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 periodended July 31, 2008.

 

[  ]  **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 principalexecutiveoffices)                                            | (Zip			Code)                              |
|                                                                              |                                      |
| 860-646-6555                                                                      |
|  (Registrant'stelephone 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 is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See definition of “largeaccelerated filer”, “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ⁪                                                             Acceleratedfiler ⁪         

 

Non-accelerated filer ⁪   (Do not check if a smallerreporting company)      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.

 

3,039,967 as of September 24,2008

 

 

 

1

----

 

 

 

 

FIRST HARTFORD CORPORATION AND SUBSIDARIES 

#### INDEX

 

| PART I.           		FINANCIALINFORMATION                                                    | PAGE    |
|----------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                                                                                               |    |
| Item 1.              FinancialStatements                                          |    |
|                                                                                                                                               |    |
| CondensedConsolidated Balance Sheets -                                                                                                             |    |
| July31, 2008 (unaudited) and April 30, 2008 (audited)                                                                                              | 3 - 4   |
|                                                                                                                                               |    |
| CondensedConsolidated Statements of Operations and other Comprehensive Loss                                                                        |    |
| for the Three Months                                                                                                                               |    |
| EndedJuly 31, 2008 and 2007 (unaudited)                                                                                                            | 5 - 6   |
|                                                                                                                                               |    |
| CondensedConsolidated Statements of Cash Flows for the                                                                                             |    |
| ThreeMonths Ended July 31, 2008 and 2007 (unaudited)                                                                                               | 7 - 8   |
|                                                                                                                                               |    |
| Notesto Condensed Consolidated Financial Statements                                                                                                | 9 - 13  |
|                                                                                                                                               |    |
| Item 2.             		Management's Discussion and Analysis of Financial Condition |    |
| AndResults of Operations                                                                                                                           | 14 - 15 |
|                                                                                                                                               |    |
| Item 3.             		Quantitativeand Qualitative Disclosures About Market Risk   | 15      |
|                                                                                                                                               |    |
| Item 4   .          		Controlsand Procedures                                           | 15 - 16 |
|                                                                                                                                               |    |
| **PART II          		OTHERINFORMATION**                                                          |    |
|                                                                                                                                               |    |
| Item 1.              LegalProceedings                                             | 17      |
|                                                                                                                                               |    |
| Item 1A            RiskFactors                                                              | 17      |
|                                                                                                                                               |    |
| Item 2.             		UnregisteredSales of Equity Securities and Use of Proceeds  | 17      |
|                                                                                                                                               |    |
| Item 3.             		DefaultsUpon Senior Securities                              | 17      |
|                                                                                                                                               |    |
| Item 4.             		Submissionof Matters to a Vote Of Security Holders          | 17      |
|                                                                                                                                               |    |
| Item 5.             		OtherInformation                                            | 17      |
|                                                                                                                                               |    |
| Item 6.              Exhibits                                                     | 18 - 22 |
|                                                                                                                                               |    |
| Signatures                                                                                                                                         | 19      |
|                                                                                                                                               |    |

 

 

 

 

 

 2

----

 

 

 

 

 

# FIRST HARTFORD CORPORATION AND SUBSIDIARIES 

**CONDENSED CONSOLIDATED BALANCE SHEETS**

#  

# ASSETS

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

                                                                                     |  

  |  

**July 31, 2008** |   | ** **

**April 30, 2008** |
|                                                                                              |  

  |  

(unaudited) |   |  

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

  |   |  

  |
|  

   Developed properties                                                         |  

  |  

$68,810,864 |   |  

$68,810,864 |
|  

   Equipment and leasehold improvements                                         |  

  | 536,354 |   | 515,182 |
|                                                                                              |   | 69,347,218 |   | 69,326,046 |
|                                                                                              |   |   |   |   |
|    Less: accumulated depreciation and amortization                                      |   |  

6,644,591 |   |  

6,208,228 |
|                                                                                              |  

  | 62,702,627 |   | 63,117,818 |
|                                                                                              |   |   |   |   |
|  

   Property under construction                                                  |  

  | 43,150,372 |   |  

36,687,727 |
|                                                                                              |   | 105,852,999 |   | 99,805,545 |
|                                                                                              |   |   |   |   |
|  

Cash and cash equivalents                                                       |  

  | 4,657,166 |   | 3,670,538 |
|                                                                                              |  

  |   |   |   |
| Marketable securities  - available for sale                                                  |   | 1,198,367 |   |  

