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 endedOctober 31, 2010.

 

[  ]  **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 jurisdiction of incorporation or organization)    		

(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 January 5, 2011   

1

 

 

 

 

 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

 

INDEX

 

PART I.		
FINANCIALINFORMATION

PAGE
 
 
 
Item 1.
FinancialStatements
 
 
 
 
 
CondensedConsolidated Balance Sheets -
 
 
    October31, 2010 (unaudited) and April 30, 2010 (audited) 

3 - 4
 
 
 
 
CondensedConsolidated Statements of Operations and Other 
 
 
    ComprehensiveIncome (Loss) for the Three and Six Months
 
 
    Ended October 31, 2010 and 2009 (unaudited)     

5		
 
 
 
 
CondensedConsolidated Statements of Cash Flows for the 
 
 
     SixMonths Ended October 31, 2010 and 2009 (unaudited) 

6 - 7
 
 
 
 
Notesto Condensed Consolidated Financial Statements    

 8 - 12
 
 
 
Item 2.
Management’sDiscussion and Analysis of Financial Condition   
 
 
andResults of Operations       

13 - 15
 
 
 
Item 3.		
Quantitativeand Qualitative Disclosures About Market Risk  

15
 
 
 
Item 4T.
Controlsand Procedures    

15
 
 
 
**PARTII**
**OTHERINFORMATION**
 
 
 
 
Item 1.
LegalProceedings    

16
 
 
 
Item 1A.
Risk Factors    

16
 
 
 
Item 2.
UnregisteredSales of Equity Securities and Use of Proceeds  

16
 
 
 
Item 3.
DefaultsUpon Senior Securities   

16
 
 
 
Item 4.
Removedand Reserved    

16
 
 
 
Item 5.
OtherInformation   

16
 
 
 
Item 6.
Exhibits  

17
 
 
 
 
Signatures  

18
 
 
 
 

 

 

 

 

 

 

2
 
 

 

 

 

 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 

ASSETS

** **

 

 

 

 

 

**October 31, 2010**
 
** **

**April 30, 2010**

 

 

 

 

(unaudited)
 
 

(audited)

Real estate and equipment:

 

 

 
 
 

 

 

   Developed properties

 

 

 

$110,663,203
 
 

$131,437,600

 

   Equipment and tenant improvements

 

 

1,522,442
 
1,408,206

 

 

112,185,645
 
132,845,806

 

 

 
 
 

   Less: accumulated depreciation and amortization

 

 

9,987,880
 
 

11,200,570

 

 

 

102,197,765
 
121,645,236

 

 

 
 
 

   Property under construction

 

16,509,543
 
5,525,858

 

 

118,707,308
 
127,171,094

 

 

 
 
 

 

Cash and cash equivalents   

 

 

3,562,849
 
5,179,164

 

 

 

 
 
 

Cash and cash equivalents - restricted

 

2,168,253
 
 

2,350,003

 

 

 
 
 

Marketable securities  

 

172,216
 
1,323,571

 

 

 
 
 

 

Accounts and notes receivable, less allowance for doubtful accounts

 

 

 

 
 
 

 

 

   of $500,000 and $214,000 as of Oct. 31, 2010 and April 30, 2010,  respectively

 

 

2,037,807
 
 

2,175,177

 

 

 

Other receivables

 

10,510,203
 
 

15,654,514

 

 
 
 

 

Deposits, escrows, prepaid and deferred expenses, net

 

10,163,150
 
 

10,316,964

 

 
 
 

 

Investments in affiliates

 

 

 

9,665
 
 

9,665 

 

 

 
 
 

Due from related parties and affiliates

 

 

 

484,412
 
454,467

 

 

 
 
 

Deferred tax assets, net

 

 

1,238,000
 
1,238,000

 

 

 
 
 

Total Assets

 

 

 

$149,053,863
 
 

$165,872,619

 

 

 

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

 

3

 

 

 

 

 

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES 

**CONDENSEDCONSOLIDATED BALANCE SHEETS (continued)**

 

 

**LIABILITIES AND SHAREHOLDERS’ DEFICIENCY**

** **

 

 

 

 

