| OMB  APPROVAL                                                                                                                                                                               |
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**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 January  31, 2006.

                                                                                                           OR

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

| For the transition period		from _______________________________________ to__________________________________________ |
|----------------------------------------------------------------------------------------------------------------------|
|                                                                                                                 |   |
| Commission File Number:______________________________________________________________________________________        |
|                                                                                                                 |   |
| FirstHartford Corporation                                                                                            |
| (Exact name of registrant as specified in its charter)                                                               |
|                                                                                                                 |   |
| Maine                                                                                                                | 01-0185800 |
| (State or other jurisdiction of		incorporation or organization)                                            | (I.R.S.Employer Identification No.)  		149 Colonial Road   		Manchester, CT
 06045-1270   
(Address of principal executive offices) 
(Zip Code) 
  
860-646-6555

(Registrant's telephone number, including area code)
 
(Former name, former address and former fiscal year,if changed since last report)

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.     XYes     ⁪ No      

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of "accelerated filer and largeaccelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ⁪                                                     Acceleratedfiler  ⁪                                                              Non-acceleratedfiler X

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).          ⁪Yes      X No

APPLICABLE ONLY TOCORPORATE ISSUERS:

Indicate the number ofshares outstanding of each of the issuer's classes of common stock, as of thelatest practicable date.

3,046,279 as of March14, 2006
1
 

**FIRST HARTFORD CORPORATION ANDSUBSIDARIES**

**INDEX**
**PART I.****FINANCIAL INFORMATION  **** PAGE**   Item 1. Financial Statements     Condensed Consolidated		Balance Sheets       January 31, 2006		(unaudited) and April 30, 2005 (audited)            3 - 4    Condensed Consolidated Statements of Operations and Comprehensive Loss       For the Three		and Nine Months       Ended January		31, 2006 and 2005 (unaudited) 5    Condensed		Consolidated Statements of Cash Flows       For the Nine		Months       Ended January		31, 2006 and 2005 (unaudited)  6-7    Notes		to Condensed Consolidated Financial Statements 8-14   Item 2.Management's Discussion and Analysis  of Financial Condition		15 and Results of Operations    Item 3. Quantitative and		Qualitative Disclosures About Market Risk15-16   Item 4. Controls and Procedures		16   **PART II****OTHER INFORMATION**    Item 1.Legal		Proceedings16-17   Item 1A.Risk Factors18   Item 2.Unregistered Sales of Equity Securities and Use of Proceeds18   Item 3.Defaults Upon Senior		Securities18   Item 4.Submission of Matters to a Vote of Security Holders18   Item 5Other		Information19 - 20   Item 6. Exhibits20     Signatures21		 
 

2

**PART I.          FINANCIAL INFORMATION**

**ITEM 1.          FINANCIAL STATEMENTS**

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

**ASSETS**
   
**January 31, 2006**(unaudited)   
**April 30, 2005**(audited)
Real  estate and equipment:    
                     Developed properties
$33,574,457   
$33,574,457	Equipment and leasehold improvements	
316,142   
268,088    
33,890,599   
33,842,545            Less: accumulated depreciation and amortization
3,212,856   
2,575,420   
30,677,743   
31,267,125	                        Property under construction  held for lease
2,307,841   
0Property under construction held for sale
20,477,234   
 8,203,715	   
53,462,818   
39,470,840	            Cash958,326   2,367,434	            Investment in marketable securities	18,284   0            Accounts  and notes receivable, less allowance for doubtful accounts of $201,795 and $1,600  for Jan. 31, 2006 and April 30, 2005, respectively.   	339,025   509,022	            Deposits, escrows, prepaid and deferred expenses4,085,975	   3,659,911            Investment in affiliates	9,665	   9,665            Due from related parties and affiliates	361,315   259,675            Deferred tax assets, net of valuation allowance of $800,0002,730,000   1,700,000    $61,965,408   $47,976,547 
 

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**
   
**January 1, 2006**
   
**April 30, 2005**
Liabilities:
(unaudited)
   
(audited)
Mortgages and notes  payable:        Construction loan  payable
$17,514,916 
   
$4,424,409 
     Mortgage payable
39,547,915 
   
39,549,494 
     Notes payable - other
                   0	
   
    2,082,130	

57,062,831
   
46,056,033
   Accounts payable
2,545,075 
   
1,170,949 
Accrued liabilities
446,917 
   
687,394 
Accrued cost of derivatives
235,011 
   
0 
Deferred income
196,131 
   
123,402 
Other liabilities
6,382,118 
   
1,449,020 
Due to related parties and  affiliates
71,852 
   
83,954 

66,939,935 
   
49,570,752 
   Minority interest
(533,869)
   
(283,869)
   Commitments and  contingencies       
Shareholders'  Deficiency:
   Preferred stock, $1 par  value; $.50 cumulative and convertible;    authorized 4,000 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
(10,776,205)
   
(7,617,590)
Unearned stock compensation
      (6,771)
   
     (128,646)

(2,428,256)
   
608,484 
Less: Treasury stock, at  cost, 252,330 and 215,368 shares at January 31, 2006        and April 30, 2005,  respectively.
 

