**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.  20549**

**FORM 10-Q**

(Mark One)

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

For the quarterly periodended July 31, 2006.

[  ]  **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 or organization)                                                                                                                              |   | (I.R.S.Employer Identification No.) |
|                                                                                                                                                                                             |
| 149 Colonial Road   Manchester, CT                                                                                                                                                |   | 06045-1270 |
| (Address of principalexecutiveoffices)                                                                                                                                                           |   | (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 whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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 whether the registrantis a large accelerated filer, an accelerated filer, or a non-acceleratedfiler.  See definition of "accelerated filer and large acceleratedfiler" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ⁪                                   Acceleratedfiler ⁪                                            Non-accelerated filerX

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

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.

3,046,279as of September 11, 2006

                                                                                                                                                           

| 1 |
|---|

 

----

**FIRST HARTFORD CORPORATION ANDSUBSIDARIES**

**INDEX**

| **PART I. **                                                   | **FINANCIALINFORMATION**                                                                     | **PAGE** |
|---------------------------------------------------------------------|----------------------------------------------------------------------------------------------|----------|
|                                                                |                                                                                         |     |
| Item 1.                                                        | Financial Statements                                                                         |     |
|                                                                |                                                                                         |     |
|                                                                | CondensedConsolidated Balance Sheets -                                                       |     |
|                                                                |      July31, 2006 (unaudited) and April 30, 2006 (audited)               | 3 - 4    |
|                                                                |                                                                                         |     |
|                                                                | CondensedConsolidated Statements of Operations                                               |     |
|                                                                |      Forthe Three Months                                                 |     |
|                                                                |      EndedJuly 31, 2006 and 2005 (unaudited)                             | 5        |
|                                                                |                                                                                         |     |
|                                                                | CondensedConsolidated Statements of Cash Flows                                               |     |
|                                                                |      Forthe Three Months                                                 |     |
|                                                                |      EndedJuly 31, 2006 and 2005 (unaudited)                             | 6 - 7    |
|                                                                |                                                                                         |     |
|                                                                | Notes		to Condensed Consolidated Financial Statements                                        | 8 - 11   |
|                                                                |                                                                                         |     |
| Item 2.                | Management's Discussion and Analysis  of Financial Condition And		Results of Operations | 11 - 13  |
|                                                                |                                                                                         |     |
| Item 3.           | Quantitative and Qualitative Disclosures About Market Risk                                   | 13 - 14  |
|                                                                |                                                                                         |     |
| Item 4.                                                   | Controls and Procedures                                                                      | 14       |
|                                                                |                                                                                         |     |
| **PART II         **   | **OTHERINFORMATION**                                                                         |     |
|                                                                |                                                                                         |     |
| Item 1.                                    | Legal Proceedings                                                                            | 15       |
|                                                                |                                                                                         |     |
| Item 1A                                    | Risk Factors                                                                                 | 15       |
|                                                                |                                                                                         |     |
| Item 2.                                         | Unregistered Sales of Equity Securities and Use of Proceeds                                  | 15       |
|                                                                |                                                                                         |     |
| Item 3.                                              | Defaults Upon Senior Securities                                                              | 15       |
|                                                                |                                                                                         |     |
| Item 4.                                         | Submission of Matters to a Vote Of Security Holders                                          | 15       |
|                                                                |                                                                                         |     |
| Item 5.                                              | Other Information                                                                            | 15       |
|                                                                |                                                                                         |     |
| Item 6.                                              | Exhibits                                                                                     | 15       |
|                                                                |                                                                                         |     |
|                                                                | Signatures                                                                                   | 17       |

2

 