 
 
 

 

 

 

 

 

 

**October 31, 2010**
 
** **

**April 30, 2010**

Liabilities:

 

 

 

(unaudited)
 
 

(audited)

 

   Mortgages and notes payable:

 

 

 

 
 
 

 

 

   Construction loans payable

 

 

 

$65,463,131
 
 

$52,683,189

 

   Mortgages payable

 

 

 

65,847,529
 
 

86,613,734

 

   Notes payable

 

 

 

1,682,259
 
 

2,165,321
 
 

132,992,919
 
141,462,244

 

 

 
 
 

 

Accounts payable

 

 

 

2,068,965
 
1,815,727

 

Other payables

 

 

4,892,767
 
10,133,280

 

Accrued liabilities

 

 

6,853,265
 
 

7,454,741

 

Deferred income

 

 

 

110,444
 
 

198,090

 

Derivative liabilities

 

 

 

-0-
 
 

2,677,363

 

Other liabilities

 

 

 

4,566,633
 
 

4,709,772

 

Due to related parties and affiliates

 

 

 

102,750
 
 

62,418

 

Total Liabilities

 

 

 

151,587,743
 
 

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

 

 

 

2,176,704 
 
 

2,176,704 

 

Accumulated deficit

 

 

 

(15,111,665)
 
 

(15,118,235)

Accumulated other comprehensive loss

 

 

-0-
 
 

(85,414)

Treasury stock, at cost, 270,644 shares as of October 31, 2010 and  April 30, 2010

 

 

 

(2,044,429)
 
(2,044,429)

Total Company Shareholders’ Deficiency

 

 

 

(11,680,781)
 
 

(11,772,765)

 

Noncontrolling interests

 

 

 

9,146,901
 
9,131,749

 

 

 
 
 

 

Total Shareholders’ Deficiency

 

 

 

(2,533,880)
 
 

(2,641,016)

 

 

 
 
 

Total Liabilities and Shareholders’ Deficiency

 

 

 

$149,053,863 
 
 

$165,872,619

 

 

 

The accompanying notes are an integralpart of these condensed consolidated financial statements.

4

 

 

 

 

 

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS AND**

**OTHER COMPREHENSIVE (LOSS)INCOME**

(Unaudited)

 

 

**Three Months Ended**

 

**Six Months Ended**

 

**Oct. 31, 2010**

 

**Oct. 31, 2009**

 

**Oct. 31, 2010**

 

**Oct. 31, 2009**

 

 

 

**(As Restated)**

 

 

 

**(As Restated)**

Operating revenues:

 

 

 

 

 

 

 

     Rental income

$4,153,543

 

$3,570,040

 

$8,352,020

 

$6,676,412

     Service income

908,390

 

1,145,480

 

1,676,229

 

2,740,114

     Sales of real estate

-0-

 

4,300,000

 

-0-

 

4,300,000

     Other income

(84,521)

 

58,619

 

791

 

304,806

 

4,977,412

 

9,074,139

 

10,029,040

 

14,021,332

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

     Rental expenses

3,409,805

 

2,588,824

 

6,558,256

 

4,495,328

     Services expenses

713,355

 

626,469

 

1,346,751

 

1,529,696

     Cost of sales, real estate

-0-

 

3,750,828

 

-0-

 

3,750,828

     Selling, general and administrative

965,069

 

964,003

 

1,737,667

 

1,836,790

 

5,088,229

 

7,930,124

 

9,642,674

 

11,612,642

 

 

 

 

 

 

 

 

(Loss) income from operations

(110,817)

 

1,144,015

 

386,366

 

2,408,690

 

 

 

 

 

 

 

 

Non-operating income (expense):

 

 

 

 

 

 

 

     Interest expense

(1,714,919)

 

(1,676,899)

 

(3,405,114)

 

(3,204,194)

     Other income

142,104

 

197,807

 

142,104

 

235,317

     (Loss) gain on derivatives

-0-

 

(207,652)

 

-0-

 

616,913

     Equity in earnings of unconsolidated subsidiaries

280,834

 

285,120

 

496,271

 

428,095

 

(1,291,981)

 

(1,401,624)

