UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

** **

**FORM 10-Q**

(MarkOne)

 

[x]  **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

** **

For the quarterly period endedJanuary 31, 2011.

 

[  ]  **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

** **

For the transition periodfrom _______________________________________ to___________________________________

 

Commission File Number:_______________________________________________________________________________

 
| FirstHartford Corporation                                                         |
|-----------------------------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)                            |
|                                                                              |
| Maine                                                                             |  01-0185800 |
|  (State or other jurisdictionof incorporation ororganization)                | (I.R.S.Employer Identification No.) |
|                                                                              |   |
| 149 Colonial Road    Manchester, CT                                | 06045-1270 |
| (Address of principal executive offices)                                          | (Zip		Code) |
|                                                                              |
| 860-646-6555                                                                      |
|  (Registrant’s telephone number, including area code)                   |
|                                                                              |
| (Former name, former address and former fiscal year,if changed since last report) |

 

Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90days.                                                                                                                                                                                                            XYes   ⁪ No    

 

Indicate by check mark whetherthe registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T during the preceding 12 months (or forsuch shorter period that the registrant was required to submit and post suchfiles).

                                                                                                                                                            ⁪Yes   ⁪ No

 

Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See definition 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 ⁪   (Do not check if a smaller reportingcompany)      | Smaller reporting company X     |

 

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act).

                                                                                                                                                ⁪Yes   X No

 

APPLICABLE ONLY TOCORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of theissuer's classes of common stock, as of the latest practicable date.

 

2,436,711 as of March 25, 2011   

 

| 1 |
|---|

 

----

 

 

 

 

 

 

 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

 

INDEX

 
| PART I.            FINANCIALINFORMATION                                                    | PAGE    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                                                                                                             |    |
| Item 1.              FinancialStatements                                                        |    |
|                                                                                                                                                             |    |
| CondensedConsolidated Balance Sheets -                                                                                                                           |    |
| January31, 2011 (unaudited) and April 30, 2010 (audited)                                                                                                         | 3 - 4   |
|                                                                                                                                                             |    |
| CondensedConsolidated Statements of Operations and Other                                                                                                         |    |
| ComprehensiveIncome (Loss) for the Three and Nine Months                                                                                                         |    |
| Ended January 31, 2011 and 2010 (unaudited)                                                                                                            | 5       |
|                                                                                                                                                             |    |
| CondensedConsolidated Statements of Cash Flows for the                                                                                                           |    |
|             NineMonths Ended January 31, 2011 and 2010 (unaudited)                    | 6 - 7   |
|                                                                                                                                                             |    |
| Notesto Condensed Consolidated Financial Statements                                                                                                         | 8 - 12  |
|                                                                                                                                                             |    |
| Item 2.             Management’sDiscussion and Analysis of Financial Condition   |    |
| andResults of Operations                                                                                                                          | 12 - 14 |
|                                                                                                                                                             |    |
| Item 3.              Quantitativeand Qualitative Disclosures About Market Risk             | 14      |
|                                                                                                                                                             |    |
| Item 4T.           Controlsand Procedures                                                       | 14      |
|                                                                                                                                                             |    |
| **PART II           OTHERINFORMATION**                                                                         |    |
|                                                                                                                                                             |    |
| Item 1.             LegalProceedings                                                            | 15      |
|                                                                                                                                                             |    |
| Item 1A.          Risk Factors                                                             | 15      |
|                                                                                                                                                             |    |
| Item 2.             UnregisteredSales of Equity Securities and Use of Proceeds                  | 15      |
|                                                                                                                                                             |    |
| Item 3.             DefaultsUpon Senior Securities                               | 15      |
|                                                                                                                                                             |    |
| Item 4.             Removedand Reserved                                     | 15      |
|                                                                                                                                                             |    |
| Item 5.             OtherInformation                                   | 15      |
|                                                                                                                                                             |    |
| Item 6.             Exhibits                                                               | 16      |
|                                                                                                                                                             |    |
| Signatures                                                                                                                                                       | 17      |
|                                                                                                                                                             |    |
| Exhibits                                                                                                                                                         | 18 - 21 |
|                                                                                                                                                             |    |

 

 

 

 

 

 

 

 

| 2 |
|---|

 

----

 

 

 

 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 

ASSETS

| ** **                                                                                 |
|--------------------------------------------------------------------------------------------|
|  

                                                                              |  

  |  

**January 31, 2011** |   | ** **

**April 30, 2010** |
| ** **

                                                                          |  

  |  

(unaudited) |   |  

(audited) |
| Real estate and equipment:                                                                 |   |  

  |   |  

  |
|  

   Developed properties                                                  |  

  |  

$110,901,957 |   |  

$131,437,600 |
|  

   Equipment and tenant improvements                                     |  

  | 1,542,370 |   | 1,408,206 |
|                                                                                       |   | 112,444,327 |   | 132,845,806 |
|                                                                                       |   |   |   |   |
|    Less: accumulated depreciation and amortization                               |   |  

10,646,570 |   |  

11,200,570 |
|                                                                                       |  

  | 101,797,757 |   | 121,645,236 |
|                                                                                       |   |   |   |   |
|    Property under construction                                                   |   | 22,402,379 |   | 5,525,858 |
|                                                                                       |   | 124,200,136 |   | 127,171,094 |
|                                                                                       |   |   |   |   |
|  

Cash and cash equivalents                                                |  

  | 1,136,308 |   | 5,179,164 |
|                                                                                       |  

  |   |   |   |
| Cash and cash equivalents - restricted                                                     |   | 645,692 |   |  