----

**PART I.          FINANCIAL INFORMATION**

**ITEM 1.          FINANCIAL STATEMENTS**

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS**

**ASSETS**

|                                                                                                                                                        |           | **July 31, 2006** |      | **April 30, 2006**       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|-------------------|-----------|--------------------------|
|                                                                                                                                                        |           | (unaudited)       |      | (audited)                |
| Real estate and    equipment:                                                                                                                          |           |                   |      |                          |
|  Developed properties                                                                                                                             |           | $33,574,457       |      |    $33,574,457 |
|  Equipment and leasehold    improvements                                                                                                          |           | 383,042           |      | 377,433                  |
|                                                                                                                                                        |           | 33,957,499        |      | 33,951,890               |
|                                                                                                                                                        |           |                   |      |                          |
|  Less: accumulated    depreciation and amortization                                                                                               |           | 3,651,264         |      | 3,431,767                |
|                                                                                                                                                        |           | 30,306,235        |      | 30,520,123               |
|                                                                                                                                                        |           |                   |      |                          |
|  Property under    construction held for lease                                                                                                    |           | 6,898,142         |      | 3,323,517                |
|  Property under    construction held for sale                                                                                                     |           | 323,024           |      | 76,003                   |
|                                                                                                                                                        |           | 37,527,401        |      | 33,919,643               |
|                                                                                                                                                        |           |                   |      |                          |
| Cash and cash equivalents                                                                                                                              |           | 2,906,680         |      | 5,144,743                |
|                                                                                                                                                        |      |                   |
| Investment in marketable    securities                                                                                                                 |           | 2,849,853         |      | 2,520,014                |
|                                                                                                                                                        |           |                   |      |                          |
| Accounts and notes    receivable, less allowance	for doubtful accounts of    $14,000 and $30,000	for July 31, 2006 and    April 30, 2006, respectively |           | 771,468           |      | 537,561                  |
|                                                                                                                                                        |           |                   |      |                          |
| Deposits, escrows,    prepaid and deferred expenses, net                                                                                               | 4,881,273 |              | 4,343,168 |
|                                                                                                                                                        |           |                   |      |                          |
| Investment in affiliates                                                                                                                               |           | 9,665             |      | 9,665                    |
|                                                                                                                                                        |           |                   |      |                          |
| Due from related parties    and affiliates                                                                                                             |           | 363,339           |      | 344,228                  |
|                                                                                                                                                        |           |                   |      |                          |
| Derivative instruments -    swap agreements                                                                                                            |           | 586,092           |      | 675,292                  |
|                                                                                                                                                        |           |                   |      |                          |
| Deferred tax assets, net    of valuation allowance of $464,000                                                                                         | 1,932,000 |              | 1,854,000 |
|                                                                                                                                                        |           |                   |      |                          |
|                                                                                                                                                        |           | $51,827,771       |      | $49,348,314              |

 

The accompanyingnotes are an integral part of these condensed consolidated financial statements

 

| 3 |
|---|

 

----

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(continued)**

**LIABILITIES AND SHAREHOLDERS' DEFICIENCY**

 

|                                                                    |           |                   |      |                    |
|--------------------------------------------------------------------|-----------|-------------------|-----------|--------------------|
|                                                                    |           | **July 31, 2006** |      | **April 30, 2006** |
| Liabilities:                                                       |           | (unaudited)       |      | (audited)          |
| Mortgages and notes  payable:                                      |           |                   |      |                    |
|      Construction loan  payable                |           | $2,946,607        |      | $663,635           |
|      Mortgage payable                          |           | 40,850,703        |      | 40,102,741         |
|                                                                    |           | 43,797,310        |      | 1,449,376          |
|                                                                    |           |                   |      |                    |
| Accounts payable                                                   |           | 3,032,581         |      | 1,449,628          |
| Accrued liabilities                                                |           | 286,247           |      | 1,725,213          |
| Deferred income                                                    |           | 504,687           |      | 566,515            |
| Other liabilities                                                  |           | 5,678,471         |      | 5,647,434          |
| Due to related parties and  affiliates                             |           | 71,853            |      | 67,795             |
|                                                                    |           | 53,371,149        |      | 50,222,961         |
|                                                                    |           |                   |      |                    |
| Minority interest                                                  |           | 0                 |      | 0                  |
|                                                                    |           |                   |      |                    |
| Shareholders' Deficiency:                                          |           |                   |      |                    |
| 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                                                            |           | (7,885,696)       |      | (7,216,965)        |
|                                                                    |           | 469,024           |      | 1,137,755          |
|                                                                    |           |                   |      |                    |
| Less: Treasury stock, at  cost, 252,330 shares                     |           | 2,012,402         |      | 2,012,402          |
|                                                                    |           | (1,543,378)       |      | (874,647)          |
|                                                                    |           |              |      |               |
|                                                                    |           | $51,827,771       |      | $49,348,314        |