 

(2,766,739)

 

(1,923,869)

 

 

 

 

 

 

 

 

(Loss) income before income taxes

(1,402,798)

 

(257,609)

 

(2,380,373)

 

484,821

 

 

 

 

 

 

 

 

Provision for income taxes

-0-

 

44

 

2,350

 

16,761

 

 

 

 

 

 

 

 

Net (loss) income

(1,402,798)

 

(257,653)

 

(2,382,723)

 

468,060

 

 

 

 

 

 

 

 

Net loss (income) attributable to noncontrolling interests

454,215

 

(47,386)

 

423,223

 

72,605

 

 

 

 

 

 

 

 

Net (loss) income attributable to Company

(948,583)

 

(305,039)

 

(1,959,500)

 

540,665

 

 

 

 

 

 

 

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

Unrealized holding (losses) gains on securities during 

 

 

 

 

 

 

 

     the period

-0-

 

(118,751)

 

-0-

 

174,981

 

 

 

 

 

 

 

 

Comprehensive (loss) income

$(948,583)

 

$(423,790)

 

$(1,959,500)

 

$715,646

 

 

 

 

 

 

 

 

Net (loss) income per share - basic

$(0.31)

 

$(0.10)

 

$(0.65)

 

0.18

 

 

 

 

 

 

 

 

Net (loss) income per share - diluted

$(0.31)

 

$(0.10)

 

$(0.65)

 

0.18

 

 

 

 

 

 

 

 

Shares used in basic per share computation

3,027,965

 

3,028,065

 

3,027,965

 

3,028,065

 

 

 

 

 

 

 

 

Shares used in diluted per share computation

3,027,965

 

3,028,065

 

3,027,965

 

3,064,681

 

 

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)**

** **

 

 

 

 

 

 

 

 

 

 

Six Months Ended
 

 

**October  31, 2010**

** **

** **

** **

**October  31, 2009**

 

 

 

 

 

 

**(As  Restated)   **

 

Cash flows from operating  activities:

 

 

 

 

 

 

 

  Net (loss) income

 

$(2,382,723)

 

 

$468,060

 

Adjustments to reconcile net (loss) income  

 

 

 

 

 

 

 

  to net cash provided by operating activities:

 

 

 

 

 

 

 

  Equity in earnings of unconsolidated subsidiaries

 

(496,271)

 

 

 

(428,095)

 

  Gain on sale of real estate

 

-0-

 

 

(549,172)

 

  Gain on sales of marketable securities

 

-0-

 

 

(235,317)

  Depreciation

 

1,694,031

 

 

 

1,222,808

  Amortization

 

142,475

 

 

148,799

 

  Gain on derivatives

-0-

 

 

(616,913)

 

 

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

 

  Accounts, notes and other receivables, net

 

4,919,999

 

 

1,316,633

 

  Deposits, escrows, prepaid and deferred expenses

 

(417,013)

 

 

 

(1,207,406)

 

  Cash and cash equivalents – restricted

181,750

 

 

(941,134)

 

Increase (decrease) in:

 

 

 

 

 

 

 

  Accrued liabilities

 

(409,222)

 

 

832,903

 

  Deferred income

 

49,707

 

 

(25,512)

 

  Accounts and other payables

(4,987,275)

 

 

(375,133)

 

 

 

 

 

 

 

Net cash used in operating activities

 

(1,704,542)

 

 

 

(389,479)
      
 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

  Distributions from affiliates, net

353,132

 

 

 

201,562

 

  Investment in marketable securities, net

(160,000)

 

 

(48,662)

 

  Purchase of equipment and tenant improvements

 

(114,236)

 

 

 

(25,800)

 

  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

(10,790,989)

 

(831,780)

Net cash (used in) provided by investing activities

 

(12,603,891)

 

 

 

3,045,663

 

 

 

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)

 

** **

** **

** **

 

 

**Six Months Ended**

 

 

 

**October  31, 2010**

** **

** **

 

**October  31, 2009**

 

 

 

 

 

 

**(As Restated)   **

 

Cash flows from financing activities:

 

 

 

 

 

 