   2,012,402	
   
   1,918,820	

(4,440,658)
   
(1,310,336)

$ 61,965,408 
   
$47,976,547 
 
 

 

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

4

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE LOSS****(Unaudited)**
   
**Three Months Ended**
**Nine Months  Ended **
**January 31, 2006**
   
**January 31, 2005**
   
**January 31, 2006**
   
**January 31, 2005**

 
                  
Revenues
         
     Rental income

$1,332,787 
   
$1,280,515 
   
$4,205,009 
   
$3,536,150 

     Service income

214,379 
   
53,295 
   
930,369 
   
205,041 

     Other 

33,284 
   
25,747 
   
100,038 
   
190,974 

1,580,450 
   
1,359,557 
   
5,235,416 
   
3,932,165 

Operating costs and  expenses

 
   
 
   
 
   
 

     Rental expenses

620,511 
   
436,115 
   
1,975,091 
   
1,615,391 

     Service

109,621 
   
14,754 
   
450,174 
   
73,969 

     Selling, general 	and administrative

1,101,843
   
1,046,005
   
2,884,222
   
2,064,266

1,831,975
   
1,496,874
   
5,309,487
   
3,753,626
         
Income (loss) from  operations

(251,525)
   
(137,317)
   
(74,071)
   
178,539
         
Non-operating income  (expense)
                  
     Interest expense

(464,858)
   
(445,160)
   
(1,431,890)
   
(1,141,043)

     Non recurring expenses

0 
   
(188,443)
   
(101,500)
   
(188,443)

     Gain (loss) on  derivatives

(159,552)
   
               0	
   
(235,011)
   
29,059 

(624,410)
   
(633,603)
   
(1,768,401)
   
(1,300,427)
         
Loss before tax expense

(875,935)
   
(770,920)
   
(1,842,472)
   
(1,121,888)
         
Provision for (benefit  from) income taxes

23,086
   
(30,219)
   
(1,001,189)
   
(21,224) 

 
   
 
   
 
   
 

Loss before minority  interest and equity in
         
     unconsolidated  subsidiaries

(899,021)
   
(740,701)
   
(841,283)
   
(1,100,664)
         
Minority interest in income  of consolidated 	   joint ventures 

24,240 
   
(39,963)
   
0 
   
(201,034)

Equity in earnings  (losses) of unconsolidated	   subsidiaries 

109,494 
   
143,793 
   
(2,317,332)
   
339,414 

 
   
 
   
 
   
 

Net Loss

(765,287)
   
(636,871)
   
(3,158,615)
   
(962,284)
         
Other comprehensive  income, net of taxes

              0	
   
21,805 
   
                 0	
   
                 0	
         
 
   
 
   
 
   
 

Comprehensive loss

($765,287)
   
($615,066)
   
($3,158,615)
   
($962,284)
         
Net loss per share

(0.25)
   
(0.20)
   
(1.03)
   
(0.31)
         
Weighted average number of  shares outstanding

3,046,279 
   
3,089,648 
   
3,065,682 
   
3,089,648 

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

5

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)**
   
**Nine Months Ended**
**January 31, 2006**
   
**January 31, 2005**

Cash flows from operating  activities:
   
     Net loss

($3,158,615)
   
($962,284)
   
Adjustments to reconcile net  loss to net cash

     provided by (used in)  operating activities:
      
     Equity in losses  (earnings) of unconsolidated subsidiaries

2,317,332
   
(339,414)

     Minority interest in  income of consolidated joint ventures

0
   
201,034

     Depreciation

637,436
   
497,023

     Amortization

159,672
   
172,311

     Deferred income taxes

(1,030,000)
   
0

     Amortization of unearned  stock compensation

121,875
   
121,875

     Loss (gain) on derivatives

235,011
   
(179,059)
   
(Increase) decrease in:
   
     Accounts and notes  receivables, net

169,997
   
583,192

     Deposits, escrows, prepaid  and deferred expenses

(585,736)
   
(962,229)

    	
   
Increase (decrease) in:
   
     Accounts payable

1,374,126
   
(287,496)

     Accrued liabilities

(240,477)
   
(328,104)

     Deferred income

72,729
   
76,445

     Other liabilities

800,000
   
289,545

     Distributions from  (investment in) affiliates, net

1,815,766
   
(147,877)

 
   
 

Net cash provided by (used in)  operating activities

2,689,116
   
(1,265,038)
   
Cash flows from investing  activities:
   
     (Investment in) proceeds  from sale of marketable securities

(18,284)
   
649,899

     Purchase of equipment and  leasehold improvements

(48,054)
   
(95,414)

     Additions to developed  properties and properties under 

         construction

(14,581,360)
   
 (8,264,794)

 
   
 

Net cash used in investing  activities

(14,647,698)
   
(7,710,309)
   
Cash flows from financing  activities:
   
     Minority distributions  from consolidated joint ventures

(250,000)
   
(332,750)

     Other comprehensive income  

0
   
(3,661)

     Purchase of treasury stock

(93,582)
   
(834)

Proceeds from:
   
     Construction loan payable

13,090,507
   
4,963,953

     Mortgage payable

213,574
   
20,150,000

     Notes payable

0
   
700,000

     Related parties and  affiliates, net

0
   
422,872
   
Principal payments on:
   