The accompanying notesare an integral part of these condensed consolidated financial statements

|  

4 |
|-----------|

----

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)**

|                                                                                                     | **Three Months Ended**                |
|-----------------------------------------------------------------------------------------------------|---------------------------------------|
|                                                                                                     | **July 31, 2006**                     |   | **July 31, 2005** |
| ** **                                                                                          |                                       |   |         (restated) |
| Revenues:                                                                                           |                                       |   |  |
|      Rental income                                                              | $1,394,001                            |   | $1,464,390 |
|      Service income                                                             | 32,558                                |   | 200,227 |
|      Other                                                                      |       82,241 |   |      19,114 |
| ** **                                                                                          | 1,508,800                             |   | 1,683,731 |
| Operating cost and  expenses:                                                                       |                                       |   |  |
|      Rental expenses                                                            | 612,097                               |   | 652,173 |
|      Service expenses                                                           | 25,797                                |   | 105,831 |
|      Selling, general and  administrative                                       |    994,185                  |   |    908,055 |
| Loss on  derivatives                                                                                |                                       |   |  |
|                                                                                                     | 1,632,079                             |   | 1,666,059 |
|                                                                                                     |                                       |   |  |
| Income (loss) from  operations                                                                      | (123,279)                             |   | 17,672 |
|                                                                                                     |                                       |   |  |
| Non-operating income  (expense)                                                                     |                                       |   |  |
|      Interest expense                                                           | (469,661)                             |   | (477,799) |
|      Non recurring items                                                        | 0                                     |   | (101,500) |
|      Loss on derivatives                                                        | (89,200)                              |   | (365,718) |
|                                                                                                     | (558,861)                             |   | (945,017) |
|                                                                                                     |                                       |   |  |
| Loss before income taxes                                                                            | (682,140)                             |   | (927,345) |
|                                                                                                     |                                       |   |  |
| Provision for (benefit  from) income taxes                                                          | (96,248)                              |   | (624,275) |
|                                                                                                     |                                       |   |  |
| Loss before minority  interest and equity in 	     unconsolidated  subsidiaries | (585,892)                             |   | (303,070) |
| ** **                                                                                          |                                       |   |  |
| **Discontinued  Items:**                                                                            |                                       |   |  |
| Gain on  operations of shopping center sold                                                         | 0                                     |   | 0 |
|                                                                                                     |                                       |   |  |
| Net income  before income tax                                                                       | (2,358,742)                           |   | (363) |
|                                                                                                     |                                       |   |  |
| Minority interest in income  of consolidated joint ventures                                         | 0                                     |   | (50,000) |
| Equity in earnings (losses)  of unconsolidated subsidiaries                                         | 222,059                               |   | (1,431,397) |
|                                                                                                     |                                       |   |  |
| Net loss                                                                                            | ($363,833)                            |   | ($1,784,467) |
|                                                                                                     |                                       |   |  |
| Net loss per share                                                                                  | (0.12)                                |   | (0.58) |
|                                                                                                     |                                       |   |  |
| Shares used in basic  per share computation                                                         | 3,046,279                             |   | 3,083,171 |

|  

The accompanying notes are an integral part of these  condensed consolidated financial statements |
|-----------------------------------------------------------------------------------------------------------|