   Limited partners investment in consolidated joint ventures

936,401

 

374,664

   Purchase of treasury stock

-0-

 

(315)

   

 

 

 

Proceeds from:

 

 

 

 

   Construction loans payable

 

12,779,943

 

 

1,125,537

 

Principal payments on:

 

 

 

 

 

 

 

  Construction loans payable

 

-0-

 

 

(3,622,607)

 

  Mortgages payable

 

(534,263)

 

 

(445,548)

 

  Notes payable

 

(483,062)

 

 

 

(3,035)

 

  Advances to related parties and affiliates, net

 

(6,901)

 

 

 

(16,893)

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

12,692,118

 

 

(2,588,197)

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(1,616,315)

 

 

67,987

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

5,179,164

 

 

 

2,760,342

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

$3,562,849

 

$2,828,329

 

 

 

 

Cash paid during the period  for interest

$3,118,097

 

$3,032,328

 

Cash paid during the period for income taxes

$35,791

 

 

$28,461

 

 

 

 

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

 

 

 

 

** **

**                                                              **

 

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 six months ended October 31, 2010 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.

           	

Certain amounts in the statements of operations andcash flows for the three and six months ended October 31, 2009 have been restatedto correct an error in the period as reported in Note 9 of the Company’s Form 10-Qfor the quarterly period ended January 31, 2010. The error related to thecapitalization of project costs associated with the acquisition and developmentof a low income multi-residential housing complex. Note 4 summarizes the impactof the error on our previously reported condensed consolidated financialstatements for the three and six month periods ended October 31, 2009.

 

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 resultscould differ from those estimates.

 

 

 

8

 

 

 

 

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

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

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 guidance, the identification of a primary beneficiary of a variableinterest entity (“VIE”) is defined as the enterprise that has both of thefollowing characteristics: a) the power to direct the activities of a VIE thatmost significantly impacts the VIE’s economic performance, and b) theobligation to absorb losses of the VIE or the right to receive benefits fromthe VIE that could potentially be significant to the VIE.  The application ofthis updated guidance was effective for the Company as of May 1, 2010.  Basedon this updated guidance, the Company determined that it is no longerconsidered to be the primary beneficiary of the Company’s joint venture, CP Associates,LLC (“CP Associates”).  As a result of the initial application of this updatedguidance, the Company has deconsolidated CP Associates as of May 1, 2010 andhas measured its 50% retained interest in CP Associates at the carrying amountof the Company’s retained interest had this updated guidance been effective whenCP Associates was initially formed.  The difference between the net amountremoved from the Company’s balance sheet and the amount of the Company’s 50%retained interest in CP associates has been recognized as a cumulative effectadjustment 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) pershare is computed by increasing the denominator by the weighted average numberof additional shares that could have been outstanding from securitiesconvertible into 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. 

 

 

 

 
 
 

9

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

 

 

 

**2.          Investments in Affiliated Partnerships (continued):**

** **

The following is a summary of the effects of CP Associatesincluded in the Company’s condensed consolidated statement of operations forthe three and six month period ended October 31, 2009.

 

 

 

ThreeMonths   
 
Six Months   
Operatingrevenue 

$787,240 
 
$1,568,183
Expenses 

783,679 
 
1,475,635
Gain(Loss) on derivatives 

 (207,652)
 
616,913
Netincome (Loss) 

$(204,091)
 
$709,461
 

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 six month period ended October 31, 2010 and of CranstonParkade, LLC and Dover Parkade, LLC for the three and six month periods endedOctober 31, 2010 and 2009.

 

 
Three Months Ended Six Months Ended
 
    October 31, 2010 		     October 31, 2010
 
   
CPAssociates, LLC
   
            Revenues 
$776,155 $1,556,710
            Expenses 
 630,492 1,257,789
           		Loss on derivatives 
(261,205) (1,347,209)
NetLoss
$(115,542) $(1,048,288)
 

 

                                      

 

Three Months Ended 
Six Months Ended October 31 October 31
 
2010    2009       		2010 2009
 
       
CranstonParkade, LLC
       
            Revenues        
$1,198,379 $1,157,809 $2,492,136 $2,403,637
            Expenses     
  1,024,621  1,003,649 2,018,455  2,018,423
NetProfit
$173,758   $154,160  $473,681  $385,214
 
       
DoverParkade, LLC
       
           		Revenues
$609,879 $559,195 $1,282,552 $1,119,151
           		Expenses  
 516,494 545,142  1,063,573 1,051,302
		Net Profit 
$ 93,385 $14,053 $218,979  $67,849
 

 

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.