     Construction loan payable

                     0
   
(7,905,500)

     Mortgage payable

(215,153)
   
(9,347,654)

     Notes payable - other

(2,082,130)
   
(177,277)

     Advances to related  parties and affiliates, net

( 113,742)
   
                0  	

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

** **

6

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(continued)**

 
   
**Nine Months Ended**
**January 31, 2006**
   
**January 31, 2005**
   
Net cash provided by financing  activities

10,549,474
   
8,469,149
   
Net decrease in cash  

(1,409,108)
   
(506,198)
   
Cash, beginning of period

  2,367,434
   
1,500,030
   
Cash, end of period

$     958,326
   
$   993,832

 

 

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

 

 

7

 

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

**1.            Summary of SignificantAccounting 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 10-Q and Rule 10-01 of Regulation S-X. Accordingly, theydo not 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 andnine month periods ended January 31, 2006 are not necessarily indicative of theresults that may be expected for the year ending April 30, 2006. For furtherinformation, refer to the consolidated financial statements and footnotesthereto included in the Company's annual report on Form 10-K for the fiscalyear ended April 30, 2005.

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 priorperiod information to conform to the current period presentation.

Statements of Cash Flows

For purposes of the statements of cash flows, theCompany considers all highly liquid securities purchased with an originalmaturity of three months or less to be cash equivalents.

DevelopedProperties, Equipment and Leasehold Improvements

Developed properties, equipment and leaseholdimprovements are recorded at the lower of cost or net realizable value. 

Depreciation and amortization is provided using thestraight-line method for financial reporting purposes based on the followingestimated useful lives:

8

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

** **

**1.            Summary of SignificantAccounting Policies (continued):**

Developed Properties, Equipment and LeaseholdImprovements (continued):

Description

Years
      
Developed properties

15 - 40
      
Equipment and leasehold  improvements

3  - 10

Expenditures for major renewals and betterments, whichextend the useful lives of developed properties, and equipment and leaseholdimprovements are capitalized.  Expenditures for maintenance and repairs arecharged to operations as incurred. 

PropertiesUnder Construction

Expenditures directly related to real estate underconsideration for development, are capitalized and are carried at cost in theconsolidated condensed balance sheets.  These costs include but are not limitedto option payments, attorney's fees, architect and engineering fees andconsultants, but only to the extent they are from outside sources.  If theproject is later abandoned, all of the accumulated costs are charged toexpense.  Costs for in-house engineering and drafting, estimating andpurchasing and development are expensed as incurred.  

Leasing costs are capitalized when leases are signed(cost incurred) and include direct commissions, salaries and expenses.  Thesecosts are amortized over the life of the lease.  

DeferredExpenses

Leasing commissions and financing costs (included in deposits, escrows,prepaid and deferred expenses in the accompanying condensed consolidatedbalance sheets) are amortized using the straight-line method over the terms ofthe related leases and mortgages, respectively.

RevenueRecognition

Rental Income - Rental income is comprised of base rentand reimbursements for certain costs such as real estate taxes, utilities,insurance, common area maintenance and other recoverable costs as provided inthe lease agreements. There are no contingent rents.  In accordance withStatement of Financial Accounting Standards No. 13 "Accounting for Leases",rental income is recognized on a straight-line basis over the terms of therespective leases.

Developer Fee Income - The Company obtains fees fromcertain third parties for assisting them in identifying and developing sitesfor facilities.  Income from these transactions is recognized when allstipulations of the underlying agreement between the parties have been met orperformed by the Company.

Construction Revenue - The Company is primarilyinvolved in development of properties for its own use.  However, revenues fromprojects built for third parties are recognized on the percentage-of-completionmethod of accounting based on costs incurred to date in relation to totalactual costs and estimated costs to complete.  Revisions in costs and profitestimates are reflected in operations during the accounting period in which thefacts become known.  The Company provides for estimated losses on contracts inthe 

9

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

** **

**1.            Summary of SignificantAccounting Policies (continued):**

Revenue Recognition (continued):

year such losses become known. A subsidiary, LeadTech, Inc., does lead and asbestos inspections and remediation and recognizesrevenue as services are provided.

Investment In Affiliates

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 appliedas a reduction of the cost of the investments.  Investments in entities inwhich the Company has a 20-50% interest are carried at cost and aresubsequently adjusted for the Company's proportionate share of theirundistributed earnings or losses, and any distributions (Equity Method).

OPERATING RESULTS OF NONCONSOLIDATED 50% OWNEDSUBSIDIARIES
   
Three months ended	 January 31  
Nine months ended	January 31
2006
   
2005
   
2006
   
2005
Cranston Parkade, LLC              Revenues    $ 1,479,058   $1,400,870      $  3,851,743   $3,611,878     Operating expenses 1,209,670    1,122,487    3,277,079    3,048,447     Loss on early  retirement of debt                     0                       0     2,268,803   0Net income (loss) $   269,388   $   278,383   $(1,694,139)   $   563,431         Dover Parkade, LLC              Revenues$716,142   $669,624   $1,919,962   $1,843,258     Operating expenses 620,790    507,371    1,536,518    1,517,692     Loss on early  retirement of debt            0               0     3,075,163                   0Net income (loss)$  95,352   $162,253   $(2,691,719)    $   325,566
** **

The Company currently has two unconsolidated operatingpartnerships:  Cranston Parkade, LLC, which owns a shopping center in Cranston,RI (the Company owned a 25% interest up to April 27, 2005 and 50% thereafter)and Dover Parkade, LLC, which owns a shopping center in Dover Township, NJ inwhich the Company owns a 50% interest.  Although the Company exercises someinfluence, the Company does not control the operating and financial policies ofthese partnerships and, therefore, these partnerships are not consolidated.