5

----

**           **

| **FIRST HARTFORD CORPORATION AND SUBSIDIARIES**                   |
|-------------------------------------------------------------------|
| **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**               |
| **(Unaudited)**                                                   |
|                                                                   |  |  |  |
|                                                                   | **Three Months Ended** |
|                                                                   | **July 31, 2006** |   | **July 31, 2005** |
|                                                                   |  |   |       (restated)   |
| Cash flows from operating  activities:                            |  |  |  |
|  Net loss                                                    | ($363,833) |  | ($1,784,467) |
| Adjustments to reconcile  net loss                                |  |  |  |
|  to net cash provided by  (used in) operating activities:    |  |  |  |
|  Equity in losses  (earnings) of unconsolidated subsidiaries | (222,059) |  | 1,431,397 |
|  Minority interest in  income of consolidated joint ventures | 0 |  | 50,000 |
|  Depreciation                                                | 219,497 |  | 213,123 |
|  Amortization                                                | 14,491 |  | 54,190 |
|  Deferred income taxes                                       | (78,000) |  | (630,000) |
|  Amortization of unearned  stock compensation                | 0 |  | 40,625 |
|  Loss on derivatives                                         | 89,200 |  | 365,718 |
|                                                                   |  |  |  |
| (Increase) decrease in:                                           |  |  |  |
|  Accounts and notes  receivables, net                        | (233,907) |  | (14,642) |
|  Deposits, escrows,  prepaid and deferred expenses           | (552,596) |  | 132,684 |
|                                                                   |  |  |  |
| Increase (decrease) in:                                           |  |  |  |
|  Accrued liabilities                                         | (1,438,966) |  | (281,319) |
|  Other liabilities                                           | 0 |  | 1,523,281 |
|  Deferred income                                             | (61,828) |  | (1,624) |
|  Accounts payable                                            | 1,582,953 |   | 1,273,706 |
|                                                                   |  |  |  |
| Net cash (used in) provided  by operating activities              | (1,045,048) |  | 2,372,672 |
|                                                                   |  |  |  |
| Cash flows from investing  activities:                            |  |  |  |
|  Distributions from  affiliates, net                         | 253,096 |  | 0 |
|  Investment in marketable  securities                        | (329,839) |  | 0 |

The accompanying notesare an integral part of these consolidated financial statements

| 6 |
|---|

 

 

----

| **FIRST HARTFORD CORPORATION AND SUBSIDIARIES**     |
|-----------------------------------------------------|
| **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS** |
| **(Unaudited)**                                     |
| **(continued)**                                     |
|                                                |

|                                                                            | **Three Months Ended** |
|----------------------------------------------------------------------------|------------------------|
|                                                                            | **July 31, 2006**      |   | **July 31, 2005** |
|                                                                            |                        |   |  (restated)   |
|                                                                            |                        |  |  |
|  Purchase of equipment and  leasehold improvements                    | (5,609)                |  | (27,353) |
|  Additions to developed  properties and properties under construction | (3,821,646)            |   | (3,456,527) |
|                                                                            |                        |  |  |
| Net cash used in investing  activities                                     | (3,903,998)            |  | (3,573,880) |
|                                                                            |                        |  |  |
| Cash flows from financing  activities:                                     |                        |  |  |
|                                                                            |                        |  |  |
|    Minority distributions  from consolidated joint ventures      | 0                      |  | (50,000) |
|    Purchase of treasury  stock                                   | 0                      |  | (245) |
|    Dividend paid                                                 | (304,898)              |  | 0 |
|                                                                            |                        |  |  |
| Proceeds from:                                                             |                        |  |  |
|  Construction loan payable                                            | 2,282,972              |  | 1,439,566 |
|  Mortgage payable                                                     | 823,581                |  | 0 |
|                                                                            |                        |  |  |
| Principal payments on:                                                     |                        |  |  |
|  Mortgage payable                                                     | (75,619)               |  | (72,238) |
|  Notes payable                                                        | 0                      |  | (1,583,090) |
|  Advances to related  parties and affiliates, net                     | (15,053)               |   | (67,005) |
|                                                                            |                        |  |  |
| Net cash provided by (used  in) financing activities                       | 2,710,983              |   | (333,012) |
|                                                                            |                        |  |  |
| Net decrease in cash and  cash equivalents                                 | (2,238,063)            |  | (1,534,220) |
|                                                                            |                        |  |  |
| Cash and cash equivalents,  beginning of period                            | 5,144,743              |   | 2,367,434 |
|                                                                            |                        |  |  |
| Cash and cash equivalents,  end of period                                  | $2,906,680             |   | $833,214 |

 

| The accompanying notes are an integral part of these  condensed consolidated financial statements |
|---------------------------------------------------------------------------------------------------|

7

----

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

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

Descriptionof Business

First Hartford Corporation was incorporated in Mainein 1909, and is engaged in the purchase, development, ownership, management andsale of real estate.

Principlesof 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 portionsof consolidated 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 ownuse (rental/future sale).  