2,350,003 |
|                                                                                       |   |   |   |   |
| Marketable securities                                                                 |   | 172,216 |   | 1,323,571 |
|                                                                                       |   |   |   |   |
|  

Accounts and notes receivable, less allowance for doubtful accounts  of $162,000   |  

  |  

  |   |  

  |
|  

   and $214,000 as of January 31, 2011 and April 30, 2010,  respectively |  

  | 2,171,770 |   |  

2,175,177 |
|                                                                                       |   |
|  

Other receivables                                                                  |  

10,893,420 |   |  

15,654,514 |
|                                                                                       |   |   |   |
|  

Deposits, escrows, prepaid and deferred expenses, net                              |  

11,402,302 |   |  

10,316,964 |
|                                                                                       |   |   |   |
|  

Investments in affiliates                                                          |  

  |  

9,665 |   |  

9,665 |
|                                                                                       |   |   |   |   |
|  

Due from related parties and affiliates                                            |  

  |  

497,412 |   | 454,467 |
|                                                                                       |   |   |   |   |
| Deferred tax assets, net                                                                   |   |  

1,238,000 |   | 1,238,000 |
|                                                                                       |   |   |   |   |
|  

Total Assets

                                                                |  

  |  

$152,366,921 |   |  

$165,872,619 |

 

 

 

 

 

 

 

 

 

 

The accompanying notes are anintegral part of these condensed consolidated financial statements

 

 

| 3 |
|---|

 

----

 

 

 

 

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES 

**CONDENSEDCONSOLIDATED BALANCE SHEETS (continued)**

 

|  

**LIABILITIES AND SHAREHOLDERS’ DEFICIENCY**                       |
|---------------------------------------------------------------------------------|
| ** **

                                                               |  

  |  

  |   |  

  |
|  

                                                                   |  

  |  

**January 31, 2011** |   | ** **

**April 30, 2010** |
| ** **

Liabilities:                                                        |  

  |  

(unaudited) |   |  

(audited) |
|  

   Mortgages and notes payable:                               |  

  |  

  |   |  

  |
|  

   Construction loans payable                                 |  

  |  

$70,963,788 |   |  

$52,683,189 |
|  

   Mortgages payable                                          |  

  |  

65,593,212 |   |  

86,613,734 |
|  

   Notes payable                                              |  

  |  

4,853,109 |   |  

2,165,321 |
|                                                                            |   | 141,410,109 |   | 141,462,244 |
|                                                                            |   |   |   |   |
|  

Accounts payable                                                        |  

  |  

2,561,520 |   | 1,815,727 |
|  

Other payables                                                          |  

  | 4,092,947 |   | 10,133,280 |
|  

Accrued liabilities                                                     |  

  | 3,152,468 |   |  

7,454,741 |
|  

Deferred income                                                         |  

  |  

149,738 |   |  

198,090 |
|  

Derivative liabilities                                                  |  

  |  

-0- |   |  

2,677,363 |
|  

Other liabilities                                                       |  

  |  

4,487,223 |   |  

4,709,772 |
|  

Due to related parties and affiliates                                   |  

  |  

102,752 |   |  

62,418 |
|  

Total Liabilities                                                       |  

  |  

155,956,757 |   |  

168,513,635 |
|  

                                                                   |  

  |  

  |   |  

  |
|  

Shareholders’ Deficiency:                                          |  

  |  

  |   |  

  |
|  

Preferred stock, $1 par value; $.50 cumulative and convertible;         |  

  |
|   authorized 4,000,000 shares; no shares issued and outstanding            |  

  | -0- |   | -0- |
|  

Common stock, $1 par value; authorized 6,000,000 shares;                |  

  |   |  

  |
|  

  issued 3,298,609 shares                                          |  

3,298,609 |   |  

3,298,609 |
|  

Capital in excess of par                                                |  

  |  

5,056,111 |   |  

2,176,704 |
|  

Accumulated deficit                                                     |  

  |  

(16,035,808) |   |  

(15,118,235) |
|  

Accumulated other comprehensive loss                                    |  

  | -0- |   |  

(85,414) |
| Treasury stock, at cost, 861,898 and 270,644 shares as of January 31,  2011 and |   |   |   |   |
|    and April 30, 2010, respectively                                   |  

  |  

(4,923,836) |   | (2,044,429) |
|  

Total Company Shareholders’ Deficiency                             |  

  |  

(12,604,924) |   |  

(11,772,765) |
|  

Noncontrolling interests                                                |  

  |  

9,015,088 |   | 9,131,749 |
|                                                                            |   |   |   |   |
|  

Total Shareholders’ Deficiency                                     |  

  |  

(3,589,836) |   |  

(2,641,016) |
|                                                                            |   |   |   |   |
|  

Total Liabilities and Shareholders’ Deficiency                     |  

  |  

$152,366,921 |   |  

$165,872,619 |

 

 

 

 

 

 

 

 

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

| 4 |
|---|

 

----

 

 

 