Cranston Parkade, LLC reports on a calendar year andis not adjusted to the Company's April 30 year-end resulting in a consistentfour-month gap in its results of operations as reported by the Company.  Theoperating income up to the date of acquisition of the additional interest wasapproximately $255,000 and from the date of acquisition of the additionalinterest to the end of the nine-month period was approximately $320,000.  Theloss on early retirement of debt occurred immediately after the acquisition ofthe additional interest.

These investments are recorded at cost and have beensubsequently adjusted for gains, losses and distributions.  To the extent thecarrying value is less than zero, such amount is carried in other liabilitiesin the accompanying condensed consolidated financial statements.

10

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

**1.            Summary of SignificantAccounting Policies (continued):**

FairValue of Derivative 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 designatedas a hedge they must be recognized as an asset or liability and adjusted tofair value through income in the current period.

On June 10, 2005 the Company refinanced the mortgageon the Katharine Gibbs College building by executing a new mortgage for$11,377,866 with the same lender.  The previous mortgage called for interest at30 day Libor plus 2% with an 8% rate cap, amortizing over 20 years, due April1, 2008.  The new mortgage rate is fixed at 6.11% and has a 25-yearamortization starting in June 2007. The mortgage will have a balloon payment onJune 10, 2015.  To obtain this refinancing the Company became liable for a swapcontract entered into by 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 become liable for a swap contract entered into by the bankwhich effectively converts the mortgage to a rate of 6.41%.

Fair Value Of Swaps Liability

Katharine Gibbs College

Police Station

Quarterly	Gain or (Loss)
            
July 31,  2005               	

$365,000

 $       0

$(365,000)

October 31, 2005

    75,000

          0

 290,000 

January 31, 2006

    87,000

148,000

 (160,000)

As a result of the above swaps the Company hasexpensed approximately $160,000 and $235,000 in the three and nine monthperiods ended January 31, 2006, respectively.

AccountingFor The Impairment Or Disposal of Long-Lived Assets

The Company has adopted Statement of FinancialAccounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposalof Long-Lived Assets", which established a single accounting model for theimpairment or disposal of long-lived assets including discontinued operations. SFAS No. 144 requires that the operations related to properties that have beensold or properties that are intended to be sold be presented as discontinuedoperations in the consolidated statements of operations and comprehensive lossfor all periods presented, and properties that are intended to be sold bedesignated as "held for sale" on the condensed consolidated balance sheet.

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, the disclosure of contingent assets andliabilities as of the 

11

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

**1.            Summary ofSignificant Accounting Policies (continued):**

Estimates (continued):

date of the financial statements, and the reportedamounts of revenues and expenses during the reporting period.  Actual resultscould differ from those estimates.

MarketableSecurities

In accordance with SFAS No. 115 "Accounting forCertain Investments in Debt and Equity Securities" the Company determines theappropriate classification of its investments in debt and equity securities atthe time of purchase and re-evaluates such determination at each balance sheetdate.  Debt securities for which the Company does not have the intent to holdto maturity are classified as available-for-sale, along with the Company'sinvestment in equity securities.

Securities available-for-sale are carried at fairvalue, with the unrealized gains and losses reported in other comprehensiveincome (loss).

StockCompensation

The Company applies Accounting Principles BoardOpinion 25, "Accounting for Stock Issued to Employees" ("APB 25") and relatedinterpretations in accounting for its stock awards, and complies with thedisclosure provisions of SFAS No. 123, "Accounting for Stock BasedCompensation".  Under APB 25, compensation expense is recognized over thevesting period to the extent that the fair market value of the underlying common stock on the measurement dateexceeds the exercise price of the employee stock award.  

Compensation cost for the Company's employee stockoption plans determined based on the fair value at the grant date of awardsunder these plans consistent with the methodology of SFAS No. 123, has not beenpresented because the 250,000 options outstanding vest on February 11, 2006.

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 was to determine that it would not be able torealize all or a portion of its deferred tax assets in the future, it wouldincrease the recorded valuation allowance through a charge to income in theperiod in which that determination is made. Conversely, if the Company were todetermine that it would be able to realize its deferred tax assets in thefuture in excess of the net carrying amounts, it would decrease the recordedvaluation allowance through an increase to income in the period in which thatdetermination is made.

As of October 31, 2005, the Company has concluded thatit is more likely than not that the Company will realize $2,730,000 in deferredtax assets. Accordingly, the Company has recognized a deferred tax benefit of$0 and $1,030,000 for the three and nine month periods ended January 31, 2006,respectively.