1,366,240 |
|                                                                                              |   |   |   |   |
|  

Accounts and reimbursements receivable, less allowance for doubtful  accounts             |  

  |  

  |   |  

  |
|  

   of $29,000 and $70,000 as of July 31, 2008 and April 30, 2008, respectively. |  

  | 4,033,603 |   |  

3,764,048 |
|                                                                                              |   |   |
|  

Deposits, escrows, prepaid and deferred expenses, net                                     |  

5,120,039 |   |  

4,006,189 |
|                                                                                              |   |   |   |
|  

Investments in affiliates                                                                 |  

  |  

9,665 |   |  

9,665 |
|                                                                                              |   |   |   |   |
|  

Due from related parties and affiliates                                                   |  

  |  

415,794 |   | 408,340 |
|                                                                                              |   |   |   |   |
|  

Deferred tax assets, net of valuation allowance of $1,329,000 and  $1,034,000             |  

  |  

  |   |  

  |
|  

   as of July 31, 2008 and April 30, 2008, respectively.                        |   |  

1,638,000 |   | 1,638,000 |
|                                                                                              |   |   |   |   |
|  

                                                                                     |  

  |  

$122,925,633 |   |  

$114,668,565 |

 

 

 

 

 

 

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

 

3

----

 

 

 

 

 

 

 

# FIRST HARTFORDCORPORATION AND SUBSIDIARIES 

**CONDENSEDCONSOLIDATED BALANCE SHEETS (continued)**

 

|  

**LIABILITIES AND SHAREHOLDERSDEFICIENCY**                                         |
|--------------------------------------------------------------------------------------------|
| ** **

                                                                          |  

  |  

  |   |  

  |
|  

                                                                              |  

  |  

**July 31, 2008** |   | ** **

**April 30, 2008** |
| ** **

Liabilities:                                                                   |  

  |  

(unaudited) |   |  

(audited) |
|  

   Mortgages and notes payable:                                          |  

  |  

  |   |  

  |
|  

   Construction loan payable                                             |  

  |  

$36,351,817 |   |  

$28,374,034 |
|  

   Mortgages payable                                                     |  

  |  

67,433,923 |   |  

67,663,181 |
|  

   Notes payable                                                         |  

  |  

246,234 |   |  

247,736 |
|  

                                                                              |  

  |  

104,031,974 |   |  

96,284,951 |
|  

                                                                              |  

  |  

  |   |  

  |
|  

Accounts payable                                                                   |  

  |  

6,239,432 |   |  

4,558,746 |
|  

Accrued liabilities                                                                |  

  |  

995,407 |   |  

2,410,050 |
|  

Deferred income                                                                    |  

  |  

264,959 |   |  

283,649 |
|  

Accrued cost of derivatives                                                        |  

  |  

991,676 |   |  

1,405,001 |
|  

Other liabilities                                                                  |  

  |  

5,439,771 |   |  

5,590,191 |
|  

Due to related parties and affiliates                                              |  

  |  

72,000 |   |  

71,853 |
|  

                                                                              |  

  |  

118,035,219 |   |  

110,604,441 |
|  

                                                                              |  

  |  

  |   |  

  |
|  

Minority interest                                                                  |  

  |  

8,218,941 |   |  

6,736,060 |
|  

                                                                              |  

  |  

  |   |  

  |
|  

Shareholder'sDeficiency:                                                           |  

  |  

  |   |  

  |
|  

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

  |
|  

  authorized 4,000,000 shares; issued and outstanding 	- None.                |  

  | -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 |   |  

5,056,111 |
|  

Deficit                                                                            |  

  |  

(9,309,391) |   |  

(8,853,895) |
|  

Accumulated other comprehensive loss                                               |  

  | (345,780) |   |  

(152,110) |
|  

                                                                              |  

  |  

(1,300,451) |   |  

(651,285) |
|                                                                                       |   |   |   |   |
|  

Less: Treasury stock, at cost, 258,642 and 255,842 shares as of July  31, 2008 and |   |   |   |   |
|  

   April 30, 2008, respectively                                          |  

  |  

2,028,076 |   | 2,020,651 |
|                                                                                       |   |   |   |   |
|  

                                                                              |  

  |  

(3,328,527) |   | (2,671,936) |
|                                                                                       |   |   |   |   |
|  

                                                                              |  

  |  

$122,925,633 |   | $114,668,565 |

 

