intrinsic | 
|                                              |  | Options   |         |   | Exercise Price |  |      | Value     | 
|Balance at December 31, 2013                  |  |           | 166,000 |   |                |  | 7.96 |           | 
|Plan Awards                                   |  |           | -       |   |                |  |      |           | 
|Options Exercised                             |  |           | (20,000 | ) |                |  | 7.96 |           | 
|Options Forfeited                             |  |           | (40,000 | ) |                |  | 7.96 |           | 
|Balance as of December 31, 2014               |  |           | 106,000 |   |                |  | 7.96 |           | 
|Options expected to vest at December 31, 2014 |  |           | 35,333  |   |                |  | 7.96 |           | 
|Options exercisable as of December 31, 2014   |  |           | 70,667  |   |                |  | 7.96 |           | 



For
the year ended December 31, 2014, the weighted average fair value of options vested, not vested and granted is $0.96 per share.
The Aggregate Intrinsic Value is based on the difference between the option exercise price and its closing price of $8.35 at December
31, 2014.



During
the year ended December 31, 2014, the Company issued 20,000 shares in connection with the 20,000 options exercised for total proceeds
of $159,200.





F-17







Summary
of Plan Activity – Restricted Stock



The
summary of Plan activity for the year ended December 31, 2015, with respect to the Trust’s restricted stock, was as follows:



|                                |  | Number of  |         |   | Weighted   |  
|------------------------------- |  | ---------- | ------- | - | ---------- | -
|                                |  | Shares of  |         |   | Average    |  
|                                |  | Restricted |         |   | Grant Date |  
|                                |  | Stock      |         |   | Fair Value |  
|Balance at December 31, 2014    |  |            | 37,042  |   |            | $
|Plan Awards                     |  |            | 10,900  |   |            |  
|Restricted Stock Vested         |  |            | (23,067 | ) |            |  
|Balance as of December 31, 2015 |  |            | 24,875  |   |            |  



The
summary of Plan activity for the year ended December 31, 2014, with respect to the Trust’s restricted stock, was as follows:



|                                |  | Number of  |         |   | Weighted   | 
|------------------------------- |  | ---------- | ------- | - | ---------- | 
|                                |  | Shares of  |         |   | Average    | 
|                                |  | Restricted |         |   | Grant Date | 
|                                |  | Stock      |         |   | Fair Value | 
|Balance at December 31, 2013    |  |            | 20,400  |   |            | 
|Plan Awards                     |  |            | 41,500  |   |            | 
|Restricted Stock Vested         |  |            | (18,191 | ) |            | 
|Restricted Stock Forfeited      |  |            | (6,667  | ) |            | 
|Balance as of December 31, 2014 |  |            | 37,042  |   |            | 



Stock-based
Compensation



During
2015, the Trust recorded approximately $186,000 of non-cash expense related to restricted stock and options granted under the
Plan compared to approximately $181,000 for 2014. As of December 31, 2015 there was approximately $186,000 of total unrecognized
share-based compensation expense, which expense will be recognized through the second quarter of 2018, equating to a weighted
average amortization period of approximately 1.5 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.



8
- INCOME TAXES



The
Trust is organized as a Maryland-domiciled real estate investment trust and has elected to be treated under the Internal Revenue
Code as a real estate investment trust. As such, the Trust does not pay Federal taxes on taxable income and capital gains to the
extent that they are distributed to shareholders. In order to maintain qualified status, at least 90% of annual ordinary taxable
income must be distributed; it is the intention of the trustees to continue to make sufficient distributions to maintain qualified
status.



Under
the Railroad Lease, NSC reimburses P&WV, in the form of additional cash rent, for all taxes and governmental charges imposed
upon the assets leased by NSC from P&WV, except for taxes relating to cash rent payments made by the lessee. Due to the treatment
of the Railroad Lease as a direct financing lease for financial reporting purposes, the tax basis of the leased property is higher
than the basis of the leased property as reported in these consolidated financial statements.





F-18







The
Trust has implemented the accounting guidance for uncertainty in income taxes using the provisions of FASB ASC 740, Income
Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not
the position will be sustained upon examination by the tax authorities.



Dividends
distributed by the Trust for the years ended December 31, 2015 were deemed a return of capital for 2015 and ordinary income for
2014.



The
Trust and its wholly-owned subsidiary P&WV are generally no longer subject to examination by income taxing authorities for
years ended prior to December 31, 2012.