FinancialStatement 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 10Q and Rule 10-01 of Regulation S-X. Accordingly, they donot include all of the information and footnotes required by generally acceptedaccounting principles for complete financial statements. In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals andadjustments to previously established loss provisions) considered necessary fora fair presentation have been included. Operating results for the three monthsended July 31, 2006 are not necessarily indicative of the results that may beexpected for the year ending April 30, 2007. For further information, refer tothe consolidated financial statements and footnotes thereto included in the Company's annualreport on Form 10-K for the fiscal year ended April 30, 2006.

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. 

Certain reclassifications have been made to the priorperiod information to conform to the current period presentation.  In addition,as disclosed in Note 17 to the consolidated financial statements included inthe Company's Annual Report on Form 10K for the year ended April 30, 2006,results for the three months ended July 31, 2005 have been restated toproperly account for minority interest.     

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 10K forthe year ended April 30, 2006, except as discussed in Note 5.

 

| 8 |
|---|

----

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**1.            Nature of Business and Significant Accounting Policies(continued)**

LossPer Common Share

Loss per common share is based on the weighted averagenumber of common shares outstanding during the three month periods ended July31, 2006 and 2005. Due to the Company's net loss, the effect of common stockequivalents are anti-dilutive and therefore have not been considered in thecalculation of loss per common share.

**2.            Fair Value ofDerivative Instruments**

In the normal course of business, the Company isexposed to the effects of interest rate changes.  To mitigate the exposure tounexpected changes in interest rates, derivatives are used primarily to hedgeagainst rate movements on some of the Company's related debt. In accordancewith SFAS No. 133, "Accounting for Derivative Instruments and HedgingActivities", since the Company's interest rate swaps have not been designated asa hedge they must be recognized as an asset or liability and adjusted to fairvalue through income in the current period.

On June 10, 2005 the Company refinanced the mortgageon the Katharine Gibbs College building by signing a new mortgage for$11,377,866 with the same lender.  The new mortgage rate is fixed at 6.11% andhas a 25-year amortization starting in June 2007. The mortgage will have aballoon payment on June 10, 2015.  To obtain this refinancing the Companyentered into a swap contract with the bank. 

In January 2006 a construction loan and mortgage wasconsummated with the above lender for a Police Station to be built for andleased to the City of Cranston, R.I.  The lease contains a bargain purchaseoption which will require that it be accounted for as a capital lease.  Theconstruction loan is based on the 30 day LIBOR rate plus 1.25% and effectivelyconverts to a 24 1⁄2 year self liquidating mortgage starting January 1, 2007. The Company has entered into a swap contract with the bank which effectivelyconverts the mortgage to a rate of 6.41%.

After expensing $89,200 in the current quarter, thefair value of the Company's swap contracts were in a favorable position ofapproximately $586,000 and are recorded as a derivative instrument asset.

**3.             Investment In Affiliated Partnerships**

Investments in entities in which the Company has lessthan a 20% interest are carried at cost.  Distributions received from thoseentities are included in income.  Distributions received in excess of theCompany'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 are carried at cost and are subsequently adjusted for the Company'sproportionate share of their undistributed earnings or losses, and anydistributions (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 DoverTownship, NJ.  Although the Company exercises some influence, the Company dosnot control the operating and financial policies of these partnerships and,therefore, these partnership are not consolidated.

 

 

| 9 |
|---|

----

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

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

OPERATING RESULTS OF NONCONSOLIDATED 50% OWNEDSUBSIDIARIES

|                                                            | Cranston Shopping Center Total                                         | Dover Shopping Center Total |
|------------------------------------------------------------|------------------------------------------------------------------------|-----------------------------|
| Three month ended July 31,  2006                           |                                                                        |                             |
|       Revenues                    | $1,327,420                                                             | $660,222                    |
|       Expenses                    |   1,051,688                                                       |   510,353              |
| Net Profit                                                 | $   275,732                                                  | $149,869                    |
| Three month ended July 31,  2005                           |                                                                        |                             |
|      Revenues                          | $1,176,007                                                             | $ 601,886                   |
|      Expenses                          |  1,020,872                                                        |    512,864        |
|      Loss on early  retirement of debt |             -0- | 3,075,163                   |
| Net Profit (Loss)                                          | $   155,135                                                  | $(2,986,141)                |

Theseinvestments are recorded at cost and have been subsequently adjusted for gains,losses and distributions such that the carrying value is less than zero. Although the Company is not liable for the obligations of the two partnershipsit has not discontinued applying the Equity Method since the Company considersitself to be committed to providing financial support to the partnerships.  Asof July 31, 2006 and April 30, 2006, $5,559,880 and $5,528,543, respectively, is included inother liabilities in the consolidated balance sheets representing the carryingvalue of these investments.