LossPer Common Share

Loss per common share is based on the weighted averagenumber of common shares outstanding during the three and nine month periodsended January 31, 2006. Due to the Company's net loss, the effect of 

12

 

**FIRST HARTFORD CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

**1.         Summary ofSignificant Accounting Policies (continued):**

Loss Per Common Share (continued):

common stock equivalents are anti-dilutive andtherefore have not been considered in the calculation of loss per common share.

NewAccounting Standards

In December 2004, the FASB issued SFAS No. 123(revised 2004), "Share-Based Payment" ("SFAS 123 (R)).  SFAS 123 (R) requirescompanies to recognize in the statement of operations the grant-date fair valueof stock options and other equity based compensation.  The cost will berecognized over the period during which an employee is required to provideservice in exchange for the award, usually the vesting period.  Subsequent changes in fair value during therequisite service period, measured at each reporting date, will be recognizedas compensation cost over that period.

In April 2005, the SEC extended the effective date forSFAS No. 123 (R) for public companies, to the beginning of a registrant's nextfiscal year that begins after June 15, 2005.  The Company will be required toadopt SFAS No. 123 (R) in its first quarter of fiscal 2007.  The Company isevaluating the impact of the adoption of SFAS No. 123 (R) on the Company'sfinancial position and results of operations.

In March 2005, the Financial Accounting StandardsBoard issued Interpretation No. 47, "Accounting for Conditional AssetRetirement Obligations (an interpretation of FASB No. 143)" ("FIN47"). This Interpretation provides clarification with respect to thetiming of liability recognition for legal obligations associated with theretirement of tangible long-lived assets when the timing and/or method ofsettlement of the obligation are conditional on a future event.FIN 47 is not expected to have a material impact on the Company's financialposition and results of operations.

**2.         LegalProceedings**

Additionallawsuits have been filed against the Company by a dissident shareholder.  SeePart II, Item 1.

**Item 2.           **           **MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL  CONDITIONAND 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 constitute "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 andrelationships with key customers may affect the Company's performance.  TheCompany undertakes no obligation to update publicly any forward-lookingstatements, whether as a result of new information, future events or other.

13

 

**Item 2.           **           **MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL  CONDITIONAND 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, the disclosure of contingent assets and liabilities as of the dateof the financial statements and the reported amounts of revenues and expensesfor the reporting period.  Actual results could differ from those estimates.

The discussion included in Item7 of our Annual Report on Form 10-K for the year ended April 30, 2005 under thesubheading "Critical Accounting Policies and Estimates" is still consideredcurrent and applicable, and is hereby incorporated into this Quarterly Reporton Form 10-Q.

Results of Operations

The three and nine month periods ended January 31, 2006resulted in net losses of $765,287 and $3,158,615, respectively.  The netlosses for the three and nine month periods ended January 31, 2005 were$636,871 and $962,284, respectively.  A significant amount of the current losswas a result of debt refinancing, not operations.  The losses fromrefinancing's are summarized as follows:  

Three Months Ended  1/31/06
   
Nine MonthsEnded 1/31/06

Loss from early  retirement of debt (non consolidated affiliate)
 $             0       ($2,671,983)
Loss on derivatives  (consolidated affiliate)
           (159,552)            (235,011)
Loss from early  retirement of debt (consolidated affiliate)
               0            (101,500)              (159,552)        (3,008,494)
Less deferred income  tax on above
               0            890,000         $ (159,552)        $(2,118,494)
Excluding the net effect of the above refinancing, the losses areapproximately $606,000 and $1,040,000 respectively, for the three and nine monthperiods ended January 31, 2006.

For the three and nine monthperiods ended January 31, 2006 rental income has increased approximately$52,000 and $669,000, respectively, from the corresponding periods in 2005. The increases were due to the addition of occupied stores which were acquiredin the North Adams shopping center as well as additional stores finished in theWest Springfield shopping center.  An additional 53,000 s.f. is underconstruction in North Adams, Massachusetts and is leased.  Correspondingcosts for real estate taxes, insurance and common area, billed to tenants, alsoresult in increased rental income.  Included in service income for thethree and nine months ended January 31, 2006 are fees for service provided to CVSPharmacy of $175,000 and $860,000, respectively.  Prior periods did not haveany income from this source.

Included in selling, generaland administrative are costs related to our joint venture into multi-familyhousing of $121,000 and $296,000 for the three and nine months ended January31, 2006.  This venture, which started January 1, 2005, has not generated anyincome to date.  

The litigation against theCompany by a dissident shareholder has cost the Company $110,000 and $205,000in legal fees during the three and nine month periods ended January 31, 2006,respectively.  

In the current three monthperiod the Company has also provided $200,000 as an allowance for a potentialuncollectible receiveable from a property acquisition.  The Company is suingfor recovery.  

14

 

**Item 2.           **           **MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL  CONDITIONAND RESULTS OF OPERATIONS**

Results of Operations (continued):

Other than the above, theaddition of new employees, salary increases and related salary benefits accountfor the balance of the increase in selling general and administrative

Inthe current quarter the partnership that owns the Gibbs College building (CPAssociates, LLC) has signed a lease with the City of Cranston for a 60,000 s.f.building to be constructed by Brewery Parkade (a 100% owned subsidiary of FirstHartford) on property owned by CP Associates, LLC.  The 25 year lease calls formonthly payments of $88,750 plus a lump sum payment of $1,000,000 for acontribution to improvements (included in other liabilities), another$1,500,000 six months after occupancy and $1,000,000 at the end of the lease. The lease constitutes a bargain purchase option, therefore the City will ownthe building at lease maturity.