9
- RELATED PARTY TRANSACTIONS



The
Trust and its subsidiaries have hired Morrison Cohen, LLP (“Morrison Cohen”) as their legal counsel with respect to
general corporate matters and the litigation with NSC. A spouse of the Trust’s Chairman, CEO, Secretary and Treasurer is
a partner at Morrison Cohen. During 2015, Power REIT (on a consolidated basis) paid approximately $890,000 in legal fees and costs
to Morrison Cohen in connection with various legal matters, including the litigation with NSC. (See Note 12, Legal Proceedings).



On
December 28, 2012, Hudson Bay Partners, LP (“HBP”), a wholly-owned affiliate of the Trust’s Chairman, CEO, Secretary
and Treasurer, loaned PWSS $800,000 in the form of a senior, secured bridge loan. This amount was refinanced with a third party
lender on July 5, 2013 and HBP was repaid in full with interest. On July 11, 2013, HBP loaned PWTS $1,650,000 in the form of senior,
secured bridge loan notes which was repaid in full with interest on November 6, 2015 (See Note 5, Long-term Debt).



A
wholly-owned subsidiary of HBP provides the Trust and its subsidiaries with office space at no cost.



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 retention
of Morrison Cohen and the bridge loan arrangements described above, the independent trustees approved the hiring of Morrison Cohen
as counsel and approved the bridge loans, determining all such arrangements to be fair and reasonable and in the interest of the
Trust.



10
- CONTINGENCY



The
Trust is not subject to any contingencies, except as described in Note 12, Legal Proceedings. 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
January 26, 2016, Power REIT and P&WV filed a Notice of Appeal to appeal the litigation with Norfolk Southern Corporation
(“NSC”) and NSC’s sub-lessee, Wheeling & Lake Erie Railroad to the United States Court of Appeals for the
Third Circuit. See Note 12, Legal Proceedings.





F-19







On
January 26, 2016, the Registrant declared a quarterly dividend of $0.48375 per share on Power REIT’s 7.75% Series A Cumulative
Redeemable Perpetual Preferred Stock payable on March 15th, 2016, to shareholders of record on February 15th, 2015.



12
– LEGAL PROCEEDINGS



As
previously disclosed in its public filings with the SEC, the Trust and its wholly-owned subsidiary P&WV are in litigation
with NSC and NSC’s sub-lessee, Wheeling & Lake Erie Railroad (“WLE” and, together with NSC, the “Litigants”)
concerning matters arising under the Railroad Lease. The case is pending in Federal trial court in Pittsburgh (the “Court”).
The Litigants initiated the litigation against the Trust and P&WV in December 2011, seeking, among other things, a declaratory
judgment that NSC was not in default under the Railroad Lease.



P&WV,
as lessor, has asserted counterclaims, seeking determinations that NSC is in default under the Railroad Lease for, among other
things, failing to reimburse P&WV for certain legal fees incurred by P&WV, failing to permit P&WV to inspect NSC’s
books and records as called for under the terms of the Railroad Lease and failing to pay other amounts that P&WV believes
are due and owing. P&WV also seeks declarations from the Court (a) that NSC’s obligation to repay the indebtedness owed
under the Railroad Lease is not indefinite in duration, and (b) that the indebtedness owed to P&WV is due on demand with interest.
If P&WV is successful with certain of its counterclaims, it can terminate the Railroad Lease and demand from NSC payment of
the indebtedness.



The
indebtedness is the cumulative result of amounts received by NSC from its dispositions of P&WV property, additional rental
amounts due and other sums that NSC owes to P&WV but which NSC has elected, under its interpretation of the Railroad Lease,
to pay by increasing its indebtedness to P&WV rather than by providing P&WV with cash. According to records maintained
by NSC pursuant to the Railroad Lease and provided by NSC to P&WV, as of December 31, 2012 the indebtedness owed to P&WV
was approximately $16,600,000. NSC has not provided a more recent update of the indebtedness amount. P&WV believes that the
indebtedness amount is understated. The indebtedness has not been included in P&WV’s balance sheets prepared under GAAP,
because of the dispute as to when it is due. Similarly, certain additional rental amounts that NSC disputes are due on a current
basis, and which have historically been treated as indebtedness, have not been included in P&WV’s income statements
or balance sheets prepared under GAAP; however, these additional rent amounts have historically been recorded as taxable income
on P&WV’s tax returns.



The
Litigants have alleged that the Trust is a successor in interest in respect of the Railroad Lease. If that allegation were to
be decided against us in a fact-finding stage of the litigation, it could lead to liability and expenses. The Trust believes that
it is not a successor in interest in respect of the Railroad Lease and is not constrained by any of the Railroad Lease restrictions.