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS AND**

**OTHER COMPREHENSIVE (LOSS)INCOME**

(Unaudited)

|                                                                       | **Three Months Ended** |   | **Nine Months Ended** |
|----------------------------------------------------------------------------|------------------------|--------|-----------------------|
|                                                                       | **Jan. 31, 2011**      |   | **Jan. 31, 2010**     |   | **Jan. 31, 2011** |   | **Jan. 31, 2010** |
| Operating revenues:                                                        |                   |   |                  |   |   |   |   |
|      Rental income                                     | $4,551,140             |   | $3,090,674            |   | $12,903,160 |   | $9,767,086 |
|      Service income                                    | 521,943                |   | 1,162,323             |   | 2,198,172 |   | 3,902,437 |
|      Sales of real estate                              | -0-                    |   | -0-                   |   | -0- |   | 4,300,000 |
|      Other income                                      | 4,883                  |   | 106,943               |   | 5,674 |   | 411,749 |
|                                                                       | 5,077,966              |   | 4,359,940             |   | 15,107,006 |   | 18,381,272 |
|                                                                       |                   |   |                  |   |   |   |   |
| Operating costs and expenses:                                              |                   |   |                  |   |   |   |   |
|      Rental expenses                                   | 3,601,221              |   | 2,211,137             |   | 10,159,477 |   | 6,706,465 |
|      Services expenses                                 | 523,447                |   | 702,251               |   | 1,870,198 |   | 2,231,947 |
|      Cost of sales, real estate                        | -0-                    |   | -0-                   |   | -0- |   | 3,750,828 |
|      Selling, general and administrative               | 539,047                |   | 838,591               |   | 2,276,714 |   | 2,675,381 |
|                                                                       | 4,663,715              |   | 3,751,979             |   | 14,306,389 |   | 15,364,621 |
|                                                                       |                   |   |                  |   |   |   |   |
| Income from operations                                                     | 414,251                |   | 607,961               |   | 800,617 |   | 3,016,651 |
|                                                                       |                   |   |                  |   |   |   |   |
| Non-operating income (expense):                                            |                   |   |                  |   |   |   |   |
|      Interest expense                                  | (1,807,505)            |   | (1,633,935)           |   | (5,212,619) |   | (4,838,129) |
|      Other income                                      | 229,822                |   | 9,827                 |   | 371,926 |   | 245,144 |
|      Gain on derivatives                               | -0-                    |   | 264,726               |   | -0- |   | 881,639 |
|      Equity in earnings of unconsolidated subsidiaries | 207,298                |   | 131,698               |   | 703,569 |   | 559,793 |
|                                                                       | (1,370,385)            |   | (1,227,684)           |   | (4,137,124) |   | (3,151,553) |
|                                                                       |                   |   |                  |   |   |   |   |
| Loss before income taxes                                                   | (956,134)              |   | (619,723)             |   | (3,336,507) |   | (134,902) |
|                                                                       |                   |   |                  |   |   |   |   |
| Provision for income taxes                                                 | 29,629                 |   | 2,041                 |   | 31,979 |   | 18,802 |
|                                                                       |                   |   |                  |   |   |   |   |
| Net loss                                                                   | (985,763)              |   | (621,764)             |   | (3,368,486) |   | (153,704) |
|                                                                       |                   |   |                  |   |   |   |   |
| Net loss attributable to noncontrolling interests                          | 61,621                 |   | 125,813               |   | 484,844 |   | 198,418 |
|                                                                       |                   |   |                  |   |   |   |   |
| Net (loss) income attributable to Company                                  | (924,142)              |   | (495,951)             |   | (2,883,642) |   | 44,714 |
|                                                                       |                   |   |                  |   |   |   |   |
| Other comprehensive income, net of tax:                                    |                   |   |                  |   |   |   |   |
| Unrealized holding gains on securities during                              |                   |   |                  |   |   |   |   |
|      the period                                        | -0-                    |   | 48,175                |   | -0- |   | 223,156 |
|                                                                       |                   |   |                  |   |   |   |   |
| Comprehensive (loss) income                                                | $(924,142)             |   | $(447,776)            |   | $(2,883,642) |   | $267,870 |
|                                                                       |                   |   |                  |   |   |   |   |
| Comprehensive income attributable noncontrolling Interests                 | -0-                    |   | (32,293)              |   | -0- |   | (162,967) |
|                                                                       |                   |   |                  |   |   |   |   |
| Comprehensive (loss) income attributable to Company                        | $-0-                   |   | $(480,069)            |   | $-0- |   | $104,903 |
|                                                                       |                   |   |                  |   |   |   |   |
| Net (loss) income per share - basic                                        | $(0.35)                |   | $(0.16)               |   | $(0.99) |   | 0.01 |
|                                                                       |                   |   |                  |   |   |   |   |
| Net (loss) income per share - diluted                                      | $(0.35)                |   | $(0.16)               |   | $(0.99) |   | 0.01 |
|                                                                       |                   |   |                  |   |   |   |   |
| Shares used in basic per share computation                                 | 2,612,138              |   | 3,027,965             |   | 2,899,691 |   | 3,027,998 |
|                                                                       |                   |   |                  |   |   |   |   |
| Shares used in diluted per share computation                               | 2,612,138              |   | 3,027,965             |   | 2,899,691 |   | 3,027,998 |

 

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

| 5 |
|---|

 

----

 

 

 

 

 

 

| **   **

**FIRST HARTFORD CORPORATION AND  SUBSIDIARIES**            |
|-------------------------------------------------------------------------------------|
| ** **

**CONDENSED CONSOLIDATED  STATEMENTS OF CASH FLOWS**                    |
| ** **

**(Unaudited)**                                                         |
| ** **

                                                                   |  

  |   |  

  |  

  |
|  

                                                                       |  

Nine Months Ended

  |
|  

                                                                       |  

**January 31,  2011** |   |   | ** **

**January  31, 2010** |
|  

Cash flows from operating  activities:                                      |  

  |   |   |  

  |
|  

  Net loss                                                   |  

$(3,368,486) |   |  

  | $(153,704) |
|  

Adjustments to reconcile net loss                                      |  

  |   |  

  |  

  |
|  

  to net cash used in operating activities:                            |  

  |   |  

  |  

  |
|  

  Equity in earnings of unconsolidated subsidiaries                    |  

(703,569) |   |  

  |  

(559,793) |
|  

  Gain on sale of real estate                                          |  

-0- |   |  

  | (549,172) |
|  

  Gain on sales of marketable securities                               |  

-0- |   |  

  | (245,144) |
|   Depreciation                                                                 |  