The bank financing is 1.5% over the one month LIBORrate.  The loan is structured as an Economic Development Revenue Bond issued bythe Rhode Island Facility Corporation, a public corporation and governmentalagency of the State of Rhode Island and Providence Plantation.

TheCompany has arranged with the bank for a swap which is effective January 1,2007, which fixes the permanent rate at 6.41% for 24.5 years, at which time theloan will be fully amortized.  The approximate value of the swap at January 31,2006 was $148,000 and is included in loss on derivatives.  

The City of Cranston hasreceived a $1,000,000 Bank Letter of Credit, to be returned upon buildingcompletion.  The construction loan, the Letter of Credit and ConstructionGuarantee were all personally guaranteed by Neil Ellis, the President of theCompany, without any consideration.

The Company has not yetcompleted the sale of the Bangor, Maine shopping center to date.  Managementexpects to close prior to the end of March.  The sale price of the center is$27,340,000 less a $436,000 holdback for approximately $24,000 s.f. of unleasedand unfinished space.  A broker fee and closing cost should reduce the proceedsby approximately $550,000.  After payment of approximately $17,515,000 due onthe construction loan, the Company expects net proceeds of approximately$8,800,000.  Additional income will be realized by the Company if it securesoccupancies for the unleased space within 18 months of the closing date.  Dueto the delay in closing the Bangor sale, the Company has obtained a $1,500,000line of credit.  At March 14, 2006, $600,000 was borrowed on this line at primeplus 1%.  Neil Ellis has personally guaranteed this loan and has not receivedany consideration for the guarantee.
**Contractual 	Obligations**
**Total**

**Less Than1 year**
**1-3 years**

**3-5 years**

**More than 5 years**
Long-Term Debt
$ 39,547,915

$     418,225
$1,279,751$1,481,507  $36,368,432Short-Term Debt 17,514,916
 17,514,916

                0
                0                  0Purchase Obligations    1,091,000   1,091,000                0                0                    0Tenant Allowance
       990,000

       990,000

                0

0
                    0Lease Obligation
         66,000

         66,000

                0
                0                   0Total$59,209,831$20,080,141$1,279,751$1,481,507$36,368,432
**Item3.                       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**

Interest Rate Risk:  Changes ininterest rates can potentially impact the Company's profitability and its abilityto realize assets and satisfy liabilities.  Interest rate risk is presentprimarily in the Company's borrowings, some of which have variable interestrates.  To mitigate the exposure to unexpected changes in interest rates,derivatives are used primarily to hedge against rate movements on some of theCompany's variable related debt.

** **

** **

15

 

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

OnJune 10, 2005 the Company refinanced the mortgage on the Katharine GibbsCollege building by executing a new mortgage for $11,377,866 with the samelender.  The previous mortgage called for interest at 30 day Libor plus 2% withan 8% rate cap, amortizing over 20 years, due April 1, 2008.  The new mortgagerate is fixed at 6.11% and has a 25-year amortization starting in June 2007.The mortgage will have a balloon payment on June 10, 2015.  To obtain thisrefinancing the Company became liable for a swap contract entered into by thebank. 

InJanuary 2006 a construction loan and mortgage was consummated with the abovelender for a police station to be built for and leased to the City of Cranston,R.I..  The lease contains a bargain purchase option which will require that itbe accounted for as a capital lease.  The construction loan is based on the 30day LIBOR rate plus 1.25% and converts to a 24 1⁄2 year self liquidating mortgagestarting January 1, 2007.  The Company has become liable for a swap contractentered into by the bank which converts the mortgage to a rate of 6.41%.

Fair Value Of Swaps Liability

Katharine Gibbs College

Police 	Station

Gain or (Loss)

July 31,  2005               	

$365,000

 $        0

$(365,000)

October 31, 2005

    75,000

            0

290,000 

January 31, 2006

    87,000

 148,000

(160,000)

As a result of the aboveswaps the Company has expensed approximately $159,000 and $235,000 in the threeand nine month periods ended January 31, 2006, respectively.

**Item 4.                       CONTROLSAND PROCEDURES**

Disclosure Controls andProcedures.

The Company's management, withthe participation of the Company's chief executive officer and chief financialofficer, has evaluated the effectiveness of the Company's disclosure controlsand procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of theend of the period covered by this report.  Based on such evaluation, theCompany's chief executive officer and chief financial officer have concluded that,as of the end of such period, the Company's disclosure controls and proceduresare effective in recording, processing, summarizing and reporting, on a timely basis, information required tobe disclosed by the Company in the reports that it files or submits under theExchange Act.

Internal Control OverFinancial Reporting

There have not been any changesin the Company's internal control over financial reporting (as such term isdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during theperiod to which this report relates that have materially affected, or arereasonably likely to materially affect, the Company's internal control overfinancial reporting.