**4.            IncomeTaxes**

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 taxable incomelevels. In the event the Company were to determine that it would not be able torealize 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, 2006, the Company has concluded that itis more likely than not that the Company will realize $1,932,000 in deferred taxassets. Accordingly, the Company has recognized a deferred tax benefit of$78,000 for the three months ended July 31, 2006.

**5.             StockBased Compensation**

Effective May 1, 2006, the Company adopted theprovisions of Statement of Financial Accounting Standards No. 123R, ("SFAS123R") "Share-Based Payment," which establishes accounting forequity instruments exchanged for employee services.  Under the provisions ofSFAS No. 123R, share-based compensation cost is measured at the grant date,based on the calculated fair value of the award, and is recognized as anexpense over the employee's requisite service period (generally the vestingperiod of the equity grant).  Prior to May 1, 2006, the Company accounted forshare-based compensation to employees in accordance with Accounting PrinciplesBoard Opinion ("APB") No. 25, "Accounting for Stock Issued 

| 10 |
|----|

 

----

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**5.            StockBased Compensation (continued)**

to Employees," and related interpretations.  TheCompany also followed the disclosure requirements of SFAS No. 123,"Accounting for Stock-Based Compensation", as amended by SFAS No.148, "Accounting for Stock-Based Compensation-Transition andDisclosure".  The Company elected to adopt the modified prospectivetransition method as provided by SFAS No. 123R and, accordingly, financialstatement amounts for the prior periods presented in this Form 10-Q have notbeen restated to reflect the fair value method of expensing share-basedcompensation.  Under this application, we are required to record compensationcost for all share-based payments granted after the date of adoption based onthe grant date fair value estimated in accordance with the provisions of SFASNo. 123R and for the unvested portion of all share-based payments previouslygranted that remain outstanding which were based on the grant date fair valueestimated in accordance with the original provisions of SFAS No. 123.  TheCompany expenses its share-based compensation under the straight-line method.

On February 11, 2004 the Company adopted a stockoption plan providing for the grant of up to 1,000,000 shares.  The Companygranted 250,000 shares to five employees, two of whom are directors.  Theoptions, which had a two year vesting period and are now fully vested, weregranted at $1.10 per share.  The right to exercise the options expires February11, 2014.  The options include a "put option" that requires theCompany to purchase the exercised shares for $1.30 in excess of the grantprice.  The cost of the deferred stock compensation was $325,000 of which$128,646, $162,500, and $33,854 has been expensed in fiscal years 2006, 2005,and 2004, respectively.  

During the three months ended July 31, 2006, nooptions were granted or exercised and no compensation expense has beenrecognized.  The aggregate intrinsic value of outstanding options as of July31, 2006 was approximately $350,000.

**Item 2.           **           **MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION                                     AND RESULTS OF OPERATIONS
The financial and businessanalysis below provides information which the Company believes is relevant toan assessment and understanding of the Company's financial position and resultsof operations.  This financial and business analysis should be read inconjunction with the condensed consolidated financial statements and relatednotes.

The following discussion and certain other sections ofthis Report on Form 10-Q contain statements reflecting the Company's viewsabout its future performance and constitutes "forward-looking statements" underthe Private Securities Litigation Reform Act of 1995.  These views may involverisks and uncertainties that are difficult to predict and may cause theCompany's actual results to differ materially from the results discussed insuch forward-looking statements.  Readers should consider how various factorsincluding changes in general economic conditions, cost of materials, interestrates and availability of funds, and the nature of competition and relationshipswith key customers may affect the Company's performance.  The Companyundertakes no obligation to update publicly any forward-looking statements,whether as a result of new information, future events or other.