 

 

 

 

 

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

 

4

----

 

 

 

 

 

# FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS AND**

**OTHER COMPREHENSIVELOSS**

(Unaudited)

|                                                              | **Three Months Ended** |
|-------------------------------------------------------------------|------------------------|
|                                                              | **July 31, 2008**      | **July 31, 2007** |
|                                                              |                   |   |
| Revenues:                                                         |                   |   |
|     Rental income                             | $2,395,443             | $2,156,598 |
|     Service income                                      | 366,207                | 426,756 |
|    Other                                                | 61,137                 | 166,563 |
|                                                              | 2,822,787              | 2,749,917 |
|                                                              |                   |   |
| Operating  costs and expenses:                                    |                   |   |
|     Rental expenses                                     | 1,267,650              | 1,139,071 |
|     Service                                             | 405,252                | 281,065 |
|     Selling, general and administrative                 | 1,280,586              | 1,149,074 |
|                                                              | 2,953,488              | 2,569,210 |
|                                                              |                   |   |
| (Loss)  income from operations                                    | (130,701)              | 180,707 |
|                                                              |                   |   |
| Non-operating  income (expense)                                   |                   |   |
|     Interest expense                                    | (915,538)              | (647,176) |
|    Gain  on derivatives                                 | 413,325                | 494,638 |
|    Other  income                                        | -0-                    | 69,852 |
|                                                              | (502,213)              | (82,686) |
|                                                              |                   |   |
| (Loss)  income before income taxes                                | (632,914)              | 98,021 |
|                                                              |                   |   |
| Provision  for income taxes                                       | 15,576                 | 13,183 |
|                                                              |                   |   |
| (Loss)  income before minority interest and equity in earnings of |                   |   |
|     unconsolidated subsidiaries                         | (648,490)              | 84,838 |
|                                                              |                   |   |
| Minority  interest in income of consolidated joint ventures       | (2,420)                | (285,529) |
| Equity  in earnings of unconsolidated subsidiaries                | 195,414                | 218,057 |
|                                                              |                   |   |
| Net  (loss) income before other comprehensive loss                | (455,496)              | 17,366 |

 

The accompanying notes are an integral part of thesecondensed consolidated financial statements

 

5

----

 

 

 

 

 

# FIRST HARTFORDCORPORATION AND SUBSIDIARIES

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS AND**

**OTHER COMPREHENSIVELOSS (continued)**

(Unaudited)

|                                                                    | **Three Months Ended** |
|-------------------------------------------------------------------------|------------------------|
|                                                                    | **July 31, 2008**      | **July 31, 2008** |
|                                                                    |                   |   |
| Other  comprehensive loss, net of taxes:                                |                   |   |
|     Unrealized holding losses on securities during the period | (193,670)              | -0- |
|                                                                    |                   |   |
| Comprehensive  (loss) income                                            | $(649,166)             | $17,366 |
|                                                                    |                   |   |
| Net  (loss) income per share - basic                                    | (0.15)                 | .01 |
| Net  (loss) income per share – diluted                             | (0.15)                 | .01 |
|                                                                    |                   |   |
| Shares  used in basic per share computation - basic                     | 3,041,234              | 3,046,279 |
| Shares  used in basic per share computation - diluted                   | 3,041,234              | 3,181,690 |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

6

----

 

 

 

 

 

 

 

**           **

| ** **

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

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

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

                                                                                        |  

  |  

  |  

  |
|  

                                                                                            |  
Three Months Ended
  |
|  

                                                                                            |  

**July 31,  2008** |   |  

**July 31,  2007** |
| ** **

                                                                                        |  

  |   |  

         |
|  

Cash flows from operating  activities:                                                           |  

  |   |  

  |
|  

  Net (loss) income                                                                         |  

$(455,496) |   |  

$17,366 |
|  

Adjustments to reconcile net (loss) income                                                  |  

  |   |  

  |
|  

  to net cash used in operating activities:                                                 |  

  |   |  

  |
|  

  Equity in earnings of unconsolidated subsidiaries                                         |  

(195,414) |   |  

(218,057) |
|  

  Minority interest in income of consolidated joint  ventures                               |  

2,420 |   |  

285,529 |
|  

  Depreciation                                                                              |  

436,363 |   |  

344,023 |
|  

  Amortization                                                                              |  

57,921 |   |  

52,792 |
|  

  Deferred income taxes                                                                     |  