**PART II          OTHERINFORMATION**

**Item 1.             LEGALPROCEEDINGS**

OnJanuary 29, 2004, a shareholder filed a Form 13D with the Securities andExchange Commission indicating that he controls over 19% of the Company'sshares.  That shareholder was Richard E. Kaplan, purportedly a resident of theCommonwealth of Massachusetts.  By Complaint dated February 27, 2004, Mr.Kaplan filed suit against First Hartford Corporation (the "Company" or "FHC")as Civil Action No. 04 10402 NMG in the United States District Court for theDistrict of Massachusetts.  The Company was served with the complaint on March2, 

** **

16

 

**PART II          OTHERINFORMATION**

**Item1.             LEGAL PROCEEDINGS (continued):**

2004. The complaint alleges that the proxy solicitation materials issued by theCompany as a prelude to its annual meeting on January 22, 2004, were falseand/or misleading in certain respects and also omitted certain material information. As a result thereof, the plaintiff seeks to void the shareholder votes taken atthe January 22, 2004 shareholder meeting of the Company and have a new voteordered based upon revised proxy material which would be required to be issuedby the Company.  The shareholder votes taken at the annual meeting were tore-elect the Board of Directors, which had been serving the Company, and toapprove the Employee Stock Option Plan.

Additionally,on February 27, 2005, Mr. Kaplan filed another suit against the Company in thesame court as Civil Action No.  05 10320 NMG (United States District Court forthe District of Massachusetts) making essentially the same claims as the firstsuit with regard to the Company's 2005 annual meeting.  The shareholder votefor the February 24, 2005 meeting was to re-elect the Board of Directors, whichhad been serving the Company and a proposal brought forth by Mr. Kaplan torequire the Company to have 80% independent directors.    The proposal wasdefeated 1,860,706 to 662,672.  

OnJuly 12, 2005 the District Court Judge approved a request by the Company toconsolidate the cases.

OnSeptember 15, 2005 Mr. Kaplan filed another suit styled as Civil Action No.05-144-B-H (United States District Court of Maine) Richard E. Kaplan -Plaintiff v. First Hartford Corporation and Neil Ellis Defendants, again makingthe same claims as his prior suits.  Mr. Kaplan is now asking for the followingrelief:

            1)   entera judgment dissolving FHC and appointing a receiver to (a) preserve the assetsand business of FHC pending its liquidation, (b) rescind transactions in whichFHC assets were diverted to Ellis and his related entities, (c) recover fromEllis and his related entities all damages to which FHC is entitled on accountof their wrongdoing, and (d) liquidate and wind-up the business of FHC in suchmanner and over such time as is determined to be in the best interests of itsshareholders, and

            2)   appointa receiver pendente lite to preserve the corporate assets of FHC and to carryon the business of FHC until a full hearing can be held.

Alternatively,Kaplan requests pursuant to 13-C M.R.S.A. §§ 1430 & 1434, that the Courtenter an order providing for the purchase at fair value by Ellis and/or FHC ofKaplan's shares (and the shares of other shareholders who desire to sell), orfor the appointment of one or more independent receivers or directors with fullaccess to FHC corporate and financial records to make recommendationsconcerning the preservation of the value of FHC and its affairs in light of theself-dealing of Ellis and his other illegal, oppressive, and fraudulent acts,and 

therecovery on behalf of FHC of assets diverted to Ellis and his related entitiesand damages sustained by FHC on account of the wrongdoing of Ellis and hisrelated entities, and such other relief as the Court may deem appropriate. Kaplan further requests that he be awarded his costs and attorneys feesincurred in the bringing of this action.

TheCompany believes strongly that information in its proxy materials was neitherfalse nor misleading, the allegations against Mr. Ellis are without anyfoundation and that the lawsuit is without merit.  It is the intention of theCompany to counter claim and sue for legal fees and any other consequentialdamages.

OnFebruary 28, 2006 First Hartford has filed a Motion For Summary Judgment inMassachusetts (this would have no bearing on the Maine suit).  On March 8, 2006Kaplan filed an additional lawsuit in Massachusetts expanding to the last ProxyStatement but making the same charges. 

The Company is not aware of anyother material legal proceedings which would need to be cited herein.

** **

** **

17

 

**PART II          OTHERINFORMATION (continued):**

**Item 1A.         RISKFACTORS**

Allphases of the real estate business are inherently speculative and intenselycompetitive with many enterprises, both large and small, engaged in businessessimilar to the Company's throughout the United States.  The success of theCompany, to a large extent, depends upon factors which may be beyond thecontrol of management.  Some of these factors are variable construction costs,the mortgage market, real estate taxes, income tax laws, governmentregulations, the commercial rental market and the economy.  The ability of the Companyto meet its debt service obligations and to operate profitably is alsodependent on its ability to attract tenants and to compete successfully withthe numerous other commercial properties available to prospective tenants.  Theability to attract tenants is dependent upon the changing character of theareas in which the Company's properties are located, the rate of newconstruction in those areas and the extent of present and future competition inthose areas.  The Company's holdings have become less diversified bothgeographically and in use and types of occupancy.

TheCompany's assets are concentrated mostly in the Northeast which creates ageographic diversification risk.  The Company presently has properties fromSouthern New Jersey to Maine.

Thereal estate business does not experience "backlogs" as that term is generallyunderstood, nor is it seasonal.