 

11

**Item 2.           **           **MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION                                     AND RESULTS OF OPERATIONS**
Critical Accounting Policies

Thediscussion and analysis of financial condition and results of operations isbased upon the condensed consolidated financial statements contained in Item 1in this Quarterly Report.  The condensed consolidated financial statementsinclude the accounts of the Company and its controlled affiliates.  Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities as of thedate of the financial statements and the reported amounts of revenues andexpenses for the reporting period.  Actual results could differ from thoseestimates.

The discussion included in Item 7 of our Annual Report onForm 10K for the year ended April 30, 2006 under the subheading "CriticalAccounting Policies and Estimates" is still considered current andapplicable, and is hereby incorporated into this Quarterly Report on Form10-Q.

Restatement 

As previously reported in Note 7 to theconsolidated financial statements included in the Company's Annual Report onForm 10K for the year ended April 30, 2006, results for the three months endedJuly 31, 2005 have been restated as follows:

Previously Reported

Restated

Minority interest

$              0

     ($50,000)

Net (loss)

($1,734,000)

($1,784,000)

Net (loss) per common  shares

           (.56)

            (.58)

Results of Operations

The three monthsended July 31, 2006 and 2005 resulted in losses of $363,833 and $1,784,467,respectively, and included the following items:
   
July 31
2006
   
2005

Loss from early retirement  of debt, (presented in Equity in losses 	of unconsolidated subsidiaries.)

$       0
   
$1,639,081

Loss on derivatives

89,200
   
     365,718

Less: deferred income tax  benefit

        	(78,000)
   
(630,000)

$11,200
   
$1,374,799

Without the aboveitems the loss would be approximately $353,000 and $410,000 for the three monthperiods ended July 31, 2006 and 2005,  respectively.

Other highlights in Consolidated Statement of Operations forthe three months ended July 31, 2006:
- The Company did not have any sales of real estate and did notrecord any income from its CVS Pharmacy business.  The period ended July 31,2005 recorded $175,000 in service income and $83,000 in service expensesrelated to CVS business.
- Increases in other income is from cash invested in Certificatesof Deposits and U.S. Treasuries.  These investments are a result of the sale ofthe Bangor property.

** **

12

**Item 2.           **           **MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION                                     AND RESULTS OF OPERATIONS
Results of Operations (continued):
-  Selling, general and administrative expenses for the three monthsended July 31, 2006 was burdened with legal costs due to the Kaplan lawsuit ofapproximately $242,000 compared to approximately $24,000 for the three monthsended July 31, 2005.  Write off of costs associated with pending projects in thecurrent quarter were approximately $66,000 and were $139,000 for the threemonths ended July 31, 2005.

CapitalResources and Liquidity

The Company has adequatecash, investment and available credit to complete its current constructionprojects and most new projects.  A new project in Texas is planned.  However,due to the size of the project a joint venture partner would probably berequired.  

The Company does have anundrawn upon credit line of $1,500,000 but does not anticipate any cash flowneeds requiring borrowings in the foreseeable future.  Capital resourcesare readily available but we believe the personal guarantee of the President of theCompany will be necessary for future construction loans.

Long Term ObligationSchedule as of July 31, 2006:

Contractual Obligations

Total

Less than 1 year

1-3 years

3-5 years

More than 5 years

Long-Term Debt

40,850,703

330,999

1,418,456

1,452,689

37,648,559

Short-Term Debt

2,946,607

2,946,607

Purchase Obligations

4,602,000

4,602,000

Tenant Allowance

990,000

990,000

Total

49,389,310

8,869,606

1,418,456

1,452,689

37,648,559

Although we are wary of thepossibilities of rising interest rates, problems with major tenants, and majorconstruction cost overruns, we feel our liquidity and capital resources arepresently adequate to meet our needs.

**Item 3.                       QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

As described below, interestrate risk related to its notes payable and long-term debt is the primary sourceof financial market risk to the Company.

Qualitative

InterestRate Risk: Changes in interest rates can potentially impact the Company'sprofitability and its ability to realize assets and satisfy liabilities. Interest rate risk is present primarily in the Company's borrowings, some ofwhich have variable interest rates.  The Company limits its exposure with theuse of interest rate swaps.  To mitigate the exposure to unexpected changes ininterest rates, interest rate swaps are used primarily to fix rates in order tohedge against rate movements on some of the Company's debt.