-0- |   |  

(42,000) |
|  

  Gain on derivatives                                                                       |  

(413,325) |   |  

(494,638) |
|                                                                                                     |   |   |   |
|  

(Increase) decrease in:                                                                          |  

  |   |  

  |
|  

  Accounts and reimbursements receivable, net                                               |  

(269,555) |   |  

(1,899,215) |
|  

  Deposits, escrows, prepaid and deferred expenses                                          |  

(1,171,771) |   |  

354,281 |
|  

                                                                                            |  

  |   |   |
|  

Increase (decrease) in:                                                                          |  

  |   |  

  |
|  

  Accrued liabilities                                                                       |  

(1,414,643) |   |  

(268,946) |
|  

  Deferred income                                                                           |  

(18,690) |   |  

(8,518) |
|  

  Accounts payable                                                                          |  

1,680,686 |   |  

(336,142) |
|  

                                                                                            |   |   |   |
|  

Net cash used in operating activities                                                            |  

(1,761,504) |   |  

(2,213,525) |
|  

                                                                                            |   |   |   |
|  

Cash flows from investing activities:                                                            |  

  |   |  

  |
|  

  Distributions from affiliates, net                                                        |  

44,994 |   |  

134,629 |
|  

  Investment in marketable securities                                                       |  

(25,797) |   |  

(437,173) |
|  

  Purchase of equipment and leasehold improvements                                          |  

(21,172) |   |  

(31,161) |
|  

  Additions to developed properties and properties  under construction

  construction |  

(6,462,645) |   |  

(660,217) |
|  

                                                                                            |   |   |   |
| Net cash used in investing activities                                                                    |  

(6,464,620) |   |  

(993,922) |
|                                                                                                          |

 

 

 

 

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

 

7

----

 

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

**CONDENSED CONSOLIDATED  STATEMENTS OF CASH FLOWS**                    |
| (Unaudited)                                                                         |
|  

**(continued)**                                                             |
| ** **

** **                                                              |
| ** **

                                                                   |  

**Three Months Ended** |
|  

                                                                       |  

**July 31, 2008** |   |  

**July 31, 2007** |
| ** **

                                                                   |  

  |   |  

  |
|  

Cash flows from financing activities:                                       |  

  |   |  

  |
|  

   Minority distributions from consolidated joint ventures        | (17,677) |   | -0-

  |
|  

   Limited partners investment in consolidated joint ventures     |  

1,498,138 |   |  

-0- |
|  

   Purchase of treasury stock                                     | (7,425) |   | -0-

  |
|                                                                           |   |   |   |
| Proceeds from:                                                                      |   |   |   |
|  

   Construction loan payable                                      |  

7,977,783 |   |  

1,160,765 |
|  

   Mortgages payable                                              |  

-0- |   |  

447,820 |
|  

   Notes payable                                                  |  

-0- |   |  

500,000 |
|  

   Advances from related parties and affiliated partnerships, net |  

-0- |   | 24,109 |
|  

Principal payments on:                                                      |  

  |   |  

  |
|  

  Mortgages payable                                                    |  

(229,258) |   |  

(164,086) |
|  

  Notes payable                                                        |  

(1,502) |   |  

(1,489) |
|  

  Advances to related parties and affiliates partnerships, net         |  

(7,307) |   |  

-0- |
|  

                                                                       |  

  |   |  

  |
|  

Net cash provided by financing activities                                   |  

9,212,752 |   |  

1,967,119 |
|  

                                                                       |  

  |   |  

  |
|  

Net increase (decrease) in cash and cash equivalents                        |  

986,628 |   |  

(1,240,328) |
|  

                                                                       |  

  |   |  

  |
|  

Cash and cash equivalents, beginning of period                              |  

3,670,538 |   |  

2,585,076 |
|  

                                                                       |  

  |   |  

  |
|  

Cash and cash equivalents, end of period                                    |  

$4,657,166 |   |  

$1,344,748 |
|  

                                                                       |   |   |   |
|  

Cash paid during the period for interest                                    | $1,068,615 |   |  

$745,503 |
|  

Cash paid during the period for income taxes                                | $10,576 |   |  

$55,184 |
|                                                                                |   |   |   |
|                                                                                |   |   |   |
|                                                                                |   |   |   |

**                                                              **

** **

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

  

8

----

 

 

 

 

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIES**

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

** **

**1.   Nature of Business and Significant AccountingPolicies:**
 

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 records minority interest for the non-owned portions ofconsolidated subsidiaries.  All significant intercompany transactions andaccounts have been eliminated in the consolidated financial statements,including construction revenues and costs of development for 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 threemonths ended July 31, 2008 are not necessarily indicative of the results thatmay be expected for the year ending April 30, 2009. For further information,refer to the consolidated financial statements and footnotes thereto includedin the Company's annual report on Form 10-K for the fiscal year endedApril 30, 2008.