2,352,722 |   |  

  |  

1,912,873 |
|   Amortization                                                                 | 207,746 |   |  

  | 222,420 |
|   Gain on purchase of noncontrolling interest                                  | (87,718) |   |   | -0- |
|  

  Gain on derivatives                                                  | -0- |   |  

  | (881,639) |
|  

                                                                       |  

  |   |  

  |   |
|  

(Increase) decrease in:                                                     |  

  |   |  

  |  

  |
|  

  Accounts, notes and other receivables, net                           |  

4,402,819 |   |  

  | 3,597,317 |
|  

  Deposits, escrows, prepaid and deferred expenses                     |  

(1,721,436) |   |  

  |  

(1,697,803) |
|  

  Cash and cash equivalents – restricted                          | 1,704,311 |   |  

  | (1,801,319) |
|  

Increase (decrease) in:                                                     |  

  |   |  

  |  

  |
|  

  Accrued liabilities                                                  |  

(2,037,634) |   |  

  | 94,769 |
|  

  Deferred income                                                      |  

89,001 |   |  

  | 13,285 |
|  

  Accounts and other payables                                          | (5,294,540) |   |  

  | (1,230,823) |
|  

                                                                       |  

  |   |  

  |   |
|  

Net cash used in operating activities                                       |  

(4,456,784) |   |  

  |  

(1,278,733) |
|                                                                                |   |   |   |   |
|  

Cash flows from investing activities:                                       |  

  |   |  

  |  

  |
|  

  Distributions from affiliates, net                                   | 481,020 |   |  

  |  

201,681 |
|  

 (Investment in) proceeds from sale of marketable securities,  net     | (160,000) |   |  

  | 111,203 |
|  

  Purchase of equipment and tenant improvements                        |  

(134,164) |   |  

  |  

(41,970) |
|  

  Proceeds from sale of real estate, net of closing  costs             |  

-0- |   |  

  | 3,750,343 |
|  

  Deconsolidation of CP Associates, LLC                                |  

(1,891,798) |   |  

  | -0- |
|  

   Additions to developed properties and properties under construction |  

(16,922,580) |   |  

  | (1,028,975) |
| Net cash (used in) provided by investing activities                                 |  

(18,627,522) |   |  

  |  

2,992,282 |
|                                                                                |   |   |   |   |
| Cash flows from financing activities:                                               |   |   |   |   |
|   Limited partners investment in	consolidated joint ventures                   | 1,553,927      
374,664  Purchase of treasury stock
500,000      
(315)
 

 

 

 

 

 

 

 

   

 

 

 

   

 

 

 

 

 

 

 

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

	6

 

 

 

 

 

 

 

**           **

**FIRST HARTFORD CORPORATION AND  SUBSIDIARIES**

** **

**CONDENSED CONSOLIDATED  STATEMENTS OF CASH FLOWS (continued)**

(Unaudited)

 

** **

** **

** **

 

 

**Nine Months Ended**

 

 

 

**January 31,  2011**

 
   
** **

**January  31, 2010**

Proceeds from:

 

 
   
 

 

   Construction loans payable

 

18,280,599

 

 
   
2,921,677

 

Principal payments on:

 

 

 

 
   
 

 

 

  Construction loans payable

 

-0-

 

 
   
(3,622,607)

 

  Mortgages payable

 

(788,579)

 

 
   
(694,234)

 

  Notes payable

 

(484,598)

 

 
   
 

(4,558)

 

  Advances to related parties and affiliates, net

 

(19,899)

 

 
   
 

(23,400)

 

 

 

 

 

 
   
 

 

 

Net cash provided by (used in) financing activities

 

19,041,450

 
   
 

(1,048,771)

** **

** **

** **

** **

** **

** **
   
** **

** **

 

Net (decrease) increase in cash and cash equivalents

 

(4,042,856)

 

 
   
664,778

 

 

 

 

 

 
   
 

 

 

Cash and cash equivalents, beginning of period

 

5,179,164

 

 
   
 

2,760,342

** **

** **

** **

** **

** **

** **
   
** **

** **

Cash and cash equivalents, end of period

$1,136,308

 
   
$3,425,120

 

 

 
   
 

Cash paid during the period  for interest

$4,663,547

 
   
$4,431,129

 

Cash paid during the period for income taxes

$65,179

 

 
   
$30,502

 

 

 
   
 

Non-cash investing and financing activities:

 

 
   
 

  Reduction of developed properties resulting from an increase in

 

 
   
 

 

      other receivables related to Edinburg reimbursement agreement

 

$-0-

 

 
   
 

$8,000,000

 

 

 
   
 

  Reduction of accrued liabilities resulting from decrease in capital  in

 

 
   
 

      excess of par for common stock to be redeemed in connection

 

 
   
 

 

      with the Kaplan matter

 

$-0-

 

 
   
 

$2,190,349

 

 

 
   
 

 Conversion of accrued liabilities into a note payable in connection

 

 
   
 

     with the redemption of  Kaplan’s common stock

$3,172,385

 
   
$-0-

 

 

 
   
 

Increase in accrued liabilities for the purchase of the remaining 50%

 

 
   
 

   interest in  Rockland Place Developers, LLC

$600,000

 
   
$-0-

 

 

 
   
 

 

 

 
   
 

 

 

 
   
 

**                                               **

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

	7

 

 
****
 

 

 

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIES**

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

** **

**1.         Nature of Business andSignificant Accounting Policies:**
 

Description of Business

 

First Hartford Corporation was incorporated in Maine in 1909 and is engaged in the purchase, development, ownership, management and saleof real estate.