 
 
10

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

 

 

 

**2.         Investments in Affiliated Partnerships (continued):**

 

The Company received a $210,000 distribution from C.P.Associates during the quarter ended October 31, 2010.  The Company recorded thedistribution 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 October 31, 2010) and would be recovered by Mr.Ellis from the Company in the event Mr. Ellis was 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.

** **

**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 bythe Company 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 October 31, 2010 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 $206,000 during the six months ended October 31, 2010. TheCompany has federal net operating loss carry-forwards totaling approximately$13 million at October 31, 2010 that are available to offset future federaltaxable income through various periods expiring between 2012 and 2026.

 

 

 

** **

11

 

 

FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

 

 

 

**4.         Correction of Error**

** **

As described in Note 1, theCompany identified an error in our condensed consolidated financial statementsfor the three and six months ended October 31, 2009.  The error related to thecapitalization of project costs associated with the acquisition and developmentof a low income multi-residential housing complex. The following tablesummarizes the impact of the error on the Company’s previously reportedconsolidated financial statements for the three and six months ended October31, 2009.

           

 

 

Three months ended October 31, 2009

 

Six months ended October 31, 2009

 

 

Previously 		Reported

 

 

Adjustment

 

 

Restated

 

Previously 		Reported

 

 

Adjustment

 

 

Restated

Revenues 

 

$9,074,139

 

$0

 

$9,074,139

 

$14,021,332

 

$0

 

$14,021,332

Costs and expenses

 

8,120,124

 

(190,000)

 

7,930,124

 

11,980,642

 

(368,000)

 

11,612,642

Net (loss) income  		attributable to company

 

(495,039)

 

190,000

 

(305,389)

 

172,665

 

368,000

 

540,665

Net (loss) income 		per  common share:

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

$(0.16)

 

$0.06

 

$(0.10)

 

$0.06

 

$0.12

 

$0.18

     Diluted 

 

$(0.16)

 

$0.06

 

$(0.10)

 

$0.06

 

$0.12

 

$0.18

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets 

 

133,308,840

 

368,000

 

133,676,840

 

133,308,840

 

368,000

 

133,676,840

Liabilities 

 

133,163,708

 

0

 

133,163,708

 

133,163,708

 

0

 

133,163,708

Equity

 

145,132

 

368,000

 

513,132

 

145,132

 

368,000

 

513,132

** **

**5.         Subsequent Events**

**           **

**            Legal**

On November 29, 2010, the Company purchased 591,254shares of common stock beneficially owned by Richard Kaplan.  The terms as setby the court were a $500,000 initial payment and a secured note for thebalance.  There will be 20 quarterly payments of approximately $119,000 eachplus interest at the statutory rate (approximately .05%) for the first 12months and thereafter based on the average rate First Hartford pays to itsfirst mortgage creditors.  There will be a balloon payment of approximately $790,000for pre-judgement interest from September 15, 2005 through November 29, 2010.

The first quarterly payment will be due 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.  Aliability of approximately $3,672,000 is included in accrued liabilities in theconsolidated balance sheets.

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.

           **ConnollyAnd Partners LLC**

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. 

 

 

12

 

 

 

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

**CONDITION AND RESULTS OF OPERATIONS**

 

Thefinancial and business analysis below provides information which the Companybelieves is relevant to an assessment and understanding of the Company’sfinancial position and results of operations.  This financial and businessanalysis should be read in conjunction with the condensed consolidatedfinancial statements 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.  The preparationof financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates 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.

 

Results of Operations:

 

RentalIncome

 

Increasein rental income for the three and six month periods ended October 31, 2010 comparedto the three and six month periods ended October 31, 2009 was mainly due to theacquisition of Clarendon Tower’s, a low income residential apartment complexduring April 2010, offset partially by the deconsolidation of CP Associates asof May 1, 2010.