 

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.

 

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, 2008, except as discussed in Note 5.

 

 

 

 
   
9

 

 

 

 

 
FIRST HARTFORDCORPORATION AND SUBSIDIARIES
**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

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

Income (loss) Per Common Share

 

Basic income (loss) per share is computed by dividingthe net income (loss) attributable to the common stockholders (the numerator)by the weighted average number of shares of common stock outstanding (thedenominator) during the reporting periods. Diluted income (loss) per share iscomputed by increasing the denominator by the weighted average number of additionalshares that could have been outstanding from securities convertible into commonstock, such as stock options and warrants (using the "treasury stock"  method).

** **

**2.   Fair Value of DerivativeInstruments**

** **

In the normal course ofbusiness, the Company is exposed to the effects of interest rate changes.  Tomitigate the exposure to unexpected changes in interest rates, derivatives areused primarily to hedge against rate movements on some of the Company's related debt. In accordance with SFAS No. 133, "Accounting for Derivative Instruments and HedgingActivities", since the Company's interest rate swaps have notbeen designated as a hedge they must be recognized as an asset or liability andadjusted to fair value through income in the current period.

 

The Company recognized a gain of $413,325 onderivatives in the current quarter. The aggregate fair value of the Company's swap contracts were in an unfavorable position of $(991,676)as of July 31, 2008 and are recorded  as a liability in the accompanying condensedconsolidated balance sheet.

 

**3.         Investment In Affiliated Partnerships**

 

Investments in entities in which the Company is notthe general partner and has less than a 20% interest are carried at cost. Distributions received from those entities are included in income. Distributions received in excess of the Company's proportionate share of capital are applied as a reduction of the costof the investments.  Investments in entities in which the Company has a 20-50%interest but does not control are carried at cost and are subsequently adjustedfor the Company's proportionate share of their undistributed earningsor losses, and any distributions (Equity Method).

 

The Company currently has two unconsolidated operatingpartnerships accounted for under the Equity Method.  The Company has a 50%interest in Cranston Parkade, LLC which in turn has an interest in Cranston/BVTAssociates LP which owns a shopping center in Cranston, RI. The Company alsohas a 50% interest in Dover Parkade, LLC which owns a shopping center in Dover Township, NJ.  Although the Company exercises some influence, the Company does notcontrol the operating and financial policies of these partnerships and,therefore, these partnerships are not consolidated.

 

 

 

 

 

 

 

 

 

 

10
 
 

 

 

 

 
FIRST HARTFORDCORPORATION AND SUBSIDIARIES
**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

**3.         Investment In Affiliated Partnerships (continued):**

 

OPERATING RESULTS OFNONCONSOLIDATED 50% OWNED SUBSIDIARIES

 

 

Three Months Ended 

July 31

 

2008
   
2007

Cranston Parkade, LLC

 
   
 

      Revenues

$ 1,312,327
   
$1,220,175

      Expenses

  1,064,070
   
     993,901

Net Profit 

 $   248,257
   
$   226,274

Dover Parkade, LLC

 
   
 

     Revenues

$  652,367
   
$  650,464

     Expenses

    507,186
   
    475,542

Net Profit 

$  145,181
   
$   174,922

** **

These investments are recorded at cost and have beensubsequently adjusted for gains, losses and distributions such that thecarrying value is less than zero.  Although the Company is not liable for theobligations of the two partnerships it has not discontinued applying the EquityMethod since the Company considers itself to be committed to providingfinancial support to the partnerships.  As of July 31, 2008 and April 30, 2008,$5,364,935 and $5,515,353, respectively, is included in other liabilities in theconsolidated balance sheets representing the carrying value of theseinvestments.