 

Principles of Consolidation

 

The accompanying condensed consolidated financialstatements include the accounts of First Hartford Corporation, its wholly ownedsubsidiaries and other controlled subsidiaries (collectively referred to as the“Company”).  The Company reflects noncontrolling interest for the non-ownedportions of consolidated subsidiaries.  All significant intercompanytransactions and accounts have been eliminated in the condensed consolidatedfinancial statements, including construction revenues and costs of developmentfor the Company’s own use (rental/future sale).  

 

Financial Statement Presentation

 

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with generally acceptedaccounting principles for interim financial information and with theinstructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, theydo not include all of the information and footnotes required by generallyaccepted accounting principles for complete financial statements.  In theopinion of management, all adjustments (consisting of normal recurring accrualsand adjustments to previously established loss provisions) considered necessaryfor a fair presentation have been included.  Operating results for the threeand nine months ended January 31, 2011 are not necessarily indicative of theresults that may be expected for the year ending April 30, 2011.  For furtherinformation, refer to the consolidated financial statements and footnotesthereto included in the Company’s annual report on Form 10-K for the fiscalyear ended April 30, 2010.

            

Because the Company is engaged in the development andsale of real estate at various stages of construction, the operating cycle mayextend beyond one year. Accordingly, following the usual practice of the realestate industry, the accompanying condensed consolidated balance sheets areunclassified. 

 

Estimates

 

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamount of assets and liabilities, and the disclosure of contingent assets andliabilities as of the date of the financial statements, and the reportedamounts of revenues and expenses during the reporting period.  Actual results coulddiffer from those estimates.

 

Significant Accounting Policies

 

There has been no change in the Company's significantaccounting policies from those contained in our Annual Report on Form 10-K forthe year ended April 30, 2010, except as discussed below.

 

In June 2009, the Financial Accounting Standards Board(“FASB”) issued consolidation guidance, which amended the previousconsolidation guidance applicable to variable interest entities.  Under theupdated 

** **

	8

 

 

 

 

 

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIES**

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

** **

**1.         Nature of Business andSignificant Accounting Policies (continued):**
 

SignificantAccounting Policies (continued):

 

guidance, the identification of a primary beneficiaryof a variable interest entity (“VIE”) is defined as the enterprise that hasboth of the following characteristics: a) the power to direct the activities ofa VIE that most significantly impacts the VIE’s economic performance,and b) the obligation to absorb losses of the VIE or the right to receivebenefits from the VIE that could potentially be significant to the VIE.  Theapplication of this updated guidance was effective for the Company as of May 1,2010.  Based on this updated guidance, the Company determined that it is nolonger considered to be the primary beneficiary of the Company’s joint venture,CP Associates, LLC (“CP Associates”).  As a result of the initial applicationof this updated guidance, the Company has deconsolidated CP Associates as ofMay 1, 2010 and has measured its 50% retained interest in CP Associates at thecarrying amount of the Company’s retained interest had this updated guidancebeen effective when CP Associates was initially formed.  The difference betweenthe net amount removed from the Company’s balance sheet and the amount of theCompany’s 50% retained interest in CP associates has been recognized as acumulative effect adjustment to the Company’s beginning equity as of May 1,2010 (see Note 2).

 

Net Income (Loss) Per Common Share

 

Basic net income (loss) per share is computed bydividing the net income (loss) attributable to the common stockholders (thenumerator) by the weighted average number of shares of common stock outstanding(the denominator) during the reporting periods. Diluted net income (loss) per shareis computed by increasing the denominator by the weighted average number ofadditional shares that could have been outstanding from securities convertibleinto common stock, such as stock options and warrants (using the “treasurystock” method).

 

**2.         Investments in Affiliated Partnerships:**

 

On May 1, 2010, the Company deconsolidated CPAssociates based on updated consolidation guidance issued by the FASB.  Thefollowing is a summary of the carrying amount of CP Associates’ assets andliabilities and the resulting cumulative effect adjustment to the Company’sequity as of May 1, 2010.

 

Assets     
$21,685,455 
Liabilities    
23,238,912 
Equity:Cumulative effect adjustment       
($1,553,457)
   

 

AtApril 30, 2010, the Company reported approximately $1,892,000 of unrestrictedcash and cash equivalents belonging to CP Associates, LLC.  Due to thedeconsolidation, it is no longer included in the Company’s balance sheet subsequentto April 30, 2010. 

** **

The following is a summary of the effects of CPAssociates included in the Company’s condensed consolidated statement ofoperations for the three and nine month period ended January 31, 2010.

 

                                          

 
ThreeMonths  Nine Months
Operatingrevenue   
 $779,390 $2,347,573
Expenses    
474,647  1,950,282
Gainon derivatives    
600,892 1,217,805
Netincome  
$905,635 $1,615,096
 

 

	9

 

 

 

 

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

** **

**2.         Investments in AffiliatedPartnerships (continued):**

 

The Company has prospectively accounted for itsretained interest in CP Associates under the equity method of accounting.  Inaddition, the Company also accounts for its 50% interest in Cranston Parkade,LLC and Dover Parkade, LLC under the equity method of accounting.  Thefollowing is a summary of the unconsolidated operating results of CP Associatesfor the three and nine month period ended January 31, 2011 and of CranstonParkade, LLC and Dover Parkade, LLC for the three and nine month periods ended January31, 2011 and 2010.