Tothe Company's knowledge, its real estate business is not dependent upon asingle customer but there is a dependency on supermarkets for strip malls.  TheCompany has Stop & Shop, Price Rite and Big Y as such tenants.

**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.  The Company hasnot declared any dividends.

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

(a)                On November 30, 2005 the Companyheld its annual meeting of shareholders.

(b)                The following directors wereelected for a one year term at the meeting:

 

 

Directors

Votes Cast For

Votes Case Against		or Withheld

Neil H. Ellis

2,115,891

652,961

David B. Harding

2,115,891

652,961

Stuart I. Greenwald

2,115,891

652,961

(c)                Other matters voted upon:

Proposalto ratify

Votes Cast For

Against or Withheld

Abstained

Broker Non Votes

1. First Hartford's 2003  Stock Option Plan

1,905,150

674,734

3,000

222,551

2. A grant of non-qualified  stock options to five individuals

1,904,849

674,789

3,255

222,551

3. A grant of Put Options  to five individuals 

1,895,749

680,834

3,310

222,551
               
                         	(d)                	Not Applicable            
 

 

18

 

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

**Item 5.             OTHERINFORMATION**

**CODE OF ETHICSAPPLICABLE TO SENIOR EXECUTIVES**

On September 20, 2005, the Board of Directors of FirstHartford Corporation adopted this Code of Ethics Applicable to SeniorExecutives as contemplated by the Sarbanes-Oxley Act of 2002.  It iscritical to the success of the Company and in the best interests of itsstockholders that its employees conduct themselves honestly andethically.  In particular, each senior executive of the Company, includingthe President and Chief Executive Officer, the Vice President-Finance, theTreasurer and the Controller ("Senior Executives"), are required toobserve the highest standards of ethical business conduct, including strictadherence to this Code of Ethics Applicable to Senior Executives (this"Code").  Accordingly, each Senior Executive must comply withthe letter and spirit of the following:
- Each Senior Executive will act     at all times honestly and ethically, including the ethical handling of     actual or apparent conflicts of interest between personal and professional     relationships.  
- Each Senior Executive must     ensure that all reasonable and necessary steps within his or her areas of     responsibility are taken to provide full, fair, accurate, timely and     understandable disclosure in reports and documents that the Company files     with or submits to the Securities and Exchange Commission or state     regulators, and in all other regulatory filings.  In addition, Senior     Executives must provide full, fair, accurate, and understandable     information whenever communicating with the Company's stockholders or the     general public. 
- Each Senior Executive must take     all reasonable measures to protect the confidentiality of non-public information     about the Company, its business, operations and customers obtained or     created in connection with such Senior Executive Officer's activities and     to prevent the unauthorized disclosure of any such information, unless     required by law, regulation or legal or regulatory process.   
- All Senior Executives must conduct Company business in     compliance with all applicable federal, state, foreign and local laws,     rules and regulations. 
- Senior Executives shall not     directly or indirectly take any action to fraudulently influence, coerce,     manipulate or mislead the Company's independent public auditors for the     purposes of rendering the financial statements of the Company misleading. 
- It is each Senior Executive's     responsibility to notify promptly the General Counsel regarding any actual     or potential violation of this Code and/or any applicable securities or     other laws, rules or regulations by any Senior Executive.  Senior     Executives may choose to remain anonymous in reporting any possible     violation of this Code.  All Senior Executives are responsible for     ensuring that their own conduct complies with this Code. 
- Anyone who violates the     provisions of this Code by engaging in unethical conduct, failing to     report conduct potentially violative of this Code or refusing to participate     in any investigation of such conduct, will be subject to disciplinary     actions, up to and including termination of service with the     Company.  Violations of this Code may also constitute violations of     law and may result in civil or criminal penalties for a Senior Executive     or the Company.

19

 

**PART II          OTHERINFORMATION (continued):**

**Item 5.             OTHERINFORMATION (continued):**

**CODE OF ETHICSAPPLICABLE TO SENIOR EXECUTIVES (continued)**
- The Board of Directors of the     Company shall be responsible for the administration of this Code and shall     have the sole authority to amend this Code or grant waivers of its     provisions.  Waivers will be disclosed as required by the Securities     Exchange Act of 1934 and the rules thereunder.

**ACKNOWLEDGEMENT**

The undersigned Senior Executive hereby acknowledge that the Executive has     received a copy of the Company's code of Ethics Applicable to Senior     Executives and that he or she has read and understood this Code in its     entirety and agrees to abide by it.  The Senior Executive further     acknowledges that it is his or her responsibility to seek clarification     from the Company's General Counsel if any application of the Code to a     particular circumstance is not clear.  The Senior Executive     acknowledges that the Senior Executives' continued service with the     Company requires the Senior Executive to fully adhere to this Code and     that failure to do so can result in disciplinaryaction up to and including termination of the Senior Executive's employment bythe Company.

**Item 6.           EXHIBITS**

                        a)         Exhibits:

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

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

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

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

 

 

 

 

 

20
 
 

**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)   March 17, 2006 			/s/Neil H. EllisDate 			Neil H. Ellis - President and   Chief Executive Officer      March 17, 2006 			/s/Stuart I. Greenwald Date 			Stuart I. Greenwald - Treasurer   and Chief Financial Officer 
21

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