 

**4.        ****Income Taxes**

 

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is no longer subjectto U.S. federal tax examinations for years before May 1, 2005. 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 of assetsand 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 be impacted by thechanges to tax laws, changes to statutory tax rates and future taxableincome levels. In the event the Company were to determine that it would not beable to realize all or a portion of its deferred tax assets in the future, it wouldreduce such amounts through a charge to income in the period in which thatdetermination is made. Conversely, if the Company were to determine that itwould be able to realize its deferred tax assets in the future in excess of thenet carrying amounts, it would decrease the recorded valuation allowancethrough an increase to income in the period in which that determination ismade.

 

As of July 31, 2008, the Company has concluded that itis more likely than not that the Company will realize $1,638,000 in deferredtax assets. 

 

11
 
 

 

 
FIRST HARTFORDCORPORATION AND SUBSIDIARIES
**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

 

**5.         FairValue Measurements**

 

The Company adopted SFAS No. 157, “Fair ValueMeasurements” on May 1, 2008 for its financial assets and liabilities which aremeasured at fair value on a recurring basis. As it relates to non-recurringfair value measurements of nonfinancial assets and liabilities SFAS 157 iseffective for fiscal years beginning after November 15, 2008. The Company has determinedthe financial assets and liabilities subject to SFAS No. 157 are marketablesecurities and interest rate swap agreements (derivatives).

 

            *FairValue Hierarchy*

 

SFASNo. 157 specifies a hierarchy of valuation techniques based upon whether theinputs to those valuation  techniques reflect assumptions other market participantswould use based upon market data obtained from independentsources (also referred to as observable inputs).  In accordance with SFAS No.157, the following summarizes the fairvalue hierarchy:

 

•     Level 1 -  Quoted prices in activemarkets that are unadjusted and accessible at the measurement date foridentical, unrestricted assets or liabilities;

 

•     Level 2 - Quoted prices foridentical assets and liabilities in markets that are not active, quoted pricesfor similar assets and liabilities in active markets or financial instrumentsfor which significant observable inputs are available, either directly orindirectly such as interest rates and yield curves that are observable atcommonly quoted intervals; and 

 

•     Level 3 - Prices or valuationsthat require inputs that are unobservable.

 

In certain cases, the inputs used to measure fairvalue may fall into different levels of the fair value hierarchy. In suchcases, the level in the fair value hierarchy within which the fair valuemeasurement in its entirety falls has been determined based on the lowest levelinput that is significant to the fair value measurement in its entirety.  TheCompany’s assessment of the significance of a particular input to the fairvalue measurement in its entirety 

requires judgment, and considers factors specific tothe asset or liability.

 

*Items Measured at Far Value on a Recurring Basis*

 

Marketable securities are marked to market based uponthe last sale of the period obtained from recognized stock exchanges.  Interestrate swaps (derivatives) are valued by an estimate of the net present value ofthe expected cash flows from each transaction between the Company and Counterpartyusing relevant mid-market data inputs and based on the assumption of no unusualmarket conditions or forced liquidation.

 

**                       **

**Fair Value Measurements**

 

Level 1

Level 2

Level 3

Available  for sale securities

$1,198,367

    $          -0-

    $   -0-

Interest  rate swap agreements (negative fair value)

                   -0-

  (991,676)

         -0-

      Total

$1,198,367

 $(991,676)

    $   -0-
 
 

 
12
 
 

 

 

 

 
FIRST HARTFORDCORPORATION AND SUBSIDIARIES
**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

** **

**5.         FairValue Measurements (continued):**

 

In February 2007, the FASB issued SFAS No. 159, “TheFair Value Option for Financial Assets and Financial Liabilities - Including anAmendment of FASB Statement No. 115” which permits entities to choose tomeasure eligible items at fair value at specified election dates and reportunrealized gains and losses on items, for which the fair value option has beenelected, in earnings at each subsequent reporting date. SFAS No. 159 iseffective for the Company’s fiscal years beginning May 1, 2008. The adoption ofSFAS No. 159 in fiscal 2009 did not have an impact on the Company’s condensedconsolidated results of operations or financial position, as the Company hasnot elected the fair value option for any of its eligible financial assets orliabilities.