 

                                                           
 
                   		
Three Months Ended Nine Months Ended 
 
January 31, 2011 		 January 31, 2011 
 
    
CPAssociates, LLC
    
            Revenues
$  779,506  $2,336,216 
            Expenses 
591,593 1,849,382 
            Gain(Loss) on derivatives 
1,198,046   (149,163) 
            NetIncome     
$1,385,959  $   337,671
 

 
 
                          		    
Three		Months Ended Nine		Months Ended 
 

 January 31January 31 
 
        
 
2011 2010  2011  2010 
 
        
CranstonParkade, LLC
        
            Revenues
$1,121,660 $1,193,022 $3,613,796 $3,596,659 
            Expenses 
  1,003,989  1,024,685 3,022,444 3,043,108 
           		Net Income    
 $   117,671 $   168,337 $  591,352 $   553,551 
 
        
DoverParkade, LLC
        
            Revenues  
$654,611 $619,310  $1,937,163  $1,738,461 
            Expenses    
599,845 524,489  1,663,418  1,575,791 
            NetIncome 
$  54,766 $  94,821 $  273,745  $   162,670 
 
       
 

The Company’s investments in CP Associates, CranstonParkade and Dover Parkade have been recorded at cost and have been subsequentlyadjusted for gains, losses and distributions such that the carrying value isless than zero. Although the Company no longer considers itself liable for theobligations of Cranston Parkade and Dover Parkade, it had not previouslydiscontinued applying the equity method on these investments since the Companyhad previously considered itself to be committed to providing financial supportto these partnerships. Other liabilities in the condensed consolidated balancesheets represents the negative carrying value of these investments.

 

The Company received a $210,000 distribution from C.P.Associates during the nine months ended January 31, 2011.  The Company recordedthe distribution as a reduction of its investment in C.P. Associates, which hasresulted in the carrying value of this investment being less than zero.  TheCompany reduced the carrying value of its investment in C.P. Associates belowzero on the basis that the Company is committed to providing financial supportto C.P. Associates due to a personal guarantee made by Mr. Ellis, President ofthe Company, on a mortgage obtained by C.P. Associates.  The personal guaranteemade by Mr. Ellis is 5% of the outstanding balance of the mortgage(approximately $525,000 as of January 31, 2011) and would be recovered by Mr.Ellis from the Company in the event Mr. Ellis is required to perform under theguarantee.  The Company will record any future distributions from C.P.Associates as a further reduction in its investment up to the amount of theguarantee.

 

	10

 

 

 

 

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

 

** **

**3.        ****Income Taxes:**

 

The Company files income tax returns in the U.S.federal jurisdiction and various state jurisdictions. The Company is no longersubject to U.S. federal tax examinations for years before May 1, 2007. Statejurisdictions could remain subject to examination for longer periods. 

 

Deferred tax assets or liabilities are computed basedon the difference between the financial statement and income tax bases ofassets and liabilities using the enacted marginal tax rate. Deferred income taxexpenses or benefits are based on the changes in the deferred tax assets andliabilities from period to period.

 

In assessing the need for a valuation allowance, theCompany estimates future taxable income, considering the feasibility of ongoingtax planning strategies and the realizability of tax loss carryforwards.Valuation allowances related to deferred tax assets can beimpacted by changes to tax laws, changes to statutory tax rates and future taxable income levels. In the event the Company were todetermine that it would not be able to realize all or a portion of its deferredtax assets in the future, it would reduce such amounts through a charge toincome in the period in which that determination is made. Conversely, if theCompany were to determine that it would be able to realize its deferred taxassets in the future in excess of the net carrying amounts, it would decreasethe recorded valuation allowance through an increase to income in the period inwhich that determination is made.

 

The Company accounts for uncertain income taxpositions in accordance with the accounting guidance in FASB ASC topic 740,Income Taxes. Using that guidance, tax positions are initially recognized by theCompany in the consolidated financial statements when it ismore-likely-than-not the position will be sustained upon examination by the taxauthorities. The Company’s policy is to recognize interest and penaltiesaccrued on any uncertain income tax positions as a component of income taxexpense.

 

The Company will only recognize a deferred tax assetwhen, based upon available evidence, realization is more likely than not. Inmaking this determination, the Company has considered both available positiveand negative evidence including, but not limited to, cumulative losses inrecent years, future taxable income and prudent and feasible tax planningstrategies. As of January 31, 2011 and April 30, 2010, the Company concludedthat it was more-likely-than-not that the Company would realize $1,238,000 indeferred tax assets. Accordingly, the Company increased its valuation allowanceby approximately $556,000 during the nine months ended January 31, 2011. TheCompany has federal net operating loss carry-forwards totaling approximately $15million at January 31, 2011 that are available to offset future federal taxableincome through various periods expiring between 2012 and 2026.

 

**4.         Legal:**

**           **

On November 29, 2010, the Company purchased 591,254shares of common stock beneficially owned by Richard Kaplan.  The terms ofrepayment as set by the court consisted of a $500,000 initial payment made onNovember 23, 2010 and a secured note for the balance.  There will be 20quarterly payments of approximately $119,000 each plus interest at thestatutory rate (approximately .05%) for the first 12 months and thereafterbased on the average rate First Hartford pays to its first mortgage creditors. There will be a balloon payment of approximately $790,000 for pre-judgementinterest from September 15, 2005 through November 29, 2010.