 

ServiceIncome

 

Decreasein service income for the three and six month period ended October 31, 2010 comparedto the three and six month period ended October 31, 2009 was mainly due to aslowdown in our CVS Pharmacy business.  Additionally, management fees fromClarendon Towers for the current periods were eliminated in consolidation. Prior to acquisition such management fees were included in service income.

 

RentalExpense

 

Rentalexpense for the three and six month periods ended October 31, 2010 increasedfor the same reasons as rental income.

 

 

 

13

 

 

**MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL**

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

 

 

 

 

 

ServiceExpense

 

Serviceexpense decreased approximately $183,000 from the six month period endedOctober 31, 2009.  This reduction is mostly from a decline in activity relatedto our CVS Pharmacy business, which is consistent with the decline in ourincome 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.

 

CapitalResource and Liquidity.  

 

TheCompany ended the period with approximately $3,563,000 of unrestricted cash andcash equivalents.  Unrestricted cash and cash equivalents includesapproximately $1,510,000 belonging to less than wholly-owned consolidatedpartnerships (Rockland Place, LP, $942,000 and Clarendon Hill Somerville, LP, $568,000). Funds received from CVS Pharmacy, which are to be paid out in connection withCVS developments amounted to approximately $2,168,000 and is included inrestricted 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.	

 

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

$132,442,919

$1,160,986

$55,330,380

$14,990,221

$60,961,332

 

 

 

 

 

 

Short-Term  Debt

550,000

550,000

 

 

 

 

 

 

 

 

 

Stock Repurchase 

3,670,000

976,000

952,000

952,000

790,000

 

 

 

 

 

 

Purchase  Obligations

3,769,000

3,769,000

 

 

 

 

 

 

 

 

 

Total  

$140,431,919

$6,455,986

$56,282,380

$15,942,221

$61,751,332

** **

Subsequent Events

**           **

Legal

On November 29, 2010, the Company purchased 591,254 shares of commonstock beneficially owned by Richard Kaplan.  The terms as set by the court werea $500,000 initial payment and a secured note for the balance.  There will be20 quarterly payments of approximately $119,000 each plus interest at the statutoryrate (approximately .05%) for the first 12 months and thereafter based on theaverage rate First Hartford pays to its first mortgage creditors.  There willbe a balloon payment of approximately $790,000 for pre-judgement interest fromSeptember 15, 2005 through November 29, 2010.

The first quarterlypayment will be due February 1, 2011.

 

 

14

 

 

**MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL**

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

 

 

 

 

 

Subsequent Events (continued):

**           **

Legal (continued):

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.  A liability of approximately $3,672,000is included in accrued liabilities in the consolidated balance sheets.

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.

Connolly andPartners LLC

OnNovember 30, 2010, Connolly and Partners, LLC (a 75% owned subsidiaryconsolidated by the Company) acquired the remaining 50% interest in Rockland PlaceDevelopers, LLC (previously 50% owned and consolidated by Connolly and Partners,LLC) for a purchase price of $600,000.  

** **

**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 October 31, 2010, 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.

 

15

 

 

 

 

 

 

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 as set by the court werea $500,000 initial payment and a secured note for the balance.  There will be20 quarterly payments of approximately $119,000 each plus interest at thestatutory rate (approximately .05%) for the first 12 months and thereafter basedon the average rate First Hartford pays to its first mortgage creditors.  Therewill be a balloon payment of approximately $790,000 for pre-judgement interestfrom September 15, 2005 through November 29, 2010.

The first quarterlypayment will be due 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.  A liability of approximately $3,672,000is included in accrued liabilities in the consolidated balance sheets.

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

January11, 2011
______________________________

Date
Neil H. Ellis B President and			

 
Chief Executive Officer

 
 

 
/s/ Stuart I. Greenwald

January11, 2011
______________________________

Date
Stuart I. Greenwald B Treasurer			

 
and Chief Financial Officer

 
 

 

 

 

 

 

 

 

 

 

 

 
 

 
 

18 |