 

**6.         RecentAccounting Pronouncements**

** **

In December 2007, the FASB issued SFAS No. 141(revised 2007), “Business Combinations” (SFAS141(R)), whichreplaces SFAS No. 141, “Business Combinations.” SFAS 141(R) retains the underlyingconcepts of SFAS 141 in that all businesscombinations are still required to be accounted for at fair value under theacquisition method of accounting but SFAS 141(R) changed the method of applyingthe acquisition method in a number ofsignificant aspects. Acquisition costs will generally be expensed as incurred;non-controlling interests will bevalued at fair value at the acquisition date; in-process research anddevelopment will be recorded atfair value as an indefinite-lived intangible asset at the acquisition date;restructuring costs associatedwith a business combination will generally be expensed subsequent to theacquisition date; and changes indeferred tax asset valuation allowances and income tax uncertainties after theacquisition date generally will affectincome tax expense. SFAS 141(R) is effective on a prospective basis for allbusiness combinations for which the acquisitiondate is on or after the beginning of the first annual period subsequent to December15, 2008, with the exception of the accounting for valuation allowances ondeferred taxes and acquired taxcontingencies. SFAS 141(R) amends SFAS 109 such that adjustments made tovaluation  allowances on deferred taxes andacquired tax contingencies associated with acquisitions that closed prior to the effective date of SFAS 141(R) would also apply theprovisions of SFAS 141(R). Early adoption is not permitted.

 

In December 2007, the FASB issued Financial AccountingStandards No. 160, “Non-controlling Interests in Consolidated FinancialStatements – an amendment of ARB No. 51.” This statement is effective forfiscal years, and interim periods within those fiscal years, beginning on orafter December 15, 2008, with earlier adoption prohibited. This statementrequires the recognition of a non-controlling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’sequity. The amount of net income attributable to the non-controlling interestwill be included in consolidated net income on the face of the income statement.It also amends certain of ARB No. 51’s consolidation procedures for consistencywith the requirements of SFAS 141(R). This statement also includes expandeddisclosure requirements regarding the interests of the parent and itsnon-controlling interest. Theimpact to the Company of SFAS No. 160 is currently being evaluated and has notyet been determined.

 

In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities,” whichchanges the disclosure requirements for derivative instruments and hedgingactivities. SFAS No. 161 requires enhanced disclosures about (a) how and why anentity uses derivative instruments, (b) how derivative instruments and relatedhedged items are accounted for under SFAS No. 133, “Accounting for DerivativeInstruments and Hedging Activities” and its related interpretations, and (c)how derivative instruments and related hedged items affect an entity’sfinancial position, financial performance, and cash flows. This statement’sdisclosure requirements are effective for fiscal years and interim periodsbeginning after November 15, 2008.  The impact to the Company of SFAS No. 161is currently being evaluated and has not yet been determined.

 

 

13

 

 
FIRST HARTFORDCORPORATION AND SUBSIDIARIES
 

**Item 2.**           **MANAGEMENT****'S DISCUSSION AND ANALYSIS OF FINANCIAL**

**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's financial position andresults of operations.  This financial and business analysis should be read inconjunction with the condensed consolidated financial statements and relatednotes.

 

The following discussionand certain other sections of this Report on Form 10-Q contain statementsreflecting the Company'sviews about its future performance and constitutes "forward-looking statements" under the PrivateSecurities Litigation Reform Act of 1995.  These views may involve risks anduncertainties that are difficult to predict and may cause the Company's actual results to differmaterially from the results discussed in such forward-looking statements. Readers should consider how various factors including changes in generaleconomic conditions, cost of materials, interest rates and availability offunds, and the nature of competition and relationships with key customers mayaffect 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
 

The discussion and analysis of financial condition andresults of operations is based upon the condensed consolidated financialstatements contained in Item 1 in this Quarterly Report.  The condensedconsolidated financial statements include the accounts of the Company and itscontrolled affiliates.  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 reportedamounts of assets and liabilities and the disclosure of contingent assets andliabilities as of the date of the financial statements and the reported amountsof revenues and expenses for the reporting period.  Actual results could differfrom those estimates.

** **

Thediscussion included in Item 7 of our Annual Report on Form 10-K for the yearended April 30, 2008 under the subheading "Critical Accounting Policiesand Estimates" is still considered current and applicable, and is herebyincorporated into this Quarterly Report on Form 10-Q.

 

Resultsof Operations

 

Rentalincome increased approximately $239,000 during the three months ended July 31,2008. Of that amount approximately $118,000 was from increased occupancy andrents generated from Rockland Place Apartments, LLC and approximately $88,000from the Cranston Police Department lease which commenced on June 1, 2007. Service income decreased approximately $61,000 which relates to timing of dealclosings with CVS.  