 

	11

 

 

 

 

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

**4.         Legal(continued):**

**           **The first quarterly payment was made on February 1,2011.

The Company will pay the quarterly payment from adedicated account, which will retain the net cash flow of three of theCompany’s shopping centers.  It is expected that the cash flow generated fromthese shopping centers will adequately fund the repayment of the note.  

Although the Company has given additional collateralin the form of the aforementioned 591,254 shares of repurchased common stockand a security interest in certain of the Company’s other assets, it is highlyunlikely in management’s opinion that any of it will be utilized.  On December14, 2010, the Company filed an appeal with the United States Court of Appealfor the First Circuit.

**5.**         **Acquisition of Additional Interest:**

On November 30, 2010, Connolly and Partners, LLC (a75% owned subsidiary consolidated by the Company) acquired the remaining 50%interest in Rockland Place Developers, LLC) (previously 50% owned andconsolidated by Connolly and Partners, LLC) for a purchase price of $600,000. Thefair value of the additional interest acquired was estimated to be $687,718,which resulted in the Company recognizing a gain of $87,718. 

 

**Item 2.            MANAGEMENT’SDISCUSSION AND ANALYSIS OFFINANCIAL**

**CONDITION AND RESULTS OF OPERATIONS**

 

Thefinancial and business analysis below provides information which the Company believesis relevant to an assessment and understanding of the Company’s financialposition and results of operations.  This financial and business analysisshould be read in conjunction with the condensed consolidated financialstatements and related notes.

 

The following discussionand certain other sections of this Report on Form 10-Q contain statementsreflecting the Company’s views about its future performance and constitutes “forward-lookingstatements” under the Private Securities Litigation Reform Act of 1995.  Theseviews may involve risks and uncertainties that are difficult to predict and maycause the Company’s actual results to differ materially from the resultsdiscussed in such forward-looking statements.  Readers should consider howvarious factors including changes in general economic conditions, cost ofmaterials, interest rates and availability of funds, and the nature ofcompetition and relationships with key customers may affect the Company’sperformance.  The Company undertakes no obligation to update publicly anyforward-looking statements, whether as a result of new information, futureevents or other.

 

Critical Accounting Policies
 

Thediscussion and analysis of financial condition and results of operations isbased upon the condensed consolidated financial statements contained in Item 1in this Quarterly Report.  The condensed consolidated financial statementsinclude the accounts of the Company and its controlled affiliates.  Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates 

andassumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities as of the date of the financialstatements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates.

 

The discussion included in Item 7 of our Annual Report on Form10-K for the year ended April 30, 2010 under the subheading "CriticalAccounting Policies and Estimates" is still considered current andapplicable, and is hereby incorporated into this Quarterly Report on Form 10-Q.

 

12

 

 

 

 

 

 

**Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL**

**                        CONDITION AND RESULTS OF OPERATIONS(continued):**

 

Resultsof Operations

 

RentalIncome

 

Increasein rental income for the three and nine month periods ended January 31, 2011 comparedto the three and nine month periods ended January 31, 2010 was mainly due tothe acquisition of Clarendon Tower’s, a low income residential apartmentcomplex during April 2010, offset partially by the deconsolidation of CPAssociates as of May 1, 2010.

 

ServiceIncome

 

Decreasein service income (approximately $640,000 and $1,704,000) for the three and ninemonth periods ended January 31, 2011 compared to the three and nine monthperiods ended January 31, 2010 was mainly due to a slowdown in our CVS Pharmacybusiness.  Additionally, management fees from Clarendon Towers for the currentperiods were eliminated in consolidation.  Prior to acquisition such managementfees were included in service income.

 

RentalExpense

 

Theincrease in rental expense for the three and nine month periods ended January31, 2011 was a direct result of the inclusion of Clarendon Towers less thedeconsolidation of the rental expense of C P Associates.

 

ServiceExpense

 

Serviceexpense decreased approximately $179,000 and $362,000 for the three and nine monthsperiod ended January 31, 2011.  This reduction is mostly from a decline inactivity related to our CVS Pharmacy business, which is consistent with thedecline in our income generated from this business.

 

Gain(Loss) on Derivative  

 

The gain(loss) on derivatives relates to the change in fair value of interest rateswaps held by CP Associates, which was deconsolidated as of May 1, 2010.

 

InterestExpense

 

Theincrease in interest expense for the three and nine months ended January 31,2011 is due to the deconsolidation of C P Associates offset by the addition ofClarendon Towers.

 

CapitalResource and Liquidity

 

TheCompany ended the period with approximately $1,136,000 of unrestricted cash andcash equivalents.  Unrestricted cash and cash equivalents include approximately$816,000 belonging to less than wholly-owned consolidated partnerships (RocklandPlace, LP, and Clarendon Hill Somerville, LP).  Funds received from CVSPharmacy, which are tobe paid out in connection with CVS developments amounted to approximately $645,000and is included in restricted cash and cash equivalents.

 

AtApril 30, 2010, the Company reported approximately $1,892,000 of unrestrictedcash and cash equivalents belonging to CP Associates, LLC.  Due to thedeconsolidation, it is no longer included in the Company’s balance sheets. 

 

 

 

	13

 

 

 

 

 

 

**Item 2.            MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL**

**                        CONDITION AND RESULTS OF OPERATIONS(continued):**

 

CapitalResource and Liquidity (continued):

 

Thefollowing schedule outlines our long-term obligations.