13

**Item 3.           QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK (continued):**

Quantitative

** **

Maturing less than one year

Maturing greater	than one year

Revolving line of credit  and Long-term debt

          Amount

$3,277,606

$40,519,704

          Weighted average  interest rate

6.88%

5.74%

Included in the above isvariable rate debt of $11,337,886 for which the Company has a Swap Agreement withits bank which fixes the interest rate at 6.11%.

**Item 4.                       CONTROLSAND PROCEDURES**

**Disclosure Controls andProcedures**

Pursuantto Rule 13a-15(b) of the Exchange Act, the Company has reevaluated theoperating effectiveness of our disclosure controls and procedures as of July31, 2006.  This was done under the supervision and with the participation ofmanagement.  Based on this evaluation, the Company concluded that because ofpossible weaknesses in our internal controls over financial reporting, our disclosurecontrols on procedures as defined in Rule 13a-15(e) may not be effective enoughto qualify under the new guidelines.  The Company does not maintain effectivecontrols over the financial reporting process to ensure the accuratepreparation and review of its consolidated financial statements. The 2005restatement and audit adjustments recorded in 2006 are indicative of a lack ofeffective controls over the application of generally accepted accountingprinciples commensurate with the Company's financial reporting requirements.Further, the Company does not have effective controls over the process foridentifying and accumulating all required supporting information to ensure thecompleteness and accuracy of its consolidated financial statements. Managementintends to engage in remediation efforts to address the material weaknessesidentified in our disclosure controls and procedures and to improve andstrengthen our overall control environment. Notwithstanding weaknesses in ourinternal control over financial reporting as of July 31, 2006, we believe thatthe consolidated financial statements contained in this report present fairlyour financial condition, the results of our operations and cash flows for thefiscal years covered thereby in all material respects in accordance withaccounting principles generally accepted in the United States.  

**Internal Control overFinancial Reporting**

Therehave not been any changes in the Company's internal control over financialreporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under theExchange Act) during the period to which this report relates that havematerially affected, or are reasonably likely to materially affect, theCompany's internal control over financial reporting.

14

 

**FIRST HARTFORD CORPORATIONAND SUBSIDIARIES**

**PART II                OTHER INFORMATION**

**Item 1.                   LEGALPROCEEDINGS**

There have not been anymaterial developments in the legal proceedings we described in our AnnualReport on Form 10-K for the year ended April 30, 2006.

**Item 1A.               RISKFACTORS**

The discussion included inItem 1A of our Annual Report on Form 10K for the year ended April 30, 2006under the heading "Risk Factors" is still considered current andapplicable, and is hereby incorporated into this Quarterly Report on Form 10-Q. 

**Item 2.                   UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 (a)               Not Applicable.

 (b)               Not Applicable.

 (c)               Not Applicable.

**Item 3.                    DEFAULTSUPON SENIOR SECURITIES**

 (a)               Not Applicable.

 (b)               Not Applicable.  

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

 (a)               Not Applicable.

 (b)               Not Applicable.

 (c)               Not Applicable

 (d)               Not Applicable

**Item 5.                    OTHERINFORMATION**

**                               ** None

**Item 6.                   EXHIBITS**

                                a)         Exhibits:

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

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

Exhibit 32.1       Certification ofChief Executive Officer, pursuant to 18 U.S.C. Section 1350.

 

15

**FIRST HARTFORDCORPORATION AND SUBSIDIARIES**

**PART II          OTHER INFORMATION (continued):**

Exhibit 32.2       Certification ofChief Financial Officers, pursuant to 18 U.S.C. Section 1350.

 

 

 

 

 

 

 

 

 

 

16

**SIGNATURES**

Pursuant to the requirements of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.
 FirstHartford Corporation (Registrant)    /s/ Neil H. EllisSeptember 19, 2006 ______________________________           DateNeil H. Ellis - President and  Chief Executive Officer   /s/ Stuart I. GreenwaldSeptember 19, 2006______________________________          DateStuart I. Greenwald - Treasurer  and Chief Financial Officer
 

 

 

 

 

 

 

17
 ****