 

Otherincome decreased $107,000 during the three months ended July 31, 2008.  In the2007 period, a $117,000 fee was paid to the Company by Hartford Lubbock LP (98%owned by a Company which is 100% owned by the President of the Company and hiswife).  This fee was for the Company's assistance in refinancing a mortgage.

 

Operatingcosts increased approximately $384,000 for the current period.  Approximately$230,000 of which was a result of professional fees incurred in connection withthe Kaplan lawsuit.  The balance was a result of increases in depreciation(mainly Rockland) and additional CVS expenses.

 

Interestexpense increased $268,000 in the current period due to increased borrowings on Rockland, Police Station has three months of interest versus two for the priorperiod and additional payments of interest were accrued for the North Adams   Shopping Center.

 

14

 
 
 

 

 

 

 

 
FIRST HARTFORDCORPORATION AND SUBSIDIARIES
 

**Item 2.**            **MANAGEMENT****'****S DISCUSSION AND ANALYSIS OF FINANCIAL**

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

 

CapitalResource and Liquidity:

 

Despitethe current tightening of credit by financial institutions, the Company hasadequate cash and borrowing arrangements to meet our current obligations. However, banks may not be funding construction or mortgage loans for sometime.  At this time, we cannot even estimate when that will change. 

 

At this point in time we arenot in need of any new financing.  The potential purchase of the shares of adissident shareholder, as discussed in Part II, Item 1 of this document is unknownas to the quantity or price.  We are well aware that a purchase in excess ofthe value of the shares negatively impacts the remaining shareholders and will depleteour cash position.

 

Contractual Obligations

Total

Less than 1 year

1-3 years

3-5 years

More than 5 years

 

 

 

 

 

 

Long-Term Debt

$101,390,465

$1,057,553

$29,451,180

$3,041,584

$67,840,148

 

 

 

 

 

 

Short-Term Debt

2,641,509

2,641,509

 

 

 

 

 

 

 

 

 

Purchase Obligations

2,213,000

2,213,000

 

 

 

 

 

 

 

 

 

Tenant Allowance

3,695,000

3,695,000

 

 

 

 

 

 

 

 

 

Total

$109,939,974

$9,607,062

$29,451,180

$3,041,584

$67,840,148

 

Although we are wary of the possibilities of risinginterest rates, problems with major tenants, and major construction costoverruns, we feel our liquidity and capital resources are presently adequate tomeet our needs.

 

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

 

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

** **

**Item 4.              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 

 
 
15

 

 

 

** **

**FIRST HARTFORD CORPORATION AND SUBSIDIARIES**

** **

**Item 4.             CONTROLS AND PROCEDURES (continued):**

 

weaknesses in our control environment, as of July 31, 2008, webelieve that the condensed consolidated financial statements contained in thisreport present fairly the Company’s financial condition, results of operationsand cash flows for the periods presented.

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.

 

 

 

 

 

 

 

 

16

 

 

 

 

 

**FIRST HARTFORD CORPORATION ANDSUBSIDIARIES**

 

PARTII           OTHER INFORMATION

 

**Item 1.             LEGAL PROCEEDINGS**

 

Therehave not been any material developments in the legal proceedings we describedin our Annual Report on Form 10-K for the year ended April 30, 2008.

 

**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**

 

(a)               Not Applicable.

 

(b)               Not Applicable.

 

(c)               Not Applicable.

** **

**Item 3.             DEFAULTS UPON SENIOR SECURITIES**

 

(a)               Not Applicable.

 

(b)               Not Applicable.  

 

**Item 4.             SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

(a)               Not Applicable.

 

(b)               Not Applicable.

 

(c)               Not Applicable

 

(d)               Not Applicable

 

**Item 5.             OTHER INFORMATION**

** **

None

 

 

 

 

 

 

 

 

 

 

 

17
 
 

 

 

**FIRST HARTFORD CORPORATION ANDSUBSIDIARIES**

 

 

** **

PARTII           OTHER INFORMATION (continued):

** **

**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 Officers, pursuant to 18 U.S.C. Section 1350.

 

 

 

 

 

 

 

18
 
 

 

 

 

 

 
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
October 6,		2008
______________________________
Date  
Neil H. Ellis B President and 
 
Chief Executive Officer
 
 
 
/s/ Stuart I. Greenwald
October 6,		2008
______________________________
Date
Stuart I. Greenwald B Treasurer 
 
and Chief Financial Officer
 
 

 

 

 

 

 

 

 

 

 

 

 

19