 

 

Contractual Obligations

Total

Less Than

1 year

1-3 years

3-5 years

More Than 

5 years

 

 

 

 

 

 

Long-Term  Debt

$137,687,724

$20,955,349

$41,139,465

$15,024,224

$60,568,686

 

 

 

 

 

 

Short-Term  Debt

550,000

550,000

 

 

 

 

 

 

 

 

 

Stock Repurchase-Note

3,172,385

476,000

952,000

952,000

792,385

 

 

 

 

 

 

Purchase  Obligations

1,071,000

1,071,000

 

 

 

 

 

 

 

 

 

Total  

$142,481,109

$23,052,349

$42,091,465

$15,976,224

$61,361,071

** **

**Item 3.             QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**

 

Smallerreporting companies are not required to provide the information required bythis item.

 

**Item 4T.           CONTROLS AND PROCEDURES**

 

Evaluation of Disclosure Controls and Procedures 

 

We maintain “disclosure controls andprocedures,” as such term is defined in Rule 13a-15(e) under the SecuritiesExchange Act of 1934 (the “Exchange Act”), that are designed to ensure thatinformation required to be disclosed in our Exchange Act reports is recorded,processed, summarized and reported within the time periods specified in theSecurities and Exchange Commission rules and forms, and that such informationis accumulated and communicated  to our management, including our President andTreasurer, as appropriate, to allow timely decisions regarding requireddisclosure. We conducted an evaluation (the “Evaluation”), under thesupervision and with the participation of our President and Treasurer, of theeffectiveness of the design and operation of our disclosure controls andprocedures (“Disclosure Controls”) as of the end of the period covered by thisreport pursuant to Rule 13a-15b of the Exchange Act. Based on this Evaluation,our President and Treasurer concluded that because of weaknesses in our controlenvironment, our Disclosure Controls were not fully effective as of the end ofthe period covered by this report. Notwithstanding weaknesses in our controlenvironment, as of January 31, 2011, we believe that the condensed consolidatedfinancial statements contained in this report present fairly the Company’sfinancial condition, results of operations and cash flows for the periodspresented.

 

Changes in Internal Control Over FinancialReporting

 

Asof the end of the period covered by this report, there have been no changes ininternal control over financial reporting (as defined in Rule 13a-15(f) of theExchange Act) during the period covered by this report, that materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

 

 

 

 

 

	14

 

 

 

 

 

 

PARTII           OTHER INFORMATION

 

**Item 1.             LEGAL PROCEEDINGS**

 

On November 29, 2010, the Company purchased 591,254 shares of commonstock beneficially owned by Richard Kaplan.  The terms of repayment as set bythe court consisted of  a $500,000 initial payment made on November 23, 2010 anda secured note for the balance.  There will be 20 quarterly payments of approximately$119,000 each plus interest at the statutory rate (approximately .05%) for thefirst 12 months and thereafter based on the average rate First Hartford pays toits first mortgage creditors.  There will be a balloon payment of approximately$790,000 for pre-judgement interest from September 15, 2005 through November29, 2010.

The first quarterlypayment was made on February 1, 2011.

The Company will pay the quarterly payment from a dedicated account,which will retain the net cash flow of three of the Company’s shopping centers. It is expected that the cash flow generated from these shopping centers willadequately fund the repayment of the note.  

Although the Company has given additional collateral in the form of theaforementioned 591,254 shares of repurchased common stock and a securityinterest in certain of the Company’s other assets, it is highly unlikely inmanagement’s opinion that any of it will be utilized.  On December 14, 2010,the Company filed an appeal with the United States Court of Appeal for theFirst Circuit.

**Item 1A.           RISK FACTORS**

 

                        Smallerreporting companies are not required to provide the information required bythis item.

 

**Item 2.             UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 

**                       **None

 

**Item 3.             DEFAULTS UPON SENIOR SECURITIES**

 

                        None

 

**Item 4.             REMOVED AND RESERVED**

 

**Item 5.             OTHER INFORMATION**

                        **SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

(a)   The annual meeting of the Companywas held on November 9, 2010.

 

(b)   Elected as Directors:       NeilH. Ellis, David Harding and Stuart Greenwald

 

(c)
   
Director

Votes For

Votes Withheld

Abstention
   
Ellis

1,880,304

6,258

None
   
Harding

1,880,604

5,958

None
   
Greenwald

1,880,604

5,958

None

  

 

 

** **

** **

** **

** **

16

 

 

 

 

 

 

**Item 6.             EXHIBITS**

 

a)         Exhibits:

 

Exhibit 31.1      Certificationof Chief Executive Officer, pursuant to Rule 13a-14(c) under the SecuritiesExchange Act of 1934.

 

Exhibit 31.2      Certificationof Chief Financial Officer, pursuant to Rule 13a-14(c) under the SecuritiesExchange Act of 1934.

 

Exhibit 32.1      Certificationof Chief Executive Officer, pursuant to 18 U.S.C. Section 1350.

 

Exhibit 32.2      Certificationof Chief Financial Officer, pursuant to 18 U.S.C. Section 1350.
 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 

First Hartford Corporation
 

(Registrant)
 

 
 

/s/ Neil H. Ellis
            March 31, 2011 		 

______________________________
Date 

Neil H. Ellis B President and		
 

Chief Executive Officer
 

 
 

/s/ Stuart I. Greenwald
             March 31, 2011

______________________________
Date

Stuart I. Greenwald B Treasurer
 

and Chief Financial Officer
 

 

 

 

 

  |