The
parties have made certain supplements to their respective claims and counterclaims. In August 2013, P&WV filed a second supplement
to its counterclaims following the Litigants’ disclosure of previously undisclosed dispositions of P&WV property. P&WV
believes that additional amounts are owed to it as a result of these dispositions and, accordingly, asserted new counterclaims,
including claims of fraud and conversion. Based on the information available at the time P&WV supplemented its claims, P&WV
has estimated that the additional amounts owed to it exceed $8 million, not including potential interest and damages. P&WV
also supplemented its counterclaim for additional rental amounts due in order to include the reimbursement of its legal expenses
related to the litigation. In response to P&WV’s second supplement to its counterclaims, in January 2014 the Litigants
amended their pleadings to add additional claims against both P&WV and the Trust. The Litigants’ new claims seek additional
declarations from the Court that the Litigants have not defaulted on or violated the terms of the Railroad Lease.



On
September 13, 2013, the Trust filed a motion for summary judgment seeking dismissal of all of the claims against it primarily
based on the fact that the Trust is not a party to the Lease. On January 15, 2014, the Court heard oral arguments from the parties
on the Trust’s motion. On October 16, 2013, the Litigants filed a motion seeking leave to supplement their claims to include:
(i) nominal damages, (ii) enjoinment of Power REIT from taking actions in breach of the Lease Agreement, (iii) the withdrawal
of NSC’s consent to the additional share by PWV; and (iv) the undoing of the reverse triangular merger. On June 19, 2014,
the court denied the Trust’s motion but also denied Plaintiff’s motion seeking leave to supplement their claims with
the exception of granting the motion to seek nominal damages.





F-20







The
fact and expert discovery phases of the litigation have been completed. On September 8, 2014, P&WV filed a Motion for Summary
Judgment and on October 22, 2014, the Litigants filed an opposition to such motion and on November 5 2014, P&WV filed a Reply
to NSC and WLE’s opposition to such motion. On September 8, 2014, the Litigants filed a Motion for Summary Judgment and
on October 22, 2014, P&WV filed an opposition to such motion and on November 5, 2014, the Litigants filed a reply to P&WV’s
opposition to such motion. On December 16, 2014, the court held oral argument on both of the pending motions for Summary Judgment.



On
April 22, 2015, the court denied P&WV’s motion for summary judgment and granted the Litigants’ summary judgment
motion thereby dismissing all of P&WV’s claims. During the week of August 3, 2015, a trial was conducted on the two
remaining claims of the Litigants against P&WV and Power REIT. On December 29, 2015, the Court issued a ruling with respect
to the remaining claims that were the subject of the trial. In the ruling, the Court found in favor of Power REIT on all claims
brought against it by NSC and WLE. In addition, the Court also found in favor of P&WV with respect to claims brought against
P&WV by WLE. However, the Court did find in favor of NSC against P&WV for certain of its claims (fraud and breach of contract)
and awarded nominal damages of $1.00. In connection with NSC’s demand for punitive damages, the Court ruled that NSC was
not entitled to punitive damages.



On
January 26, 2016, Power REIT and P&WV filed a Notice of Appeal to appeal the matter to the United States Court of Appeals
for the Third Circuit. Power REIT and P&WV’s appellate brief is currently scheduled to be filed on April 28, 2016. Power
REIT and P&WV have retained the firm of Keker & Van Nest LLP as lead counsel related to the appeal.



P&WV
has provided key court filings in the litigation on its website (www.pwreit.com) under a tab called “P&WV Litigation
Update” which is under the “Investor Relations” tab. The provided documents and accompanying supporting documents
are not comprehensive or complete and the full case docket is available from the Public Access to Court Records (PACER) website.
Power REIT encourages interested parties to review all the public filings available on PACER and to review the risks and disclosures
in Power REIT’s Annual Report filed on Form 10-k and other documents filed from time to time with the Securities and Exchange
Commission (SEC).



During
the year December 31, 2015 and 2014, P&WV incurred litigation related expenses of approximately $359,000 and $1,050,000, respectively.
As of December 31, 2015, P&WV had incurred a total of approximately $3.1 million of cumulative expenses related to the litigation,
of which approximately $2,000 is in accounts payable. P&WV believes that the costs associated with the litigation are reimbursable
by NSC under the Railroad Lease as additional rent, but NSC has refused to pay such amounts. At this point, in order to collect
such amounts, P&WV would need to prevail on the appeal. There can be no assurance that P&WV will prevail in collecting
its litigation expenses from NSC; accordingly, the expenses of the litigation are accrued and expensed as incurred.



As
of the date of this filing, NSC has continued to make its quarterly base rental payments ($228,750 per quarter) despite the pendency
of the litigation. However, there can be no assurance that NSC will continue to make its base rental payments.





F-21